REDtone Asia Inc - FORM 10-K/A

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K/A

(Amendment No. 1)

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

	For the fiscal year ended May 31, 2013

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

	For the transition period from ______ to______

	Commission file number 333-129388

REDTONE ASIA, INC
(Exact Name of registrant as specified in its charter)


Nevada		71-098116
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)


Unit 15A, Plaza Sanhe, No. 121,Yanping Road, JingAn District, 200042 Shanghai, PRC
(Address of principal executive offices)		(Zip Code)
		)

Registrant’s telephone number, including area code (86) 6103 2230

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, $0.0001 par value per share

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

o Yes x No

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

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 x No o

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 during the preceding 12 months (of for such shorter period that the registrant was required to submit and post such files). Yes o No x

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


Large accelerated filer o	Accelerated filer o
Non-accelerated filer o	Smaller reporting company x

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

The issuer’s revenues for its most recent fiscal year were $7,220,840.

The aggregate market value of voting and non-voting stock held by non-affiliates of the registrant as of May 31, 2013 was $-0-. Although listed on the OTCBB under the symbol RTAS, there is currently no active trading for the registrant’s common stock. Therefore, the aggregate market value of the stock is deemed to be $-0-.

At the date of this report, there were 282,315,325 outstanding shares of Redtone Asia, Inc. Common Stock, $0.0001 par value.

Documents Incorporated by Reference: None

Transitional Small Business Disclosure Format (check one) Yes o No x

EXPLANATORY NOTE

This Amendment No. 1 to REDtone Asia Inc.’s (the “Company”) Annual Report on Form 10-K/A for the year ended May 31, 2013 (the “Amended 10-K”) is being made as a result of the Company’s recent discovery of inadequate disclosures in our previously reported financial statements for the year ended May 31, 2013 relating to the organization and principal activities, and the controls and procedures. We have also made minor revisions to various other sections of the Company’s original Annual Report on Form 10-K for the year ended May 31, 2013 (the “Original 10-K”).

For convenience and ease of reference, the Company is filing the annual report in its entirety with applicable changes. Unless otherwise stated, all information contained in this Amended 10-K is as of September 13, 2013, the filing date of the Original 10-K. Except as stated herein, this Amended 10-K does not reflect events or transactions occurring after such filing date and does not contain any modification or updates to the disclosure in the Annual Report that may have been affected by events or transactions occurring subsequent to such filing date. No information in the Original 10-K other than as set forth above is amended hereby.

TABLE OF CONTENTS

PART I
ITEM 1.	BUSINESS	4
ITEM 1A.	UNRESOLVED STAFF COMMENTS	7
ITEM 2.	PROPERTIES	10
ITEM 3.	LEGAL PROCEEDINGS	10
ITEM 4.	SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS	11

PART II

ITEM 5.	MARKET FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES	11
ITEM 6.	SELECTED FINANCIAL DATA	11
ITEM 7	MANAGEMENTS DISUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	11
ITEM 7A.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	15
ITEM 8.	FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA	15
ITEM 9.	CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE	15
ITEM 9A.	CONTROLS AND PROCEDURES	15
ITEM 9B.	OTHER INFORMATION	16

PART III

ITEM 10.	DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE	16
ITEM 11.	EXECUTIVE COMPENSATION	18
ITEM 12.	SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS	19
ITEM 13.	CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE	19
ITEM 14.	PRINCIPAL ACCOUNTANT FEES AND SERVICES	19

PART IV

ITEM 15.	EXHIBITS AND FINANCIAL STATEMENT SCHEDULES	21

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Note About Forward-Looking Statements

Certain statements in this report, other than purely historical information, including estimates, projections, statements relating to our business plans, objectives and expected operating results, and the assumptions upon which those statements are based, are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These forward-looking statements generally are identified by the words “believe,” “project,” “expect,” “anticipate,” “estimate,” “intend,” “strategy,” “future,” “opportunity,” “plan,” “may,” “should,” “will,” “would,” “will be,” “will continue,” “will likely result,” “possible,” and similar expressions. Forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties which may cause actual results to differ materially from the forward-looking statements. A detailed discussion of these and other risks and uncertainties that could cause actual results and events to differ materially from such forward-looking statements is included in the section entitled “Risk Factors” (refer to Part I, Item 1A). We undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise.

PART I

ITEM 1. BUSINESS

Historical Overview

As of May 31, 2013, details of the Company and its subsidiaries are as follows:

Name	Domicile and date of incorporation	Effective ownership	Principal activities

Redtone Telecommunication (China) Limited (“Redtone China”)	Hong Kong May 26, 2005	100%	Investment holdings

Redtone Telecommunications (Shanghai) Limited (“Redtone Shanghai”)	The PRC July, 26, 2005	100%	Provides technical support services to group companies

Shanghai Hongsheng Net Telecommunication Company Limited (“Hongsheng”)	The PRC November 29, 2006	100%(1)	Marketing and distribution of discounted call services to PRC consumer market

Shanghai Huitong Telecommunication Company Limited (“Huitong”)	The PRC March, 26, 2007	100%(1)	Marketing and distribution of IP call and discounted call services in the PRC

Shanghai Jiamao E-Commerce Company Limited (“Jiamao”)	The PRC March 21, 2008	100%(1)	Marketing and distribution of products on the Internet

Nantong Jiatong Investment Consultant Co., Ltd (“Nanjing Jiatong”)	The PRC May 17, 2011	100%(1)	Investment holdings

Shanghai QianYue Business Administration Co., Ltd. ("QBA")	The PRC December 12, 2008	100%(1)	Provision of prepaid shopping-card services in the PRC

(1) - Variable interest entities. See also Footnote 14 in the Notes to the audited financials.

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Business of the Issuer

Corporate Structure

Control through equity ownership

Control through contractual binding (“VIE”)

On November 30, 2006, the Company entered into loan agreements with Huang Bin (“HB”) and Mao Hong (“MH”) for the establishment of Shanghai Hongsheng Net Telecommunications Co., Ltd (“Hongsheng”). On November 30, 2006, the Company entered into an equity pledge agreement which provides that HB and MH will pledge all their equities in Hongsheng to the Company and REDtone Telecommunications (Shanghai) Limited (“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 loan agreements with Mao Junbao (“MJ”) and MH for the establishment of Shanghai Huitong Telecommunications Co., Ltd (“Huitong”). On April 30, 2007, the Company entered into an equity pledge agreement, which provides that MJ and MH would pledge all their equities in Huitong to the Company and REDtone Shanghai.

On May 24, 2011, Hongsheng entered into a nominee agreement between Wang Jianping and Xu Lanying. The nominee agreement provided that Hongsheng would commission Wang Jianping and Xu Lanying to establish Nantong Jiatong Investment Consultant Co., Ltd (“Nantong Jiatong”). The nominee shareholders of Nantong Jiatong are Wang Jianping and Xu Lanying.

On May 24, 2011, the Company entered into a loan Agreement with Nantong Jiatong to extend a loan of RMB22,000,000 (RMB22 million) for the additional capital injection into Hongsheng for the establishment of Shanghai Qianyue Business Administration Co., Ltd (“QBA”). An equity pledge agreement entered into by and amongst the Company, Nantong Jiatong and Hongsheng, provided that Nantong Jiatong would pledge all its equities in Hongsheng to the Company.

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

Mr Mao Hong, the newly appointed Chief Operating Officer, is also a shareholder of Hongsheng and HuiTong.

Business Overview

We are principally involved in the business of offering discounted call services for end users and corporate segment and paperless reload services for prepaid mobile air-time reload for end user in Shanghai covering all three major telecommunication operators namely China Mobile, China Unicom and China Telecom. We also are venturing into e-business, or an internet business as third party payment solution for e-commerce industry in China.

Products and Services

REDtone China offer the following services to customers:

1. Discounted call services for consumers (“EMS”)

2. Discounted call services for corporate customers

3. Reload services for prepaid mobile

4. Prepaid shopping card/ third party payment service providers

Competition

The telecommunications industry in China is dominated by three state-run corporations: China Telecom Corporation Limited, China Mobile Communications Corporation and China United Network Communications Group Co., Ltd, all of whom have 3G licenses and engaged fixed-line and mobile business in China.

We see competition from:

(i) Direct Telecommunication Operators namely China Telecom Corporation Limited, China Mobile Communications Corporation and China United Network Communications Group Co., Ltd. These companies may adopt a more aggressive pricing on their local and international calls and have direct impact on our discounted call services for corporate segment. Likewise, if these operators offer very competitive rates for domestic, long distance and international calls, it could pose a substitution threat to our EMS services.

(ii) Other Discounted Service Providers

The discounted service providers such as Super E-Secretary operate domestic calls and the tool to compete is to provide discount on long distance calls. This company, despite being a small player (less than 15% market share) in the Shanghai discounted consumer call market, may cause the price disruption when they compete on price aggressively.

(iii) Other Mobile air-time reload service providers

Other competitors like Smartpay, Defeng and YiQiao offers similar mobile air-time reload services in Shanghai. They entered into this reload services earlier than us but we command slightly better price advantage and better system support for paperless mobile reload in comparison with conventional paper-based reload model.

(iv) Other prepaid shopping card/ third party payment service providers.

Other competitors like Alipay, Tenpay and 99Bill offers similar third party payment services in China.

We believe our competitive advantage is derived from the following strengths

(a)	Competitive Pricing

We, being one of the leading alternative voice service providers in Shanghai in terms of market share, could command the economies of scale to achieve lower minutes cost and lower operating cost per minute. Additional cost advantage is the low capital investment with self-developed technology.

By having advantage of longer market presence, credibility and dominant market share, we can afford to price its products and services competitively while maintaining healthy gross margins.

