As filed with the Securities and Exchange Commission on September 11, 2003
Registration No. 333-________
U. S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM SB-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
G2 VENTURES, INC.
Texas 980221494
(State or other jurisdiction of (I.R.S. Employer
incorporation or Organization) Identification Number)
9995
(Primary Standard Industrial
Classification Code Number)
14110 N. Dallas Parkway, Suite 365, Dallas, Texas 75254 (972) 726-9203
(Address of principal executive offices) Telephone Number
Gust Kepler
14110 N. Dallas Parkway
Suite 365
Dallas, Texas 75254
(972) 726-9203
(Name, address and phone number for agent for service)
Copies to:
CARL A. GENERES, ESQ.
4315 WEST LOVERS LANE
Dallas, Texas 75209
(214) 352-8674
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Approximate date of proposed sale to the public: As soon as practicable after
the effective date of this registration statement.
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the securities Act registration statement number of the earlier effective registration statement for the same offering [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box. [ ]
The Registrant hereby amends this registration statement on such date or dates as may be necessary to delay our effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the registration statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.
PRELIMINARY
PROSPECTUS
(SUBJECT TO COMPLETION)
G2 VENTURES, INC.
Maximum of 1,500,000 shares/Minimum of 1,000,000 shares of common stock Total proceeds if maximum sold: $75,000 Total proceeds if minimum sold: $50,000
This is our initial public offering so there is not a public market for our shares. However, we hope to have a market maker apply to have prices for our shares quoted on the OTC bulletin board maintained by the National Association of Securities Dealers after we complete our offering.
An investment in G2 Ventures is risky, especially given its young age. Only people who can afford to lose 100% of their investment should invest in our shares. A FULL DICUSSION OF THE RISKS OF OWNING OUR SHARES BEGINS AT PAGE 2 OF THIS PROSPECTUS.
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of our shares or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offence.
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Price to Public Underwriting Proceeds to G2
Discount and Ventures
Commissions
------------------- --------------------- ------------------ -------------------
Per Share $0.05 None $0.05
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Total Maximum $75,000 None $75,000
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Total Minimum $50,000 None $50,000
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We will sell the shares ourselves and do not plan to use underwriters or pay any commissions. We will be selling our shares using our best efforts and no public investor as agreed to buy any of our shares. If we do not raise a minimum of $50,000 from public investors, our president, Gust Kepler, will purchase the number of shares necessary to raise a minimum of $50,000 in this offering. We expect to end our offering no later than 120 days after the date this registration statement becomes effective although we may extend the offering for a 90 day period past this original 120 day period.
SEPTEMBER ____, 2003
INDEX Page
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SUMMARY OF THE OFFERING 4
RISK FACTORS 5
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We are a development stage company, with no significant history of operations that you can examine to know if we have the ability to successfully conduct business.......................................... 6
Even if we sell all of the shares offered, we will not have significant funds so that a financial reversal could wipe out any reserves we might otherwise have......................................................... 6
Competition in the recorded music industry is keen and we may not be able to compete and survive............................................ 6
We need to raise a minimum of $50,000 in order to start any meaningful operations.................................................. 6
We have no underwriters so no other party with a financial interest has reviewed this offering for fairness................................ 6 We have no history of profits and no assurances of profits ever developing............................................................. 7 Our success will depend greatly upon our sole director and officer,.... 7 Because we only have one director, Gust Kepler, his compensation is in his sole discretion.............................................. 7 Because the price at which the shares are offered is higher than our current per share value, immediate dilution of the value of our stock will occur............................................................. 7 Because we have issued shares that may become eligible for resale under Rule 144, a large amount of our stock could be sold, potentially depressing our stock price................................. 7 Because we do not expect to pay dividends on our common stock in the foreseeable future, shareholders may have no way to recoup any of their investment................................................ 8 |
