Axiom III, Inc. and Subsidiaries Unaudited Pro forma Condensed Consolidated Financial Statements



Exhibit 99.2


Axiom III, Inc. and Subsidiaries

Unaudited Pro forma Condensed Consolidated Financial Statements


The unaudited pro forma condensed consolidated financial statements set forth below for AXIO give effect to the Acquisition Agreement pursuant to which AXIO, through its indirect wholly-owned subsidiary, Eastern Concept Corporate Consulting (Shenzhen) Limited (“Eastern Concept Shenzhen”), will acquire 100% of the registered capital of Foshan Wanzhi Electron S&T Company Limited (“Foshan Wanzhi”) from the shareholders of Foshan Wanzhi (“Foshan Wanzhi Shareholders”) at a cash consideration of RMB10,000,000. For the purposes of these unaudited pro forma condensed consolidated financial statements, the Acquisition Agreement is deemed to be effected as of the beginning of the periods for which the pro forma financial information is presented, i.e. January 1, 2006.

The pro forma adjustments included herein are based on available information and certain assumptions that management believes are reasonable and are described in the accompanying notes to the unaudited pro forma condensed consolidated financial statements. The unaudited pro forma condensed consolidated financial statements do not necessarily represent what AXIO’s financial position or results of operations would have been had the Acquisition Agreement been completed as of the dates presented, and should not be taken as representative of the future consolidated financial position or results of operations of AXIO. In the opinion of management, all adjustments necessary to present fairly the unaudited pro forma financial information have been made. The unaudited pro forma condensed consolidated financial statements should be read in conjunction with the historical financial statements of AXIO.

 
 

 
 
PF - 1

 

Axiom III, Inc. and Subsidiaries
Unaudited Pro forma Condensed Consolidated Balance Sheet
As of September 30, 2007
 
   
AXIO
(Unaudited)
   
Eastern Concept
(Audited)
   
Pro Forma adjustments
   
The Pro Forma
(Unaudited)
   
Foshan Wanzhi
(Audited)
   
Investment in Eastern Concept Shenzhen
         
Eastern Concept Shenzhen
         
Elimination Adjustments
   
Pro forma consolidated balance
 
                     
Note 1(a)
   
Note 1(d)
         
Note
         
Note
   
Note 2(c)
       
   
US$
   
US$
   
US$
   
US$
   
US$
   
US$
         
US$
         
US$
   
US$
 
                                                                   
                                                                   
ASSETS
                                                                 
Current assets
                                                                 
    Cash and cash equivalents
   
2,672
     
1,362,246
      (2,672 )    
1,362,246
     
185,946
      (1,282,051 )    
1(c)
2(a)
                       
266,141
 
    Trade receivables from third parties
   
3,468
     
129
      (3,468 )    
129
     
27,421
                                       
27,550
 
    Trade receivable from a related party
   
-
     
-
             
-
     
21,481
                                       
21,481
 
    Prepayments and deposits
   
-
     
-
             
-
     
4,584
                                       
4,584
 
    Income tax recoverable
   
-
     
-
             
-
     
5,898
                                       
5,898
 
    Taxation
                           
-
                                               
-
 
    Due from holding company
                           
-
                                               
-
 
    Due from a director
                           
-
                                               
-
 
    Due from related companies
                           
-
                                               
-
 
    Inventories
   
-
     
-
             
-
     
18,701
                                       
18,701
 
Total current assets
   
6,140
     
1,362,375
             
1,362,375
     
264,031
                                       
344,355
 
                                                                                   
    Property, plant and equipment, net
   
192,715
     
-
      (192,715 )    
-
     
50,857
                                       
50,857
 
    Intangible assets, net
   
-
     
-
             
-
     
310,256
                                       
310,256
 
    Investments in subsidiaries
   
-
     
-
             
-
     
-
     
1,282,051
     
1(c)
2(a)
     
