For the fiscal year ended DecemberAUGUST 31, 20112013
oTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from______ to______Commission file number 001-3427
ADGS ADVISORY, INC.
(Exact Name of Registrant as Specified in Its Charter)
LIFE NUTRITION PRODUCTS, INC.| Delaware | | 42-1743717 |
(State or other jurisdiction of incorporation or organization) | | (I.R.S. Employer Identification Number) |
| | |
Units 2611-13A, 26/F 113 Argyle Street, Mongkok Kowloon, Hong Kong, SAR | | N/A |
| (Address of principal executive offices) | | (Zip Code) |
(Exact name of registrant as specified in its charter)
Commission file number: Registrant’s telephone number, including area code:001-34274 (852) 2374-0002
Delaware
State or other jurisdiction of incorporation or organization
42-1743717
(I.R.S. Employer incorporation or organization Identification No.)
Chu Zhanjun
Chief Executive Officer
20 Broad Street, 7th Floor
New York, New York 10005
(212) 797-7833
(Address of principal executive offices)
Securities registered pursuant to Section 12(b) of the Exchange Act: none None
Securities registered pursuant to sectionSection 12(g) of the Exchange Act: Common Stock ($.0001 par value $0.0001 (Title of class)value)
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. o Yes o No xNo
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. o Yes o No xNo
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. x Yes x No oNo
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website,Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (Section (§232.405 of this chapter) during the preceding twelve12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o Yes o No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of regulationRegulation S-K ( 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant'sregistrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o xYes x No
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 the definitionsdefinition of "large“large accelerated filer," "accelerated filer"filer”, “accelerated filer” and "smaller“smaller reporting company"company” in Rule 12b-2 of the Exchange Act. (Check one):
| Large accelerated filer | o | Accelerated filer | o |
| Non-accelerated filer | o |
Accelerated filer | o | Smaller reporting company | x |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). xYes o Nox
As of June 30, 2011 theThe aggregate market value of the voting and non-voting common stockequity held by non-affiliates of the registrant was approximately $0.00 based onas of February 28, 2013, the closing market pricelast business day of the registrant's common stockregistrant’s most recently completed second fiscal quarter, was $0. The number of $0.00shares outstanding of the Common Stock ($.0001 par value) of the registrant as of the close of business on that day.
As of April 13, 2011 there were 4,095,000 shares of common stock outstanding with a par value of $0.0001.
DOCUMENTS INCORPORATED BY REFERENCEDecember 15, 2013 was 25,000,000.
Documents Incorporated by Reference: None
Table of ContentsADGS ADVISORY, INC.
Life Nutrition Products, Inc. (LNP, Inc.)
TABLE OF CONTENTS
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PartPART I | | | |
| | | | |
Item 1 | Business | | | 4 | |
Item 1A | Risk Factors | | | 7 | |
Item 1 B | Unresolved Staff Comments | | | 7 | |
Item 2 | Properties | | | 7 | |
Item 3 | Legal Proceedings | | | 7 | |
Item 4 | Mine Safety Disclosures | | | 7 | |
| | | | | | |
Part IIItem 1. | Business | | | 4 | |
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Item 51A. | Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Risk Factors | | | 8 | |
Item 6 | Selected Financial Data | | | 9 | |
Item 7 | Management's Discussion and Analysis of Financial Condition and Results of Operations
| | | 9 | |
Item 7A | Quantitative and Qualitative Disclosure About Market Risks
| | | 13 | |
Item 8 | Financial Statements and Supplementary Data | | | F-1 | |
Item 9 | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
| | | 14 | |
Item 9A | Controls and Procedures | | | 14 | |
Item 9B | Other Information | | | 15 | |
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Part III | | | 11 | |
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Item 101B. | Directors, Executive Offices and Corporate GovernanceUnresolved Staff Comments | | | 16 | |
Item 11 | Executive Compensation | | | | |
Item 12 | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters | | | 18 | |
Item 13 | Certain Relationships and Related Transactions and Director Independence | | | 18 | |
Item 14 | Principal Accounting Fees and Services | | | 18 | |
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Part IV | | | | |
| | | | | | |
Item 152. | Exhibits,Properties | | | 16 | |
| | | | | |
| Item 3. | Legal Proceedings | | | 16 | |
| | | | | |
| Item 4. | Mine Safety Disclosures | | | 16 | |
| | | | | |
| PART II |
| | | | | |
| Item 5. | Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities | | | 17 | |
| | | | | |
| Item 6. | Selected Financial Statement SchedulesData | | | 19 | |
| | | | | | |
| Item 7. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | | | 19 | |
| | | | | |
| Item 7A. | Quantitative and Qualitative Disclosures About Market Risk | | | 27 | |
| | | | | |
| Item 8. | Financial Statements and Supplementary Data | | | 27 | |
| | | | | |
| Item 9. | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure | | | 27 | |
| | | | | |
| Item 9A. | Controls and Procedures | | | 28 | |
| | | | | |
| Item 9B. | Other Information | | | 28 | |
| | | | | |
| PART III |
| | | | | |
| Item 10. | Directors, Executive Officers and Corporate Governance | | | 29 | |
| | | | | |
| Item 11. | Executive Compensation | | | 31 | |
| | | | | |
| Item 12. | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters | | | 32 | |
| | | | | |
| Item 13. | Certain Relationships and Related Transactions, and Director Independence | | | 32 | |
| | | | | |
| Item 14. | Principal Accountant Fees and Services | | | 33 | |
| | | | | |
| PART IV |
| | | | | |
| Item 15. | Exhibits and Financial Statement Schedules | | | 34 | |
| | | | | |
| Signatures | | | 2036 | |
FORWARD LOOKING STATEMENTSpecial Note Regarding Forward Looking Statements
This annual filing ending December 31, 2011report contains forward-looking statements. These statements that involve substantialknown and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements to be materially different from any future results, performances or achievements expressed or implied by the forward-looking statements. In some cases, you can identify forward-looking statements by terms such as “anticipates,” “believes,” “could,” “estimates,” “expects,” “intends,” “may,” “plans,” “potential,” “predicts,” “projects,” “should,” “would” and similar expressions intended to identify forward-looking statements. Forward-looking statements reflect our current views with respect to future events and are based on assumptions and are subject to risks and uncertainties. You can identifyGiven these uncertainties, you should not place undue reliance on forward-looking statements. Also, forward-looking statements by forward-looking words suchrepresent our estimates and assumptions only as “may,” “expect,” “plans,” “intends,” “anticipate,” “believe,” “estimate” and “continue” or similar words and are intended to identify forward looking statements within the meaning of Section 27A of the Securities Act and Section 21Edate of the Securities Exchange Act of 1934.this report. You should read statementsthis report and the documents that contain these words carefully because they discusswe reference and filed as exhibits to this report completely and with the understanding that our future expectations or may contain projections of ouractual future results may be materially different from what we expect. Except as required by law, we assume no obligation to update any forward-looking statements publicly, or to update the reasons actual results could differ materially from those anticipated in any forward-looking statements, even if new information becomes available in the future.
Use of operations orCertain Defined Terms
Except where the context otherwise requires and for the purposes of our financial condition or state other “forward-looking” information. We believe thatthis report only:
| · | the “Company,” “we,” “us,” and “our” refer to the combined business of ADGS Advisory, Inc. (formerly known as Life Nutrition Products, Inc.), a Delaware corporation, and its direct and indirect wholly-owned subsidiaries, Almonds Kisses Limited (BVI), a British Virgin Islands company, ADGS Advisory Limited, a Hong Kong corporation, Vantage Advisory Limited, a Hong Kong corporation, Motion Tech Development Limited, a British Virgin Islands company, and TH Strategic Management Limited, a Hong Kong corporation, as well as ADGS Tax Advisory Limited, a Hong Kong corporation which is an 80% owned subsidiary, and Dynamic Golden Limited, a Hong Kong corporation which is a 30% owned subsidiary; |
| | |
| · | “Exchange Act” refers to the Securities Exchange Act of 1934, as amended; |
| | |
| · | “HKD” refers to Hong Kong dollars, the legal currency of Hong Kong; |
| | |
| · | “Hong Kong” refers to the Hong Kong Special Administrative Region of the People’s Republic of China; |
| | |
| · | “PRC,” “China,” and “Chinese,” refer to the People's Republic of China; |
| | |
| · | “SEC” refers to the Securities and Exchange Commission; |
| | |
| · | “Securities Act” refers to the Securities Act of 1933, as amended; and |
| | |
| · | “U.S. dollars,” “dollars”, “USD” and “$” refer to the legal currency of the United States. |
In China it is importantcustomary to communicate our future expectationsrefer to our investors. However, there may be events ina person’s name with the future thatfamily name first and the Company is not ablegiven name second. We have followed this convention with respect to accurately predict or control. Before you invest in the Company’s common stock, you should be aware that the occurrence of the events described as risk factors and elsewherecertain Chinese individuals named in this annual filing could have a material adverse effect on our business, operating results and financial condition.report.
PartPART I
Item 1. Business
The CompanyGeneral Overview
References to “we,” “our,” “ourWe are primarily engaged in providing accounting, taxation, company” “us,” “the Company,” or “Life Nutrition” refer to Life Nutrition, Inc. secretarial, general corporate and its consolidated subsidiaries. Ourconsultancy services in Hong Kong.
The address of our principal executive office is located at 20 BroadUnits 2611-13A, 26/F, 113 Argyle Street, 7Mongkok, Kowloon, Hong Kong, SARth Floor, New York, New York 10005 and our phone. Our telephone number is (212) 797-7833. We do not maintain a Website.(852) 2374-0002.
Company OverviewCorporate History and Background
ADGS Advisory, Inc., which was incorporated in the State of Delaware in September 2007 under the name Life Nutrition Products, Inc. (the “Company”, “we”, “us” and “our”) was previously a dietary supplement company specializing in the development marketing and distribution of all natural, proprietary, dietary supplements under the names Trim For Life3®Life® Appetite Control and Trim For Life3®Life® Energy Formula. Pursuant to a Certificate of Amendment to our Certificate of Incorporation filed with the State of Delaware and effective as of July 19, 2013, Life Nutrition Products, Inc. changed its corporate name to ADGS Advisory, Inc.
In our original business plan, we outlined a marketing strategy to compete more effectively in the dietary supplement marketplace. However, due to a lack of available financing, we were unable to implement the marketing strategy or invest in product expansion. We are no longer pursuing this business. As a result, we began to explore other viable options that may provide the potential to generate a positive cash flow to accommodate the costs of being a public company. With volatile economic conditions and unknown opportunities, we are unable to adequately determine if there are indeed, business opportunities that would lend to the Company acquiring additional capital or having the available resources to construct such a deal.
Our common stock is traded in the over-the-counter market under the symbol “LIPN”. Since January 20, 2009, it has been listed on the OTC Bulletin Board. As a public company with the potential for shares to trade on the open market, we believe the Company may be in a better position to raise additional capital to meet our operating costs. However, we cannot claim nor guarantee that by having Company stock publicly quoted that it will provide the opportunity to raise additional capital.
Our current operating costs are minimal due to limited business activities, but we do incur an expense in ongoing legal and professional services to meet our SEC obligations as a publicly held company. The Company may continue to meet these expenses by opting to raise additional capital through sales of our common stock, loans from our board of directors and affiliates, and/or other transactions to meet these obligations.
On September 7, 2010, we entered into a Share Exchange Agreement (the “Share“Conqueror Share Exchange Agreement”) with Conqueror Group Limited, a Hong Kong corporation (“Conqueror”) and Acumen Charm Ltd., a British Virgin Islands corporation (the “Conqueror Shareholder”). Pursuant to the Conqueror Share Exchange Agreement, at the closing of the transaction contemplated in the Conqueror Share Exchange Agreement (the “Transaction”“Conqueror Transaction”), the Company willwas to acquire 100% of the issued and outstanding capital stock of Conqueror from the Conqueror Shareholder, making Conqueror a wholly-owned subsidiary of the Company. There was no prior relationship between the Company and any of its affiliates and the Conqueror Shareholder and any of its affiliates.
Conqueror owns 100% of the equity interest of Shenyang Kai Xin, a wholly-owned foreign enterprise incorporated in the People’s Republic of China (“PRC”), which entity has entered into contractual arrangements with Liaoning New Land Food & Beverage Co., Limited (“NLFB”) and Liaoning New Land Fast Frozen Food Co. Limited (“NLFF”), each a company incorporated in the PRC, which arrangements give Conqueror effective control of the business of NLFB and NLFF. NLFB is principally engaged in the processing and distribution of raspberry and blueberry drinks, wines and other related products in China, and NLFF is principally engaged in the cultivation, processing and distribution of fresh and frozen raspberries in the domestic market in China and internationally.
In consideration for the purchase of the Conqueror Shareholder’s interest in Conqueror, the Company will issue to designees of the Conqueror Shareholder a total of 23,905,000 newly issued shares of the Company’s common stock.
The closing of the Transaction is conditioned upon, among other things, satisfactory due diligence investigations by the parties, the cancellation of a total of 13,787,800 shares of the Company’s common stock by certain shareholders of the Company, the ability of certain designees of Conqueror to purchase a total of 4,010,000 shares of the Company’s common stock from non-affiliated shareholders of the Company in unrelated transactions, the accuracy at closing of the representations made by the parties in the Share Exchange Agreement, and the obtaining of necessary consents.
The First Amendment to the Share Exchange Agreement (the “First Amendment”) was entered into on November 17, 2010 by the Company with Conqueror and the Conqueror Shareholder. The First Amendment amends the terms of the Share Exchange Agreement in which 1,004,900 shares shall be redeemed by the Company contemporaneously with the execution of the First Amendment at an aggregate redemption price of $55,270 (the “Group B Redemption Price”) and 12,782,900 shares shall be redeemed by the Company at or before the closing at an aggregate redemption price of $49,731 (the “Group C Redemption Price”) pursuant to mutually acceptable and duly executed redemption agreements.
Contemporaneously with the execution of the First Amendment, Conqueror loaned the Company the principal amount of $55,270 in exchange for which the Company delivered a promissory note to Conqueror which proceeds were used to pay the Group B Redemption Price. The First Amendment further provides that at or before the closing, Conqueror shall loan the Company the principal amount of $49,731 which shall be paid from the funds remaining in escrow (the “Remaining Escrow Funds”) pursuant to the Escrow Agreement dated as of August 13, 2010, as amended on August 30, 2010, by and among Conqueror, the Company and Cyruli Shanks Hart & Zizmor LLP, in exchange for which the Company shall deliver a promissory note to Conqueror which proceeds shall be used to pay the Group C Redemption Price.
The First Amendment also provides that in the event that the closing does not occur for any reason on or before January 31, 2011, then, among other things, the Remaining Escrow Funds shall be paid to the Company and used to promptly redeem 12,782,900 shares as provided therein at the Group C Redemption Price, and the then officers and directors of the Company shall resign with immediate effect and appoint such persons as designated by Conqueror as officers and directors.
The Closing was to transpire on or before January 31, 2011 but did it did not occur by that date. As a result,However, as of May 11, 2011, and in accordance with the terms of the First Amendment, the Remaining Escrow Funds were paid to the Company and were used to redeem 12,782,900 shares at the Group C Redemption Price and the Company delivered a promissory note to Conqueror in the principal amount of $49,731. In addition, on May 11, 2011,among other things, Michael M. Salerno, the Company’s then sole officer and director, resigned as an officer and director of the Company, and appointed Chu Zhanjun and Li Gang as directors, and Chu Zhanjun as President, Chief Executive Officer and Principal Financial Officer of the Company, each a designee of Conqueror.
As a result, a change in control has occurred, due to the resignation of Mr. Salerno as sole officer and director, appointment of Mr. Chu as President, Chief Executive Officer and Principal Financial Officer of the Company, and appointment of Mr. Chu and Mr. Li as directors.
As of At the date hereof, we do not expecttime, the parties anticipated that the transaction contemplated by the Conqueror Share Exchange Agreement willwould not be completed at any time in future.
On December 7, 2012, Life Nutrition Products, Inc. entered into a share exchange agreement (the “Original Exchange Agreement”) with ADGS Advisory Limited, a Hong Kong corporation (“ADGS Hong Kong”) and ADGS Advisory (Holding) Limited, a British Virgin Islands corporation (“ADGS Holding”). Pursuant to the Original Exchange Agreement, at the closing of the transaction contemplated thereunder (the “Transaction”), the Company agreed to acquire 100% of the issued and outstanding capital stock of ADGS Hong Kong, making ADGS Hong Kong a wholly-owned subsidiary of the Company. In consideration for the purchase of 100% of the issued and outstanding capital stock of ADGS Hong Kong, the Original Exchange Agreement provided that the Company would issue a total of 20,155,000 newly issued shares of the Company’s Common Stock.
On March 28, 2013, the Company entered into an amendment (the “Amendment”) to the Original Exchange Agreement (the Original Exchange Agreement, as amended is referred to herein as the “Exchange Agreement”) pursuant to which the Company agreed to acquire all of the outstanding shares of Almonds Kisses Limited (BVI), a British Virgin Islands company (“Almonds Kisses BVI”), from the eight shareholders of Almonds Kisses BVI (the “Shareholders”), instead of the shares of ADGS Hong Kong, on the same terms and conditions set forth in the Exchange Agreement. Almonds Kisses BVI is the owner of 100% of the issued and outstanding capital stock of ADGS Hong Kong. The Original Exchange Agreement incorrectly indicated that such owner was ADGS Holdings which error was corrected in the Amendment. The Shareholders were Tong Wing Yee, Tong Wing Shan, Tso Yin Yee, Pang Yiu Kwong, Sin Kok Ho, Fahy Roase-Collette, Tsang Kwai Chun and ADGS Holdings, each of whom executed the Amendment. In addition, on March 28, 2013, the parties to the Exchange Agreement entered into an Extension Agreement (the “Extension Agreement”) extending the closing date of the Transaction to on or before April 15, 2013.
On April 12, 2013, the transactions contemplated by the Exchange Agreement were consummated whereby, among other things, the Company acquired all of the issued and outstanding capital stock of Almonds Kisses BVI in exchange for an aggregate of 20,155,000 newly issued shares of the Company’s Common Stock (the “Acquisition”).
As a result of the Acquisition, Almonds Kisses BVI became our wholly-owned subsidiary and the former shareholders of Almonds Kisses BVI became our controlling shareholders, and Almond Kisses BVI in turn owns all of the issued and outstanding capital stock of ADGS Hong Kong. Almonds Kisses BVI also owns 100% of the issued and outstanding capital stock of Vantage Advisory Limited, a Hong Kong corporation (“Vantage”) which was acquired by Almonds Kisses BVI in January 2013; 100% of the issued and outstanding capital stock of Motion Tech Development Limited, a British Virgin Islands company (“Motion Tech”), which was acquired in August 2013; and, 100% of the issued and outstanding capital stock of TH Strategic Management Limited, a Hong Kong corporation (“TH Strategic”), which was acquired in October 2013. ADGS Hong Kong owns 80% of ADGS Tax Advisory Limited (“ADGS Tax”) which is a Hong Kong incorporated holding company, and ADGS Tax owns a 30% interest in Dynamic Golden Limited which is also a Hong Kong incorporated company.
Almonds Kisses BVI was incorporated on March 1, 2011 as a limited liability company in the British Virgin Islands (“BVI”) and, as originally constituted, was owned by the eight Shareholders identified above. ADGS Hong Kong is a Hong Kong corporation which was incorporated on April 28, 2011 and, as originally constituted, was solely owned by Tong Wing Yee and Tong Wing Shan (two of the shareholders of Almonds Kisses BVI) until being acquired by Almonds Kisses BVI pursuant to a transaction completed on April 30, 2011 in contemplation of the Acquisition. In this regard and in anticipation of effecting a transaction which resulted in the Acquisition, on April 30, 2011 Tong Wing Yee and Tong Wing Shan exchanged their shares for additional shares in Almonds Kisses BVI in order to create a BVI holding company structure for the operating business. British Virgin Islands holding companies have been utilized in Hong Kong for many years by entrepreneurs undertaking business in Hong Kong. Management believes such structure may provide certain advantages in the future in that shares held in a Hong Kong corporation are subject to a fairly substantial stamp duty on the transfer of any of such shares while the transfer of shares in a BVI company is not subject to any stamp duty in the BVI. In addition, Management further believes the BVI holding company structure may provide other benefits in the future including more corporate flexibility in that mergers can be effected by a BVI company compared to Hong Kong where a Hong Kong company is not able to merge with any entity insofar that a merger is not provided for under the Hong Kong Companies Ordinance.
Vantage is a Hong Kong corporation which was incorporated on March 6, 2008 and has been wholly owned by Almonds Kisses BVI since January 2013. Motion Tech is a British Virgin Islands company which was incorporated on October 7, 2007 and has been wholly owned by Almonds Kisses BVI since August 2013. Motion Tech is a property holding company which owns a residential property. TH Strategic is a Hong Kong corporation which was incorporated on March 16, 2010 and has been wholly owned by Almonds Kisses BVI since October 2013. ADGS Tax Advisory Limited (“ADGS Tax”) is a Hong Kong incorporated holding company incorporated on March 17, 2003 and owns certain customer lists and client bases which were purchased in 2005. ADGS Tax is 80% owned by ADGS Hong Kong. Dynamic Golden Limited which is also a Hong Kong incorporated company, which was 30% owned by ADGS Tax until November 19, 2013 and has since been 30% owned by Almonds Kisses BVI, owns an investment in residential real property located in Tuen Mun, New Territories, Hong Kong.
As a condition to the consummation of the Acquisition, on the Acquisition Date the officers and directors who were designees of Conqueror resigned as officers and directors of Life Nutrition Products, Inc. and the new officers and directors identified below were appointed as officers and directors of Life Nutrition Products, Inc.
Our Current Business
We were previously a dietary supplement company specializing in the development, marketing and distribution of all natural, proprietary, dietary supplements under the names Trim For Life3® Appetite Control and Trim For Life3® Energy Formula.
InThe chart below presents our original business plan, we outlined a marketing strategy to compete more effectively in the dietary supplement marketplace. However, due to a lack of available financing, we were unable to implement the marketing strategy or invest in product expansion. We are no longer pursuing this business. As a result, we began to explore other viable options that may provide the potential to generate a positive cash flow to accommodate the costs of being a public company. With volatile economic conditions and unknown opportunities, we are unable to adequately determine if there are indeed, business opportunities that would lend to the Company acquiring additional capital or having the available resources to construct such a deal.
Our common stock is traded in the over-the-counter market under the symbol “LIPN”. Since January 20, 2009, it has been listed on the OTC Bulletin Board. As a public company with the potential for shares to trade on the open market, we believe the Company may be in a better position to raise additional capital to meet our operating costs. However, we cannot claim nor guarantee that by having Company stock publicly quoted that it will provide the opportunity to raise additional capital.corporate structure:
Our current operating costs are minimal due to limited business activities, but we do incur an expense in ongoing legal and professional services to meet our SEC obligations as a publicly held company. | | | ADGS Advisory, Inc. (formerly Life Nutrition Products, Inc.), a Delaware corporation | | | |
| | | | | | | | | | |
| | | | | ê 100% | | | | | |
| | | | | | | | | | |
| | | | | Almonds Kisses Limited (BVI), a British Virgin Islands company | | | | | |
| | | | | | | | | | |
| ê 100% | | ê 100% | | ê 100% | | ê 100% | | ê 30% | |
| | | | | | | | | | |
| ADGS Advisory Limited, | | Vantage Advisory Limited, | | TH Strategic Management | | Motion Tech Development | | Dynamic Golden | |
| a Hong Kong corporation | | a Hong Kong corporation | | Limited, a Hong Kong corporation | | Limited, a British Virgin Islands company | | Limited, a Hong Kong corporation | |
| | | | | | | | | | |
| ê 80% | | | | | | | | | |
| | | | | | | | | | |
| ADGS Tax Advisory Limited | | | | | | | | | |
| a Hong Kong corporation | | | | | | | | | |
The Company may continue to meet these expenses by opting to raise additional capital through sales of our common stock, loans from our board offollowing table lists the directors and affiliates, and/or other transactions to meet these obligations.
We will continue to review opportunities to improve our financial stability by seeking established businesses which have the financial wherewithal to either invest capital into our Company operations in exchange for our common stock, or, if in a similar line of business consider a merger or an acquisition.
Management believes an opportunity may avail itself as a result of being a reporting company with common stock quoted on the OTCBB. Management believes there are savvy investors and/or businesses that understand the value of a public company and may be interested in investment of capital, merger or acquisition. As a reporting company, our viewofficers of the Company value includes; the ability to use the Company’s common stock to raise capital, the Company’s common stock quoted on the OTCBB, audited financials, provide shareholders liquidity, obtain loans from financial lenders, and possibly increase growth opportunities through mergers and/or acquisitions.
Economic conditions may be somewhat unsettled and may cause uneasiness with prospective businesses and speculative investors. Management believes there is a viable market of prospects that are searching for a public company in which they could invest, merge or acquire. However, we cannot guarantee nor claim that the Company will be able to find a suitable opportunity.
Employees
Our Board of Directors consists of Chu Zhanjun and Li Gang and Chu Zhanjun serves as our President, Chief Executive Officer and Principal Financial Officer. Neither Mr. Chu nor Mr. Li is compensated for their service to the Company.foregoing entities.
Available Information
We were incorporated in Delaware in September 2007 as Life Nutrition Products, Inc. Our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 are available free of charge to the public by visiting the SEC's Public Reference Room at 100 F Street, NE, Washington, DC 20549 on official business days between the hours of 10a.m. to 3p.m. or by calling the Commission at 1-800-SEC-0330 or visiting the internet site, http://www.sec.gov for filed reports.| Corporate Name | Directors | Officers |
| Life Nutrition Products, Inc. | Li Lai Ying Tso Yin Yee Pang Yiu Kwong | CEO: Li Lai Ying CFO: Li Lai Ying COO: Tso Yin Yee |
| Almonds Kisses Limited (BVI) | Tso Yin Yee Tong Wing Shan Tong Wing Yee | CEO: Li Lai Ying CFO: Li Lai Ying COO: Tso Yin Yee |
| ADGS Advisory Limited | Tso Yin Yee Tong Wing Shan Tong Wing Yee | CEO: Li Lai Ying CFO: Li Lai Ying COO: Tso Yin Yee |
| Vantage Advisory Limited | Pang Yiu Kwong | CEO: Li Lai Ying CFO: Li Lai Ying COO: Tso Yin Yee |
| Motion Tech Development Limited | Tong Wing Yee | CEO: Li Lai Ying CFO: Tong Wing Shan COO: Tso Yin Yee |
| TH Strategic Management Limited | LI Hon Lun | CEO: Li Lai Ying CFO: Li Lai Ying COO: Tso Yin Yee |
| ADGS Tax Advisory Limited | Tong Wing Yee | CEO: Tong Wing Yee CFO: Tong Wing Yee |
| Dynamic Golden Limited | Woo Chai Cheung Tong Wing Yee | CEO: Tong Wing Yee CFO: Tong Wing Yee |
Recent Acquisition
As indicated above, TH Strategic has been a wholly owned subsidiary of Almonds Kisses BVI since October 2013. Such acquisition was completed pursuant to an Agreement for Sale and Purchase of Shares entered into by Almonds Kisses BVI with Li Hon Lun pursuant to which on October 20, 2013 Almonds Kisses BVI acquired all of the issued and outstanding shares of TH Strategic from Li Hon Lun. TH Strategic is a Hong Kong based accounting services and business consulting firm.
