1

PART I – FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

RedTone Asia, Inc.

(formerly Hotgate Technology, Inc.)

As of Quarter Ended November 30, 2010 (unaudited)

Contents

2

HOTGATE TECHNOLOGY, INC AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

November 30, 2010

See accompanying notes to the condensed consolidated financial statements.

3

HOTGATE TECHNOLOGY, INC AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

AND COMPREHENSIVE INCOME (UNAUDITED)

For the six months ended November 30, 2010 and 2009

See accompanying notes to the condensed consolidated financial statements.

4

HOTGATE TECHNOLOGY, INC AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

For the six months ended November 30, 2010 and 2009

See accompanying notes to the condensed consolidated financial statements.

5

HOTGATE TECHNOLOGY, INC AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

May 31, 2010 and 2009

NOTE 1 - ORGANIZATION AND PRINCIPAL ACTIVITIES

Hotgate Technology, Inc. and subsidiaries (the “Company”) are a group of companies engaged in providing discounted calling services and telecommunications related value added services in the People’s Republic of China (“PRC”).

As of November 30, 2010, details of the Company are as follows:

* - Variable interest entities.  See also Footnote 15.

Jiamao is not reported as a distinct operating segment as the revenue, profit or loss and total assets in association with the ecommerce business are immaterial to the Company’s revenue, reported profit or loss and total assets, respectively.

NOTE 2 – RECAPITALIZATION AND REORGANIZATION

Acquisition of Redtone China.

On August 2, 2010, the Company entered into a Share Exchange Agreement (“SEA”) with Redtone Technology Sdn. Bhd. and Redtone International Berhad, both of which are incorporated in Malaysia. The transactions as contemplated in the SEA has been completed on 25 October 2010 and Redtone China becomes a 100% owned subsidiary of the Company

For accounting purposes, the acquisition of Redtone China by Hotgate has been recorded as a reverse acquisition of a public company and a recapitalization of Redtone China based on factors demonstrating that Hotgate is acquirer for accounting purposes.  This reverse acquisition is accounted for as a recapitalization of REDtone with the common stock of the public company.  Therefore, the historical operations of REDtone are included in the condensed consolidated statements of operations for the comparative period.

6

NOTE 3 – PRINCIPLES OF CONSOLIDATION

The unaudited interim financial statements of the Company and the Company’s subsidiaries (see Note 1) for the six months ended November 30, 2010 and 2009 have been prepared pursuant to the rules & regulations of the SEC, give effect to the acquisition of Redtone China and the disposal of Hotgate Holdings Group, as if these arrangements had occurred retroactively. Certain information and disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to such rules and regulations; however the Company believes that the following disclosures are adequate to make the information presented not misleading.  All significant intercompany balances and transactions have been eliminated. The functional currency for the majority of the Company’s operations is in Renminbi (“RMB”), while the reporting currency is US Dollar.

In the opinion of management, the accompanying condensed consolidated financial statements contain all adjustments, consisting only of normal recurring accruals, necessary for a fair presentation of the Company’s financial position as of November 30, 2010, the results of its operations and cash flows for the six months ended November 30, 2010 and 2009.

The results of operations for the six months ended November 30, 2010 are not necessarily indicative of the results for a full year period.

NOTE 4 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a) Cash and Cash Equivalents

The Company considers all highly liquid investments purchased with original maturities of three months or less to be cash equivalents.  The Company maintains bank accounts in China and Hong Kong.

(b) Fair Value of Financial Instruments

The Company’s financial instruments primarily consist of cash and cash equivalents, accounts receivable, other receivables and deposits, tax recoverable, amount due from/(to) related parties, accounts payable, accrued expenses and other payables, and taxes payable.

The estimated fair value amounts have been determined by the Company, using available market information or other appropriate valuation methodologies. However, considerable judgment is required in interpreting market data to develop estimates of fair value. Consequently, the estimates are not necessarily indicative of the amounts that could be realized or would be paid in a current market exchange.

As of the balance sheet dates, the estimated fair values of the financial instruments were not materially different from their carrying values as presented, due to the short maturities of these instruments.

(c) Revenue Recognition

The Company recognizes revenue when persuasive evidence of an arrangement exists and upon utilisation of actual air-time traffic when users make calls.

For revenue derived from sale of VMS Cards, revenue is being recognized after physical delivery of VMS Cards have taken place and customer acknowledges receipt delivery with full payment collected upon delivery acceptance. 