1,282,051
     
1(b)
2(b)
      (2,564,102 )    
-
 
    Prepayments for an operating right
   
-
     
-
             
-
     
927,383
                                             
927,383
 
    Prepayments for purchase of computer equipment and software
   
-
     
-
             
-
     
192,308
                                             
192,308
 
    Goodwill, net
   
-
     
-
             
-
     
75,685
                                             
75,685
 
                                                                                         
Total assets
   
198,855
     
1,362,375
             
1,362,375
     
1,820,520
                                             
1,900,844
 
                                                                                         
LIABILITIES AND STOCKHOLDERS' EQUITY
 
Current liabilities
                                                                                       
Trade payables to third parties
   
-
     
-
             
-
     
37,170
                                             
37,170
 
Accrued charges and other payables
   
7,508
     
-
      (7,508 )    
-
     
295,515
                                             
295,515
 
Amounts due to related parties
   
-
     
1,366,161
             
1,366,161
     
16,544
                                             
1,382,705
 
Current portion of mortgage payable
   
14,694
     
-
      (14,694 )    
-
     
-
                                             
-
 
Temporary receipt
   
-
     
-
             
-
     
128,205
                                             
128,205
 
Total current liabilities
   
22,202
     
1,366,161
             
1,366,161
     
477,434
                                             
1,843,595
 
                                                                                         
Long-term liabilities
                                                                                       
Mortgage payable
   
94,249
     
-
      (94,249 )    
-
     
-
                                             
-
 
                                                                                         
Total liabilities
   
116,451
                     
1,366,161
     
477,434
                                             
1,843,595
 
                                                                                         
Stockholders'  equity
                                                                                       
Common stock/Registered capital
   
14,648
     
-
     
35,352
     
50,000
     
1,282,051
                     
1,282,051
     
1(c)
2(a)
      (2,564,102 )    
50,000
 
Additional paid-in capital
   
555,144
     
-
      (569,792 )     (50,000 )    
-
                                              (50,000 )
                      (35,352 )                                                                
Dedicated capital
   
-
     
-
             
-
     
682
                                             
682
 
Accumulated (losses) profits
    (478,388 )     (3,786 )    
478,388
      (3,786 )    
60,353
                                             
56,567
 
Receivable from the sale of stock to officer
    (9,000 )    
-
     
9,000
     
-
     
60,353
                                             
56,567
 
Total stockholders' equity
   
82,404
      (3,786 )             (3,786 )    
1,343,086
                                             
57,249
 
                                                                                         
Total liabilities and stockholders' equity
   
198,855
     
1,362,375
             
1,362,375
     
1,820,520
                                             
1,900,844
 
 
 
See notes to unaudited pro forma condensed consolidated financial statements.


 
PF - 2

 

 
Axiom III, Inc. and Subsidiaries
Unaudited Pro forma Condensed Consolidated Statement of Income
Nine months period ended September 30, 2007

 
   
AXIO
(Unaudited)
   
Eastern Concept
(Audited)
   
Pro Forma adjustments
   
The Pro Forma
(Unaudited)
Note 1(a)
   
Foshan
Wanzhi
(Audited)
Note 1(d)
   
Pro Forma consolidated balance
 
   
US$
   
US$
   
US$
   
US$
   
US$
   
US$
 
                                     
Revenues
                                   
    Rental income
   
38,344
     
-
      (38,344 )    
-
     
-
     
-
 
    Service income
   
-
     
-
             
-
     
304,057
     
304,057
 
    Cost of services rendered
   
-
     
-
             
-
      (189,698 )     (189,698 )
Gross profit
   
38,344
                     
-
     
114,359
     
114,359
 
                                                 
General and administrative expenses
                                               
    Depreciation of property, plant and equipment
   
-
     
-
             
-
     
1,524
     
1,524
 
    Other general, administrative and operating expenses
   
90,602
     
4,122
      (90,602 )    
4,122
     
38,949
     
43,071
 
Total general and administrative expenses
   
90,602
     
4,122
             
4,122
     
40,473
     
44,595
 
                                                 
(Loss) Income from operations
    (52,258 )     (4,122 )             (4,122 )    
73,886
     
