EXHIBIT 99.1
1604494 ONTARIO INC.
(A DEVELOPMENT STAGE COMPANY)
FINANCIAL STATEMENTS
PERIOD FROM INCEPTION (JANUARY 21, 2004)
TO DECEMBER 31, 2004
CONTENTS
Auditor's Report 1
Balance Sheet 2
Statement of Operations and Deficit 3
Statement of Cash Flows 4
Notes to Financial Statements 5 - 7
AUDITORS' REPORT
To the Shareholders of
1604494 Ontario Inc.
(A Development Stage Company)
We have audited the balance sheet of 1604494 Ontario Inc. (A
Development Stage Company) as at December 31, 2004 and the statements of
operations and deficit, and cash flows for the period from inception (January
21, 2004) to December 31, 2004 then ended. The financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audit in accordance with Canadian generally accepted
auditing standards. Those standards require that we plan and perform an audit to
obtain reasonable assurance whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation.
In our opinion, these financial statements present fairly, in all
material respects, the financial position of the Company as at December 31, 2004
and the results of its operations and the changes in its cash flows for the
period from inception (January 21, 2004) to December 31, 2004 then ended in
accordance with Canadian generally accepted accounting principles.
/s/ SF Partnership LLP
------------------------------
Toronto, Canada CHARTERED ACCOUNTANTS
May 3, 2005
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1604494 ONTARIO INC.
(A DEVELOPMENT STAGE COMPANY)
Balance Sheet
December 31, 2004
ASSETS
Current
Due from related parties $ 9,000
Intangible Assets 6,000
--------
$ 15,000
--------
LIABILITIES
Current
Accounts payable and accrued charges $ 8,000
--------
STOCKHOLDERS' EQUITY
Capital Stock (note 5) 18,000
Deficit (11,000)
--------
7,000
--------
$ 15,000
--------
APPROVED ON BEHALF OF THE BOARD
"Val Guilis"
- --------------------------------
Director
(See accompanying notes to the financial statements)
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1604494 ONTARIO INC.
(A DEVELOPMENT STAGE COMPANY)
Statement of Operations and Deficit
Period From Inception (January 21, 2004) To December 31, 2004
Revenue $ --
--------
Expenses
Professional fees 5,000
Consulting fees 3,000
Rent 3,000
--------
11,000
--------
Net Loss and Deficit - end of period $(11,000)
--------
(See accompanying notes to the financial statements)
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1604494 ONTARIO INC.
(A DEVELOPMENT STAGE COMPANY)
Statement of Cash Flows
Period From Inception (January 21, 2004) To December 31, 2004
Cash Flows from Operating Activities
Net loss $(11,000)
Items not affecting cash
Consulting fees 3,000
Accounts payable 8,000
--------
--
--------
Cash Flows from Investing Activities --
Cash Flows from Financing Activities --
--------
Net Cash Used in Operating Activities --
Cash - beginning of period --
--------
Cash - end of period $ --
--------
Supplemental Cash Flow Information
Interest paid $ --
--------
Income taxes paid $ --
--------
Issuance of common shares:
Due from related parties $ 9,000
Consulting fees 3,000
Intangible asset 6,000
--------
$ 18,000
---------
(See accompanying notes to the financial statements)
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1604494 ONTARIO INC.
(A DEVELOPMENT STAGE COMPANY)
Notes to Financial Statements
December 31, 2004
1. Description of Business
1604494 Ontario Inc. (A Development Stage Company) (the "Company"),
incorporated under the Canada Business Corporation Act on January 21, 2004.
The Company's main business activity is to hold a home value warranty
program.
2. Going Concern
These financial statements have been prepared in accordance with Canadian
generally accepted accounting principles with the assumption that the
Company will be able to realize its assets and discharge its liabilities in
the normal course of business.
The Company has sustained operating losses since inception. The Company's
continuation as a going concern is uncertain and dependant on successfully
bringing its services to market, achieving future profitable operations and
obtaining additional sources of financing to sustain its operations, the
outcome of which cannot be predicted at this time.