(b)	Superior Technology and Competent Technical Support

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(c)	Innovation

Innovation embodied in all the products and services is the key to the competitive advantage of our operations. In addition, innovation also helps us to truly serve the needs of the customers and to provide value-added services and products to the customers.

Close communication with our front line resellers will enable us to gather market intelligence and assist us in strategy formulation that is relevant to market needs

(d)	Value Added Services

For the telecommunications services we provide, customers would also benefit from value added services in our convenient reload, customer care services and support, and e-billings..

Regulatory Matters

REDtone China does not provide direct telecommunication services in PRC. REDtone China acts as a distributor for CTT. REDtone China has a business licence issued by PRC’s State Administration for Industry and Commerce to carry out the distribution services. REDtone China does not require a telecommunication licence to carry out its distribution activities.

We do not anticipate having to expend significant resources to comply with any governmental regulations applicable to our operations. We are subject to the laws and regulations which are generally applicable to business operations, such as business licensing requirements, income taxes and payroll taxes.

However, the telecommunications industry is highly regulated in China. PRC laws and regulations will be modified and updated from time to time by the China government. In addition, many PRC laws and regulations are subject to extensive interpretive power of governmental agencies and commissions, and there is substantial uncertainty regarding the future interpretation and application of these laws or regulations.

Shanghai Hongsheng Net Telecommunication Co., Ltd. (“Hongsheng”), the subsidiary that carries out the telecommunication distribution services currently has a business license in connection with these services. The business license is valid until November 28, 2026, and the Telecommunication Value-Adding Business Operating Permit is valid until November 5, 2013. Both are subject to annual filings; however, the Company does not foresee any issue regarding renewal or material fees involved in the renewal.

Costs of Compliance with Environmental Laws

We are not presently affected by and do not have any costs associated with compliance with environmental laws.

Customers and Suppliers

Our major customers are end users and corporate clients in Shanghai. Our suppliers are mainly termination partners and telecommunication players such as CTT, China Mobile and China Unicom and China Telecom.

Intellectual Property and Research and Development

The Company has no registered patents, trademarks or copyrights and no applications for patents, trademarks or copyrights are pending.

The Company utilized intellectual property pursuant to an agreement signed between REDtone Technology Sdn. Bhd, and REDtone Telecommunications (China) Ltd on 11 August 2005 in respect of the acquisition of the software with regards to the Customer billing, commission management, top-up management, traffic management, cardless system and gateway interface system suite.

The “REDtone” logo in Chinese and “VeryPass” logo in English are registered trademarks in China valid until October 13, 2020 and October 6, 2020 respectively.

The Company did not incur any research and development expenses in the fiscal year ended May 31, 2013.

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Number of Employees

Currently, we have our Chief Executive Officer to manage the Company. With the acquisition of REDtone China, as of May 31 2013, we had forty one (41) employees including nine (9) in the Management/ team, twenty two (22) in Research & Development, Customer Care, Sales and Marketing as well as Finance and Administrative, and balance of ten (10) in Technical supports. None of our employees are represented by labor unions or subject to collective bargaining agreements. We believe our employee relations are good and have no employee related dispute recorded over the years.

ITEM 1A. RISK FACTORS

Risks Related to Our Business

Operational/Business Risk

We are principally involved in the provision of telecommunications services and solutions and office communication solutions. As such, we are subject to certain operational and business risk factors inherent in the telecommunications industry. The operational risks include, inter alia, changes in conditions such as deterioration in prevailing market conditions, changes in labor, increase in labor cost and raw material costs and continued supply of electricity which is essential for the smooth operations of its telecommunications network(s). The business risks include, inter alia, network disruption in respect of the provision of the telecommunications services and Although we seek to mitigate these operational and business risks through, inter-alia, efficient cost control, maintaining a diversified range of customers and suppliers, having good relationships with the customers, suppliers and employees of the Company and having contractual agreements for projects undertaken, there can be no assurance that any change to these factors will not have a material adverse effect on our business and financial performance.

Competition

We are in a very competitive and rapidly changing telecommunications industry and its future success will depend on its ability to increase its market share in its markets. As we are competing against well-established telecommunications companies that offer related services which including China Telecom, China Unicom and China Mobile on their pricing strategies, technological advances, advertising campaigns, strategic partnerships and other initiatives. The increasing competition in this telecommunications industry has had, and is expected to continue to have, a significant impact on our business and financial performance. Competition is expected to increase with the emergence of new entrants into its markets. We believe that the provision of telecommunications services complemented with our innovative will provide the group with a competitive edge and differentiate us from its competitors.

Although we seek to mitigate these risks, there can be no assurance that our competitors will not develop technologies and products that are more effective than those developed by us. We have a very clear strategy to replicate the business in other provinces in China.

Dependence on key personnel

The technology industry is a growing and fast-changing sector and management and operation of the business requires the employment of highly-skilled knowledge workers, whether in technology or non-technology related fields. Our management recognizes and believes that our continuing success depends to a significant extent on the abilities and continuing efforts of its existing Executive Directors, Chief Executive Officers and key personnel. The labor market for skilled personnel in this field is highly competitive. We recognize that our success depends to a significant extent upon, amongst others, our ability to attract new personnel and retain its existing skilled personnel. We seek to mitigate this risk factor by offering its employees competitive salary/remuneration and benefits packages. There can be no assurance that the measurestaken will be successful and that any change in our existing skilled personnel will not have a material effect on our business and operations

Adverse Changes to the terms of business collaboration agreement with China TieTong

We currently have business collaboration agreements with China TieTong. The agreement provides for renewability and is subject to changes in the terms of the agreements on renewal. We will endeavour to seek and renew the agreement on terms favourable to us. There can be no assurance that any adverse changes to the terms of the agreement (for example, from failure to reach commercially acceptable terms) would not result in higher interconnection expenses. However, as we have emerged as a significant service provider, China TieTong may views this as a business opportunity to continue and further strengthen their working relationship with us.

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Although individual members of our management team have experience as officers of publicly-traded companies, much of that experience came prior to the adoption of the Sarbanes-Oxley Act.

It may be time consuming, difficult and costly for us to develop and implement the internal controls and reporting procedures required by the Sarbanes-Oxley Act. We may need to hire additional financial reporting, internal controls and other finance staff in order to develop and implement appropriate internal controls and reporting procedures. If we are unable to comply with the Sarbanes-Oxley Act’s internal controls requirements, we may not be able to obtain the independent auditor certifications that Sarbanes-Oxley Act requires publicly-traded companies to obtain.

If we need additional financing, the funding may not be available on satisfactory terms or at all.

We may seek to raise additional capital through public or private equity offerings, debt financings or additional corporate collaboration and licensing arrangements. To the extent we raise additional capital by issuing equity securities, our stockholders may experience dilution. To the extent that we raise additional capital by issuing debt securities, we would incur substantial interest obligations, may be required to pledge assets as security for the debt and may be constrained by restrictive financial and/or operational covenants. Debt financing would also be superior to your interest in bankruptcy or liquidation. To the extent we raise additional funds through collaboration and licensing arrangements, it may be necessary to relinquish some rights to our technologies or product candidates, or grant licenses on unfavorable terms.

If the market does not accept our other new products or upgrades to existing products that we launch from time to time, our operating results and financial condition would be materially adversely affected.

From time to time, we plan on launching new products and upgrades to existing products. Our future success with our next generation product offerings will depend on our ability to accurately determine the functionality and features required by our customers, as well as the ability to enhance our products and deliver them in a timely manner. We cannot predict the present and future size of the potential market for our next generation of products, and we may incur substantial costs to enhance and modify our products and services in order to meet the demands of this potential market.

If we experience delays in product development or the introduction of new products or new versions of existing products, our business and sales will be negatively affected.

There can be no assurance that we will not experience delays in connection with our current product development or future development activities. If we are unable to develop and introduce new products, or enhancements to existing products in a timely manner in response to changing market conditions or customer requirements, it may materially and adversely affect our operating results and financial condition. Because we have limited resources, we must effectively manage and properly allocate and prioritize our product development efforts. There can be no assurance that these efforts will be successful or, even if successful, that any resulting products will achieve customer acceptance.

We have only limited protection of our proprietary rights and technology.

Our success is heavily dependent upon our proprietary technology. We rely on a combination of the protections provided under applicable copyright, trademark and trade secret laws, confidentiality procedures and licensing arrangements, to establish and protect our proprietary rights. As part of our confidentiality procedures, we generally enter into non-disclosure agreements with our developers, distributors and marketers. Despite these precautions, it may be possible for unauthorized third parties to copy certain portions of our products or to reverse engineer or obtain and use information that we regard as proprietary, to use our products or technology without authorization, or to develop similar technology independently. Moreover, the laws of some other countries do not protect our proprietary rights to the same extent as do the laws of the United States. Furthermore, we have no patents and existing copyright laws afford only limited protection. There can be no assurance that we will be able to protect our proprietary software against unauthorized third party copying or use, which could adversely affect our competitive position.

We have never paid cash dividends and are not likely to do so in the foreseeable future.

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We have never declared or paid any cash dividends on our common stock. We currently intend to retain any future earnings for use in the operation and expansion of our business. We do not expect to pay any cash dividends in the foreseeable future but will review this policy as circumstances dictate.

Risks Associated With Doing Business in China and Asia

There are substantial risks associated with doing business in China and Asia, as set forth in the following risk factors.

Our operations and assets in China are subject to significant political and economic uncertainties.