69,764
 
                                                 
Non-operating income
                                               
    Interest income
   
-
     
336
             
336
     
180
     
516
 
    Subsidy income
   
-
     
-
             
-
     
635
     
635
 
Total non-operating income
   
-
     
336
             
336
     
815
     
1,151
 
                                                 
(Loss) Income before income taxes
    (52,258 )     (3,786 )             (3,786 )    
74,701
     
70,915
 
                                                 
Income tax
   
-
     
-
             
-
      (19,850 )     (19,850 )
                                                 
Net (loss) income
    (52,258 )     (4,122 )             (3,786 )    
54,851
     
51,065
 
                                                 
                                                 
(Loss) Earning per share
   
0.00
                     
0.00
             
0.00
 
                                                 
Weighted average number of shares of common stock outstanding
   
14,474,167
             
35,351,667
     
49,825,834
             
49,825,834
 

 
 
See notes to unaudited pro forma condensed consolidated financial statements.


 
PF - 3

 

 
Axiom III, Inc. and Subsidiaries
Unaudited Pro forma Condensed Consolidated Statement of Income
Year ended December 31, 2006

 
   
AXIO
(Audited)
   
Pro Forma adjustments
   
The Pro Forma
(Unaudited)
Note 1(a)
   
Foshan
Wanzhi
(Audited)
   
Pro Forma consolidated balance
 
   
US$
   
US$
   
US$
   
US$
   
US$
 
                               
Revenues
                             
    Rental income
   
49,825
      (49,825 )    
-
     
-
     
-
 
    Service income
   
-
             
-
     
304,057
     
304,057
 
    Cost of services rendered
   
-
             
-
      (189,698 )     (189,698 )
Gross profit
   
49,825
             
-
     
114,359
     
114,359
 
                                         
General and administrative expenses
                                       
    Depreciation of property, plant and equipment
   
-
             
-
     
1,524
     
1,524
 
    Other general, administrative and operating expenses
   
78,531
      (78,531 )    
-
     
38,949
     
43,071
 
Total general and administrative expenses
   
78,531
             
-
     
40,473
     
44,595
 
                                         
(Loss) Income from operations
    (28,706 )            
-
     
73,886
     
69,764
 
                                         
Non-operating income
                                       
    Interest income
   
-
             
-
     
180
     
516
 
    Subsidy income
   
118
      (118 )    
-
     
635
     
635
 
Total non-operating income
   
118
             
-
     
815
     
1,151
 
                                         
(Loss) Income before income taxes
    (28,588 )            
-
     
74,701
     
70,915
 
                                         
Income tax
   
-
             
-
      (19,850 )     (19,850 )
                                         
Net (loss) income
    (28,588 )            
-
     
54,851
     
51,065
 
                                         
                                         
(Loss) Earning per share
   
0.00
             
0.00
             
0.00
 
                                         
Weighted average number of shares
                                       
   of common stock outstanding
   
14,090,000
     
35,351,667
     
49,441,667
             
49,441,667
 

 
* Translated at RMB7.8 = US$1

 
See notes to unaudited pro forma condensed consolidated financial statements.


 
PF - 4

 

 
Axiom III, Inc. and Subsidiaries
Notes to Unaudited Pro forma Condensed Consolidated Financial Statements

 
The unaudited pro forma condensed consolidated financial statements should be read in conjunction with the historical consolidated financial statements and accompanying notes contained in AXIO’s Form 10-KSB for the year ended December 31, 2006, AXIO’s Form 10-QSB quarterly report for the nine-month period ended September 30, 2007, the audited financial statements of Eastern Concept for the period from June 29, 2007 to August 7, 2007 prepared  in  accordance with USGAAP, AXIO’s Form 8-K filed with the Securities and Exchange Commission (“SEC”) on October 24, 2007 and the audited financial statements of Foshan Wanzhi for the six months ended June 30, 2007.