In consideration for acquisition of the issued and outstanding shares of TH Strategic, Almonds Kisses BVI has agreed to pay Li Hon Lun the sum of HK $4.0 million (approximately US $516,000) payable in four equal monthly installments of HK $1.0 million (approximately US $129,000) each. Almonds Kisses has paid the first two installments and the remaining installments of HK $1.0 million each which were originally due December 15, 2013 and January 15, 2014 have been extended one month each to January 15, 2014 and February 15, 2014.
Subsequent to the year ended August 31, 2013, the Company has also acquired a client base from an unrelated party for consideration of approximately $155,000 (HK$1.2 million). The consideration is payable in four equal monthly installments of $38,700 (HK $300,000) each. The Company has paid three installments and the remaining installment of $38,700 will be due on December 30, 2013.
Description of Business
General
We provide a wide range of services in Hong Kong to individuals, small and medium sized businesses and charitable organizations in accounting, taxation, company secretarial, general corporate and consulting services. All of our business operations and services are performed in Hong Kong. However, we also maintain branch offices in Shenzhen, PRC and Bangkok, Thailand for marketing purposes only in order to attract potential clients to use our services in Hong Kong for businesses or other ventures which such potential clients may maintain in Hong Kong. Our primary business segments are described below.
Accounting and Corporate Services
Accounting
Our team of accounting business professionals can provide general accounting services for a business, including, but not limited to, bookkeeping services, including preparing a general ledger for a client, spreadsheet, income statements, cash flow statements and balance sheets, which services can be performed monthly, quarterly or annually; preparing other accounting and financial reports; providing assistance in managing compliance obligations; preparing and filing tax returns; providing assistance with payroll and invoicing, strategic planning, financial modeling and cash flow; evaluating accounting systems and processes; reporting key performance indicators and benchmarks; performing a business health check; and, providing a strategic cost management. Our business professionals can offer practical accounting and business solutions to assist our clients in identifying risks and opportunities, ensuring that their business remains profitable and competitive, and providing general guidance in building wealth and protecting assets.
Corporate Services
We believe our staff can provide expert advice and practical assistance to a company in managing its regulatory and reporting obligations along with monitoring its compliance and secretarial responsibilities. Such services which we can offer include:
| § | Company secretarial services; |
| § | The maintenance of records of contacts, nomination/appointment/resignation of directors, bank signatories, major shareholders according to the Memorandum and Article of Association (M&A) or Company Constitution; |
| § | Meeting regulatory obligations relating to the preparation of annual general meetings and filing of annual returns; |
| § | Administrative work for statutory requirements, such as preparation and maintenance of corporate records, bookkeeping, accounting, and financial transactions. |
Tax Advisory
We have practicing members of the Hong Kong Institute of Certified Public Accountants (“HKICPA”) with more than ten years of taxation experience who can provide tax planning services for our clients. Such services can include:
| § | Preparation and filing a tax return; |
| § | Calculating the estimated tax liability; |
| § | Assist clients to reply to any inquiries issued by the taxing authorities; |
| § | Act as the tax representative of our clients in connection with tax assessments. |
Corporate Restructuring and Insolvency
We recognize that each year, there will be a percentage of unsuccessful businesses resulting in liquidation or company restructuring. We can offer the services of highly qualified insolvency practitioners whose goal is to rescue the situation and avoid formal bankruptcy or insolvency proceedings.
Our approach to client relationships is underpinned by a partner-led delivery of services. We have found that our partner-led approach creates a greater sense of trust, due to the stronger personal relationship developed. In this regard, we have an established history of working closely with financial institutions, law firms and smaller accountancy firms.
Our team of professionals has extensive local knowledge in conducting business reviews and advising lenders, directors and other stakeholders on options available to enterprises facing financial hardship. We can help a business to develop strategies to maximize returns and preserve the value of the business. Our services encompass all facets of:
| § | Company winding-up including voluntary winding-up and compulsory winding-up |
Multi-Disciplinary Advisory
Forensic and Litigation Advisory
We provide multidisciplinary, independent dispute advisory, investigative, data acquisition/analysis and forensic accounting services to clients throughout the life cycle of a litigation. Our team supports clients facing high stakes litigation, arbitration and compliance investigations, and regulatory scrutiny.
Our services include:
| § | Quantifying damages and providing independent expert opinion in a range of dispute situations relating to intellectual property, breach of contract, insurance claims, asset recovery and fraud/criminal investigations; |
| § | Employing forensic accounting and complex modeling methods to provide insight on the facts and offer clarity on complex financial transactions; |
| § | Independently tracing, gathering and analyzing critical information; |
| § | Offering industry‐leading electronic evidence services that identify, preserve and collect relevant, structured information and analyze complex data. |
Engineering Services
We can provide a diversified range of engineering services including waterworks engineering, water distribution system maintenance, slope safety detection, landslide risk prevention methods and buried water conduit testing. Established as a remedial specialist in Hong Kong, we have carried out small to large scale projects on behalf of public sector bodies.
Quantity Surveying
The function of the quantity surveyor is estimating and controlling construction cost. We can provide construction cost advice, construction cost estimating and advice relating to construction services which are affordable and tailored to a client’s specific needs. Quantity surveying services range from preliminary cost estimates during feasibility, project management and cost control during construction and tax depreciation schedules and sinking fund forecasts during post construction.
Business Development Service in PRC and Thailand
Although all of our business operations and services are performed in Hong Kong, we also maintain branch offices in Shenzhen, PRC and Bangkok, Thailand for marketing purposes only in order to attract potential clients to use our services in Hong Kong for businesses or other ventures which such potential clients may maintain in Hong Kong. In connection therewith, we have retained an individual who is a professional accountant and has been an investment banker with approximately 30 years of experience in the PRC and Australia to manage this new area of business for us. We believe there are a sufficient number of individuals and other entities in both the PRC and Thailand with business dealings in Hong Kong that justify our marketing efforts in those areas. However, there can be no assurance that we will be able to successfully manage and grow our business through such marketing efforts in both the PRC and Thailand.
Market Analysis
Although there are many consulting companies in Hong Kong providing similar services, we believe that that there a few consulting companies in Hong Kong that have professional standards equal to ours in the business segments in which we provide service. We believe the Company has a solid and loyal client base in a market that has experienced a certain level of sustained growth in recent years.
The following market trends seem to be the most important to our business:
Trend 1 – Accountancy service. Accountancy is a growing market. The tightening of financial regulations, in the wake of a number of recent scandals, and the onus being put on small businesses/individuals to submit accounts that meet stricter standards of compliance, should contribute to continued growth for the Company. Financial reporting and corporate governance are growth areas. The trend to outsource services is well established for businesses, and we believe such trend will continue and increase with the difficulty many companies face in finding suitable employees.
Trend 2 – Bookkeeping service. Presently, many small companies do not have full-time accountants for their accountancy work, and we believe many will use the services of an outside accountant or company to minimize operating costs and achieve a higher level of financial management oversight. Businesses regularly need the services of a qualified accountant to help compile or check that financial records are in order and up to date.
Trend 3 – Company secretarial service. According to Hong Kong Companies Ordinance, every company shall have a secretary. The company secretary shall (a) if an individual, ordinarily reside in Hong Kong; (b) if a body corporate, has its registered office or place of business in Hong Kong. The company secretary can also be a director. However, if there is only one director, he/she/it shall not also be the secretary of the company. We believe many companies in Hong Kong have only one director so they need to appoint a company secretary. Such services are offered and can be performed by us.
Trend 4 – Corporate recovery and insolvency services. As described above, each year there will be a percentage of unsuccessful businesses resulting in liquidation or company restructuring. We can offer the services of highly qualified insolvency practitioners. Our Chief Operating Officer, Tso Yin Yee and our Senior Assurance & Business Advisory Consultant, Pang Yiu Kwong are experienced insolvency practitioners having being appointed as Joint and Several Provisional Liquidators under Panel ‘T’ by Official Receiver’s Office under Government of Hong Kong Special Administrative Region.
Trend 5 – General consulting. With growing competition, increasing economic and business sophistication and regulatory compliance requirements, more companies need advice and strategies from experts and consultants across a wide range of specialties.
Customers
As mentioned above, our services are primarily provided to individuals, small and medium sized businesses and charitable organizations. In addition to our marketing efforts to attract potential new clients, we have in the past purchased customer lists and client bases from unrelated third parties in order to increase our customer base. Prior to our formation, customer lists and client bases were purchased in 2005 by ADGS Tax and customer lists and client bases were purchased in 2011 by ADGS Hong Kong. Such customer lists and client bases were purchased from unrelated accounting firms and secretarial companies and are accounted for as intangible assets and amortized using the straight line method over a period of 10 years. In addition, in September 2013, we acquired a new client base from an unrelated party, and in October 2013, we further increased our client base by purchasing all of the issued and outstanding shares of TH Strategic whereby TH Strategic became a wholly owned subsidiary of Almonds Kisses BVI. TH Strategic is a Hong Kong based accounting services and business consulting firm. In the future, we expect that we will seek to purchase other customer lists and client bases, as well as possibly purchasing other businesses, as part of our overall growth strategy, although there can be no assurance that we will be able to do so on terms which will be acceptable to us.
Our Competition
Competition in the general field of business consulting is quite intense in Hong Kong. Although numerous established companies offer a variety of services to different customer segments, we consider competition in our focus market niche of small and medium business to be modest. Customers in this segment strongly rely on the consultant’s professional qualifications and the ability to come up with viable solutions in a timely and cost effective manner. Although we believe that we have unique strengths compared with our competitors, our industry is highly competitive and our continued success depends upon our ability to compete effectively in markets that contain numerous competitors across the country, some of which have significantly greater financial, marketing and other resources than we have. New or existing competition that uses a business model that is different from our business model may put pressure on us to change so that we can remain competitive.
We believe we achieve a competitive edge among the bookkeeping and accountancy services due to the combination of CPA oversight we maintain with lower-level, inexpensive labor. Clients will receive the advantage of having a CPA review their books and provide additional advice when appropriate, while not paying much more than they would to hire their own bookkeeper.
In addition, for other consultancy services such as taxation, insolvency and other general consulting, we have a wide range of professionals in house who can provide complete, reliable and high quality services to our clients.
We believe the larger consulting firms tend to ignore the small business market because they are better positioned to serve larger businesses. Many of these large consulting firms have several hundred employees and we believe are generally not interested in dealing with small and medium business.In addition, we believe we offer more diversified services than many other small consulting companies who tend to offer services to particular industries and restrict themselves in the services they offer.
Government Regulation
Our services generally are not subject to governmental regulation in the markets in which we operate. However, our clients may require that we comply with certain rules and regulations even if those rules and regulations do not actually apply to us. In addition, our clients may require that certain of our service providers who provide services maintain certain professional licenses in order to provide the appropriate services for that particular client. We are also governed by laws in Hong Kong regulating the employer/employee relationship, such as tax withholding and reporting, social security or retirement, anti-discrimination and workers compensation. Failure to comply with any applicable laws and regulations could result in restrictions on our ability to provide our services, as well as the imposition of fines and penalties, which could have a material adverse effect on our operations.
Our Employees
We currently employ 30 full time people consisting of 3 executive management, 5 senior consultants and 22 staff. We require our employees to have appropriate education, training or work experience in their respective fields. We believe that our management team possesses in-depth knowledge critical to our Company’s success and is capable of identifying and seizing market opportunities, and implementing our business plans. We believe we are in material compliance with all applicable labor and safety laws and regulations in Hong Kong.
Item 1A. Risk FactorsFactors.
An investment in our common stock involves a high degree of risk. You should carefully consider the risks described below, together with all of the other information included in this report, before making an investment decision. If any of the following risks actually occurs, our business, financial condition or results of operations could suffer. In that case, the trading price of our common stock could decline, and you may lose all or part of your investment. You should read the section entitled “Special Note Regarding Forward-Looking Statements” above for a discussion of what types of statements are forward-looking statements, as well as the significance of such statements in the context of this report.
Risks Related to Our Business
Our company has limited operating history, which makes it difficult to predict our future prospects and financial performance. We have only been engaged in our current business operations since March 2011. While we have audited financial statements for the full fiscal years ended August 31, 2013 and 2012, our audited financial statements for the year ended August 31, 2011 reflect only six months of operations. Due to this limited operating history, it may be difficult to evaluate our business prospects and financial performance. While we achieved net income for the fiscal year ended August 31, 2013, we sustained a net loss for each of the fiscal years ended August 31, 2012 and August 31, 2011. There can be no assurance that we can maintain profitability beyond fiscal 2013. Further, our future operating results depend upon a number of factors, including our ability to manage our growth, retain and increase our customer base and to successfully identify and respond to any emerging trends in our market areas.
We may have difficulty in managing our future growth and any associated increased scale of our operations. We expect to expand through both organic growth and acquisitions. Our future expansion may place a significant strain on our managerial, operational, technical and financial resources. In order to better allocate our resources to manage our growth, we must hire, recruit and manage our workforce effectively and implement adequate internal controls in a timely manner. If we are unable to effectively manage our growth and the associated increased scale of our operations, our business, financial condition and results of operations could be materially and adversely affected.
Our business requires significant and continuous capital investment. We will require a high level of capital expenditure in the foreseeable future to fund our future growth. We intend to fund our capital expenditures and future acquisitions out of internal sources of liquidity and/or through access to additional financing from external sources. Our ability to obtain external financing in the future at a reasonable cost is subject to a variety of uncertainties, including:
| · | our future financial condition, results of operations and cash flows; |
| · | the condition of the global and domestic financial markets; and |
| · | changes in the monetary policy of the Hong Kong governments with respect to bank interest rates and lending practices. |
If we require additional funds and cannot obtain them on acceptable terms when required or at a reasonable financing cost or at all, we may be unable to fulfill our working capital needs or expand our business. These or other factors may also prevent us from entering into transactions that would otherwise benefit our business or implementing our future strategies. Any of these factors may have a material adverse effect on our business, financial condition and results of operations.
Our auditors have expressed substantial doubt about our ability to continue as a going concern. Our financial statements for the year ended August 31, 2012 and 2013 have been prepared assuming that we will continue as a going concern. Although the Company had a working capital surplus of $80,850 at August 31, 2013, the Company had payables in excess of cash and receivables of $2,856,376. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. Our continuation as a going concern is dependent on our ability to meet our obligations as they come due, to obtain additional financing as may be required and maintain profitability. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. Our independent registered public accounting firm's report on the financial statements as of and for the year ended August 31, 2013, contained an emphasis paragraph regarding our ability to continue as a going concern. Management plans to continue its efforts to raise funds through debt or equity in the near future to sustain our operations.
Our bank loans present a significant risk. To date, we have significantly relied upon debt financings to fund our operations. At August 31, 2012 (audited) and August 31, 2013 (audited), we had outstanding bank loans in the principal amount of $2,524,985 and $2,286,785, respectively. Bank overdraft facilities have been obtained and the outstanding balance was $744,077 as of August 31, 2013. Financing in assets under capital lease was recorded at $14,599 as of August 31, 2012 and has increased to $112,081 during to the expansion in business. As of August 31, 2013, a related party loan of $750,726 has been arranged with one of the major shareholders and this loan has been borrowed to finance the acquisition of Motion Tech Development Limited, a property holding company in 2013. The loan is unsecured, non-interest bearing and will be due on August 31, 2017. Interest expense (excluding capital lease interest) were $47,332 and $151,872 for the year ended August 31, 2012 and 2013 respectively. Such loans are primarily term loans with maturity dates ranging from November 2013 to December 2035. Approximately $1.5 million of the bank loans are to be repaid over the next five years. While we have begun to achieve profitable operations during fiscal 2013, there can be no assurance that such profitability will continue or that revenues from our operations will be able to service these debt obligations. This presents a significant risk to the Company in that the Company may not have the necessary cash to meet such payment obligations, or if it does, such payments may draw significantly on the Company’s cash position. Any of such events will likely have a materially detrimental effect on the Company.
If we are unable to attract and retain senior management and personnel, our operations, financial condition and prospects could be materially adversely affected. Our future success depends in part on the contributions of our management team and key personnel and our ability to attract and retain qualified new personnel. In particular, our success depends on the continuing services of Li Lai Ying, Tso Yin Yee, Pang Yiu Kwong and Tong Wing Shan. There is significant competition in our industry for qualified managerial, key personnel and we cannot assure you that we will be able to retain our key senior managerial and other personnel or that we will be able to attract, integrate and retain other such personnel that we may require in the future. If we are unable to attract and retain key personnel in the future, our business, operations, financial condition, results of operations and prospects could be materially adversely affected.
Our operating costs may increase.Costs in Hong Kong are generally expected to increase. If our labor costs or other operating costs increase and we cannot increase our services efficiency to offset any such increase or pass any such increase on to our customers, our business, financial condition and results of operations may be materially and adversely affected.
The industry in which we operate is highly competitive. Competition in the general field of business consulting is quite intense in Hong Kong. Although numerous established companies offer a variety of services to different customer segments, we consider competition in our focus market niche of small and medium business to be modest. Customers in this segment strongly rely on the consultant’s professional qualifications and the ability to come up with viable solutions in a timely and cost effective manner. Although we believe that we have unique strengths compared with our competitors, our industry is highly competitive and our continued success depends upon our ability to compete effectively in markets that contain numerous competitors across the country, some of which have significantly greater financial, marketing and other resources than we have. New or existing competition that uses a business model that is different from our business model may put pressure on us to change so that we can remain competitive.
We may be subject to disputes with employees or other third parties. The businesses we operate involve dealings with both permanent and temporary employees as well as numerous third parties and customers, and we may be subject to claims or litigation involving such employees or third parties from time to time such as labor disputes and claims under business contracts with customers and others. We may also be subject to labor disputes, labor shortages or other impositions on our business operations, if we are unable to amicably resolve disputes with any such parties. We cannot assure you that any such disputes will not arise in the future and that the occurrence of one or multiple disputes will not have a material adverse effect on our business and financial condition.
Our insurance coverage may be insufficient to cover our business risks. We face various operational risks in connection with our business. However, we are not insured against certain risks. Any losses and liabilities for which we are not insured or our insurance coverage is inadequate to cover the entire liability may have a material adverse effect on our business, financial condition and results of operations. In the event that we incur substantial losses or liabilities and our insurance does not cover such losses or liabilities adequately or at all, our business, financial condition and results of operations may be materially and adversely affected.
We have extended significant loans in the past that do not generate income or have fixed repayment terms and which may have affected our ability to do business. During fiscal 2012 and 2013, we made significant advances of cash to one of our two largest principal shareholders who is also the Company’s current Chief Financial Officer and daughter of our Chief Executive Officer and Chairman. Although most of such advances have been repaid to the Company, such advances may have detrimentally affected our ability to do business insofar that such advances represented a major portion of the Company’s available cash. At August 31, 2013, the balance due from such shareholder was $418,658. The advances to shareholder are unsecured, non-interest bearing without fixed repayment terms although the shareholder has re-arrange her financing arrangements with banks and repaid most of the amounts during the last quarter of 2013. Such shareholder previously informally agreed to repay such amounts on or before November 1, 2013 but has since revised such date to February 28, 2014. Although such advances are no longer being made to such shareholder, such advances have not generated income to the Company and may have detrimentally affected our ability to grow the business for the benefit of all of the shareholders.
Risks Related to Doing Business in Hong Kong
Substantially all of our revenues to date are derived from our operations in Hong Kong. Accordingly, our business, financial condition, results of operations and prospects are subject, to a significant extent, to risks of doing business in Hong Kong.
The Hong Kong legal system embodies uncertainties which could limit the legal protections available to you and us. The Hong Kong legal system is a civil law system based on written statutes. The overall effect of legislation over the past approximately 25 years has significantly enhanced the protections afforded to various forms of foreign investment in Hong Kong. However, these laws, regulations and legal requirements change frequently, and their interpretation and enforcement involve uncertainties. For example, we may have to resort to administrative and court proceedings to enforce the legal protection that we enjoy either by law or contract. However, since Hong Kong administrative and court authorities have significant discretion in interpreting and implementing statutory and contractual terms, it may be more difficult to evaluate the outcome of administrative and court proceedings and the level of legal protection we enjoy than in more developed legal systems. For example, these uncertainties may impede our ability to enforce the contracts we have entered into. In addition, such uncertainties, including the inability to enforce our contracts, could materially and adversely affect our business and operation. In addition, intellectual property rights and confidentiality protections in Hong Kong may not be as effective as in the United States or other countries. Accordingly, we cannot predict the effect of future developments in the Hong Kong legal system, including the promulgation of new laws, changes to existing laws or the interpretation or enforcement thereof, or the preemption of local regulations by national laws. These uncertainties could limit the legal protections available to us, including our ability to enforce our agreements with our customers.
If tax benefits currently available to us in Hong Kong were no longer available, our effective income tax rates for our Hong Kong operations could increase. To date, all our net income has been generated from our Hong Kong operations. Our net income could be adversely affected by any change in the current tax laws in Hong Kong.
Foreign Exchange Risk.While our reporting currency is the US Dollar, our revenues, costs and expenses are denominated in HKD. All of our assets are denominated in HKD. As a "smallerresult, we are exposed to foreign exchange risk as our revenues and results of operations may be affected by fluctuations in the exchange rate between US Dollars and HKD. If the HKD depreciates against the US Dollar, the value of our HKD revenues, earnings and assets as expressed in our US Dollar financial statements will decline. To date,we have not entered into any foreign exchange forward contracts or similar instruments to attempt to mitigate our exposure to change in foreign currency rates.
Future inflation in Hong Kong may inhibit our ability to conduct business profitably. In recent years, the Hong Kong economy has experienced periods of rapid expansion and high rates of inflation. High inflation may in the future cause the Hong Kong government to impose controls on credit and/or prices, or to take other action, which could inhibit economic activity in Hong Kong, and thereby harm the market for our services.
It will be extremely difficult to acquire jurisdiction and enforce liabilities against our officers, directors and assets based in Hong Kong. Substantially all of our assets will be located in Hong Kong and our officers and our present directors reside outside of the United States. As a result, it may not be possible for United States investors to enforce their legal rights, to effect service of process upon our directors or officers or to enforce judgments of United States courts predicated upon civil liabilities and criminal penalties of our directors and officers under Federal securities laws.
We may have difficulty establishing adequate management, legal and financial controls in Hong Kong, which could impair our planning processes and make it difficult to provide accurate reports of our operating results. Although we will be required to implement internal controls, we may have difficulty in hiring and retaining a sufficient number of qualified employees to work in Hong Kong in these areas. As a result of these factors, we may experience difficulty in establishing the required controls, making it difficult for management to forecast its needs and to present the results of our operations accurately at all times. If we are unable to establish the required controls, market makers may be reluctant to make a market in our stock and investors may be reluctant to purchase our stock, which would make it difficult for you to sell any shares of common stock that you may own or acquire.
Because our funds are held in banks which do not provide insurance, the failure of any bank in which we deposit our funds could affect our ability to continue in business. Banks and other financial institutions in Hong Kong do not provide insurance for funds held on deposit. As a result, in the event of a bank failure, we may not have access to funds on deposit. Depending upon the amount of money we maintain in a bank that fails, our inability to have access to our cash could impair our operations, and, if we are not able to access funds to pay our employees and other creditors, we may be unable to continue in business.
Risks Relating to Our Common Stock and Our Status as a Public Company
We will incur significant costs as a result of operating as a public company, and our management will be required to devote substantial time to new compliance requirements, including establishing and maintaining internal controls over financial reporting, company"and we may be exposed to potential risks if we are unable to comply with these requirements. As a public company we will incur significant legal, accounting and other expenses under the Sarbanes-Oxley Act of 2002, together with rules implemented by the Securities and Exchange Commission and applicable market regulators. These rules impose various requirements on public companies, including requiring certain corporate governance practices. Our management and other personnel will need to devote a substantial amount of time to these requirements. Moreover, these rules and regulations will increase our legal and financial compliance costs and will make some activities more time-consuming and costly.
The Sarbanes-Oxley Act requires, among other things, that we maintain effective internal controls for financial reporting and disclosure controls and procedures. In particular, we must perform system and process evaluations and testing of our internal controls over financial reporting to allow management to report on the effectiveness of our internal controls over financial reporting, as definedrequired by Item 10Section 404 of Regulation S-K, the CompanySarbanes-Oxley Act. Compliance with Section 404 may require that we incur substantial accounting expenses and expend significant management efforts. We have not yet evaluated the internal control systems of Almonds Kisses (BVI) and its subsidiaries in order to allow our management to report on our internal controls on a consolidated basis as required by these requirements of SOX 404. Our testing may reveal deficiencies in our internal controls over financial reporting that are deemed to be material weaknesses. In the event we identify significant deficiencies or material weaknesses in our internal controls that we cannot remediate in a timely manner, the market price of our stock could decline if investors and others lose confidence in the reliability of our financial statements and we could be subject to sanctions or investigations by the SEC or other applicable regulatory authorities.
In addition, because of recent failures of Chinese businesses and losses sustained by public investors, we are likely to encounter a heightened level of scrutiny from regulators, including the Securities and Exchange Commission, diverting our management’s attention and increasing our costs.
Our management is not requiredfamiliar with the United States securities laws. Our management is generally unfamiliar with the requirements of the United States securities laws, which could adversely impact our ability to provide this information.comply with legal, regulatory, and reporting requirements of those laws. Our management may not be able to implement programs and policies in an effective and timely manner to adequately respond to such legal, regulatory and reporting requirements, including the establishment and maintenance of internal control over financial reporting. Any such deficiencies, weaknesses or lack of compliance could have a materially adverse effect on our ability to comply with the reporting requirements of the Exchange Act, which are necessary to maintain public company status, and could result in investigations by the Securities and Exchange Commission, and other regulatory authorities that could be costly, divert management’s attention and disrupt our business, If we were to fail to fulfill those obligations, our ability to operate as a public company would be in jeopardy, in which event you could lose your entire investment in our company.
There is a limited public trading market for our common stock, which may have an unfavorable impact on our stock price and liquidity. There has been a limited trading market for our common stock in the past and there can be no assurance that a trading market in our shares of common stock will further develop and be sustained. There were no reported trades in our common stock during the fiscal years ended August 31, 2012 and 2013. The first reported trade in fiscal 2014 occurred on November 15, 2013. The trading market for securities of companies quoted on the OTCQB or other quotation systems is substantially less liquid than the average trading market for companies listed on a national securities exchange. The quotation of our shares on the OTCQB or other quotation system may result in a less liquid market available for existing and potential shareholders to trade shares of our common stock, could depress the trading price of our common stock and could have a long-term adverse impact on our ability to raise capital in the future.
Since our Certificate of Incorporation authorizes the issuance of two million shares of “blank-check” preferred stock, our Board of Directors will have authority, without stockholder approval, to issue preferred stock with terms that may not be beneficial to common stock holders and with the ability to adversely affect stockholder voting power and perpetuate the board's control over our company.Our Certificate of Incorporation authorizes our board of directors to issue up to 2,000,000 shares of preferred stock, of which none have been issued to date. The preferred stock may be issued in one or more series, the terms of which may be determined at the time of issuance by the board of directors without further action by stockholders. These terms may include preferences as to dividends and liquidation, voting rights, conversion rights, redemption rights and sinking fund provisions. The issuance of any preferred stock could diminish the rights of holders of our common stock, and therefore could reduce the value of such common stock. In addition, specific rights granted to future holders of preferred stock could be used to restrict our ability to merge with, or sell assets to, a third party. The ability of our board of directors to issue preferred stock could make it more difficult, delay, discourage, prevent or make it more costly to acquire or effect a change-in-control, which in turn could prevent our stockholders from recognizing a gain in the event that a favorable offer is extended and could materially and negatively affect the market price of our common stock.
