Note 1 - Organization and Principal Activities

6 Months Ended

Nov. 30, 2014

Notes

Note 1 - Organization and Principal Activities

NOTE 1 - ORGANIZATION AND PRINCIPAL ACTIVITIES

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

The Company’s major subsidiaries during the six months ended November 30, 2014 are illustrated as follows:

Name	Domicile and date of incorporation	Effective ownership	Principal activities
Redtone Telecommunication (China) Limited (“Redtone China”)	Hong Kong May 26, 2005	100%	Investment holding
Redtone Telecommunications (Shanghai) Limited (“Redtone Shanghai”)	The PRC July, 26, 2005	100%	Provides technical support services to group companies
Shanghai Hongsheng Net Telecommunication Company Limited (“Hongsheng”) #	The PRC November 29, 2006	100%	Marketing and distribution of discounted call services to PRC consumer market
Shanghai Huitong Telecommunication Company Limited (“Huitong”) #	The PRC March, 26, 2007	100%	Marketing and distribution of IP call and discounted call services in the PRC
Shanghai Jiamao E-Commerce Company Limited (“Jiamao”) #`	The PRC March 21, 2008	100%	Marketing and distribution of products on the internet
Nantong Jiatong Investment Consultant Co., Ltd (“Nantong Jiatong”) #	The PRC May 17, 2011	100%	Investment holding
Shanghai QianYue Business Administration Co., Ltd. ("QBA") #	The PRC December 12, 2008	100%	Provision of prepaid shopping-card services in the PRC
Shanghai Xin Chang Information Technology Company Limited (“Xin Chang”) #	The PRC January 13, 2006	56%	Marketing and distribution of IP call and discounted call services in the PRC

    # - Variable interest entities

Hong Sheng and QBA were disposed of during the period.  See also Footnote 4.

For continuing operations, segment reporting is not required as the revenue, profit or loss and total assets in association with the e-commerce business are immaterial to the Company’s revenue, reported profit or loss and total assets.

On July 16, 2014, Huitong, Mao Hong, a director and nominee shareholder of certain VIEs, and Wei Gang, an independent third party, jointly incorporated Shanghai YuZhong Financial Information Service Co., Ltd (“YuZhong”), a limited company incorporated in PRC. Huitong, Mao Hong and Wei Gang owns 49.8%, 25.1% and 25.1% of equity interests in YuZhong, respectively. As of November 30, 2014, the capital has yet to be injected by the founders. It remained a dormant company.

On July 17, 2014, Huitong and Mao Hong jointly incorporated Shanghai YuGuang Automobile Inspection Technology Co., Ltd (“YuGuang”), a limited company incorporated in PRC. Huitong and Mao Hong owns 20% and 80% of equity interests in YuGuang, respectively. As of November 30, 2014, the capital has yet to be injected by the founders. It remained a dormant company.

On September 11, 2014, YuGuang entered into an agreement with Zhou Jin Shan and Chen Xiu Lan to acquire 51% equity interest in Taizhou Haitai Motor Vehicle Inspection Co, Ltd. (“Haitai”) from Zhou Jin Shan at a consideration of RMB652,800. YuGuang also agreed to provide a shareholder’s loan of RMB11.2 million only after Chen Xiu Lan, the 49% shareholder, contributes an accumulated shareholder’s loan of RMB11.2 million to Haitai. Haitai is principally engaged in the provision of motor vehicle inspection service in the PRC. As of the period end date, the investment has yet to be injected by YuGuang.