1.      Basis of pro forma presentation

(a)  
Pursuant to the share exchange agreement dated October 10, 2007 (“Share Exchange Agreement”), AXIO acquired 100% of the issued and outstanding share capital of Eastern Concept Development Limited (“Eastern Concept”) from the sole shareholder of Eastern Concept in exchange for 35,351,667 shares of common stock of AXIO. The then AXIO group and Eastern Concept are collectively referred to as the “Pro Forma Group”. The basis of preparation of the unaudited pro forma financial information of the Pro Forma Group included in these pro forma condensed consolidated financial statements (the “Pro Forma”) are consistent with those as set out in AXIO’s Form 8-K filed with the SEC on October 24, 2007, except that the unaudited financials of AXIO for the nine-month period ended September 30, 2007 instead of the six-month period ended June 30, 2007 are used in the preparation of the Pro Forma. The Pro Forma is used as the starting point for the preparation of these unaudited pro forma condensed consolidated financial statements.

(b)  
These unaudited pro forma condensed consolidated financial statements give effect to the agreement pursuant to which AXIO, through its indirect wholly-owned subsidiary, Eastern Concept Shenzhen, will acquire 100% of the registered capital of Foshan Wanzhi from the Foshan Wanzhi Shareholders at a cash consideration of RMB10,000,000 (equivalent to approximately US$1,282,051). For the purposes of these unaudited pro forma condensed consolidated financial statements, the share exchange agreement is deemed to be effected as of the beginning of the periods for which the pro forma financial information is presented, i.e. January 1, 2006.

(c)  
Eastern Concept Shenzhen was established in the People’s Republic of China on August 13, 2007 with registered capital of RMB10,000,000. Eastern Concept Shenzhen is wholly-owned by Eastern Concept which, pursuant to the Share Exchange Agreement, is wholly-owned by AXIO. For the purposes of these pro forma condensed consolidated financial statements, the injection of capital of RMB10,000,000 (equivalent to approximately US$1,282,051) into Eastern Concept Shenzhen by Eastern Concept was deemed to be completed as of the beginning of the periods presented, i.e. January 1, 2006.

(d)  
Foshan Wanzi’s audited financial statements for the six months ended June 30, 2007 have been adopted in preparing the unaudited pro forma condensed consolidated balance sheet and statement of income as of September 30, 2007 and for the nine-month period ended September 30, 2007.

2.   Pro forma adjustments

Pro forma adjustments are necessary to reflect the adjustments necessary to give full effect to the acquisition as if it had been occurred at the beginning of the periods presented. These pro forma adjustments include the adjustments for the difference between the considerations paid for the assets acquired and the estimated fair value of such assets. As there were no intercompany transactions or balances, no pro forma adjustments for elimination in this respect is necessary.

The pro forma consolidated provision for income taxes does not reflect the amounts that would have resulted had the Pro Forma Group, Eastern Concept Shenzhen and Foshan Wanzhi filed consolidated income tax returns during the periods presented.

The pro forma adjustments included in the unaudited pro forma condensed consolidated financial statements are as follows:

(a)  
Adjustment to reflect the injection of capital of RMB10,000,000 (equivalent to approximately US$1,282,051) into Eastern Concept Shenzhen by Eastern Concept.

(b)  
Adjustment to reflect the investment in 100% of the registered capital of Foshan Wanzhi by Eastern Concept Shenzhen of RMB10,000,000 (equivalent to approximately US$1,282,051).

(c)  
Adjustments to eliminate the costs of investment in Foshan Wanzhi and Eastern Concept Shenzhen against their respective registered capital.

 
 
PF - 5