We may, in the future, issue additional shares of our common stock, which would reduce investors' percent of ownership and may dilute our share value. Our Certificate of Incorporation authorizes the issuance of 50,000,000 shares of common stock, of which 25,000,000 shares have been issued and are outstanding. The future issuance of common stock may result in substantial dilution in the percentage of our common stock held by our then existing stockholders. We may value any common stock issued in the future on an arbitrary basis. The issuance of common stock for future services or acquisitions or other corporate actions may have the effect of diluting the value of the shares held by our investors, and might have an adverse effect on any trading market for our common stock.
The price of our common stock may be adversely impacted by developments applicable to other Chinese companies. There has been substantial press regarding certain Chinese companies that have apparently engaged in frauds and deceptive practices resulting in significant losses to investors. Such activities and the resulting negative press has had a negative impact on the prices of the stocks of Chinese companies generally. There is no guarantee that such that such activities will not continue causing investors to avoid buying our stock. Such activities could have a depressive impact on the price of our common stock.
Increased scrutiny of Chinese companies by short-sellers. The fraudulent activities of certain Chinese issuers have encouraged analysts to investigate Chinese companies in an effort to discredit the disclosures in their public filings or otherwise uncover deceptive practices. If such analysts elect to investigate a company they will often short the stock and release materials disparaging the issuer or questioning the accuracy of its public disclosures. Given the current environment for Chinese stocks, if an analyst were to publish a negative article about us, it could cause an immediate and substantial decline in the price of our stock, regardless of the accuracy of the claims in the article.
The market price of our common stock can become volatile, leading to the possibility of its value being depressed at a time when you may want to sell your holdings. The market price of our common stock can become volatile. Numerous factors, many of which are beyond our control, may cause the market price of our common stock to fluctuate significantly. These factors include:
| · | our earnings releases, actual or anticipated changes in our earnings, fluctuations in our operating results or our failure to meet the expectations of financial market analysts and investors; |
| · | changes in financial estimates by us or by any securities analysts who might cover our stock; |
| · | speculation about our business in the press or the investment community; |
| · | significant developments relating to our relationships with our customers; |
| · | stock market price and volume fluctuations of other publicly traded companies and, in particular, those that are in our industry; |
| · | customer demand for our services; |
| · | investor perceptions of our industry in general and our Company in particular; |
| · | the operating and stock performance of comparable companies; |
| · | general economic conditions and trends; |
| · | announcements by us or our competitors of new services, significant acquisitions, strategic partnerships or divestitures; |
| · | changes in accounting standards, policies, guidance, interpretation or principles; |
| · | loss of external funding sources; |
| · | sales of our common stock, including sales by our directors, officers or significant stockholders; and |
| · | additions or departures of key personnel. |
Securities class action litigation is often instituted against companies following periods of volatility in their stock price. Should this type of litigation be instituted against us, it could result in substantial costs to us and divert our management’s attention and resources.
Moreover, securities markets may from time to time experience significant price and volume fluctuations for reasons unrelated to the operating performance of particular companies. These market fluctuations may adversely affect the price of our common stock and other interests in our Company at a time when you want to sell your interest in us.
Recently adopted SEC rules prohibit a reverse acquisition company from listing on a national securities exchange until the company has been in the U.S. over-the-counter market or on another regulated U.S. or foreign exchange for at least one complete fiscal year. Recently adopted SEC rules seek to improve the reliability of the reported financial results of reverse acquisition companies by requiring a pre-listing “seasoning period” during which the post-reverse acquisition public company must produce financial and other information in connection with its required SEC filings. The company also must maintain a requisite minimum share price for at least 30 of the most recent 60 trading days prior to the date of the initial listing application and the date of listing on any national securities exchange. By virtue of such rules it is unlikely that we will be eligible to list on a national securities exchange for at least one year following the Acquisition of Almonds Kisses BVI, and only if our stock trades above the requisite minimum price in accordance with the listing requirements of the applicable national securities exchange.
Item 1B. Unresolved Staff Comments| Item 1B. | Unresolved Staff Comments. |
AsWe are a "smallersmaller reporting company"company as defined by Item 10Rule 12b-2 of Regulation S-K, the Company isSecurities Exchange Act of 1934 and are not required to provide the information under this information.item.
We have rent-free use of 2,718 square feetThe Company leases office space in Hong Kong which maintains its principal executive offices located at 20 BroadUnits 2611-13A, 26/F, 113 Argyle Street, 7Mongkok, Kowloon, Hong Kong, SARth under an operating lease which has been extended to June 2015, with a fixed monthly rent expense of approximately $10,576 USD per month. We also maintain a branch office in Shenzhen, PRC located at 19A, Building 1, China Phoenix Building, Futian District, Shenzhen, PRC, and a branch office in Bangkok, Thailand located at Level 8 Zuellig House Building, No. 1-7, Silom Road, Silom Sub-District, Bangrak District, Bangkok 10500 Thailand. Management believes that the facilities are adequate for the Company’s current needs and for the foreseeable future. Floor, New York, New York 10005,
In addition, Motion Tech Development Limited, a property holding company which has been a 100% owned subsidiary of the Company since August 2013, is the owner of a residential property located Tai Po which is our principal placean area in the New Territories of business. This spaceHong Kong. The property is being made available to us by New York Kaida Capital Holding LLC. There is no termused as collateral for our use of the space, which can be terminated at any time. We expect that this space shall be sufficient for the next 24 months.a banking facility.
Item 3. Legal Proceedings| Item 3. | Legal Proceedings. |
There are no material pendingFrom time to time, we may become involved in various lawsuits and legal proceedings to which we are a party or to which anyarise in the ordinary course of our propertybusiness. However, litigation is subject to inherent uncertainties and an adverse result in these or other matters may arise from time to the besttime that may harm our business. We are currently not aware of any such legal proceedings or claims that we believe will have a material adverse affect on our knowledge, no such actions against us are contemplatedbusiness, financial condition or threatened.operating results.
Item 4. | Item 4. | Mine Safety Disclosures. |
Not applicable.
PartPART II
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities| Item 5. | Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. |
Market Information
ForOur common stock is traded in the period covered in this filing,over-the-counter market and since July 19, 2013 has been quoted on the Company'sOTCQB, officially part of the OTC Market Group’s OTC Link quotation system, under the symbol “ADGS”. Prior thereto, our common stock was approved on January 20, 2009 for quotation on the Over-The-Counter Bulletin Board (OTCBB)quoted under the symbol "LIPN." Prior to that date, there was no established trading market for our Common Share. The Company does not guarantee nor suggest being publicly traded on“LIPN”. For the OTCBB will necessarily generate a market for its common stock.
Presented below isperiods indicated, the following table sets forth the high and low bid information for fiscal year ending December 31, 2011. The information was obtained from www. https://www.otcbb.com.
| | | High | | | Low | |
| Year Ended December 31, 2010 | | | | | | |
| Quarter Ending March 31 | | $ | 0.01 | | | $ | 0.01 | |
| Quarter Ending June 30 | | $ | 0.01 | | | $ | 0.01 | |
| Quarter Ending September 30 | | $ | 0.05 | | | $ | 0.05 | |
| Quarter Ending December 31 | | $ | 0.05 | | | $ | 0.05 | |
| | | | | | | | | |
| Year Ended December 31, 2011 | | | | | | | | |
| Quarter Ending March 31 | | $ | 0.00 | | | $ | 0.00 | |
| Quarter Ending June 30 | | $ | 0.00 | | | $ | 0.00 | |
| Quarter Ending September 30 | | $ | 0.00 | | | $ | 0.00 | |
| Quarter Ending December 31 | | $ | 0.00 | | | $ | 0.00 | |
The OTCBB provides a limited trading market, and we can makesales prices per share of common stock. There were no assurances that any market-maker will agree to provide such quotations. Failure to develop or maintain an active trading market could negatively affect the value of our shares and make it difficult for shareholders to sell their shares or recover any part of their investmentreported trades in the company. Even if a market for our common stock does develop,during the market pricefiscal years ended August 31, 2012 and 2013. The first reported trade in fiscal 2014 occurred on November 15, 2013.
| Year ended August 31, 2012 | | High | | | Low | |
| | | | | | | |
| Sept. 1, 2011 to Nov. 30, 2011 | | $ | 0.00 | | | $ | 0.00 | |
| Dec. 1, 2011 to Feb. 28, 2012 | | $ | 0.00 | | | $ | 0.00 | |
| March 1, 2012 to May 31, 2012 | | $ | 0.00 | | | $ | 0.00 | |
| June 1, 2012 to Aug. 31, 2012 | | $ | 0.00 | | | $ | 0.00 | |
| | | | | | | | | |
| Year ended August 31, 2013 | | High | | | Low | |
| | | | | | | | | |
| Sept. 1, 2012 to Nov. 30, 2012 | | $ | 0.00 | | | $ | 0.00 | |
| Dec. 1, 2012 to Feb. 28, 2013 | | $ | 0.00 | | | $ | 0.00 | |
| March 1, 2013 to May 31, 2013 | | $ | 0.00 | | | $ | 0.00 | |
| June 1, 2013 to Aug. 31, 2013 | | $ | 0.00 | | | $ | 0.00 | |
| | | | | | | | | |
| Year ending August 31, 2013 | | High | | | Low | |
| | | | | | | | | |
| Sept. 1, 2013 to Nov. 30, 2013 | | $ | 0.60 | | | $ | 0.30 | |
Holders
As of our common stock may be highly volatile so thatDecember 15, 2013, there were approximately 50 record holders of our common stock.
Penny Stock Regulations
The SEC has adopted regulations which generally define so-called “penny stocks” to be an equity security that has a market price less than $5.00 per share or an exercise price of less than $5.00 per share, subject to certain exemptions. Our common stock will not be ableis a “penny stock” and is subject to Rule 15g-9 under the Exchange Act, or the Penny Stock Rule. This rule imposes additional sales practice requirements on broker-dealers that sell such securities to persons other than established customers and “accredited investors” (generally, individuals with a net worth in excess of $1,000,000 or annual incomes exceeding $200,000, or $300,000 together with their spouses). For transactions covered by Rule 15g-9, a broker-dealer must make a special suitability determination for the purchaser and have received the purchaser's written consent to the transaction prior to sale. As a result, this rule may affect the ability of broker-dealers to sell their shares at prices that allow them to recover any or all of their investment. Marketour securities and industry factors may adversely affect the ability of purchasers to sell any of our securities in the secondary market, thus possibly making it more difficult for us to raise additional capital.
For any transaction involving a penny stock, unless exempt, the rules require delivery, prior to any transaction in penny stock, of a disclosure schedule required by the SEC relating to the penny stock market. Disclosure is also required to be made about sales commissions payable to both the broker-dealer and the registered representative and current quotations for the securities. Finally, monthly statements are required to be sent disclosing recent price ofinformation for the penny stock held in the account and information on the limited market in penny stock.
There can be no assurance that our common stock regardlesswill qualify for exemption from the Penny Stock Rule. In any event, even if our common stock were exempt from the Penny Stock Rule, we would remain subject to Section 15(b)(6) of our actual operating performance. Factorsthe Exchange Act, which gives the SEC the authority to restrict any person from participating in a distribution of penny stock, if the SEC finds that could cause fluctuationssuch a restriction would be in our stock price may include, among other things:the public interest.
Rule 144
Prior to completion of the Transaction, we were considered a shell company. As a result, we are subject to the provisions of Rule 144(i) which limit reliance on Rule 144 by shareholders owning stock in a shell company. Under current interpretations, unregistered shares issued after we first became a shell company cannot be resold under Rule 144 until the following conditions were met:
• | Introductions of new products or new pricing policies by us or by our competitors;● | we ceased to be a shell company; |
• | The gain or loss of significant customers or product orders;● | we remained subject to the Exchange Act reporting obligations; |
• | Actual or anticipated variations in our quarterly results; |
• ● | The announcement of acquisitions or strategic alliances by us or by our competitors; |
• | Recruitment or departure of key personnel; |
• | The level and quality of securities research analyst coverage for our common stock; |
• | Changes inwe filed all required Exchange Act reports during the estimates of our operating performance or changes in recommendations by us or any research analysts that follow our stock or any failure to meet the estimates made by research analysts;preceding 12 months; and |
• | Market conditions in our industry and● | at least one year had elapsed from the economy astime we filed “Form 10 information” reflecting the fact that we had ceased to be a whole.shell company. |
Common Stock
We have authorized 50,000,000 shares of common stock, par value $.0001 per share. As of December 31, 2011, there were approximately 4,095,000 common stock shareholders of record.
Preferred Stock
We have authorized 2,000,000 shares of blank check preferred stock, none of which are issued and outstanding.
Dividends
We have never paid a dividend on our Common Stock and we currently intend to retain earnings for use in our business to finance operations and growth. Any future determination as to the distribution of cash dividends will depend upon our earnings and financial position at that time and such other factors as the Board of Directors may deem appropriate.
Securities Authorized for Issuance underUnder Equity Compensation Plans
The Company doesWe do not have in effect any compensation plans under which our equity securities are authorized for issuance and we do not have any equity compensation plans or any individual compensation arrangements with respect to its commonoutstanding stock or preferred stock. The issuance of any of our common or preferred stock is within the discretion of our Board of Directors, which has the power to issue any or all of our authorized but unissued shares without stockholder approval.options.
Recent Sales of Unregistered Securities
We sold the following equity securities during the fiscal years ended August 31, 2012 and 2013 that were not registered under the Securities Act of 1933, as amended:
On January 15, 2010,February 7, 2013, and as a condition to the Companyclosing of the Acquisition, we issued a total of 1,800,000750,000 shares of common stock valued at $18,000, to Northeast Professional Planning Group which was approved during the fourth quarterWang Yu Long, a designee of 2009 for services rendered in 2009.
In the year ending December 31, 2009,Conqueror, pursuant to a subscription agreement dated January 5, 2013 between Conqueror and the Company issued 347,800whereby Conqueror agreed to accept 750,000 shares of common stock in exchange for funds advanced and other loans made by Conqueror to the Company prior to the date thereof in the amount of $160,038. The securities were issued in reliance upon the exemption from registration pursuant to Section 4(2) of the Securities Act and Regulation S thereunder. Wang Yu Long is not a cash investment“US Person” (as defined in Rule 902 of $17,520.Regulation S) and the certificate representing the shares issued has been endorsed with a restrictive legend consistent with that exemption.
Issuer PurchasesOn April 12, 2013, we issued an aggregate of Equity20,155,000 shares of our common stock to the eight former shareholders of Almonds Kisses BVI in connection with the Acquisition in exchange for all of the outstanding shares of capital stock of Almonds Kisses BVI. The securities were issued in reliance upon the exemption from registration pursuant to Section 4(2) of the Securities Act and Regulation S thereunder. None of such former shareholders of Almonds Kisses BVI is a “US Person” (as defined in Rule 902 of Regulation S) and the certificates representing the shares issued to each of them was endorsed with restrictive legends consistent with that exemption.
None18
Item. 6. Selected Financial Data
As
| Item 6. | Selected Financial Data. |
We are a "Smaller Reporting Company," wesmaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information required byunder this item.
| Item 7. | Management’s Discussion and Analysis of Financial Condition and Results of Operations. |
Item 7. Management's Discussion
The following discussion and Analysisanalysis of Financial Conditionthe results of operations and Results of Operations
Application of Critical Accounting Practices
This Management's Discussion and Analysis of Financial Condition and Results of Operations in this Annual Report ending December 31, 2011 and 2010 on Form 10-Kfinancial condition should be read in conjunction with the accompanying Financialconsolidated financial statements of the Company and notes to those financial statements for the years ended August 31, 2013 and 2012, that are included elsewhere in this Annual Report on Form 10-K. Our discussion includes forward-looking statements based upon current expectations that involve risks and uncertainties, such as our plans, objectives, expectations and intentions. Actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of a number of factors, including those set forth under the Risk Factors, Special Note Regarding Forward Looking Statements and related notes. Our discussionBusiness sections in this Form 10-K. We use words such as “anticipate,” “estimate,” “plan,” “project,” “continuing,” “ongoing,” “expect,” “believe,” “intend,” “may,” “will,” “should,” “could,” and analysis of our financial condition and results of operationssimilar expressions to identify forward-looking statements.
All amounts are based upon our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. ("GAAP").U.S. Dollars unless otherwise noted.
Company Overview
Our significant accounting policies are more fully described inUnless the Notescontext otherwise requires, the “Company,” “we,” “us,” and “our” refer to the audited financial statements. The preparationcombined business of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and the related disclosures of contingent assets and liabilities. Actual results could differ from those estimates under different assumptions or conditions.
Overview and Plan of Operation
ADGS Advisory, Inc., formerly known as Life Nutrition Products, Inc. (the “Company”, “we”a Delaware corporation, and its direct and indirect wholly-owned subsidiaries, Almonds Kisses Limited (BVI), “us” and “our”) was previously a dietary supplementBritish Virgin Islands company, specializing in the development, marketing and distribution of all natural, proprietary, dietary supplements under the names Trim For Life3® Appetite Control and Trim For Life3® Energy Formula.
In our original business plan, we outlined a marketing strategy to compete more effectively in the dietary supplement marketplace. However, due to a lack of available financing, we were unable to implement the marketing strategy or invest in product expansion. We are no longer pursuing this business. As a result, we began to explore other viable options that may provide the potential to generate a positive cash flow to accommodate the costs of being a public company. With volatile economic conditions and unknown opportunities, we are unable to adequately determine if there are indeed, business opportunities that would lend to the Company acquiring additional capital or having the available resources to construct such a deal.
Our common stock is traded in the over-the-counter market under the symbol “LIPN”. Since January 20, 2009, it has been listed on the OTC Bulletin Board. As a public company with the potential for shares to trade on the open market, we believe the Company may be in a better position to raise additional capital to meet our operating costs. However, we cannot claim nor guarantee that by having Company stock publicly quoted that it will provide the opportunity to raise additional capital.
Our current operating costs are minimal due to limited business activities, but we do incur an expense in ongoing legal and professional services to meet our SEC obligations as a publicly held company. The Company may continue to meet these expenses by opting to raise additional capital through sales of our common stock, loans from our board of directors and affiliates, and/or other transactions to meet these obligations.
On September 7, 2010, we entered into a Share Exchange Agreement (the “Share Exchange Agreement”) with Conqueror GroupADGS Advisory Limited, a Hong Kong corporation, (“Conqueror”) and Acumen Charm Ltd.,Vantage Advisory Limited, a Hong Kong corporation, Motion Tech Development Limited, a British Virgin Islands company, and TH Strategic Management Limited, a Hong Kong corporation, (the “Conqueror Shareholder”). as well as ADGS Tax Advisory Limited, a Hong Kong corporation which is an 80% owned subsidiary, and Dynamic Golden Limited, a Hong Kong corporation which is 30% owned by ADGS Tax Advisory Limited. Pursuant to a Certificate of Amendment to the Share Exchange Agreement, atits Certificate of Incorporation filed with the closingState of the transaction contemplated in the Share Exchange Agreement (the “Transaction”),Delaware and effective as of July 19, 2013, the Company will acquirechanged its corporate name from “Life Nutrition Products, Inc.” to “ADGS Advisory, Inc.”.
We are primarily engaged in providing accounting, taxation, company secretarial, general corporate and consultancy services in Hong Kong.
On April 12, 2013, we acquired 100% of the issued and outstanding capital stock of Conqueror from the Conqueror Shareholder, making Conqueror a wholly-owned subsidiary of the Company. There was no prior relationship between the Company and any of its affiliates and the Conqueror Shareholder and any of its affiliates.
Conqueror owns 100% of the equity interest of Shenyang Kai Xin, a wholly-owned foreign enterprise incorporated in the People’s Republic of ChinaAlmonds Kisses Limited (BVI) (“PRC”Almonds Kisses BVI”), which entity has entered into contractual arrangements with Liaoning New Land Food & Beverage Co., Limited (“NLFB”) and Liaoning New Land Fast Frozen Food Co. Limited (“NLFF”), each a company incorporated in the PRC, which arrangements give Conqueror effective control of the business of NLFB and NLFF. NLFB is principally engaged in the processing and distribution of raspberry and blueberry drinks, wines and other related products in China, and NLFF is principally engaged in the cultivation, processing and distribution of fresh and frozen raspberries in the domestic market in China and internationally.
In consideration for the purchase of the Conqueror Shareholder’s interest in Conqueror, the Company will issue to designees of the Conqueror Shareholder a total of 23,905,000 newly issued shares of the Company’s common stock.
The closing of the Transaction is conditioned upon, among other things, satisfactory due diligence investigations by the parties, the cancellation of a total of 13,787,800 shares of the Company’s common stock by certain shareholders of the Company, the ability of certain designees of Conqueror to purchase a total of 4,010,000 shares of the Company’s common stock from non-affiliated shareholders of the Company in unrelated transactions, the accuracy at closing of the representations made by the parties in the Share Exchange Agreement, and the obtaining of necessary consents.
The First Amendment to the Share Exchange Agreement (the “First Amendment”) was entered into on November 17, 2010 by the Company with Conqueror and the Conqueror Shareholder. The First Amendment amends the terms of the Share Exchange Agreement in which 1,004,900 shares shall be redeemed by the Company contemporaneously with the execution of the First Amendment at an aggregate redemption price of $55,270 (the “Group B Redemption Price”) and 12,782,900 shares shall be redeemed by the Company at or before the closing at an aggregate redemption price of $49,731 (the “Group C Redemption Price”) pursuant to mutually acceptable and duly executed redemption agreements.
Contemporaneously with the execution of the First Amendment, Conqueror loaned the Company the principal amount of $55,270 in exchange for 20,155,000 shares of our common stock, representing in the aggregate approximately 80.1% of our issued and outstanding shares of common stock.
Almonds Kisses BVI was incorporated on March 1, 2011 as a limited liability company in the British Virgin Islands. ADGS Advisory Limited (“ADGS Hong Kong”) is a Hong Kong corporation which was incorporated on April 28, 2011 and had been wholly owned by the Company delivered a promissory note to Conqueror which proceeds were used to pay the Group B Redemption Price. The First Amendment further provides that at or before the closing, Conqueror shall loan the Company the principal amountsame group of $49,731 which shall be paid from the funds remaining in escrow (the “Remaining Escrow Funds”)shareholders until being acquired by Almonds Kisses BVI pursuant to a reorganization completed in 2012 to prepare for the Escrow Agreement dated asTransaction. Vantage Advisory Limited is a Hong Kong corporation which was incorporated on March 6, 2008 which has been wholly owned by Almonds Kisses BVI since January 2013. Motion Tech is a British Virgin Islands company which was incorporated on October 7, 2007 and has been wholly owned by Almonds Kisses BVI since August 2013. Motion Tech is a property holding company which owns a residential property. TH Strategic Management Limited is a Hong Kong corporation which was incorporated on March 16, 2010 which has also been wholly owned by Almonds Kisses BVI since October 2013. ADGS Hong Kong owns 80% of August 13, 2010, as amended on August 30, 2010,ADGS Tax Advisory Limited (“ADGS Tax”) which is a Hong Kong incorporated holding company. Dynamic Golden Limited which is also a Hong Kong incorporated company, which was 30% owned by ADGS Tax until November 19, 2013 and among Conqueror, the Company and Cyruli Shanks Hart & Zizmor LLP,has since been 30% owned by Almonds Kisses BVI, owns an investment in exchange for which the Company shall deliver a promissory note to Conqueror which proceeds shall be used to pay the Group C Redemption Price.
The First Amendment also provides thatresidential real property located in the event that the closing does not occur for any reason on or before January 31, 2011, then, among other things, the Remaining Escrow Funds shall be paid to the Company and used to promptly redeem 12,782,900 shares as provided therein at the Group C Redemption Price, and the then officers and directors of the Company shall resign with immediate effect and appoint such persons as designated by Conqueror as officers and directors.Tuen Mun, New Territories, Hong Kong.
The Closing was to transpire on or before January 31, 2011 but did it did not occur by that date. As a result,chart below presents our corporate structure as of May 11, 2011, and in accordance with the terms of the First Amendment, the Remaining Escrow Funds were paid to the Company and were used to redeem 12,782,900 shares at the Group C Redemption Price and the Company delivered a promissory note to Conqueror in the principal amount of $49,731. In addition, on May 11, 2011, Michael M. Salerno, the Company’s sole officer and director, resigned as an officer and director of the Company, and appointed Chu Zhanjun and Li Gang as directors, and Chu Zhanjun as President, Chief Executive Officer and Principal Financial Officer of the Company, each a designee of Conqueror.
As a result, a change in control has occurred, due to the resignation of Mr. Salerno as sole officer and director, appointment of Mr. Chu as President, Chief Executive Officer and Principal Financial Officer of the Company, and appointment of Mr. Chu and Mr. Li as directors.
As of the date hereof, we do not expect that the transaction contemplated by the Share Exchange Agreement will be completed at any time in future.
Our common stock is traded in the over-the-counter market under the symbol “LIPN”. Since January 20, 2009, it has been listed on the OTC Bulletin Board. As a public company with the potential for shares to trade on the open market, we believe the Company may be in a better position to raise additional capital to meet our operating costs. However, we cannot claim nor guarantee that by having Company stock publicly quoted that it will provide the opportunity to raise additional capital.
Our current operating costs are minimal due to limited business activities, but we do incur an expense in ongoing legal and professional services to meet our SEC obligations as a publicly held company. The Company may continue to meet these expenses by opting to raise additional capital through sales of our common stock, loans from our board of directors and affiliates, and/or other transactions to meet these obligations.
We will continue to review opportunities to improve our financial stability by seeking established businesses which have the financial wherewithal to either invest capital into our Company operations in exchange for our common stock, or, if in a similar line of business consider a merger or an acquisition.
Management believes an opportunity may avail itself as a result of being a reporting company with common stock quoted on the OTCBB. Management believes there are savvy investors and/or businesses that understand the value of a public company and may be interested in investment of capital, merger or acquisition. As a reporting company, our view of the Company value includes; the ability to use the Company’s common stock to raise capital, the Company’s common stock quoted on the OTCBB, audited financials, provide shareholders liquidity, obtain loans from financial lenders, and possibly increase growth opportunities through mergers and/or acquisitions.
Economic conditions may be somewhat unsettled and may cause uneasiness with prospective businesses and speculative investors. Management believes there is a viable market of prospects that are searching for a public company in which they could invest, merge or acquire. However, we cannot guarantee nor claim that the Company will be able to find a suitable opportunity.this report:
Results of Operations
Year ended December 31, 2011 compared to year ended December 31, 2010
Revenue: Revenue was $0 for the year December 31, 2011 compared to $168 for the year ended December 31, 2010, a decrease of $168. This decrease is a result of limited marketing activities and expired inventory.