Changes in PRC laws and regulations, their interpretation, or the imposition of confiscatory taxation, restrictions on currency conversion, imports and sources of supply, devaluations of currency or the nationalization or other expropriation of private enterprises could have a material adverse effect on our business, results from operations and financial condition. Under current leadership of the PRC, the Chinese government has been pursuing economic reform policies that encourage private economic activity and greater economic decentralization. There is no assurance, however, that the Chinese government will continue to pursue these policies, or that it will not significantly alter these policies from time to time without notice.

Our business is largely subject to the uncertain legal environment in China and your legal protection could be limited.

The Chinese legal system is a civil law system based on written statutes. Unlike common law systems, the Chinese legal system is a system in which precedents set in earlier legal cases are not generally used. The overall effect of legislation enacted over the past 20 years has been to enhance the protections afforded to foreign invested enterprises in China. However, these laws, regulations and legal requirements are relatively recent and evolving rapidly, and their interpretation and enforcement involve various uncertainties. These uncertainties could limit the legal protections available to foreign investors, such as the right of foreign invested enterprises to hold business licenses and permits. In addition, all of our executive officers and directors are not residents of the U.S., and most of the assets of these persons are located outside the U.S. As a result, it could be difficult for investors to serve process on these individuals in the U.S., or to enforce a judgment obtained in the U.S. against the Company or any of these persons.

The Chinese governments exert substantial influence over the manner in which we must conduct our business activities which could have an adverse effect on our ability to operate in China

China has only recently permitted provincial and local economic autonomy and private economic activities. The Chinese governments continue to exercise substantial control over virtually every sector of the economy through regulation and state ownership. Our ability to operate may be harmed by changes in laws and regulations, including those relating to taxation, import and export tariffs, environmental regulations, land use rights, property and other matters. We believe our operations in China are in material compliance with all applicable legal and regulatory requirements. However, the central or local governments of these jurisdictions may impose new, stricter regulations or interpretations of existing regulations that would require additional expenditures and efforts to ensure our compliance with such regulations or interpretations.

Accordingly, government actions in the future, including any decision not to continue to support recent economic reforms and to return to a more centrally planned economy could have a significant effect on economic conditions in China. Additionally, regional or local variations in the implementation of economic policies, could have a significant effect on economic conditions in particular regions of China, and could require us to divest ourselves of any interest we then hold in Chinese properties or joint ventures.

Future inflation in China may inhibit our ability to conduct business in China.

In recent years, the Chinese economy has experienced periods of rapid expansion and high rates of inflation. These factors have led to the adoption by the Chinese government, from time to time, of various corrective measures designed to restrict the availability of credit or regulate growth and contain inflation. High inflation may in the future cause the Chinese government to impose controls on credit and/or prices, or to take other action, which could inhibit economic activity in China, and thereby harm the market for our products.

Restrictions on currency exchange may limit our ability to receive and use our revenues effectively.

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The substantial portion of our revenues will be settled in RMB, and any future restrictions on currency exchanges may limit our ability to use revenue generated in RMB to fund any future business activities outside China or to pay dividends or other payments in U.S. dollars. Although the Chinese government introduced regulations in 1996 to allow greater convertibility of the RMB for current account transactions, significant restrictions still remain, including the restriction that foreign-invested enterprises may only buy, sell or remit foreign currencies after providing valid commercial documents at banks in China authorized to conduct foreign exchange business. In addition, conversion of RMB for capital account items, including direct investment and loans, is subject to governmental approval in China, and companies are required to open and maintain separate foreign exchange accounts for capital account items. We cannot be certain that the Chinese regulatory authorities will not impose more stringent restrictions on the convertibility of the RMB.

The value of our securities will be affected by the foreign exchange rate between U.S. dollars and RMB and other local currencies.

The value of our common stock will be affected by the foreign exchange rate between U.S. dollars and RMB, and between those currencies and other currencies in which our sales may be denominated. For example, to the extent that we need to convert U.S. dollars into RMB for our operational needs and should the RMB appreciate against the U.S. dollar at that time, our financial position, the business of the company, and the price of our common stock may be harmed. Conversely, if we decide to convert our RMB into U.S. dollars for the purpose of declaring dividends on our common stock or for other business purposes and the U.S. dollar appreciates against the RMB, then the U.S. dollar equivalent of our earnings from our subsidiaries in China would be reduced.

The Company relies on contractual agreements (VIE structure) for all of its revenues; further, the Company has no equity interest in these subsidiaries and there are risks associated with this type of arrangement in light of the legal structure in the PRC.

Redtone China has placed tremendous reliance on contractual arrangements (VIE structure) for asserting management and controls in its wholly owned subsidiaries without equity interest. The existence of such VIE structure is due to the fact that the PRC government limits the foreign investment in the value-added telecommunication industry. These subsidiaries account for all of the Company’s revenue.

The VIE structure, while effective, does involve some associated risks, which may include:

(i)

While each agreement under the Contractual Arrangements as governed by PRC laws is valid, biding, and enforceable, there is the possibility that these Contractual Arrangements will not be deemed by the relevant government authorities to be in compliance with PRC laws and regulation; or, that other government authorities will not in the future interpret existing laws, regulations or policies, or issue new laws, regulations or policies, with the result that all or some of these Contractual Arrangements would be deemed to be in violation of PRC laws.

(ii)	The PRC laws referred to herein are laws currently in force. There is the possibility that any of such laws, or the interpretation thereof or enforcement thereof, will be changed, amended or replaced in the immediate future or in the long-term with or without retrospective effect.

(iii)

Under the current Contractual Arrangements, if the PRC Entities, and/or any of their individual shareholders fails to perform its/his/her respective obligations under these Contractual Arrangements, the Company may have to incur substantial costs and resources to enforce such arrangements, and rely on legal remedies under PRC laws, including, but not limited to, seeking specific performance or injunctive relief, and claiming damages, which we cannot assure the Company would achieve the full remedy therefrom.

ITEM 1B. UNRESOLVED STAFF COMMENTS

As a smaller reporting company, the Company is not required to provide the disclosure required by this item.

ITEM 2. PROPERTIES

The Company’s principal executive offices are located at Suites 15A, E,F, Plaza Sanhe, No. 121 Yanping Road, Jing An District, Shanghai, PRC. The Company’s management believes that all facilities occupied by the Company are adequate for present requirements, and that the Company’s current equipment is in good condition and is suitable for the operations involved.

ITEM 3. LEGAL PROCEEDINGS

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We are not a party to and none of our property is subject to any material pending or threatened legal, governmental, administrative or judicial proceedings.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matter was submitted to a vote of the Company’s security holders during the fourth quarter of the fiscal year covered by this Annual Report.

PART II

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

The Company’s Articles of Incorporation provide that the Company has the authority to issue 300,000,000 shares of common stock at par value of $0.0001 per share. As of May 31, 2013, we had 282,315,325 outstanding shares of Common Stock, after the reverse stock split as disclosed in Item 9B(d).

On March 25, 2011, our common stock began being quoted on the OTCBB under the symbol “RTAS”. We have not had any active trading in our stock as of the date of this report.

The Company has never paid any cash dividends on its stock and does not plan to pay any cash dividends in the foreseeable future.

As of May 31, 2013, we had approximately 49 shareholders of record.

Equity Compensation Plans

The Company does not have any equity compensation plans in place as of the date of this report, and had no options, warrants or other convertible securities outstanding as of that date.

Sales of Unregistered Securities

For the period from 1 June 2012 to the date of this report, there is no sale of unregistered securities.

ITEM 6. SELECTED FINANCIAL DATA

As a smaller reporting company, the Company is not required to provide the disclosure required by this item.

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

Overview

Results of Operations

Financial Presentation

The following sets forth a discussion and analysis of the Company’s financial condition and results of operations for the two years ended May 31, 2013 and 2012. This discussion and analysis should be read in conjunction with our consolidated financial statements appearing elsewhere in this Annual Report on Form 10-K. The following discussion contains forward-looking statements. Our actual results may differ significantly from the results discussed in such forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed in “Item 1A — Risk Factors” of this Annual Report on Form 10-K.

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	12-month ended
	May 31, 2013			May 31, 2012			Increase/ (Decrease) from previous year

Revenue	$	7,220,840		$	8,423,049			(1,202,209	)	-14	%

Other income and gains		141,560			209,154			(67,594	)	-32	%

Service costs		(4,729,921	)		(5,224,044	)		494,123		9	%

Personnel cost		(818,713	)		(1,232,640	)		413,927		34	%

Provision for obsolete inventories		-			(31,703	)		31,703		100	%

Depreciation expense		(651,531	)		(647,538	)		(3,993	)	-1	%

Amortization expense		(121,632	)		(121,632	)		-		0	%

Administrative and other expenses		(706,518	)		(786,722	)		80,204		10	%

Income before provision for income taxes		334,085			587,924			(253,839	)	-43	%

Provision for income taxes		(284,680	)		(329,938	)		45,258		14	%

Net gain	$	49,405		$	257,986			(208,581	)	-81	%

Other comprehensive income
Gain/(loss) on foreign currency translation		151,914			136,254

Total comprehensive income	$	201,319		$	394,240

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Year ended May 31, 2013 compared to year ended May 31, 2012

Revenues. The Company generated revenue of $7,220,840 in the fiscal year ended May 31, 2013, representing a 14% decrease as compared with the fiscal year ended May 31, 2012. The decrease in revenues was mainly due to the decrease in call traffics in consumer voice business by $1.65 million, an intense price competition in telecommunication market.

Information of the Company’s segmental revenue as follows:

	2013		2012
Revenue from:
Telecommunications	$	6,487,707	$	8,141,830
Prepaid business solutions		733,133		281,219
		7,220,840		8,423,049

Other income and gains. During the fiscal year ended May 31, 2013, the Company recorded other income and gains of $141,560, a decrease of $67,594 or 32% compared with last year. Included in the other income are interest income from placement in financial products and incentives from local governments.