The financial statements do not include any adjustments to reflect the
possible future effects on the recoverability and classification of assets
or the amounts and classification of liabilities that may result from the
possible inability of the Company to continue as a going concern.
3. Significant Accounting Policies
The accounting policies of the Company are in accordance with Canadian
generally accepted accounting principles. Outlined below are the policies
that are considered particularly significant:
a) Revenue Recognition
Revenue for warranty contracts are deferred and recognized in income
on a straight-line basis over the contract period except in those
circumstances in which sufficient historical evidence indicates that
the costs of performing services under the contract are incurred on
other than a straight-line basis. In those circumstances, revenue is
recognized over the contract period in proportion to the costs
expected to be incurred in performing services under the contract.
Losses are recognized on warranty contracts if the sum of expected
costs of providing services under the contracts exceeds the related
unearned revenue.
b) Intangible Assets
Intangible Assets with an indefinite life are accounted for at cost
and are tested for impairment annually or more frequently if events or
changes in circumstances indicate that the assets might be impaired.
When the carrying amount exceeds the fair value, an impairment loss is
recognized in the statement of earnings in amount equal to the excess.
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3. Significant Accounting Policies (cont'd)
c) Future Income Taxes
The Company follows the liability method of accounting for income
taxes. Under this method future income tax assets and liabilities
are determined based on the differences between the financial
reporting and tax bases of assets and liabilities and are measured
using substantively enacted tax rates and laws that are expected to
be in effect in the periods in which the future tax assets or
liabilities are expected to be realized or settled. The effect of a
change in income tax rates on future income tax assets and
liabilities is recognized in income in the period that the change
occurs.
d) Use of Estimates
The preparation of financial statements, in conformity with Canadian
generally accepted accounting principles, requires management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
e) Financial Instruments and Risk Management
The carrying amount of accounts payable approximate its fair market
value due to the relatively short-term maturity of these
instruments. Due from Shareholders are not subject to fixed terms of
repayment or interest and therefore their fair market value cannot
be estimated.
4. Due from Related Parties
Amounts due from related parties are non-interest bearing and have no
fixed term of payment.
Finewell Holding Inc. $ 1,000
Stingalls Investment Group Ltd. 1,000
Zulmar Holdings 1,000
HS Holding Inc. 3,000
RS Atlantic Holding Inc. 3,000
---------
$ 9,000
=========
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5. Capital Stock
Authorized:
Unlimited number of voting class "A" special shares Unlimited
number of non-voting class "B" special shares Unlimited number of
common shares
Issued:
76,000,000 common shares $ 18,000
===========
6. Related Party Transactions
During the year, the Company acquired intangible assets amounting to
$6,000 by issuing 20,085,667 common shares from a company controlled by a
director of the Company. Also, during the year the Company issued
9,231,209 common shares in exchange for consulting services amounting to
$3,000.
7. Subsequent Event
On March 24, 2005, the Company acquired control of a US public company,
Reliant Home Warranty Corporation ("Reliant") by acquiring from treasury
76,000,000 shares of the Reliant in exchange for all the issued and
outstanding shares of the Company. As a result the shareholders of the
Company have acquired 97.4% of the issued and outstanding common shares of
Reliant.
8. Reconciliation to US GAAP
These financial statements have been prepared in accordance with
accounting principles generally accepted in Canada ("Cdn. GAAP").
Significant differences under U.S. GAAP are discussed below.
In the U.S. reporting standards for auditors require the addition of an
explanatory paragraph (following the opinion paragraph) of the Report of
Independent Registered Public Accounting Firm when the financial
statements are affected by significant uncertainties such as those
referred to in note 2. In Canadian reporting standards such reference does
not have to be made when the uncertainties are adequately disclosed in the
notes.