Gross Profit: Gross profit was $0 for the year ended December 31, 2011 compared to ($139) for the year ended December 31, 2010, a decrease $139. This is due to the sales decrease.
Selling, General and Administrative Expenses: Selling, general and administrative expenses were $65,056 for the year ended December 31, 2011 compared to $25,193 for the year ended December 31, 2010, an increase of $39,863 due to increased professional fees.
Other Income (Expense): Other income (expense) was ($4,670) for the year ended December 31, 2011 compared to ($339) for the year ended December 31, 2010 due to increased interest expense resulting from advances to the Company from Conqueror Group Limited.
Impact of Inflation
Inflation has not had a material effect on our results of operations.
Liquidity and Capital Resource
Net cash used in operating activities was ($54,466) for the year ended December 31, 2011, compared to ($15,293) for the year ended December 31, 2010. This increase in cash used relates to higher professional fees and net losses offset by stock-based compensation.
The Company's net cash provided by financing activities was $54,398 for the year ended December 31, 2011 compared to net cash provided by financing activities of $10,900 for the year ended December 31, 2010. The increase was due to advances to the Company from Conqueror Group Limited.
As of December 31, 2011, the Company had $0 in cash. It is meeting its working capital needs by relying upon the proceeds from stock issuances.
Obligations are being met on a month-to-month basis as cash becomes available. There can be no assurances that the Company's present cash flow will be sufficient to meet current and future obligations. The Company has incurred losses since its inception, and continues to require additional capital to fund operations and meet SEC requirements of being a publicly held company. As such, the Company's ability to pay its already incurred obligations is mostly dependent on the Company achieving its revenue goals or raising additional capital in the form of equity or debt. These matters raise substantial doubt as to the Company's ability to continue as a going concern. The financial statements do not include any adjustments relating to the recovery and classification of recorded assets or the amounts and classifications of liabilities that may be necessary in the event the company cannot continue in existence.
Off-Balance Sheet Financings
None
Critical Accounting Policies
The Company's financial statements are prepared under the accrual method of accounting. Revenues will be recognized in the period the services are performed and costs are recorded in the period incurred rather than paid.
Impact of Recent Accounting Pronouncements
See Note 2. "Summary of Significant Accounting Policies" to the financial statements in this Form 10-K.
Item 7A Quantitative and Qualitative Disclosure About Market Risks
We do not hold instruments that are sensitive to changes in interest rates, foreign currency exchange rates or commodity prices. Therefore, we believe that we are not materially exposed to market risks resulting from fluctuations from such rates or price.
LIFE NUTRITION PRODUCTS, INC.
FINANCIAL STATEMENTS
DECEMBER 31, 2011 AND 2010
CONTENTS | | PAGE | |
| | | | |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMADGS Advisory, Inc. (formerly Life Nutrition Products, Inc.), a Delaware corporation | | | F-2 | |
| | | | | |
FINANCIAL STATEMENTS: | | | | | |
| | | | | | ê 100% | | | | | |
| | | | | | | | | | | |
| | | | | Almonds Kisses Limited (BVI), a British Virgin Islands company | | | | | |
| | | | | | | | | | |
| ê 100% | | ê 100% | | ê 100% | | ê 100% | | ê 30% | |
| | | | | | | | | | |
| ADGS Advisory Limited, | | Vantage Advisory Limited, | | TH Strategic Management | | Motion Tech Development | | Dynamic Golden | |
| a Hong Kong corporation | | a Hong Kong corporation | | Limited, a Hong Kong corporation | | Limited, a British Virgin Islands company | | Limited, a Hong Kong corporation | |
| | | | | | | | | | |
| ê 80% | | | | | | | | | |
| | | | | | | | | | |
| ADGS Tax Advisory Limited | | | | | | | | | |
| a Hong Kong corporation | | | | | | | | | |
Critical Accounting Policies
While our significant accounting policies are more fully described in Note 2 to our financial statements, we believe the following accounting policies are the most critical to aid you in fully understanding and evaluating this management discussion and analysis.
Basis of presentation
The accompanying audited consolidated financial statements and related notes have been prepared in conformity with accounting principles generally accepted in the United States of America (US GAAP). The preparation of the consolidated financial statements in accordance with US GAAP requires management of the Company to make a number of estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting year. Significant items subject to such estimates and assumptions include the recoverability of the carrying amount and the estimated useful lives of long-lived assets and valuation allowances for receivables. Actual results could differ from those estimates.
The consolidated financial statements include all accounts of the Company and its subsidiaries as disclosed in note 1. All material inter-company balances and transactions have been eliminated in consolidation.
As both the Company and its subsidiaries, ADGS Hong Kong and ADGS Tax are under common control, the financial statements of the Company have been presented as if the receipt of assets and liabilities of the subsidiaries at their net carrying amount been entered into as of March 1, 2011 in accordance with ASC 805-50-15-6. Accordingly, financial information related to periods prior to the assets and liabilities are that of the Company’s subsidiaries.
The accompanying financial statements are presented on a going concern basis. Although the Company had a working capital surplus of $80,850 at August 31, 2013, the Company had payables in excess of cash and receivables of $2,856,376. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. Our continuation as a going concern is dependent on our ability to meet our obligations as they become due, to obtain additional financing as may be required and maintain profitability. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. Our independent registered public accounting firm's report on the financial statements as of and for the year ended August 31, 2013, contained an emphasis paragraph regarding our ability to continue as a going concern. Management plans to continue its efforts to raise funds through debt or equity in the near future to sustain our operations.
Revenue recognition
The Company generates revenue primarily from providing accounting, taxation, company secretarial, consultancy services, consultancy service for slope inspection and rental income.
(i) Revenue generates from providing accounting, taxation, company secretarial and consultancy services is recognized when persuasive evidence of an arrangement exists, the related services are provided and when the collection is probable, the price is fixed or determinable and collectability is reasonably assured. The Group generates its revenues from providing professional services under fixed-fee billing arrangements.
In fixed-fee billing arrangements, the Company agrees to a pre-established fee in exchange for a pre-determined set of professional services. Generally, the client agrees to pay a fixed-fee in monthly installments over the specified contract term. These contracts are for varying periods and generally permit the client to cancel the contract before the end of the term.
(ii) Consultancy service for slope inspection represents under fixed price contract is recognized when the related services are provided and when the collection is probable, the price is fixed or determinable and collectability is reasonably assured.
(iii) Rental income
Rental income from operating leases is recognized on a straight-line basis over the term of the relevant lease. Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognized on a straight-line basis over the lease term.
Purchased intangible assets and goodwill
The Company assesses the useful lives and possible impairment of existing recognized intangible assets when an event occurs that may trigger such a review. Factors considered important which could trigger a review include:
| - | significant underperformance relative to historical or projected future operating results; |
| - | significant changes in the manner of use of the acquired assets or the strategy for our overall business; |
| - | identification of other impaired assets within a reporting unit; |
| - | disposition of a significant portion of an operating segment; |
| - | significant negative industry or economic trends; |
The intangible assets are amortized using the straight line method over a period of 10 years.
Income taxes
The Company accounts for income taxes under FASB ASC Topic 740 “Income Taxes”. Deferred income tax assets and liabilities are determined based upon differences between the financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be effective when the differences are expected to reverse.
Deferred tax assets are reduced by a valuation allowance to the extent management concludes it is more likely than not that the deferred tax assets will not be realized. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the statements of income in the period that includes the enactment date.
The Company records uncertain tax positions when it is more likely than not that the tax positions will not be sustained upon examination by the respective tax authority.
The Company recognizes interest and penalty related to income tax matters as income tax expense. As of August 31, 2013 and August 31, 2012, there was no penalty or interest recognized as income tax expenses.
Economic and political risks
The major operations of the Company are conducted in Hong Kong, the PRC. Accordingly, the political, economic, and legal environments in Hong Kong, the PRC, as well as the general state of Hong Kong’s economy may influence the business, financial condition, and results of operations of the Company.
Among other risks, the Company's operations are subject to the risks of restrictions on: changing taxation policies; and political conditions and governmental regulations.
Recently issued accounting standards not yet adopted
The Company has reviewed all recently issued, but not effective, accounting pronouncements and does not believe the future adoption of any such pronouncements will cause a material impact on its financial condition or the result of its operation.
Trends and Uncertainties
Insofar that our revenues are mainly derived from providing professional services to our clients under fixed-fee billing arrangements, the number of clients we have at any given time and the fees billed are the Company’s key uncertainties. The recent growth in revenues was primarily due to the acquisition of customer lists and client bases in 2011 and, therefore, we cannot be certain that this growth represents a trend which will continue although we have recently made acquisitions and we plan to make additional acquisitions in the upcoming years and we are regularly exploring such opportunities which may benefit our business and increase our revenues. In the future, we expect that we will seek to purchase other customer lists and client bases as part of our overall growth strategy, although there can be no assurance that we will be able to do any of the foregoing on terms which will be acceptable to us.
Other key uncertainties include our high leverage and highly variable interest expense. To date, we have significantly relied upon debt financings to fund our operations. At August 31, 2012 (audited) and August 31, 2013 (audited), we had outstanding bank loans (excluding bank overdrafts) in the principal amount of $2,524,985 and $2,286,785, respectively. We also had bank overdrafts of $744,077 as of August 31, 2013. Interest expense from bank loans and overdrafts (excluding capital lease interest) for the year ended August 31, 2013 was $151,872 and for year ended August 31, 2012 was $47,332. Such loans are primarily term loans with maturity dates ranging from November 2013 to October 2037. Approximately $0.5 million of the bank loans are to be repaid over the next five years. While we have begun to achieve profitable operations during fiscal 2013, there can be no assurance that such profitability will continue or that revenues from our operations will be able to service these debt obligations. See “Risk Factors” elsewhere in this report for further discussion of these uncertainties and others.
In addition to the foregoing, as of August 31, 2013, advances to shareholder total $418,658. See “Certain Relationships and Related Transactions, and Director Independence” elsewhere herein. The advances to shareholder represent unsecured, non-interesting bearing loans without fixed repayment terms. Although most of such advances have been repaid to the Company, such advances may have detrimentally affected our ability to do business insofar that such advances represented a major portion of the Company’s available cash. These advances were provided as a special accommodation to such shareholder whose personal properties were provided as collateral for bank loans obtained by the Company. Although there is no binding obligation on the part of the shareholder to repay such loans, such shareholder previously informally agreed to repay such amounts on or before November 1, 2013 but has since revised such date to February 28, 2014. The foregoing represents another key uncertainty since no assurance can be made that such advances will be repaid on or before February 28, 2014 or at all. In addition, although such advances are no longer being made to such shareholder, such advances have not generated income to the Company and may have detrimentally affected our ability to grow the business for the benefit of all of the shareholders.
Principal Components of Our Income Statement
Revenue
Our revenue is derived from providing professional services to our clients under fixed-fee billing arrangements. The most significant factors that affect our revenue are number of clients and our fees billed. In fixed-fee billing arrangements, we agree to a pre-established fee in exchange for a pre-determined set of professional services. Generally, our client agrees to pay a fixed-fee every month over the specified contract term. These contracts are for varying periods and generally permit the client to cancel the contract before the end of the term.
Operating expenses
Our operating expenses consist of direct cost of revenue, general and administrative expenses.
Direct cost of revenue
Our direct cost of revenue primarily consists of commission paid, consultant fees, legal and professional fees, management fees, salaries, secretarial fees and sub-contractor fees.
General and administrative expenses
Our general and administrative expenses include advertising and exhibitions, computer fee, depreciation of property and equipment, motor vehicles, rent, rates and building management fee and other miscellaneous expenses related to our administrative activities.
Our operating expenses are positively correlated to our revenue, with the anticipated expansion of our Company, we anticipate the absolute dollars of the operating expenses will increase accordingly.
Other comprehensive income
Other comprehensive income reflects foreign currency translation adjustment according to our accounting policies.
Year Ended August 31, 2013 compared to Combined Results for the Year Ended August 31, 2012
The following table presents the consolidated statements of operations of the Company for the year ended August 31, 2013 (“Y2013”) as compared to the year ended August 31, 2012 (“Y2012”).
| | | For the year ended August 31, 2013 | | | For the year ended August 31, 2012 | |
| | | | | | | | | |
| Revenue | | $ | 3,198,160 | | | $ | 1,705,024 | |
| Less: Operating expenses | | | | | | | | |
| Direct cost of revenue | | | (1,425,678 | ) | | | (1,308,729 | ) |
| General and administrative expenses | | | (842,932 | ) | | | (544,710 | ) |
| Operating profit/(loss) | | | 929,550 | | | | (148,415 | ) |
| Other income | | | 2,494 | | | | - | |
| Other expenses | | | (154,947 | ) | | | (47,754 | ) |
| Net profit/(loss) | | | 777,097 | | | | (196,169 | ) |
| Income tax expenses | | | (152,300 | ) | | | - | |
| Other comprehensive income | | | (10,395 | ) | | | 28 | |
| Total comprehensive income/(loss) | | | 614,402 | | | | (196,141 | ) |
| Comprehensive loss attributable to non-controlling interests | | | 22,813 | | | | 22,684 | |
| Comprehensive income/(loss) attributable to Almonds Kisses | | $ | 637,215 | | | $ | (173,457 | ) |
Revenue
Our business for the Y2013 expanded rapidly. We recorded of $3.2 million for Y2013, representing an increase of $1.5 million as compared to the results of $1.7 million for Y2012. The increase was primarily due to the increase of revenue stream in corporate restructuring, insolvency services and multi-disciplinary advisory services and a steadily growth in accounting and corporate services.
General and administrative expenses
| | | For the year ended August 31, 2013 | | | For the year ended August 31, 2012 | | | % change | |
| | | | | | | | | | | | | |
| Revenue | | $ | 3,198,160 | | | $ | 1,705,024 | | | | +88 | % |
| Less: Operating expenses | | | | | | | | | | | | |
| Direct cost of revenue | | | (1,425,678 | ) | | | (1,308,729 | ) | | | +9 | % |
| General and administrative expenses | | | (842,932 | ) | | | (544,710 | ) | | | +55 | % |
| Operating profit/(loss) | | $ | 929,550 | | | $ | (148,415 | ) | | | +726 | % |
The significant increase in general and administrative expenses is mainly caused by the increase of revenue stream in our services which led to more general and administrative expenses incurred.
Other expense
Other expense represents the interest expense for the bank loans of $154,947 and $47,754 in Y2013 and Y2012 respectively. The increase in the amount is mainly caused by the increase in bank overdrafts of $0.7m made to the Company in Y2013.
Other comprehensive income
Other comprehensive income represents the foreign currency translation adjustment of $10,395 and $28 in Y2013 and the Y2012 respectively.
Liquidity and Capital Resources
As of August 31, 2013, we had cash on hand of $164,314, which represented an increase of $35,313 from $129,001 as of August 31, 2012, other current assets of $1,452,763, and other current liabilities of $1,391,113. Working capital was $225,964 and the ratio of current assets to current liabilities was 1.2 to 2 as of August 31, 2013.
As of August 31, 2013 we had long term debt of $3,453,612, which represented an increase of $1,843,035 from $1,610,577 as of August 31, 2012; total assets of $4,765,877 as of August 31, 2013 representing an increase of $2,893,621 from $1,872,256 as of August 31, 2012. The ratio of long term debts to total assets was 0.7 to 1 as of August 31, 2013.
These conditions raise substantial doubt about the Company’s ability to continue as a going concern. The Company’s continuation as a going concern is dependent on its ability to meet its obligations, to obtain additional financing as may be required and ultimately to attain profitability. The financial statements do not include any adjustment that might result from the outcome of this uncertainty. Our management plans to continue its efforts to raise funds through debt or equity in the near future to sustain its operations.
The following is a summary of cash provided by or used in each of the indicated type of activities during the year ended August 31, 2013 and 2012, respectively:
| | | For the year ended August 31, 2013 | | | For the year ended August 31, 2012 | |
| Cash provided by (used in): | | | | | | |
| Operating activities | | $ | 1,054,287 | | | $ | (17,320 | ) |
| Investing activities | | | (1,926,451 | ) | | | (94,800 | ) |
| Financing activities | | | 907,202 | | | | 230,231 | |
| Effect of change of exchange rates | | | 275 | | | | (17 | ) |
| | | | | | | | | |
| Cash, beginning of period | | | 129,001 | | | | 10,907 | |
| Cash, end of period | | $ | 164,314 | | | $ | 129,001 | |
Net cash provided by operating activities was $1,054,287 for the year ended August 31, 2013, as compared to net cash used in operating activities of $17,320 for Y2012. The increase was mainly due to a net profit of $624,625, deferred revenue of $580,241, income tax payable of $192,075 and accrued liabilities of $192,075, offset by accounts receivable of $(564,561). The decrease in Y2012 was mainly due to a net loss of $(196,169), a $(27,320) utility and other deposits increase driven by moving to a new office, and an increase of $(18,518) prepaid expenses for the Company’s transaction pursuant to the Share Exchange Agreement, offset by amortization of intangible assets adjustments of $179,496.
Net cash used in investing activities was $(1,926,451) in Y2013, as compared to net cash used in investing activities of $94,800 for Y2012. The increase was mainly due to the purchase of property and equipment which amounted to $1,935,864.
Net cash provided by financing activities was $907,202 in Y2013, as compared to $230,231 in Y2012. The increase in Y2013 was primarily caused by repayment of related party advances (shareholder) of $4,655,559, advances received from the same related party of $750,445 in Y2013, bank loans of $1,230,111 and bank overdrafts of $744,077, offset by related party advances of $(4,831,702) and repayment of bank loans of $(1,483,361). The decrease in Y2012 was primarily caused by repayment of related party advances of $3,951,854, bank loans of $2,571,199 and income received on behalf of the Company of $348,897, offset by related party advances of $(6,591,003). The advances to shareholder represented unsecured, non-interesting bearing loans without fixed repayment terms. Although there is no binding obligation on the part of the shareholder to repay such loans, such shareholder previously informally agreed to repay such amounts on or before November 1, 2013 which date has been revised to February 28, 2014.
The Company had bank loans with outstanding principal of $2.3 million as of August 31, 2013 and $2.5 million as of August 31, 2012. Summary of total bank loans is as follows:
| Nature of loans | | Terms of loans | | Outstanding loan amount | | Current annualized interest rate | | Collateral |
| | | | | | | | | | |
| Term loan | | Ranging from 1 year to 25 years | | $ | 2,286,785 | | Ranging from annual rate from 0.38% to 6.98% | | Property and personal guarantee from related party and third party |
| | | | | | | | | | |
| | | | | $ | | | | | |
The valuations for the above collaterals on August 15, 2013 were approximately $3.7m while the total outstanding loan amount was approximately $2.3m.
The Company had assets held under capital leases, which represent leases of motor vehicle. The cost of motor vehicle under capital lease was $154,040 at August 31, 2013. The future minimum lease payments required under the capital leases and the present value of the net minimum lease payments as of August 31, 2013 are as follows:
| | | Amount | |
| Year ending August 31, | | | |
| 2014 | | $ | 27,345 | |
| 2015 | | | 27,345 | |
| Thereafter | | | 65,442 | |
| Total minimum lease payment | | $ | 120,132 | |
| Less: Imputed interest | | | (8,051 | ) |
| Present value of net minimum lease payments | | $ | 112,081 | |
| Less: Current maturities of capital leases obligations | | | (23,775 | ) |
| Long-term capital leases obligations | | $ | 88,306 | |
Material capital expenditure commitments
We anticipate that we will require a high level of capital expenditure in the foreseeable future to fund our future growth. We intend to fund our capital expenditures and future acquisitions out of internal sources of liquidity and/or through access to additional financing from external sources. Currently, the Company has not entered into any agreements for any potential acquisitions. As a result, there are no material capital expenditure commitments as of August 31, 2013.
Contractual Obligations
The following table sets forth information regarding the Company's contractual payment obligations excluding the bank overdrafts of $0.7 million as of August 31, 2013.
| | | | | | Payment due by period | |
| Contractual obligations | | Total | | | < 1 year | | | 1 - 3 years | | | 3 - 5 years | | | > 5 years | |
| | | | | | | | | | | | | | | | |
| Borrowing: | | | | | | | | | | | | | | | |
| - Capital lease | | $ | 120,132 | | | $ | 27,345 | | | $ | 54,690 | | | $ | 38,097 | | | $ | - | |
| - Bank loan | | | 2,286,785 | | | | 107,548 | | | | 232,556 | | | | 169,745 | | | | 1,776,936 | |
| - Loan from a related party | | | 750,726 | | | | - | | | | - | | | | 750,726 | | | | - | |
| | | | | | | | | | | | | | | | | | | | | |
| Operating lease obligation: | | | | | | | | | | | | | | | | | | | | |
| - Office rental | | | 228,276 | | | | 134,105 | | | | 94,171 | | | | - | | | | - | |
| | | $ | 3,385,919 | | | $ | 268,998 | | | $ | 381,417 | | | $ | 958,568 | | | $ | 1,776,936 | |
Off-Balance Sheet Arrangement
There are no off-balance sheet arrangements between us and any other entity that have, or are reasonably likely to have, a current or future effect on our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to shareholders.
We have not entered into any financial guarantees or commitments to guarantee the payment obligations of any third parties. We have not entered into any derivative contracts that are indexed to our shares and classified as shareholder’s equity or that are not reflected in our consolidated financial statements. Furthermore, we do not have any retained or contingent interest in assets transferred to an unconsolidated entity that serves as credit, liquidity or market risk support to such entity. We do not have any variable interest in any unconsolidated entity that provides financing, liquidity, market risk or credit support to us.
We may be exposed to interest rate risk in relation to the bank loans we maintain. The interest rate risk is managed by the Directors of the Company on an ongoing basis with the primary objective of limiting the extent to which interest expense could be affected by adverse movement in interest rates. A 100 basis point increase or decrease is used when reporting interest rate risk internally to key management personnel and represents management’s assessment of the reasonably possible change in interest rates. If interest rates had been 100 basis points higher/lower and all other variables were held constant, the Company’s post-tax profit for the year ended August 31, 2013 would increase/decrease by US$8,105 as compared with the combined post-tax profit for the year ended August 31, 2012.
| Item 7A | Quantitative and Qualitative Disclosures About Market Risk. |
We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item
| Item 8. | Financial Statements and Supplementary Data. |
See the Financial Statements annexed to this report.
| Item 9. | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. |
Effective as of April 29, 2013, the Company engaged Union Power HK CPA Limited (“Union Power HK”) as its principal independent accountants to audit the financial statements of the Company. Union Power HK replaces Wei, Wei & Co., LLP, which firm was dismissed as the principal independent accountants of the Company effective as of April 29, 2013. The Company’s Board of Directors considered the matter and approved the change in the Company’s principal independent accountants.
During the Company’s two most recent fiscal years preceding the dismissal of the former accountants and any subsequent interim period preceding the date hereof, there were no disagreements with the former accountants on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which disagreements, if not resolved to the satisfaction of the former accountants, would have caused it to make reference to the subject matter of the disagreements in connection with its report.
During the Company’s two most recent fiscal years preceding the dismissal of the former accountants and any subsequent interim period preceding the date hereof, there were no reportable events as defined in Item 304(a)(1)(v) of Regulation S-K.
| Item 9A. | Controls and Procedures. |
Under the supervision and with the participation of our management, including the Chief Executive Officer and Chief Financial Officer, we have evaluated the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) of the Exchange Act) as of the end of the period covered by this report. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that, as of August 31, 2013, these disclosure controls and procedures were effective to ensure that all information required to be disclosed by us in the reports that we file or submit under the Exchange Act is: (i) recorded, processed, summarized and reported, within the time periods specified in the Commission’s rule and forms; and (ii) accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.
There have been no material changes in internal control over financial reporting that occurred during the fourth fiscal quarter that have materially affected, or are reasonably likely to materially affect the Company’s internal control over financial reporting.
Management’s Annual Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is a process designed by, or under the supervision of, the Chief Executive Officer and Chief Financial Officer and effected by our Board of Directors, management and other personnel, 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 evaluation of internal control over financial reporting includes using the COSO framework, an integrated framework for the evaluation of internal controls issued by the Committee of Sponsoring Organizations of the Treadway Commission, to identify the risks and control objectives related to the evaluation of our control environment.
Based on our evaluation under the frameworks described above, our management has concluded that our internal control over financial reporting was effective as of August 31, 2013.
This annual report does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation requirements by the company’s registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the company to provide only management’s report in this annual report.
| Item 9B. | Other Information. |
Not applicable.
| Item 10. | Directors, Executive Officers and Corporate Governance. |
Directors and Executive Officers
Set forth below are our present directors and executive officers. Note that there are no other persons who have been nominated or chosen to become directors nor are there any other persons who have been chosen to become executive officers. There are no arrangements or understandings between any of the directors, officers and other persons pursuant to which such person was selected as a director or an officer. Directors are elected to serve until the next annual meeting of stockholders and until their successors have been elected and have qualified. Officers serve at the discretion of the Board of Directors.
| Name | | Age | | Position | | Has Served as Director Since |
| | | | | | |
| Li Lai Ying | | 57 | | Chairman, Chief Executive Officer, Secretary and Director | | April 2013 |
| | | | | | |
| Tso Yin Yee | | 38 | | Chief Operating Officer and Director | | April 2013 |
| | | | | | |
| Tong Wing Shan | | 36 | | Chief Financial Officer | | - |
| | | | | | |
| Pang Yiu Kwong | | 50 | | Director | | April 2013 |
The following sets forth information about our directors and executive officers:
Li Lai Ying has been our Chairman of the Board, Chief Executive Officer, Secretary and a Director since April 2013. From April 2013 to November 2013, she was also our Chief Financial Officer. She has been Chief Executive Officer of ADGS Hong Kong since April 2011. She will be responsible for the strategic planning, overall operation of the Company and will oversee the financial reporting matters for the Company. Ms. Li has served as a Director of Rodney Engineering Company Limited (“Rodney”) since 1980 which company provides construction auditing and construction management services. Ms. Li holds overall responsibility of Rodney for daily operation and management. She has over 30 years experience in project management and construction auditing. Ms. Li’s leadership experience and knowledge were important qualifications considered in designating her for appointment to the Board. In addition, as the Chief Executive Officer, her presence on the Board will assist the Board in remaining informed regarding the operations of the Company and the progress on business plans.
Tso Yin Yee has been our Chief Operating Officer and a Director since April 2013. She has been Chief Operating Officer and a Director of ADGS Hong Kong since April 2011. She will oversee the daily business operations of the Company. Ms. Tso is a Practicing Certified Public Accountant in Hong Kong since January 2005 and received her bachelor’s degree in accountancy from the Hong Kong Polytechnic University. From May 2006 to March 2011, she was a Director of Honest Joy Accounting Service Co., Ltd. Ms. Tso is an experienced insolvency practitioner being appointed as Joint and Several Provisional Liquidator under Panel ‘T’ by Official Receiver’s Office under Government of Hong Kong Special Administrative Region for the period of 24 months from January 1, 2012 to December 31, 2013. This background and Tso Yin Yee’s experiences as a professional in accountancy and insolvency led to the conclusion that she should serve as a director of the Company.