Service cost. Service costs from operations for the year ended May 31, 2013 of $4,729,921 reflected a decrease of $494,123 over the fiscal year ended May 31, 2012, consistent with the decrease in the revenue.

Administrative and other operating expenses. The general and administrative expenses has reduced $80,204 or 10% to $706,518. The decrease was mainly due to some redundancy staffs lay off during the financial year as well as effective cost control over the administration..

Personnel expenses. The personnel expenses have decreased 34% or $413,927 to $818,713 for the year ended May 31, 2013. The decrease was mainly due to some redundancy staffs lay off during the financial year.

Provision for obsolete inventories. During the year ended May 31, 2012 the Company has provided obsolete inventories of $31,703. There was no provision provided during the year ended May 31, 2013.

Depreciation and amortization expenses. Depreciation and amortization stood at $651,531 and $121,632 respectively for the year ended May 31, 2013.

Income before provision for income taxes. For the financial year under review, as the decrease in revenue, the net income before provision for income taxes has been lower at $334,085 as compared to $587,924 over the financial year 2012.

Liquidity and Capital Resources.

Cash

Our cash balance at May 31, 2013, was $5,479,091, representing an increase of $1,958,843, from previous cash balance of $3,520,248 as of May 31, 2012.

Cash Flow (before effect of exchange rate changes).

	Fiscal year ended May 31,
	2013		2012			+/-	% changes
Net cash provided by operating activities	$	1,683,337	$	998,245		685,092		68	%
Net cash used in investing activities	$	151,079	$	(2,092,656	)	2,243,735		107	%
Net cash (used in)/provided from financing activities	$	39,190	$	(24,690	)	63,880		258	%
Net increase/(decrease) in cash and cash equivalents		1,873,606		(1,119,101	)	2,992,707		267	%

Net cash provided by operations during the fiscal year ended May 31, 2013 amounted to $1,683,337 as compared to net cash used in operations of $998,245 in the same period of FY2012, an increase of 68% as a result of operating expenses increase.

Net cash flow used in investing activities for the fiscal year ended May 31, 2013 amounted to $151,079 mainly aroused from uplift of our trust fund matured during the year..

There was net cash provided in financing activities for the year ended May 31, 2013 total $39,190 represented by aroused from intercompany advances.

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Working Capital

Our working capital was a positive of $2,385,294 at May 31, 2013, an increase of 179% year on year. The strong positive working capital is mainly attributed by well managed of the operation where current liabilities are sufficiently covered by current assets. The largest current asset comprises cash and cash equivalent total $5,479,091 or represents 66% of total current assets. This is because the core businesses of REDtone are prepaid in nature.

At May 31, 2013, we had stockholders’ equity of $9,738,274; total assets of $15,718,848 and total current liabilities of $5,980,574.

We do not currently anticipate any material capital expenditures for our existing operations. We do not currently anticipate purchasing or leasing any plant and equipment during approximately the next twelve (12) months.

We do not believe that inflation has had a material effect on our results of operations. However, there can be no assurances that our business will not be affected by inflation in the future.

We have no off balance sheet arrangements.

Critical Accounting Policies and Estimates

Revenue Recognition

The Company assesses appropriate revenue recognition policy for each type of operation according to ASC 605-45

Revenue represents the invoiced value of services rendered and receivable during the year. Revenue is recognized when all of the following criteria are met:

Persuasive evidence of an arrangement exists,

Delivery has occurred or services have been rendered,

The seller’s price to the buyer is fixed or determinable, and

Collectability is reasonably assured

Revenue Recognition policy for each of the major products and services:

1.	Discounted call services for consumer (EMS) as follow:

Collaboration with CTT – Redtone China is appointed as the sole distributor for EMS and we will recognize the revenue when airtime is utilize by the consumer and it is on net basis which is computed based on a fixed sharing ratio of the total airtime utilize by consumers after netting of direct traffic termination cost and incidental expenses as per the collaboration agreement with CTT. Redtone China’s role for Business Collaboration with China TieTong Telecommunications (CTT) would be as “Agent” as Redtone China is the sole distributor for EMS brand owned and controlled by CTT ; and

Collaboration with other telecommunication providers – Redtone China will act as discounted consumer call Reseller whereby Redtone China will decide on service and package specification, pricing policy while China Unicom merely acts as passive termination partner for call traffic. Redtone China will pay China Unicom solely based on call traffic termination by China Unicom at prescribed rate (defined as traffic termination cost in the book of Redtone China). In this regard, Redtone China will recognize the revenue when airtime is utilized by the consumer and the value recognize is the call charges gross value. Redtone China role for Business Collaboration with China Unicom would be as “Principal” as China Unicom is playing passive role as traffic termination partner while Redtone China is fully responsible for the entire management of discounted call services.

As this is a prepaid product, there is an expiry date for the product sold. If the airtime is not utilize by the expiry date, which is currently one year from the activation date, it will be deemed expired and recognize as revenue based on the remaining gross value of the expired prepaid product.

2.	Discounted call services for corporate as follow:

Collaboration with CTT – the revenue recognize is the commission earn from distributing the discounted call services to corporate customer; and

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Collaboration with other telecommunication providers –the revenue recognize is the commission earn from distributing the discounted call services to corporate customer;

3.	Reload services for prepaid mobile – revenue recognize is the commission earn

4.	Prepaid Business Solution – a flexible payment solution in order to eliminate cumbersome processes and overhead while increasing convenience, flexibility, security and profitability’ This revenue is recognize in the net commission/fee earned basis.

Recent Accounting Pronouncements.

The Company does not expect the adoption of any recent accounting pronouncements which are further elaborated in Note 3 (o) of Notes to Consolidated Financial Statements will have any material impact on its financial statements.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

As a smaller reporting company, the Company is not required to provide disclosure required by this item.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The Company’s audited financial statements and the notes thereto appear in Part IV, Item 15, of this report.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.

On April 5, 2013, REDtone Asia, Inc (“the Company”) dismissed Madsen & Associates CPA’s, Inc (“Madsen”) as its independent registered accounting firm. Madsen reported on the Company’s financial statements for the years ended May 31, 2012, 2011, 2010 and 2009. Their opinion did not contain an adverse opinion or a disclaimer of opinion and was not qualified as to uncertainty, audit scope, or accounting principles.

From January 14, 2008 when Madsen was engaged, through the dismissal of Madsen on April 5, 2013, there were no disagreements between the Company and Madsen on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedures, which disagreements, if not resolved to the satisfaction of Madsen would have caused Madsen to make reference to the subject matter of the disagreements in connection with its reports.

The Company provided a copy of this disclosure to Madsen and an opportunity to furnish the Company with a letter stating whether it agrees or disagrees with the statements made by the Company herein in response to Item 304(a) of Regulation S-K.

Immediately following the dismissal of Madsen, our Board of Directors commenced contacting and interviewing other auditors in order to engage another firm as our independent auditor. Effective April 5, 2013, we engaged Albert Wong & Co. as our new independent registered public accounting firm. The decision to engage Albert Wong & Co. was approved by our Board of Directors. During its two most recent fiscal years, and during any subsequent interim period prior to the date of Albert Wong & Co.’s engagement, the Company did not consult the new auditor regarding either (i) the application of accounting principles to a proposed or completed specified transaction, or the type of audit opinion that might be rendered, and neither a written report nor oral advice was provided that was an important factor considered by the Company in reaching a decision as to the accounting, auditing , or financial reporting issue; or (ii) any matter that was either the subject of a disagreement or reportable event within the meaning set forth in Regulation S-K, Item 304a(I)(iv)(a)(1).

ITEM 9A. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

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Our management team, under the supervision and with the participation of our principal executive officer and our principal financial officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures as such term is defined under Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended (Exchange Act), as of the last day of the fiscal period covered by this report, May 31, 2013. The term disclosure controls and procedures means our controls and other procedures that are designed to ensure 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 SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to management, including our principal executive and principal financial officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Based on this evaluation, our principal executive officer and our principal financial officer concluded that our disclosure controls and procedures were effective as of May 31, 2013.

Management’s Annual Report on Internal Control Over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is defined in Rule 13a-15(f) and Rule 15d-15(f) under the Exchange Act as a process designed by, or under the supervision of, the issuer’s principal executive and principal financial officers, or persons performing similar functions, and effected by the issuer’s board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP and includes those policies and procedures that:

•	pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the issuer;

•	provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that receipts and expenditures of the issuer are being made only in accordance with authorizations of management and directors of the issuer; and

•	provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the issuer’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In accordance with the internal control reporting requirement of the SEC, management completed an assessment of the adequacy of our internal control over financial reporting as of May 31, 2013. In making this assessment, management used the criteria set forth by our Internal Control team.

Based on this assessment and the criteria in our internal control framework, management has concluded that, as of May 31, 2013, our internal control over financial reporting was adequately controlled.

Changes in Internal Control Over Financial Reporting

During the fourth quarter of Fiscal 2013, there were no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

During April and May, 2013, 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 May 31, 2013, 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.

ITEM 9B. OTHER INFORMATION

There were no items required to be disclosed in a report on Form 8-K during the fourth quarter of the fiscal year ended May 31, 2013 that have not been already disclosed on a Form 8-K filed with the SEC.

PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE

The following table sets forth as of the date hereof, except as otherwise noted, the names, ages and positions held with respect to each director, executive officer, and significant employee expected to make a significant contribution to the Company:


Name	Age	Position	Period

Chuan Beng Wei	48	Director CEO	July 2008 - Present October 2010- Present
Lau Bik Soon	43	Director	October 2010-Present

Ng Hui Nooi	40	CFO	March 2012-Present

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Mr Chuan Beng Wei, age 48, is now the Chief Executive Officer of the Company. Mr Wei has been and will continue serving on the Board of Directors of the Company. He obtained his Bachelor’s Degree in Electrical Engineering from University of Technology Malaysia in 1989 and Diploma in Management (Gold Medalist Award Winner) from the Malaysian Institute of Management, Kuala Lumpur in 1995. He also completed an Entrepreneur Development Program from the renowned MIT Sloan School of Management in USA in January 2006.

He began his career with Hewlett Packard Sales Malaysia Sdn Bhd in 1989 as a Systems Engineer responsible for information technology (“IT”) technical and customer relations, and was subsequently promoted to Major Account Manager. Having gained wide exposure in IT, electronics and the telecommunications industry, he began his entrepreneur pursuit. He started Redtone Telecommunications Sdn Bhd in 1996 with two other partners. As one of the founding members of the Redtone Group, he is instrumental in shaping the Group’s business relations and policies. His main responsibilities include management of the Group’s overall business, expanding its overseas markets and financial-related matters. Mr Wei also serves as the Managing Director of the Redtone Group, which was listed in January 2004 in the ACE Market of Bursa Malaysia. In addition, in 2007, Mr Wei started Redtone China where he played a significant role in developing business strategy in China. He was the past Chairman for The Association of Computer and Multimedia Malaysia and the past Deputy Chapter Chairperson for the exclusive Young Presidents’ Organization (YPO).

Mr. Bik Soon Lau, age 43, obtained his first-class honors degree in electrical engineering from the University of Technology in Malaysia. He joined REDtone in 2008, as an executive director responsible for expanding the Group’s Malaysia business which includes data, broadband, Wifi and discounted call services. Prior to joining REDtone, he was the Country Manager for Hitachi Data Systems Malaysia from year 2005 to 2008. Under his leadership in Hitachi, he strengthened the organisation and company’s channel partner, and helped the company grow its business in Malaysia.

Mr. Lau’s 15 years of experience as Sales Director in the ICT and telecommunications industry provides expertise in corporate leadership and strategic marketing planning. In his career, he has held numerous other positions, including sales director, partner sales manager, enterprise division account manager, business development manager, systems engineer, and research and design engineer. He has held these positions with organizations such as Cisco Systems, Sun Microsystems, Compaq Computer, TQC Consultant (IT Division) Sdn Bhd, and Motorola Penang. During his tenure with these organizations, he received various Partner Management Excellence awards as well as many accolades as a high achiever in sales.

Ms. Hui Nooi Ng, age 40, a Malaysian Chartered Accountant, obtained her Professional Degree from The Association of Chartered Certified Accountants in 2004. Ms. Ng has more than seventeen years of working experience in accountancy and has held various positions from accountant to finance manager with companies in Malaysia and Vietnam. In 1999, she joined ChemQuest Sdn Bhd, as an accountant, fully responsible for the finance and accounting operations for the company. In 2010, she joined Poh Huat Furniture Ind. Vietnam Joint Stock Co, a Malaysian manufacturing company based in Vietnam as the Finance Manager. In this position, her main responsibilities included financial review and reporting, budgeting, business planning and risk management and treasury functions.

Number and Terms of Office of Directors

A Board of Directors, consisting of at least one (1) person shall be chosen annually by the Stockholders at their meeting to manage the affairs of the company. The Directors' term of office shall be one year, and Directors may be re-elected for successive annual terms. There is no family relationship between any of our executive officers and directors.

Code of Ethics

The Company has not yet adopted a Code of Ethics that applies to our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, comprising written standards that are reasonably designed to deter wrongdoing and to promote the behavior described in Item 406 of Regulation S-K promulgated by the Securities and Exchange Commission. Due to the small size of the Company, management does not believe such a code is needed at this time.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Exchange Act requires the Company’s directors, executive officers and persons who own more than 10% of the Company’s stock (collectively, “Reporting Persons”) to file with the SEC initial reports of ownership and changes in ownership of the Company’s Common Stock. Reporting Persons are required by SEC regulations to furnish the Company with copies of all Section 16(a) reports they file. To the Company’s knowledge, based solely on its review of the copies of such reports received or written representations from certain Reporting Persons that no other reports were required, the Company believes that during its fiscal year ended May 31, 2013, all Reporting Persons complied with all applicable filing requirements.

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ITEM 11. EXECUTIVE COMPENSATION.

The following table sets forth, for the fiscal years ended May 31, 2013 and 2012, certain information regarding the compensation earned by the Company’s named executive officers. Where columns have been omitted from the Summary Compensation Table below, it is because no such compensation was paid to the named executive officer during the 2013 or 2012 fiscal years.

SUMMARY COMPENSATION TABLE

		Annual Compensation
						Other		All Other
Name and	Year					Annual		Compen-
Principal	Ended	Salary		Bonus		Compen-		Sation
Position	May 31	($)		($)		sation ($)		($)
Chuan Beng Wei,	2013		-0-		-0-		-0-		-0-
Director, CEO	2012		-0-		-0-		-0-		-0-

Bik Soon, Lau	2013		-0-		-0-		-0-		-0-
Director	2012		-0-		-0-		-0-		-0-

Chee Keong, Lee	2013		0		0		0		-0-
Former CFO	2012		52,157		0		22,203		-0-

Hui Nooi, Ng	2013		17,649		0		0		0
CFO	2012		8,503		0		0		0

Director Compensation

Members of the Board of Directors did not receive any cash or non-cash compensation for their service as Directors during our 2013 and 2012 fiscal years.

Compensation Committee Interlocks and Insider Participation

As a smaller reporting company, the Company is not required to provide the disclosure required by this item.

Compensation Committee Report

As a smaller reporting company, the Company is not required to provide the disclosure required by this item.

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

The following table sets forth beneficial ownership information as of May 31, 2013: (i) each of the Company’s officers and directors, (ii) each person who is known by the Company to own beneficially more than 5% of the outstanding shares of common stock, and (iii) all of the Company’s officers and directors as a group. As of the date of this report, the Company had 282,315,325 shares of common stock outstanding.

(i)

Security Ownership of directors and executive officers: None

(ii) Security ownership of certain beneficial owners:


Title of Class	Name and Address	Amount & Nature of Beneficial Ownership		Percentage of Class

Common shares	Redtone International Bhd, Suites 22-28, 5th Floor, IOI Business Park, 47100 Puchong, Malaysia.		260,619,364		92.31	%

(iii)

Security ownership of officers and directors as a group: None.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE

During the fiscal year ended May 31, 2013 and 2012, there were no related transactions between the Company and the directors except the followings:

	2013		2012
Fellow subsidiary:
REDtone Technology Sdn. Bhd.		41,146		2,078,955

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

On 2013, Madsen and Associates CPA has resigned as the Company’s principal accountant. Albert Wong & Co

Their fees billed to the Company for the past two fiscal years are set forth below:

	Fiscal Year ended May 31,
	2013		2012
Audit Fees	$	39,000		45,000

Audit Related Fees		0		0

Tax Fees		0		0

All Other Fees		0		0

Total Fees		39,000		45,000

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•	Audit Fees.

	-Including fees for professional services for the audit of our annual financial statements and for the reviews of the financial statements included in each of our quarterly reports on Form 10-QSB and 10-Q.

•	Audit Related Fees

	-Consists of assurance related services by the independent auditors that are reasonably related to the performance of the audit and review of our financial statements and are not included under audit fees.

•	Tax Fees

	- These services included assistance regarding federal, state and local tax compliance and return preparation.

•	All Other Fees

	-Includes time and procedures related to change in independent accountants and research and assistance provided to the Company.

During its fiscal year ended May 31, 2013, the Company did not have an Audit Committee and the Company’s director pre-approved all fees of the principal accountant.

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PART IV

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

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

1. FINANCIAL STATEMENTS - beginning on page F-1 of this Report:
- Independent Auditors’ Report – Madsen and Associates	F1
- Independent Auditors’ Report – Consolidated Balance Sheet at May 31, 2013 and 2012	F2
- Consolidated Statements of Operations and Comprehensive Loss for the Years Ended May 31, 2013 and 2012	F3
- Consolidated Statements of Stockholders’ Deficit for the Years Ended May 31, 2013 and 2012	F4
- Consolidated Statements of Cash Flows for the Year Ended May 31, 2013 and 2012	F5
- Notes to Consolidated Financial Statements	F6

Report of Independent Registered Public Accounting Firm

ALBERT WONG & CO.

CERTIFIED PUBLIC ACCOUNTANTS

7th Floor, Nan Dao Commercial Building

359-361 Queen’s Road Central

Hong Kong

Tel : 2851 7954

Fax: 2545 4086

ALBERT WONG

B.Soc., Sc., ACA., LL.B., C.P.A.(Practising)

To:	The board of directors and stockholders of

REDtone Asia, Inc.

Report of Independent Registered Public Accounting Firm

We have audited the accompanying consolidated balance sheet of REDtone Asia, Inc. and its subsidiaries (“the Company”) as of May 31, 2013 and the related consolidated statements of income, stockholders' equity and cash flow for the years then ended. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

We were not engaged to examine management’s assertion about the effectiveness of the Company’s internal control over financial reporting as of May 31, 2013 included in the Company’s Item 9A “Controls and Procedures” in the Annual Report on Form 10-K and, accordingly, we do not express an opinion thereon.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of REDtone Asia, Inc. and its subsidiaries as of May 31, 2013 and the results of its operations and its cash flow for the years then ended in conformity with accounting principles generally accepted in the United States of America.