(d) Earnings Per Share

Basic earnings per share is computed by dividing income available to common shareholders by the weighted-average number of common shares outstanding during the period. Diluted earnings per share is computed similar to basic earnings per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common shares had been issued and if the additional common shares were dilutive. As of November 30, 2010 and 2009, there were no dilutive securities outstanding.

(e) Foreign Currency Translation

The accompanying consolidated financial statements are presented in United States dollars (US$). The functional currencies of the Company are the Hong Kong dollar (HK$) and the Renminbi (RMB), respectively. Capital accounts of the financial statements are translated into United States dollars from HK$ or RMB at their historical exchange rates when the capital transactions occurred. Assets and liabilities are translated at the exchange rates as of balance sheet date. Income and expenditures are translated at the average exchange rate of the year.  The translation rates are as follows:

7

On July 21, 2005, the PRC changed its foreign currency exchange policy from a fixed RMB/US$ exchange rate into a flexible rate under the control of the PRC’s government.

The RMB is not freely convertible into foreign currency and all foreign exchange transactions must take place through authorized institutions.  No representation is made that the RMB amounts could have been, or could be, converted into US$ at the rates used in translation.

(f) Recent Accounting Pronouncements

New accounting rules and disclosure requirements may significantly impact the financial statements. We believe that there is no new accounting guidance adopted but not yet effective that is relevant to the readers of our financial statements. However, there are numerous new proposals under development which, if and when enacted, may have a significant impact on our financial reporting.

NOTE 5 – CASH & CASH EQUIVALENTS

As of the balance sheet dates, cash & cash equivalents are summarized as follows:

As of the balance sheet dates, the fixed deposits had a maturity term of less than three months.

NOTE 6 – AVAILABLE-FOR-SALE INVESTMENT

As of the balance sheet dates, available-for-sale investment is summarized as follows:

Hai He is principally engaged in the wholesale and retailing of 3G mobile internet devices and air-time access packages in the PRC.  The above investment was held for sale without participation in management and control.  

The Company is currently in the process of negotiation for disposal of this investment at a price that is not less than original cost. In the opinion of the directors, the carrying value of the unlisted investment approximates the fair value as of November 30, 2010 and up to the date of this report.

8

NOTE 7 –OTHER RECEIVABLES AND DEPOSITS

Other receivables and deposits as of the balance sheet dates were summarized as follows:

Deposits consist of payments made by the Company to third parties in the normal course of business operations with no interest being charged and no fixed repayment terms. These payments are made for the places and services that are used by the Company for its current operations.

The Company evaluates the amounts recorded as deposits, prepaid expenses and other receivables on a periodic basis and records a charge to the current operations of the Company when the related expense has been incurred or when the amounts reported as other receivables is no longer deemed to be collectible by the Company.

NOTE 8 – PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment as of the balance sheet dates are summarized as follows:

Depreciation expense for the six months ended November 30, 2010 and 2009 was $223,727 and $212,138, respectively.

NOTE 9 – INTANGIBLE ASSETS

Intangible assets of the Company consist primarily of licenses and software for the PRC operations.  

Intangible assets as of the balance sheet dates are summarized as follows:

Amortization expense for the six months ended November 30, 2010 and 2009 amounted to $58,227 and $55,221, respectively. 

9

NOTE 10 – AMOUNT DUE FROM/(TO) RELATED COMPANIES

Amount due from a related company as of the balance sheet dates were summarized as follows:

The amount represents non-trade advances to the related company. As of the balance sheet dates, the amount is unsecured, non-interest bearing and is not expected to be repaid within 12 months.

Amount due to a related company as of the balance sheet dates were summarized as follows:

The amount due to the related company is unsecured, non-interest bearing and has no fixed repayment date..

NOTE 11 – ACCRUED EXPENSES AND OTHER PAYABLES

Accrued expenses and other payables as of the balance sheet dates were summarized as follows:

NOTE 12 – DEFERRED INCOME

Deferred income consists of prepaid air-time sold which are yet to be utilized. The basis of revenue recognition for discounted call services is based on actual call charges made by end users.   When calls are being made, the amount will be deducted from deferred income to statement of income, net of call costs and expenses.

10

NOTE 13 – TAXES PAYABLE

Taxes payable at the balance sheet dates are summarized as follows:

Business tax represents PRC sales tax imposed upon the Company’s services provided in the PRC.  Tax rates range from 3% to 5% depending on the nature of the taxable activities.

