REDtone Asia 10K 2010 Annual report

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K


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

	For the fiscal year ended May 31, 2010

o TRANSITION 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

HOTGATE TECHNOLOGY, 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 Id entification No.)


Room 1602, Aitken Vanson, 61, Hoi Yuen Road, Kwun Tong, Hong Kong
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code (852) 2270-0688

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.

Yes o No x

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.&nb sp; Yes o No x

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes 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 r equired to submit and post such files). Yes o No o

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 re porting 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 $63,312.

The aggregate market value of voting and non-voting stock held by non-affiliates of the registrant as of May 31, 2010 was $-0-Although listed on the OTCBB under the symbol HTGT, 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 24,723,683 outstanding shares of Hotgate Technology, Inc. Common Stock, $0.0001 par value, after the reverse stock split as disclosed in Item 9B(d).

Documents Incorporated by Reference: None

&nbs p;

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

TABLE OF CONTENTS

PART I

ITEM 1. BUSINESS

ITEM 1A. RISK FACTORS

ITEM 1B. UNRESOLVED STAFF COMMENTS

ITEM 2. PROPERTIES

ITEM 3. LEGAL PROCEEDINGS

ITEM 4. [REMOVED AND RESERVED]

PART II

ITEM 5. MARKET FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES & nbsp; 9

ITEM 6. SELECTED FINANCIAL DATA

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS &n bsp; 9

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. & nbsp; 13

ITEM 9A. CONTROLS AND PROCEDURES

ITEM 9B. OTHER INFORMATION

PART III

IT EM 10. DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE

ITEM 11. EXECUTIVE COMPENSATION.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS &nb sp; 17

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

PART IV

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

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 th e 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 uncertaintie s 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

Hotgate Technology, Inc. (the “Company” or “HTGT”) (formerly RNS Software, Inc.) was incorporated on January 6, 2005 in Nevada as File4ward Software, Inc.

On May 16, 2008, the Company entered into an Agreement for Share Exchange (the “Agreement”) with Hotgate Holding Limited, a British Virgin Island company (“HHL”) and the shareholders of HHL, namely Redtone Telecommunications Sdn Bhd, a Malaysian company, Pang Wee Tak, Alvin James and Michael Yang, individually. Such shareholders collectively own 100% of the shares of HHL. Upon completion of the Agreement, the Company had a total of approximately 186,321,429 shares of its common stock issued and outstanding. In connection with these changes, the Company received a new trading symbol of HTGT on June 9, 2008.

Since the previous 4^th quarter of the fiscal year ended May 31, 2009, the management has implemented a drastic downsizing arrangement for the Group as a measure to braise through the severe economic crisis and t he expenses and resources has been kept down in line.

On September 30, 2009, the Board of Directors of the Company accepted the resignation of Ms. Li Li Wong as the Chief Financial Officer of the Company, as was previously reported on Form 8-K filed October 2, 2009. Ms. Wong’s resignation is not due to any disagreements with the Company and she has no claims against the Company. On the same day, the Board of Directors of the Company appointed Ms. Yan Suan Sah to serve as the Company’s Chief Financial Officer. Ms. Yan Suan Sah, age 33, is a registered Chartered Accountant with Malaysian Institute of Accountants, and also an associate member of Chartered Institute of Management Accountants UK. She brings with her over 10 years of work experience in finance, accounting and internal control.

On May 3, 2010, the Board of Directors of the Company accepted the resignation of Mr Chuan Beng Wei as the interim Chief Executive Officer of the Company, which was reported on Form 8-K filed May 5, 2010. Ms Yan Suan Sah was appointed as the Chief Executive Officer on the same day.

Business of the Issuer

Business Overview

We are an information and communication technology (ICT) application provider in China and Asia specializing in internet connectivity, internet value-added services, wireless solutions and voice services for the hospitality industry. We provide consulting, implementation, operating and support services for ICT systems such as telephone systems, internet systems, wireless solutions, and online concierge systems to hotels. Currently, we have offices located in Hong Kong, and Malaysia.

However, in anticipation of the tougher year coming ahead, the Group has initiated the cost contention exercise last year and non-profit generating business activities are gradually phasing out, while the management continues to seek new profitable business opportunities.

In line with the management’s decision to seek new profitable business, the Company entered into an Agreement for a Share Exchange (the “Agreement”) on August 2, 2010 with REDtone Technology Sdn. Bhd. and REDtone International Berhad, both of which are incorporated in Malaysia, which was previously reported on Form 8-K filed on August 3. Upon the closing of t he transactions contemplated in the Agreement, the Company will acquire 100% ownership of REDtone Telecommunications (China) Limited (“REDtone China”). REDtone China has subsidiaries in Shanghai which are principally involved in the business of offering discounted call services for end users and corporate segment in Shanghai. Redtone China is also conducting 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. The details of the Agreement are discussed in Note 18 of the Company Financial Statements.

Products and Services

The Hospitality Hotgate Solution is a tailor-made solution for hotels that offer traditional voice services.

The voice suite provides traditional telecommunication applications including phone systems, voice mail, fax and other phone-based services.

Competition

The market of ICT solutions for the hospitality industry throughout Asia is highly competitive. We compete with various companies in respect to specific elements of our business. Many of our competitors are large companies with substantially greater resources. Our competitors also include small firms offering network services, divisions of large entities and other large independent firms. Our major competitors included InterTouch owned by NTT DoCoMo, Inc., iBAHN owned by STSN Inc., Juru Data Sdn Bhd and FCS Computer Systems. Due to severe market competition, our business has not achieved the targeted sales volume and we are looking for strategic partners to enhance our market presence or possibly merger and acquisition opportunities to strengthen our position.

Regulatory Matters

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.

Costs of Compliance with Environmental Laws

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

Custome rs and Suppliers

Our major customers are hotels located in Asia. We serve a wide range of hotels from domestic motels to international brands. We provide our customers with ICT services through our product offering.

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 its wholly owned subsidiary, Hotgate Technology (M) Sdn Bhd and Synchroweb Technology Sdn Bhd on December 18, 2006 in respect of the HOTGATE patent and solutions for internet bill ing gateway and customer list, and another agreement between its wholly owned subsidiary, Hotgate VMS Technology Limited (“VMS”) and Redtone Technology Sdn Bhd on 28 February 2009 which grants VMS a non-transferable and non-exclusive perpetual license to use the licensed Telecare Voice Mail System source code.

The Company did not incur any research and development expenses in the fiscal year ended May 31, 2010.

Number of Employees

Currently, we have our Chief Executive Officer to manage the Company. With the acquisition of RED tone China, we anticipate the need to hire additional employees in the very near future. Our existing personnel are not subject to any collective bargaining agreements and management believes that its relationship with the Company’s personnel is good.

ITEM 1A. RISK FACTORS

Risks Related to Our Business

Our customers are concentrated in a limited number of industries.

Our customers are concentrated primarily in the hospitality industry, where the current trend is to improve their ICT offerings to cope with the demand of their customers in efficient and convenient communication services. Our ability to generate revenue depends on the demand for our services in these industries. An economic do wnturn, or a slowdown or reversal of the tendency in any of these industries in investment of ICT solutions could have a material adverse effect on our business, results of operations or financial condition.

The markets in which we operate are highly competitive and fragmented and we may not be able to maintain market share.