There is no public market for our shares and they should be considered an illiquid investment................................................. 8
Our stock will probably be subject to the penny stock regulations and
may be more difficult to sell than other registered stock.............. 8
PLAN OF DISTRIBUTION....................................................... 9
DETERMINATION OF OFFERING PRICE............................................ 9
USE OF PROCEEDS............................................................ 9
DILUTION................................................................... 10
MANAGEMENT'S PLAN OF OPERATION............................................. 11
DESCRIPTION OF BUSINESS.................................................... 13
DESCRIPTION OF PROPERTY.................................................... 15
DIRECTOR AND EXECUTIVE OFFICER............................................. 15
EXECUTIVE COMPENSATION..................................................... 16
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS............................. 16
SECURITIES OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT........................................................ 16
MARKET FOR COMMON EQUITY AND RELATED SHAREHOLDER
MATTERS........................................................... 17
LEGAL PROCEEDINGS.......................................................... 18
DESCRIPTION OF SECURITIES.................................................. 18
DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION FOR
SECURITIES ACT LIABILITIES........................................ 19
LEGAL MATTERS.............................................................. 20
EXPERTS.................................................................... 20
FINANCIAL STATEMENTS....................................................... 20
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SUMMARY OF THE OFFERING
The Company
G2 Ventures, Inc. is a corporation formed under the laws of the state of Texas on March 21, 2003. Our principal executive offices are located in Dallas, TX. We are a developmental stage company with minimal revenues to date. However, on April 1, 2003, we acquired the business, assets and assumed the liabilities of G2 Companies, Inc., also a development stage company that had no revenues to date. See Description of Business, page 13. We expect to use the net proceeds of this offering to operate as an independent production label for the purpose of recording and producing the music of solo artists and bands. This includes paying recording costs, engineering costs, producer costs and any other related costs of making full length compact discs including mixing and mastering associated artwork. G2 Ventures will then package and print up to 1,000 compact disc units for test marketing, promotion, and solicitation to major record labels and major recorded music distributors with the intent to sell the rights to the music or enter into a joint venture by licensing the distribution and sale of the recorded music.
We maintain our executive offices at 14110 North Dallas Parkway, Suite 365, Dallas TX 75254. Telephone number: (972) 726-9203.
Purpose Of Our Offering
We are conducting this offering, in part, because we believe that an early registration of our equity securities will minimize some of the barriers to capital formation that otherwise exist. By having a registration statement in place, we believe that we will be in a better position, either to conduct a future public offering of our securities or to undertake a private placement with registration rights, than if we were a privately held company. Registering our shares may help minimize the liquidity discounts we may otherwise have to take in a future financing because investors may have a confidence that the Rule 144(c )(1) public information requirement will be satisfied and a public market will exist to effect Rule 144 (g) broker transactions.
We believe that the cost of registering our securities, and undertaking the required disclosure obligations will be more than offset by being able to get better terms for future financing efforts. No specific investors have been identified, but our management has general knowledge of an investor class interested in investing in companies that have some measure of liquidity.
Securities Offered
We are offering up to a maximum of 1,500,000 shares and a minimum of 1,000,000 shares of common stock, $0.001 par value per share. The shares are offered at $ 0.05 per share for a total gross offering proceeds of $75,000, assuming the maximum amount is sold and $50,000 assuming the minimum amount is sold.
Shares Now Outstanding
3,500,000
Shares Outstanding Assuming Maximum Amount Sold 5,000,000
Terms Of The Offering
We intend to raise a maximum of $75,000 and a minimum of $50,000 in this offering. The offering will remain open for 120 days after this registration statement becomes effective unless we decide to cease selling efforts prior to this date. We may also extend our offering for 90 days past the original period if we choose. If we do not raise a minimum of $50,000 from public investors, our president, Gust Kepler, will purchase the number of shares necessary to raise a minimum of $50,000 in this offering.
