UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 20-F
ANNUAL REPORT
PURSUANT TO SECTION 12(B) OR (G)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 000-30084
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LINUXWIZARDRY SYSTEMS, INC.
(FORMERLY FLAME PETRO-MINERALS CORP.)
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(Exact name of registrant as specified in its charter)
185 - 10751 SHELLBRIDGE WAY
RICHMOND, BRITISH COLUMBIA V6X 2W8, CANADA
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(Address of principal executive offices)
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK, NO PAR VALUE
--------------------------
(Title of Class)
Securities for which there is a reporting obligation pursuant to Section
15(d) of the Act:
NONE
Indicate the number of outstanding shares of each of the issuer's class of
capital or common stock as of the close of the period covered by the annual
report.
Title of Each Class Outstanding at February 29, 2000
---------------------- ------------------------------------
COMMON SHARES, NO PAR VALUE 13,764,864
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES NO X
-
<PAGE>
------
Indicate by check mark which financial statement the registrant has elected
to follow.
ITEM 17. ITEM 18. X
-
INTRODUCTION
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This 20-F annual report, including all exhibits, consists of 39 pages. The
Exhibit Index is displayed on page 35.
LinuxWizardry Systems, Inc., (the "Company", formerly called Flame
Petro-Minerals Corp.), is a Canadian corporation incorporated under the laws of
the Province of British Columbia. Over 50% of its common stock is held by
non-United States citizens and residents and all of its officers and directors
are non-United States citizens and residents. As a result, the Registrant
believes that it qualifies as a "foreign private issuer" for continuing to
report regarding the registration of its common stock using this Form 20-F
annual report format.
Unless otherwise indicated, all monetary amounts referred to in this annual
report are in Canadian dollars. On February 29, 2000, one U.S. dollar equalled
approximately Canadian $1.4498. The following table sets forth a history of the
exchange rates for the US dollar vs. Canadian dollar during the Registrant's
past five fiscal years.
Year Average Low/High February 28/29
---- ------- -------- -------- -----
2000 1.4737 1.4956/1.4475 1.4498
1999 1.4956 1.5465/1.4159 1.5078
1998 1.3990 1.4412/1.3684 1.4334
1997 1.3623 1.3704/1.3498 1.3656
1996 1.3667 1.4093/1.3451 1.3752
<PAGE>
PART I
ITEM 1. DESCRIPTION OF BUSINESS.
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GENERAL DESCRIPTION
LinuxWizardry Systems, Inc., formerly Flame Petro-Minerals Corp., (the
"Company"), as of each of its five fiscal years ended February 28/29 1995 -
1999, had been involved in the acquisition, exploration and development of
mining properties.
On January 10, 2000, prior to the end of its last fiscal year, the Company
acquired all the issued capital stock of LinuxWizardry, Inc. for 2,000,000
shares of the Company's restricted common stock pursuant to Rule 144 of the SEC.
These shares were valued at US$0.375 per share or Cnd$1,087,500. LinuxWizardry,
Inc. is a newly created Florida Corporation owned by four individuals which
develops Linux-based enterprise software and hardware for end-to-end networking
solutions targeted toward small to medium-sized businesses.
The Company currently owns a 50% joint venture interest in 30 mining claims
known as the Fish Creek Prospect, located in the Fairbanks Mining Division in
Alaska. It also owns a 1.277% net working interest in an oil well located in
Fayette County, Texas. To date, the Company has received no revenues from its
mining property activities, and has received no revenues from its oil and gas
activities during the past four fiscal years. As a result, it has written down
its interest in the oil well located in Fayette County to $1, and has also
written down its Fish Creek Prospect mineral property holdings to $1.
The Company has no current plans to pursue further activities in either the
oil and gas business or the mineral property development business, although it
plans to retain its current property interests in both on the remote chance that
they may have some value in the future.
The fiscal year end of the Company is February 28.
The Company has three part-time employees and nine full-time employees at
present.
<PAGE>
CORPORATE DEVELOPMENT
The Company was incorporated on February 27, 1979 under a perpetual charter
pursuant to the British Columbia Company Act by registration of its Memorandum
and Articles and was extraprovincially registered in the Province of Alberta on
October 12, 1995. Its authorized capital consists of 100,000,000 Common Shares
without par value. Of these, 12,909,114 shares were issued and outstanding as of
February 29, 2000 and 13,764,864 shares were issued and outstanding as of the
date of this Form 20-F. The head office of the Company is located at #185
-10751 Shellbridge Way, Richmond, B.C., V6X 2W8.
In November 1995 the Company made a public offering of 4,500,000 Common
Shares at a price of $0.15 per share to residents of Alberta and British
Columbia, and following the completion of the offering, its shares were listed
on the Alberta Stock Exchange. The Company voluntarily delisted from the
Canadian Venture Exchange on December 14, 1999. The Company's stock currently
trades on the Over the Counter Bulletin Board under the symbol LNXWF.
Since its inception and during the five fiscal years ending in February
1999, the Company had been involved in oil and gas exploration/production and
more recently, mineral property development. It has investigated several mineral
properties in both Canada and the United States and currently retains only a 50%
interest in the Fish Creek Prospect mentioned previously. Although some testing
work has been done on this property indicating the presence of gold, there is
presently no positive indication that it contains any economic mineral resource
and as a result, its value has been written down to $1.
To date the mineral development business has produced no revenues from
operations and the oil and gas business has produced only limited revenues.
During the five fiscal years ended February 28, 1995 though 1999, the Company
received negligible net revenues after operating costs from its interest in the
Fayette County oil well and the value of its interest in the well was written
down to $1 during fiscal 1994.
On November 3, 1999 the Company announced that it had become a fully
reporting company to the United States Securities and Exchange Commission and
its stock commenced trading on the OTC Bulletin Board under the symbol FPMCF.
<PAGE>
On December 15, 1999 announced that as a result of it's common stock being
listed on the OTC Bulletin Board as a fully reporting company, the Company
applied for a delisting from the Canadian Venture Exchange, which was effective
the close of business on December 14, 1999.
On January 10, 2000, the Company acquired all the issued capital stock of
LinuxWizardry, Inc. for 2,000,000 shares of the Company's restricted common
stock pursuant to Rule 144 of the SEC. These shares were valued at US$0.375 per
share or Cnd$1,087,500. LinuxWizardry, Inc. was a newly created Florida
Corporation owned by four individuals. LinuxWizardry, Inc. develops Linux-based
enterprise software and hardware for end-to-end networking solutions for small
and medium sized businesses. LinuxWizardry, Inc. has had no sales to date and
is currently developing various prototypes. Operating advances of have been
transferred to LinuxWizardry, Inc. to cover salaries and other overheads.
Additional funds are required to further develop the software solutions and
commercially exploit and execute upon their business plan. The Company plans to
raise US$2,000,000 to provide necessary funds to the end of the next fiscal
year. The business acquisition was accounted for using the purchase method of
accounting for business combinations. Share consideration, totalling
$1,087,500, was allocated to in process research and development which was
expensed to operations. There were no other purchase price adjustments.
The Company is currently in the development stage and equity financing is
required to continue development and commercial exploitation of the software. As
a result of the uncertainty that is typical in a development stage company there
is doubt about the company's ability to continue as going concern as ultimate
success will be based on securing adequate equity financing and/or the
attainment of a commercially profitable business.
<PAGE>
On February 8, 2000 LinuxWizardry, Inc. announced that the Linux low-cost
router prototype was successfully demonstrated at the Linux Expo show in New
York February 2 through 4. Michael Carpenter, CEO, reported that the
LinuxWizardry team achieved over 400 hours of software development in 2 1/2
weeks to complete the router project. The LinuxWizardry team bring a combination
of 46 years experience in database driven websites, expertise in developing and
optimizing the manufacturing process for major facilities worldwide, and
experience in developing enterprising software solutions with X Windows, Java
for Unix and Linux for major companies such as IBM, Motorola, Honeywell, Boeing
and Chrysler. It was also announced that LinuxWizardry's Board of Directors
appointed Michael Carpenter as CEO, Nelson Comas as COO, and Frank Gepfrich as
CTO.
On February 17, 2000 LinuxWizardry, Inc. announced that a partnership
agreement has been completed with Information Highway.com, Inc. to distribute
and market their low-cost Linux-based Apprentice. The Company believes that
Information Highway.com is an ideal partner to bring LinuxWizardry's Linux-based
low-cost routers to the small business market throughout North America through
its relationship with Level 3 Communications (NASDAQ: LVLT) and Bell Atlantic
(NYSE: BEL) using their backbone. Information Highway.com, Inc. is a leading
Internet Service Provider (ISP) engaged in web content development, e- commerce
solutions, and Internet access and emerging Internet technology. It has opened
Internet Points of Presence in 20 major US cities and is selling Bell Atlantic
ADSL service in 13 states from Virginia to Maine. The Apprentice router
features the revolutionary Apprentice Command Center which allows for an easy
configuration of Internet routers and network appliances through a drag and drop
graphical user interface. The Apprentice router will not require an expensive
network specialist to configure and thus will allow small businesses to take
control of their networks. Mike Carpenter, CEO of LinuxWizardry, stated that
this partnership with Information Highway.com, Inc. is expected to be the first
of many such partnerships which will dramatically leverage LinuxWizardry's
ability to market our Linux-based family of products to businesses worldwide.
According to Access Media International, in 1998 there was approximately 85
million small businesses worldwide having fewer than 100 employees, including
approximately 8 million in the USA and Canada.
On March 15, 2000 the Company held a well-attended shareholders meeting at
which shareholders voted to change the Company name from Flame Petro-Minerals
Corp. to LinuxWizardry Systems, Inc. and selected the new requested symbol
LNXWF. Shareholders also approved an amended stock options agreement. Senior
management of LinuxWizardry presented information on the Apprentice Router
status, marketing opportunities and their plan to take full advantage of the
explosive growth of the Linux industry. The new name, LinuxWizardry Systems,
Inc. and the new symbol, LNXWF, more closely represent the Company's true
business activities as a pure-play Linux company and is expected to remove
confusion for potential investors.