We operate in highly competitive markets and expect competition to persist and intensify in the future. Our major competitors include InterTouch owned by NTT DoCoMo Inc., iBAHN Corporation, Juru Data Sdn Bhd and FCS Computer Systems. Our competitors also include small firms offering network services, divisions of large entities and other large independent firms. We face the risk that new competitors with greater resources than us will enter our markets.

Competition among hotel companies in greater China can lead to a reduction in services fees that can be charged by such companies. If a reduction in services fees negatively impacts revenue generated by our customers, they may require us to reduce the price of our services, or seek competitors that charge less, which could reduce our market share. If we must significantly reduce the price of our services, the decrease in revenue could adversely affect our profitability.

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 requ ired 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.

We must respond quickly and effectively to new technological developments.

Our business is highly dependent on our computer and telecommunications equipment and software systems. Our failure to maintain our technological capabilities or to respond effectively to technological changes could adversely affect our business, results of operations or financial condition. Our future success also depends on our ability to enhance existing software and systems and to respond to changing technological developments. If we are unable to successfully develop and bring to market new software and systems in a timely manner, our competitors’ technologies or services may render our products or services noncompetitive or obsolete.

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 succes s 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.

Lower than expected demand for our products and services will impair our business and could materially adversely affect our results of operations and financial condition.

If we meet a lower demand for our products and services than we are expecting, our business, results of operations and financial condition are likely to be materially adversely affected. Moreover, overall demand for ICT products and services in general may grow slowly or decrease in upcoming quarters and years because of unfavorable general economic conditions, decreased spending by hospitality industry, food and drinks and media industries in need of ICT solutions or otherwise. This may reflect a saturation of the market for ICT solutions. To the extent that there is a slowdown in the overall market for ICT solutions, our business, results of operations and financial condition are likely to be materially adversely affected.

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.

Customer cl aims, whether successful or not, could be expensive and could harm our business.

The sale and support of our products may entail the risk of product liability claims. Our agreements typically contain provisions designed to limit exposure to potential product liability claims. It is possible, however, that the limitation of liability provisions contained in such agreements may not be effective as a result of federal, state or local laws or ordinances or unfavorable judicial decisions. A successful product liability claim brought against us relating to our product or third party software embedded in our products could have a material adverse effect upon our business, operating results and financial condition.

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 C hinese 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 and Malaysian 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 and Malaysia.

China has only recently permitted provincial and local economic autonomy and private economic activities. The Chinese and Malaysian 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 and Malaysia 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 and Malaysia. 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 Malaysia, and could require us to divest ourselves of any interest we then hold in Chinese or Malaysian properties or joint ventures.

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

The substantial portion of our revenues will be settled in RMB, and any future restrictions on currency exchanges may limit our ability to u se 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 ou r 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.

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 27, 6th Floor, IOI Business Park, 47100 Puchong, Selangor, Malaysia. 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

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. [REMOVED AND RESERVED]

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 July 31, 2010, we had 24,723,683 outstanding shares of Common Stock, after the reverse stock split as disclosed in Item 9B(d).

On June 9, 2008, our common stock began being quoted on the OTCBB under the symbol “HTGT”. 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, 2010, 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

During the fiscal year ended May 31, 2010, the Company did not sell any unregistered securities. Subsequent to the fiscal year ended May 31, 2010, the Company sold unregistered securities as contained herein. These shares were sold to a stockholder who acknowledges and understands that the certificates representing the shares has not been registered under the Securities Act 1933, as amended (“The Act”) and are restricted securities as that term is defined in Rule 144 under the Act, and requires written release from either the issuing Company or their attorney prior to legend removal.

Date of share certificate

Share certificate number

Name of shareholder

No. of shares

Subscripti on price (per share)

Total subscription price (US$)

2 August 2010

1156

Grand Trading Investment Pte Ltd

110,000,000

US$0.00 04

44,000

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

We are an information and communication technology (ICT) application provider in China and Asia specializing in internet connectivity, internet value-added services, wireless solutions and voice services for the hospitality industry. Subsequent to the economic crisis and severe market competition, the operation of the company has been drastically downsized in FY2010.

We intend to establish new core business that is aligned to the core experience and competency of the management and previous business along with the scope of business in internet based solutions especially to ride on the growth of mobile internet and telecommunication value added services, leveraging of business partners in market such as China. In line with the management’s decision to seek new profitable business, the Company has on August 2, 2010, entered into an Agreement for a Share Exchange (the “Agreement”) with REDtone Technology Sdn. Bhd. and REDtone International Berhad, both of which are incorporated in Malaysia. Upon the closing of the transactions contemplated in the Agreement, the Company will acquire 100% ownership of REDtone Telecommunications (China) Limited (“REDtone China”). REDtone China has subsidiaries in Shanghai which are principally involved in the business of offering discounted call services, e-commerce services and 3G mobile internet solutions. The details of the Agreement are discussed in Note 18 of the Company Financial Statements.

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, 2010 and 2009. 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.


		Fiscal year ended May 31,				Increase /(Decrease)
		2010		2009		from previous year
							%
Revenue	$	63,312	$	716,531	$	(653,219)	-91%
Cost of goods sold		12,098		155,507		(143,409)	-92%
Gross profit		51,214		561,024		(509,810)	-91%
General and administrative expenses		161,819		1,111,263		(949,444)	-85%
Net (loss) profit from operations		(110,605)		(550,239)		439,634	-80%
Other Income /(Expenses)						-
Recovery of doubtful debts		60,764		-		60,764	NA
Interest income		2		687		(685)	-100%
Gain/（loss）on disposal of plant & equipment		11,485		(39,911)		51,396	NA
Impairment loss on investment in a subsidiary		-		(307, 123)		307,123	-100%
Total Other Income (Expense)		72,251		(346,347)		418,598	NA
Net loss before provision for income taxes		(38,354)		(896,586)		858,232	-96%
P rovision for income taxes		-		-		-
Net loss		(38,354)		(896,586)		858,232	-96%
Other comprehensive loss:Loss on foreign exchange		(16,950)		(724)		(16,226)	2241%
Comprehensive loss	&nb sp;	(55,304)		(897,310)		842,006	-94%
					&nbs p;

Year ended May 31, 2010 compared to year ended May 31, 2009

Revenues. Revenues from operations for the year ended May 31, 2010 of $63,312 reflected a decrease of $653,219 over the fiscal year ended May 31, 2009. This is due to severe downsizing of company operations due to the economic crisis and severe market competition.

Cost of Sales. Costs of sales has registered a reduction of 92% over the fiscal year ended May 31, 2009, in tandem with the reduction of revenues.

General and administrative expenses. As a result of management effort in cost control, the general and administrative expenses has been reduced to $161,819 for the fiscal year ended May 31, 2010, a reduction of 85% or $949,444 compared with the similar period last year. Major expenses cut were observed in professional fees and payroll related and staff travelling expenses as a result of downsizing.

Other Income/(Expenses)

Recovery of doubtful debts. During the fiscal year ended May 31, 2010, the Company recorded a recovery of doubtful debt total $60,764 which was previously classified as doubtful collection in account.

Impairment loss on investment in a subsidiary. During the fiscal year ended May 31, 2009, the Company recorded a total impairment loss of $307,123, for Beijing Hotgate Technology Limited (“Beijing Hotgate”) being the investment cost and advances to Beijing Hotgate, which are considered not recoverable. In the fiscal year ended May 31, 2010, no impairment loss was recorded.