Use Of Proceeds
We intend to use the net proceeds of this offering primarily to pay recording costs, engineering costs, producer costs and any other related costs of making full length compact discs including mixing and mastering and creating the associated artwork for two artists currently signed to exclusive recording contracts with G2 Ventures. Some of the funds will be allocated to cover administrative costs. Any amount that we raise above the minimum of $50,000 up to $70,000 will be used to pay back loans from our president, Gust Kepler.
Plan Of Distribution
This is a best efforts offering, with no commitment by anyone to purchase any shares. The shares will be offered and sold by our principal executive officer and director. No underwriters will be used.
RISK FACTORS
An investment in the shares involves a high degree of risk, including a risk of loss of an investor's entire investment in G2 Ventures. Prospective investors should consider carefully, in addition to the other information contained in this prospectus, the following risk factors before purchasing any shares.
We are a development stage company, with no significant history of operations that you can examine to know if we have the ability to successfully conduct business. We were incorporated on March 21, 2003, and are, therefore, a start up company with very little operating history and minimal revenues to date. Our predecessor, G2 Companies, the business we acquired on April 1, 2003, began operations as a record label in September of 2002 and did not generate any revenue. As a result, we have no meaningful financial history that you can review to see if we have made money in the past. Although past performance is not guarantee of future success, if we had a long financial record, you could determine whether we are capable of implementing our business plan and increasing the value of our stock.
Even if we sell all of the shares offered, we will not have significant funds so that a financial reversal could wipe out any reserves we might otherwise have. We are only seeking to raise $75,000. As a result, we will still be considered an extremely small company, even if we sell all of the stock we are trying to sell. Because we will have so little money, any financial reversal could totally wipe out any reserve we may have.
Competition in the recorded music industry is keen and we may not be able to compete and survive. We are a very small company in a huge industry. Many of our competitors in the record label industry have been in existence for a substantially longer period than we and most have much greater financial, marketing, personnel, and other resources than G2 Ventures. We may be competing with many other independent production labels that are marketing their acts to major labels.
We need to raise a minimum of $50,000 in order to start any meaningful operation. This is a best efforts offering, meaning there's no assurance that we will be able to sell any shares to outside public investors. If we do not raise a minimum of $50,000 from public investors, our president, Gust Kepler, will purchase the number of shares necessary to raise a minimum of $50,000 in this offering. In addition Gust Kepler has agreed to loan G2 Ventures up to an additional $50,000 to begin operations if needed. However, if Mr. Kepler fails to loan such amount to G2 Ventures, any investment in our shares will almost certainly be a total loss.
We have no underwriters so no other party with a financial interest has reviewed this offering for fairness. We are offering these shares through our sole director and officer, Gust Kepler, and are not using an underwriter. As a result, no other person sophisticated in financial affairs has reviewed this offering to determine if it is fair or if our business plan makes financial sense so there is a risk that we may have priced our shares at an amount that is higher than they are intrinsically worth.
We have no history of profits and assurances of profits ever developing. As with most development stage companies, we have experienced losses since inception. The risk of our financial failure is high. We have been dependent upon loans in the aggregate amount of $44,794 from Gust Kepler to sustain our development activities to date. Mr. Kepler has contributed $24,794 to capital of this amount leaving a balance of $20,000 owed to him. In our discretion, if we receive the maximum proceeds sought to be raised, we may pay off the full balance of this loan.
Our success will depend greatly upon our sole director and officer. Gust Kepler is serving as our sole officer and director. We do not have an employment contract with him. Loss of his services would have a material adverse affect on us. Mr. Kepler's last venture in the record label business was unsuccessful. From October, 1996 to July, 2002, Mr. Kepler was president, CEO and principal shareholder of Parallax Entertainment, Inc., a company in substantially the same business as G2 Ventures. Over a six year period, Parallax generated $102,291 in gross sales and incurred an aggregate loss of $4,275,323. Also, Mr. Kepler was the principal shareholder, president and chief executive officer of our predecessor, G2 Companies, from September 2002 until we acquired its operations on April 1, 2003. During that approximate seven month period, G2 Companies had zero revenue and aggregate losses of $58,966.