<PAGE>
On March 28, 2000 the Company announced that a private placement for
$5,000,000 is being completed for the development and production of its Linux
based low-cost router. The Company plans to release the beta version of the
Linux Apprentice router in April of 2000 and release a commercial version of the
Apprentice router by August of 2000.
On May 12, 2000 the Company announced that an agreement has been completed
with Programmers Paradise to sell its LinuxWizardry Apprentice router through
its many catalogs and through its web site: programmersparadise.com. Production
units of the Apprentice router are scheduled to be launched in August of this
year. Pursuant to the terms of the Agreement dated April 25 , 2000, Programmer's
Paradise will the sell the routers at LinuxWizardry's suggested retail price,
with a 25% deduction. The term of the Agreement is one year and is renewable
annually. The license is non-exclusive and non-transferable.
The revenue from the roll-out of the Apprentice Router will be generated
from three main sources: (i) selling the Apprentice Router as a plug and play
device; (ii) licensing of the Apprentice Router Command Center software; and,
(iii) developing customized network solutions for businesses utilizing the
Apprentice Router and Apprentice Command Center. Programmer's Paradise, Inc. is
an international marketer of software and hardware targeting the software
development professional and information technology professionals within
enterprise organizations. The Company offers over 70,000 products from more
than 2,000 publishers and manufacturers and distributes these products through
multiple distribution channels.
<PAGE>
On June 9, 2000 the Company awarded a contract to Lineo, Inc. to
manufacture LinuxWizardry's new Apprentice Router incorporating TM
LinuxWizardry's proprietary configuration software known as the Apprentice
Command Center. The Company believes that this alliance with Lineo TM will
enable it to bring our Apprentice Router technology to market quickly and allow
it to keep pace with the expected demand for its products. Under the terms of
the Agreement, Lineo will manufacture the hardware for the first version of
Apprentice Router for LinuxWizardry. LinuxWizardry expects to begin selling the
Apprentice Router starting in August of this year. Pursuant to the terms of the
proposed License Agreement, Lineo will create 100 prototype routers for
LinuxWizardry to beta test. LinuxWizardry shall pay a non-recurring engineering
fee of $35,000, together with the payment of $29,900 for the prototype routers.
Upon completion of the beta testing, expected to be completed by August, Lineo
will manufacture the Apprentice Router at a cost of manufacturing cost plus 45%
on a declining scale, based on volume manufacturing, provided that the cost of
the router shall not be greater than $300 US. LinuxWizardry's first Apprentice
router will connect small business to the high-speed Internet access markets,
namely xDSL and cable modems. Telechoice, a firm which analyses the telecom
industry, estimates the number of xDSL connections to grow from nearly 250,000
in 1999 to over 2.25 million by 2001.
Lineo, Inc. develops, markets and sells embedded Linux system software and
applications that provide OEMs and consumers with simple, low-cost software for
interacting with the Internet via embedded devices. Lineo owns the Embedix
product family including Embedix Linux, Embedix TM SDK and Embedix Browser.
Lineo also owns other technologies designed to improve connectivity TM while
reducing system requirements and per-unit costs.
On June 20, 2000 the Company announced that its LinuxWizardry Linux routing
technology would be used on Linux-based routers which have been named the
official Network hardware for the LinuxFest Trade Show. The network routers
will be connecting all the vendors at the trade show to a high-speed wireless
Internet connection. This would be the first practical demonstration of the
Company's technology. LinuxWizardry also exhibited at the event which was held
in Kansas City from June 20-24, 2000 and was billed as the premier Linux event
in the Midwest.
On July 17, 2000 the Company announced that LinuxWizardry has developed a
new Virtual Private Network (VPN) Internet Appliance which uses the Apprentice
Command Center TM interface to configure secure access through the Internet.
The new product, dubbed Magic Passage, will protect a business network from
unscrupulous Internet hackers while allowing authorized users to access the
network with ease. The Apprentice Command Centre TM allows anyone to configure
their VPN graphically, using simple drag-and-drop commands. LinuxWizardry will
be demonstrating Magic Passage along with the Apprentice Router product at the
LinuxWorld Conference and Expo in San Jose, California during the week of August
15, 2000.
July 25, 2000 the Company announced that an agreement has been completed
with SOVO Computer Center to sell its Apprentice Family of Linux-Based Routers
through SOVO's many customers and through its web site: www.sovo.net.
Production units of the Apprentice router are scheduled for launch in August of
this year.
<PAGE>
LINUXWIZARDRY INC.
BACKGROUND
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LinuxWizardry has identified a need for and is developing a small, low cost
router, which it calls the "Apprentice Router" that runs on the Linux Operating
System. The Apprentice Router utilizes a simple drag and drop Java-based
Graphical User Interface (GUI) such that a network specialist is not needed in
order to configuration the network
Linux Operating System
----------------------
As the new digital economy continues to emerge, companies are moving
towards use of the Linux Operating System for their mission critical operations.
Linux's rise in popularity can be partially
attributed to its open source programming code which allows for continuous
improvement in the operating system and lets users effectively customize the
operating system to their own needs. This, combined with its ease of
availability has led Linux to emerge as a viable alternative to other operating
systems such Windows NT, Novell Netware and Unix. In 1999, 1.35 million copies
of Linux were sold, which represented a 25% market share of the 5.4 million
total copies of operating system software sold. In comparison, sales of Linux in
1998 represented only 16% of the market share. Linux shipments in 1999
surpassed those of Novell Netware and Unix. Linux shipments increased by 92%
between 1998 and 1999, faster than any other operating system. While it is
important to note that the number of Linux Operating System copies sold is
significant, the number of Linux installations may actually be a more
appropriate indicator of Linux popularity, due to the free availability of the
Linux software. As a result, Linux appears to be poised to become a major
player in the Information Technology marketplace.
Network and Router Technology
-----------------------------
A computer network incorporates a series of points or nodes (computers,
printers, terminals) connected by communication paths. These paths transfer
information from point to point using various types of wired and wireless
connections. Networks can be characterized by their connectivity over spatial
distance - local area network (LAN) or wide area network (WAN) and by means of
data transmission type, nature of connection and physical link types.
<PAGE>
Routers function as fundamental components of any LAN, WAN intranet or
Internet network. A router is a device combining hardware and software on a
computer that determines the subsequent network point to which information is to
be forwarded in order to reach its final destination. Routers are flexible in
that they can run different operating systems such as Windows NT, Novell Netware
and Unix, as well as supporting various Internet protocols. A significant
drawback, however, has been that certain standard router technology uses
difficult to configure, text-based interfaces that require a network specialist.
Routers can connect to the Internet through specific high-speed connections
including xDSL, T1, T3 and ISDN subscriber lines, all of which allow for greater
data throughput over the Internet than available through standard telephone
lines and modems.
In order to connect to the Internet, an individual user may use a phone
line and modem, which connects them to an Internet Service Provider (ISP). The
ISP then provides a connection to the Internet via one or more routers. Small
and medium sized businesses or enterprises with existing LANs may choose to
purchase their own router(s), which can be a costly endeavor. Prices can vary
from US$300 to US$100,000 depending on the router features which include
Internet connection type, firewall capability and protocol(s).
The demand for high-speed Internet access globally is increasing at a very
high rate. Analysts believe that xDSL (high bandwidth Digital Subscriber Lines)
connections will facilitate adoption of the Internet in the consumer, small to
medium sized business and small office-home office marketplaces. In particular,
it is believed that North America will see enormous growth in the implementation
of xDSL connections over the next two years. It is estimated by industry
experts that the number of xDSL connections will rise from 25,000 in 1999 to
2.25 million in 2002. Small businesses are a major source of demand for
high-speed Internet access. In 1998, there were an estimated 85 million small
business globally (those with less than 100 employees), with 8 million located
in Canada and the United States. Approximately half of these small businesses
were not online at the beginning of 1999 and one-third still may not be by 2001.
As small businesses continue to come on-line, they will require a
cost-effective, simple means of Internet access, security and traffic management
solutions such as those proposed by Linux Wizardry.
<PAGE>
Consumers and businesses continue to seek high-speed Internet access,
resulting in rapidly expanding market for broadband routers. According to
research published by The Dell Oro Group, a US-based market research firm
specializing in networking, it predicts that router sales will triple from
US$700 million in 1999 to US$2 billion in 2000. Three factors appear to be
driving this rapid growth: (1) an increase in Internet traffic; (2) a move by
ISPs from hub and spoke network topologies, which require few routers, to mesh
technologies, which require several routers; and, (3) use of DWDM equipment in
networks, which requires a router to terminate each DWDM channel.
PRODUCTS
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Apprentice Router(TM)
---------------------
The Apprentice Router is one of the few Linux-based routers to be available
in the current marketplace. It combines low cost and Pentium PC based hardware
utilizing the Linux Operating System, which can be configured through an easy to
use Java-based Graphical User Interface (GUI), known as the Apprentice Command
Centre. The Apprentice Command Centre software was developed by LinuxWizardry
using the Java programming language (version 1.21) and has been copyrighted. By
using Java as the development language for the Apprentice Router, the software
component is completely portable for use with other operating systems. A
primary use of the Apprentice Router will be to connect LANs to the Internet
over a xDSL connection in small to medium sized business environments.