Net Loss before income tax. For the fiscal year under review, operations in China and Malaysia underwent severe downsizing which led to the major reduct ion in staff and headcount related costs and associated cuts in legal and professional fees. As a result, the net loss for the fiscal year under review was lower at $38,354 as compared to $896,586 over the fiscal year 2009.

Liquidity and Capital Resources.

Cash

Our cash balance at May 31, 2010, was $9,527, representing a slight decrease of $1,384, from previous cash balance of $10,911 as of May 31, 2009.

Cash Flow (before effect of exchange rate changes).


		Fiscal year ended May 31,
		2010		2009	Percentage change (%)
Net cash used in operating activities	$	(62,542)	$	(265,356)	-76%
Net cash provided by/ (used in) investing activities		78,828		(435,856)	NA
Net cash provided by financing activities		-		441,655	-100%
Net increase /(decrease) in cash		16,286		(259,557)	NA

Net cash used in operations during the fiscal year ended May 31, 2010 amounted to $62,542 as compared to net cash used in operations of $265,356 in the same period of 2009, a reduction of 76% as a result of downsized operations.

Net positive cashflow generated from investing activities for the fiscal year ended May 31, 2010 amounted to $78,828 due to disposal of some ICT equipment. In the same period of 2009, a total of $435,856 was spent for renovations for new offices in China and Malaysia and the purchase of furniture and fittings, new notebooks and computers for the new offices in China and Malaysia, and the purchase of hotel ICT equipment during the early quarters of 2009.

There were no financing activities for the year ended May 31, 2010. In the same period of 2009, a total net cash of $441,655 was generated through issuance of 362,770 shares of common stock or equivalent to 30,231 shares if reverse stock split effect retroactively.

Working Capital

Our working capital was a deficit of $1,180,725 at May 31, 2010. On-going effort has been made to secure new opportunities for injection of new business into the Company to enhance the financial position of the Group.

Our financial statements appearing else where in this report have been prepared on a going concern basis that contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. Management realizes that we must generate capital and revenue resources to enable us to achieve profitable operations. To the extent that we are unable to obtain additional working capital from operations and/or other sources as required or otherwise desired, our financial statements will be materially affected.

As highlighted in the previous section, the Company has on August 2, 2010, entered into an Agreement for a Share Exchange (the “Agreement”) for the acquisition of 100% ownership of REDtone Telecommuni cations (China) Limited (“REDtone China”) whom via its subsidiaries in Shanghai are principally involved in the business of offering discounted call services for end users and corporate segment. Redtone China is also conducting paperless reload services for prepaid mobile air-time reload for end users in Shanghai covering all three major telecommunication operators namely China Mobile, China Unicom and China Telecom. The details of the Agreement are disclosed in Item 9B (c) of this report.

We were in a working capital shortage at the fiscal year end of May 31, 2010, and cash flow from operations is insufficient to sustain our operations as of the date of this filing. As of the date of this filing, the Company still requires additional financing to sustain operations until additional subscribers can be obtained. No assurances are given that we will be successful in obtaining additional needed capital. Our inabilit y to secure such additional capital will materially adversely affect the Company and its operations. We believe our current cash position after funding and anticipated receipt of revenues will enable us to sustain current operations for up to approximately six month.

At May 31, 2010, we had stockholders’ deficit of $1,122,970, total assets of $106,290 and total current liabilities of $1,229,260. For the year ended May 31, 2010, we have incurred losses of $38,354, and for the year ended May 31, 2010, we used cash in operations of $62,542. Our operations have been funded by the sale of ICT equipment to finance and collection of receivables to support working capital and general corporate purposes.

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.

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

The Company recognizes revenues from the sale of its voice mail systems once the system has been sold and installed at the customer’s location. Revenues from maintenance services are recognized when the service has been delivered and completed.

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.

The accounting firm of Madsen and Associates CPA’s, Inc., (“Madsen”) was engaged on September 8, 2008 as independent auditor of the Company.

During the period that Madsen served as our independent auditor, we have not had any disagreements with Madsen, whether resolved or unresolved, on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which, if not resolved to said accountants' satisfaction, would have caused it to make reference to the subject matter of the disagreements(s) in connection with its report.

ITEM 9A. CONTROLS AND PROCEDURES

Evaluation of disclosure controls and procedures

As of May 31, 2010, the end of the fiscal year covered by this Form 10-K, 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, 2010, our disclosure controls and procedures were not effective, because they did not have proper application of accounting principles to ensure a material transaction was accounted for in accordance to the United States generally accepted accounting principles. The remedial action plan is for the management to provide further technical review over the accounting policies used in ensuring that the financial reports comply with the United States generally accepted accounting principles. Otherwise, information required to be disclosed by us in the reports that we file or submit under the Excha nge 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.

The management believes that a control system, no matter how well designed and operated, cannot provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected. The design of any system of controls is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions, regardless of how remote. However, management believes that our system of disclosure controls and procedure is designed to pr ovide a reasonable level of assurance that the objectives of the system will be met.

Management is aware that there is a lack of segregation of duties due to the small number of employees dealing with general administrative and financial matters. However, management has concluded that considering the employees involved and the control procedures in place, the risks associated with such lack of segregation are insignificant and the potential benefits of adding employees to clearly segregate duties do not justify the expenses associated with such increases.

Changes in internal controls

There were no material changes in the Company’s internal controls or in other factors that could materially affect these controls subsequent to the date of thei r evaluation. Disclosure controls and procedures are the Company’s controls and other procedures that are designed to ensure that information required to be disclosed in the reports that the Company files or submits 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. There were no changes in the Company’s internal control over financial reporting that occurred during the last quarter that has materially affected, or is reasonable likely to materially affect, the Company’s internal control over financial reporting.

Sarbanes - Oxley Act 404 compliance

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

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, 2010 that have not been already disclosed on a Form 8-K filed with the SEC except for the following:

(a)

On 29 June 2010, the Company entered into the following:

Share Sale Agreement between the Company and Yan Suan Sah for the acquisition by the Company of 1 share in RT Communications Limited, representing 100% equity interest in RT Communications Limited for a total cash consideration of USD1.00;

Share Sale Agreement between Hotgate VMS Technology Limited (“Hotgate VMS”) and Hotgate Holdings Limited for the disposal by Hotgate VMS of USD166,025 in th e issued and paid-up capital of Beijing Hotgate Technology Limited, representing 100% equity interest in Beijing Hotgate Technology Limited for a total cash consideration of RMB1.00;

Share Sale Agreement between Hotgate Holdings Limited and RT Communications Limited for the acquisition by RT Communications Limited of 500,000 shares of HKD1.00 each in Hotgate VMS, representing 100% equity interest in Hotgate VMS for a total cash consideration of HKD1.00; and

Share Sale Agreement between the Company and Wimax Asia Limited for the disposal by Hotgate of 100,000, 000 issued shares of one class with no par value in Hotgate Holdings Limited, representing 100% equity interest in Hotgate Holdings Limited for a total cash consideration of USD3.00.

(b)

On July 22, 2010, the Company entered into a Stock Subscription Agreement whereby it sold 110,000,000 of its common shares at a price per share of $0.0004. The shares were purchased by Grand Trading Investment Pte Ltd, of which company Lu Kan, Lee Chee Keong, and Tan Chee Keong are the directors. Lu Kan and Lee Chee Keong are also the shareholders of Grand Trading Investment Pte Ltd.