Tong Wing Shan, Michelle has been our Chief Financial Officer since November 2013 and has been a director of Almonds Kisses BVI, the Company’s wholly owned subsidiary since its inception in March 2011, and a director of ADGS Advisory Limited, a Hong Kong corporation and the Company’s indirect wholly owned subsidiary, since its inception in April 2011. In addition, since 2005, she has been a Manager and Chief Financial Officer of Eugenics Add Centre for Education, an organization located in Hong Kong which provides tutoring services to primary and secondary school students. From 2000 to 2005, she was Finance Manager of Rodney Engineering Company Limited, a Hong Kong corporation which provides engineering services.
Pang Yiu Kwong has been our Director since April 2013. Mr. Pang is a practicing member of Hong Kong Law Society since November 1999 and has been an attorney with Michael Pang & Co. in Hong Kong since April 2004. Mr. Pang is an experienced insolvency practitioner being appointed as Joint and Several Provisional Liquidator under Panel ‘T’ by Official Receiver’s Office under Government of Hong Kong Special Administrative Region for the period of 24 months from January 1, 2012 to December 31, 2013. This background and Pang Yiu Kwong’s experiences as a professional in law and in insolvency work led to the conclusion that he should serve as a director of the Company.
There are no family relationships of any kind among our directors, executive officers, or persons nominated or chosen by us to become directors, except that Tong Wing Shan is the daughter of Li Lai Ying, the Company’s Chairman, Chief Executive Officer and Secretary. Li Lai Ying is also the mother of Tong Wing Yee, who along with Tong Wing Shan are the two largest shareholders of the Company. Both Tong Wing Shan and Tong Wing Yee are directors of the Company’s subsidiaries, Almonds Kisses BVI and ADGS Hong Kong, and Tong Wing Yee is also a director of ADGS Tax and Dynamic Golden Limited.
Involvement in Certain Legal Proceedings
To the knowledge of the Company, none of the directors, executive officers, or persons nominated or chosen by us to become directors has been personally involved in any legal proceedings as defined in Section 401 of Regulation S-K in the past ten years.
Audit Committee Financial Expert
We do not have an audit committee financial expert, as such term is defined in Item 407(d)(5) of Regulation S-K, serving on our audit committee because we have no audit committee and are not required to have an audit committee because we are not a listed security.
Compliance with Section 16(a) of the Exchange Act
Section 16(a) of the Securities Exchange Act of 1934 requires the Company’s directors and executive officers, and persons who own more than ten percent of the Company’s Common Stock, to file with the Securities and Exchange Commission initial reports of ownership and reports of changes of ownership of Common Stock of the Company. Officers, directors and greater than ten percent stockholders are required by SEC regulation to furnish the Company with copies of all Section 16(a) forms they file.
Based solely on the Company’s review of such forms received by it, or written representations from certain of such persons, the Company believes that, with respect to the year ended August 31, 2013, all Section 16(a) filing requirements applicable to its officers, directors and greater than 10% beneficial owners were complied with.
Code of Ethics
The Board of Directors has adopted a Code of Ethics applicable to its principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, which is designed to promote honest and ethical conduct; full, fair, accurate, timely and understandable disclosure; and compliance with applicable laws, rules and regulations. A copy of the Code of Ethics will be provided to any person without charge upon written request to the Company at its executive offices, Units 2611-13A, 26/F, 113 Argyle Street, Mongkok, Kowloon, Hong Kong, SAR.
Insider Transactions Policies and Procedures
We do not currently have an insider transaction policy.
Board Committees
We do not have an audit, compensation, nominating or other committees of the Board of Directors.
| Item 11. | Executive Compensation. |
The following summary compensation table set forth information concerning the annual and long-term compensation paid by the Company to its executive officers for services in all capacities to the Company for the fiscal years ended August 31, 2013 and August 31, 2012. Prior to the Acquisition, Life Nutrition Products, Inc. did not pay any cash or other compensation to its executive officers for the years ended December 31, 2012 and December 31, 2011.
Summary Compensation Table
| Name and Principal Position | | Year | | Salary ($) | | | Bonus ($) | | | Stock Awards ($) | | | Option Awards ($) | | | Non-Equity Incentive Plan Compensation ($) | | | Nonqualified Deferred Compensation Earnings ($) | | | All Other Compensation ($) | | | Total | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Li Lai Yang | | 2013 | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 0 | |
| Chief Executive Officer | | 2012 | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 0 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Tso Yin Yee | | 2013 | | $ | 116,048 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 116,048 | |
| Chief Operating Officer | | 2012 | | $ | 86,015 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 86,015 | |
Each of Ms. Li and Ms. Tso are employed as executive officers of the Company on an at-will basis, although it is expected that employment agreements may be entered into with each of them in the near term.
In addition, Tong Wing Shan who became Chief Financial Officer in November 2013 is employed as an executive officer of the Company on an at-will basis, although it is expected that an employment agreement will be entered into with her in the near term.
Compensation of Directors
We did not pay and cash or other compensation to our directors for the fiscal years ended August 31, 2013 and August 31, 2012.
Outstanding Equity Awards at Fiscal Year End
For the fiscal year ended August 31, 2013, no director or executive officer has received compensation from us pursuant to any compensatory or benefit plan. There is no plan or understanding, express or implied, to pay any compensation to any director or executive officer pursuant to any compensatory or benefit plan, although we anticipate that we will compensate our officers and directors for services to us with stock or options to purchase stock, in lieu of cash.
Indebtedness of Management
See Part III, Item 13 “Certain Relationships and Related Transactions, and Director Independence” for information on shareholder advances with Tong Wing Shan. Other than the foregoing, no member of management was indebted to the Company during its last fiscal year.
| Item 12. | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters. |
The following table sets forth, as of December 15, 2013, certain information with regard to the record and beneficial ownership of the Company’s Common Stock by (i) each stockholder owning of record or beneficially 5% or more of the Company’s Common Stock, (ii) each director of the Company, (iii) the Company’s Chief Executive Officer and other executive officers, if any, of the Company whose total compensation was in excess of $100,000 (the “named executive officers”), and (iv) all executive officers and directors of the Company as a group. Except as indicated in the footnotes to the table below, the address of each of the beneficial owners named in the table below is in care of our company, Units 2611-13A, 26/F, 113 Argyle Street, Mongkok, Kowloon, Hong Kong, SAR. Except as indicated in the footnotes to this table and subject to applicable community property laws, the persons named in the table to our knowledge have sole voting and investment power with respect to all shares of securities shown as beneficially owned by them. The information in this table is based upon 25,000,000 shares of common stock outstanding as of December 15, 2013. Shares of common stock have one vote per share.
| Name and Address | | Shares Owned | | | Percent of Class(1) | |
| | | | | | | | | |
| Tong Wing Shan | | | 9,069,750 | | | | 36.3 | % |
| | | | | | | | | |
| Tong Wing Yee | | | 9,069,750 | | | | 36.3 | % |
| | | | | | | | | |
| Li Lai Ying | | | 0 | (2) | | | 0 | % |
| | | | | | | | | |
| Tso Yin Yee | | | 655,037 | | | | 2.6 | % |
| | | | | | | | | |
| Pang Yiu Kwong | | | 503,875 | | | | 2.0 | % |
| | | | | | | | | |
| All Directors & Officers as a Group (4 persons) | | | 10,228,662 | | | | 40.9 | % |
_______________
| (1) | Based upon 25,000,000 issued and outstanding shares of common stock. |
| (2) | Does not include shares owned by Tong Wing Shan and Tong Wing Yee, daughters of Li Lai Ying. |
| Item 13. | Certain Relationships and Related Transactions, and Director Independence. |
Except as indicated below, since September 1, 2012, 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: (i) in which the amount involved exceeds the lesser of $120,000 or one percent of the average of our total assets at year-end for the last three completed fiscal years; and (ii) in which any director, executive officer, shareholder who beneficially owns 5% or more of our common stock or any member of their immediate family had or will have a direct or indirect material interest.
Parties are considered to be related if one party has the ability, directly or indirectly, to control the other party or exercise significant influence over the other party in making financial and operational decisions. Parties are also considered to be related if they are subject to common control or common significant influence.
As of August 31, 2011, there was $2,051,460 due to shareholder representing amounts which had been previously advanced to the Company by Tong Wing Shan, one of the two largest principal shareholders of the Company and former principal shareholder of Almonds Kisses (BVI). Such amount was paid to Tong Wing Shan in fiscal 2012. In addition, during fiscal 2012, advances were made by the Company to Tong Wing Shan in the amount of $4,539,543 of which $4,300,751 was repaid by Tong Wing Shan by August 31, 2012. As of August 31, 2012, the balance due from Tong Wing Shan was $241,036. At August 31, 2013, the balance due from Tong Wing Shan was $418,658 with $4,831,702 have been advanced during fiscal 2013 and $4,655,559 being repaid. The advances to shareholder represent unsecured, non-interesting bearing loans without fixed repayment terms. Although there was no binding obligation on the part of the shareholder to repay such loans, Tong Wing Shan previously informally agreed to repay such amounts on or before November 1, 2013 which date has been revised to February 28, 2014.
On August 30, 2013, Tong Wing Shan made an interest free, unsecured loan to the Company in the principal amount of $750,726 in order to provide the Company with certain funds needed to complete the purchase of the outstanding capital stock of Motion Tech Development Limited. Such loan is payable on August 30, 2017.
During fiscal 2013, there were subcontracting fees paid to related parties in the amount of $107,534 which consisted of amounts paid to Tso Yin Yee, the Company’s Chief Operating Officer, and a company controlled by Pang Yiu Kwong, a director, for services rendered. The amount paid to Tso Yin Yee is included in the Summary Compensation Table. See Part III, Item 11.
Director Independence
Our board of directors currently consists of three members. They are Li Lai Ying, Tso Yin Yee and Pang Yiu Kwong and none of them is an independent director. We have determined that they are not independent directors using the general independence criteria set forth in the Nasdaq Marketplace Rules.
| Item 14. | Principal Accountant Fees and Services. |
The following is a summary of the fees billed to us by the principal accountants to the Company for professional services rendered for the fiscal years ended August 31, 2013 and August 31, 2012:
| Fee Category | | 2013 Fees | | | 2012 Fees | |
| | | | | | | |
| Audit Fees | | $ | 118,627 | | | $ | 0 | |
| Audit Related Fees | | $ | 7,994 | | | $ | 0 | |
| Tax Fees | | $ | 0 | | | $ | 0 | |
| All Other Fees | | $ | 0 | | | $ | 0 | |
| | | | | | | | | |
| Total Fees | | $ | 126,621 | | | $ | 0 | |
Audit Fees. Consists of fees billed for professional services rendered for the audit of our financial statements and review of interim consolidated financial statements included in quarterly reports and services that are normally provided by the principal accountants in connection with statutory and regulatory filings or engagements.
Audit Related Fees. Consists of fees billed for assurance and related services that are reasonably related to the performance of the audit or review of our consolidated financial statements and are not reported under “Audit Fees”.
Tax Fees. Consists of fees billed for professional services for tax compliance, tax advice and tax planning. These services include preparation of federal and state income tax returns.
All Other Fees. Consists of fees for product and services other than the services reported above.
Pre-Approval Policies and Procedures
Prior to engaging its accountants to perform a particular service, the Company’s Board of Directors obtains an estimate for the service to be performed. All of the services described above were approved by the Board of Directors in accordance with its procedures.
PART IV
| Item 15. | Exhibits and Financial Statement Schedules. |
The following documents are filed as part of this report:
(1) Financial Statements
Financial Statements are annexed to this report.
(2) Financial Statement Schedules
No financial statement schedules are included because such schedules are not applicable, are not required, or because required information is included in the financial statements or notes thereto.
(3) Exhibits
| | | | | | Incorporated by Reference | | |
| Exhibit | | Description | | Filed Herewith | | Form | | Filing Date |
| 2.1 | | Share Exchange Agreement whereby Life Nutrition Products, Inc. merged with and into Life Nutrition Products, LLC on or about September 24, 2007 | | | | S-1 | | 07/21/2008 |
| | | | | | | | |
| 3.1 | | Certificate of Incorporation | | | | S-1 | | 07/21/2008 |
| | | | | | | | |
| 3.2 | | Certificate of Amendment filed with the Secretary of State of Delaware effective on July 19, 2013 FILED 7/19/13 | | | | 8-K | | 07/19/2013 |
| | | | | | | | |
| 3.3 | | By-laws | | | | S-1 | | 07/21/2008 |
| | | | | | | | |
| 4.1 | | Specimen of Common Stock Certificate | | | | S-1 | | 07/21/2008 |
| | | | | | | | |
| 10.1 | | Share Exchange Agreement dated as of September 7, 2010 by and among Life Nutrition Products, Inc., Conqueror Group Limited and Acumen Charm Ltd. | | | | 8-K | | 09/08/2010 |
| | | | | | | | |
| 10.2 | | Share Exchange Agreement dated as of December 7, 2012 by and among Life Nutrition Products, Inc., ADGS Advisory Limited and ADGS Advisory (Holding) Limited | | | | 8-K | | 12/13/2012 |
| | | | | | | | |
| 10.3 | | Amendment to Share Exchange Agreement dated as of March 28, 2013 | | | | 8-K | | 04/04/2013 |
| | | | | | | | |
| 10.4 | | Extension Agreement dated as of March 28, 2013 | | | | 8-K | | 04/04/2013 |
| | | | | | | | |
| 10.5 | | Banking Facilities Agreement with Shanghai Commercial Bank dated September 26, 2012 | | | | 8-K/A | | 08/30/2013 |
| 10.6 | | Banking Facilities Agreement with Hang Seng Bank dated June 20, 2012 | | | | 8-K/A | | 08/30/2013 |
| | | | | | | | |
| 10.7 | | Lease Agreement (Financing Agreement) with Hitachi Capital (HK) Ltd. dated June 29, 2012 | | | | 8-K/A | | 08/30/2013 |
| | | | | | | | |
| 10.8 | | Banking Facilities Agreement DBS Bank (Hong Kong) Limited dated July 31, 2012 | | | | 8-K/A | | 08/30/2013 |
| | | | | | | | |
| 10.9 | | Agreement for Sale and Purchase of Shares of Vantage Advisory Limited dated January 4, 2013 | | | | 8-K/A | | 08/30/2013 |
| | | | | | | | |
| 10.10 | | Agreement for Sale and Purchase of Shares dated October 20, 2013 between Li Hon Lun and Almonds Kisses Limited | | | | 8-K | | 10/23/2013 |
| | | | | | | | |
| 14.1 | | Code of Ethics | | | | S-1 | | 07/21/2008 |
| | | | | | | | |
| 21.1 | | List of Subsidiaries | | X | | | | |
| | | | | | | | |
| 31.1 | | Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (Rules 13a-14 and 15d-14 of the Exchange Act) | | X | | | | |
| | | | | | | | |
| 31.2 | | Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (Rules 13a-14 and 15d-14 of the Exchange Act) | | X | | | | |
| | | | | | | | |
| 32.1 | | Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350) | | X | | | | |
| | | | | | | | |
| 101 * | | The following financial information from our Annual Report on Form 10-K for the year ended August 31, 2013 formatted in Extensible Business Reporting Language (XBRL): (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Operations, (iii) the Consolidated Statement of Stockholders’ Equity, (iv) the Consolidated Statements of Cash Flows, and (v) Notes to Consolidated Financial Statements* | | X | | | | |
__________________
| * | In accordance with Rule 406T of Regulation S-T, the XBRL information in Exhibit 101 to this annual report on Form 10-K shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (“Exchange Act”), or otherwise subject to the liability of that section, and shall not be incorporated by reference into any registration statement or other document filed under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such filing. |
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
| ADGS ADVISORY, INC. (Registrant) | |
| | | |
| By: | /s/ Li Lai Ying | |
| | Li Lai Ying | |
| | Chief Executive Officer | |
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant, and in the capacities and on the dates indicated:
| Signature | | Title | | Date | |
| | | | | |
| /s/ Li Lai Ying | | Chief Executive Officer, Chairman of the Board, | | December 24, 2013 | |
| Li Lai Ying | | Secretary and Director (Principal Executive Officer) | | | |
| | | | | |
| | | | | |
| /s/ Tong Wing Shan | | Chief Financial Officer | | December 24, 2013 | |
| Tong Wing Shan | | (Principal Financial Officer) | | | |
| | | | | |
| | | | | |
| /s/ Tso Yin Yee | | Chief Operating Officer and Director | | December 24, 2013 | |
| Tso Yin Yee | | | | | |
| | | | | |
| | | | | |
| /s/ Pang Yiu Kwong | | Director | | December 24, 2013 | |
| Pang Yiu Kwong | | | | | |
ADGS ADVISORY, INC.CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEARS ENDED AUGUST 31, 2013 AND 2012
CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEARS ENDED AUGUST 31, 2013 AND 2012
| CONTENTS | | Pages | |
| | | |
| Report of Independent Registered Public Accounting Firm | | | F-3 | |
Statements | | | | |
Consolidated Balance Sheets as of OperationsAugust 31, 2013 and 2012 | | | F-4 | |
| | | | | |
Consolidated Statements of Changes in Stockholders’ EquityOperations for the years ended August 31, 2013 and 2012 | | | F-5 | |
| | | | | |
Consolidated Statements of Cash FlowsComprehensive Income for the years ended August 31, 2013 and 2012 | | | F-6 | |
| | | | | |
NOTES TO FINANCIAL STATEMENTSConsolidated Statements of Changes in Stockholders’ Equity for the years ended August 31, 2013 and 2012 | | | F-7 | |
| | | | |
| Consolidated Statements of Cash Flows for the years ended August 31, 2013 and 2012 | | | F-8 | |
| | | | |
| Notes to the Consolidated Financial Statements | | | F-9 - F-30 | |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors and Stockholders ofTO THE SHAREHOLDERS AND THE BOARD OF
Life Nutrition Products, Inc.DIRECTORS OF ADGS ADVISORY, INC.
We have audited the accompanying consolidated balance sheetsheets of Life Nutrition Products,ADGS Advisory, Inc. (the(collectively the “Company”) as of DecemberAugust 31, 2011,2013 and 2012, and the related consolidated statements of operations, comprehensive income, statement of changes in stockholders’ deficit,equity, and cash flows for the year ended DecemberAugust 31, 2011.2013 and 2012. These consolidated 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.audits.
We conducted our auditaudits 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 consolidated financial statements are free of material misstatement. The Company is not required to have, nor havewere we been engaged to perform, an audit of its internal control over financial reporting. Our audits 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 includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall consolidated financial statement presentations.presentation. We believe that our audit providesaudits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Life Nutrition Products,ADGS Advisory, Inc. at Decemberas of August 31, 2011,2013 and 2012 and the consolidated results of its operations and its consolidated cash flows for the year then ended August 31, 2013 and 2012, in conformity with accounting principles generally accepted in the United States of America.
The accompanying consolidated financial statements for December 31, 2011 have been prepared assuming that the Company will continue as a going concern. As more fully describeddiscussed in Note 12 to the consolidated financial statements, the Company has suffered recurring lossesis highly leveraged and experiences a deficiency of cash flow fromis dependent on debt financings to fund its operations. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regard toregarding these matters are also described in Note 1.2. The consolidated financial statements do not include any adjustments that might result from the outcome of these uncertainties.this uncertainty.
/s/ UNION POWER HK CPA LIMITED
UNION POWER HK CPA LIMITED
/s/ Wei, Wei & Co., LLPCertified Public Accountants
Hong Kong, People Republic of China
New York, New YorkApril 16, 2012
LIFE NUTRITION PRODUCTS, INC.
BALANCE SHEETS
| | | December 31, | |
| | | 2011 | | | 2010 | |
| ASSETS |
| | | | | | | |
| Current assets: | | | | | | |
| Cash | | $ | - | | | $ | 68 | |
| | | | | | | | | |
| Total current assets | | | - | | | | 68 | |
| | | | | | | | | |
| Property and equipment, net | | | - | | | | 900 | |
| | | | | | | | | |
| TOTAL ASSETS | | $ | - | | | $ | 968 | |
| LIABILITIES AND STOCKHOLDERS’ DEFICIT |
| | | | | | | |
| Current liabilities: | | | | | | |
| Accounts payable and accrued expenses | | $ | 17,198 | | | $ | 2,839 | |
| Note payable | | | 160,038 | | | | 55,000 | |
| Officer loans payable | | | - | | | | 16,768 | |
| | | | | | | | | |
| Total current liabilities | | | 177,236 | | | | 74,607 | |
| | | | | | | | | |
| Stockholders’ deficit: | | | | | | | | |
| Preferred stock, $0.0001 par value per share, 2,000,000 authorized, none issued and outstanding | | | - | | | | - | |
| Common stock, $0.0001 par value per share, | | | | | | | | |
| 50,000,000 shares authorized, 4,095,000 and 16,877,900 shares issued and outstanding shares as of December 31, 2011 and 2010, respectively | | | 410 | | | | 1,688 | |
| Additional paid-in capital | | | 427,939 | | | | 460,533 | |
| Accumulated deficit | | | (605,585 | ) | | | (535,860 | ) |
| | | | | | | | | |
| Total stockholders’ deficit | | | (177,236 | ) | | | (73,639 | ) |
| | | | | | | | | |
| TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT | | $ | - | | | $ | 968 | |
See accompanying notes to financial statements.December 24, 2013
LIFE NUTRITION PRODUCTS,| ADGS ADVISORY, INC. |
| CONSOLIDATED BALANCE SHEETS |
| (IN US DOLLARS) |
| | | August 31, 2013 | | | August 31, 2012 | |
| | | | | | (A) | |
| Assets | | | | | | |
| | | | | | | |
| Current assets | | | | | | |
| Cash | | $ | 164,314 | | | $ | 129,001 | |
| Restricted cash | | | 129,312 | | | | - | |
| Accounts receivable | | | 564,773 | | | | - | |
| Other receivables | | | 130,835 | | | | - | |
| Due from a related party | | | 418,658 | | | | 241,036 | |
| Prepaid expenses | | | 64,071 | | | | 18,518 | |
| Total current assets | | | 1,471,963 | | | | 388,555 | |
| | | | | | | | | |
| Non-current assets | | | | | | | | |
| Property and equipment, net | | | 2,088,690 | | | | 93,350 | |
| Equity-method investment | | | 371,096 | | | | 379,693 | |
| Intangible assets | | | 793,840 | | | | 974,359 | |
| Utility and other deposits | | | 40,288 | | | | 36,299 | |
| Total non-current assets | | | 3,293,914 | | | | 1,483,701 | |
| | | | | | | | | |
| Total assets | | $ | 4,765,877 | | | $ | 1,872,256 | |
| | | | | | | | | |
| Liabilities and stockholders' equity | | | | | | | | |
| | | | | | | | | |
| Current liabilities | | | | | | | | |
| Assets held under capital lease | | $ | 23,775 | | | $ | 9,615 | |
| Accrued liabilities | | | 218,242 | | | | 25,937 | |
| Deferred revenue | | | 145,114 | | | | - | |
| Income tax payable | | | 152,357 | | | | - | |
| Bank overdraft | | | 744,077 | | | | - | |
| Bank loans - current portion | | | 107,548 | | | | 919,392 | |
| Total current liabilities | | | 1,391,113 | | | | 954,944 | |
| | | | | | | | | |
| Non-current liabilities | | | | | | | | |
| Deferred revenue, net of current portion | | | 435,343 | | | | - | |
| Bank loans - net of current portion | | | 2,179,237 | | | | 1,605,593 | |
| Assets held under capital lease, net of current portion | | | 88,306 | | | | 4,984 | |
| Loan from a related party | | | 750,726 | | | | - | |
| Total non-current liabilities | | | 3,453,612 | | | | 1,610,577 | |
| | | | | | | | | |
| Total liabilities | | | 4,844,725 | | | | 2,565,521 | |
| | | | | | | | | |
| Commitments and contingencies | | | | | | | | |
| | | | | | | | | |
| Stockholders' equity/(deficit) | | | | | | | | |
| Preferred stock, $0.0001 par value per share, 2,000,000 authorized, none issued and outstanding | | | - | | | | - | |
| Common stock, | | | | | | | | |
| Common stock, $0.0001 par value per share, 50,000,000 shares authorized, 4,095,000 shares issued and outstanding as of August 31, 2012 and 25,000,000 issued and outstanding as of August 31, 2013 | | | 2,500 | | | | 410 | |
| Additional paid in capital | | | (2,500 | ) | | | (410 | ) |
| Retained earning/(accumulated deficit) | | | 67,868 | | | | (579,757 | ) |
| Accumulated other comprehensive (loss)/income | | | (10,364 | ) | | | 31 | |
| Total ADGS Advisory, Inc. stockholders' equity/(deficit) | | | 57,504 | | | | (579,726 | ) |
| | | | | | | | | |
| Non-controlling interests | | | (136,352 | ) | | | (113,539 | ) |
| | | | | | | | | |
| Total liabilities and stockholders’ equity/(deficit) | | $ | 4,765,877 | | | $ | 1,872,256 | |
| | | Year Ended December 31, | |
| | | 2011 | | | 2010 | |
| | | | | | | |
| Revenue | | $ | - | | | $ | 168 | |
| Cost of goods sold | | | - | | | | (307 | ) |
| | | | | | | | | |
| Gross profit | | | - | | | | (139 | ) |
| | | | | | | | | |
| Operating expenses: | | | | | | | | |
| Selling, general and administrative | | | 65,055 | | | | 25,193 | |
| | | | | | | | | |
| (Loss) from operations | | | (65,055 | ) | | | (25,332 | ) |
| | | | | | | | | |
| Interest expense | | | 4,670 | | | | 339 | |
| | | | | | | | | |
| Net (loss) | | $ | (69,725 | ) | | $ | (25,671 | ) |
| | | | | | | |
| (Loss) per common share, basic and diluted | | $ | (0.01 | ) | | $ | (0.00 | ) |
| | | | | | | | | |
| Weighted average shares outstanding, basic and diluted | | $ | 8,647,814 | | | $ | 17,689,867 | |
| (A) | Represents the consolidated balance sheets of Almonds Kisses Limited and subsidiaries (the “Accounting Acquirer”) (See note 1) |
See accompanying notes to consolidated financial statements.
