Quality Online Education Group Inc. - Annual Report: 2014 (Form 10-K)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-K

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

For the fiscal year ended AUGUST 31, 2014

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

Commission file number 001-3427

Registrant’s telephone number, including area code: (852) 2374-0002

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

Securities registered pursuant to Section 12(g) of the Exchange Act: Common Stock ($.0001 par value)

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

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

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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’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. x

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 definition of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

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

The aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant as of February 28, 2014, the last business day of the registrant’s most recently completed second fiscal quarter, was $33,961,000. The number of shares outstanding of the Common Stock ($.0001 par value) of the registrant as of the close of business on February 10, 2015 was 36,704,789.

Documents Incorporated by Reference: None

ADGS ADVISORY, INC.

TABLE OF CONTENTS

Special Note Regarding Forward Looking Statements

This report contains forward-looking statements. These statements involve known 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. Given these uncertainties, you should not place undue reliance on forward-looking statements. Also, forward-looking statements represent our estimates and assumptions only as of the date of this report. You should read this report and the documents that we reference and filed as exhibits to this report completely and with the understanding that our actual 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 Certain Defined Terms

Except where the context otherwise requires and for the purposes of this report only:

In China it is customary to refer to a person’s name with the family name first and the given name second. We have followed this convention with respect to certain Chinese individuals named in this report.

PART I

Item 1. Business.

General Overview

We are primarily engaged in providing accounting, taxation, company secretarial, general corporate and consultancy services in Hong Kong.

The address of our principal executive office is 11/F, Rykadan Capital Tower, 135-137 Hoi Bun Road, Kwun Tong, Kowloon, Hong Kong, SAR. Our telephone number is (852) 2374-0002.

Corporate History and Background

ADGS Advisory, Inc., which was incorporated in the State of Delaware in September 2007 under the name Life Nutrition Products, Inc., was previously a dietary supplement company specializing in the development marketing and distribution of all natural, proprietary, dietary supplements under the names Trim For Life® Appetite Control and Trim For 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.

On September 7, 2010, we entered into a Share Exchange Agreement (the “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 “Conqueror Transaction”), the Company was 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.

The Closing was to transpire on or before January 31, 2011 but it did not occur by that date. However, as of 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 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. At the time, the parties anticipated that the transaction contemplated by the Conqueror Share Exchange Agreement would 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 T H Strategic Management Limited, a Hong Kong corporation (“T H 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. Dynamic Golden Limited which is also a Hong Kong incorporated company was 30% owned by ADGS Tax until November 19, 2013 and has since been 30% owned by Almonds Kisses BVI.

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. T H 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.

As indicated above, T H 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 T H Strategic from Li Hon Lun. T H Strategic is a Hong Kong based accounting services and business consulting firm.

In consideration for acquisition of the issued and outstanding shares of T H Strategic, Almonds Kisses BVI 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. All of such installments were paid by the end of February 2014.

During fiscal 2014, the Company also acquired two client bases from an unrelated party for consideration of approximately $155,000 and $322,477 respectively (HK$1.2 million and HK$4 million respectively). The consideration of one of them was payable in four equal monthly installments of $38,700 (HK $300,000) each. All of such installments and the amount due for the other client base have been paid.

The chart below presents our corporate structure:

The following table lists the directors and officers of the foregoing entities.

Recent Developments

On July 30, 2014, the Company, through ADGS Hong Kong, entered into a Customer List Purchase Agreement (the “July 2014 Purchase Agreement”) with Lau Kam George and Yung Chi Shing (collectively, the “Sellers”) pursuant to which ADGS Hong Kong has agreed to acquire from the Sellers the customer list of the accounting advisory business of the Sellers operating under the name of Acorate Advisory Limited and Berfield Enterprise Solutions and Technology Limited, located in Hong Kong.

In consideration for the acquisition of the customer list, ADGS Hong Kong has agreed to pay the Sellers the sum of approximately US $1.5 million (HK $12.0 million) and 5,000,000 shares of the common stock of the Company. Such amount is to be paid as follows: (i) approximately US $258,000 (HK $2.0 million) upon signing of the July 2014 Purchase Agreement which amount has been paid, (ii) approximately US $387,000 (HK $3.0 million) on or before March 30, 2015, and (iii) the balance of the purchase price of approximately US $903,000 (HK $7.0 million) in 18 monthly installments commencing one month after closing. The shares of common stock are to be issued at closing. Subsequent to the year ended August 31, 2014, and in January 2015, the Company paid half of the second installment described above.