(c)

Consideration to be paid by the Company shall be a total of 244,444,444 shares of its common stock (following the reverse split set forth in item (d) below) in exchange for 100% ownership of REDtone China (such share exchange shall be referred to herein as the “Exchange”)

The SEA also provide for the implementation and completion of the capitalization of the debts due from the Company to REDtone International Berhad which is to be satisfied by way of issuance and allotment of 13,147,197 shares of the Company’s common stock and the presentation of any required financial statements for the completion of the transaction as required by applicable law.

On July 29, 2010, the Company’s majority shareholders approved a resolution to effect a one-for-twelve reverse stock split of the Company’s common stock.

(d)

As a result of the reverse stock split, every twelve shares of the Company’s issued and outstanding common st ock was combined into one share of common stock, and the number of shares of the Company’s common stock outstanding was reduced from approximately 297 million shares to approximately 25 million shares. The reverse stock split did not change the number of authorized shares of the Company’s common stock.

PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE

The following table sets forth as of the date hereof, except as otherwise note d, 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	45	Director Interim CEO	July 2008 - Present April 2009 – May 2010

Michael Chee Hoong Yang	62	Director Former President	July 2008 – Present July 2008 – April 2009

Yan Suan Sah	34	CEO	May 2010 – Present
		CFO	September 2009 - Present

Mr. Chuan Beng Wei took office as Director with the Company on July 2008. In 1996, he founded Redtone Telecommunications Sdn Bhd which later became a subsidiary of Redtone International Bhd (“Redtone”), a company specializing in value-added telecommunications services. Redtone is listed on the ACE market of Bursa Malaysia. He served as the Managing Director of Redtone and was in charge of business development and strategic management. Mr. We i began his career with Agilent Technologies (M) Sdn Bhd in 1989 and performed duties as a System Engineer and Major Account Manager. In 1995, he founded TQC Consultants (IT Division) Sdn Bhd, a software development and system integration company. Mr. Wei is also a Council Member and the chairperson for Communication Special Interest Group for The Association of Computer and Multimedia Malaysia and the Vice President for the Kuala Lumpur/Selangor Darul Ehsan Telecommunication Association. He holds a Bachelor’s Degree in Electrical Engineering from the University of Technology in Malaysia and a Diploma in Management from the Malaysia Institute of Management.

Mr. Wei was also the interim CEO from April 13, 2009 to May 3, 2010. Ms. Yan Suan Sah, the existing CFO of the Company assumes the role of CEO with effect from May 3, 2010.

Micha el Yang, age 62, is a director of the Company. Since 1994, Mr. Yang has been the managing director of Zephyr Capital, an investment and management consulting company with clients in Australia, Malaysia, Hong Kong, China and other Asia countries. He is also a director of a number of companies including PHI Bhd., Cash Bhd. and EB Capital Bhd Mr. Yang started his career in 1975 with Amanah-Chase Merchant Bank Bhd, the Malaysian merchant banking arm of Chase Manhattan Bank (now known as JP Morgan Chase) where he served as a General Manager and head of corporate banking. Mr. Yang holds a Master’s Degree in Business Administration from Cranfield University in the United Kingdom, a Bachelor of Economics degree (with honors) from the University of Malaya, Malaysia and a Diploma in Marketing from the Institute of Marketing in the United Kingdom.

Ms. Yan Suan Sah, age 34 is the CFO of the Company pursuant to the resignation of Li Li Wo ng on 30 September 2009. Ms. Sah is a registered Chartered Accountant with Malaysian Institute of Accountants, and also an associate member of Chartered Institute of Management Accountants UK. She brings with her over 10 years of work experience in finance, accounting and internal control. Upon graduation from her Bachelor studies at Otago University in New Zealand, she began her career as an audit assistant in a Chartered Accounting firm in Malaysia. In 1999, she joined TNT Logistics as an Accounts Executive. In 2000, she worked at APIIT College as a Business Analyst, responsible for business analysis and internal control. During her employment with APIIT, she obtained her Post Graduate Certificate in IT from Staffordshire University, UK in 2002. In 2003, she joined Success Forte Sdn Bhd, a local business consulting firm, as a Business Consultant in the areas of accounting, tax, research and corporate finance. In 2007, she worked with DSC Sys tems Sdn Bhd as the Group Finance Manager, responsible for the overall finance and administration of the group. From 2008 until September 2009, Ms Sah was the Group Finance Manger of Redtone Telecommunications Sdn Bhd, responsible for the overall accounting and financial management of Redtone group.

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 o fficers 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 (coll ectively, “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, 2010, all Reporting Persons complied with all applicable filing requirements.

ITEM 11. EXECUTIVE COMPENSATION.

The following table sets forth, for the fiscal years ended May 31, 2010 and 2009, certain information regarding the compensation earned by the Company’s named executive officers. Where columns hav e been omitted from the Summary Compensation Table below, it is because no such compensation was paid to the named executive officer during the 2010 or 2009 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,	2010	-0-	-0-	-0-	-0-
Director, Interim CEO	2009	-0-	-0-	-0-	-0-

Michael Yang Chee Hoong,	2010	-0-	-0-	-0-
Director, Former President	2009	-0-	-0-	18,058(1)	-0-

Yan Suan Sah, CEO, CFO	2010	-0-	-0-	-0-	-0-
	2009	-0-	-0-	-0 - -	-0-
(1) The Company paid Mr Yang $18,058 in advisory fee pursuant to a service agreement for the fiscal year ended May 31, 2009

Director Compensation

Members of the Board of Directors did not receive any cash or non-cash compensation for their service as Directors during our 2010 and 2009 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.

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

The following table sets forth beneficial ownership information as of July 31, 2010: (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 office rs and directors as a group. As of the date of this report, the Company had 24,723,683 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	Grand Trading Investment Pte Ltd 47, Kaki Bukit Place, #04-00, Eunos Tech Park, 416225, Singapore.	9,166,667	37.1%

Common shares	CE Multimedia Pte Ltd 32B North Canal Road, 059288, Singapore.	7,063,438	28.6%

Common shares	Redtone International Bhd, Suites 22-28, 5^th Floor, IOI Business Park, 47100 Puchong, Malaysia.	3,027,723	12.2%

(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, 2010, there were no related transactions between the Company and the directors

During the fiscal year ended 31 May 2009, a wholly owned subsidiary of the Company entered into an advisory agreement with Michael Yang Chee Hoong, a director of the Company as described in Item 11.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

Madsen and Associates CPA’s Inc. has served as the Company’s principal accountant since September 8, 2008. Their fees billed to the Company for the past two fiscal years are set forth below:


		Fiscal Year ended May 31,
		2010	2009
Audit Fees	$	27,500	32,405

Audit Related Fees		0	0

Tax Fees		0	0

All Other Fees		0	0

Total Fees		0	0


•	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, 2010, the Company did not have an Audit Committee and the Company’s director pre-approved all fees of the principal accountant.