LIFE NUTRITION PRODUCTS,| ADGS ADVISORY, INC. |
| CONSOLIDATED STATEMENTS OF OPERATIONS |
| (IN US DOLLARS) |
STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT
FOR THE YEARS ENDED DECEMBER 31, 2011 AND 2010
| | | Year ended August 31, | |
| | | 2013 | | | 2012 | |
| | | | | | (A) | |
| | | | | | | |
| Revenue | | $ | 3,198,160 | | | $ | 1,705,024 | |
| | | | | | | | | |
| Less: Operating expenses: | | | | | | | | |
| Direct cost of revenue | | | (1,425,678 | ) | | | (1,308,729 | ) |
| General and administrative expenses | | | (842,932 | ) | | | (544,710 | ) |
| Total operating expenses | | | (2,268,610 | ) | | | (1,853,439 | ) |
| | | | | | | | | |
| Operating profit/(loss) | | | 929,550 | | | | (148,415 | ) |
| | | | | | | | | |
| Other income: | | | | | | | | |
| Bank interest received | | | 321 | | | | - | |
| Other income | | | 2,173 | | | | - | |
| | | | | | | | | |
| Other expense: | | | | | | | | |
| Interest expenses | | | (154,947 | ) | | | (47,754 | ) |
| | | | | | | | | |
| Profit/(loss) before income taxes | | | 777,097 | | | | (196,169 | ) |
| | | | | | | | | |
| Less: Income tax expense | | | (152,300 | ) | | | - | |
| | | | | | | | | |
| Net profit/(loss) before allocation of non-controlling interest | | $ | 624,797 | | | $ | (196,169 | ) |
| | | | | | | | | |
| Net loss attributable to non-controlling interest | | | 22,828 | | | | 22,684 | |
| | | | | | | | | |
| Net profit/(loss) attributable to common stockholders | | $ | 647,625 | | | $ | (173,485 | ) |
| | | | | | | | | |
| Earnings/(loss) per share | | | | | | | | |
| - Basic and diluted | | $ | 0.05 | | | $ | (0.04 | ) |
| | | | | | | | | |
| Weighted average common shares outstanding | | | | | | | | |
| - Basic and diluted | | | 12,252,562 | | | | 4,095,000 | |
| | | Preferred | | | Preferred | | | Common | | | Common | | | Additional | | | | | | | |
| | | Stock | | | Stock | | | Stock | | | Stock | | | Paid-in | | | Accumulated | | | | |
| | | Shares | | | Amount | | | Shares | | | Amount | | | Capital | | | Deficit | | | Total | |
| | | | | | | | | | | | | | | | | | | | | | |
| Balance, January 1, 2010 | | | - | | | $ | - | | | | 16,082,800 | | | $ | 1,608 | | | $ | 497,883 | | | $ | (510,189 | ) | | $ | (10,698 | ) |
| Stock issued to settle liability | | | - | | | | - | | | | 1,800,000 | | | | 180 | | | | 17,820 | | | | - | | | | 18,000 | |
| Stock cancellation | | | - | | | | - | | | | (1,004,900 | ) | | | (100 | ) | | | (55,170 | ) | | | - | | | | (55,270 | ) |
| Net (loss) | | | - | | | | - | | | | - | | | | - | | | | - | | | | (25,671 | ) | | | (25,671 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Balance, December 31, 2010 | | | - | | | | - | | | | 16,877,900 | | | | 1,688 | | | | 460,533 | | | | (535,860 | ) | | | (73,639 | ) |
| Shareholder forgiveness of debt | | | - | | | | - | | | | - | | | | - | | | | 15,858 | | | | - | | | | 15,858 | |
| Stock cancellation | | | - | | | | - | | | | (12,782,900 | ) | | | (1,278 | ) | | | (48,452 | ) | | | - | | | | (49,730 | ) |
| Net (loss) | | | - | | | | - | | | | - | | | | - | | | | - | | | | (69,725 | ) | | | (69,725 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Balance, December 31, 2011 | | | - | | | $ | - | | | | 4,095,000 | | | $ | 410 | | | $ | 427,939 | | | $ | (605,585 | ) | | $ | (177,236 | ) |
| (A) | Represents the consolidated statement of income of Almonds Kisses Limited and subsidiaries (the “Accounting Acquirer”) (See note 1) |
See accompanying notes to consolidated financial statements.
LIFE NUTRITION PRODUCTS,| ADGS ADVISORY, INC. |
| CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME |
| (IN US DOLLARS) |
| | | Year ended August 31, | |
| | | 2013 | | | 2012 | |
| | | | | | (A) | |
| | | | | | | |
| Net profit/(loss) | | $ | 624,797 | | | $ | (196,169 | ) |
| | | | | | | | | |
| Other comprehensive (loss)/income | | | | | | | | |
| Foreign currency translation adjustment | | | (10,395 | ) | | | 28 | |
| | | | | | | | | |
| Comprehensive income/(loss) | | | 614,402 | | | | (196,141 | ) |
| | | | | | | | | |
| Comprehensive loss attributable to non-controlling interest | | | 22,813 | | | | 22,684 | |
| | | | | | | | | |
| Comprehensive income/(loss) attributable to ADGS Advisory, Inc. | | $ | 637,215 | | | $ | (173,457 | ) |
STATEMENTS OF CASH FLOWS| (A) | Represents the consolidated statement of comprehensive income of Almonds Kisses Limited and subsidiaries (the “Accounting Acquirer”) (See note 1) |
| | | For the Years Ended December 31, | |
| | | 2011 | | | 2010 | |
| | | | | | | |
| Cash flows from operating activities: | | | | | | |
| Net (loss) | | $ | (69,725 | ) | | $ | (25,671 | ) |
| Adjustments to reconcile net loss to net cash used in operating activities: | | | | | | | | |
| Depreciation | | | 900 | | | | 1,232 | |
| Changes in operating assets and liabilities: | | | | | | | | |
| Decrease in inventory | | | - | | | | 307 | |
| Decrease in prepaid rent | | | - | | | | 6,000 | |
| Increase in accounts payable and accrued expenses | | | (14,359 | ) | | | 2,839 | |
| | | | | | | | | |
| Net cash (used in) operating activities | | | (54,466 | ) | | | (15,293 | ) |
| | | | | | | | | |
| Cash flows from financing activities: | | | | | | | | |
| Stock cancellation | | | (49,730 | ) | | | (55,293 | ) |
| Proceeds from issuance of promissory note | | | 105,038 | | | | 55,000 | |
| Proceeds from officer loans | | | - | | | | 11,170 | |
| Repayment of loan | | | (910 | ) | | | - | |
| | | | | | | | | |
| Net cash provided by financing activities | | | 54,398 | | | | 10,900 | |
| | | | | | | | | |
| Net change in cash | | | (68 | ) | | | (4,393 | ) |
| Cash, beginning of year | | | 68 | | | | 4,461 | |
| | | | | | | | | |
| Cash, end of year | | $ | - | | | $ | 68 | |
| | | | | | | | | |
| | | | | | | | | |
| Supplemental disclosure of cash flow information | | | | | | | | |
| Cash paid for interest | | $ | - | | | $ | - | |
| Cash paid for income taxes | | $ | - | | | $ | - | |
| | | | | | | | | |
| Supplemental disclosure of non-cash financing and investing activities: | | | | | | | | |
| Stock issued to settle liability | | $ | - | | | $ | 18,000 | |
See accompanying notes to consolidated financial statements.statements
LIFE NUTRITION PRODUCTS,| ADGS ADVISORY, INC. |
| CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY |
| (IN US DOLLARS) |
| | | Preferred shares with US$0.0001 Par Value | | | Common Stock, with US$0.0001 Par Value | | | Additional paid-in | | | Accumulated Other Comprehensive | | | Retained Earnings/ | | | Non- | | | | |
| | | Number of Shares | | | Amount | | | Number of Shares | | | Amount | | | capital Amount | | | (loss)/ income | | | (Accumulated Deficit) | | | controlling Interest | | | Total Equity | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Balance as of August 31, 2011 | | | - | | | | - | | | | 4,095,000 | | | $ | 410 | | | $ | (410 | ) | | $ | 3 | | | $ | (406,272 | ) | | $ | (93,164 | ) | | $ | (499,433 | ) |
| Capital increased in non-controlling interest | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | 2,309 | | | | 2,309 | |
| Net loss | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | (173,485 | ) | | | (22,684 | ) | | | (196,169 | ) |
| Foreign translation gain | | | - | | | | - | | | | - | | | | - | | | | - | | | | 28 | | | | - | | | | - | | | | 28 | |
| Balance as of August 31, 2012 | | | - | | | | - | | | | 4,095,000 | | | $ | 410 | | | $ | (410 | ) | | $ | 31 | | | $ | (579,757 | ) | | $ | (113,539 | ) | | $ | (693,265 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Balance as of August 31, 2012 | | | - | | | | - | | | | 4,095,000 | | | $ | 410 | | | $ | (410 | ) | | $ | 31 | | | $ | (579,757 | ) | | $ | (113,539 | ) | | $ | (693,265 | ) |
| Shares issued to settle notes payable and accrued liabilities as part of recapitalization during April 2013 | | | - | | | | - | | | | 750,000 | | | | 75 | | | | (75 | ) | | | - | | | | - | | | | - | | | | - | |
| Shares issued to Almond Kisses shareholders | | | - | | | | - | | | | 20,155,000 | | | | 2,015 | | | | (2,015 | ) | | | - | | | | - | | | | - | | | | - | |
| Net profit/(loss) | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | 647,625 | | | | (22,828 | ) | | | 624,797 | |
| Foreign translation loss | | | - | | | | - | | | | - | | | | - | | | | - | | | | (10,395 | ) | | | - | | | | 15 | | | | (10,380 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Balance as of August 31, 2013 | | | - | | | | - | | | | 25,000,000 | | | | 2,500 | | | | (2,500 | ) | | $ | (10,364 | ) | | $ | 67,868 | | | $ | (136,352 | ) | | $ | (78,848 | ) |
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2011 AND 2010
1. (A) | GENERALRepresents the consolidated statement of changes in stockholders’ equity of Almonds Kisses Limited (the “Accounting Acquirer”) (See note 1) |
Organization and Business Nature
Life Nutrition Products, Inc. was originally organized as a New Jersey limited liability company in February 2005 under the name Life Nutrition Products, LLC ("LNP"). On September 24, 2007, Life Nutrition Products, Inc. (the "Company") a Delaware Corporation was formed and merged with LNP. Under the terms of the merger 10 million shares of common stock were issuedSee notes to the LNP Members to acquire all of LNP’s membership interests. After the merger, 10 million shares of common stock were outstanding, all of which were owned by LNP's two founders, Michael M. Salerno, President and Richard G. Birn, Vice President.
LNP’s previous primary business purpose was to market over-the-counter, all-natural dietary supplements under the trade names: Trim For Life3 Appetite Control and Trim For Life3 Energy Formula. The Trim For Life3 Appetite Control Formula is patent pending and supported by scientific studies. The Trim For Life3 Energy Formula is a proprietary formula blend. The Company is no longer pursuing this business.
On September 7, 2010, the Company entered into a Share Exchange Agreement (the "Share Exchange Agreement") with Conqueror Group Limited, a Hong Kong corporation ("Conqueror") and Acumen Charm Ltd., a British Virgin Islands corporation (the "Conqueror Shareholder"). Pursuant to the Share Exchange Agreement, at the closing of the transaction contemplated in the Agreement (the "Transaction"), the Company will acquire 100% of the issued and outstanding capital stock of Conqueror from the Conqueror Shareholder, making Conqueror a wholly-owned subsidiary of the Company.
On November 17, 2010, the parties entered into a First Amendment to the Share Exchange Agreement (the “First Amendment”) which, among other things, provided that 1,004,900 shares shall be redeemed by the Company contemporaneously with the execution of the First Amendment at an aggregate redemption price of $55,270 (the “Group B Redemption Price”) and 12,782,900 shares shall be redeemed by the Company at or before the closing at an aggregate redemption price of $49,731 (the “Group C Redemption Price”) pursuant to mutually acceptable and duly executed redemption agreements.
Contemporaneously with the execution of the First Amendment, Conqueror loaned the Company the principal amount of $55,270 in exchange for which the Company delivered a promissory note to Conqueror which proceeds were used to pay the Group B Redemption Price.consolidated financial statements.
LIFE NUTRITION PRODUCTS,| ADGS ADVISORY, INC. |
| CONSOLIDATED STATEMENTS OF CASH FLOWS |
| (IN US DOLLARS) |
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2011 AND 2010
| | | For the year ended August 31, | |
| | | 2013 | | | 2012 | |
| | | | | | (A) | |
| Cash flows from operating activities: | | | | | | |
| Net profit/(loss) | | $ | 647,625 | | | $ | (173,485 | ) |
| Less: Net loss attributable to non-controlling interest | | | (22,828 | ) | | | (22,684 | ) |
| | | | 624,797 | | | | (196,169 | ) |
| Adjustments to reconcile net profit/(loss) to net cash provided by/(used in) operating activities: | | | | | | | | |
| Depreciation of property and equipment | | | 50,475 | | | | 23,516 | |
| Equity in loss of equity-method investment | | | 10,911 | | | | 10,849 | |
| Loss on disposal of property and equipment | | | 7,504 | | | | 872 | |
| Amortization of intangible assets | | | 180,519 | | | | 179,496 | |
| | | | | | | | | |
| Changes in assets and liabilities: | | | | | | | | |
| Utility and other deposits | | | (3,765 | ) | | | (27,320 | ) |
| Accounts receivable | | | (564,561 | ) | | | - | |
| Other receivables | | | (130,786 | ) | | | - | |
| Prepaid expenses | | | (45,423 | ) | | | (18,518 | ) |
| Income tax payable | | | 152,300 | | | | - | |
| Accrued liabilities | | | 192,075 | | | | 9,954 | |
| Deferred revenue | | | 580,241 | | | | - | |
| Net cash provided by/(used in) operating activities | | | 1,054,287 | | | | (17,320 | ) |
| | | | | | | | | |
| Cash flows from investing activities: | | | | | | | | |
| Sales proceeds of property and equipment | | | 9,413 | | | | - | |
| Cash paid for property and equipment | | | (1,935,864 | ) | | | (94,800 | ) |
| Net cash used in investing activities | | | (1,926,451 | ) | | | (94,800 | ) |
| | | | | | | | | |
| Cash flows from financing activities: | | | | | | | | |
| Advances made and expenses paid on behalf of a related party | | | (4,831,702 | ) | | | (6,591,003 | ) |
| Income receipt on behalf of the Company | | | - | | | | 348,897 | |
| Repayment of advances made and expenses paid on behalf of a related party | | | 4,655,559 | | | | 3,951,854 | |
| Advance received from a related party | | | 750,445 | | | | - | |
| Proceeds from bank loans | | | 1,230,111 | | | | 2,571,199 | |
| Repayment of bank loans | | | (1,483,361 | ) | | | (46,085 | ) |
| Net increase in restricted cash | | | (129,312 | ) | | | - | |
| Repayment of capital lease obligations | | | (28,615 | ) | | | (4,631 | ) |
| Increase in bank overdraft | | | 744,077 | | | | - | |
| Net cash provided by financing activities | | | 907,202 | | | | 230,231 | |
| | | | | | | | | |
| Net increase in cash | | | 35,038 | | | | 118,111 | |
| | | | | | | | | |
| Effect on change of exchange rates on cash | | | 275 | | | | (17 | ) |
| Cash as of the beginning of the year | | | 129,001 | | | | 10,907 | |
| Cash as of the end of year | | $ | 164,314 | | | $ | 129,001 | |
| | | | | | | | | |
| Supplemental disclosures of cash flow information: | | | | | | | | |
| Capital lease additions | | $ | 126 006 | | | $ | - | |
| Cash paid during the year for: | | | | | | | | |
| Bank loan interest paid | | $ | 127,101 | | | $ | 47,322 | |
| Capital lease interest | | $ | 3,075 | | | $ | 422 | |
1. (A) | GENERAL (continued)Represents the consolidated statement of cash flows of Almonds Kisses Limited and subsidiaries (the “Accounting Acquirer”) (See note 1) |
Organization and Business Nature (continued)
The First Amendment further provided that at or before the closing, Conqueror shall loan the Company the principal amount of $49,731 which shall be paid from the funds remaining in escrow (the “Remaining Escrow Funds”) pursuantSee notes to the Escrow Agreement dated as of August 13, 2010, as amended on August 30, 2010, by and among Conqueror, the Company and Cyruli Shanks Hart & Zizmor LLP, in exchange for which the Company shall deliver a promissory note to Conqueror which proceeds shall be used to pay the Group C Redemption Price.
The First Amendment also provided that in the event that the closing does not occur for any reason on or before January 31, 2011, then, among other things, the Remaining Escrow Funds shall be paid to the Company and used to promptly redeem 12,782,900 shares as provided therein at the Group C Redemption Price, and the then officers and directors of the Company shall resign with immediate effect and appoint such persons as designated by Conqueror as officers and directors.
The Closing was to transpire on or before January 31, 2011 but, as of the date hereof, has not occurred. As a result, on May 11, 2011, and in accordance with the terms of the First Amendment, the Remaining Escrow Funds were paid to the Company and were used to redeem 12,782,900 shares at the Group C Redemption Price and the Company delivered a promissory note to Conqueror in the principal amount of $49,731. On May 11, 2011, Michael M. Salerno, the Company’s sole officer and director, resigned as an officer and director of the Company, and appointed Chu Zhanjun and Li Gang as directors, and Chu Zhanjun as President, Chief Executive Officer and Principal Financial Officer of the Company, each a designee of Conqueror.
On May 11, 2011, the Company’s former CEO agreed to forgive and discharge all amounts due and owing to him for funds advanced or loans made to the Company (see Note 6).consolidated financial statements.
LIFE NUTRITION PRODUCTS, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2011 AND 2010| ADGS ADVISORY, INC. |
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|
| (IN US DOLLARS) |
| 1. | GENERAL (continued)Description of business and organization |
Going ConcernNature of operations
ADGS Advisory, Inc. (“the Company” or “ADGS”) was incorporated in the State of Delaware in September 2007 under the name Life Nutrition Products, Inc. Pursuant to a Certificate of Amendment to its Certificate of Incorporation filed with the State of Delaware and effective as of July 19, 2013, the Company changed its corporate name from “Life Nutrition Products, Inc.” to “ADGS Advisory, Inc.”.
On December 7, 2012, the Company entered into a share exchange agreement (the “Original Exchange Agreement”) with ADGS Advisory Limited, a Hong Kong corporation (“ADGS Hong Kong”) and ADGS Advisory (Holding) Limited, a British Virgin Islands corporation (“ADGS”). Pursuant to the Original Exchange Agreement, at the closing of the transaction contemplated thereunder (the “ADGS Transaction”), the Company agreed to acquire 100% of the issued and outstanding capital stock of ADGS, making ADGS a wholly-owned subsidiary of the Company. On March 28, 2013, the Company entered into an amendment (the “Amendment”) to the Original Exchange Agreement (the Original Exchange Agreement, as amended is referred to herein as the “Exchange Agreement”) pursuant to which the Company agreed to acquire all of the outstanding shares of Almonds Kisses Limited (BVI), a British Virgin Islands company (“Almonds Kisses BVI”), from the eight shareholders of Almonds Kisses BVI (the “Shareholders”), instead of the shares of ADGS, on the same terms and conditions set forth in the Exchange Agreement. Almonds Kisses BVI is the owner of 100% of the issued and outstanding capital stock of ADGS. The Original Exchange Agreement incorrectly indicated that such owner was ADGS Holdings which error was corrected in the Amendment.
On April 12, 2013, the ADGS Transaction closed whereby the Company acquired all of the issued and outstanding capital stock of Almonds Kisses BVI pursuant to the Exchange Agreement in exchange for an aggregate of 20,155,000 newly issued shares of the Company’s common stock which were issued to the eight former shareholders of Almonds Kisses BVI. As a result, on April 12, 2013, Almonds Kisses BVI became the Company’s wholly-owned subsidiary and the former shareholders of Almonds Kisses BVI became the Company’s controlling shareholders, and Almond Kisses BVI in turn owns all of the issued and outstanding capital stock of ADGS. Almond Kisses (BVI) also owns all of the issued and outstanding capital stock of Vantage Advisory Limited, a Hong Kong corporation. ADGS Hong Kong owns 80% of ADGS Tax Advisory Limited (“ADGS Tax”) which is a Hong Kong incorporated holding company, and ADGS Tax owns a 30% interest in Dynamic Golden Limited which is also a Hong Kong incorporated company and through Almonds Kisses owns its 30% effective on November 19, 2013.
The Company also acquired a property holding company, Motion Tech Development Limited, incorporated in British Virgin Islands. The transfer of shares was completed in August 29, 2013 and it is now 100% owned by Almond Kisses.
In October 2013, the Company further acquired a Hong Kong incorporated company, T H Strategic Management Limited for purchase consideration of approximately $516,000 (HK$4,000,000) and it is now 100% owned by Almonds Kisses. T H Strategic Management Limited is engaged in providing accounting, taxation, company secretarial and consultancy services.
| ADGS ADVISORY, INC. |
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS |
| (IN US DOLLARS) |
| 1. | Description of business and organization (…/Cont’d) |
ADGS Advisory, Inc. is a holding company and, through its subsidiaries and group company, engages in providing accounting, taxation, company secretarial, consultancy services and consultancy service for slope inspection. The Company together with its consolidated subsidiaries and its equity-method investment, are collectively referred to as the “Group”. The Share Exchange was accounted for as a "reverse merger", since the former stockholders of Almond Kisses own a majority of the outstanding shares of the Company's capital stock immediately following the Share Exchange.
Reorganization
Almond Kisses was incorporated on March 1, 2011 as a limited liability company in British Virgin Island. ADGS Advisory Limited (“ADGS) and its subsidiary and equity-method investment, were limited companies incorporated in Hong Kong had been wholly owned by the same group of shareholders until being acquired by Almonds Kisses pursuant to a reorganization (“Reorganization”) to prepare for the listing of the Company’s shares on a stock exchange. ADGS Tax Advisory Limited (“ADGS Tax”) provided the same type of services prior to the establishment of ADGS. ADGS Tax became a dormant holding company after ADGS incorporated.
| ADGS ADVISORY, INC. |
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS |
| (IN US DOLLARS) |
| 1. | Description of business and organization (…/Cont’d) |
Details of the Company’s subsidiaries and equity-method investment which are included in these
| Subsidiary’s name | | Place and date of incorporation | | Percentage of ownership by the Company | | Principal activities |
| | | | | | |
Almond Kisses Limited “Almond Kisses” | | British Virgin Island March 1, 2011 | | 100% | | Holding company |
| | | | | | |
ADGS Advisory Limited “ADGS Hong Kong” | | Hong Kong, People's Republic of China (“PRC”) April 28, 2011 | | 100% (though Almonds Kisses) | | Engage in providing accounting, taxation, company secretarial, and consultancy services. |
| | | | | | |
ADGS Tax Advisory Limited “ADGS Tax” | | Hong Kong, PRC March 17, 2003 | | 80% (through ADGS Hong Kong) | | Holding company |
| | | | | | |
Dynamic Golden Limited “Dynamic” | | Hong Kong, PRC April 16, 2004 | | 30% (through ADGS Tax, until November 19, 2013 and through Almonds Kisses thereafter) | | Property holding company |
| | | | | | |
Vantage Advisory Limited “Vantage” | | Hong Kong, PRC March 6, 2008 | | 100% (though Almonds Kisses) | | Engage in providing accounting, taxation, company secretarial, and consultancy services. |
| | | | | | |
| Motion Tech Development Limited “Motion Tech” | | British Virgin Islands October 3, 2007 | | 100% (through Almonds Kisses effective on August 29, 2013) | | Property holding company |
The Company also operates branches in Shenzhen, PRC and Bangkok, Thailand, The branches are set up to attract potential clients to go to Hong Kong and establish companies. A full range of services could be provided to these clients.
| ADGS ADVISORY, INC. |
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS |
| (IN US DOLLARS) |
| 2. | Summary of significant accounting policies |
Basis of presentation
The accompanying audited consolidated financial statements and related notes have been prepared in conformity with accounting principles generally accepted in the United States of America which contemplates continuation(US GAAP). The preparation of the consolidated financial statements in accordance with US GAAP requires management of the Company to make a number of estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting year. Significant items subject to such estimates and assumptions include the recoverability of the carrying amount and the estimated useful lives of long-lived assets and valuation allowances for receivables. Actual results could differ from those estimates.
The consolidated financial statements include all accounts of the Company and its subsidiaries as disclosed in note 1. All material inter-company balances and transactions have been eliminated in consolidation.
As both the Company and its subsidiaries, ADGS and ADGS Tax are under common control, the financial statements of the Company have been presented as if the receipt of assets and liabilities of the subsidiaries at their net carrying amount been entered into as of March 1, 2011 in accordance with ASC 805-50-15-6. Accordingly, financial information related to periods prior to the assets and liabilities are that of the Company’s operating subsidiaries.
Going concern
The accompanying consolidated financial statements are presented on a going concern basis. Although the Company has a working capital surplus of $80,850 at August 31, 2013, the Company had payables in excess of cash and receivables of $2,856,376. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. The Company has suffered recurring lossesCompany's continuation as a going concern is dependent on its ability to meet its obligations, to obtain additional financing as may be required and experiences a deficiencymaintain its profitability. The financial statements do not include any adjustments that might result from the outcome of cash flow from operations. These matters raise substantial doubt aboutthis uncertainty. The Company's independent registered public accounting firm's report on the financial statements as of and for the year ended August 31, 2013, contained an emphasis paragraph regarding the Company's ability to continue as a going concern. The continued operations of the Company are dependent upon the Company's abilityManagement plans to continue its efforts to raise capital and/funds through debt or generate positive cash flows from operations. Management may achieve profitability and generate positive cash flows through possible acquisition or merger. However, there is no guarantee that a suitable offer may exist or that funding will be available to close on such a transaction. These financial statements do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts and classification of liabilities that might be necessaryequity in the event the Company cannot continue in existence.
2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires managementnear future to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from these estimates.
Cash and Cash Equivalents
For purposes of the cash flow statements, the Company considers investments with an initial maturity of 3 months or less to be cash equivalents.
The Company maintains cash balances at financial institutions and are insured by the Federal Deposit Insurance Corporation up to federally insured limits. At times during the year, balances in certain bank accounts may exceed the FDIC insured limits.
LIFE NUTRITION PRODUCTS, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2011 AND 2010
2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) |
Property and Equipment
Property and equipment are stated at cost. Depreciation and amortization are computed on the straight-line method based on the estimated useful lives of the assets. Repairs and maintenance charges, which do not increase the useful lives of the assets, are charged to operations as incurred.
Revenue Recognition
The Company recognizes revenue upon shipment of goods, and the price is fixed and determinable, and collectability is reasonably assured.
Net (Loss) Per Share of Common Stock
Net loss per common share is computed using the weighted average number of common shares outstanding. Diluted earnings per share (EPS) include additional dilution from common stock equivalents, such as stock issuable pursuant to the exercise of stock options and warrants. Common stock equivalents are not included in the computation of diluted earnings per share as the result is anti-dilutive for the periods presented.
Income Taxes
The Company accounts for income taxes in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 740, Income Taxes, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred income taxes are recognized for the tax consequences in future years of differences between the tax bases of assets and liabilities and their financial reporting amounts at each period end based on enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.
ASC 740-10 prescribes detailed guidance for the financial statement recognition, measurement and disclosure of uncertain tax positions recognized in an enterprise’s financial statements in accordance with generally accepted accounting standards. Tax positions must meet a more-likely-than-not recognition threshold at the effective date to be recognized. Federal, state and local income tax returns for the years prior to 2008 are no longer subject to examination by tax authorities. The Company did not have any uncertain tax positions.
LIFE NUTRITION PRODUCTS, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2011 AND 2010
2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) |
Income Taxes (continued)
The tax effect of temporary differences, primarily net operating loss carry forwards, gave rise to the Company's deferred tax asset in the accompanying December 31, 2011 and December 31, 2010 balance sheets. Because of the current uncertainty of realizing the benefit of the tax carry forward, a valuation allowance equal to the tax benefit for deferred taxes has been established. The full realization of the tax benefit associated with the carry forward depends predominantly upon the Company's ability to generate taxable income during the carry forward period.