Income tax represents PRC income tax. The provision for PRC income tax is based on a statutory rate of 25% of the assessable income of the PRC subsidiaries as determined in accordance with the relevant income tax rules and regulations of the PRC.

NOTE 14 – PROVISION FOR INCOME TAXES

Income tax expense for the six months ended November 30, 2010 and 2009 are summarized as follows:

A reconciliation of the expected tax with the actual tax expense is as follows:

(i)

All PRC subsidiaries are subject to PRC tax. The provision for PRC income tax is based on a statutory rate of 25% of the assessable income of the PRC subsidiaries as determined in accordance with the relevant income tax rules and regulations of the PRC.

(ii)

VMS and Redtone China did not generate any assessable profits in Hong Kong and therefore are not subject to Hong Kong tax.

11

NOTE 15 – VARIABLE INTEREST ENTITIES (“VIEs”)

On November 30, 2006, the Company entered into loan agreements with Huang Bin (“HB”) and Mao Hong (“MH”) for the establishment of Hongsheng and on November 30, 2006, an equity pledge agreement which provides that HB and MH will pledge all their equities in Hongsheng to the Company and Redtone Shanghai. The agreement also provides that control of Hongsheng by the Company shall take effect from June 1, 2007.

On April 30, 2007, the Company entered into the loan agreements with Mao Junbao (“MJ”) and MH for the establishment of Huitong and on April 30, 2007, an equity pledge agreement which provides that MJ and MH would pledge all their equities in Huitong to the Company and Redtone Shanghai.

Although the Company is not the shareholder of Hongsheng and Huitong, the Company has determined that it is the primary beneficiary of these two entities, as the Company has 100% voting powers and entitled to receive all the benefit from operations of these two entities. Hence, Hongsheng and Huitong are identified as VIEs and are consolidated as if wholly-owned subsidiaries of the Company.

The status of Hongsheng and Huitong as VIEs has not changed since the date of the combination. In addition, we did not identify any additional VIEs in which we hold a significant interest.

The total consolidated VIE assets and liabilities reflected on the Company’s balance sheet are as follows:

The statements of income of the consolidated VIEs for the six months ended November 30, 2010 and 2009 are as follows, and are included in the condensed consolidated statements of income of the Company:

12

NOTE 16 – COMMON STOCK

As of the balance sheet dates, the Company has a total of 300,000,000 shares of common shares authorized at US$0.0001 par value.  

(a)

Changes in common stock before reverse takeover transaction

On July 22, 2010, the Company entered into a Stock Subscription Agreement whereby it sold 110,000,000 of its common shares at a price per share of $0.0004. The shares were purchased by Grand Trading Investment Pte Ltd, of which Lu Kan, Lee Chee Keong, and Tan Chee Chong are the directors.  Lu Kan and Lee Chee Keong are also the shareholders of Grand Trading Investment Pte Ltd. The transaction has been retroactively reflected in the financial statements.  Lee Chee Keong has been appointed as the Company’s Chief Financial Officer with effect from October 22, 2010.

On July 29, 2010, the Company’s majority shareholders approved a resolution to effect a one-for-twelve reverse stock split of the Company’s common stock.   The reverse stock split did not change the number of authorized shares of the Company’s common stock.  The transaction has been retroactively reflected in the financial statements.

During the second quarter, the Company issued 244,444,444 shares of its common shares to Redtone International Berhad as consideration for the acquisition of Redtone China. The transaction has been retroactively reflected in the financial statements.

(b)

Changes in common stock after reverse takeover transaction

On October 25, 2010, the Company satisfied certain debts due from the Company to Redtone International Berhad amounting to $1,183,248 by way of issuance and allotment of 13,147,197 shares of the Company’s common stock.

(c)

Weighted average number of shares

The calculation of weighted average number of shares for the six months ended November 30, 2010 is illustrated as follows:

NOTE 17 – CONTINGENCIES AND COMMITMENTS

Operating lease commitments

As of November 30, 2010, two PRC subsidiaries had arranged non-cancelable operating leases with a third party for its office premise.  The expected annual lease payments under these operating leases are as follows:

13

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

NOTE REGARDING FORWARD-LOOKING STATEMENTS

This quarterly report contains forward-looking statements within the meaning of the federal securities laws. These include statements about our expectations, beliefs, intentions or strategies for the future, which we indicate by words or phrases such as "anticipate," "expect," "intend," "plan," "will," "we believe," "Hotgate believes," "management believes" and similar language. The forward-looking statements are based on the current expectations of HTGT and are subject to certain risks, uncertainties and assumptions, including those set forth in the discussion under "Management's Discussion and Analysis of Financial Condition and Results of Operations" in this report. The actual results may differ materially from results anticipated in these forward-looking statements. We base the forward-looking statements on information currently available to us, and we assume no obligation to update them.