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 R eport:

- Independent Auditors’ Report – Madsen and Associates

- Independent Auditors’ Report – Consolidated Balance Sheet at May 31, 2010

and 2009

- Consolidated Statements of Operations and Comprehensive Loss for the Years Ended May 31, 2010 and 2009

- Consolidated Statements of Stockholders’ Deficit for the Years Ended May 31, 2010 and 2009

- Consolidated Statements of Cash Flows for the Year Ended May 31, 2010 and 2009

- Notes to Consolidated Financial Statements

Exhibit No. Description

31.1	Certification of Sah Yan Suan pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of Sah Yan Suan, pursuant to 18 U.S.C. Section 1350 as adopted pursu ant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certification of Sah Yan Suan pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	Certification of Sah Yan Suan, pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

Board of Directors

Hotgate Technology, Inc. and Subsidiaries

Hong Kong

REPORT OF INDEP ENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We have audited the accompanying consolidated balance sheets of Hotgate Technology, Inc. and subsidiaries (the Company) as of May 31, 2010 and 2009 and the consolidated statements of operations and comprehensive loss, stockholders’ deficit and cash flows for each of the years in the two-year period ended May 31, 2010. 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 ar e 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 fina ncial statements referred to above present fairly, in all material aspects, the consolidated financial position of the Company as of May 31, 2010 and 2009, and the consolidated results of its operations and cash flows for each of the years in the two-year period ended May 31, 2010 in conformity with accounting principles generally accepted in the United States of America.

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. The Company does not have the necessary working capital to service its debt and for its planned activity, which raises substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are described in Note 16 to the financial statements. These financial statements do not include any adjustments that might result from the outcome of this uncertainty.

/s/Madsen & Associates CPA’s, Inc.

Madsen & Associates CPA’s, Inc.

August 27, 2010

Salt Lake City, Utah

F-1

HOTGATE TECHNOLOGY, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

As of May 31, 2010 and 2009


		2010			2009
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	9,527&nb sp;	$		10,911
Accounts receivable		23,919			79,370
Inventories		-			6,048
Deposits, prepayments and other receivables		15,089			7,517
Total current assets		48,535			103,846

PLANT AND EQUIPMENT, net of accumulated depreciation		14,970			86,629
INTANGIBLE ASSETS, net of accumulated depreciation		42,785			55,961

TOTAL ASSETS	$	106,290	$		246,436

LIABILITIES AND STOCKHOLDERS’ DEFICIT
LIABILITIES				& nbsp;
CURRENT LIABILITIES
Accounts payable	$	30,144	$	65,901
Accrued expenses and other payables		162,657		257,027
Income tax payables		11,279		10,705
Due to minority shareholder		1,025,180		980,469
Total current liabilities		1,229,260		1,314,102

TOTAL LIABILITIES		1,229,260		1,314,102

STOCKHOLDERS’ DEFICIT
Common stock, $0.0001 par value, 300,000,000 shares authorized; 15,557,017 shares issued and outstanding as of May 31, 2010 and 2009		1,556		1,556
Additional paid in capital		564,841		564,841
Accumulated deficits		(1,671,693)		(1,633,339)
Accumulated other comprehensive losses		(17,674)		(724)
TOTAL STOCKHOLDERS’ DEFICIT		(1,122,970)		(1,067,666)
TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT	$	106,290	$	246,436

See accompanying notes to the consolidated financial statements.

F-2

HOTGATE TECHNOLOGY, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

For the Years Ended May 31, 2010 and 2009




		2010		2009

REVENUE	$	63,312	$	716,531

COST OF REVENUE (inclusive of depreciation)		12,098		155,507

GROSS PROFIT		51,214		561,024

GENERAL AND ADMINISTRATIVE EXPENSES		161,819		1,111,263

OPERATING LOSS		(110,605)		(550,239)

OTHER INCOME/(EXPENSE)
Recovery of doubtful debts		60,764		-
Interest income		2		687
Gain/(loss) on disposal of plant & equipment		11,485		(39,911)
Impairment loss on investment in a subsidiary		-		(307,123)

TOTAL OTHER INCOME/(EXPENSE)		72,251		(346,347)

LOSS BEFORE PROVISION FOR INCOME TAXES		(38,354)		(896,586)

PROVISION FOR INCOME TAXES		-		-

NET LOSS	$	(38,354)	$	(896,586)

OTHER COMPREHENSIVE LOSS
Loss on foreign exchange translation		(16,950)		(724)

COMPREHENSIVE LOSS	$	(55,304)	$	(897,310)

NET LOSS PER SHARE, BASIC AND DILUTED	$	(0.00)	$	(0.06)

WEIGHTED AVERAGE NUMBER OF SHARES		15,557,017		15,548,226

See accompanying notes to the consolidated financial statements.

F-3

HOTGATE TECHNOLOGY, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ DEFICIT

For the Years Ended May 31, 2010 and 2009


	Num ber of Common Shares Issued		Common Stock		Additional Paid in Capital		Accumulated Deficit		Accumulated Other Comprehensive Losses		Total Deficit

Balance at June 1, 2008	15,526,786	$	1,553	$	123,189	$	(736,753)	$	-	$	(612,011)

Net loss for the year	-		-		-		(896,586)		-		(896,586)

Loss on foreign exchange translation	-		-		-		-		(724)		(724)

Shares issued during the year	30,231		3		441,652		-		-		441,655

Balance at May 31, 2009 and June 1, 2009	15,557,017	$	1,556	$	564,841	$	(1,633,339)	$	(724)	$	(1,067,666)

Net loss for the year	-		-		-		(38,354)		-		(38,354)

Loss on foreign exchange translation	-		-		-		-		(16,950)		(16,950)

Balance at May 31, 2010	15,557,017	$	1,556	$	564,841	$	(1,671,693)	$	(17,674)	$	(1,122,970)

See accompanying notes to the consolidated financial statements.

F-4

HOTGATE TECHNOLOGY, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Years Ended May 31, 2010 and 2009



		2010		;2009

Cash flows from operating activities
Net loss	$	(38,354)	$	(896,586)
Adjustments to reconcile net loss to net cash used by operating activities:
Amortization expense		13,544		12,703
Depreciation expense		4,668		7,101
Provision for obsolete inventories		6,048		-
Impairment loss on investment in a subsidiary		-		307,123
(Gain)/loss on disposal of plant & equipment		(11,485)		39,911
Recovery of doubtful debts		(60,764)		-
Changes in operating assets a nd liabilities:
Decrease in accounts receivable		116,215		188,080
Decrease in inventories		-		44,744
(Increase)/decreas e in deposits, prepayments and other receivables		(7,572)		64,075
(Decrease)/increase in accounts payable		(35,757)	&n bsp;	32,618
Increase in income tax payable		574		7,822
Increase/(decrease) in due to minority shareholder		44,711		(257,320)
(Decrease)/increase in accrued liabilities and other payables		(94,370)		184,373

Net cash used in operating activities		(62,542)		(265,356)

Cash flows from investing activities
Purchase of plant and equipment		-		(120,950)
Purchase of customer lists and voice mail software		-		(7,783)
&nbs p;Capital contributed for investment in a subsidiary		-		(166,040)
Advances to a subsidiary		-		(141,083)
Disposal of plant and equipment		78,828		-

Net cash provided by/(used in) investing activities		78,828		(435,856)

Cash flows from financing activities
Issuance of common stock		-		441,655

Net cash provided by financing activities		-		441,655

Net increase/(decrease) in cash and cash equivalents		16,286		(259,557)

Effect of exchange rate changes on cash and cash equivalents		(17,670)		(5,555)

Cash and cash equivalents at beginning of year		10,911		276,023

Cash and cash equivalents at end of year	$	9,527	$	10,911

Cash paid for interest	$	-	$	-

Cash paid for income taxes	$	-	$	-

See accompanying notes to the consolidated financial statements.

F-5

HOTGATE TECHNOLOGY, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

May 31, 2010 and 2009

NOTE 1 - ORGANIZATION AND PRINCIPAL ACTIVITIES

Hotgate Technology, Inc. (the “Company”) was incorporated on January 6, 2005 in the State of Nevada. The Company and subsidiaries are a group of companies engaged in the providing of system design, maintenance services and distance call services.