Advantages of Apprentice Router(TM)
-----------------------------------
The Apprentice Router:
* Combines ease of use, low cost, size and flexibility in the router market
place
* Offers low cost because it uses off-the-shelf personal computer technologies
and readily available hardware components
* Is user friendly because the Java-based Graphical User Interface provides
icons that represent network components. The network is configured by drawing a
network diagram using standard drag and drop techniques, letting businesses see
a graphical representation of their networks, instead of cryptic text-base
messages. This allows consumers, small to medium sized businesses and small
office-home office users to take control of their network configuration and
maintenance where previously a network specialist was needed for network
configuration
* Offers software portability because it uses Java as the development language
which allows use on other operating systems that support Java-enabled servers
and browsers
* Offers easy upgradability with system software upgrades available from the
LinuxWizardry website
<PAGE>
The Apprentice Router has several key features:
Firstly, even though the router itself runs the Linux Operating System, the
router operating system runs independently of the operating system of the
network to which it is to be connected. Simply put, the router has the
capability to serve LANs or WANs running on other operating systems;
Secondly, the connections between the Apprentice Router, the Internet and
other network computers are configured through the Apprentice Command Centre, a
drag and drop Graphical User Interface. The Java-based Graphical User Interface
is run from most Java-enabled web browsers (Netscape and Microsoft Internet
Explorer) and is intended to be so simple that most individuals would find the
task of configuring the network connections relatively straightforward, and:
Lastly, the Apprentice Router also supports various Internet connections
including xDSL, ISDN, T1 to T3 as well as supporting standard Internet routing
protocols such as RIP, BGP and OSPF.
The Apprentice Router, running Linux, allows an individual using a network
computer to configure not only the xDSL connection between the router and the
Internet, but the entire network. Specifically, the web browser on the network
computer sends a request for the Graphical User Interface to the router. The
web server running on the router responds to the web browser's request by
sending the Graphical User Interface in the form of a Java applet. The
configuration protocol instructions as input from the network computer are
transferred via the Graphical User Interface to the Apprentice Router.
MARKETING STRATEGY
--------- --------
LinuxWizardry demonstrated the prototype version of the Apprentice Router
at the LinuxWorld Expo in February 2000 and received, what it believes to be, an
enthusiastic response. A market-ready product is planned to be available to the
market by August 2000. The projected price point range of US$500 to US$1,000 per
router will target small office-home office users and small businesses.
<PAGE>
The anticipated revenue from the roll-out of the Apprentice Router is
expected to be generated from three main sources: (1) selling the Apprentice
Router as a plug and play device; (2) licensing of the Apprentice Router Command
Centre software; and, (3) developing customized network solutions for businesses
utilizing the Apprentice Router and Apprentice Command Centre.
Consumer demand is growing rapidly for high-speed Internet xDSL and cable
connections. This provides a significant opportunity for a Linux-based plug and
play router capable of offering services to new subscribers. Distribution
channels include telcos, computer manufacturers, retailers and direct to the end
user over the Internet. Through Information Highway.com, Inc., a Canadian-based
ISP and a related company, LinuxWizardry has established a strategic partnership
to sell their DSL Service with Bell Atlantic, one of the leading telecom
companies in the eastern United States. Information Highway.com, Inc. Bell
Atlantic will sell the LinuxWizardry Internet products through their existing
customer base. Other distribution channels are also being investigated and
developed.
ADDITIONAL PRODUCT POTENTIAL
---------- ------- ---------
The Company believes, based upon its knowledge of the market, that the
router has significant potential to develop into a network appliance as other
applications such as firewall protection, VoIP solutions and VPNs are added to
the router configuration.
The Java-based Graphical User Interface software (Apprentice Com- mand
Centre) developed by LinuxWizardry for the drag and drop configur- ation of a
router has high functionality and ease of use.
The Company believes that an excellent opportunity exists to license this
software for use in other products and to OEMs. Custom programming and user
interface solutions can also be provided on an outsource basis as the embedded
Linux Operating System market continues to expand providing customized network
solutions to larger businesses appears to represent a significant growth
opportunity for LinuxWizardry to utilize their skills, knowledge and expertise
to establish the Company as a premier service provider for Linux Operating
System and Java-based solutions.
<PAGE>
MANUFACTURING
-------------
On June 9, 2000 the Company awarded a contract to Lineo, Inc., to
manufacture the Apprentice Router incorporating LinuxWizardry's propri- etary
configuration software known as the Apprentice Command Center. The Company
believes that this alliance with Lineo TM will enable it to bring our Apprentice
Router technology to market quickly and allow it to keep pace with the expected
demand for its products. Under the terms of the Agreement, Lineo will
manufacture the hardware for the first version of Apprentice Router for
LinuxWizardry. Pursuant to the terms of the proposed License Agreement, Lineo
will create 100 proto- type routers for LinuxWizardry for beta testing.
LinuxWizardry will pay a non-recurring engineering fee of $35,000, together with
the pay- ment of $29,900 for the prototpye routers. Upon completion of the beta
testing, Lineo will manufacture the Apprentice Router at a cost of manu-
facturing cost plus 45% on a declining scale, based on volume manufacturing,
provided that the cost of the router will not exceed US$300.
COMPETITION
-----------
Cisco Systems, Inc. currently controls 77% of the global router market with
many small niche players holding a 1% to 2% market share. Other companies active
in this market include Nortel Networks, Juniper Networks, Inc., Ramp Networks,
Inc. and ZyXel Communications. The Apprentice Router's low cost, ease of use
and flexibility combined with it being one of the few Linux-based routers
available in the current market gives it a competitive advantage over other
existing routers.
RISK FACTORS
---- -------
The Company is subject all of the generic risk factors affecting any small
startup business, including: limited operating capital; limited management
capabilities; difficulty and expense of marketing products; quickly and
ever-changing technology, and perhaps, most importantly, significant competition
from much larger competitors who are well-established, well-funded and capable
of coming into the market with similar products which could quickly erase any
potential advantage which LinuxWizardry may currently have. Any one or any
combination of the above factors could be sufficient to cause the Company to
fail in its current efforts and to possibly go out of business.
ITEM 2. DESCRIPTION OF PROPERTY.
------------------------
Registrant's Head Office
------------------------
<PAGE>
The Company owns no properties. The Company currently utilizes office
space in a commercial business park building located in Richmond, British
Columbia, Canada, a suburb of Vancouver. The space is shared with several other
companies which share common management.
The monthly rent for its portion of this 1,000 square foot space is
$500.00. The present facilities are believed to be adequate for meeting the
Registrant's needs for the immediate future. If required in the future, the
Company does not anticipate that it will have any difficulty in obtaining
additional space at favorable rates. There are no current plans to purchase or
otherwise acquire any properties in the near future.
LinuxWizardry, Inc., the Florida-based subsidiary currently sub leases
office space in Boca Raton at a rate of US$5,724 on a lease which expires March
31, 2003.
ITEM 3. PENDING LEGAL PROCEEDINGS.
--------------------------
The Company is not presently involved in, nor aware of any pending legal
proceedings which could have a material adverse effect upon its business or
financial position. To the best of the Registrant's knowledge, no legal
proceedings are contemplated by any governmental or regulatory authorities.
ITEM 4. CONTROL OF REGISTRANT.
----------------------
To the best of the Registrant's knowledge, it is not indirectly owned or
controlled by any other corporation or foreign government.
As of August 28, 2000, 13,764,864 Common Shares were outstanding. At such
date, there were no persons or groups known to the Company to be the owners of
more than 10% of the Registrant's issued and outstanding shares except as
disclosed below:
Title Amount Percent of Class
Identity of Person or Group owned of class
--------------------------- --------- ----------------
Common John G. Robertson 1,652,000 12.00%
<PAGE>
The present officers and directors of the Company and its subsidiary, as a group
own, directly or indirectly (including optioned shares of 950,000) a total of
5,985,423 shares representing 43.48% of the currently outstanding 13,764,864
Common Shares, as of August 15, 2000, and 40.65% of the shares which would be
outstanding if all of the officers' and directors' 960,000 options were to be
exercised.
There are no arrangements, known to the Company, the operation of which could
result in a change in control of the Company.
ITEM 5. NATURE OF TRADING MARKET.
-------------------------
The Registrant's shares have traded solely on the Alberta Stock Exchange
(the "ASE") between November, 1995 and December 14, 1999, at which time it
voluntarily delisted from said exchange. The stock has traded on the OTC
Bulletin Board in the United States since November 1999 under the symbol
"FPMCF".
The Company believes that its common stock falls under the classification
of a "penny stock", as that term is defined by Rule 3a51-1 of the Securities
Exchange Act of 1934. This rule imposes additional sales practice requirement on
broker-dealers who sell such securities to persons, other that established
customers and accredited investors, which are generally defined as institutions
with assets in excess of US$5,000,000, or individuals with net worths in excess
of US$1,000,000, or annual incomes exceeding US$200,000 or US$300,000 jointly
with their spouse. For transactions covered by this rule, the broker-dealer must
first make a special suitability determination for the purchaser and the
transaction, prior to the sale. Consequently, the rule may affect the ability of
brokers-dealers to sell the Registrant's securities and may also have a
potentially adverse effect upon the ability of existing shareholders and new
purchasers of the Registrant's securities to sell their shares in the secondary
market, should one ever develop in the United States.
The ranges of the low and high sales prices for the Company's shares traded
on the ASE and OTC Bulletin Board during the last two fiscal years ended
February 28/29 and the quarter ended May 31,
2000 were as follows:
Period High* Low* Close* Volume
------ ---- --- ----- ------
1999 1st Quarter ended 5/29/98 0.11 0.08 0.08 115,500
2nd Quarter ended 8/31/98 0.15 0.08 0.14 116,595
3rd Quarter ended 11/30/98 0.19 0.10 0.11 370,500
4th Quarter ended 2/26/99 0.12 0.08 0.12 73,000
<PAGE>
2000 1st Quarter ended 5/31/99 0.13 0.11 0.11 250,000
2nd Quarter ended 8/31/99 0.16 0.08 0.12 374.500
3rd Quarter ended 11/30/99* 0.72 0.16 0.66 1,228,000
4th Quarter ended 2/29/00* 4.00 0.42 2.87 12,385,000
2001 1st Quarter ended 5/31/00* 1.25 4.60 1.31 8,614,800
*Prices in C$ through 11/30/99, US$ from 12/01/99 through 5/31/00
As of August 15, 2000, there were 13,764,864 Common Shares of the Company
outstanding. At such date, there were 29 holders of record of the Registrant's
shares residing in the United States, holding a total of approximately 3,070,950
shares, representing approximately 22.3% of the outstanding shares. This number
does not include any possible shareholders who are not registered and those
holding shares in street name.
