UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
RELIANT HOME WARRANTY CORPORATION
FORM 10-QSB
(Mark One)
[X] 3 MONTH REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the 3 month period ended March 31, 2006
-----------------
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from __________ to ____________
Commission files number 000-29827
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RELIANT HOME WARRANTY CORPORATION
---------------------------------
(Exact name of small business issuer as specified in its charter)
Florida 65-0656668
- ------------------------------- -----------------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
Suite 250, 350 Bay Street
Toronto, Ontario M5H 2S6
------------------------------------
(Address of principal executive offices)
416 445-9500
---------------------------------------
(Issuer's telephone number)
APPICABLE ONLY TO CORPORATE ISSUERS
STATE THE NUMBER OF SHARES OUTSTANDING OF EACH OF THE ISSUER'S CLASSES OF COMMON
EQUITY, AS OF THE LATEST PRACTICABLE DATE: March 31, 2006 - 86,019,782
---------------------------
ITEM 2 MANAGEMENT DISCUSSIONS AND ANALYSIS OR PLAN OF OPERATION
GENERAL
The following discussion is intended to provide an analysis of Reliant's
financial condition and should be read in conjunction with Reliant's audited
financial statements and the related footnotes. The matters discussed in this
section that is not historical or current facts deal with potential future
circumstances and developments. Such forward-looking statements include, but are
not limited to, the development plans for the Company's growth, trends in the
results of the Company's development, anticipated development plans, operating
expenses and the Company's anticipated capital requirements and capital
resources. The Company's actual results could differ materially from the results
discussed in the forward-looking statements.
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
This report includes "forward-looking statements" within the meaning of Section
27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act
of 1934. For example, statements included in this report regarding our financial
position, business strategy and other plans and objectives for future
operations, and assumptions and predictions about future product demand, supply,
manufacturing, costs, marketing and pricing factors are all forward-looking
statements. When Reliant uses words like "intend," "anticipate," "believe,"
"estimate," "plan" or "expect," Reliant is making forward-looking statements.
Reliant believes that the assumptions and expectations reflected in such
forward-looking statements are reasonable, based on information available to
Reliant on the date hereof, but Reliant cannot assure you that these assumptions
and expectations will prove to have been correct or that we will take any action
that we may presently be planning. Reliant has disclosed certain important
factors that could cause Reliant's actual results to differ materially from
Reliant's current expectations elsewhere in this report. You should understand
that forward-looking statements made in this report are necessarily qualified by
these factors. Reliant is not undertaking to publicly update or revise any
forward-looking statement if Reliant obtains new information or upon the
occurrence of future events or otherwise.
GOING CONCERN
Reliant is in the process of developing, and exploiting its proprietary
financial systems and "know how". The Company has not yet generated either
revenue or profit from its operations. Its continued existence and its ability
to continue as a growing concern are dependent upon its ability to obtain
additional capital to fund its operations.
COMPANY HISTORY
Reliant Home Warranty Corporation ("the Company") was incorporated in the State
of Florida on December 18, 1995 as Ronden Vending Corp.
On December 24, 1996, the Company incorporated a wholly owned subsidiary called
Ronden Acquisition, Inc., a Florida corporation. Ronden Acquisition, Inc then
merged with Video Home Shopping, Inc., (a Tennessee corporation), and Ronden
Acquisition, Inc. was the surviving Florida Corporation. Subsequent to the
merger the Company suspended the network marketing and distribution operations
of Video Home Shopping, Inc of Tennessee.
-2-
On January 9, 1997, articles of merger were filed for the Company as the
surviving corporation of a merger between the Company and its wholly owned
subsidiary Ronden Acquisition, Inc. This step completed the forward triangular
merger between Video Home Shopping, Inc., Ronden Acquisition, Inc. and the
Company.
On January 9, 1997, articles of amendment were filed to change the name of the
Company from Ronden Vending Corp to VHS Network, Inc. On April 9, 1997, the
Company incorporated VHS Acquisition, Inc. as a wholly owned subsidiary. In
April 1997, the Company was restructured by way of a reverse take-over involving
its wholly owned subsidiary, VHS Acquisition, Inc., a Florida company, and VHS
Network, Inc., a Manitoba and Canadian controlled Private Corporation. On April
12, 2000, the Company acquired all the outstanding common shares of China eMall
Corporation, an Ontario private company. This represented a 100% voting interest
in China eMall Corporation. The Company functioned as an e-commerce company. On
September 5, 2003 the Company divested its interest in China eMall by selling
all the outstanding common shares of China eMall for a nominal amount ($2.00).
