EX-99.6 12 v045248_ex99-6.txt EXHIBIT 99.6 FRANKLYN RESOURCES III, INC. UNAUDITED COMBINED PRO FORMA FINANCIAL STATEMENTS INDEX TO UNAUDITED COMBINED PRO FORMA FINANCIAL STATEMENTS Unaudited Combined Pro Forma Balance Sheet as of March 31, 2006 2 Unaudited Combined Pro Forma Statements of Operations for the Three Months Ended March 31, 2006 and for the Year Ended December 31, 2006 3-4 Notes to Unaudited Combined Pro Forma Financial Statements 5-6 1 FRANKLYN RESOURCES III, INC. UNAUDITED COMBINED PRO FORMA BALANCE SHEET As of March 31, 2006 (In thousands of United States dollars)
Qingdao Sinogas Franklyn General Sinoenergy Franklyn Resources Machinery Holding Resources III, Inc. Ltd. Corp. Limited Adjustment III, Inc. -------- -------- -------- -------- -------- ASSETS CURRENT ASSETS Cash and cash equivalents $ -- $ 112 $ -- $ 112 Accounts receivable (net) -- -- -Related parties -- 1,347 -- 1,347 - Third parties -- 3,435 -- 3,435 Other receivables- -- -- -Related party -- 236 -- 236 -Third party -- 917 -- 917 Deposits and prepayments -- -- -Related parties -- 4,986 -- 4,986 - Third parties -- 951 -- 951 Inventories -- 2,060 -- 2,060 -------- -------- -------- -------- -------- TOTAL CURRENT ASSET -- 14,044 -- 14,044 ======== ======== ======== ======== ======== LONG TERM ASSETS Property, plant and equipment (net) -- 3,470 -- 3,470 Intangible assets -- 257 -- 257 Long term deferred tax asset -- 17 -- 17 TOTAL ASSETS $ -- $ 17,788 $ -- $ 17,788 ======== ======== ======== ======== ======== CURRENT LIABILITIES Short term loan $ -- $ 2,495 $ -- $ 2,495 Accounts payable-third party 3 1,213 -- 1,216 Other payables -- -- - Related party -- 622 -- 622 - Third parties -- 1,057 -- 1,057 Accrued expenses -- 24 -- 24 Warranty accrual -- 19 -- 19 Advances from customers -- 1,914 -- 1,914 Income taxes payable -- 1,662 -- 1,662 Total current liabilities 3 9,006 -- 9,009 -------- -------- -------- -------- -------- LONG TERM DEFERRED TAX LIABILITIES -- 28 -- 28 MINORITY INTERESTS -- 665 -- 665 -------- -------- -------- -------- -------- TOTAL LIABILITIES 3 9,699 -- 9,702 OWNERS' EQUITY Common Stock (2) 3 -- 50 (39) 14 Unpaid common stock (2) -- -- (50) 50 -- Paid-in capital (2) 74 4,950 -- (91) 4,933 Capital surplus -- 67 -- 67 Statutory surplus reserve fund -- 331 -- 331 Retained earnings -- 2,566 -- 2,566 Development stage (80) -- -- 80 -- -------- -------- -------- -------- -------- Accumulated other comprehensive income -- 173 -- 173 -------- -------- -------- -------- -------- Total owners' equity (3) 8,088 -- 8,085 -------- -------- -------- -------- -------- TOTAL LIABILITIES AND OWNERS' EQUITY $ -- $ 17,788 $ -- $ 17,788 ======== ======== ======== ======== ========
See notes to unaudited combined pro forma financial information. 2 FRANKLYN RESOURCES III, INC. UNAUDITED COMBINED PRO FORMA STATEMENTS OF OPERATIONS For the Three Months Ended March 31, 2006 (In thousands of United States dollars)
Qingdao Sinogas Franklyn General Resources Franklyn Machinery Sinoenergy III, Inc. Resources Limited Holding Combined III, Inc. Corporation Limited Pro forma ------- ------- ------- ------- NET REVENUE $ -- $ 2,500 $ -- $ 2,500 COST OF REVENUE -- (1,245) -- (1,245) ------- ------- ------- ------- GROSS PROFIT -- 1,255 -- 1,255 OPERATING EXPENSES Selling expenses -- 64 -- 64 General and administrative expenses 3 265 -- 268 ------- ------- ------- ------- TOTAL OPERATING EXPENSES 3 329 -- 332 ------- ------- ------- ------- INCOME(LOSS) FROM OPERATIONS (3) 926 -- 923 OTHER INCOME(EXPENSES) Other non-operating income -- 2 -- 2 Interest expense -- (42) -- (42) Other expenses -- (3) -- (3) ------- ------- ------- ------- OTHER INCOME (LOSS) NET -- (43) -- (43) INCOME (LOSS) BEFORE INCOME TAXES (3) 883 -- 880 Income tax -- (313) -- (313) ------- ------- ------- ------- INCOME (LOSS) BEFORE MINORITY INTEREST (3) 570 -- 567 Minority interest 22 -- 22 ------- ------- ------- ------- NET INCOME $ (3) $ 548 $ -- $ 545 ======= ======= ======= =======
See notes to unaudited combined pro forma financial information. 3 FRANKLYN RESOURCES III, INC. UNAUDITED COMBINED PRO FORMA STATEMENTS OF OPERATIONS For the Year Ended December 31, 2005 (In thousands of United States dollars)
Qingdao Sinogas Franklyn General Resources Franklyn Machinery Sinoenergy III, Inc. Resources Limited Holding Combined III, Inc. Corporation Limited Pro forma ------- ------- -------- ------- NET REVENUE $ -- $ 8,236 $ -- $ 8,236 COST OF REVENUE -- (3,821) -- (3,821) ------- ------- -------- ------- GROSS PROFIT -- 4,415 -- 4,415 OPERATING EXPENSES Selling expenses -- 110 -- 110 General and administrative expenses 7 586 -- 593 ------- ------- -------- ------- TOTAL OPERATING EXPENSES 7 695 -- 703 ------- ------- -------- ------- INCOME(LOSS) FROM OPERATIONS (7) 3,719 -- 3,712 OTHER INCOME(EXPENSES) Other non-operating income -- 76 -- 76 Interest expense -- (41) -- (41) Other expenses -- (106) -- (106) ------- ------- -------- ------- OTHER INCOME (LOSS) NET -- (71) -- (71) INCOME (LOSS) BEFORE INCOME TAXES (7) 3,647 -- 3,640 Income tax -- (1,173) -- (1,173) ------- ------- -------- ------- INCOME (LOSS) BEFORE MINORITY INTEREST (7) 2,474 -- 2,467 Minority interest -- 14 -- 14 ------- ------- -------- ------- NET INCOME $ (7) $ 2,460 $ -- $ 2,453 ======= ======= ======== =======