ITEM 6. EXCHANGE CONTROLS AND OTHER LIMITATIONS AFFECTING SECURITY HOLDERS.
-------------------------------------------------------------------
(a) There are no governmental laws, decrees or regulations in Canada
relating to restrictions on the export of capital affecting the remittance of
interest, dividends or other payments to nonresident holders of the Registrant's
shares. Any such remittances, however, are subject to withholding tax. See
Item 7, "Taxation".
(b) There are no limitations under the laws of Canada, the Province of
British Columbia or in the charter or any other constituent documents of the
Company on the right of foreigners to hold or vote the shares of the Company.
However, under the provisions of the Investment Canada Act, when control of a
Canadian business is acquired by a non- Canadian, the transaction may be
reviewable in certain circumstances by Investment Canada, an agency of the
federal government of Canada. Reviewable transactions are those in which a
non-Canadian acquires the assets of a Canadian business or the voting shares of
a Canadian corporation the value of which assets or shares exceeds $5 million
(Canadian). Also, certain transactions are specifically exempted from review.
<PAGE>
ITEM 7. TAXATION.
---------
Withholding
-----------
Generally, cash dividends paid by Canadian corporations to nonresident
shareholders are subject to a withholding tax of 25 percent. However, pursuant
to Article X[2 of the Canada-United States tax treaty, dividends paid to a
resident if a company of the United States are only subject to a 15 percent
withholding tax. Further, if the United states resident owns 10 percent or more
of the voting shares of the Canadian company paying the dividends, the
withholding tax is reduced to 10 percent. In addition to dividend withholding,
interest paid to United States residents is subject to a 15 percent withholding
tax pursuant to Article XI[2 of the Canada-United States tax treaty.
Capital Gains
-------------
A nonresident purchaser who holds shares of the Company as capital property
will not be subject to tax on capital gains realized on the disposition of such
shares unless such shares are "taxable Canadian property" within the meaning of
the Income Tax Act (Canada) and no relief is afforded under any applicable tax
treaty.
The shares of the Company would be taxable Canadian property of a nonresident
purchaser if the nonresident purchaser used the shares in carrying on a business
in Canada or if at any time during the five-year period immediately preceding
the disposition not less than 25 percent of the issued shares of any class of
the Company belonged to the particular purchaser, persons with whom the
purchaser did not deal at arm's length or any combination thereof.
Holders of Common Shares of the Company should seek independent advice from
their own professional tax advisors with respect to the Canadian Income Tax
consequences arising from the holding of Common Shares of the Company.
ITEM 8. SELECTED FINANCIAL DATA.
------------------------
The selected financial data set forth in the following table is expressed
in Canadian dollars. Since June 1, 1970, the Government of Canada has permitted
a floating exchange rate to determine the value of the Canadian dollar as
compared to the United States dollar. At February 29, 2000, US$1.00 was equal
to approximately C$1.4487. The exchange rates for the past five fiscal years
ended February 28/29, are presented in the introduction to this registration
statement.
Capital Expenditures and Financing
----------------------------------
<PAGE>
At its February 28, 2000 fiscal year end, the Company had $750,000 of
anticipated capital expenditures for the ensuing six month period.
The following represents selected financial data for the Company for each
of the past five fiscal years, ending on February 28/29. The data presented for
the 2000, 1999, 1998 and 1997 fiscal years are prepared in accordance with
generally accepted accounting principles in the United States and for 1996, in
accordance with generally accepted accounting principles in Canada. All amounts
are expressed in Canadian dollars:
Fiscal Years Ended February 28/29
<TABLE>
<CAPTION>
2000 1999 1998 1997 1996*
------------ ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Net Revenue $ - $ - $ - $ - $ 439
Income (loss)
from continuing
operations (1,390,772) (129,212) (160,404) (195,571) (117,831)
Income (loss)
per Common Share (0.13) (0.02) (0.02) (0.05) (0.03)
Total Assets 543,404 6,574 32,259 437,641 634,956
Working Capital 451,376 (171,653) (128,883) 30,521 116,344
Shareholders' Equity 455,947 (171,651) (129,881) 327,775 551,163
Cash Dividends per
Common Share $ nil $ nil $ nil $ nil $ nil
<FN>
*1996 figures are presented under Canadian GAAP.
</TABLE>
<PAGE>
Reference is made to "Item 1. Description of Business" and "Item 9.
----------------------- ------
Management's Discussion and Analysis of Financial Condition and Results of
--------------------------------------------------------------------------
Operations" for a description of the initiation and progression of
----------
Registrant's activities since its incorporation.
ITEM 9. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
---------------------------------------------------------------
RESULTS OF OPERATIONS.
---------------------
In the past, the Company has derived most of its development and operating
capital primarily from the issuance of capital stock. Minor amounts were derived
from oil and gas revenues, and interest.
The Company has been successful in the past in acquiring capital through
the issuance of shares of its Common Stock, and through advances from related
parties. Although it intends to continue utilizing these sources, there has been
no assurance in the past that these sources and methods would continue to be
available in the future. On July 16, 1999, the Company received from John G.
Robertson, its President, a "Commitment to Provide Financing to Flame
Petro-Minerals Corp. as Required for Ongoing Operations". In substance, the
Commitment states that if the Company is not able to obtain funds required for
maintaining its ongoing operations and status as a publicly traded company, from
other sources, Mr. Robertson agrees and commits to provide, and/or arrange for
any such funds for the Company on either a loan, equity, or combination basis,
on mutually agreeable terms, and which comply with any regulatory rules and
regulations applicable to such transactions. Mr. Robertson further states that
such maintenance funding requirements are estimated at approximately C$100,000
per year and that he is capable of and willing to provide and/or arrange for
such funding until the Company is able to obtain adequate funding from other
sources, and/or is able to generate net earnings from revenues which will
sustain its ongoing operations.
In the event that Mr. Robertson were not able to meet his commitments, and
no other sources of capital were available to the Company in the future, on a
reasonable financial basis, it would face the same obstacles as many small,
undercapitalized companies do, and, in the worst case, could be forced to
reorganize or liquidate, either of which consequence would likely have an
adverse financial effect upon the Registrant's shareholders.
<PAGE>
At the present time, and in its present circumstances, there exists
substantial doubt as to the ability of the Company to continue as a going
concern, since there is no ongoing source of revenues and profits capable of
sustaining the Registrant's operating overhead. Although Mr. Robertson has
committed to ensuring that the Company is able to survive on an interim basis,
over the longer term, the Com- pany will need to find and enter into a business
which holds the pros- pects of ensuring that it can continue as a going concern.
The primary focus of management at the present time is on researching new
business opportunities and assessing potential financing possibilities for
funding any such new business which may be entered into or acquired.
LIQUIDITY AND CAPITAL RESOURCES
-------------------------------
Three months ended May 31, 2000 compared to three months ended May 31, 1999
----------------------------------------------------------------------------
During the period ended May 31, 2000, the Company financed its operations
mainly through the issuance of capital stock which provided a net $348,869
compared to no such stock sales in the 1999 period. The other significant source
of capital resulted from an increase in accounts payable, which stood at $90,897
at the end of the 2000 period, compared to $22,777 at the end of the 1999
period. Amounts due to related parties decreased to $23,128 at the end of the
1999 period, compared to $180,134 at the end of the 1999 period.
At the end of the 2000 period, current assets stood at $195,863, compared
to $9,178 at the end of the 1999 period. Current liabilities decreased to
$122,025 from $204,911 in 1999 due to the factors described above. As a result,
working capital increase substantially from a negative $195,737 at the end of
the 1999 period to a positive $73,838. Shareholders' equity increased to a
positive $135,099 from a negative $195,733 at the end of the 1999 period as a
result of the cash infusions from the capital stock insuances.
Fiscal 1999 compared to 1998
----------------------------
During the 1999 fiscal year ended February 28, 1999, the Company continued
to derive, as in the past, most of its development and operating capital
primarily from the issuance of capital stock.
During the year, the Company issued a total of 584,000 Common Shares in a
private placement at $0.15 per share which provided $87,442 to the Company. The
securities offered pursuant to this placement were sold in Canada. During the
year, the Company received a net $5,961 in advances from related parties.
<PAGE>
At 1999 yearend, current assets stood at $6,574, compared to $32,259 at the
end of 1998. Current liabilities increased to $178,225 from $162,140 in 1998
due mainly to an increase in accounts payable from $7,667 at the end of in 1998
to $18,591 the end of 1999. Working capital decreased substantially to a
negative $171,651 from a negative $129,881 at the end of 1998. Shareholders'
equity decreased to a negative $171,651 from a negative $129,881 at the end of
1998. as a result of continuing operating losses.
All of the above figures are reported under U.S. GAAP.
RESULTS OF OPERATIONS
---------------------
Three months ended May 31, 2000 compared to three months ended
--------------------------------------------------------------
May 31, 1999
------------
The Company received no revenues from operations in the 2000 period ended
May 31, as it similarly did in the 1999 period. 2000 interest income increased
to $538 from $45 in 1999.