The closing of the acquisition is subject to various conditions including but not limited to ADGS Hong Kong being satisfied in its due diligence review following the execution of the July 2014 Purchase Agreement that revenues for the period of April 1, 2013 to June 30, 2014 meet the amount of HK $10.0 million (approximately US $960,000). The closing, which is expected to occur on or before March 30, 2015, is subject to the delivery of the customer list by the Sellers, and each of the Sellers having entered into mutually acceptable employment agreements and operating agreements with ADGS Hong Kong. Following the closing, the amount of the aggregate purchase price will be adjusted based upon revenues achieved in the 14 month period following the closing.

On August 20, 2014, the Company acquired 2% of the issued and outstanding capital stock of Elite Global Group Limited (incorporated in Hong Kong) (“Elite Global”) from one of the then two shareholders of Elite Global for the sum of approximately $2,000,000 (HK $15,000,000) payable by the transfer of certain receivables due to a subsidiary of the Company. Elite Global has entered into a Preliminary Development Agreement with Viacom Media Networks to construct and establish a new entertainment theme park in the PRC. Elite Global is expected to submit a development plan for Viacom’s approval and then obtain a license to operate the theme park. The Company is not aware of the proposed timeframe for completion of the foregoing. In addition, Elite Global is a party to a Joint Venture Agreement with Simson Giftware which operates and manufactures merchandise for theme stores in Taiwan and Hong Kong. Pursuant to the agreement with the seller of the shares, the Company retains the right to request the seller to buy back all or part of the shares purchased at $2,000,000 or such proportionate amount, if any, after August 20, 2015.

The Company was also a party to a Memorandum of Understanding entered into with Elite Global pursuant to which the Company was to provide certain consulting and advisory services in connection with the construction of the proposed entertainment theme park in the PRC. Such Memorandum of Understanding is no longer in effect.

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:

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:

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:

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:

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.

See “Recent Developments” above for information on the Customer List Purchase Agreement entered into on July 30, 2014 with Lau Kam George and Yung Chi Shing (collectively, the “Sellers”) pursuant to which ADGS Hong Kong has agreed to acquire from the Sellers the customer list of the accounting advisory business of the Sellers operating under the name of Acorate Advisory Limited and Berfield Enterprise Solutions and Technology Limited, located in Hong Kong. The transaction is expected to close on or before March 30, 2015.

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 Factors.

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. 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 years ended August 31, 2014 and 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 2014. 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:

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 bank loans present a significant risk. To date, we have significantly relied upon debt financings to fund our operations. At August 31, 2013 (audited) and August 31, 2014 (audited), we had outstanding bank loans (excluding bank overdrafts) in the principal amount of $2,286,785 and $4,126,739, respectively. We also had bank overdrafts of $253,738 as of August 31, 2014. Interest expense from bank loans and overdrafts (excluding capital lease interest) for the year ended August 31, 2014 was $78,660 and for year ended August 31, 2013 was $127,101. Such loans are primarily term loans with maturity dates ranging from November 2014 to October 2037. Approximately $2 million of the bank loans are to be repaid over the next five years. While we have begun to achieve profitable operations during fiscal 2014, 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 did 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 principal shareholders who is also the Company’s current Chief Financial Officer and daughter of our Chief Executive Officer and Chairman. Although all 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 then available cash. The advances to the related party were unsecured, non-interest bearing without fixed repayment terms. Although such advances are no longer being made to such related party, such advances did not generate income to the Company and may have detrimentally affected our ability to grow the business for the benefit of all of the shareholders.

We may be subject to a concentration of credit risk. During the year ended August 31, 2014, we had one customer which accounted for 15% of our total revenues and 35% of our total accounts receivable. No customer accounted for more than 10% total revenue during the year ended August 31, 2013. Although we believe our credit risk is somewhat limited due to a large customer base, there can be no assurance that we will not have a concentration of credit risk in fiscal 2015 and in future years similar to or greater than fiscal 2014. In such event, the loss of any such key customer or customers could significantly reduce our revenues, or detrimentally impact our revenues if any such key customer or customers experience financial difficulties.

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 result, 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, 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 required by Section 404 of the Sarbanes-Oxley Act. Compliance with Section 404 may require that we incur substantial accounting expenses and expend significant management efforts. 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.

Currently, none of our employees, including our Chief Financial Officer, who is responsible for preparing and supervising the preparation of our financial statements, have any formal training in U.S. GAAP and SEC rules and regulations. In that regard, we rely exclusively on our independent accountants and our outside counsel for advice with respect to U.S. GAAP and SEC rules and regulations. Therefore, there is a risk that our current of future financial statements may not be properly prepared in accordance with U.S. GAAP or that our current or future disclosures are not in compliance with SEC rules and regulations.