On May 6, 2001, the Company entered into an agreement and plan of reorganization
(the "Agreement") with Branson Holdings, Inc ("Branson") to acquire all the
issued and outstanding shares of Branson. On July 26, 2001 VHSN terminated its
agreement with Branson.
On December 1, 2001, the Company acquired all the outstanding common shares of
TrueNet Enterprise Inc., an Ontario private company. On September 22, 2003 the
Company changed its name to Dialex Minerals Inc. and completed a reverse split
of its issued and outstanding common shares on the basis of ten (10) common
shares for one (1) new common share.
On February 9, 2004, the Company completed a transaction acquiring all the
outstanding shares of Condor Diamond Corp. an Ontario private company. On
February 2, 2005, pursuant to a Stock Exchange Agreement and a registration
statement filed on Form 14-3 with the Securities and Exchange Commission, the
Company changed its name from Dialex Minerals Inc. to Reliant Home Warranty
Corporation. The Company undertook a reverse split of its outstanding common
shares on the basis of one (1) new share for twenty-two (22) old shares thereby
reducing its outstanding common shares from 44,438,786 to 2,019,782.
On March 16, 2005 Sandro Sordi in Trust acquired control of the Company, by
acquiring a majority of its issued and outstanding shares through the execution
of a share purchase agreement with Condor Gold Corp and RTO Zarex Ltd.
Effective March 23, 2005 and prior to the approval of the Stock Exchange
Agreement, the former directors of the Corporation, Alexander Stewart, Wallace
Stonehouse, Kirk Boyd, Stephen Stewart and Neil Novak, resigned upon the
appointment of new directors, Kevin Hamilton, Valeri Guilis, Boyd Soussana and
the Honorable John Roberts. On March 24, 2005, pursuant to the Stock Exchange
Agreement, The BSA Group Limited ("BSA"), in trust for the shareholders of
1604494 Ontario Inc., an Ontario private company, acquired control of the
-3-
Company by acquiring from treasury 76,000,000 shares of the Company in exchange
for all of the issued and outstanding shares of 1604494 Ontario Inc. The total
amount of issued and outstanding shares in the Company as a result increased to
78,019,782.
Coincident with the establishment of its home warranty insurance business, the
Company divested all of issued and outstanding shares, of Condor Diamond Corp.,
the Company's wholly-owned subsidiary, to Condor Gold Corp., in consideration of
the return of any and all liabilities owing by the Company to Condor Gold Corp.
During 2005 the Company changed the nature of its business and now markets to
Canadian homeowners a proprietary line of non-prime home mortgage programs,
designed to compliment to mortgages of residential real estate (single family
homes and condominiums).
On April 21st, 2005, the Company entered into a Letter of Intent with
Creditorlife Inc respecting the comprehensive marketing of the Company's
proprietary line of products.
On May 19th, 2005, the Company announced to the public, the media and the trade
the full extent of its new range of its products. On May 21st, 2005, the Company
entered into a comprehensive Letter of Intent with Brit Insurance respecting the
full reinsurance by Brit of the Company's range of products.
On June 20th, 2005, the Company entered into a comprehensive Letter of Intent
with Dundee Securities respecting Dundee's acting as the Company's fiscal
advisor. On August 26th, 2005, the board of Directors of the Corporation
accepted the resignation of its President and Chairman Kevin Hamilton and
appointed one of its existing directors, Boyd Soussana, as its new Chairman and
President.
On January 1st, 2006, the board of Directors of the Corporation accepted the
resignation of its Treasurer and Director, Val Guilis, and appointed Steve
Hamilton as its Treasurer and Director. On March 1st, 2006 the Company issued
8,000,000 of its common shares to Harvey E. Moss and Leslie N. Moss in
consideration of consulting services rendered by them to the Company. The
8,000,000 "unrestricted" common shares were issued pursuant to an S-8 Filing
that the Company filed with the Securities and Exchange Commission.
OPERATIONS MANAGEMENT DISCUSSION AND ANALYSIS
The Company has changed the nature of its business and now is preparing to
operate a fully integrated mortgage and general insurance enterprise. The
Company used the 3 month period ending March 31st, 2006 to further develop and
refine its' proprietary in house computerized residential mortgage documentation
and processing systems. Work is near completion. This intensive effort together
with an array of one time legal accounting, investment advisory and development
costs resulted in a net loss ($ 1,458,493) during 1st quarter 2006
GOALS AND OBJECTIVES
The Company is engaged in marketing a series of proprietary non-prime mortgage
suite of products.