General and administrative expenses rose significantly in the 2000 period
to $401,297 from the $21,082 of the previous year period as the Company went
from an essentially dormant position to an operating entity. The most
significant changes occurred in investor relations expenses, which jumped to
$180,009 in 2000 from nil in 1999. Other significant increases came in office,
rent and telephone costs which jumped to $60,820 from $2,751 in 1999 reflecting
the operation of the Florida subsidiary. Salaries and benefits totaled $59,820
in 2000 compared to nil in 1999, and travel and promotion totaled $33,633 in
2000 compared to nil in 1999. Research and development expenses totaled $128,892
in the 2000 period compared to none recorded in the previous year. Likewise,
selling and marketing expenses totaled $139,528 in the 2000 period compared to
none recorded in the 1999 period.
As a result of the increased expenditures, the net loss for the 2000 period
totaled $669,717, compared to a loss of $21,082 in 1999.
Fiscal 2000 compared to 1999
----------------------------
During fiscal 2000, the Company received no revenues from operations, as it
also did in 1999. Interest income was negligible in both years.
<PAGE>
Administrative expenses in 2000 totaled $188,700 compared to $113,607 in
1999. The increase was due mainly to the higher level of activity related to
the Company's acquisition of LinuxWizardry, Inc. Investor relations expenses
totaled $42,951 in 2000 compared to $9.090 in 1999, Other factor contributing to
the higher administrative expenses were increased office, rent and
telephone expenses ($30,547 in 2000 vs $16,134 in 1999), increased professional
fees ($25,240 in 2000 vs $16,223 in 1999). Management and directors fees also
rose to $55,050 from $42,000 in 1999. Travel and promotion costs rose from
nil in 1999 to $12,019 in 2000. The only area of decrease was in consulting and
subtract expenses, which dropped from $17,486 in 1999 to $3,787 in 2000.
Other expenses remained relatively stable. For additional details on
events which took place during the course of the fiscal year, please refer to
Item 1.
Mineral property carrying costs decreased considerably in 2000 to $3,817
from $15,605 in 1999 because the Company did not carry on any drilling
activities during fiscal 2000 as it had in 1999.
Costs associated with the acquisition and operations of LinuxWizardy, Inc.
contributed significantly to expenses incurred during fiscal 2000. Research and
development costs totaled $1,000,557 compared to no such amount during the
previous year, since LinuxWizardy, Inc. was only formed in late 1999. Selling
and marketing costs related to that business totaled $97,698 in 2000.
The net loss for 2000 under U.S. GAAP., totaled $1,390,772 compared to a
loss of $129,212 in 1999.
Fiscal 1999 compared to 1998
----------------------------
The Company received no revenues from operations in fiscal 1999 as it
similarly did in 1998. 1999 interest income decreased to $148 from $2,875 in
1998.
Administrative expenses rose to $113,607 in 1999 from $98,553 in 1998 due
mainly to a net increase of $26,084 in consulting and professional fees while
investor relations expenses dropped to $9,090 from $27,726 in 1998. Other
expenses remain relatively static.
<PAGE>
Mineral property exploration expenses dropped considerably in 1999 to
$13,808 from $61,851 in 1998 as the Company determined to de- emphasize its
interest in this area due low gold prices, lack of positive exploration results
and difficulty in raising capital for further exploration.
The net loss for 1999 under U.S. GAAP., totaled $129,212 compared to a loss
of $160,404 in 1998.
Year 2000 Concerns and Compliance
---------------------------------
The Company experienced no adverse effects as a result of concerns related
to the year 2000 (Y2K) rollover. Neither is the Company aware of any adverse
effects which may have been experienced by any of its suppliers or customers as
a result of their relationship or dealings with the Company.
ITEM 9A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
----------------------------------------------
MARKET RISK.
------------
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133.
"Accounting For Derivative Instruments and Hedging Activities." This statement
establishes accounting and reporting standards for derivative instruments,
including certain derivative instruments embedded in other contracts, and for
hedging activities. SFAS No. 133 will be effective for the Registrant's fiscal
year beginning March 1, 2000. Because the Company is not involved in any
activities covered by SFAS No. 133, the adoption of SFAS No. 133 is not expected
to have a material effect on the Registrant's financial position or results of
operations.
ITEM 10. DIRECTORS AND OFFICERS OF THE REGISTRANT.
-----------------------------------------
Position with Office
Name Registrant Term of Office Held Since
---- -------------- ------------------- ----------
John G. Robertson President and Annual Shareholders 3/05/79
Director Meeting in 2000
Brian Cherry Director Annual hareholders 2/11/93
Meeting in 2000
<PAGE>
Donna M. Moroney Director and Annual Shareholders 6/17/98
Secretary Meeting in 2000
Jennifer H. Lorette Vice President At the discretion 6/01/94
and CFO of the Directors
Mike Carpenter Director and At the discretion 1/07/00
Officer of of the Directors
Subsidiary
Nelson Comas Director and At the discretion 1/07/00
Officer of of the Directors
Subsidiary
Frank Gepfrich Officer of At the discretion 1/07/00
Subsidiary of the Directors
Russ Gallagher Officer of At the discretion 1/07/00
Subsidiary of the Directors
John G. Robertson - Mr. Robertson is President and founder of the Company.
------- ---------
He is also the President and a Director of the following public companies: IAS
Communications, Inc., a U.S. public company which is developing and marketing
proprietary antenna technology; Information Highway Inc., a U.S. public
company engaged in the internet services provider business; Reg Technologies
Inc., a Canadian company, and REGI U.S. Inc., a related U.S. public company
which, together, are engaged in the development of a rotary engine/compressor
technology; and Teryl Resources Corp., a Canadian public company engaged in the
minerals development business in Alaska. He is also President and a Director of
SMR Investments Ltd., a private company. Mr. Robertson is a citizen and resident
of Canada.
Brian Cherry - Mr. Cherry is a Director of the Company. He is also a
------------
Director and Officer of the following public companies: Reg Technologies Inc.,
REGI U.S. Inc. and Teryl Resources Corp., and is also employed by Superior
Manufacturing, a private company located in Mission, B.C. Mr. Cherry is a
citizen and resident of Canada.
Donna M. Moroney - Ms. Moroney is a director of the Company and also a
----------------
consultant to and officer of a number of private and public companies in Canada
providing assistance in regulatory compliance and administrative support. She is
a citizen and resident of Canada.
<PAGE>
Jennifer H. Lorette - Ms. Lorette has been Vice President and Chief
-------------------
Financial Officer of the Company since June 1, 1994. She is also a vice
president of Reg Technologies, Inc. and REGI US, Inc. Ms. Lorette is also
Secretary/ Treasurer and Chief Financial Officer of Information Highway Inc.,
and Secretary/Treasurer of IAS Communications Inc. Ms. Lorette is a citizen and
resident of Canada.
Michael Carpenter, Chief Executive Officer of subsidiary - has over 20
-----------------
years of experience with IBM, Motorola, Honeywell, Boeing and Chrysler in the
development of Linux and Unix based applications including IBM ViaVoice Outloud
for the Linux Operating System.
Nelson Comas, Chief Operating Officer of subsidiary - has 12 years of
------------
experience in developing and optimizing the manufacturing process throughout
major manufacturing facilities worldwide, through hardware and software process
improvements. Mr. Comas has an extensive background in Test Systems
Engineering and was responsible for the development of level 4 software
processes at Motorola.
Frank Gepfrich, Chief Technology Officer of subsidiary - has 14 years of
--------------
experience in developing enterprise software solutions with X- Windows and Java
for Unix. Additional technical experience also includes creating Intranet
applications using CORBA and JAVA in mixed computer environments. Mr. Gepfrich
was also responsible for developing corporate wide solutions at Motorola.
Russ Gallagher, Chief Financial Officer of subsidiary, has over 40 years
--------------
experience in the securities industry, including 20 years as owner of Gallagher
& Co., a NASD broker dealer firm. Mr. Gallagher previously worked as a computer
design engineer for North American Rockwell and has advanced degrees in
Electrical Engineering.
ITEM 11. REMUNERATION OF DIRECTORS AND OFFICERS
--------------- ------------- --------
For the fiscal year ended February 29, 2000 the Company and itssubsi-
diaries paid $42,000 in compensation to directors and officers as a group.
<PAGE>
SMR Investments Ltd., a company owned by Susanne M. Robertson, wife of
John G. Robertson, receives, in accordance with a management agreement $2,5OO
per month for management fees provided to the Company and $500 per month for
rent. A further $1,000 per month is paid to the President of the Company, John
G. Robertson, as a director's fee. John G. Robertson is also president and a
director of SMR Investments Ltd.
During the fiscal year ended February 29, 2000 stock options were granted
on a total of 1,100,000 common shares pursuant to stock option plans. A total of
725,000 are exercisable at $0.75 and expire on December 21, 2004, and 375,000
are exercisable at $0.75 and expire on January 5, 2005.
No cash or non-cash compensation was paid or distributed to the executive
officers of the Company under any pension or other plans nor is there any plan
for such payments or distributions during the following fiscal year.
No monies were set aside or accrued by the Company during the fiscal year
ended February 29, 2000 to provide pension, retirement or similar benefits for
officers or directors of the Company.
ITEM 12. OPTIONS TO PURCHASE SECURITIES FROM REGISTRANT OR SUBSIDIARIES
---------------------------------------------------------------
Options and warrants to purchase Registrant's Common Shares
-----------------------------------------------------------
held by Officers and Directors of Registrant and Subsidiary
----------- -----------------------------------------------
Number of Exercise Expiration
Name of Optionee Shares Price Date of Option
---------------- ------- ----- --------------
John G. Robertson 375,000 $0.75 12-21-04
Brian Cherry 75,000 0.75 12-21-04
Donna M. Moroney 75,000 0.75 12-21-04
Jennifer H. Lorette 75,000 0.75 12-21-04
Mike Carpenter 95,000 0.75 01-05-05
Nelson Comas 85,000 0.75 01-05-05
<PAGE>
Frank Gepfrich 85,000 0.75 01-05-05
Ray Gallagher 85,000 0.75 01-05-05
As a group 950,000
Options and warrants to purchase Registrant's Common Shares held by Others
--------------------------------------------------------------------------
Number of Exercise Expiration
Shares Price Date of Option
------ ----- --------------
Employee 100,000 $0.75 12-21-04
Employee 25,000 0.75 12-21-04
ITEM 13. INTEREST OF MANAGEMENT IN CERTAIN TRANSACTIONS
----------------------------------------------
The Company is party to a management services agreement with SMR Investment
Ltd. under which it incurred management fees of $30,000 in each of fiscal years
2000, 1999 and 1998, and rent of $6,000 in each of fiscal years 2000, 1999 and
1998. SMR Investment Ltd. is a private company owned by Susanne M. Robertson,
the wife of John G. Robertson.