U.S. GAAP requires the measurement and reporting of "comprehensive
income". Comprehensive income includes net income and all other changes to
Shareholders' Equity other than amounts received from or paid to
shareholders. There is no material reportable comprehensive income item
for the Company.
U.S. GAAP requires the use of the current rate method of foreign currency
translation, with any resulting foreign exchange translation adjustments
forming part of comprehensive income for the year and accumulating as a
separate component of shareholders' equity. The financial statements of
the Company are presented in Canadian dollars.
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Reliant Home Warranty Corporation
(Formerly Dialex Minerals Inc)
PRO-FORMA CONSOLIDATED BALANCE SHEET
(PREPARED BY MANAGEMENT)
Reliant Home 1604494
Warranty Corp Ontario Inc.
at at
March 24, 2005 March 24, 2005
--------------- --------------
ASSETS
$ -- $ 7,398
Intangible asset -- 4,932
Due From Related Companies -- --
----------- -----------
$ -- $ 12,330
=========== ===========
LIABILITIES
CURRENT
Accounts Payable & Accruals $ 57,729 $ 6,165
Advances From Related Companies 6,265 9,392
----------- -----------
63,994 15,557
----------- -----------
SHAREHOLDERS EQUITY
Capital Stock 78,048 14,797
Additional paid In Capital 5,323,395 --
RETAINED EARNING, (Accumulated Deficit) (5,465,437) (18,023)
----------- -----------
(63,994) (3,226)
----------- -----------
----------- -----------
Total liabilities & Shareholders Equity $ -- $ 12,330
=========== ===========
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Reliant Home Warranty Corporation
(Formerly Dialex Minerals Inc.)
Pro-forma Consolidated Statements of Operations
For the period ended March 31, 2005, and 2004
(Prepared by management)
Reliant Home 1604494
Warranty Corp Ontario Inc.
Year to date Year to Date
March 24, 2005 March 24, 2005
-------------- --------------
Income:
Sales $ -- --
Cost of Goods Sold -- --
-------- --------
Gross Margin -- --
Operating Expenses:
Management Fees -- --
Professional fees 19,351 --
Consulting 1,415 9,392
General & Admin 117 3,699
-------- --------
Total Operating Expenses 20,883 13,091
-------- --------
Gain/(Loss) from continuing operations (20,883) (13,091)
-------- --------
Income before taxes, discontinued operations
-------- --------
and extraordinary Items (20,883) (13,091)
-------- --------
Discontinued operations Note 4
Results from discontinued operations (10,560) --
-------- --------
Income Taxes -- --
-------- --------
Net Gain/(Loss) (31,443) (13,091)
======== ========
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RELIANT HOME WARRANTY CORPORATION
(Formerly Dialex Minerals Inc)
NOTES TO PRO-FORMA CONSOLIDATED FINANCIAL STATEMENTS OF
March 24, 2005
Note 1 Basis of presentation
- ----------------------------
The accompanying unaudited pro-forma financial statements have been prepared in
accordance with accounting principles generally accepted in the United States of
America for interim financial information and the requirements of item 310 (b)
of Regulation S-B. Accordingly, certain information and disclosures normally
included in financial statements prepared in accordance with accounting
principles generally accepted in the United States of America have been
condensed or omitted pursuant to the rules and regulations of the Securities and
Exchange Commission. The financial statements reflect adjustments (consisting
only of normal recurring adjustments), which, in the opinion of management, are
necessary for a fair presentation of the results for the periods presented. The
results from operations for the interim periods are not indicative of the
results expected for the full fiscal year or any future period. Certain prior
period amounts have been reclassified to conform to correct period presentation.
The accompanying pro-forma consolidated balance sheet gives effect to the
acquisition "the Acquisition" of 1604494 Ontario Inc (1604494 Inc) by Reliant
Home Warranty Corporation (Reliant).