Hong Kong, China	/s/ Albert Wong & Co.
September 13, 2013	Certified Public Accountants

Board of Directors

Redtone Asia, Inc. and Subsidiaries

Hong Kong

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We have audited the accompanying consolidated balance sheets of Redtone Asia, Inc. and subsidiaries (formerly Hotgate Technology, Inc. (the Company) as of May 31, 2012 and 2011 and the consolidated statements of income and comprehensive income, stockholders’ equity and cash flows for each of the years in the two-year period ended May 31, 2012. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit.

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

In our opinion, the consolidated financial statements referred to above present fairly, in all material aspects, the consolidated financial position of the Company as of May 31, 2012 and 2011, and the consolidated results of its operations and cash flows for each of the years in the two-year period ended May 31, 2012 in conformity with accounting principles generally accepted in the United States of America.

s/Madsen & Associates CPA’s, Inc.

Madsen & Associates CPA’s, Inc.

August 29, 2012

Salt Lake City, Utah

F-1

REDTONE ASIA, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

May 31, 2013 and 2012

	2013		2012

Assets
Current assets
Cash and cash equivalents	$	5,479,091	$	3,520,248
Inventories		10,621		18,385
Accounts receivable		2,398,488		633,009
Tax recoverable		23,323		22,755
Other receivables and deposits		434,606		383,443
Total current assets		8,346,129		4,577,840

Property, plant and equipment, net		1,900,561		2,367,320
Intangible assets, net		1,559,471		1,680,972
Goodwill		610,386		610,386
Available-for-sale investments		-		315,689
Amount due from a related company		3,302,301		3,261,155

Total assets	$	15,718,848	$	12,813,362

Liabilities and stockholders’ equity
Liabilities
Current liabilities
Deferred income	$	840,740	$	1,423,566
Accounts payable		3,751,360		715,078
Accrued expenses and other payables		534,375		576,331
Amount due to a related company		116,318		77,128
Taxes payable		718,042		450,700
Total current liabilities		5,960,835		3,242,803

Deferred tax liabilities		19,739		33,604

Total liabilities		5,980,574		3,276,407

Stockholders’ equity
Common stock, US$0.0001 par value , 300,000,000 shares authorized; 282,315,325 shares issued and outstanding, respectively		28,232		28,232
Additional paid in capital		7,726,893		7,726,893
Retained earnings		1,095,216		1,045,811
Accumulated other comprehensive income		887,933		736,019
Total stockholders’ equity		9,738,274		9,536,955

Total liabilities and stockholders’ equity	$	15,718,848	$	12,813,362

See accompanying notes to the consolidated financial statements.

F-2

REDTONE ASIA, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

AND COMPREHENSIVE INCOME

Year ended May 31, 2013 and 2012


	2013		2012

Revenue	$	7,220,840	$	8,423,049

Other income and gains		141,560		209,154

Service costs		4,729,921		5,224,044

Personnel cost		818,713		1,232,640

Provision for obsolete inventories		-		31,703

Depreciation expense		651,531		647,538

Amortization expense		121,632		121,632

Administrative and other operating expense		706,518		786,722

Income before provision for income taxes		334,085		587,924

Provision for income taxes		284,680		329,938

Net income	$	49,405	$	257,986

Other comprehensive income
Gain on foreign currency translation		151,914		136,254

Total comprehensive income	$	201,319	$	394,240

Net income per share, basic and diluted	$	-	$	-

Weighted average number of shares		282,315,325		282,315,325

See accompanying notes to the consolidated financial statements.

F-3

REDTONE ASIA, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY

For the Years Ended May 31, 2013 and 2012

	Number of common shares issued		Common stock		Additional paid-in capital		Retained earnings		Accumulated other comprehensive income		Total equity

Balance at June 1, 2011		282,315,325		28,232	$	7,726,893		787,825		599,765		9,142,715

Net income for the year		-		-		-		257,986		-		257,986

Gain on foreign exchange translation		-		-		-		-		136,254		136,254

Balance at May 31, 2012 and June 1, 2012		282,315,325		28,232		7,726,893		1,045,811		736,019		9,536,955

Net income for the year		-		-		-		49,405		-		49,405

Gain on foreign exchange translation		-		-		-		-		151,914		151,914

Balance at May 31, 2013		282,315,325		28,232		7,726,893		1,095,216		887,933		9,738,274

See accompanying notes to the consolidated financial statements.

F-4

REDTONE ASIA, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

Year ended May 31, 2013 and 2012

	2013			2012

Cash flows from operating activities
Net income	$	49,405		$	257,986
Adjustments to reconcile net income to net cash provided by operating activities:
Deferred tax		(14,452	)		(12,569	)
Amortization expense		121,632			121,632
Depreciation expense		651,531			647,538
Provision for obsolete inventories		-			31,703
Loss on disposal of property, plant and equipment		5,825			-
Impairment loss on available-for-sale investment		-			-
Changes in operating assets and liabilities:
(Increase)/decrease in accounts receivable		(1,765,479)			11,633
Decrease/(increase) in inventories		7,764			(43,409	)
(Increase)/decrease in other receivables and deposits		(51,163	)		57,908
(Increase)/decrease in tax recoverable		(568	)		84,553
Decrease in deferred income		(582,826	)		(417,586	)
Increase/(decrease) in accounts payable		3,036,282			(224,854	)
Increase in tax payables		267,342			330,216
(Decrease)/increase in accrued liabilities and other payables		(41,956	)		153,494

Net cash provided by operating activities	$	1,683,337		$	998,245

Cash flows from investing activities
Purchase of property, plant and equipment		(131,351	)		(13,701	)
Decrease in available-for-sale investments		323,576			-
Increase in amount due from a related company		(41,146	)		(2,078,955)

Net cash provided from/(used in) investing activities	$	151,079		$	(2,092,656	)

Cash flows from financing activities
Decrease in amount due to related companies		39,190			(24,690	)

Net cash provided from/(used in) financing activities	$	39,190		$	(24,690	)

Net increase/(decrease) in cash and cash equivalents		1,873,606			(1,119,101	)

Effect of exchange rate changes on cash and cash equivalents		85,237			59,160

Cash and cash equivalents at beginning of year		3,520,248			4,580,189

Cash and cash equivalents at end of year	$	5,479,091		$	3,520,248

Cash paid for interest	$	-		$	-

Cash paid for income taxes	$	-		$	58,662

See accompanying notes to the consolidated financial statements.

F-5

REDTONE ASIA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

May 31, 2013

NOTE 1 - ORGANIZATION AND PRINCIPAL ACTIVITIES

REDtone Asia, Inc. and subsidiaries (the “Company”) are a group of companies in The People’s Republic of China (“PRC”). The principal activities of the Company are that of a Telecommunications provider for mobile, fixed and international gateway services. REDtone provides a wide range of telecommunication services, including prepaid and postpaid discounted call services to corporate customers and consumers as well as prepaid mobile air-time top-up. The Company also offers prepaid shopping card services.

Name	Domicile and date of incorporation	Effective ownership	Principal activities

Redtone Telecommunication (China) Limited (“Redtone China”)	Hong Kong May 26, 2005	100%	Investment holdings

Redtone Telecommunications (Shanghai) Limited (“Redtone Shanghai”)	The PRC July, 26, 2005	100%	Provides technical support services to group companies

Shanghai Hongsheng Net Telecommunication Company Limited (“Hongsheng”)	The PRC November 29, 2006	100%(1)	Marketing and distribution of discounted call services to PRC consumer market

Shanghai Huitong Telecommunication Company Limited (“Huitong”)	The PRC March, 26, 2007	100%(1)	Marketing and distribution of IP call and discounted call services in the PRC

Shanghai Jiamao E-Commerce Company Limited (“Jiamao”)	The PRC March 21, 2008	100%(1)	Marketing and distribution of products on the internet

Nantong Jiatong Investment Consultant Co., Ltd (“Nanjing Jiatong”)	The PRC May 17, 2011	100%(1)	Investment holdings

Shanghai QianYue Business Administration Co., Ltd. ("QBA")	The PRC December 12, 2008	100%(1)	Provision of prepaid shopping-card services in the PRC

(1) - Variable interest entities. See also Footnote 14.

Jiamao is not reported as distinct operating segments 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.

NOTE 2 – PRINCIPLES OF CONSOLIDATION

The accompanying consolidated financial statements for the years ended May 31, 2013 and 2012 include the accounts of the Company, the Company’s subsidiaries and VIEs (see Note 1). The consolidated financial statements are prepared in accordance with generally accepted accounting principles used in the United States of America, and all significant intercompany balances and transactions have been eliminated. The functional currency for the majority of the Company’s operations is the Renminbi (“RMB”), while the reporting currency is the US Dollar.

NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

F-6

(a) Economic and political risk

The Company’s major operations are conducted in the PRC. Accordingly, the political, economic, and legal environments in PRC may influence the Company’s business, financial condition, and results of operations.

The Company’s major operations in the PRC are subject to considerations and significant risks typically associated with companies in North America and Western Europe. These include risks associated with, among others, the political, economic, and legal environment. The Company’s results may be adversely affected by changes in governmental policies with respect to laws and regulations, anti-inflationary measures, and rates and methods of taxation, among other things.

(b) Cash and cash equivalents

The Company considers all highly liquid investments purchased with original maturities of three months or less to be cash equivalents.

Trade receivables are recognized and carried at the original invoice amount less allowance for any uncollectible amounts. An estimate for doubtful accounts is made when collection of the full amount is no longer probable.

(d) Property, plant and equipment

Property, plant and equipment are carried at cost less accumulated depreciation. The cost of maintenance and repairs is charged to the statement of operations as incurred, whereas significant renewals and improvements are capitalized. The cost and the related accumulated depreciation of assets sold or otherwise retired are eliminated from the accounts and any gain or loss is included in the statement of operations.