As at May 31, 2010, details of the subsidiaries are as follows:

Hotgate Holdings Limited, a private limited company incorporated and domiciled in the British Virgin Islands.

Hotgate Technology (M) Sdn. Bhd. (formerly known as Fiber Hub Marketing Sdn. Bhd.), a private limited company incorporated and domiciled in Malaysia.

Hotgate VMS Technology Limited (formerly known as VMS Technology Limited), a private limited company incorporated and domiciled in Hong Kong.

NOTE 2 – PRINCIPLES OF CONSOLIDATION

All material inter-company accounts and transactions have been eliminated. The functional currencies for the majority of the Company’s operations in Hong Kong and Malaysia are Hong Kong dollars an d Malaysian Ringgit, respectively while the reporting currency is United States dollars. The consolidated financial statements are prepared in accordance with generally accepted accounting principles used in the United States of America.

NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a) Economic and Political Risk

The Company’s major operations are conducted in Hong Kong and Malaysia. Accordingly, the political, economic, and legal environments in Hong Kong and Malaysia, as well as the general state of the economy of Hong Kong and Malaysia may influence the Company’s business, financial condition, and results of operations.

The Company’s major operations in Hong Kong and Malaysia 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 w hen collection of the full amount is no longer probable. As of May 31, 2010 and 2009, allowance for doubtful accounts of $nil and $78,333, respectively were recorded. Accounts receivable that are specifically identified as uncollectible are charged to bad debt expense. Bad debt expense recorded during the years ended May 31, 2010 and 2009 were $nil and $16,572, respectively.

Recovery of doubtful accounts for the years ended May 31, 2010 and 2009 were $60,764 and $nil, respectively.

(d) Inventories

Inventories consisting of merchandise for re-sale are stated at the lower of cost or net realizable value. Inventory costs are calculated using a weighted average method of accounting.

Provision for obsolete inventories for the years ended May 31, 2010 and 2009 were $6,048 and $n il, respectively.

F-6

(e) Plant and Equipment

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 plant and equipment principally by use of the straight-line method for financial reporting purposes. Plant and equipment are depreciated over the following estim ated useful lives:

Leasehold improvements

Over the shorter of the lease terms or 5 years

Computer hardware and software

5 to 10 years

IT equipment

5 years

Furniture, fixtures and equipment

10 years

The depreciation expense for the years ended May 31, 2010 and 2009 amounted to $4,668 and $7,101, respectively.

(f) Intangible Assets

The Company acquired certain intangible assets which were comprised of voice mail system software through Hotgate VMS Technology Limited in May 2009. The Company also acquired certain intangible assets through the acquisition of Hotgate Technology (M) Sdn. Bhd. in May 2009. These intangible assets consisted of customer lists and relationships. Both voice mail system software and customer lists and relationships are subject to amortization over their respective economic useful life and are reviewed for impairment if the carrying amount of these intangible assets are not recoverable and their carrying amount exceeds their fair market value. After an impairment loss is recognized, the adjusted carrying amount of the intangible assets shall be their new accounting basis.

The estimation of the useful life of the voice mail system software and customer lists and relationships will be affected by factors such as change in demand, unanticipated competition and other economic factors including stability of industry, change in technology, legislative action that results in an uncertain or an adverse change in the regulatory environment and changes in distribution channels and business climate.

Intangible assets are amortized over the following estimated economic lives:

Voice mail system software

5.5 years

Customer lists and relationships

5 years

The amortization expenses for the years ended May 31, 2010 and 2009 amounted to $13,544 and $12,703, respectively.

(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. The impairment loss on investment in a subsidiary for the year ended May 31, 2009 amounted to $307,123. There were no impairments of long-lived assets for the year ended May 31, 2010.

(h) Income Tax

The Company has adopted the provisions of statements of Financial Accounting Standards No. 109, "Accounting for Income Taxes", which incorporates the use of the asset and liability approach of accounting for income taxes. The Company allows for recognition of deferred tax benefits in future years. Under the asset and liability approach, deferred taxes are provided for the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. A valuation allowance is provided for deferred tax assets if it is more likely than not these items will either expire before the Company is able to realize their benefits, or that future realization is uncertain.

F-7

In accordance with the relevant tax laws and regulations of Hong Kong, the corporation income tax rate applicable is 16.5% for both years ended May 31, 2010 and 2009. No income tax expense for years ended May 31, 2010 and 2009 was incurred.

(i) Fair Value of Financial Instruments

The carrying amounts of the Company's cash, accounts receivable and accrued expenses approximate fair value because of the short maturity of these items.

(j) Revenue Recognition

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

Collectibility is reasonably assured

(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, 2010 and 2009, there were no common share equivalents 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

Hong Kong mandates companies to operate a mandatory provident fund scheme, which is available to all employees in Hong Kong. Both the Company and the employees are required to contribute 5% (subject to an aggregate amount of $256) per month of the employees’ relevant income. Contributions from the Company are 100% vested in the employees as soon as they are paid to the scheme. Contributions to the scheme are expensed in the statement of operations as they become payable in accordance with the rules of the scheme. The assets of the scheme are held separately from those of the Company and managed by independent professional fund managers. The Company provides no other retirement benefits to its employees.

(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 Malaysian Ringgit (RM), respectively. Capital accounts of the financial statements are translated into United States dollars from HK$ or RM 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, 2010	May 31, 2009

Year end RM : US$ exchange rate	0.3025	0.2855
Average yearly RM : US$ exchange rate	0.2940	0.2973
Year end HK$ : US$ exchange rate	0.1282	0.1282
Average yearly HK$ : US$ exchange rate	0.1282	0.1282

F-8

(o) Recent Accounting Pronouncements

ASC Topic “The FASB Accounting Standards Codification(TM) and the Hierarchy of Generally Accepted Accounting Principles – A Replacement of FASB Statement No. 162” became effective on September 15, 2009. This standard establishes the FASB Accounting Standards Codification™ (the “Codification”) as the source of authoritative accounting principles recognized by the FASB to be applied by nongovernmental entities in the preparation of financial statements in conformity with US GAAP. The Codification does not change current US GAAP, but is intended to simplify user access to all authoritative US GAAP by providing all the authoritative literature related to a particular topic in one place. As of the effective date, all existing accounting standard documents were superseded and, accordingly, all subsequent public filings will reference the Codification as the sole source of authoritative literature.

In April 2010, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Updates (“ASU”) 2010-17, which amends ASC 605, “Revenue Recognition”. ASU 2010-17 provides guidance on applying the milestone method to milestone payments for achieving specified performance measure when those payments are related to uncertain future events limited to transactions involving research and development. Entities can make an accounting policy election to re cognize arrangement consideration received for achieving specified performance measure during the period in which the milestones are achieved, provided certain criteria are met. ASU 2010-17 is effective for interim and annual periods beginning on or after June 15, 2010, with early adoption permitted. The Company does not expect the adoption of ASU 2010-17 to have a material impact on its consolidated financial statements.

In March 2010, the FASB (Financial Accounting Standards Board) issued Accounting Standards Update 2010-11 (ASU 2010-11), “Derivatives and Hedging (Topic 815): Scope Exception Related to Embedded Credit Derivatives.” The amendments in this Update are effective for each reporting entity at the beginning of its first fiscal quarter beginning after June 15, 2010. Early adoption is permitted at the beginning of each entity’s first fiscal quarter beginning after issuance of this Update. The Company doe s not expect the provisions of ASU 2010-11 to have a material effect on the financial position, results of operations or cash flows of the Company.