As of December 31, 2011, the Company has net operating loss carry forwards of approximately $606,000 that can be utilized to offset future taxable income for Federal income tax purposes through 2030. Utilization of these net loss carry forwards is subject to the limitations of Internal Revenue Code Section 382. Significant components of the Company's deferred tax assets and liabilities are summarized as follows:
| | | December 31, | |
| | | 2011 | | | 2010 | |
| | | | | | | |
| Deferred tax asset | | $ | 245,000 | | | $ | 186,000 | |
| Less: valuation allowance | | | (245,000 | ) | | | (186,000 | ) |
| | | | | | | | | |
| Net deferred tax asset | | $ | - | | | $ | - | |
Fair Value Measurements
The Company follows ASC 820, which defines fair value, provides a consistent framework for measuring fair value under Generally Accepted Accounting Principles and expands fair value financial statement disclosure requirements. ASC 820’s valuation techniques are based on observable and unobservable inputs. Observable inputs reflect readily obtainable data from independent sources, while unobservable inputs reflect our market assumptions. ASC 820 classifies these inputs into the following hierarchy:
Level 1 Inputs– Quoted prices for identical instruments in active markets.
LIFE NUTRITION PRODUCTS, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2011 AND 2010
2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) |
Fair Value Measurements (continued)
Level 2 Inputs– Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations whose inputs are observable or whose significant value drivers are observable.
Level 3 Inputs– Instruments with primarily unobservable value drivers.
The carrying amounts of the Company’s financial instruments including cash, accounts payable and accrued expenses, note payable and officer loans payable, approximate fair value because of their short-term nature.
3. | RECENTLY ISSUED ACCOUNTING STANDARDS |
In September 2011, the FASB issued Accounting Standards Update No. 2011-08, “Testing Goodwill for Impairment” (“ASU No. 2011-08”), which allows entities to use a qualitative approach to test goodwill for impairment. ASU No. 2011-08 permits an entity to first perform a qualitative assessment to determine whether it is more likely than not that the fair value of a reporting unit is less thansustain its carrying value. If it is concluded that this is the case, it is necessary to perform the currently prescribed two-step goodwill impairment test. Otherwise, the two-step goodwill impairment test is not required.
ASU No. 2011-08 is effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011. The Company does not expect the adoption of the provisions of this ASU to have a material impact on the Company's financial statements.
In June 2011, the FASB issued Accounting Standards Update No. 2011-05, “Presentation of Comprehensive Income” (“ASU No. 2011-05”), which improves the comparability, consistency, and transparency of financial reporting and increases the prominence of items reported in other comprehensive income (“OCI”) by eliminating the option to present components of OCI as part of the statement of changes in stockholders’ equity. The amendments in this standard require that all nonowner changes in stockholders' equity be presented either in a single continuous statement of comprehensive income or in two separate but consecutive statements. The adoption of this standard did not have a material impact on the Company’s financial statements.operations.
LIFE NUTRITION PRODUCTS, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2011 AND 2010| ADGS ADVISORY, INC. |
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|
| (IN US DOLLARS) |
3.2. | RECENTLY ISSUED ACCOUNTING STANDARDS (continued)Summary of significant accounting policies (…/Cont’d) |
SubsequentlyForeign currency translation
The Group uses United States dollars (“U.S. Dollar” or “US$” or “$”) for financial reporting purposes. The subsidiaries within the Company maintain their books and records in December 2011,their respective functional currency, Hong Kong dollars (“HK$”), being the FASB issued Accounting Standards Update No. 2011-12, “Deferrallawful currency in Hong Kong. Assets and liabilities of the Effective Date for Amendments tosubsidiaries are translated from H.K. Dollars into U.S. Dollars using the Presentation of Reclassifications ofapplicable exchange rates prevailing at the balance sheet date. Items Out of Accumulated Other Comprehensive Income” (“ASU No. 2011-12”), which indefinitely defers the requirement in ASU No. 2011-05 to present on the facestatements of the financial statements reclassification adjustments for items that are reclassified from OCI to net income in the statement(s) where the components of net income and the components of OCIcomprehensive income and cash flows are presented. The amendments in these standards do not change the items that must be reported in OCI, when an item of OCI must be reclassified to net income, or change the option for an entity to present components of OCI gross or net of the effect of income taxes. The amendments in ASU No. 2011-05 and ASU No. 2011-12 are effective for interim and annual periods beginning after December 15, 2011 and are to be applied retrospectively. The adoption of the provisions of ASU No. 2011-05 and ASU No. 2011-12 will not have a material impact on the Company's financial statements.
In May 2011, the FASB issued Accounting Standards Update No. 2011-04, “Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs” (“ASU No. 2011-04”), which amends current guidance to result in common fair value measurements and disclosures between accounting principles generally accepted in the United States of America and International Financial Reporting Standards. The amendments explain how to measure fair value. They do not require additional fair value measurements and are not intended to establish valuation standards or affect valuation practices outside of financial reporting. ASU No. 2011-04 clarifies the application of certain existing fair value measurement guidance and expands the disclosures for fair value measurements that are estimated using significant unobservable inputs (Level 3 inputs). The amendments in ASU No. 2011-04 are effective for interim and annual periods beginning after December 15, 2011. The Company does not believe that the adoption of the provisions of ASU No. 2011-04 will have a material impact on the Company's financial statements.
In December 2010, FASB issued ASU No. 2010-29, “Disclosure of Supplementary Pro Forma Information for Business Combinations” (“ASU 2010-29”). ASU 2010-29 specifies that if a public entity presents comparative financial statements, the entity should disclose revenue and earnings of the combined entity as though the business combination that occurredtranslated at average exchange rates during the current year had occurred asreporting period. Equity accounts are translated at historical rates. Adjustments resulting from the translation of the beginning of the comparable prior annual reporting period only. ASU 2010-29 is effective prospectively for business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2010. The adoption of this standard did not have a material impact on the Company’s financial statements.statements are recorded as accumulated other comprehensive income included in the stockholders’ equity section of the balance sheets. The exchange rates used to translate amounts in HKD into U.S. Dollars for the purposes of preparing the consolidated financial statements are as follows:
| | 2013 | | 2012 | |
| | | | | |
| Balance sheet items, except for equity accounts | HK$7.7525=$1 | | HK$7.8000=$1 | |
| | | | | |
| Items in statements of income and cash flows | HK$7.7554=$1 | | HK$7.7996=$1 | |
Revenue recognition
The Company generates revenue primarily from providing accounting, taxation, company secretarial, consultancy services, consultancy service for slope inspection and rental income.
| (i) | Revenue generates from providing accounting, taxation, company secretarial and consultancy services is recognized when persuasive evidence of an arrangement exists, the related services are provided and when the collection is probable, the price is fixed or determinable and collectability is reasonably assured. The Group generates its revenues from providing professional services under fixed-fee billing arrangements. In fixed-fee billing arrangements, the Company agrees to a pre-established fee in exchange for a pre-determined set of professional services. Generally, the client agrees to pay a fixed-fee in monthly installments over the specified contract term. These contracts are for varying periods and generally permit the client to cancel the contract before the end of the term. |
| (ii) | Consultancy service for slope inspection represents under fixed price contract is recognized when the related services are provided and when the collection is probable, the price is fixed or determinable and collectability is reasonably assured. |
| (iii) | Rental income Rental income from operating leases is recognized on a straight-line basis over the term of the relevant lease. Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognized on a straight-line basis over the lease term. |
LIFE NUTRITION PRODUCTS, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2011 AND 2010
3. ADGS ADVISORY, INC. |
RECENTLY ISSUED ACCOUNTING STANDARDS (continued)NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS |
| (IN US DOLLARS) |
In December 2010, FASB issued ASU No. 2010-28, “When to Perform Step 2 of the Goodwill Impairment Test for Reporting Units with Zero or Negative Carrying Amounts” (“ASU 2010-28”). ASU 2010-28 modifies Step 1 of the goodwill impairment test for reporting units with zero or negative carrying amounts. This eliminates an entity’s ability to assert that a reporting unit is not required to perform Step 2 because the carrying amount of the reporting unit is zero or negative despite the existence of qualitative factors that indicate the goodwill is more likely than not impaired. ASU 2010-28 is effective for fiscal and interim periods beginning after December 15, 2010. The adoption of this standard did not have a material impact on the Company’s financial statements.
4.2. | PROPERTY AND EQUIPMENTSummary of significant accounting policies (…/Cont’d) |
At December 31, propertyDirect cost of revenue
Direct costs of revenues generated from providing accounting, taxation, company secretarial and equipmentconsultancy services consists primarily of billable employee compensation and related payroll benefits, the cost of consultants assigned to revenue generating activities and direct expenses billable to clients. Direct cost of revenues does not include an allocation of overhead costs.
Direct costs from providing consultancy service for slope inspections under fixed price contracts are recognized, as the related contact costs are incurred.
Cash
Cash represents cash in banks and cash on hand.
The Group considers all highly liquid investments with original maturities of three months or less to be cash equivalents. Substantially all of the following:cash deposits of the Group are held with financial institutions located in the Hong Kong, PRC. Management believes these financial institutions are of high credit quality. The group held no cash equivalents at August 31, 2013 and 2012.
Restricted cash
Restricted cash represents cash in banks were restricted and deposited in certain banks as security for installment loans payable to the banks.
Accounts receivable
| | | 2011 | | | 2010 | | Estimated Useful Lives |
| | | | | | | | |
| Computer equipment | | $ | 4,324 | | | $ | 4,324 | | 3 years |
| Website development | | | 4,315 | | | | 4,315 | | 3 years |
| Less: accumulated depreciation and amortization | | | (8,639 | ) | | | (7,739 | ) | |
| | | | | | | | | | |
| | | $ | - | | | $ | 900 | | |
Accounts receivable are recorded at invoiced amounts, net of allowances for doubtful accounts and discounts. The allowance for doubtful accounts is the Group’s best estimate of the amount of probable credit losses in the Group’s existing accounts receivable. Management determines the allowance based on historical write-off experience, customer specific facts and economic conditions. The Group historically has been able to collect all of its receivable balances.
Outstanding account balances are reviewed individually for collectability. Account balances are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. The Group does not have any off-balance-sheet credit exposure to its customers.
At December 31, notes payable consist of the following:
| | | 2011 | | | 2010 | |
| | | | | | | |
| Note payable to Conqueror Group Limited bears interest at 5%, originally due May 17, 2011, currently due on demand | | $ | 55,270 | | | $ | 55,000 | |
| Note payable to Conqueror Group Limited bears interest at 5% and due November 11, 2011, currently due on demand | | | 49,730 | | | | - | |
| Advances from Conqueror Group Limited no interest bearing and due on demand | | | 55,038 | | | | - | |
| | | | | | | | | |
| | | $ | 160,038 | | | $ | 55,000 | |
The Company entered into a contract with a third party to provide corporate advisory and consulting services. The agreement has accrueda fixed term of four years, and expensed $4,670is renewable upon maturity. These fees are deferred and $339 for interestare amortized to income as earned over the term of December 31, 2011 and 2010, respectively.the agreement. Deferred revenue that will be recognized in next fiscal year is classified within current liabilities.
| ADGS ADVISORY, INC. |
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS |
| (IN US DOLLARS) |
LIFE NUTRITION PRODUCTS, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2011 AND 2010
6.2. | LOANS PAYABLESummary of significant accounting policies (…/Cont’d) |
The Company was advanced $5,598Property and equipment
Property and equipment are recorded at cost less accumulated depreciation. Maintenance, repairs and minor renewals are expensed as incurred; major renewals and improvements that extend the lives or increase the capacity of plant assets are capitalized.
When assets are retired or disposed of, the cost and accumulated depreciation are removed from its former CEOthe accounts, and any resulting gains or losses are included in 2009, which was due on demand without interest. The Company was advanced $11,170 from a company controlled by the Company’s former CEO in 2010. Total advances of $16,768 were due on demand without interest. The Company repaid $910 and $15,858 was forgivenincome in the transaction and included in additional paid-in capital.reporting period of disposition.
Depreciation is calculated on a straight-line basis over the estimated useful life of the assets after taking into account their respective estimated residual value.
The estimated useful lives of the assets are as follows:
7. | STOCKHOLDERS’ DEFICIT | Estimated Life |
| | |
| Investment property | | Over the unexpired term of the lease |
| Leasehold improvement | | 5 years |
| Furniture and fixtures | | 5 years |
| Office equipment | | 5 years |
| Motor vehicles | | 5 years |
We have authorized 2,000,000 shares of blank check preferred stock, none of which are issued and outstanding.Equity-method investment
We have authorized 50,000,000 shares of common stock, par value $.0001 per share. As of December 31, 2011 there are 4,095,000 issued and outstanding. In connection with the share exchange agreement (see Note 1),Affiliated companies, in which the Company redeemedhas significant influence, but not control, are accounted for equity-method investment. Equity-method investment adjustments include the Company’s proportionate share of investee income or loss, gains or losses resulting from investee capital transactions, adjustments to recognize certain differences between the Company’s carrying value and cancelledthe Company’s equity in net assets of the investee at the date of investment, impairments, and other adjustments required by the equity method. Gain or losses are realized when such investments are sold.
Non-controlling interest
Non-controlling interests represents the 20% interest in ADGS Tax not owned by Almonds Kisses.
Purchased intangible assets and goodwill
The Group assesses the useful lives and possible impairment of existing recognized intangible assets when an event occurs that may trigger such a totalreview. Factors considered important which could trigger a review include:
| - | significant underperformance relative to historical or projected future operating results; |
| - | significant changes in the manner of use of the acquired assets or the strategy for our overall business; |
| - | identification of other impaired assets within a reporting unit; |
| - | disposition of a significant portion of an operating segment; |
| - | significant negative industry or economic trends; |
The intangible assets are amortized using the straight line method over a period of 13,787,800 shares of its common stock, cancelling 12,782,900 in 2011 and 1,004,900 in 2010.10 years.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None
Item 9A. Controls and Procedures
| ADGS ADVISORY, INC. |
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS |
| (IN US DOLLARS) |
(a) Evaluation of Disclosure Controls and Procedures
The Company maintains a system of disclosure controls and procedures which are designed to ensure that information required to be disclosed by the Company in reports that it files or submits to the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended (the " Exchange Act"), including this report, ending December 31, 2011 is recorded, processed, summarized and reported on a timely basis. These disclosure controls and procedures include controls and procedures designed to ensure that information required to be disclosed under the Exchange Act is accumulated and communicated to the Company's management, including our chief executive officer and chief financial officer, as appropriate to allow for timely decisions regarding required disclosure.
As of December 31, 2011, the Company's management, including the Company's Chief Executive Officer ("CEO"), and Chief Financial Officer ("CFO") conducted an evaluation of the effectiveness of the Company's disclosure controls and procedures (as such term is defined in Exchange Act Rules 13a-15(e) and 15d-15(e)). Based on this evaluation, the CEO, CFO, and executive management have concluded that our disclosure controls and procedures are not effective to ensure that information required to be included in our periodic SEC filings is recorded, processed, summarized, and reported within the time periods specified in the SEC rules and forms.
(b) Management's Annual Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is defined in Rule 13a-15(f) or 15d-15(f) promulgated under the Securities Exchange Act of 1934 as a process designed by, or under the supervision of, the company's principal executive and principal financial officers and effected by the company's board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America and includes those policies and procedures that:
1.2. | Pertain to the maintenanceSummary of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the company; |
2. | Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance withsignificant accounting principles generally accepted in the United States of America and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and |
3. | Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company's assets that could have a material effect on the financial statements.policies (…/Cont’d) |
BecauseAssets under capital lease
Assets held under capital leases are recorded at the lower of its inherent limitations, internal control over financial reporting may not preventthe net present value of the minimum lease payments or detect misstatements. Projectionsthe fair value of any evaluationthe leased asset at the inception of effectiveness to future periods are subjectthe lease. The interest element of the finance cost is charged to the risk that controls may become inadequate becausestatement of changes in conditions, or thatcomprehensive income over the degreelease period so as to produce a constant periodic rate of compliance withinterest on the policies or procedures may deteriorate. All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Becauseremaining balance of the inherent limitationsliability for each period. Depreciation expense is computed using the straight-line method over the shorter of internal control, therethe estimated useful lives of the assets or the period of the related lease.
Comprehensive income
Comprehensive income includes net income and also considers the effect of other changes to stockholders' equity that are not included in the determination of net income, but rather are reported as a separate component of stockholders' equity. The Group reports foreign currency translation adjustments and unrealized gains and losses on investments (those which are considered temporary) as components of comprehensive income.
Earnings per share
Basic earnings per share is a risk that material misstatements may not be prevented or detectedcomputed on a timelythe basis by internal control over financial reporting. However, these inherent limitationsof the weighted-average number of shares of the Company’s common stock outstanding during the fiscal years. Diluted earnings per share is computed on the basis of the weighted-average number of shares of the common stock plus any effect of dilutive potential common shares outstanding during the period using the if-converted method.
Income taxes
The Group accounts for income taxes under FASB ASC Topic 740 "Income Taxes". Deferred income tax assets and liabilities are known features ofdetermined based upon differences between the financial reporting process. Therefore,and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be effective when the differences are expected to reverse.
Deferred tax assets are reduced by a valuation allowance to the extent management concludes it is possiblemore-likely-than-not that the deferred tax assets will not be realized. Deferred tax assets and liabilities are measured using enacted tax rates expected to design intoapply to taxable income in the process safeguardsyears in which those temporary differences are expected to reduce, thoughbe recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the statements of income in the period that includes the enactment date.
The Group records uncertain tax positions when it is more likely than not eliminate, this risk.that the tax positions will not be sustained upon examination by the respective tax authority.
The Group recognizes interest and penalty related to income tax matters as income tax expense. As of August 31, 2013 and August 31, 2012, there was no penalty or interest recognized as income tax expenses.
As| ADGS ADVISORY, INC. |
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS |
| (IN US DOLLARS) | | |
| 2. | Summary of significant accounting policies (…/Cont’d) |
Employee benefits
| i) | Salaries, wages, annual bonuses, paid annual leave and staff welfare are accrued in the year in which the associated services are rendered by employees of the Group. Where payment or settlement is deferred and the effect would be material, these amounts are stated at their present values. |
| ii) | Contributions to appropriate local contribution retirement schemes pursuant to the relevant labor rules and regulations in Hong Kong which are charged to the cost of sales and general and administrative expenses in the statement of operation as and when the related employee service is provided. The Group incurred $24,614 and $13,300 for the year ended August 31, 2013 and 2012, respectively. |
Fair value measurements
FASB ASC Topic 820, “Fair Value Measurement and Disclosures” defines fair value, the methods used to measure fair value and the expanded disclosures about fair value measurements. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between the buyer and the seller at the measurement date. In determining fair value, the valuation techniques consistent with the market approach, income approach and cost approach shall be used to measure fair value FASB ASC Topic 820 establishes a fair value hierarchy for inputs, which represent the assumptions used by the buyer and seller in pricing the asset or liability. These inputs are further defined as observable and unobservable inputs. Observable inputs are those that buyer and seller would use in pricing the asset or liability based on market data obtained from sources independent of December 31, 2011, Management assessed the effectiveness of our internal control over financial reportingGroup. Unobservable inputs reflect the Group’s assumptions about the inputs that the buyer and seller would use in pricing the asset or liability developed based on the criteria for effective internal control over financial reporting establishedbest information available in Internal Control--Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO") and SEC guidance on conducting such assessments. Based on that evaluation, they concluded that, during the period covered by this report, such internal controls and procedures were not effective.circumstances.
The matters involving internal controlsfair value hierarchy is categorized into three levels based on the inputs as follows:
| Level 1 - | Valuations based on unadjusted quoted prices in active markets for identical assets or liabilities that the Group has the ability to access. Valuation adjustments and block discounts are not being applied. Since valuations are based on quoted prices that are readily and regularly available in an active market, valuation of these securities does not entail a significant degree of judgment. |
| Level 2 - | Valuations based on (i) quoted prices in active markets for similar assets and liabilities, (ii) quoted prices in markets that are not active for identical or similar assets, (iii) inputs other than quoted prices for the assets or liabilities, or (iv) inputs that are derived principally from or corroborated by market through correlation or other means. |
| Level 3 - | Valuations based on inputs that are unobservable and significant to the overall fair value measurement. |
The Group’s financial instruments consist principally of cash, accounts receivable, accounts payable, bank loans, and procedures that our management consideredaccrued liabilities. Pursuant to be material weaknesses underASC 820, the standardsfair value of the Public Company Accounting Oversight Board were: (1) inadequate segregationGroup's cash is determined based on “Level 1” inputs, which consist of duties consistent with control objectives; and (2) ineffective controls over period end financial disclosure and reporting processes. The aforementioned material weaknesses were identified by our Chief Executive Officerquoted prices in connection with the review of our financial statements as of December 31, 2011.
Managementactive markets for identical assets.The Group believes that the material weaknesses set forth in items (1)carrying amounts of all of the Group's other financial instruments approximate their current fair values because of their nature and (2) above did not have an effect on our financial results. At this time, the Company does not have an audit committee and relies on its Board of Directors and executive management to monitor internal controls and procedures to ensure the Company is meeting its SEC obligations.
(c) Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting that occurred during our most recent fiscal quarter that have materially affected,respective maturity dates or reasonably likely to materially affect, our internal control over financial reporting.
Item 9B. Other Information
None.durations.
| ADGS ADVISORY, INC. |
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS |
| (IN US DOLLARS) |
| A) | Business segment reporting - by product |
The Company has three (3) reportable business segments: providing accounting, taxation, company secretarial, consultancy services, and consultancy service for slope inspection. The Company evaluates performance based on net operating profit. Administrative functions are centralized however, where applicable, portions of the administrative function expenses are allocated between the operating segments. In the event any services are provided to one operating segment by the other, the transaction is valued according to the company’s transfer policy, which approximates market price. The administrative expenses are captured discretely within each segment. The Company’s property and equipment, and accounts receivable are captured and reported discretely within each operating segment.
The following tables set forth the Company's four main segments:
| | | Accounting & Corporate Services | | | Corporate Restructuring & Insolvency | | | Multi-Disciplinary Advisory | | | Corporate & Other Income | | | Total | |
| Year ended August 31, 2013 | | | | | | | | | | | | | | | |
| Segment revenue | | | | | | | | | | | | | | | |
| Revenue from external customer | | $ | 1,541,120 | | | $ | 709,828 | | | $ | 937,936 | | | $ | 9,276 | | | $ | 3,198,160 | |
| Cost of sales | | | (675,169 | ) | | | (378,005 | ) | | | (372,004 | ) | | | (500 | ) | | | (1,425,678 | ) |
| Administrative expense | | | (491,381 | ) | | | (150,594 | ) | | | (198,989 | ) | | | (1,968 | ) | | | (842,932 | ) |
| Gross profit | | | 374,570 | | | | 181,229 | | | | 366,943 | | | | 6,808 | | | | 929,550 | |
| | | | | | | | | | | | | | | | | | | | | |
| Other income | | | 2,494 | | | | - | | | | - | | | | - | | | | 2,494 | |
| Finance cost | | | (74,359 | ) | | | (34,522 | ) | | | (45,615 | ) | | | (451 | ) | | | (154,947 | ) |
| | | | | | | | | | | | | | | | | | | | | |
| Income before income taxes | | | 302,705 | | | | 146,707 | | | | 321,328 | | | | 6,357 | | | | 777,097 | |
| Income tax | | | (85,500 | ) | | | (28,615 | ) | | | (37,811 | ) | | | (374 | ) | | | (152,300 | ) |
| Net income | | $ | 217,205 | | | $ | 118,092 | | | $ | 283,517 | | | $ | 5,983 | | | $ | 624,797 | |
| | | Accounting & Corporate Services | | | Corporate Restructuring & Insolvency | | | Multi-Disciplinary Advisory | | | Corporate & Other Income | | | Total | |
| Total assets | | $ | 2,086,481 | | | $ | 968,673 | | | $ | 26,257 | | | $ | 1,684,466 | | | $ | 4,765,877 | |
| | | | | | | | | | | | | | | | , | | | | | |
| Total liabilities | | $ | 1,653,593 | | | $ | 767,700 | | | $ | 934,302 | | | $ | 1,489,130 | | | $ | 4,844,725 | |
Part III
Item 10. Directors, Executive Officers and Corporate Governance| ADGS ADVISORY, INC. |
| NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS |
| (IN US DOLLARS) |
Identification of Directors and Executive Officers:3. | BUSINESS SEGMENTS (…../Cont’d) |
| A) | Business segment reporting - by product (…../Cont’d) |
| | | Accounting & Corporate Services | | | Corporate Restructuring & Insolvency | | | Multi-Disciplinary Advisory | | | Corporate & Other Income | | | Total | |
| Year ended August 31, 2012 | | | | | | | | | | | | | | | |
| Segment revenue | | | | | | | | | | | | | | | |
| Revenue from external customer | | $ | 1,077,365 | | | $ | 200,413 | | | $ | 427,246 | | | $ | - | | | $ | 1,705,024 | |
| Cost of sales | | | (1,003,621 | ) | | | (117,248 | ) | | | (187,860 | ) | | | - | | | | (1,308,729 | ) |
| Administrative expense | | | (272,523 | ) | | | (50,695 | ) | | | (221,492 | ) | | | - | | | | (544,710 | ) |
| Gross profit/(loss) | | | (198,779 | ) | | | 32,470 | | | | 17,894 | | | | - | | | | (148,415 | ) |
| | | | | | | | | | | | | | | | | | | | | |
| Other income | | | - | | | | - | | | | - | | | | - | | | | - | |
| Finance cost | | | (30,175 | ) | | | (5,613 | ) | | | (11,966 | ) | | | - | | | | (47,754 | ) |
| | | | | | | | | | | | | | | | | | | | | |
| Income/(loss) before income taxes | | | (228,954 | ) | | | 26,857 | | | | 5,928 | | | | - | | | | (196,169 | ) |
| Income tax | | | - | | | | - | | | | - | | | | - | | | | - | |
| Net income/(loss) | | $ | (228,954 | ) | | $ | 26,857 | | | $ | 5,928 | | | $ | - | | | $ | (196,169 | ) |
| | | Accounting & Corporate Services | | | Corporate Restructuring & Insolvency | | | Multi-Disciplinary Advisory | | | Corporate & Other Income | | | Total | |
| Total assets | | $ | 1,541,734 | | | $ | 286,796 | | | $ | 43,726 | | | $ | - | | | $ | 1,872,256 | |
| | | | | | | | | | | | | | | | | | | | | |
| Total liabilities | | $ | 1,621,093 | | | $ | 301,558 | | | $ | 642,870 | | | $ | - | | | $ | 2,565,521 | |
NameADGS ADVISORY, INC. |
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS |
| (IN US DOLLARS) |
| 4. | ACQUISITION OF BUSINESS |
In January 2013, the Company acquired 100% shareholding of Vantage Advisory Limited, a Hong Kong incorporated limited company, for net purchase consideration of about US$641(HK$5,000). Vantage Advisory Limited is one of the nine firms in Hong Kong which has appointed as Joint and Several Provisional Liquidators under Panel “T” by Official Receiver’s Officer under the Government of Hong Kong Special Administrative Region. The value of Vantage Advisory Limited as at January 4, 2013 was $641 and was allocated as follows:
| Total asset acquired | | $ | 2,493 | |
| Total liabilities assumed | | | (1,852 | ) |
| Net assets acquired | | $ | 641 | |
The directors assessed that the differences between fair values and carrying amounts of assets and liabilities are insignificant. No goodwill arose in the acquisition of Vantage Advisory Limited.