See notes to unaudited combined pro forma financial information. 4 FRANKLYN RESOURCES III, INC. NOTES TO UNAUDITED COMBINED PRO FORMA FINANCIAL STATEMENTS 1. Introduction Franklyn Resources III, Inc. ("Franklyn") was incorporated in Nevada. Effective on June 2, 2006, Franklyn entered into an Exchange Agreement ("Exchange Agreement") with Sinoenergy Holding Limited ("Sinoenergy"), an International Business Company incorporated in the British Virgin Islands, and each of the members of Sinoenergy (the "Sinoenergy BVI Members"). Qingdao Sinogas General Machinery Limited Corporation ("Sinogas"), a limited liability company under the Company Law of The People Republic of China. The closing of the transactions contemplated by the Exchange Agreement occurred on June 2, 2006. At the closing, pursuant to the terms of the Exchange Agreement, Franklyn acquired all of the outstanding capital stock and ownership interests of Sinoenergy from the Sinoenergy BVI Members, and the Sinoenergy BVI Members contributed all of their interests in Sinoenergy to Franklyn. In exchange, Franklyn issued to the Sinoenergy BVI Members 14,215,385 shares of Common Stock. At the closing, Sinoenergy became a wholly-owned subsidiary of Franklyn. Sinoenergy, in turn, owns all of the registered capital of Sinogas, a wholly foreign owned enterprise ("WFOE") registered under the wholly foreign-owned enterprises laws of the PRC. Under generally accepted accounting principles, both acquisitions described above are considered to be capital transactions in substance, rather than business combinations. That is, the acquisitions are equivalent, in the merger of Sinoenergy and Sinogas, to the issuance of stock by Sinogas for the net monetary assets of Sinoenergy, and in the Franklyn/Sinoenergy merger, the issuance of stock by Sinoenergy for the net monetary assets of Franklyn. Each transaction is accompanied by a recapitalization, and is accounted for as a change in capital structure. Accordingly, the accounting for the acquisition is identical to that resulting from a reverse acquisition, except that no goodwill is recorded. Under reverse takeover accounting, the comparative historical financial statements in the Franklyn/Sinoenergy merger of the "legal acquirer", Franklyn, are those of the "accounting acquirer", Sinoenergy. The unaudited pro forma financial information has been prepared giving pro forma effects on the statements of operations for the year ended December 31, 2005 and for the three months ended March 31, 2006 as if the transaction occurred on January 1, 2005. The pro forma balance sheet assumes the transaction occurred on the balance sheet date. The unaudited pro forma financial information is based upon the historical financial statements of Franklyn, Sinoenergy, and Sinogas as of and for the year ended December 31, 2005 and for the three months ended March 31, 2006 after giving effect to pro forma adjustments described in Note 2. 5 FRANKLYN RESOURCES III, INC. NOTES TO UNAUDITED COMBINED PRO FORMA FINANCIAL STATEMENTS (Continued) The unaudited pro forma financial information does not purport to represent what the results of operations of Franklyn, Sinoenergy, and Sinogas would actually have been if the events described above had in fact occurred at the beginning of 2005, or any other date, or to project the net profit of Franklyn, Sinoenergy, and Sinogas for any future period. The adjustments are based on currently available information and certain estimates and assumptions. However, management believes that the assumptions provide a reasonable basis for presenting the unaudited pro forma financial information and those pro forma adjustments give effect to those assumptions and are properly applied in the unaudited pro forma financial information. 2. Pro forma Adjustments The adjustments in the combined pro forma balance sheet represent the following: (a) elimination of common stock of Sinoenergy, the BVI company; (b) elimination of accumulated deficit of Franklyn; and (c) Pursuant to the Securities Exchange Agreement, Franklyn acquired 3,305,000 share of common stock, par value $0.001 per share, and issued 14,584,385 share of common stock, par value $0.001 per share, to the stockholders of Sinoenergy (14,215,385 Shares are original shareholders of Sinoenergy and 369,000 Shares to new investors), representing approximately 99.8% of the Franklyn post-exchange issues and outstanding common stock, in exchange for 100% of the outstanding capital stock of Sinoenergy. The Company presently carries on the business of Qingdao Sinogas General Machinery Limited Corporation, a Chinese corporation and Sinoenergy's wholly-owned subsidiary, or Sinogas. 6