REDtone Asia Inc's Subsidiary REDtone China venture into Prepaid Shopping Pass/ Card Business

Mar 15, 2011, 10:00 ET from REDtone Asia, Inc.

NEW YORK, March.15, 2011 /PRNewswire-Asia-FirstCall/ -- Following the satisfactory completion of due diligence on March 7, 2011, REDtone Asia, Inc. (OTC Bulletin Board: RTAS), through its wholly-subsidiary Shanghai Hongsheng Net Telecommunications Company Limited ("REDtone China"), entered into a share sales agreement ("SSA") with Shanghai QianYue Information Technology Co., Ltd. ("QIT") for the acquisition of the entire paid-up capital of Shanghai QianYue Business Administration Co., Ltd. ("QBA"). The acquisition of QBA, valued at RMB 10 million, was acquired for a cash consideration of RMB 7.9 million. QBA is an established prepaid shopping-card issuer in Shanghai and its "VeryPass" prepaid shopping cards are targeted for online shopping and for use at retail outlets.

The salient terms and conditions of the SSA are:

  1. The purchase consideration will be paid in 3 tranches – RMB200,000 earnest deposit paid upon signing the term sheet, RMB2.8 million within 3 days after date of SSA and the balance upon completion of shares transfer.  
  2. The net book value of QBA's fixed assets (inclusive of software) must be at least RMB 1.2 million;
  3. All of the liabilities/obligations that existed or occurred on or before the completion date shall be fully undertake by QIT.
  4. The cut-off date for transferring the QBA operations to REDtone China is on April 1, 2011 ("Cut-off Date").
  5. QIT will not engage in any similar business as QBA within 2 years from the date of SSA.
  6. QIT has the right to the cash balance after deducting designated card payment obligation and all liabilities as at the Cut-off Date.

By venturing into this business, REDtone Asia is now positioned as a comprehensive sales and distributor for prepaid businesses in Shanghai, including prepaid mobile air-time and game reload, discounted consumer call reload and prepaid shopping card businesses.

Prepaid shopping cards are increasingly popular with consumers and the corporate sector in China where they are given to employees as an alternative to cash and to business associates as gifts, especially during festive seasons. Total market size for shopping card business in Shanghai alone is estimated at approximately RMB18 billion per annum.

The prepaid shopping card market is a huge market with lots of growth opportunities and the Company believes that it is in a good position to tap into these opportunities as the Company has a solid prepaid business background, strong sales channels, and a vast network of 40,000 dealers.

REDtone Asia's revenue from the prepaid shopping cards will come from various channels such as rebates from merchants and processing fees deducted from card holders if they opt for cash instead of using their shopping cards for purchases. In addition, this business is highly scalable due to low capital expenditure requirements and can be easily replicated to other provinces in China as the Company owns the technology of its e-account management system.

The Company is also seeking synergistic partnerships with financial institutions in China to gain payment network access such as UnionPay. This partnership will make "VeryPass" a widely accepted prepaid shopping card in PRC with worldwide accessibility.  

This shopping card business is not expected to have any major contribution to the profit of the Company for financial year ending 31 May 2011. It is expected to contribute positively to the Company's profitability in the future.

REDtone Asia, Inc. and subsidiaries are a group of companies engaged in providing discounted calling services and telecommunications related value added services in the People's Republic of China ("PRC"). The Company has changed its name from Hotgate Technology, Inc to REDtone Asia, Inc effective as of March 14, 2011 and the common stock is publicly traded under the new symbol "RTAS".

Cautionary Disclaimer -- Forward-Looking Statements

This news release contains "forward-looking statements," as that term is defined in Section 27A of the United States Securities Act of 1933, as amended, and Section 21E of the United States Securities Exchange Act of 1934, as amended. Such forward-looking statements include, among others, the estimation, expectation and/or claim, as applicable. Actual results could differ from those projected in any forward-looking statements due to a variety of risks, uncertainties and other factors. These forward-looking statements are made as of the date of this news release and the Company assumes no obligation to update the forward-looking statements, or to update the reasons why actual results could differ from those projected in the forward-looking statements. Although the Company believes that the beliefs, plans, expectations and intentions contained in this press release are reasonable, there can be no assurance those beliefs, plans, expectations, or intentions will prove to be accurate. Investors should consider all of the information set forth herein and should also refer to the risk factors disclosed in the Company's periodic reports filed from time-to-time with the Securities and Exchange Commission and available at www.sec.gov .

For more information, please contact:

Ivan Wong

Tel:   +603-8073-2288

Phone: +601-3214-1301

Email: ivan.wong@redtone.com

Ng Keng Chai

Phone: +601-3338-0970

SOURCE REDtone Asia, Inc.



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