CASH REQUIREMENTS
The Company intends to meet its cash requirements through a combination of
operational cash flow as well as sales of its securities.
-4-
DESCRIPTION OF REAL PROPERTY
Reliant does not own any real property. Reliant currently works out of rented
office space located at Suite 250, 350 Bay Street, Toronto. Reliant believes
that this arrangement is adequate for its current and immediately foreseeable
operating needs. Reliant does not have any policies regarding investments in
real estate, securities or other forms of real or personal property outside of
that required to carry on its business operations.
LEGAL PROCEEDINGS
From time to time, Reliant may be involved as a plaintiff or defendant in
various legal actions arising in the normal course of business. Reliant does not
anticipate any material liability as a result of such litigation.
CHANGES IN SECURITIES
On September 5, 2003, the Company announced that it would conduct a reverse
split of its issued and outstanding shares on the basis of 10 common shares for
one new common share. The Company at that date had 37,345,268 common shares
issued and outstanding, after the reverse split there were 3,734,526 common
shares issued and outstanding. On February 9, 2004, the Company issued
34,000,000 common shares for the acquisition of 100% of the issued and
outstanding common shares of Condor Diamond Corp.
On March 3, 2004, the Company authorized the issuance of 6,004,426 S-8 shares
pursuant to debt settlement agreements totaling $428,875.
On February 2, 2005, Company undertook a reverse split of its outstanding common
shares on the basis of one (1) new share for twenty-two (22) old shares reducing
its outstanding common shares from 44,438,786 to 2,019,782.
On March 24, 2005, Corporation issued 76,000,000 shares in consideration of the
acquisition of 100% of the issued and outstanding common shares of 1604494
Ontario Inc., an Ontario private company. This transaction occurred pursuant to
a Stock Exchange Agreement (the "Stock Exchange Agreement"), whereby The BSA
Group Limited ("BSA"), in trust for the shareholders of 1604494 Ontario Limited,
acquired control of the Company by acquiring from treasury 76,000,000 shares of
the Corporation in exchange for all of the issued and outstanding shares of
1604494 Ontario Inc. As a result, the three shareholders of 1604494 Ontario Inc.
had acquired and then owned ninety-seven point four percent (97.4%) of the
issued and outstanding common shares of the Company.
Namely, Kevin Hamilton acquired beneficial ownership of 20,085,667 common shares
in the capital of the Company, through a corporation, Galaxy Galaria Inc. that
he controls. This represents 25.7 % of the issued and outstanding common shares
of the Company. These common shares of the Company were issued to Kevin Hamilton
(Galaxy Galleria Inc.) pursuant to the Stock Exchange Agreement, namely one
common share of the Company was issued for each one common share of 1604494
Ontario Inc. acquired. RS Atlantic Holdings Inc. a private company acquired
ownership of 18,921,220 common shares in the capital of the Company, which
represents 24.2 % of the issued and outstanding consolidated common shares of
the Company. These common shares of the Company were issued to RS Atlantic
Holdings Inc pursuant to the Stock Exchange Agreement, namely one common share
of the Company was issued for each one common share of 1604494 Ontario Inc
acquired.
HS Holdings Inc. a private company acquired ownership of 18,753,113 common
shares in the capital of the Company, which represents 24.0 % of the issued and
outstanding consolidated common shares of the Company. These common shares of
the Company were issued to HS Holdings Inc pursuant to the Stock Exchange
Agreement, namely one common share of the Company for each one common share of
1604494 Ontario Inc. acquired. The total amount of issued and outstanding shares
in the Company thereby increased to 78,019,782.
-5-
On March 1st, 2006 the Company issued 8,000,000 of its common shares to Harvey
E. Moss and Leslie N. Moss in consideration of consulting services rendered by
them to the Company. The 8,000,000 "unrestricted" common shares were issued
pursuant to an S-8 Filing that the Company filed with the Securities and
Exchange Commission.
SHAREHOLDER VOTE
No matter was submitted to a shareholder vote during the first quarter of the
2006 fiscal year.