Investors are also advised to refer to the information in our filings with the Securities and Exchange Commission, specifically Forms 10-KSB, 10-QSB and 8-K, in which we discuss in more detail various important factors that could cause actual results to differ from expected or historic results. It is not possible to foresee or identify all such factors. As such, investors should not consider any list of such factors to be an exhaustive statement of all risks and uncertainties or potentially inaccurate assumptions.

Except as otherwise indicated by the context, references in this Form 10-Q to “HTGT,” “we,” “us,” “our,” “the Registrant”, “our Company,” or “the Company” are to Hotgate Technology, a Nevada corporation and its consolidated subsidiaries. Unless the context otherwise requires, all references to (i) “BVI” are to British Virgin Islands; (ii) “PRC” and “China” are to the People’s Republic of China; (iii) “U.S. dollar,” “$” and “US$” are to United States dollars; (iv) “RMB” are to Yuan Renminbi of China; (v) “RM” are to Malaysian Ringgit; (vi) “Securities Act” are to the Securities Act of 1933, as amended; and (vii) “Exchange Act” are to the Securities Exchange Act of 1934, as amended.

Business Overview

Pursuant to the Share Exchange Agreement signed with REDtone Technology Sdn. Bhd. and REDtone International Berhad, the Company completed the acquisition of 100% ownership of Redtone China on October 7, 2010.  Redtone China has subsidiaries in Shanghai that are principally involved in the business of offering discounted call services for consumers and corporate market segment in Shanghai.   Redtone China is also conducting paperless reload services for prepaid mobile air-time reload for consumers in Shanghai covering all three major telecommunication operators namely China Mobile, China Unicom and China Telecom.

Critical Accounting Policies and Estimates

Our financial statements and related public financial information are based on the application of accounting principles generally accepted in the United States ("US GAAP"). US GAAP requires the use of estimates; assumptions, judgments and subjective interpretations of accounting principles that have an impact on the assets, liabilities, revenues and expenses amounts reported. These estimates can also affect supplemental information contained in our external disclosures including information regarding contingencies, risk and financial condition. We believe our use of estimates and underlying accounting assumptions adhere to GAAP and are consistently and conservatively applied. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Actual results may differ materially from these estimates under different assumptions or conditions. We continue to monitor significant estimates made during the preparation of our financial statements.

We believe the following is among the most critical accounting policies that impact our consolidated financial statements. We suggest that our significant accounting policies, as described in our condensed consolidated financial statements in the Summary of Significant Accounting Policies, be read in conjunction with this Management's Discussion and Analysis of Financial Condition and Results of Operations.

The Company recognizes revenue when persuasive evidence of an arrangement exists and upon utilisation of actual air-time traffic by users.

Pursuant to the reverse take-over of Redtone China, the majority of the Company's revenue derives from consumer and corporate voice services.     Majority of the Company call services are for consumer market which is prepaid in nature and hence there are no bad debts.   For corporate market segment, credit background checks for new customers are conducted to reduce bad debts.

Recent Accounting Pronouncements

The Company does not expect the adoption of any recent accounting pronouncements will have any material impact on its financial statements.

14

Results of Operations

Six Months Ended November 30, 2010 as Compared to Six Months Ended November 30, 2009

The following table summarizes the results of our operations during the six month periods ended November 30, 2010 and 2009, and associated percentage changes for comparisons purposes

Revenues

The Company generated revenue of US$2,614,538 in the first 6 months representing a 35% increase as compared with the same period last year. The increase is mainly due to increase in consumer call business resulted from the marketing effort undertaken by the Company to promote consumer call services.

Other income and gains:  

Other income comprises mainly of interest income from bank deposits.  The decrease in interest income by US$5,896 is mainly due to lower cash reserve recorded for the current quarter.

Service Cost

The service cost for the six months period ended November 30, 2010 increase by 900% or US$1,049,707 over the prior interim period mainly due to increase in the sales from the collaboration agreement with other telecommunication providers whereby we recognize both revenue and cost on the gross basis.

General and administrative expenses

General and administrative expenses total US$314,529, represent 20% increase or US$51,855 as compared to the same period last year.  The increase is mainly due to higher expenses required to support the higher revenue.