The unaudited pro-forma balance sheet has been prepared by management and is
based on the unaudited balance sheet of 1604494 Inc and unaudited balance sheet
of Reliant as at March 24, 2005, after giving effect to the following
transaction:
o The acquisition of all the issued and outstanding shares of 1604494 Inc
by Reliant for consideration of 76,000,000 consolidated common shares
of Reliant.
o Change the name from Dialex Minerals Inc to Reliant Home Warranty
Corporation
o The divesting of all of the issued and outstanding shares of wholly
owned subsidiary Condor Diamond Corp to Condor Gold Corp in
consideration of any and all liabilities owing by the Corporations to
Condor Gold Corp and its directors and officers
The accounting polices used in the preparation of the pro-forma consolidated
balance sheet are those disclosed in the Reliant audited financial statements
for the year ended December 31, 2004 that have been filed with and can be viewed
at http://www.sec.gov/
Management has determined that no adjustments are necessary to confirm 1604494
Inc a financial statement with the accounting polices used by Reliant in the
preparation of its financial statements.
The pro-forma 8-K filed March 28, 2005, the audited financial statements of
Reliant at December 31, 2004, both filed at http://www.sec.gov/, and the audited
financial statements for 1604494 Inc for period ended December 31, 2004.
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Note 2 Acquisition
- ------------------
On March 24, 2005, Reliant and 1604494 Ontario Inc entered onto a Securities
Exchange Agreement ("Agreement") whereby Reliant acquired all of the issued and
outstanding securities of 1604494 Inc in exchange for equivalent securities on a
one for one basis. Effectively, 1604494 Inc acquired control of Reliant, a US
publicly traded company. The stock exchange between the Reliant and 1604494
Ontario Inc. has been recorded as the recapitalization of the Reliant, with the
net assets of the Reliant brought forward at their historical basis. Management
does not intend to pursue the business of the Corporation and accordingly has
changed the nature of the business as described below. As such, accounting for
the merger as the recapitalization of the Company is deemed appropriate. The
ongoing business will continue as that of 1604494 Inc. Prior to the consummation
of the Acquisition, the issued and outstanding common shares of Reliant were
consolidated into 2,019,945 consolidated shares.
Reliant Home Warranty Corporation
(Formerly Dialex Minerals Inc)
PRO-FORMA CONSOLIDATED BALANCE SHEET after
acquisition of 1604494 Ontario Inc.
(PREPARED BY MANAGEMENT)
Reliant Home Warranty Corp
at March 24, 2005
--------------------------
ASSETS
- ------
Cash $ 7,398
Intangible asset 4,932
Due From Related Companies --
-----------
Total assets $ 12,330
===========
LIABILITIES
- -----------
CURRENT
Accounts Payable & Accruals $ 3,894
Advances From Related Companies $ 5,657
-----------
79,551
-----------
SHAREHOLDERS EQUITY
- -------------------
Capital Stock 154,048
Additional paid In Capital 5,323,395
RETAINED EARNING, (Accumulated Deficit) (5,544,663)
-----------
(67,220)
-----------
-----------
Total liabilities & Shareholders Equity $ 12,330
===========
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Note 3 Write off of Assets, Discontinued Operations
- ---------------------------------------------------
The results of the discontinued operations are follows:
Revenue $0
Operating loss from discontinued operations $0
Gain (loss) on discontinued operations ($810,560)
Loss from discontinued operations ($810,560)
To settle the advances from related parties and divesting subsidiary Condor
Diamond Corp, certain assets and associated liabilities were excluded from the
transaction and written off at a net cost to the company.
Note 4 Loans and advances from related parties
- ----------------------------------------------
Loans and advances from related companies in the amount of $15,657 are unsecured
and non-interest bearing with no specific due date.
Note 5 Capital Stock
Authorized
100,000,000 Common shares par value of $0.001 per share
25,000,000 Preferred shares, par value of $0.001 per share
Issued and outstanding 78,019,945
2,019,945 common shares before share exchange
76,000,000 common shares issued for share exchange agreement
with 1604494 Inc.
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