RESULTS OF OPERATIONS
Results of three months ended March 31, 2006
Revenue for the 3 months ended March 31, 2006 was $ Nil. The Company continued
to develop its proprietary home warranty and a mortgage program which it plans
to launch during the second quarter of this fiscal year and as such has not
generated any revenues. Operating expenses increased to $1,458,493 for the three
months period ended March 31, 2006. This increase was due primarily to the one
time consulting expenses.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
NONE
ITEM 3 CONTROLS & PROCEEDURES
EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES
The Company maintains a system of controls and procedures designed to provide
reasonable assurance as to the reliability of the financial statements and other
disclosures included in this report, as well as to safeguard assets from
unauthorized use or disposition. Within 90 days prior to the filing of this
report, the Company's CEO and CFO have reviewed and evaluated the effectiveness
of the design and operations of the Company's disclosure controls and procedures
with the assistance and anticipation of other members of management team. Based
upon that evaluation, the Company's CEO and CFO have concluded that company's
disclosure controls and procedures are effective for gathering, analyzing and
disclosing the information the Company is required to disclosure in the reports
it files under SEC's rules and forms.
-6-
CHANGES IN INTERNAL CONTROLS
The Company has not made any significant changes to its internal controls
subsequent to the Evaluation Date. The Company has not identified any
significant deficiencies or material weaknesses or other factors that could
significantly affect these controls, and therefore, no need for corrective
action to be taken.
POST PERIOD EVENT
NONE
INVOLVEMENT IN CERTAIN LEGAL PROCEEDINGS
Reliant is not aware of any material legal proceedings that have occurred within
the past five years concerning any director, director nominee, or control person
which involved a criminal conviction, a pending criminal proceeding, a pending
or concluded administrative or civil proceeding limiting one's participation in
the securities or banking industries, or a finding of securities or commodities
law violations.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
The following documents are filed as part of this Quarterly Report on Form
10-QSB/A:
(1) Financial Statements
The financial statements for the three-month period ended March 31, 2006 are
attached as pages F-1 through F-8 and are incorporated herein by reference.
(2) Exhibits
2.1* Agreement and Plan of Reorganization between VHS Network, Inc and
Exodus Acquisition Corporation, dated May 6, 2000.
3.1* Articles of Incorporation for VHS Network, Inc
3.2* Articles of Merger for VHS Network, Inc 3.3Articles of Amendment for
VHS Network, Inc
3.4* By-Laws of VHS Network, Inc
4.1* Specimen Stock Certificate
10.1* Share Exchange Agreement made April 15, 2000 among VHS Network, Inc.,
China eMall Corporation, Gang Chai, Qin Lu Chai, Uphill Capital Inc.,
Charles He, Qing Wang, and Forte Management Corporation
10.2* License Agreement between Groupmark Canada Limited, and VHS Network,
Inc dated January 1, 2000.
10.3* Management Services Agreement between VHS Network, Inc. and Groupmark
Canada Limited, dated April 1997.
10.4* Agreement and Plan of Merger dated as of December 26, 1996 made among
Ronden Vending Corporation and Ronden Acquisition, Inc., Video Home
Shopping, Inc. (A Tennessee Corporation), Progressive Media Group,
Inc. and Pamela Wilkerson.
10.5* Agreement and Plan of Merger dated as of December 30, 1996 between
Ronden Vending Corporation and Ronden Acquisition, Inc.
10.6* Agreement and Plan of Reorganization dated April 10, 1997 among VHS
Network, Inc. and VHS Acquisition, Inc. and VHS Network (Canada) Inc*
-7-
10.8** Form of Acquisition Agreement between the Company and TruNet
Enterprise Inc 10.9Articles of Amendment to Articles of Incorporation
of VHS Network, Inc September 5, 2003.
10.10 Form of Acquisition Agreement between the Company and 1604494 Ontario
Limited, dated March 23, 2005. 10.11Articles of Amendment of the
Company dated Feb 01, 2005.
99.1 Certifications Pursuant To 18 U.S.C Section 1350, As Adopted Pursuant
To Section 906 Of The Sarbanes-Oxley Act Of 2002 * Previously filed as
an exhibit to the Company's Registration Statement on Form SB2 filed
with the Commission and incorporated by reference herein.
** Filed as exhibit 10.8 to the Company's form 10K-SB filed with the
Commission on April 16, 2002 and incorporated by reference herein.
Reports on Form 8-K
On February 12, 2002, the Company filed a Current Report on Form 8-K with the
Commission disclosing the Company's change of accountants.
On July 25, 2003, the Company filed a Current Report on Form 8-K with the
Commission disclosing the Company's change of accountants.