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 familiar 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 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 was recently amended to increase the number of shares of common stock which we are authorized to issue from 50,000,000 to 200,000,000 shares of common stock, of which 36,704,789 shares are issued and outstanding as of February 10, 2015. 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:

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.

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 2. Properties.

As of January 26, 2015, the Company relocated in principal executive offices to 11/F., Rykadan Capital Tower, 135-137 Hoi Bun Road, Kwun Tong, Kowloon, Hong Kong, SAR under an operating lease which will expire in September 2017, with a fixed monthly rent expense of approximately $34,280 USD per month.  The Company previously maintained its principal executive offices at Units 2611-13A, 26/F, 113 Argyle Street, Mongkok, Kowloon, Hong Kong, SAR under an operating lease which had 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.

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 an area in the New Territories of Hong Kong. The property is used as collateral for a banking facility.

Item 3. Legal Proceedings.

From time to time, we may become involved in various lawsuits and legal proceedings which arise in the ordinary course of business. However, litigation is subject to inherent uncertainties and an adverse result in these or other matters may arise from time to time that may harm 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 business, financial condition or operating results.

Item 4. Mine Safety Disclosures.

Not applicable.

PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

Market Information

Our common stock is traded in the over-the-counter market and since July 19, 2013 has been quoted on the OTCQB, officially part of the OTC Market Group’s OTC Link quotation system, under the symbol “ADGS”. Prior thereto, our common stock was quoted under the symbol “LIPN”. For the periods indicated, the following table sets forth the high and low sales prices per share of common stock. There were no reported trades in our common stock during the fiscal year ended August 31, 2013. The first reported trade in fiscal 2014 occurred on November 15, 2013. The prices set forth in the table below may not be an accurate indicator of the value of the Company’s shares. These prices represent inter-dealer quotations and do not reflect retail markup, markdown or commissions and may not necessarily represent actual transactions.

Holders

As of February 10, 2015, there were approximately 87 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 is 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 our securities and may 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 information 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 will 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 the 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 such a restriction would be in 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:

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 Under Equity Compensation Plans

On August 28, 2014, our Board of Directors approved and adopted the ADGS Advisory, Inc. 2014 Equity Incentive Plan (the “2014 Plan”), subject to the approval by the stockholders in the extent required under Section 422 or 424 of the U.S. Internal Revenue Code or any other applicable laws, and authorized us to issue up to 7,500,000 shares of our Common Stock under the 2014 Plan (subject to adjustment to take account of stock dividends, stock splits, recapitalizations and similar corporate events). Holders of shares representing a majority of the voting securities of the Company have given their written consent to the approval of the 2014 Plan. The purpose of the 2014 Plan is to provide officers, other employees and directors of, and consultants and advisors to, us and our subsidiaries an incentive to (a) enter into and remain in our service or that of our subsidiaries, (b) enhance our long term performance and that of our subsidiaries, and (c) acquire a proprietary interest in us. Under the 2014 Plan, we will have the right to issue stock options, restricted stock, restricted stock units and other stock awards.

The Compensation Committee or another committee of our Board of Directors (or if there is no committee, the Board of Directors itself) will administer the 2014 Plan. Subject to the express limitations of the 2014 Plan, the Compensation Committee shall have authority in its discretion to determine the eligible persons to whom, and the time or times at which, awards may be granted, the number of shares, units or other rights subject to each award, the exercise, base or purchase price of an award (if any), the time or times at which an award will become vested, exercisable or payable, the performance goals and other conditions affecting an award, the duration of the award, and all other terms of the award.

To date, no awards have been granted under the 2014 Plan.

Information regarding equity compensations plans is set forth in the table below:

Recent Sales of Unregistered Securities

We sold the following equity securities during the fiscal years ended August 31, 2013 and 2014 that were not registered under the Securities Act of 1933, as amended:

On February 7, 2013, and as a condition to the closing of the Acquisition, we issued 750,000 shares of common stock to Wang Yu Long, a designee of Conqueror, pursuant to a subscription agreement dated January 5, 2013 between Conqueror and the Company whereby Conqueror agreed to accept 750,000 shares 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 “US Person” (as defined in Rule 902 of Regulation S) and the certificate representing the shares issued has been endorsed with a restrictive legend consistent with that exemption.

On April 12, 2013, we issued an aggregate of 20,155,000 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.