Personnel expenses

Personnel expenses total US$296,210, representing a 21% increase or US$51,779 as compared to the same period last year.  The increase is due to additional headcount recruited to support the higher revenue.

15

Amortization and depreciation expenses

Amortisation and depreciation expenses total US$281,954, representing an increase of 5% as compared to the same period last year. This is mainly due to new capital expenditure incurred by the Company.

 Income before provision for income tax

Income before provision for income tax total US$571,516, representing a 46% reduction as compared to the same period last year mainly due to higher cost of good sold and higher operating expenses

Provision for taxes

Provision for taxation made for the first six months was lower by US$178,441 due to lower income before provision for income tax as compared to the same period last year.

Liquidity and Capital Resources

Cash

Our cash balance at November 30, 2010, was $5,089,573, representing an increase of $769,739 compared to our cash balance of $4,319,834 at November 30, 2009.

Cash Flow

Cash inflows from operations during the six months ended November 30, 2010 amounted to $715,250 as compared to net cash outflows from operations of $555,623 in the same period of 2009. This is mainly due to decrease in other receivables and deposit paid to telecommunication service providers.

Our cash outflows in investing activities during the six months ended November 30, 2010 amounted to $50,457 as compared to cash outflows of $8,925 for the same period in 2009. The cash outflow in the investing activities for the first six months is primarily due to acquisition of new equipment inline with the capacity expansion.  

The Company has cash outflow of $58,104 from financing activities for the period ended November 30 as compared to cash inflow of $133,372 in same period last year.   The cashflow changes for these two periods are due to related party transactions.

Working Capital

Our working capital recorded a surplus of $2,858,612 as at November 30, 2010.  This is mainly contributed by our core business namely consumer call service which is prepaid in nature which helps generating high cash reserve for the Company.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements.

16

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are exposed to various market risks arising from adverse changes in market rates and prices, such as foreign exchange fluctuations and interest rates, which could impact our results of operations and financial position. We do not currently engage in any hedging or other market risk management tools, and we do not enter into derivatives or other financial instruments for trading or speculative purposes.

Foreign Currency Exchange Rate Risk

Fluctuations in the rate of exchange between the U.S. dollar and foreign currencies in Chinese Renminbi (“RMB”), Malaysian Ringgit (“RM”) and Hong Kong Dollar (“HK$”) could adversely affect our financial results. We expect that foreign currencies will continue to represent a similarly significant percentage of our sales in the future. Selling, marketing and administrative costs related to these sales are largely denominated in the same respective currency, thereby mitigating our transaction risk exposure. We therefore believe that the risk of a significant impact on our operating income from foreign currency fluctuations is not substantial. However, for sales not denominated in U.S. dollars, if there is an increase in the rate at which a foreign currency is exchanged for U.S. dollars, it will require more of the foreign currency to equal a specified amount of U.S. dollars than before the rate increase. In such cases and if we price our products in the foreign currency, we will receive less in U.S. dollars than we did before the rate increase went into effect. If we price our products in U.S. dollars and competitors price their products in local currency, an increase in the relative strength of the U.S. dollar could result in our price not being competitive in a market where business is transacted in the local currency. All of our sales and expenses denominated in foreign currencies are denominated in the RMB, RM and HK$. Our principal exchange rate risk therefore exists between the U.S. dollar and these currencies. Fluctuations from the beginning to the end of any given reporting period result in the re-measurement of our foreign currency-denominated receivables and payables, generating currency transaction gains or losses that impact our non-operating income/expense levels in the respective period and are reported in other (income) expense, net in our combined consolidated financial statements. We do not currently hedge our exposure to foreign currency exchange rate fluctuations. We may, however, hedge such exposure to foreign currency exchange rate fluctuations in the future.

Interest Rate Risk

Changes in interest rates may affect the interest paid (or earned) and therefore affect our cash flows and results of operations. However, we do not believe that this interest rate change risk is significant.

Inflation

Inflation has not had a material impact on the Company's business in recent years.