On September 22, 2003, the Company filed a Current Report on Form 8-K with the
Commission disclosing change in control of registrant.
On March 12th 2004 the Company filed a Current Report on Form 8-K with the
Commission disclosing the acquisition of all the outstanding shares of Condor
Diamond Corp.
On March 29, 2005, the Company filed a Current Report on Form 8-K with the
Commission disclosing the change of control of the Company.
Reports on Form S-8
On March 1st, 2006 the Company filed a Report on Form S-8 disclosing the
issuance of 8,000,000 shares of the Company in payment of consulting services
rendered to the Company.
SIGNATURES
- --------------------------------------------------------------------------------
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
RELIANT HOME WARRANTY CORPORATION
Date May 19, 2006 /s/ Boyd Soussana
---------------------------------
(Signature) Boyd Soussana
Chief Executive Officer
Date May 19, 2006 /s/ Steve Hamilton
---------------------------------
(Signature) Steve Hamilton
Chief Financial Officer
-8-
RELIANT HOME WARRANTY CORPORATION
(FORMERLY DIALEX MINERALS INC.)
(A DEVELOPMENT STAGE COMPANY)
INTERIM FINANCIAL STATEMENTS
MARCH 31, 2006 and 2005
(EXPRESSED IN U.S. DOLLARS)
(Unaudited)
CONTENTS
Interim Balance Sheet F-1
Interim Statements of Operations and Comprehensive Loss F-2
Interim Statements of Cash Flows F-3
Notes to Interim Financial Statements F-4 - F-8
RELIANT HOME WARRANTY CORPORATION
(FORMERLY DIALEX MINERALS INC.)
(A DEVELOPMENT STAGE COMPANY)
Interim Balance Sheet
March 31, 2006
(unaudited)
2006
ASSETS -----------
Current Assets
Cash $ --
Total Current Assets --
Intangible Assets 5,141
-----------
Total Assets $ 5,141
-----------
LIABILITIES
Current Liabilities
Accounts payable and accrued liabilities 94,679
Due to related party 85,297
-----------
Total Current Liabilities 179,976
-----------
Total Liabilities 179,976
-----------
Commitments and Contingencies
STOCKHOLDERS' DEFICIT
Common Stock (note 5)
$0.001 par value; 100,000,000 shares authorized
86,019,782 (2005 - 78,019,944) issued and outstanding 86,020
Additional Paid - in Capital 2,150,846
Accumulated Other Comprehensive Loss (6,001)
Deficit Accumulated During the Development Stage (2,405,700)
-----------
Total Stockholders' Deficit (174,835)
-----------
Total Liabilities and Total Stockholders' Deficit $ 5,141
===========
(The accompanying notes are an integral part of these financial statements)
F-1
RELIANT HOME WARRANTY CORPORATION
(FORMERLY DIALEX MINERALS INC.)
(A DEVELOPMENT STAGE COMPANY)
Interim Statements of Operations and Comprehensive Loss
Periods Ended March 31, 2006 and 2005 and cumulative from the period January 21,
2004 (date of inception) through March 31, 2006
(unaudited)
Cumulative
for the Period
Jan.21, 2004
(Date of Inception)
through March 31,
2006 2005 2006
------------ ------------ ------------
Revenue $ -- $ -- $ --
------------ ------------ ------------
Expenses
General and administrative 2,894 3,780 27,484
Professional fees 2,599 19,351 43,152
Consulting fees 1,453,000 10,890 1,525,064
Total Operating Expenses 1,458,493 34,021 1,595,700
------------ ------------ ------------
Loss from Operations (1,458,493) (34,021) (1,595,700)
Discontinued Operations -- (810,000) (810,000)
------------ ------------ ------------
Loss Before Income Taxes (1,458,493) (844,021) (2,405,700)
Provision for Income Taxes 0 0 0
------------ ------------ ------------
Net Loss (1,458,493) (844,021) (2,405,700)
Foreign Currency Translation Adjustment 30 -- (6,001)
------------ ------------ ------------
Total Comprehensive Loss $ (1,458,463) $ (844,021) $ (2,411,701)
============ ============ ============
Net Loss per share - Basic and Diluted
during the Period $ (0.02) $ 0
============ ============
Loss per share from discontinuing operations
during the period $ 0 $ (0.01)
============ ============
Weighted Average Number of Shares Outstanding
during the Period - Basic and Diluted 80,775,499 76,057,094
============ ============
(The accompanying notes are an integral part of these financial statements)
F-2
RELIANT HOME WARRANTY CORPORATION
(FORMERLY DIALEX MINERALS INC.)