During March 2014, the Company sold 1,400,000 shares of common stock to 12 investors for the purchase price of $0.30 per share or $420,000 in the aggregate. The securities were issued in reliance upon the exemption from registration pursuant to Section 4(2) of the Securities Act of 1933, as amended, and Regulation S thereunder. All investors represented and warranted that they were non-U.S. persons within the meaning of Regulation S.

During April 2014, the Company sold 1,791,305 shares of common stock to 10 investors for the purchase price of $0.30 per share or $537,391.50 in the aggregate. The securities were issued in reliance upon the exemption from registration pursuant to Section 4(2) of the Securities Act of 1933, as amended, and Regulation S thereunder. All investors represented and warranted that they were non-U.S. persons within the meaning of Regulation S.

During June 2014, the Company sold 21,500 shares of common stock to one investors for the purchase price of $0.30 per share or $6,450 in the aggregate. The securities were issued in reliance upon the exemption from registration pursuant to Section 4(2) of the Securities Act of 1933, as amended, and Regulation S thereunder. The investor represented and warranted that he was a non-U.S. person within the meaning of Regulation S.

During August 2014, the Company sold 7,125,000 shares of common stock to 13 investors for the purchase price of $0.35 per share or $2,493,750 in the aggregate. The securities were issued in reliance upon the exemption from registration pursuant to Section 4(2) of the Securities Act of 1933, as amended, and Regulation S thereunder. All investors represented and warranted that they were non-U.S. persons within the meaning of Regulation S.

Of such proceeds with regard to shares sold in fiscal 2014, $3,454,057 has been paid by such investors during fiscal 2014, leaving a subscription receivable due of $3,092,458 as of August 31, 2014. Of such amount, $64,515 (approximately HK $500,000) has been received subsequent to August 31, 2014 and prior to the issuance of this report.

Item 6. Selected Financial Data.

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 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion and analysis of the results of operations and financial condition should be read in conjunction with the consolidated financial statements of the Company and notes to those financial statements for the years ended August 31, 2014 and 2013, 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 Business 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 similar expressions to identify forward-looking statements.

All amounts are in U.S. Dollars unless otherwise noted.

Company Overview

Unless the context otherwise requires, 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 until November 19, 2013 was 30% owned by ADGS Tax Advisory Limited and has since been 30% owned by Almonds Kisses Limited (BVI). Pursuant to a Certificate of Amendment to the 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.”.

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 Almonds Kisses Limited (BVI) (“Almonds Kisses BVI”) 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 same group of shareholders until being acquired by Almonds Kisses BVI pursuant to a reorganization completed in 2012 to prepare for the Transaction. 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 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 has since been 30% owned by Almonds Kisses BVI, owns an investment in residential real property located in Tuen Mun, New Territories, Hong Kong.

The chart below presents our corporate structure as of the date of this report:

Critical Accounting Policies and Estimates

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 consolidated financial statements are audited. In the opinion of management, all adjustments (consisting of normal recurring accruals) and disclosures for a fair presentation of these consolidated financial statements have been included. The accompanying consolidated financial statements have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission and do not include all information and footnotes necessary for a complete presentation of financial statements in conformity with accounting principles generally accepted in the United States.

The audited condensed 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.

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 prior periods are the assets and liabilities of the Company’s operating subsidiaries.

Certain reclassifications have been made to the comparative period amounts to conform with that of the current period.

Use of estimates

The preparation of the consolidated financial statements in conformity with U.S. GAAP requires management of the Company to make a number of estimates and assumptions relating to 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 years. Significant items subject to such estimates and assumptions include the recoverability of the carrying amount and the estimated useful lives of long-live assets; valuation allowances for receivables, and realizable values for inventories. Accordingly, actual results could differ from those estimates.

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) The Company recognizes the management fee income when service is provided. Services include providing administration support service or accounting service to companies.

Intangible assets

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:

The intangible assets are amortized using the straight line method over a period of 10 years.

Goodwill

In accordance with U.S. GAAP, the Company tests goodwill for impairment annually and whenever events or circumstances make it more likely than not that impairment may have occurred. The Company reviews goodwill for impairment based on its identified reporting units, which are defined as reportable segments or groupings of businesses one level below the reportable segment level. In September 2011, the FASB issued guidance on testing goodwill for impairment. The guidance provides entities with an option to perform a qualitative assessment to determine whether further quantitative impairment testing is necessary.