The Company paid a director's fee of $12,000 to John G. Robertson, its
president, during each of fiscal years 2000, 1999 and 1998.
The Company had related party advances outstanding of $9,929 at the
February 2000 yearend, compared to $157,634 at the end of its previous fiscal
year. These were unsecured, non-interest bearing and with no fixed terms of
repayment.
<PAGE>
PART II
ITEM 14. DESCRIPTION OF SECURITIES TO BE REGISTERED
------------------------------------------
The Company has an authorized capital of 100,000,000 Common Shares without
par value. Of these, 12,909,114 shares were issued and outstanding as of
February 28, 2000 and 13,764,864 shares were issued and outstanding as of the
date of this Form 20-F. The Common Shares are not subject to any future call or
assessment and they all have equal voting rights. There are no special rights
or restrictions of any nature attached to any of the shares and they all rank
equally, as to all benefits that might accrue to the holder thereof. There are
no restrictions on the repurchase or redemption of shares while there is any
arrearage in the payment of dividends or sinking funds installments.
A. CAPITAL STOCK
-------------
The holders of Common Shares are entitled to receive dividends in cash,
property or shares when and if dividends are declared by the Board of Directors
out of funds legally available therefor. There are no limitations on the
payment of dividends. A quorum for a general meeting of shareholders is two
shareholders (or proxyholders) personally present. The holders of shares are
entitled to one vote per share on all matters submitted to a vote of
shareholders. In the event of any liquidation, dissolution or winding up of the
business of the Company, the assets of the Company, if any, after payment or
provision for payment of all debts, obligations or liabilities of the Company,
shall be distributed to the holders of shares. There are no pre- emptive
rights, subscription rights, conversion rights or redemption provisions relating
to the shares and none of the shares carries any liability for further calls.
The rights of holders of shares may not be modified other than by a vote
of 75% of the shares voting on such modification. Because a quorum for a
general meeting of shareholders can exist with two
shareholders (or proxyholders) personally present holding not less than 10% of
the issued shares, the rights of holders of shares may be modified by less than
a majority of the issued shares of Company. Where the rights of any class of
shares have been amended, however, the holders of more than 1O% of that class of
shares who were entitled to vote and did vote against the special resolution for
the amendment are entitled, under the Company Act (British Columbia), to apply
to the court to set aside the special resolution. On such application, the
court may set aside the resolution, affirm the resolution subject to certain
terms or affirm the resolution and require the Company or any other person to
purchase the shares of any shareholder at a price and on the terms determined by
court.
B. OTHER SECURITIES TO BE REGISTERED
---------------------------------
None
<PAGE>
PART III
ITEM 15. DEFAULTS UPON SENIOR SECURITIES
-------------------------------
Not applicable.
ITEM 16. CHANGES IN SECURITIES AND CHANGES IN SECURITY FOR REGISTERED SECURITIES
-----------------------------------------------------------------------
Not applicable.
PART IV
ITEM 17. FINANCIAL STATEMENTS
--------------------
Reference is made to "Item 18. "Financial Statements".
ITEM 18. FINANCIAL STATEMENTS
--------------------
The Registrant's Financial Statements, Auditor's Reports and Notes to the
Financial Statements which are required to be filed hereunder are listed in Item
19(a) hereof and are contained on pages 25 through 34 of this Form 20-F.
ITEM 19. FINANCIAL STATEMENTS AND EXHIBITS
---------------------------------
(a) Financial Statements for the fiscal years ended February 28 2000, 1999, and
--------------------
1998 are audited. The Financial Statements were prepared in accordance with
generally accepted accounting principles in the United States and are expressed
in Canadian dollars. At February 28, 2000 the Canadian dollar equalled
approximately US$0.6897.
(b) Exhibits. Reference is made to the Exhibit Index displayed on page 35
---------
of this Form 20-F which incorporates by reference those exhibits previously
filed.
<PAGE>
LINUXWIZARDRY SYSTEMS, INC.
(FORMERLY FLAME PETRO-MINERALS CORP.)
(EXPRESSED IN CANADIAN DOLLARS)
INDEX
-----
Independent Auditors Report F-1
Consolidated Balance Sheets as of February 29, 2000
and February 28, 1999 F-2
Consolidated Statements of Loss and Deficit for the Years Ended
February 29, 2000 and February 28, 1999 F-3
Consolidated Statements of Cash Flows for the Years Ended
February 29, 2000 and February 28, 1999 F-4
Notes to the Consolidated Financial Statements F-5 to F-10
<PAGE>
Independent Auditors Report
---------------------------
of
Elliott Tulk Pryce Anderson
Chartered Accountants
<PAGE>
LinuxWizardry Systems, Inc.
(formerly Flame Petro-Minerals Corp.)
(Expressed in Canadian dollars)
Index
-----
Independent Auditors' Report F-1
Consolidated Balance Sheets as of February 29, 2000 and
February 28, 1999 F-2
Consolidated Statements of Loss and Deficit for the Years Ended
February 29, 2000 and February 28, 1999 F-3
Consolidated Statements of Cash Flows for the Years Ended
February 29, 2000 and February 28, 1999 F-4
Notes to the Consolidated Financial Statements F-5 to F-10
<PAGE>
Independent Auditors' Report
----------------------------
To the Directors of
LinuxWizardry Systems, Inc. (formerly Flame Petro-Minerals Corp.)
We have audited the accompanying consolidated balance sheets of LinuxWizardry
Systems, Inc. (formerly Flame Petro-Minerals Corp.) as at February 29, 2000 and
February 28, 1999 and the consolidated statements of operations and deficit, and
cash flows for the years ended February 29, 2000 and February 28, 1999. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing standards
in the United States. 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. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, these consolidated financial statements present fairly, in all
material respects, the financial position of the Company as at February 29, 2000
and February 28, 1999 and the results of its operations and its cash flows for
the years then ended February 29, 2000 and February 28, 1999 in accordance with
generally accepted accounting principles in the United States. As required by
the British Columbia Company Act we report that, in our opinion, these
principles have been applied on a consistent basis.
The accompanying consolidated financial statements have been prepared assuming
the Company will continue as a going concern. As discussed in Note 1 to the
consolidated financial statements, the Company has not generated profitable
operations since inception and has recently acquired a new business in the
development stage requiring significant operating funds. These factors raise
doubt about the Company's ability to continue as a going concern. Management's
plans in regard to these matters are also discussed in Notes 1 and 10. These
consolidated financial statements do not include any adjustments which might
result from the outcome of these uncertainties.
CHARTERED ACCOUNTANTS
Vancouver, Canada
May 26, 2000
<PAGE>
<TABLE>
<CAPTION>
Vancouver, Canada
May 26, 2000
LinuxWizardry Systems, Inc.
(formerly Flame Petro-Minerals Corp.)
Consolidated Balance Sheets
(Expressed in Canadian dollars)
February 29, February 28,
2000 1999
<S> <C> <C>
(Note 2(b))
$ $
Assets
Current Assets
Cash 369,395 2,187
Accounts receivable - 4,385
Prepaid expenses 169,438 -
538,833 6,572
Capital Assets (Note 3) 7,569 -
Natural Resource Properties (Note 4) 2 2
543,404 6,574
Liabilities
Current Liabilities
Accounts payable 69,528 18,591
Accrued liabilities 8,000 2,000
Due to related parties (Note 5) 9,929 157,634
87,457 178,225
Contingencies and Commitments (Notes 1 and 7)
Shareholders' Equity
Common Stock (Note 6)
Authorized: 100,000,000 common shares,
no par value
Issued: 12,909,114 and 10,004,114 respectively 2,767,512 1,402,137
Common shares and warrants subscribed for but not
issued (600,000 shares) (Note 6(a)) 652,995 -
3,420,507 1,402,137
Deficit (2,964,560) (1,573,788)
455,947 (171,651)
543,404 6,574
</TABLE>
(The accompanying notes are an integral part of these consolidated financial
statements)
<PAGE>
Approved by The Board:
John G. Robertson, Director Brian Cherry, Director
<TABLE>
<CAPTION>
LinuxWizardry Systems, Inc.
(formerly Flame Petro-Minerals Corp.)
Consolidated Statements of Loss and Deficit
(Expressed in Canadian dollars)
February 29, February 28,
2000 1999
<S> <C> <C>
(Note 2(b))
$ $
Revenues - -
Expenses
General and Administrative
Consulting and subcontract 3,787 17,486
Foreign exchange 1,905 299
Investor relations 42,951 9,090
Management and directors fees (Note 5(b)) 55,050 42,000
Office, rent and telephone 30,547 16,134
Professional fees 25,240 16,223
Regulatory fees 13,547 12,523
Technical report 4,000 -
Travel and promotion 12,019 -
Less interest income (346) (148)
188,700 113,607
Research and Development
Programmers 14,500 -
Purchased in process research and development (Note 1) 1,086,057 -
1,100,557 -
Selling and Marketing
Advertising and trade shows 93,196 -
Travel 4,502 -
97,698 -
Natural Resource
Assaying and metallurgical - 816
Drilling - 12,992
Annual lease costs 3,817 1,797
3,817 15,605
Net Loss For The Year (1,390,772) (129,212)
Deficit - Beginning of Year (1,573,788) (1,444,576)
<PAGE>
Deficit - End of Year (2,964,560) (1,573,788)
Loss per share (Note 2) (.13) (.02)
(The accompanying notes are an integral part of these consolidated financial
statements)
<PAGE>
LinuxWizardry Systems, Inc.