In February 2010, the FASB Accounting Standards Update 2010-10 (ASU 2010-10), “Consolidation (Topic 810): Amendments for Certain Investment Funds” which is effective as of the beginning of a reporting entity’s first annual period that begins after November 15, 2009, and for interim periods within that first reporting period. Early application is not permitted. The Company’s adoption of provisions of ASU 2010-10 did not have a material effect on the financial position, results of operations or cash flows.

In February 2010, the FASB issued ASU No. 2010-09 “Subsequent Events (ASC Topic 855) “Amendments to Certain Recognition and Disclosure Requirements” (“ASU No. 20 10-09”) which requires an entity that is an SEC filer to evaluate subsequent events through the date that the financial statements are issued and removes the requirement for an SEC filer to disclose a date, in both issued and revised financial statements, through which the filer had evaluated subsequent events. The adoption did not have an impact on the Company’s financial position and results of operations.

In January 2010, the FASB issued Accounting Standards Update (“ASU”) ASU No. 2010-06, Improving Disclosures about Fair value Measurements, which amends ASC 820 to add new requirements for disclosures about transfers into and out of Levels 1 and 2 and separate disclosures about purchases, sales, issuances, and settlements relating to Level 3 measurements. The ASU also clarifies existing fair value disclosures about the level of disaggregation and about inputs and valuation techniques used to me asure fair value. The ASU is effective for the first reporting period (including interim periods) beginning after December 15, 2009, except for the requirement to provide the Level 3 activity of purchases, sales, issuances, and settlements on a gross basis, which will be effective for fiscal years beginning after December 15, 2010, and for interim periods within those fiscal years. Early adoption is permitted. We do not expect that this ASU will have a significant impact on the consolidated financial statements or related disclosures.

NOTE 4 – CONCENTRATIONS OF CREDIT RISK

(a)

Financial instruments that potentially expose the Company to concentrations of credit risk, consist of cash and cash equivalents and accounts receiva ble. The Company performs ongoing evaluations of their cash position and credit evaluations to ensure collections and minimize losses.

(b)

One customer accounted for 60% and 66% of the balance of accounts receivable as at May 31, 2010 and 2009, respectively.

F-9

NOTE 5 – INVENTORIES

Inventories consisting of computer hardware and accessories held for re-sale are stated at the lower of weighted average cost or market value.

Inventories as of May 31, 2010 and May 31, 2009 are summarized as follows:


		As of May 31,
		2010		2009

Finished goods	$	6,048	$	6, 048
Less: Provision for obsolete inventories		(6,048)		-
Inventories, net	$	-	$	6,048

Provisions for obsolete inventories for the years ended May 31, 2010 and 2009 are $6,048 and $nil, respectively.

NOTE 6 – ACCOUNTS RECEIVABLE AND CONCENTRATION OF CREDIT RISK


		&n bsp;
		As of May 31,
		2010		2009
Accounts receivable	$	23,919	$	157,703
Less: Allowance for doubtful accounts		-		(78,333)
Accounts receivable, net	$	23,919	$	79,370

Certain doubtful accounts of $60,764 were recovered during the year ended May 31, 2010.

Concentration of credit risk with respect to accounts receivable is limited to certain customers to whom the Company makes substantial sales. At May 31, 2010 and 2009, a customer accounted for 60% and 66% of the Company's accounts receivabl e, respectively. The Company regularly monitors the creditworthiness of its customers and believes that it has adequately provided for exposure to potential credit losses.

NOTE 7 – DEPOSIT, PREPAYMENT AND OTHER RECEIVABLES

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

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

Deposits, prepayment and other receivables as of May 31, 2010 and 2009 were summarized as follows:



		As of May 31,
		2010		2009
Rental and utility deposit	$	5,042	$	6,257
Prepayment		10,047		1,260
Other receivables		-		-
Total	$	15,089	$	7,517

F-10

NOTE 8 – PLANT AND EQUIPMENT

Plant and equipment of the Company consists primarily of computer hardware and software, furniture, fixtures and equipment owned and operated by the Company’s subsidiaries in Hong Kong and Malaysia.

Plant and equipment as of May 31, 2010 and 2009 are summarized as follows:


		As of May 31,
		2010		2009

At cost:
Computer hardware and software	$	27,564	$	27,325
IT equipment		6,326		78,038
Furniture, fixtures and equipment		12,509		12,451
Leasehold improvement		10,649		10,649
	$	57,048	$	128,463


Less: Accumulated depreciation
Computer hardware and software	$	20,184	$	18,187
IT equipment		1,930		4,564
Furniture, fixtures and equipment		9,315		8,434
Leasehold improvement		10,649		10,649
	$	42,078	$	41,834

Plant and equipment , net	$	14,970	$	86,629

During the year, certain equipment with net book value of $67,343 were disposed of at a consideration of $78,828. The gain on disposal of $11,485 was recognized in operations for the year ended May 31, 2010. Loss on disposal of plant and equipment for the year ended May 31, 2009 was $39,911.

Depreciation expense for the years ended May 31, 2010 and 2009 were $4,668 and $7,101, respectively.

NOTE 9 – INTANGIBLE ASSETS

Intangible assets of the Company consist primarily of voice mail system software and customer lists and relationships acquired.

Intangible assets as of May 31, 2010 and 2009 are summarized as follows:


	&n bsp;	As of May 31,
		2010		2009
At cost:
Voice mail system software	$	58,974	$	58,974
Customer lists and relationships		15,126		10,442
	$	74,100	$	69,416

Less: Accumulated amortization
Voice mail system software	$	21,231	$	10,615
Customer lists and relationships		10,084		2,840
	$	31,315	$	13,455

Intangible assets, net	$	42,785	$	55,961

Amortization expense for the year ended May 31, 2010 and May 31, 2010 amounted to $13,544 and $12,703 respectively.

F-11

NOTE 10 – ACCRUED EXPENSES AND OTHER PAYABLES

Accrued expenses and other payables as of May 31, 2010 and 2009 were summarized as follows:


		As of May 31,
		2010		2009
Accrued expenses	$	105,068	$	62,667
Accrued salaries and staff income tax		-		67,606
Accrued pension fund contributions and retirement benefits		-		20,082
Advanced customers’ deposits		1,210		40,602
Other payables		56,379		66,070
Total	$	162,657	$	257,027

NOTE 11 – DUE TO MINORITY SHAREHOLDER

This amount represented net advances from Redtone Telecommunications Sdn. Bhd., a minority shar eholder of the Company. The amount is unsecured, non-interest bearing and repayable within one year.