In accordance with the guidance, the Company reviews goodwill for impairment by first assessing qualitative factors to determine whether the existence of events or circumstances made it more likely than not that the fair value of a reporting unit is less than its carrying amount. If the Company determines it is more likely than not that the fair value of a reporting unit is less than its carrying amount, goodwill is further tested for impairment by comparing the carrying value to the estimated fair value of its reporting units, determined using externally quoted prices (if available) or a discounted cash flow model and, when deemed necessary, a market approach. Significant assumptions inherent in the valuation methodologies for goodwill are employed and include, but are not limited to, such estimates as projected business results, growth rates, the Company’s weighted-average cost of capital, royalty and discount rates.

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, 2014 and August 31, 2013, 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 pronouncements

In April 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2014-08, “Presentation of Financial Statements (Topic 205) and Property, Plant and Equipment (Topic 360).” ASU 2014-08 amends the requirements for reporting discontinued operations and requires additional disclosures about discontinued operations. Under the new guidance, only disposals representing a strategic shift in operations or that have a major effect on the Company's operations and financial results should be presented as discontinued operations. This new accounting guidance is effective for annual periods beginning after December 15, 2014. The Company is currently evaluating the impact of adopting ASU 2014-08 on the Company's results of operations or financial condition.

In May 2014, the FASB issued Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers (ASU 2014-09), which supersedes nearly all existing revenue recognition guidance under U.S. GAAP. The core principle of ASU 2014-09 is to recognize revenues when promised goods or services are transferred to customers in an amount that reflects the consideration to which an entity expects to be entitled for those goods or services. ASU 2014-09 defines a five step process to achieve this core principle and, in doing so, more judgment and estimates may be required within the revenue recognition process than are required under existing U.S. GAAP. The standard is effective for annual periods beginning after December 15, 2016, and interim periods therein, using either of the following transition methods: (i) a full retrospective approach reflecting the application of the standard in each prior reporting period with the option to elect certain practical expedients, or (ii) a retrospective approach with the cumulative effect of initially adopting ASU 2014-09 recognized at the date of adoption (which includes additional footnote disclosures). Early adoption is not permitted. The adoption of this guidance is not expected to have a material impact on the Company’s consolidated financial statements.

In June 2014, the FASB issued Accounting Standards Update No. 2014-12, Compensation — Stock Compensation (Topic 718), Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period (a consensus of the FASB Emerging Issues Task Force) (ASU 2014-12). The guidance applies to all reporting entities that grant their employees share-based payments in which the terms of the award provide that a performance target that affects vesting could be achieved after the requisite service period. The amendments require that a performance target that affects vesting and that could be achieved after the requisite service period be treated as a performance condition. For all entities, the amendments in this Update are effective for annual periods and interim periods within those annual periods beginning after December 15, 2015. Earlier adoption is permitted. The effective date is the same for both public business entities and all other entities. The Company is currently evaluating the impact of adopting ASU 2014-12 on the Company's results of operations or financial condition.

In August 2014, the FASB issued Accounting Standards Update No. 2014-15, Presentation of Financial Statements – Going Concern (Subtopic 205-40), Disclosure of Uncertainties about an Entities Ability to Continue as a Going Concern (ASU 2014-15). The guidance in ASU 2014-15 sets forth management's responsibility to evaluate whether there is substantial doubt about an entity's ability to continue as a going concern as well as required disclosures. ASU 2014-15 indicates that, when preparing financial statements for interim and annual financial statements, management should evaluate whether conditions or events, in the aggregate, raise substantial doubt about the entity's ability to continue as a going concern for one year from the date the financial statements are issued or are available to be issued. This evaluation should include consideration of conditions and events that are either known or are reasonably knowable at the date the financial statements are issued or are available to be issued, as well as whether it is probable that management's plans to address the substantial doubt will be implemented and, if so, whether it is probable that the plans will alleviate the substantial doubt. ASU 2014-15 is effective for annual periods ending after December 15, 2016, and interim periods and annual periods thereafter. Early application is permitted. The adoption of this guidance is not expected to have a material impact on the Company’s consolidated financial statements.

Management does not believe that any other recently issued, but not yet effective accounting pronouncements, if adopted, would have a material effect on the accompanying financial statements

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, 2013 and 2014; 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, 2013 (audited) and August 31, 2014 (audited), we had outstanding bank loans (excluding bank overdrafts) in the principal amount of $2,286,785 and $4,126,739, respectively. We also had bank overdrafts of $253,738 as of August 31, 2014. Interest expense from bank loans and overdrafts (excluding capital lease interest) for the year ended August 31, 2014 was $129,738 and for year ended August 31, 2013 was $151,872. Such loans are primarily term loans with maturity dates ranging from November 2014 to October 2037. Approximately $2 million of the bank loans are to be repaid over the next five years. While we have begun to achieve profitable operations during fiscal 2014, 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.