(formerly Flame Petro-Minerals Corp.)
Consolidated Statements of Cash Flows
(Expressed in Canadian dollars)
February 29, February 28,
2000 1999
(Note 2(b))
$ $
Operating Activities
Net loss for the year (1,390,772) (129,212)
Financial consulting services paid with shares 27,187 -
In process research and development paid with shares 1,086,057 -
Change in non-cash working capital items 30,822 7,461
Cash to Operations (246,706) (121,751)
Financing Activities
Capital stock issued and/or subscribed for 766,245 87,442
Advances from (repayment to) related parties (147,705) 5,961
Cash from Financing Activities 618,540 93,403
Investing Activities
Acquisition of capital assets (7,569) -
Cash to Investing Activities (7,569) -
Increase (Decrease) in Cash During the Year 367,208 (28,348)
Cash - Beginning of Year 2,187 30,535
Cash - End of Year 369,395 2,187
Cash is comprised of:
Cash (deficiency) 369,395 (313)
Term deposit - 2,500
369,395 2,187
Non-Cash Financing Activities
Stock based compensation
150,000 shares were issued pursuant to a
financial consulting services agreement 164,625 -
Property acquisition (Note 1)
LinuxWizardry, Inc. was acquired by way
of issuance of 2,000,000 shares 1,087,500 -
1,252,125 -
Income taxes paid - -
Interest paid - -
</TABLE>
(The accompanying notes are an integral part of these consolidated financial
statements)
<PAGE>
<PAGE>
LinuxWizardry Systems, Inc.
(formerly Flame Petro-Minerals Corp.)
Notes to the Consolidated Financial Statements
(Expressed in Canadian dollars)
1. Nature of Operations, Business Acquisition and Continuance of Business
The Company was incorporated February 27, 1979 in Canada under the British
Columbia Company Act and was extraprovincially registered in the Province
of Alberta on October 12, 1995.
The Company voluntarily delisted from the Canadian Venture Exchange on
December 14, 1999. The Company's stock currently trades on the Over the
Counter Bulletin Board under the symbol "LNXWF".
On January 10, 2000, the Company acquired all the issued capital stock of
LinuxWizardry, Inc. for 2,000,000 shares of the Company restricted pursuant
to Rule 144 of the SEC. These shares were valued at US$0.375 per share or
Cnd$1,087,500. LinuxWizardry, Inc. was a newly created Florida Corporation
owned by four individuals. Through the experience, knowledge and in process
research and development conducted by these four individuals to January 10,
2000, LinuxWizardry, Inc. develops Linux-based enterprise software and
hardware for end-to-end networking solutions for small and medium sized
businesses. LinuxWizardry, Inc. has no sales to date and is currently
developing various prototypes. Operating advances of US$545,000 have been
transferred to LinuxWizardry, Inc. to cover salaries and other overheads in
Florida to May 26, 2000. Additional funds are required to further develop
the software solutions and commercially exploit and execute upon their
business plan. The Company plans to raise US$2,000,000 to provide necessary
funds to the end of the next fiscal year. (Note 10)
The business acquisition was accounted for using the purchase method of
accounting for business combinations. Share consideration, totalling
$1,087,500, was allocated to in process research and development which was
expensed to operations. There were no other purchase price adjustments.
On March 15, 2000 shareholders approved to rename the Company,
LinuxWizardry Systems, Inc.
The Company is currently in the development stage and equity financing is
required to continue development and commercial exploitation of the
software. As a result of the uncertainty that is typical in a development
stage company there is doubt about the companies ability to continue as
going concern as ultimate success will be based on securing adequate equity
financing and/or the attainment of a commercially profitable business.
These financial statements have been prepared on a going concern basis.
The Company is also in the business of acquiring and exploring mineral
properties in the State of Alaska. There has been no determination whether
properties held contain ore reserves which are economically recoverable.
2. Significant Accounting Policies
(a) Basis of Accounting
These consolidated financial statements are prepared in conformity with
accounting principles generally accepted in the United States and are
presented in Canadian dollars. There are no consolidated financial
statements prepared using Canadian generally accepted accounting
principles; however, there would be no material reconciling items other
than presentation items.
(b) Consolidation
<PAGE>
These financial statements include the accounts of the Company and its
wholly owned US subsidiary, LinuxWizardry, Inc. These accounts only include
the operations of LinuxWizardry, Inc. for the period from January 10, 2000
(date of acquisition) to February 29, 2000.
The comparative figures include only the accounts of the Company.
<PAGE>
2. Significant Accounting Policies (continued)
(c) Natural Resource Properties
The Company confines its exploration activities to areas from which
gold has previously been produced or to properties which are
contiguous to such areas and have demonstrated mineralization.
Accordingly, the Company capitalizes the costs of acquiring mineral
claims and options until such time as the properties are placed into
production or abandoned. At that time, costs are amortized or written
off.
Exploration and development expenditures are expensed as incurred.
The Company has adopted the Statement of Financial Accounting
Standards No. 121 ("FAS 121"), "Accounting for the Impairment of
Long-Lived Assets to be Disposed Of". On an ongoing basis, the Company
evaluates each property based on exploration results to date, and
considering facts and circumstances such as operating results, cash
flows and material changes in the business climate, determines whether
any of the properties may be impaired. The carrying value of a
long-lived asset is considered impaired when the anticipated
undiscounted cash flow from such asset is separately identifiable and
is less than its carrying value. In that event, a loss is recognized
based on the amount by which the carrying value exceeds the fair
market value of the long-lived asset. Fair market value is determined
primarily using the anticipated cash flows on a discounted rate
commensurate with the risk involved.
The amounts shown for claims and options for mineral properties which
have not yet commenced commercial production represent costs incurred
to date, and are not intended to reflect present or future values.
Amortization of claims and options relating to properties in
production is provided during periods of production using the
units-of-production method based on an estimated economic life of the
ore reserves.
(d) Translation of Foreign Subsidiary Balances and Transactions
The Company's subsidiary's functional currency is the US dollar as
equity funds raised by the Company and advanced to its US subsidiary
are in US dollars and expenses are paid in US dollars.
Assets and liabilities are translated into Canadian dollars at the
balance sheet date rate of exchange. Revenues and expenses, gains and
losses, are translated at appropriate transaction date rates using a
weighted average rate. Gains and losses on translation are included in
operations.
(e) Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions which affect the reported amounts of assets and
liabilities at the date of the financial statements and revenues and
expenses for the period reported. By their nature, these estimates are
subject to measurement uncertainty and the effect on the financial
statements of changes in such estimates in future periods could be
significant.
(f) Loss Per Share
Loss per share has been calculated based on the weighted average
number of shares outstanding during the year not including escrowed
securities. The weighted average number of shares outstanding, for the
purpose of loss per share calculations, is as follows:
Year to February 28, 1999 8,505,000
Year to February 29, 2000 10,892,000
Loss per share does not include the effect of the potential
conversions of stock options, as their effect would be anti-dilutive.
<PAGE>
(g) Accounting for Stock Based Compensation
The Company uses the intrinsic value based method of accounting
prescribed by Accounting Principles Board Opinion No. 25, "Accounting
for Stock Issued to Employees" ("APB Opinion No. 25") in accounting
for its stock based method, compensation cost is the excess, if any,
of the quoted market price of the stock at grant date over the amount
an employee or director must pay to acquire the stock. See Note 6.
<PAGE>
3. Capital Assets
Capital assets are comprised of computers, furniture and telecommunications
equipment acquired in February, 2000. These assets will be amortized on a
straight-line basis over their useful lives, estimated to be two years,
starting March 1, 2000.
4. Natural Resource Properties
(a) Mineral Property
The Company owns a 50% joint venture interest in 30 claims located in
the Fairbanks Mining Division, Alaska, USA, known as the Fish Creek
Claims.
The Company has billed, but not recorded, $54,510 to its 50% partner
in the Fish Creek Claims for exploration work to date. This amount,
when received, will reduce exploration expenses.
The Company has written down its interest to a nominal $1.
(b) Petroleum Property
The Company owns a 1.277% net working interest in one producing well
in Fayette County, Texas. The Company has written down its interest to
a nominal $1.
5. Related Party Balances/Transactions
(a) Balances
The amounts due to related parties are unsecured, non-interest bearing
and have no fixed terms of repayment.
(b) Transactions
(i) Pursuant to a management services agreement, the Company paid
management fees of $30,000 (1999 - $30,000) and rent of $6,000
(1999 - $6,000) to a company controlled by the President of the
Company.
(ii) The Company paid a director's fee of $12,000 (1999 - $12,000) to
the President of the Company.
(iii)The Company paid the President of LinuxWizardry, Inc. a salary
of US$9,000.
6. Capital Stock
<TABLE>
<CAPTION>
No.of Value
Shares $
<S> <C> <C>
Issued as at February 28, 1998 9,420,114 1,314,695
Issued during 1999 for:
Cash pursuant to a private placement 584,000 87,442
Issued as at February 28, 1999 10,004,114 1,402,137
Cancelled due to a private placement rescission (20,000) (3,000)
<PAGE>
Issued during the year for:
Cash pursuant to stock options exercised 775,000 116,250
Financial consulting services - stock based compensation 150,000 164,625
Acquisition of LinuxWizardry, Inc. (Note 1) 2,000,000 1,087,500
Issued at February 29, 2000 12,909,114 2,767,512
</TABLE>
<PAGE>
6. Capital Stock (continued)
(a) Shares allotted pursuant to a unit private placement
The Company raised US$450,000 pursuant to a private placement of
600,000 units at US$0.75 per unit. These units were issued in March,
2000 and each unit contained one share and one warrant to acquire one
additional share at US$1.00 if exercised within one year of receipt of
funds being between January 7, 2001 and February 28, 2001. A total of
207,000 warrants were exercised subsequently.