(A DEVELOPMENT STAGE COMPANY)
Interim Statements of Cash Flows
Periods Ended March 31, 2006 and 2005
and cumulative from the period January 21, 2004 (date of inception) through
March 31, 2006.
(unaudited)
Cumulative
from the Period
Jan.21, 2004
(Date of Inception)
through March 31,
2006 2005 2006
------------- ------------- -------------
Cash Flows from Operating Activities
Net loss $ (1,458,493) $ (844,021) $ (2,405,701)
Adjustments to reconcile net loss to net cash
(used in) provided by operating activities:
Issuance of shares for consulting fees 1,440,000 -- 1,442,306
Discontinued Operations -- 810,000 810,000
Change in Non- cash working capital:
Accounts payable and accrued liabilities 7,664 30,807 74,099
------------- ------------- -------------
Net cash used in provided by operating activities (10,829) (3,214) (79,296)
------------- ------------- -------------
Cash Flows from Investing Activities
-----------------------------------------------
Net cash used in investing activities -- -- --
------------- ------------- -------------
Cash Flows from Financing Activities
Proceeds from related party debt 10,781 -- 85,297
Issuance of common stock -- -- --
------------- ------------- -------------
Net cash provided by financing activities 10,781 -- 85,297
------------- ------------- -------------
Net Increase in Cash (48) (3,214) 6,001
Foreign Exchange on Balances 48 (4,226) (6,001)
Cash - beginning of period -- -- --
------------- ------------- -------------
Cash - end of period $ -- $ (7,440) $ --
============= ============= =============
(The accompanying notes are an integral part of these financial statements)
F-3
RELIANT HOME WARRANTY CORPORATION
(FORMERLY DIALEX MINERALS INC.)
Notes to Interim Financial Statements
March 31, 2006 and 2005
(unaudited)
1. Nature of Business and Development Stage Activities
---------------------------------------------------
Reliant Home Warranty Corporation (Formerly Dialex Minerals Inc.) (the
"Company") was incorporated in the State of Florida on December 18, 1995,
under the trade name of Ronden Vending Corp.
On March 24, 2005, the Company entered into a stock exchange agreement with
BSA Group Limited, in trust as trustee for the stockholders of 1604494
Ontario Inc (an Ontario Corporation incorporated on January 21, 2004).
Under this agreement the Company exchanged 76,000,000 common shares for
100% of the issued and outstanding shares of 1604494 Ontario Inc. As a
result of the stock exchange the Company obtained control over 1604494
Ontario Inc. Legally the Company is the parent of 1604494 Ontario Inc.,
however, as a result of the stock exchange, control of the combined
companies passed to the stockholders of 1604494 Ontario Inc., which for
accounting purposes is deemed to be the acquirer under reverse merger. As
such, the financial statements present the financial position as of March
31, 2006, and 2005, and the operations for the periods ended March 31, 2006
and 2005, and for the period from inception (January 21, 2004) through
March 31, 2006, of 1604494 Ontario Inc. under the name of the Company. The
reverse merger has been recorded as a recapitalization of the Company, with
the net assets of 1604494 Ontario Inc. and the Company brought forward at
their historical basis. The costs associated with the reverse merger have
been expensed as incurred.
Development Stage Activities
Upon completion of the reverse merger, the Company changed the nature of
its business and now offers a proprietary line of Home Value Warranty
Programs, designed for sale to purchasers of residential real estate
(single family homes and condominiums).
2. Going Concern
-------------
The accompanying financial statements have been prepared in accordance
with accounting principles generally accepted in the United States of
America with the assumption that the Company will be able to realize its
assets and discharge its liabilities in the normal course of business.
As of March 31, 2006 the Company has sustained net losses of $1,458,493
(2005 - $844,021), and a working capital deficiency of $ 174,835 which
raises substantial doubt about the Company's ability to continue as a
going concern. The Company is 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. Although the Company plans to
pursue additional financing, there can be no assurance that the Company
will be able to secure financing when needed or obtain such on terms
satisfactory to the Company, if at all.
The accompanying 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.
F-4
RELIANT HOME WARRANTY CORPORATION
(FORMERLY DIALEX MINERALS INC.)