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, and 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, 2014 compared to Combined Results for the Year Ended August 31, 2013

The following table presents the consolidated statements of operations of the Company for the year ended August 31, 2014 (“Y2014”) as compared to the year ended August 31, 2013 (“Y2013”).

Revenue

Our business for the Y2014 expanded rapidly. We recorded revenues of $6.2 million for Y2014, representing an increase of $2.9 million as compared to the results of $3.2 million for Y2013. The increase was primarily due to the increase of revenue stream multi-disciplinary advisory services and a steady growth in accounting and corporate services.

General and administrative expenses

The significant increase in direct cost of revenue is mainly caused by the increase in consultant fees and surveyor fees for the multi-disciplinary advisory services to our clients.

Other expense

Other expense represents the interest expense for the bank loans and overdraft of $129,738 and $151,872 in Y2014 and Y2013 respectively. The decrease in the amount is mainly caused by the decrease in bank overdrafts of $0.25m made to the Company in Y2014.

Other comprehensive income

Other comprehensive income represents the foreign currency translation gain of $239 and foreign currency translation loss of $10,380 in Y2014 and the Y2013 respectively.

Liquidity and Capital Resources

As of August 31, 2014, we had cash on hand of $95,811, which represented a decrease of $68,503 from $164,314 as of August 31, 2013, other current assets of $2,853,264, and other current liabilities of $2,683,273. Working capital was $265,802 and the ratio of current assets to current liabilities was 1.1 to 1 as of August 31, 2014.

As of August 31, 2014 we had long term debt (excluding the deferred revenue of $290,319 in 2014) of $4,223,569, which represented an increase of $1,205,300 from $3,018,269 excluding deferred revenue of $435,343 as of August 31, 2013; total assets of $8,794,562 as of August 31, 2014 representing an increase of $4,028,685 from $4,765,877 as of August 31, 2013. The ratio of long term debts to total assets was 0.5 to 1 as of August 31, 2014.

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, 2014 and 2013, respectively:

Net cash used in operating activities was $670,294 for the year ended August 31, 2014, as compared to net cash provided by operating activities of $1,208,913 for the year ended August 31, 2013. The decrease in fiscal 2014 was mainly due to a net profit of $1,331,194, plus accrued liabilities and other payables of $192,635 and income tax payable of $433,483, offset by accounts receivable of $(896,467), other receivables of $(1,842,599) and prepaid expenses of $(187,462). The increase in fiscal 2013 was mainly due to a net profit of $647,625, deferred revenue of $580,241, accrued liabilities and other payables of $192,075 and income tax payable of $152,300, offset by accounts receivable of $(564,561) and other receivables of $(130,786).

Net cash used in investing activities was $1,914,293 for the year ended August 31, 2014, as compared to net cash used in investing activities of $2,055,442 for the year ended August 31, 2013.  Such change in fiscal 2014 was mainly due to advances to third parties of $(841,368), acquisition of an intangible asset and subsidiary totaling $(670,719) and deposit for acquisition of a client list of $(257,928), compared to fiscal 2013 wherein cash used was primarily due to cash paid for property and equipment of $(1,935,864). 

Net cash provided by financing activities was $2,473,962 for the year ended August 31, 2014, as compared to net cash provided by financing activities of $881,567 for the year ended August 31, 2013.  Such increase in fiscal 2014 was mainly due to proceeds of bank loans of $2,992,990, proceeds from the issuance of stock of $365,133, advances received from a related party of $557,451 and repayment of advances made on behalf of related party of $418,658, offset by repayment of bank loans of $(1,154,689) and net increase in bank overdraft of $(490,316).  This compares to fiscal 2013 wherein net cash provided by financing activities was mainly due to repayment of related party advances of $4,655,559, advances received from related party of $750,445, proceeds of bank loans of $1,230,111 and net increase in bank overdraft of $744,077, offset by related party advances of $(4,831,702) and repayment of bank loans of $(1,483,361).  The advance to related party of $4,831,702 in fiscal 2013 was fully repaid during fiscal 2014.