(b) Escrowed shares
A total of 1,077,994 shares are held in escrow to be released as
follows:
(i) 317,057 shares upon completion of a work program on the Fish
Creek claim, subject to regulatory approval;
(ii) 190,234 shares on each of November 7, 1997, 1998, 1999 and 2000.
The November 7, 1997, 1998 and 1999 releases have not been
requested by the Company.
(c) Stock options
(i) Fiscal 1999
The Company reserved 850,000 common shares pursuant to three
separate stock option plans. On December 20, 1994 the Company
granted stock options to certain directors and employees to
acquire 675,000 shares at $0.15 per share expiring December 20,
1999. On September 29, 1998 the Company granted stock options to
a director to acquire 75,000 shares at $0.15 per share expiring
September 29, 2003. On October 5, 1998 the Company granted stock
options to an employee to acquire 25,000 shares at $0.15 per
share expiring 2003. A total of 775,000 shares were issued during
fiscal 2000 pursuant to stock options exercised; a total of
75,000 expired.
(ii) Fiscal 2000
A total of 1,100,000 common shares are reserved pursuant to stock
options granted during the year. A total of 725,000 are
exercisable at $0.75 expiring December 21, 2004 and 375,000 are
exercisable at US$0.75 expiring January 5, 2005.
The options are granted for services provided to the Company.
Statement of Financial Accounting Standards No. 123 ("SFAS 123")
requires that an enterprise recognize, or at its option, disclose the
impact of the fair value of stock options and other forms of stock
based compensation in the determination of income. The Company has
elected under SFAS 123 to continue to measure compensation costs on
the intrinsic value basis set out in APB Opinion No. 25. As options
are granted at exercise prices based on the market price of the
Company's shares at the date of grant, no compensation cost is
recognized. However, under SFAS 123, the impact on net income and
income per share of the fair value of stock options must be measured
and disclosed on a fair value based method on a pro forma basis.
The fair value of the employee's purchase rights under SFAS 123, was
estimated using the Black-Scholes model with the following assumptions
for stock options granted in fiscal 2000: risk free interest rate was
5.8%, expected volatility of 50%, an expected option life of six
months and no expected dividends.
If compensation expense had been determined pursuant to SFAS 123, the
Company's net loss and net loss per share for fiscal 2000 and 1999
would have been as follows:
<PAGE>
2000 1999
$ $
Net loss
As reported (1,390,772) (129,212)
Pro forma (1,433,689) (130,000)
Basic net loss per share
As reported (.13)(.02)
Pro forma (.13)(.02)
7. Commitments
(i) The Company is committed to paying 10,000 shares per month for the
five months ending July 31, 1999 pursuant to a financial services
agreement.
(ii) The Company has entered into a premises sublease on April 10, 2000 for
its Florida operation. The Company paid US$10,800 as a security
deposit and last months rent. Monthly lease payments are US$5,724 to
the end of the lease which expires March 31, 2003.
(iii)See Note 6(a) and (c) regarding the allotment of shares pursuant to
warrants and stock options outstanding.
8. Losses and Deductions for Tax Purposes
The Company has Canadian income tax losses of approximately $633,000 which
are available to reduce taxable income of future years. The losses expire
as follows:
$ $
2001 66,000 2005 99,000
2002 80,000 2006 106,000
2003 118,000 2007
2004 114,000
The Company has US tax losses of US$94,000 expiring in 2015.
The Company has Canadian capital losses of approximately $207,000 which are
available to reduce future years capital gains. The losses have no expiry.
The Company has Canadian exploration and development expenditures available
to reduce taxable income of future years. These expenditures, totalling
some $355,000 can be claimed at rates varying from 30% to 100%, and have no
expiry dates.
The potential benefits of the income tax losses and timing differences
arising from the exploration and development expenditures have not been
recognized in the accounts as realization is not virtually certain or
reasonably assured.
The Company has Canadian foreign income deductions available to reduce
foreign resource profits. These deductions, totalling some $375,000 can be
claimed against resource profits or 10% against taxable income, whichever
is greater.
9. Financial Instruments
Financial instruments included in the balance sheet are comprised of cash,
accounts payable, accrued liabilities and due to related parties. The fair
values of these balance sheet items are equivalent to their carrying value
because of the short-term maturity of those instruments. The Company is not
party to any derivative instruments.
<PAGE>
The Company has no interest rate risk or concentrations of credit risk.
10. Subsequent Events
Subsequent to February 29, 2000 the Company has:
(a) received US$207,000 and issued 207,000 shares pursuant to the exercise
of warrants.
(b) started negotiations with a private financier to raise US$2,000,000 by
way of an issuance of equity securities.
<PAGE>
THIS AGREEMENT is dated for reference the 7th day of January 2000.
--- --------------
BETWEEN:
FLAME PETRO-MINERALS CORP. ("FLAME PETRO")
#185, 10751 Shellbridge Way
Richmond, B.C.
V6X 2W8
OF THE FIRST PART
AND:
MIKE CARPENTER ("CARPENTER")
123 NW 13th Street, Suite 214-02
Boca Raton, FL 33432
OF THE SECOND PART
AND: LINUXWIZARDRY, INC. ("PRIVCO")
123 NW 13th Street, Suite 214-02
Boca Raton, FL 33432
OF THE THIRD PART
WHEREAS:
This Agreement is intended to outline the mutual understanding as to the terms
and conditions upon which Carpenter, PrivCo and FlamePetro hereto wish to enter
into an agreement to finance and develop a LinuxWizardry Router (as hereinafter
defined). The terms and conditions set out herein will be included in a formal
agreement to be entered into between the parties hereto, which proposed
agreement will contain customary terms and conditions commonly found in similar
agreements of the sort in question, and will provide, inter alia, as follows:
1. Flame Petro agrees to issue 2,000,000 of its common shares to Carpenter or
his nominees for 100% interest in the issued shares of PrivCo. The said
2,000,000 treasury shares are subject to the regulation of the SEC and the
applicable British Columbia and Alberta Securities rules and regulations.
2. In further consideration for the 2,000,000 shares of Flame Petro, Carpenter
agrees to transfer the LinuxWizardry.com domain name to Flame Petro.
3. Carpenter agrees to build and test a Linux based, low cost router that
provides a simple drag and drop JAVA user Interface for configuration
protocol routing (the "LinuxWizardry Router") for PrivCo, as more
particularly described in the LinuxWizardry Product Development Proposal
prepared by Mike Carpenter, as attached as Schedule "A" hereto.
4. Carpenter agrees to work exclusively for PrivCo for one (1) year on any
Linux related projects and/or a longer term as long as Carpenter is an
employee or Officer of PrivCo.
5. FlamePetro agrees to vend in the LinuxWizardry Router concept to PrivCo.
6. FlamePetro agrees to appoint Carpenter as Chief Executive Officer of the
PrivCo. FlamePetro will appoint the President, Secretary of the PrivCo.
Carpenter and Flame Petro will appoint 2 directors each for the PrivCo. 1.
<PAGE>
7. Carpenter agrees to grant to PrivCo the first right of refusal to finance
and own any other Linux based projects that may be developed by Carpenter
in the future.
8. Attached to this Letter of Intent as Schedule "B" is a budget for a
proposed four phase work program on the LinuxWizardry Router as prepared by
Carpenter and reviewed by FlamePetro (the "Work Program").
9. FlamePetro agrees to finance Phase I of the Work Program within ten
business days from the date that this Letter of Intent is signed by both
parties hereto.
10. The Phase 2, Phase 3 and Phase 4 of the Work Program shall be financed by
FlamePetro, subject to successful completion of the Phase I Work Program
and provided that a report on the results of the successful Phase I Work
Program has been completed by FlamePetro's Chief Information Officer (to be
appointed) and the Chief Information Officer recommends proceeding with
Phase 2, Phase 3 and Phase 4 of the Work Program.
11. Flame Petro agrees to grant to Carpenter a stock option to purchase up to
100,000 common shares in the capital stock of Flame Petro, which option
shall be exercisable at a price of $0.75 US per share and shall be
exercisable for a period of five years from the date of granting. The stock
option shall be formalized by a Stock Option Agreement and shall be subject
to Flame Petro's Stock Option Plan and may be exercised at the rate of 25%
every 90 days.
12. Carpenter agrees to gift back the 2,000,000 shares of Flame Petro after one
(1) year from the date of this agreement in the event the LinuxWizardry
Router project or other Linux commercial applications is not successfully
available for production. The decision will be made by an independent
technical Company appointed by the Flame Petro Board of Directors.
13. If either party fails to perform its obligations hereunder (the "Defaulting
Party") after receiving written notice from the other party (the "Notifying
Party") requesting performance from the Defaulting Party and the Defaulting
Party fails to carry out its obligations hereunder within 30 days of
receipt of such notification from the Notifying Party, this Letter of
Intent may be terminated at the sole option of the Notifying Party and any
and all obligations of both parties hereto shall immediately terminate.
14. The above Agreement sets out the intended terms and conditions of a formal
agreement to be entered into between the parties hereto within a period of
30 days from the date hereof.
IN WITNESS WHEREOF the parties hereto have executed this Agreement as of the ___
of January 2000.
FLAME PETRO-MINERALS CORP. MIKE CARPENTER
Signature Signature
/S/ JOHN ROBERTSON /S/ MIKE CARPENTER
------------------- --------------------
Print Name Print Name
President
------------------- --------------------
Title Title
LINUXWIZARDRY, INC.
-------------------
Signature
/S/ MIKE CARPENTER
-------------------
Print Name
-------------------
Title
<PAGE>