Notes to Interim Financial Statements
March 31, 2006 and 2005
(unaudited)
3. Basis of Financial Statement Presentation
These financial statements have been prepared in conformity with accounting
principles generally accepted in the United States of America , under the
accrual method of accounting, with the assumption that the Company will be
able to realize its assets and discharge its liabilities in the normal
course of business.
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with accounting principles generally accepted
in the United States of America for interim financial information and with
the instructions to Form 10-QSB. Accordingly, they do not include all of
the information and footnotes required by accounting principles generally
accepted in the United States of America for complete financial statements.
In the opinion of management, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation have been
included. Interim results are not necessarily indicative of the results
that may be expected for a full year. These financial statements should be
read in conjunction with the audited consolidated financial statements and
notes thereto included in the Company's Annual Report to Stockholders on
Form 10-KSB for the fiscal year ended December 31, 2005, as filed with the
Securities and Exchange Commission.
4. Summary of Significant Accounting Policies
a) Recent Accounting Pronouncements
In March 2006, the Financial Accounting Standards Board ("FASB")
issued Statement 156, Accounting for Servicing of Financial Assets,
which amends FAS 140, Accounting for Transfers and Servicing of
Financial Assets and Extinguishments of Liabilities. In a significant
change to current guidance, the Statement of Financial Accountant
Standards ("SFAS") No. 156 permits an entity to choose either of the
following subsequent measurement methods for each class of separately
recognized servicing assets and servicing liabilities: (1)
Amortization Method or (2) Fair Value Measurement Method. SFAS No. 156
is effective as of the beginning of an entity's first fiscal year that
begins after September 15, 2006. The Company is currently reviewing
the effect, if any, the proposed guidance will have on its financial
statements.
F-5
RELIANT HOME WARRANTY CORPORATION
(FORMERLY DIALEX MINERALS INC.)
Notes to Interim Financial Statements
March 31, 2006 and 2005
(unaudited)
4. Summary of Significant Accounting Policies (cont'd)
In February 2006, the FASB issued SFAS No. 155, Accounting for Certain
Hybrid Financial Instruments--an amendment of FASB Statements No. 133
and 140. This Statement permits fair value of remeasurement for any
hybrid financial instrument that contains an embedded derivative that
otherwise would require bifurcation; clarifies which interest-only
strips and principal-only strips are not subject to the requirements
of SFAS No. 133, Accounting for Derivative Instruments and Hedging
Activities; establishes a requirement to evaluate interests in
securitized financial assets to identify interests that are
freestanding derivatives or that are hybrid financial instruments that
contain an embedded derivative requiring bifurcation; clarifies that
concentrations of credit risk in the form of subordination are not
embedded derivatives; and amended SFAS No. 140, Accounting for
Transfers and Servicing of Financial Assets and Extinguishments of
Liabilities, to eliminate the prohibition on a qualifying
special-purpose entity from holding a derivative financial instrument
that pertains to a beneficial interest other than another derivative
financial instrument. SFAS No. 155 is effective for all financial
instruments acquired, issued, or subject to a remeasurement (new
basis) event occurring after the beginning of an entity's first fiscal
year that begins after September 15, 2006. The Company is currently
reviewing the effect, if any, the proposed guidance will have on its
financial statements.
In December 2005, the Financial Accounting Standards Board ("FASB")
issued SFAS No. 154, Accounting Changes and Error Corrections--a
replacement of APB Opinion No. 20 and FASB Statement No. 3. This
Statement replaces APB Opinion No. 20, Accounting Changes, and FASB
Statement No. 3, Reporting Accounting Changes in Interim Financial
Statements, and changes the requirements for the accounting for and
reporting of a change in accounting principle. This Statement applies
to all voluntary changes in accounting principle. It also applies to
changes required by an accounting pronouncement in the unusual
instance that the pronouncement does not include specific transition
provisions. When a pronouncement includes specific transition
provisions, those provisions should be followed. Opinion 20 previously
required that most voluntary changes in accounting principle be
recognized by including in net income of the period of the change the
cumulative effect of changing to the new accounting principle. This
Statement requires retrospective application to prior periods'
financial statements of changes in accounting principle, unless it is
impracticable to determine either the period-specific effects or the
cumulative effect of the change
In July 2005, the FASB issued an exposure draft of a proposed
interpretation, Accounting for Uncertain Tax Positions-an
Interpretation of FASB Statement No. 109 ("SFAS No. 109"). This
interpretation would apply to all open tax positions accounted for in
accordance with SFAS No. 109, including those acquired in business
combinations. It is a proposed asset recognition approach to apply a
dual threshold for uncertain tax positions. The interpretation would
allow the recognition of a tax benefit when it is probable that it
could be sustained upon audit. The interpretation defines "probable"
as it is defined in SFAS No. 5, "Accounting for Contingencies." FASB
has not established an effective date for the interpretation. The
Company is currently reviewing the effect, if any, the proposed
guidance will have on its financial statements.