Material investment activities

On August 20, 2014, the Company acquired 2% of the issued and outstanding capital stock of Elite Global Group Limited (incorporated in Hong Kong) (“Elite Global”) from one of the then two shareholders of Elite Global for the sum of approximately $2,000,000 (HK $15,000,000) payable by the transfer of certain receivables due to a subsidiary of the Company. Elite Global has entered into a Preliminary Development Agreement with Viacom Media Networks to construct and establish a new entertainment theme park in the PRC. Elite Global is expected to submit a development plan for Viacom’s approval and then obtain a license to operate the theme park. The Company is not aware of the proposed timeframe for completion of the foregoing. In addition, Elite Global is a party to a Joint Venture Agreement with Simson Giftware which operates and manufactures merchandise for theme stores in Taiwan and Hong Kong. Pursuant to the agreement with the seller of the shares, the Company retains the right to request the seller to buy back all or part of the shares purchased at $2,000,000 or such proportionate amount, if any, after August 20, 2015. In view of the potential from this business, the Company acquired such 2% stock interest in Elite Global and is looking for a satisfactory return in the near future.

The Company had bank loans with outstanding principal of $4.1 million as of August 31, 2014 and $2.3 million as of August 31, 2013. Summary of total bank loans is as follows:

The valuations for the above collaterals on August 31, 2014 were approximately $5.3 million while the total outstanding loan amount was approximately $4 million.

The Company had assets held under capital leases, which represent leases of motor vehicle. The cost of motor vehicle under capital lease was $31,076 at August 31, 2014. The future minimum lease payments required under the capital leases and the present value of the net minimum lease payments as of August 31, 2014 are as follows:

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. On July 30, 2014, we entered into a Customer List Purchase Agreement (the “July 2014 Purchase Agreement”) with Lau Kam George and Yung Chi Shing (collectively, the “Sellers”) pursuant to which we have agreed to acquire from the Sellers the customer list of the accounting advisory business of the Sellers operating under the name of Acorate Advisory Limited and Berfield Enterprise Solutions and Technology Limited, located in Hong Kong. In consideration for the acquisition of the customer list, we have agreed to pay the Sellers the sum of approximately $1.5 million (HK $12.0 million) and 5,000,000 shares of the common stock of the Company. Such amount is to be paid as follows: (i) approximately $258,000 (HK $2.0 million ) upon signing of the July 2014 Purchase Agreement which amount has been paid, (ii) approximately $387,000 (HK $3.0 million ) on or before March 30, 2015, and (iii) the balance of the purchase price of approximately $903,000 (HK $7.0 million ) in 18 monthly installments commencing one month after closing. The shares of common stock are to be issued at closing. The closing is expected to occur on or before March 30, 2015. Following the closing, the amount of the aggregate purchase price will be adjusted based upon revenues achieved in the 14 months period following the closing. Subsequent to the year ended August 31, 2014, and in January 2015, we paid half of the second installment described above.

Contractual Obligations

The following table sets forth information regarding the Company’s contractual payment obligations excluding the bank overdrafts of $0.25 million as of August 31, 2014.

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, 2014 would increase/decrease by $36,577 as compared with the combined post-tax profit for the year ended August 31, 2013.

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 June 23, 2014, the Company engaged UHY Vocation HK CPA Limited (“UHY HK”) as its principal independent accountants to audit the financial statements of the Company. UHY HK replaces Union Power HK CPA Limited (“Union Power HK”), which firm resigned as the principal independent accountants of the Company effective as of June 23, 2014. The decision to accept the resignation of Union Power HK and engage UHY HK as the Company’s principal independent accountants was approved by the Company’s Board of Directors.

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, 2014, these disclosure controls and procedures were not 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.

Currently, none of our employees, including our Chief Financial Officer, who is responsible for preparing and supervising the preparation of our financial statements, have any formal training in U.S. GAAP and SEC rules and regulations. In that regard, we rely exclusively on our independent accountants and our outside counsel for advice with respect to U.S. GAAP and SEC rules and regulations. Therefore, there is a risk that our current of future financial statements may not be properly prepared in accordance with U.S. GAAP or that our current or future disclosures are not in compliance with SEC rules and regulations.

Based on our evaluation under the frameworks described above and in light of the significant deficiency described above, our management has concluded that our internal control over financial reporting was not effective as of August 31, 2014. Management intends to mitigate the risk of such deficiency going forward by having our Chief Financial Officer and other personnel continue to work with our auditors and other outside advisors to ensure that our control processes and procedures are adequate and effective.

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.

PART III

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.

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.

Fu Kei Man Derek has been our Director since March 2014. Mr. Fu has been since June 2011 an Executive Director of Simsen International Corporation Limited, an investment holding company in Hong Kong. Since January 2008, he has worked as a foreign lawyer for Ng and Shum Solicitors & Notaries, located in Hong Kong. Mr. Fu is a practicing lawyer of the People’s Republic of China. Mr. Fu holds a bachelor degree of law from Chongqing University in the People’s Republic of China and a master degree in International Management from University of Reading in the United Kingdom.