NOTE 12 – INCOME TAX AND DEFERRED TAX LIABILITIES

Corporation Income Tax ("CIT")

The corporate income tax rates applicable to the Company and its subsidiaries for the years ended May 31, 2010 and May 31, 2009 were as follows:


	Place of incorporation	2010	2009


Hotgate Holdings Limited	BVI	0%	0%
Hotgate Technology (M.) Sdn. Bhd.	Malaysia	20%	20%
Hotgate VMS Technology Limited	Hong Kong	16.5%	16.5%

For the year ended May 31, 2010:


		Hong Kong			Malaysia			Others			Total
Net loss before provision for income taxes	$	72,777		$	(33,678)		$	(77,453)		$	(38,354)

Tax at the applicable rate		12,008	16.5%		(6,736)	20.0%		-	0.0%		5,272	(13.7%)
Utilization of tax losses		(12,008)	(16.5%)		-	-		-	-		(12,008)	31.3%
Tax loss not recognized		-	-		6,736	(20.0%)		-	(0.0%))		6,736	(17.6%)

TOTAL		-	-		-	-		-	-		-	-

For the year ended May 31, 2009:



		Hong Kong		Malaysia			Others			Total
Net loss before provision for income taxes	$	(223,420)		$	(338,184)		$	(334,982)		$	(896,586)

Tax at the applicable rate		(36,864)	16.5%		(67,637)	20.0%		-	0.0%		(104,501)	11.7%
Tax loss not recognized		36,864	(16.5%)		67,637	(20.0%)		-	(0.0%)		104,501	(11.7%)

TOTAL		-	-		-	-		-	-		-	-

F-12

The provisions for income taxes for the years ended May 31, 2010 and 2009 are summarized as follows:



		For the years ended May 31,
		2010		2009

Current	$	-	$	-
Deferred		-		-
TOTAL	$	-	$	-

There are no other timing differences between reported book or financial income and income computed for income tax purposes. Therefore, the Company has made no adjustment for deferred tax assets or liabilities.

NOTE 13 – IMPAIRMENT LOSS ON INVESTMENT IN A SUBSIDIARY

The impairment loss on investment in a subsidiary for the years ended May 31, 2010 and 2009 are summarized as follows:



		For the years ended May 31,
		2010		2009

Beijing Hotgate Technology Limited (“Beijing Hotgate”)
Impairment of investment cost	$	-	$	166,040
Impairment of advance to Beijing Hotgate		-		141,083
TOTAL	$	-	$	307,123

Due to continued losses and projec ted negative cash flow, the Company closed down the business operations of Beijing Hotgate during the year ended May 31, 2009.

No discontinued operations were reported for the year ended May 31, 2009 as Beijing Hotgate was in the same line of business of the Company.

NOTE 14 – COMMON STOCK


		Number of common shares issued
	Authorized number of shares	Original issued common shares	As if one-for-twelve reverse stock split effect retrospectively


As of May 31, 2010 and 2009	300,000,000	186,684,199	15,557,017

As of May 31, 2010 and 2009, the Company has a total of 300,000,000 shares of common shares authorized at US$0.0001 par value. As of May 31, 2010 and 2009, the Company has a total of 186,684,199 shares of common stock issued and outstanding.

Th e Company has subsequently on July 22, 2010 disclosed on a Form 8-K filed with the SEC that a total of 110,000,000 new shares has been allotted to Grand Trading Investment Limited for total consideration of US$44,000.

On July 29, 2010, the Company’s majority shareholders approved a resolution to effect a one-for-twelve reverse stock split of the Company’s common stock. The effect of the reverse stock split has been retroactively reflected in the financial statements.

As a result of the reverse stock split, every twelve shares of the Company’s issued and outstanding common stock was combined into one share of common stock, and the number of shares of the Company’s common stock outstanding was reduced from approximately 297 million shares to approximately 25 million shares. The reverse stock sp lit did not change the number of authorized shares of the Company’s common stock.

F-13

NOTE 15 – CONTINGENCIES AND COMMITMENTS

OPERATING LEASE COMMITMENTS

As of May 31, 2010 and 2009, one of the three subsidiaries of the Company, Hotgate VMS Technology Limited had arranged a non-cancelable operating lease with a third party for its office premise. The expected annual lease payments under these operating leases are as follows:



		As of May 31,
		2010		2009
For the year ended May 31,
2010		-		14,569
2011		9,713		9,713

TOTAL	$	9,713	$	24,282

NOTE 16 – GOING CONCERN

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As reflected in the accompanying consolidated financial statements, the Company has an accumulated deficit of $1,671,693 and a working capital deficiency of $1,180,725 at May 31, 2010, had a net loss of $38,354 for the year ended May 31, 2010, respectively.

On August 2, 2010, the Company entered into a Share Excha nge Agreement (“SEA”) with REDtone Technology Sdn. Bhd. and REDtone International Berhad, both of which are incorporated in Malaysia. Upon the closing of the transactions contemplated in the SEA, the Company will acquire 100% ownership of REDtone Telecommunications (China) Limited (“REDtone China”). REDtone China has been in operation for the last 4 years and it generates average cash of approximately RMB9 million per month. The Management believes REDtone China will generate sufficient revenue and cash to provide the opportunity for the Company to continue as a going concern.

NOTE 17 – COMPARATIVE FIGURE

Certain comparative figures have been reclassified to conform to the current year’s presentation.

NOTE 18 – SUBSEQUENT EVENT

The Company has evaluated for disclosure all subsequent events occurring through August 30, 2010, the date the financial statements were issued.

Subsequent to the balance sheet date, the Company entered into following agreements:

(a)

On 29 June 2010, the Company entered into the following:

Share Sale Agreement between the Company and Yan Suan Sah, the CEO of the Company for the acquisition by the Company of 1 share in RT Communications Limited, re presenting 100% equity interest in RT Communications Limited for a total cash consideration of USD1.00;

Share Sale Agreement between Hotgate VMS Technology Limited (“Hotgate VMS”) and Hotgate Holdings Limited for the disposal by Hotgate VMS of USD166,025 in the issued and paid-up capital of Beijing Hotgate Technology Limited, representing 100% equity interest in Beijing Hotgate Technology Limited for a total cash consideration of RMB1.00;

Share Sale Agreement between Hotgate Holdings Limited and RT Communications Limited for the acquisition by RT C ommunications Limited of 500,000 shares of HKD1.00 each in Hotgate VMS, representing 100% equity interest in Hotgate VMS for a total cash consideration of HKD1.00; and

F-14

Share Sale Agreement between the Company and Wimax Asia Limited for the disposal by Hotgate of 100,000,000 issued shares of one class with no par value in Hotgate Holdings Limited, representing 100% equity interest in Hotgate Holdings Limited for a total cash consideration of USD3.00.

(b)

(c)

The SEA also provide for the implementation and completion of the capitalization of the debts due from the Company to REDtone International Berhad which is to be satisfied by way of issuance and allotment of 13,147,197 shares of the Company’s common stock and the presentation of any r equired financial statements for the completion of the transaction as required by applicable law.

(d)

On July 29, 2010, the Company’s majority shareholders approved a resolution to effect a one-for-twelve reverse stock split of the Company’s common stock.

(e)

As a result of the reverse stock split, every twelve shares of the Company’s issued and outstanding common stock was combined into one share of common stock, and the number of shares of the Company’s common stock outstanding as of the date o f this report was reduced from approximately 297 million shares to approximately 25 million shares. The reverse stock split did not change the number of authorized shares of the Company’s common stock.

F-15

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.





	HOTGATE TECHNOLOGY, INC.


Dated: August 30, 2010	/s/ SanYan Suan
	San Yan Suan
	Chief Executive Officer
	Chief Financial Officer, Principle Accounting Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

Name

Title

Date

/s/ San Yan San

San Yan Suan

Chief Executive Officer,

August 30, 2010

Chief Financial Officer Director ,

Principle Accounting Officer

/s/ Chuan Beng Wei

Chuan Beng Wei

Director

August 30, 2010

/s/ Michael Yan Chee Hoong

Michael Yang Chee Hoong

Director

August 30, 2010

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REDtone Asia (RTAS) 10-K2010 FY Annual report

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