F-6
RELIANT HOME WARRANTY CORPORATION
(FORMERLY DIALEX MINERALS INC.)
Notes to Interim Financial Statements
March 31, 2006 and 2005
(unaudited)
4. Summary of Significant Accounting Policies (cont'd)
In March 2005, the FASB issued FASB Staff Position ("FSP") No.
46(R)-5, "Implicit Variable Interests under FASB Interpretation No.
("FIN") 46 (revised December 2003), Consolidation of Variable Interest
Entities" ("FSP FIN 46R-5"). FSP FIN 46R-5 provides guidance for a
reporting enterprise on whether it holds an implicit variable interest
in Variable Interest Entities ("VIEs") or potential VIEs when specific
conditions exist. This FSP is effective in the first period beginning
after March 3, 2005 in accordance with the transition provisions of
FIN 46 (Revised 2003), "Consolidation of Variable Interest Entities --
an Interpretation of Accounting Research Bulletin No. 51" ("FIN 46R").
The adoption of this standard is not expected to have a material
impact on the Company's results of operations or financial position.
In March 2005, the FASB issued Interpretation No. 47, "Accounting for
Conditional Asset Retirement Obligations" ("FIN 47"), which will
result in (a) more consistent recognition of liabilities relating to
asset retirement obligations, (b) more information about expected
future cash outflows associated with those obligations, and (c) more
information about investments in long-lived assets because additional
asset retirement costs will be recognized as part of the carrying
amounts of the assets. FIN 47 clarifies that the term "conditional
asset retirement obligation" as used in SFAS 143, "Accounting for
Asset Retirement Obligations," refers to a legal obligation to perform
an asset retirement activity in which the timing and/or method of
settlement are conditional on a future event that may or may not be
within the control of the entity. The obligation to perform the asset
retirement activity is unconditional even though uncertainty exists
about the timing and/or method of settlement. Uncertainty about the
timing and/or method of settlement of a conditional asset retirement
obligation should be factored into the measurement of the liability
when sufficient information exists. FIN 47 also clarifies when an
entity would have sufficient information to reasonably estimate the
fair value of an asset retirement obligation. FIN 47 is effective no
later than the end of fiscal years ending after December 15, 2005.
Retrospective application of interim financial information is
permitted but is not required. Early adoption of this interpretation
is encouraged. As FIN 47 was recently issued, the Company has not
determined whether the interpretation will have a significant effect
on its financial position or results of operations.
F-7
RELIANT HOME WARRANTY CORPORATION
(FORMERLY DIALEX MINERALS INC.)
Notes to Interim Financial Statements
March 31, 2006 and 2005
(unaudited)
5. Stockholders' Equity
Authorized
100,000,000 common shares, par value $0.001 per share
25,000,000 preferred shares, par value $0.001 per share
2006
-----------------
Issued
86,019,782 common shares $ 86,020
=================
Common Stock
On February 2, 2005, the Company undertook a reverse split of its outstanding
common shares on the basis of one new share for twenty two old shares, thereby
reducing its outstanding common shares from 44,438,768 to 2,019,782 prior to the
acquisition of a subsidiary company. The reverse split has retroactively been
taken into consideration in the consolidated financial statements and in the
calculation of earnings per share.
March 24, 2005, pursuant to stock exchange agreement, the BSA Group
Limited, In trust for the shareholders of the Company, acquired control of
1604494 Ontario Inc. by acquiring from treasury 76,000,000 shares of the
Company in exchange for all the shares issued and outstanding shares of
1604494 Ontario Inc
On March 1, 2006, the board of directors approved the issuance of
8,000,000 of its common shares in consideration of consulting service to
Harvey E. Moss and Leslie N. Moss.
Equity Compensation Plan
In accordance with SFAS No. 123 "Accounting for Stock-Based Compensation",
the Company enters into transactions in which goods or services are the
consideration received for the issuance of equity instruments. The value
of these transactions are measured and accounted for, based on the fair
value of the equity instrument issued or the value of the services,
whichever is more reliably measurable. The services are expensed in the
periods during which the services are rendered.
F-8