The Company provides for depreciation of property, plant and equipment principally by use of the straight-line method for financial reporting purposes. Plant and equipment are depreciated over the following estimated useful lives:

Computer and software	5 years
Furniture, fixtures and equipment	5 years
Motor vehicles	5 years
Leasehold improvements	5 years
Telecommunication equipment	10 years

Depreciation expense for the years ended May 31, 2013 and 2012 amounted to $651,531 and $647,538, respectively.

(e) Intangible assets

Intangible assets primarily represent license and software and are generally amortized on a straight-line basis over the periods of benefit, in 20 years.

The Company performs regular review of identified intangible assets to determine if facts and circumstances indicate that the useful life is shorter than the original Company policies. If such facts and circumstances exist, the Company regularly assesses the recoverability of identified intangible assets by comparing the projected undiscounted net cash flows associated with the related asset or group of assets over their remaining lives against their respective carrying amounts. Impairments, if any, are based on the excess of the carrying amount over the fair value of those assets. If the useful life is shorter than originally estimated, we accelerate the rate of amortization and amortize the remaining carrying value over the new shorter useful life.

Amortization expense for the years ended May 31, 2013 and 2012 amounted to $121,632and $121,632, respectively.

(f) Available-for-sale investments

F-7

Investments in equity securities that do not have a quoted market price in an active market and whose fair value cannot be reliably measured are recognized in the balance sheet at cost less impairment losses.

(g) Accounting for the impairment of long-lived assets

The long-lived assets held and used by the Company are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of assets may not be recoverable. It is reasonably possible that these assets could become impaired as a result of technology or other industry changes. Determination of recoverability of assets to be held and used is by comparing the carrying amount of an asset to future net undiscounted cash flows to be generated by the assets. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell.

There is no impairment loss recognized during the years ended May 31, 2013 and 2012.

(h) Income tax

Income taxes are based on pre-tax financial accounting income. Deferred tax assets and liabilities are recognized for the expected tax consequences of temporary differences between the tax bases of assets and liabilities and their reported amounts. The Company periodically assesses the need to establish valuation allowances against its deferred tax assets to the extent the Company no longer believes it is more likely than not that the tax assets will be fully utilized.

The Company evaluates a tax position to determine whether it is more likely than not that the tax position will be sustained upon examination, based upon the technical merits of the position. A tax position that meets the more-likely-than-not recognition threshold is subject to a measurement assessment to determine the amount of benefit to recognize and the appropriate reserve to establish, if any. If a tax position does not meet the more-likely-than-not recognition threshold, no benefit is recognized.

(i) Fair value of financial instruments

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. To increase the comparability of fair value measures, the following hierarchy prioritizes the inputs to valuation methodologies used to measure fair value:

Level 1—Valuations based on quoted prices for identical assets and liabilities in active markets.

Level 2—Valuations based on observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data.

Level 3—Valuations based on unobservable inputs reflecting our own assumptions, consistent with reasonably available assumptions made by other market participants. These valuations require significant judgment.

We measure the fair value of money market funds and equity securities based on quoted prices in active markets for identical assets or liabilities. All other financial instruments were valued based on quoted market prices of similar instruments and other significant inputs derived from or corroborated by observable market data.

(j) Revenue recognition

The Company assesses appropriate revenue recognition policy for each type of operation according to ASC 605-45

Revenue represents the invoiced value of services rendered and receivable during the year. Revenue is recognized when all of the following criteria are met:

F-8

o Persuasive evidence of an arrangement exists,

o Delivery has occurred or services have been rendered,

o The seller’s price to the buyer is fixed or determinable, and

o Collectability is reasonably assured

Revenue recognition policy for each of the major products and services:

1.	Discounted call services for consumer (EMS) as follow:

Collaboration with CTT – Redtone China is appointed as the sole distributor for EMS and will recognize revenue when airtime is utilized by the consumer and the revenue recognized is on net basis which is computed based on a fixed sharing ratio of the total airtime utilized by consumers after netting of direct traffic termination cost and incidental expenses. Redtone China’s role for Business Collaboration with China TieTong Telecommunications (CTT) would be as “Agent” as Redtone China is the sole distributor for EMS brand owned and controlled by CTT; and

Collaboration with other telecommunication providers – Redtone China will act as a discounted consumer call Reseller whereby Redtone China will determine the service and package specification and pricing policies whereas China Unicom acts as a passive termination partner for call traffic. Redtone China will pay China Unicom solely based on call traffic termination by China Unicom at a prescribed rate (defined as traffic termination costs on the books of Redtone China). In this regard, Redtone China will recognize the revenue when airtime is utilized by the consumer and the value recognized as revenue is the call charges gross value. Redtone China’s role for Business Collaboration with China Unicom would be as “Principal” as China Unicom is playing a passive role as traffic termination partner while Redtone China is fully responsible for the entire management of discounted call services

As this is a prepaid product, there is an expiration date for the product sold. If the airtime is not utilized by the expiration date, which is currently one year from the activation date, it will be deemed expired and revenue will be recognized based on the remaining gross value of the expired prepaid product.

2.	Discounted call services for corporate as follow:

o	Collaboration with CTT – the revenue recognize is the commission earned from distributing the discounted call services to corporate customer; and

o	Collaboration with other telecommunication providers –the revenue recognized is the commission earned from distributing the discounted call services to corporate customer.

3.	Reload services for prepaid mobile – revenue recognized is the commission earned.

4.	Prepaid shopping-card services – revenue recognized is the commission earned.

(k) 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 year. 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 May 31, 2011 and 2010, there were no dilutive securities outstanding.

(l) Use of estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results may differ from those estimates.

(m) Retirement benefits

PRC mandates companies to contribute funds into the national retirement system, which benefits qualified employees based on where they were born within the country. The Company pays the required payment for qualified employees of the Company.

F-9

(n) 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:

	May 31, 2013		May 31, 2012

Year end RMB : US$ exchange rate		0.1618		0.1578
Average yearly RMB : US$ exchange rate		0.1590		0.1585
Year end HK$ : US$ exchange rate		0.1288		0.1288
Average yearly HK$ : US$ exchange rate		0.1288		0.1288

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.

(o) Recent accounting pronouncements

In October 2012, FASB has issued Accounting Standards Update (ASU) No. 2012-04, Technical Corrections and Improvements. This ASU make technical corrections, clarifications, and limited-scope improvements to various Topics throughout the Codification. The amendments in this ASU that will not have transition guidance will be effective upon issuance for both public entities and nonpublic entities. For public entities, the amendments that are subject to the transition guidance will be effective for fiscal periods beginning after December 15, 2012. For nonpublic entities, the amendments that are subject to the transition guidance will be effective for fiscal periods beginning after December 15, 2013.

In October 2012, FASB has issued Accounting Standards Update (ASU) No. 2012-05, Statement of Cash Flows (Topic 230). This ASU addresses how cash receipts arising from the sale of certain donated financial assets, such as securities, should be classified in the statement of cash flows of not-for-profit entities (NFPs). Some NFPs classify those cash receipts as investing cash inflows, while other entities classify them as either operating cash inflows or financing cash inflows, consistent with their treatment of inflows arising from cash contributions. The objective of this Update is for an NFP to classify cash receipts from the sale of donated financial assets consistently with cash donations received in the statement of cash flows if those cash receipts were from the sale of donated financial assets that upon receipt were directed without the NFP imposing any limitations for sale and were converted nearly immediately into cash. The amendments in the ASU are effective prospectively for fiscal years, and interim fiscal periods within those years, beginning after June 15, 2013. Retrospective application to all periods presented upon the date of adoption is permitted. Early adoption from the beginning of the fiscal year of adoption is permitted.

In January 2013, FASB has issued Accounting Standards Update (ASU) No. 2013-01, Balance Sheet (Topic 210): Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities. This ASU clarifies that ordinary trade receivables and receivables are not in the scope of ASU No. 2011-11, Balance Sheet (Topic 210): Disclosures about Offsetting Assets and Liabilities. Specifically, ASU 2011-11 applies only to derivatives, repurchase agreements and reverse purchase agreements, and securities borrowing and securities lending transactions that are either offset in accordance with specific criteria contained in the FASB Accounting Standards Codification™ (Codification) or subject to a master netting arrangement or similar agreement. The FASB undertook this clarification project in response to concerns expressed by U.S. stakeholders about the standard’s broad definition of financial instruments. After the standard was finalized, companies realized that many contracts have standard commercial provisions that would equate to a master netting arrangement, significantly increasing the cost of compliance at minimal value to financial statement users. An entity is required to apply the amendments in ASU 2013-01 for fiscal years beginning on or after January 1, 2013, and interim periods within those annual periods. An entity should provide the required disclosures retrospectively for all comparative periods presented. The effective date is the same as the effective date of ASU 2011-11.

F-10

In February 2013, FASB has issued Accounting Standards Update (ASU) No. 2013-02, Comprehensive Income (Topic 220): Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income. This ASU improves the transparency of reporting these reclassifications. Other comprehensive income includes gains and losses that are initially excluded from net income for an accounting period. Those gains and losses are later reclassified out of accumulated other comprehensive income into net income. The amendments in this ASU do not change the current requirements for reporting net income or other comprehensive income in financial statements. All of the information that this ASU requires already is required to be disclosed elsewhere in the financial statements under U.S. GAAP.

The new amendments will require an organization to:

 Present (either on the face of the statement where net income is presented or in the notes) the effects on the line items of net income of significant amounts reclassified out of accumulated other comprehensive income - but only if the item reclassified is required under U.S. GAAP to be reclassified to net income in its entirety in the same reporting period.

