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