Cash represents cash in bank and cash on hand. Cash as of August 31, 2013 and 2012 consists of the following:
| | | August 31, | | | August 31, | |
| | | 2013 | | | 2012 | |
| | | | | | | |
| Bank balances and cash | | $ | 164,314 | | | $ | 129,001 | |
All cash was maintained in Hong Kong, PRC. In Hong Kong, there are no rules or regulations mandating an obligatory insurance of bank accounts. Management believes these financial institutions are of high credit quality.
As of August 31, 2013 and 2012 the Group's cash amounting to $129,312 and nil respectively, were restricted and deposited in a bank as security for instalment loans payable to the bank.
| ADGS ADVISORY, INC. |
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS |
| (IN US DOLLARS) |
| 7. | DUE FROM A RELATED PARTY |
The amounts due from the Group CFO are interest free, unsecured and repayable on demand. The Advances to the CFO were funded by Group bank loans. These bank loans were secured by real property owned by the CFO.
The activity for such amounts due to shareholders for the year ended August 31, 2013 and 2012 is as follows:
| | | 2013 | |
| | | | |
| Balance due from a related party at beginning of year | | $ | 241,036 | |
| Amount repaid/advanced to her during the year | | | 4,831,702 | |
| Amount repaid by her during the year | | | (4,655,559 | ) |
| Exchange alignment | | | 1,479 | |
| Balance due from a related party at end of year | | $ | 418,658 | |
| | | 2012 | |
| | | | |
| Balance due from a related party at beginning of year | | $ | (2,051,460 | ) |
| Amount repaid/advanced to her during the year | | | 6,591,003 | |
| Amount repaid by her during the year | | | (4,300,751 | ) |
| Exchange alignment | | | 2,244 | |
| Balance due from a related party at end of year | | $ | 241,036 | |
| 8. | LOAN FROM A RELATED PARTY |
The $750,726 loan is interest free, unsecured and is due and payable on August 30, 2017.
| ADGS ADVISORY, INC. |
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS |
| (IN US DOLLARS) |
| 9. | PROPERTY AND EQUIPMENT, NET |
Property and equipment, net consist of the following:
| | | August 31, | | | August 31, | |
| | | 2013 | | | 2012 | |
| | | | | | | |
| Investment property | | $ | 1,909,062 | | | $ | - | |
| Leasehold improvement | | | 85,345 | | | | 78,251 | |
| Furniture and fixtures | | | 5,632 | | | | 4,560 | |
| Office equipment | | | 6,730 | | | | 6,730 | |
| Motor vehicle | | | 145,407 | | | | 28,034 | |
| | | | 2,152,176 | | | | 117,575 | |
| Less: Accumulated depreciation | | | (63,486 | ) | | | (24,225 | ) |
| | | $ | 2,088,690 | | | $ | 93,350 | |
Depreciation expense for the year ended August 31, 2013 and 2012 amounted to $50,475 and $23,516 respectively.
Included in motor vehicle of the Group, the net carrying amount of $117,602 (2012: $22,427) is under capital lease with the related depreciation charge for the years ended August 31, 2013 of $30,831 and 2012 is $5,607.
ADGS Group’s subsidiary, Almonds Kisses has prepaid a deposit of $574,364 (HK$4.48 million) during the third quarter of 2013 to acquire a BVI incorporated company, Motion Tech Development Limited which owned a residential property at the time of acquisition and had no operations since incorporation, October 7, 2007, through the time of acquisition, August 30, 2013. A further settlement of $1,334,698 (HK$10.32 million) was made during the fourth quarter, of which $750,726 was funded by a loan advanced by a significant shareholder to Almonds Kisses. The management determined that the acquired company was not considered a business as defined in ASC 805-10-25-1. Thus this acquisition was characterized as acquisition of assets. A property of $1,909,062 at cost was recorded and included in the Group’s property and equipment .
The residential property held by Motion Tech is collateral for a banking facility with a maximum amount of $2,063,850 (HK$16 million).
| ADGS ADVISORY, INC. |
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS |
| (IN US DOLLARS) |
| 10. | ASSETS HELD UNDER CAPITAL LEASES |
The Group leases a motor vehicle that is classified as capital lease. The cost of the motor vehicle under capital leases is included in the Balance Sheets as property and equipment and was $19,047 ($19,047 net of accumulated depreciation) at August 31, 2013. Amortization of assets under capital leases is included in depreciation expense. The future minimum lease payments required under the capital leases and the present value of the net minimum lease payments as of August 31, 2013, are as follows:
| | | Amount | |
| Year ending August 31, | | | |
| 2014 | | $ | 27,345 | |
| 2015 | | | 27,345 | |
| 2016 | | | 27,345 | |
| 2017 | | | 27,345 | |
| 2018 | | | 10,752 | |
| Thereafter | | | - | |
| Total minimum lease payment | | | 120,132 | |
| Less: Imputed interest | | | (8,051 | ) |
| Present value of net minimum lease payments | | | 112,081 | |
| Less: Current maturities of capital leases obligations | | | (23,775 | ) |
| Long-term capital leases obligations | | $ | 88,306 | |
Intangible assets consist of customer lists purchased from three unrelated parties pursuant to the agreements dated June 21, 2005 and April 28, 2011.
The intangible assets are amortized using the straight line method over a period of 10 years. Amortization expenses for the years ended August 31, 2013 is $180,519 and 2012 is $179,496. The future amortization as of August 31, will be as follows:
| | | Amount | |
| Year ending August 31, | | | |
| 2014 | | $ | 180,519 | |
| 2015 | | | 178,749 | |
| 2016 | | | 77,365 | |
| 2017 | | | 77,365 | |
| 2018 | | | 77,365 | |
| Thereafter | | | 202,477 | |
| | | $ | 793,840 | |
| ADGS ADVISORY, INC. |
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS |
| (IN US DOLLARS) |
| 12. | INCOME TAXES EXPENSES |
The entities that comprise the Group file separate tax returns in the respective tax jurisdictions that they operate. The Company files income tax returns in the U.S. federal and state, and foreign jurisdictions such as Hong Kong, People’s Republic of China. The Inland Revenue Department of Hong Kong, People’s Republic of China would have a 7 year period that it could make changes on tax returns filed.
The Company is domiciled in the State of Delaware, U.S.A.. No provision for U.S.A. profits tax has been made as the Company has sustained losses.
The Company’s subsidiary, Almonds Kisses is domiciled in the British Virgin Islands, the law of which does not require the company to pay any income taxes or other taxes based on income, business activity or assets.
The Company’s subsidiary, Motion Tech is domiciled in the British Virgin Islands, the law of which does not require the company to pay any income taxes or other taxes based on income, business activity or assets.
The Company's subsidiary, ADGS, is domiciled in Hong Kong and subject to statutory profits tax of 16.5% on earnings and profits in Hong Kong.
The Company’s subsidiary, ADGS Advisory Limited, is domiciled in Hong Kong, and a provision for Hong Kong profits tax in the amount of $152,357 has been made for the year ended August 31, 2013. No provision for Hong Kong profits tax has been made for 2012, as the subsidiary sustained tax losses in that year.
The Company’s subsidiary, ADGS Tax Advisory Limited, is domiciled in Hong Kong. No provision for Hong Kong profits tax has been made as the subsidiary sustained tax losses for the years ended August 31, 2013 and 2012.
The Company’s subsidiary, Vantage Advisory Limited, is domiciled in Hong Kong. No provision for Hong Kong profits tax has been made as the subsidiary sustained tax losses for the year ended August 31, 2013.
| ADGS ADVISORY, INC. |
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS |
| (IN US DOLLARS) |
| 12. | INCOME TAXES EXPENSES (…/Cont’d) |
The Company's income tax for the years ended August 31, 2013 and 2012 can be reconciled to the income before income tax expenses in the statement of operations as follows:
| | | For the year ended August 31, 2013 | | | For the year ended August 31, 2012 | |
| | | | | | | |
| Profit/(losses) before tax | | $ | 777,097 | | | $ | (196,169 | ) |
| | | | | | | | | |
| Expected Hong Kong income tax expense | | | | | | | | |
| at statutory tax rate of 16.5% | | | 128,221 | | | | - | |
| | | | | | | | | |
| Temporary difference | | | 24,079 | | | | - | |
| Actual income tax expense | | $ | 152,300 | | | $ | - | |
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company’s deferred tax assets and liabilities are as follows:
| | | August 31, 2013 | | | August 31, 2012 | |
| | | | | | | |
| Deferred tax asset: | | | | | | |
| Unrecognized tax losses | | $ | - | | | $ | 26,111 | |
| | | | | | | | | |
| Deferred tax liability: | | | | | | | | |
| Difference between book and tax depreciation | | $ | 2,340 | | | $ | 7,081 | |
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Other major temporary differences that give rise to the deferred tax assets and liabilities are net operating losses carry forwards. As the amounts are immaterial as of August 31, 2013 and 2012, no deferred taxes have been provided for in the accounts.
| ADGS ADVISORY, INC. |
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS |
| (IN US DOLLARS) |
The details of the bank loans outstanding as of August 31, 2013 are as follows:
| | | Outstanding loan | | Current annualized | | | | | | |
| Name of bank | | amount | | interest rate | | Nature of loans | | Term of loans | | Collateral |
| | | | | | | | | | | | |
| Shanghai Commercial Bank ("SCB") | | | US$943,651 (HK$7,315,652) | | SCB annual rate of 3% | | Term loan | | January 30, 2012 to December 31, 2035 | | Property and personal guarantee from related party and third party |
| | | | | | | | | | | | |
Hang Seng Bank ("HSB") | | | US$136,863 (HK$1,061,028) | | HSB monthly rate of 0.38% | | Term loan | | June 27, 2012 to June 26, 2017 | | Property and personal guarantee from related party and third party |
| | | | | | | | | | | | |
Hitachi Capital (HK) Ltd. ("HC") | | | US$5,573 (HK$43,204) | | HC annual rate of 6.98% | | Term loan | | June 29, 2012 to November 25, 2013 | | Personal guarantee from related party |
| | | | | | | | | | | | |
| DBS | | | US$1,200,698 (HK$9,308,419) | | DBS annual rate of 2.75% | | Term loan | | November 12, 2012 to 12 October, 2037 | | Property and personal guarantee from related party |
| | | | | | | | | | | | |
| | | $ | 2,286,785 | | | | | | | | |
| ADGS ADVISORY, INC. |
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS |
| (IN US DOLLARS) |
| 13. | BANK LOANS (…/Cont’d) |
The details of the bank loans outstanding as of August 31, 2012 are as follows:
| | AgeOutstanding loan | | TitleCurrent annualized | | | | | | |
| Name of bank | | amount | | interest rate | | Nature of loans | | Term of loans | | Collateral |
| | | | | |
Chu Zhanjun | | 41 | | Chief Executive Officer, President, Chief Financial Officer, Director | | |
| Shanghai Commercial Bank ("SCB") | | | US$1,037,480 (HK$8,092,342) | | SCB annual rate of 3% | | Term loan | | January 30, 2012 to December 31, 2035 | | Property and personal guarantee from related party and third party |
| | | | | |
Li Gang | | 33 | | Director |
Chu Zhanjun has been our President, Chief Executive Officer, Principal Financial Officer and a director of the Company since May 2011. Since 2008 Mr. Chu managed Dalian Kaida Venture Capital in China as the Executive of Administration, whose duties cover: organizing significant events and activities related to company’s administrative affairs; directing logistic division to create a sound working environment; and leading crews, on a regular basis, to review functional responsibilities so that they may timely spot problems and thus make corrections. From 2001 to 2007, he was co-manager general of Solar Group-Dalian Hi-Tech Corporation, assisting manager general to form strategies related to company development, business and operations; streamline in-house governance; stipulate rules regarding corporate structure, management system, business morals and the like; and oversee the execution of plans and strategies. From 1994 to 1996, Mr. Chu held the position as the Manager of Planning Department of Solar Town Hotel, in Jiamusi City, Heilongjiang Province, and later was promoted and worked as the Director of this department until 2000. His responsibilities comprised developing company’s strategic plan, brand strategies and marketing. He attended Heilongjiang Business School from year 1989 to 1993 and obtained his bachelor degree of business management.
Li Gang has been our director since May 2011. Since 2010, Mr. Li been employed by Dalian Kaida Venture Capital as the Manager General of Office Administration, whose duties include: receiving and entertaining important guests to the company; responding to important, administration-related correspondences; organizing regular examinations related to fire protection and security, thus creating a safe working environment; dealing matters in field of laws and enforcing guidelines and inspections in connection with confidential issues; smoothing in-house cooperation and settling the disputes arising; overseeing the execution of company’s management model, soliciting /analyzing feedbacks and making reports to manager general; securing full knowledge of company’s internal operations and making reports to manager general if necessary; and forging cooperative liaisons with external bodies on behalf of the company. From 2006 to 2009, he was the Director of Office Administration of Solar Group, and from 2002 to 2005, Mr. Li was the Manager of Information Department of Solar Group-Dalian Hi-Tech Corporation. Mr. Li attended Heilongjiang Jiamusi University from year 1997 to 2001 and obtained his bachelor degree of computer.
Our Board of Directors currently consists of two (2) member. Our Bylaws provide that our board shall consist of not less than one (1) nor more than nine (9) individuals. The terms of directors expire at the next annual shareholders' meeting unless their terms are staggered as permitted in our bylaws. Each shareholder is entitled to vote the number of shares owned by him for as many persons as there are directors to be elected. Shareholders do not have a right to cumulate their votes for directors.
Part III
Item 10. Directors, Executive Officers and Corporate Governance
Identification of certain significant employees
There are no significant employees.
Family relationships
There are no family relationships between the directors and/or executives.
Involvement in certain legal proceedings.
None of our directors, executive officers, promoters or control persons have not been involved in any legal proceedings as defined by item 401 of Regulation S-K in the past five years.
Director Independence
We cannot guarantee that our Board of Directors will always have a majority of independent directors. In the absence of a majority of independent directors, our executive officer, who is also a principal stockholder and director, could establish policies and enter into transactions without independent review and approval thereof. This could present the potential for a conflict of interest between the Company and its stockholders generally and the controlling officers, stockholders or directors.
Audit Committee
As of this annual report, we do not have an audit committee. However, our Board of Directors carries out the functions of an audit committee. The Board of Directors does not believe the expense of hiring a financial expert would be beneficial to the Company.
Compliance with Section 16(a) of the Exchange Act
Section 16(a) of the Exchange Act requires our directors, executive officers and any persons beneficially holding more than ten percent of our common stock to report their ownership of common stock and any changes in that ownership to the SEC. The SEC has established specific due dates for these reports, and we are required to report in this document any failure to file by these dates. We believe that all report transactions, if any, have been reported or included in the appropriate filings submitted to the SEC, except that Mr. Chu Zhanjun, an officer and director, has not filed a Form 3, and Mr. Li Gang, a director, has not filed a Form 3. Our former CEO and director, Mr. Michael Salerno, who served as our officer and director until May 2011, did not file a Form 3.
Code of Ethics
The Company has adopted a code of ethics which is applicable to our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar function, directors and/or employees. The code of ethics was filed with our S-1 registration statement on July 21, 2008.
Item 11. Executive Compensation
Currently, we do not pay our directors any cash or other compensation. In the future, we may consider appropriate forms of compensation, including the issuance of common stock and stock options as compensation.
Compensation Committee
As of this annual report, we do not have a compensation committee. Our executives and directors are not compensated. We do not anticipate the formation of such committee.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
The following table shows the number of shares and percentage of all shares of common stock issued and outstanding as of December 31, 2011, held by any person known to us to be the beneficial owner of 5% or more of our outstanding common stock, by each executive officer and director, and by all directors and executive officers as a group.
This information as to beneficial ownership was furnished to us by or on behalf of the persons named. Unless otherwise indicated, the business address of each person listed is 20 Broad Street, 7th Floor, New York, New York 10005. Information with respect to the percent of class is based on outstanding shares of common stock as of December 31, 2011. Except as otherwise indicated and pursuant to applicable community property laws, to our knowledge, each stockholder has sole power to vote and dispose of all the shares of common stock listed opposite his name.
For purposes of this table, each person is deemed to have beneficial ownership of any shares of our common stock such person has the right to acquire on or within 60 days of this annual report.
| Name and address of Beneficial Owner | | Shares of common stock Beneficially Owned | | | Percent of Class(1) | |
| Asset Intelligences Ltd. | | | 280,000 | | | | 6.8 | % |
| Clover Meadow Corp. | | | 280,000 | | | | 6.8 | % |
David Moss 30872 Hunt Club Drive San Juan Capistrano, CA | | | 225,000 | | | | 5.5 | % |
Robert Gelfand 1711 Drummon Drive Vancouver, British Columbia Canada | | | 225,000 | | | | 5.5 | % |
| Chu Zhanjun | | | -- | | | | 0 | % |
| Li Gang | | | -- | | | | 0 | % |
| Directors and officers as a group (2 persons) | | | -- | | | | 0 | % |
____
(1)Based on an aggregate of 4,095,000 common shares outstanding as of December 31, 2011.
Item 13. Certain Relationships and Related Transactions, and Director Independence.
Our Company has not had any transactions with related persons in the course of the last reported fiscal year involving any amounts exceeding $120,000 or is in the process of proposing any such transaction(s).
Item 14. Principal Accounting Fees and Services.
Audit and Non-Audit Fees
The Following table shows information as related to audit and non-audit fees for professional services rendered by Wei Wei & Co. LLP and Friedman, LLP, the principal accounting firms for the fiscal years ending December 31, 2011 and 2010, respectively.
| | | December 31, | |
| | | 2011 | | | 2010 | |
| Type of Fee | | | | | | |
Audit Fees(1) | | $ | 6,000 | | | $ | 11, 500 | |
| Audit Related Fees | | | - | | | | - | |
| Tax Fees | | | - | | | | - | |
| All Other Fees | | | - | | | | - | |
| Total | | $ | 6,000 | | | $ | 11,500 | |
_____
(1)The audit fees represent fees for professional services provided in connection with the audit of our annual financial statements, review of our quarterly financial statements and audit services provided in connection with our regulatory filings.
Our Board of Directors, performing the duties of the audit committee, has reviewed all audit and non-audit related fees quarterly and annually. The Board approves audit and tax related fees for the Company to be in compliance with regulatory filings with timely submissions.
Part IV
Item 15. Exhibits, Financial Statement Schedules
Exhibit Number | | Description |
| | | |
2.1 | | Share Exchange Agreement whereby Life Nutrition Products, Inc. merged with and into Life Nutrition Products, LLC on or about September 24, 2007* |
| | |
3.1 | | Certificate of Incorporation * |
| | |
3.2 | | By-laws* |
| | |
4.1 | | Specimen Common Stock Certificate* |
| | |
4.2 | | Form of Subscription Agreement between Life Nutrition Products, Inc. and each prospective purchaser who is a signatory thereto subscribing for Units in the December 2007 Private Placement.* |
| | |
14. | | Code of Conduct* |
| | |
17** | | Share Exchange Agreement dated as of September 7, 2010 by and among Life Nutrition Products, Inc., Conqueror Group Limited and Acumen Charm Ltd. |
| | |
31 | | Certification of Principal Executive Officer and Principal Financial Officer Sec. 302 |
| | |
32 | | Certification of Chief Executive Officer and Chief Financial Officer Sec. 906 |
| | |
101.INS*** | | XBRL Instance Document |
| | |
101.SCH*** | | XBRL Schema Document |
| | |
101.CAL*** | | XBRL Calculation Linkbase Document |
| | |
101.DEF*** | | XBRL Definition Linkbase Document |
| | |
101.LAB*** | | XBRL Label Linkbase Document |
| | |
101.PRE*** | | XBRL Presentation Linkbase Document |
______
* Filed as an Exhibit to the Registration Statement on Form S-1 filed on July 21, 2008 (SEC File No. 333-152432) and incorporated herein by reference.
** Filed with Form 8-K dated September 7, 2010 and filed on September 8, 2010 and incorporated herein by reference.
*** XBRL (Extensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf on April 16, 2012 by the undersigned thereunto duly authorized.
| LIFE NUTRITION PRODUCTS, INC. | |
| | | | |
Date: April 16, 2012
| By: | /s/ Chu Zhanjun | |
| | Chu Zhanjun,
Chief Executive Officer
| |
| Shanghai Commercial Bank ("SCB") | | | |
Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
SignatureUS$252,781 (HK$1,971,696) | | TitleSCB annual rate of 6.25% | | DateTerm loan | | July 9, 2012 to July 9, 2017 | | Property and personal guarantee from related party and third party |
| | | | | |
/s/ Chu Zhanjun | | Chief Executive Officer, President, Chief Financial Officer and Director | | April 16, 2012 |
Chu Zhanjun | | (Principal Executive Officer, and Principal Financial and Accounting Officer) | | | | | | |
| Shanghai Commercial Bank ("SCB") | | | US$251,184 (HK$1,959,236) | | SCB annual rate of 3.5% | | Term loan | | January 30, 2012 to January 30, 2032 | | Property and personal guarantee from related party and third party |
| | | | | |
/s/ Li Gang | | Director | | April 16, 2012 | | |
Li GangShanghai Commercial Bank ("SCB") | | | US$769,231 (HK$6,000,000) Loan limit: US$769,231 | | SCB annual rate of 0.75% over prime or annual rate of 2% over the overnight HIBOR, whichever is higher | | Revolving loan | | Renewal in every 6 months | | Property and personal guarantee from related party and third party |
| | | | | | | | | | | |
| Hang Seng Bank ("HSB") | | | US$173,748 (HK$1,355,232) | | HSB monthly rate of 0.38% | | Term loan | | June 27, 2012 to June 26, 2017 | | Property and personal guarantee from related party and third party |
| | | | | | | | | | | |
| Hitachi Capital (HK) Ltd.("HC") | | | US$40,561 (HK$316,372) | | HC annual rate of 6.98% | | Term loan | | June 29, 2012 to November 25, 2013 | | Personal guarantee from related party |
| | | | | | | | | | | |
| | $ | 2,524,985 | | | | | | | | |
Interest expenses for the years ended August 31, 2013 and 2012 amounted to $115,615 and $47,332 respectively.
20 Bank loans repayment schedule is as follows:
| | | August 31, 2013 | | | August 31, 2012 | |
| Year ending August 31, | | | | | | |
| 2013 | | $ | - | | | $ | 919,392 | |
| 2014 | | | 107,548 | | | | 138,580 | |
| 2015 | | | 114,303 | | | | 117,104 | |
| 2016 | | | 118,253 | | | | 122,778 | |
| 2017 | | | 90,382 | | | | 108,410 | |
| 2018 | | | 79,363 | | | | - | |
| Thereafter | | | 1,776,936 | | | | 1,118,721 | |
| | | $ | 2,286,785 | | | $ | 2,524,985 | |
The bank loans as outlined in the aforementioned tables are secured by the directors' and third parties' properties and personal guarantees.
| ADGS ADVISORY, INC. |
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS |
| (IN US DOLLARS) |
| | | August 31, 2013 | | | August 31, 2012 | |
| | | | | | | |
| Deferred revenue – current portion | | $ | 145,114 | | | $ | - | |
| Deferred revenue – net of current portion | | | 435,343 | | | | - | |
| | | $ | 580,457 | | | $ | - | |
The Company has an agreement with a third party for consultancy services with a fixed fee and term of four years, renewable upon expiration. Deferred revenue to be recognized in next fiscal year (2014) is classified as current liabilities with the remaining balance classified as a non current liabilities.
| 15. | CONCENTRATIONS OF RISK |
The Group's credit risk is somewhat limited due to a relatively large customer base. During the years ended August 31, 2013 and 2012, the Group had no customer which accounted for 10% or more of total revenue or 10% or more of total accounts receivable.
| 16. | RELATED PARTY TRANSACTIONS |
Significant operating expenses arising from transaction with a related company was as follows.
| | | For the year ended August 31, | |
| | | 2013 | | | 2012 | |
| | | | | | | | | |
| Due from a related party | | $ | 418,658 | | | $ | 241,036 | |
| Loan from a related party | | | 750,726 | | | | - | |
| Sub-contracting fee | | | 107,534 | | | | 77,568 | |
These balances primarily represent sub-contracting fees included as part of the cost of revenues to the Company's Chief Operating Officer and a company controlled by one of the Company’s directors for the year ended August 31, 2013. The sub-contracting fee is included as part of the cost of revenues to the Company's Chief Operating Officer for the year ended August 2012.
See Notes 7 and 8 for discussion of advances to and from related parties.
| ADGS ADVISORY, INC. |
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS |
| (IN US DOLLARS) |
| 17. | COMMITMENTS AND CONTINGENCIES |
Commitments and contingencies
| (a) | In the normal course of business, the Group is subject to contingencies, including legal proceedings and claims arising within the normal course of businesses that relate to a wide range of matters. The Group records accruals for such contingencies based upon the assessment of the probability of occurrence and, where determinable, an estimate of the liability. Management may consider many factors in making these assessments including past history, evidence and the specifics of each matter. The Group has not recognized a provision for claims or contingencies as of August 31, 2013 and 2012. |
| (b) | Rental expense amounted to $156,841 (HK$1,216,365) for year ended August 31, 2013 and $134,199 (HK$1,046,699) for the year ended August 31, 2012. The total future minimum lease payments under non-cancellable operating leases with respect to premises as of August 31, 2013 are payable as follows: |
| | | Rental | |
| Year Ended August 31, | | | | |
| 2014 | | $ | 134,105 | |
| 2015 | | | 94,171 | |
| 2016 | | | - | |
| 2017 | | | - | |
| 2018 | | | - | |
| Over five years | | | - | |
| | | $ | 228,276 | |
| (c) | Deferred revenue amounted to $580,457 (HK$4.5 million) for year ended August 31, 2013 and nil for the year ended August 31, 2012. The total future revenue under non-cancellable agreement with respect to consultancy service income as of August 31, 2013 are receivable as follows: |
| | | Revenue | |
| Year Ended August 31, | | | | |
| 2014 | | $ | 145,114 | |
| 2015 | | | 145,114 | |
| 2016 | | | 145,114 | |
| 2017 | | | 145,115 | |
| 2018 | | | - | |
| Over five years | | | - | |
| | | $ | 580,457 | |
Economic and political risks
| (d) | The major operations of the Group are conducted in Hong Kong, the PRC. Accordingly, the political, economic, and legal environments in Hong Kong, the PRC, as well as the general state of Hong Kong's economy may influence the business, financial condition, and results of operations of the Company. |
Among other risks, the Group's operations are subject to the risks of restrictions on: changing taxation policies; and political conditions and governmental regulations.
| ADGS ADVISORY, INC. |
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS |
| (IN US DOLLARS) |
On September 30, 2013, the Company acquired a client customer base from a third party for consideration of about $155,000 (equivalent to HK$1.2 million). The consideration is payable in four equal monthly installments of $38,700 (equivalent to HK$300,000).
On October 20, 2013, the Company acquired 100% of the shares of T H Strategic Management Limited, a Hong Kong incorporated company for purchase consideration of approximately $515,963 (equivalent to HK$4,000,000). The consideration is payable in four equal monthly installments of $129,000 (equivalent to HK $1.0 million). T H Strategic Management Limited is engaged in the provision of accounting, taxation, company secretarial and consultancy services.
In November 2013, shares of Dynamic Golden have been transferred from ADGS Tax to Almonds Kisses. There was no consideration for this group restructure.
F-30