 Cross-reference to other disclosures currently required under U.S. GAAP for other reclassification items (that are not required under U.S. GAAP) to be reclassified directly to net income in their entirety in the same reporting period. This would be the case when a portion of the amount reclassified out of accumulated other comprehensive income is initially transferred to a balance sheet account (e.g., inventory for pension-related amounts) instead of directly to income or expense.

The amendments apply to all public and private companies that report items of other comprehensive income. Public companies are required to comply with these amendments for all reporting periods (interim and annual). A private company is required to meet the reporting requirements of the amended paragraphs about the roll forward of accumulated other comprehensive income for both interim and annual reporting periods. However, private companies are only required to provide the information about the effect of reclassifications on line items of net income for annual reporting periods, not for interim reporting periods. The amendments are effective for reporting periods beginning after December 15, 2012, for public companies and are effective for reporting periods beginning after December 15, 2013, for private companies. Early adoption is permitted.

In March 2013, FASB has issued Accounting Standards Update (ASU) No. 2013-05, Foreign Currency Matters (Topic 830). This ASU resolve the diversity in practice about whether Subtopic 810-10, Consolidation—Overall, or Subtopic 830-30, Foreign Currency Matters—Translation of Financial Statements, applies to the release of the cumulative translation adjustment into net income when a parent either sells a part or all of its investment in a foreign entity or no longer holds a controlling financial interest in a subsidiary or group of assets that is a nonprofit activity or a business (other than a sale of in substance real estate or conveyance of oil and gas mineral rights)within a foreign entity. In addition, the amendments in this Update resolve the diversity in practice for the treatment of business combinations achieved in stages (sometimes also referred to as step acquisitions) involving a foreign entity. This ASU is the final version of Proposed Accounting Standards Update EITF11Ar—Foreign Currency Matters (Topic 830), which has been deleted. The amendments in this Update are effective prospectively for fiscal years (and interim reporting periods within those years) beginning after December 15, 2013. For nonpublic entities the amendments in this Update are effective prospectively for the first annual period beginning after December 15, 2014, and interim and annual periods thereafter. The amendments should be applied prospectively to derecognition events occurring after the effective date. Prior periods should not be adjusted. Early adoption is permitted. If an entity elects to early adopt the amendments, it should apply them as of the beginning of the entity’s fiscal year of adoption.

NOTE 4 – CASH & CASH EQUIVALENTS

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

F-11

	2013		2012

Cash and bank	$	1,086,549	$	868,462
Time deposits		4,392,542		2,651,786

Total	$	5,479,091	$	3,520,248

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

NOTE 5 – AVAILABLE-FOR-SALE INVESTMENT

As of the balance sheet dates, available-for-sale investments are summarized as follows:

	2013		2012

Investment in trust fund	$	-	$	315,689
Total	$	-	$	315,689

NOTE 6 –OTHER RECEIVABLES AND DEPOSITS

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

	2013		2012

Deposits	$	176,191	$	117,718
Other receivables		258,415		265,725
Total	$	434,606	$	383,443

NOTE 7 – PROPERTY, PLANT AND EQUIPMENT

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

	2013			2012
At cost:
Computer and software	$	587,392		$	553,680
Telecommunication equipment		5,048,888			4,895,607
Furniture, fixtures and equipment		205,308			213,144
Motor vehicles		125,871			32,516
Leasehold improvement		35,253			33,912
		6,002,712			5,728,859

Less: Accumulated depreciation		(4,102,151	)		(3,361,539	)
Property, plant and equipment, net	$	1,900,561		$	2,367,320

Depreciation expense for the years ended May 31, 2013 and 2012 amounted to $651,531 and $647,538, respectively.

NOTE 8 – INTANGIBLE ASSETS

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

F-12

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


	2013			2012
At cost:
Licenses and software	$	2,278,603		$	2,278,425

Less: Accumulated amortization		(719,132	)		(597,453	)

Intangible assets, net	$	1,559,471		$	1,680,972

Amortization expense for the years ended May 31, 2013 and 2012 amounted to $121,632 and $121,632, respectively.

NOTE 9 – AMOUNT DUE FROM/(TO) RELATED COMPANIES

Redtone Technology Sdn. Bhd. was previously the holding company of Redtone Telecommunications (China) Ltd. Pursuant to the reversed take-over by Redtone Asia, Inc., Redtone Technology Sdn. Bhd. is now the related company of Redtone Asia, both of which are subsidiaries of penultimate holding company namely Redtone International Berhad.

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


	2013		2012
Fellow subsidiary:
REDtone Technology Sdn. Bhd.	$	3,302,301	$	3,261,155

The amount represents advances to the related company. As of the balance sheet dates, the amount is unsecured, non-interest bearing and is expected to be repaid within three to five years.

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


	2013		2012
Fellow subsidiary:
Redtone Telecommunications Sdn Bhd	$	116,318	$	77,128

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

NOTE 10 – ACCRUED EXPENSES AND OTHER PAYABLES

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


	2013		2012

Accrued expenses	$	336,609	$	373,129
Other payables		197,766		203,202
Total	$	534,375	$	576,331

F-13

NOTE 11 – DEFERRED INCOME

Deferred income consists of prepaid air-time sold which is 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 the statement of income, net of call costs and expenses.

NOTE 12 – TAXES PAYABLE

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


	2013		2012

Business tax payable	$	152,131	$	166,612
Income tax payable		563,497		283,880
Others		2,414		208
Total	$	718,042	$	450,700

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 13 – PROVISION FOR INCOME TAXES

Income tax expense for the year ended May 31, 2013 and 2012 are summarized as follows:


	2013			2012

Current – PRC income tax provision	$	299,132		$	342,507
Deferred income tax income		(14,452	)		(12,569	)
Total	$	284,680		$	329,938

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

	2013				2012
	Amount		%		Amount			%

Income before provision for income taxes	$	334,085			$	587,924

Expected PRC income tax expense at statutory tax rate of 25%		83,521		25.0		146,981			25.0
Different tax rate for PRC/Hong Kong local authority		18,219		5.4		(27,729	)		(4.7	)
Expenses not deductible for tax		71,690		21.5		60,008			10.2
Tax losses not provided for deferred tax		111,250		33.3		150,678			25.6

Actual tax expense	$	284,680		85.2	$	329,938			56.1

F-14

(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.

NOTE 14 – 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 Shanghai Hongsheng Net Telecommunications Co., Ltd (“Hongsheng”). On November 30, 2006, the Company entered into an equity pledge agreement which provides that HB and MH will pledge all their equities in Hongsheng to the Company and REDtone Telecommunications (Shanghai) Limited (“REDtone Shanghai”). The agreement also provides that the Company’s control of Hongsheng shall take effect from June 1, 2007.

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

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:


	2013		2012
Assets
Cash and cash equivalents	$	1,945,614	$	3,466,743
Inventories		10,621		18,385
Accounts receivable		2,392,819		633,009
Tax recoverable		23,323		22,755
Other receivables and deposits		283,603		237,490
Goodwill		610,386		610,386
Property, plant and equipment, net		285,823		454,875
Available-for-sale investment
Total assets (not include amount due from intra-group companies)	$	5,552,189	$	5,443,643

Liabilities
Deferred income	$	867,804	$	1,441,347
Accounts payable		3,730,907		694,626
Accrued expenses and other payables		379,035		467,246
Tax payables		31,188		44,424
Total liabilities	$	5,008,934	$	2,647,643

The statements of income of the consolidated VIEs for the years ended May 31, 2013 and 2012 are as follows, and are included in the consolidated statements of income of the Company:


	2013		2012

Revenue	$	6,620,495	$	8,380,973
Other income and gains		84,882		189,213
Service costs		4,688,240		5,169,715
Personnel cost		663,613		1,231,423
Depreciation expense		220,243		647,444
Administrative and other operating expenses		363,008		663,076

Income before provision for income taxes (Not including service costs payable to intra-group companies)		770,273		858,528

Provision for income taxes		284,680		329,938

Net income	$	485,593	$	528,590

F-15

NOTE 16 – SEGMENTAL ANALYSIS

Information of the Company’s business segment is as follows:-

	2013		2012
Revenues from:
Telecommunications	$	6,487,707	$	8,141,830
Prepaid business solution		733,133		281,219
		7,220,840		8,423,049

Segment profit/(loss) from:
Telecommunications	$	685,098	$	945,927
Prepaid business solution		(351,013)		(358,003	)
		334,085		587,924

Depreciation and amortization expenses:
Telecommunications	$	580,754	$	575,361
Prepaid business solution		192,409		193,809
		773,163		769,170

Segment assets:
Telecommunications	$	13,717,728	$	10,419,344
Prepaid business solution		3,329,803		3,689,951
Eliminations		(1,328,683)		(1,295,933	)
		15,718,848		12,813,362

Capital expenditure
Telecommunications	$	131,351	$	13,701
Prepaid business solution		-		-

F-16

Table of Contents

SIGNATURES

In accordance with 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.




	REDTONE ASIA, INC.


Dated: April, 2014	/s/ Chuan Beng Wei
	Chuan Beng Wei
	Chief Executive Officer and Director

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.

Name	Title	Date


/s/ Chuan Beng, Wei
Chuan Beng, Wei	Chief Executive Officer,	April, 2014
	Director


/s/ Bik Soon, Lau
Bik Soon, Lau	Director	April, 2014



/s/ Hui Nooi, Ng
Hui Nooi, Ng	Chief Financial Officer	April, 2014

REDtone Asia Inc - FORM 10-K/A - April 25, 2014

REDtone Asia Inc Reports