Currency Exchange Fluctuations

The Company's revenues and its expenses are denominated in RMB, RM and HK$. The value of these foreign currency-to-U.S. dollars may fluctuate and is affected by, among other things, changes in political and economic conditions. Since 1994, the conversion of RMB into foreign currencies, including U.S. dollars, has been based on rates set by the People's Bank of China, which are set daily based on the previous day's inter-bank foreign exchange market rates and current exchange rates on the world financial markets. Since 1994, the official exchange rate for the conversion of RMB to U.S. dollars had generally been stable and RMB had appreciated slightly against the U.S. dollar. However, on July 21, 2005, the Chinese government changed its policy of pegging the value of RMB to the U.S. dollar. Under the new policy, RMB may fluctuate within a narrow and managed band against a basket of certain foreign currencies. Recently there has been increased political pressure on the Chinese government to decouple the RMB from the United States dollar. At the recent quarterly regular meeting of People's Bank of China, its Currency Policy Committee affirmed the effects of the reform on RMB exchange rate. Since February 2006, the new currency rate system has been operated; the currency rate of RMB has become more flexible while basically maintaining stable and the expectation for a larger appreciation range is shrinking. The Company has never engaged in currency hedging operations and has no present intention to do so.

Concentration of Credit Risk

Credit risk represents the accounting loss that would be recognized at the reporting date if counterparties failed completely to perform as contracted. Concentrations of credit risk (whether on or off balance sheet) that arise from financial instruments exist for groups of customers or counterparties when they have similar economic characteristics that would cause their ability to meet contractual obligations to be similarly affected by changes in economic or other conditions as described below:

1. The Company's business is characterized by new product and service development and evolving industry standards and regulations. Inherent in the Company's business are various risks and uncertainties, including the impact from the volatility of the stock market, limited operating history, uncertain profitability and the ability to raise additional capital.

17

2. The Company's revenue is deriving from China and Hong Kong. Changes in laws and regulations, or their interpretation, or the imposition of confiscatory taxation, restrictions on currency conversion, devaluations of currency or the nationalization or other expropriation of private enterprises could have a material adverse effect on our business, results of operations and financial condition.

3. If the Company is unable to derive any revenues from these countries, it would have a significant, financially disruptive effect on the normal operations of the Company.

ITEM 4T. CONTROL AND PROCEDURES

Evaluation of disclosure controls and procedures

As of November 30, 2010, the end of the period covered by this Form 10-Q, our management performed, under the supervision and with the participation of our principal executive officer and principal financial officer, an evaluation of the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended). Based on this evaluation, our principal executive officer and principal financial officer have concluded that, as of November 30, 2010, our disclosure controls and procedures were effective, in that they provide reasonable assurance that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding disclosure.

Changes in internal controls

As of May 31, 2010, the end of the fiscal year covered by Form 10-K, the evaluation of the effectiveness of our disclosure controls and procedures were concluded as not effective because they did not have proper application of accounting principles to ensure a material transaction was accounted for in accordance to the United States generally accepted accounting principles. At that point in time, the company was suffering major slump in business causing turnover of employees resulting in insufficient team of management to observe good internal control practices especially lacking in segregation of duties.  

Pursuant to the Share Exchange Agreement transaction resulting in Redtone China taking over Hotgate in August 2010, the Company has undertaken the following effort to improve the internal control management:

(a)

Having additional headcounts of accounting personnel managing each accounting functions for better segregations of duties

(b)

Engaged an independent audit firm Messrs. Audex Governance Sdn Bhd from Malaysia to perform internal audit review on key cycles such as Procurement, Payment Processing and Cash Management covering the period from December 2009 to November 2010.

Based on the internal audit report findings, the management has established Company policies and rulings addressing those areas highlighted for better control and process improvement.

Sarbanes - Oxley Act 404 compliance

The Company anticipates that it will be fully compliant with section 404 of the Sarbanes-Oxley Act of 2002 by the required date for non-accelerated filers and it is in the process of reviewing its internal control systems in order to be compliant with Section 404 of the Sarbanes Oxley Act. However, at this time the Company makes no representation that its systems of internal control comply with Section 404 of the Sarbanes-Oxley Act.

18

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

The Company may from time to time be involved in various claims, lawsuits, and disputes with third parties, actions involving allegations of discrimination, or breach of contract actions incidental to the operation of its business. The Company is not currently involved in any such litigation that it believes could have a materially adverse effect on its financial condition or results of operations.

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

There have been no unregistered sales of equity for the quarter ended November 30, 2010.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

There have been no material defaults for the quarter ended November 30, 2010.

ITEM 4. [REMOVED AND RESERVED]

ITEM 5. OTHER INFORMATION

The Company has evaluated for disclosure all subsequent events occurring through January 13, 2011, the date the financial statements were issued.

ITEM 6 - EXHIBITS

The following exhibits are furnished as part of the Quarterly Report on Form 10-Q:

19

SIGNATURES

In accordance with the requirements of the Securities Exchange Act of 1934, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

20