Anderson Amanda has been our Director since September 2014. Ms. Anderson attended the N.T. Heung Yee Kuk Yuen Long Secondary School from 2007 to 2012 in Hong Kong and graduated in 2012.

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, 2014, all Section 16(a) filing requirements applicable to its officers, directors and greater than 10% beneficial owners were complied with, except that Fu Kei Man Derek filed his initial report of ownership late and filed two reports late relating to two transactions.

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, 11/F., Rykadan Capital Tower, 135-137 Hoi Bun Road, Kwun Tong, 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, 2014 and August 31, 2013.

Summary Compensation Table

Each of Ms. Li Lai Yang, Tso Yin Yee and Tong Wing Shan 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. Li Lai Yang became Chief Executive Officer in April 2013, Tso Yin Yee became Chief Operating Officer in April 2013 and Tong Wing Shan became Chief Financial Officer in November 2013.

Compensation of Directors

We did not pay any cash or other compensation to our directors for services as such for the fiscal years ended August 31, 2014 and August 31, 2013.

It has been agreed that Mr. Fu who serves as a non-executive, independent director will be paid approximately $26,000 (HK$200,000) per annum for his services as such which will be paid in either cash or shares of common stock (to be valued at the market price on the date of grant) as determined by the Company in its sole discretion.

Outstanding Equity Awards at Fiscal Year End

For the fiscal year ended August 31, 2014, no director or executive officer has received compensation from us pursuant to any compensatory or benefit plan.

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 February 10, 2015, 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, 11/F, Rykadan Capital Tower, 135-137 Hoi Bun Road, Kwun Tong, 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 36,704,789 shares of common stock outstanding as of February 10, 2015. Shares of common stock have one vote per share. 

Item 13. Certain Relationships and Related Transactions, and Director Independence.

Except as indicated below, since September 1, 2013, 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 a related party representing amounts which had been previously advanced to the Company by Tong Wing Shan, one of the principal shareholders of the Company and current Chief Financial Officer of the Company. 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. No further advances were made in fiscal 2014 and the balance due at August 31, 2013 was repaid during fiscal 2014. The advances to the related party represented unsecured, non-interesting bearing loans without fixed repayment terms.

On August 30, 2013, Tong Wing Shan made an interest free, unsecured loan to the Company in the principal amount of $645,268 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. In addition, as of August 31, 2014, Tong Wing Shan is due from the Company the principal amount of $663,011 for advances made by Tong Wing Shan to the Company which advances are interest free, unsecured and repayable on demand.

In addition, there were significant related party transactions during the year ended August 31, 2014 as follows:

The balances associated with accounting & corporate services and corporate restructuring & insolvency primarily represent revenue and direct cost of revenue, which were the fees or expense charged by the Company's Chief Operating Officer and related parties as they are license holders of insolvency to execute the liquidation for the year ended August 31, 2014.

Director Independence

Our board of directors currently consists of five members. They are Li Lai Ying, Tso Yin Yee, Pang Yiu Kwong, Fu Kei Man Derek and Anderson Amanda 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 (UHY Vocation HK CPA Limited and Union Power HK CPA Limited) to the Company for professional services rendered for the fiscal years ended August 31, 2014 and August 31, 2013:

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:

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. 

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:

REPORT OF INDEPENDENT REGISTERED

PUBLIC ACCOUNTING FIRM

TO THE SHAREHOLDERS AND THE BOARD OF DIRECTORS OF

ADGS ADVISORY, INC.

We have audited the accompanying consolidated balance sheets of ADGS Advisory, Inc. (collectively the “Company”) as of August 31, 2014 and 2013, and the related consolidated statements of operations, comprehensive income, statement of changes in stockholders’ equity, and cash flows for the years ended August 31, 2014 and 2013. 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 audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our 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 presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of ADGS Advisory, Inc. as of August 31, 2014 and 2013 and the consolidated results of its operations and its consolidated cash flows for the years ended August 31, 2014 and 2013, in conformity with accounting principles generally accepted in the United States of America.

/s/ UHY VOCATION HK CPA LIMITED

UHY VOCATION HK CPA LIMITED

Certified Public Accountants

Hong Kong, People Republic of China

February 10, 2015

See notes to consolidated financial statements.

See notes to consolidated financial statements.

See notes to consolidated financial statements.