Because we only have one director, Gust Kepler, his compensation is in his sole discretion. Because Gust Kepler will own the voting majority of our stock, he will likely continue to control the board of directors. As a result, Mr. Kepler will be entitled to establish the amount of his compensation, including the amount of any bonuses paid to him. In addition, because we do not have any independent directors, there will be no oversight of the reasonableness of any compensation paid to Mr. Kepler or other officers if added.
Because the price at which the shares are offered is higher than our current per share value, immediate dilution of the value of our stock will occur. This offering itself involves immediate and substantial dilution to investors, as more particularly described in the dilution section of this prospectus. Any securities issued in the future, including issuances to management, could reduce the proportionate ownership, economic interests and voting rights of any holders of shares of our common stock purchased in this offering.
Because we have issued shares that may become eligible for resale under Rule 144, a large amount of our stock could be sold, potentially depressing our stock price. All of our presently outstanding shares of common stock aggregating 3,500,000 shares of common stock, are "restricted securities" as defined under
Rule 144 promulgated under the Securities Act and may only be sold pursuant thereto or otherwise pursuant to an effective registration statement or an exemption from registration if available. Rule 144, as amended, generally provides that a person who has satisfied a one year holding period for such restricted securities may sell, within any three-month period (provided we are current in our reporting obligations under the Exchange Act) subject to certain manner of resale provisions, an amount of restricted securities which does not exceed the greater of 1% of a company's outstanding common stock or the average weekly trading volume in such securities during the four calendar weeks prior to such sale. Gust Kepler, our principal executive officer, owns an aggregate of 3,500,000 restricted shares for which the one year holding period will expire on April 1, 2004. In addition, our other shareholder's common stock will be eligible to use Rule 144 on the same date. A sale of shares by such security holders, whether pursuant to Rule 144 or otherwise, may have a depressing effect upon the price of our common stock in any market that might develop.
Because we do not expect to pay dividends on our common stock in the foreseeable future, shareholders may have no way to recoup any of their investment. We intend for the foreseeable future to retain earnings, if any for the future operation an expansion of our business and do not anticipate paying dividends on our shares of common stock for the foreseeable future.
There is no public market for our shares and they should be considered an illiquid investment. There is currently no market for any of our shares and no assurances are given that a public market for such securities will develop or be sustained if developed. While we plan, following the termination of this offering, to take affirmative steps to request or encourage one or more broker/dealers to act as a market maker for our securities, no such efforts have yet been undertaken and no assurances are given that any such efforts will prove successful. As such, investors may not be able to readily dispose of any shares purchased hereby.
Our stock will probably be subject to the penny stock regulations and may be more difficult to sell than other registered stock. Broker-dealer practices in connection with transactions in "penny stocks" are regulated by certain "penny stock" rules adopted by the Commission. Penny stocks generally are equity securities with a price of less than $5. The penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from the rules, to deliver a standardized risk disclosure document that provides information about penny stocks and the risks in the penny stock market. The broker-dealer also must provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its
salesperson in the transaction, and monthly account statements showing the market value of each penny stock held in the customer's account. In addition, the penny stock rules generally require that prior to a transaction in a penny stock, the broker-dealer make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser's written agreement to the transaction. These disclosure requirements may have the effect of reducing the level of trading activity in the secondary market for a stock that becomes subject to the penny stock rules. As our shares immediately following this offering will likely be subject to such penny stock rules, investors in this offering will in all likelihood find it more difficult to sell their securities.
PLAN OF DISTRIBUTION
We are offering up to a maximum of 1,500,000 shares and minimum 1,000,000 shares at a price of $0.05 per share to be sold by Mr. Kepler for which he will not receive any compensation. In addition, because the offering is conducted on a "best efforts" basis, there is no assurance that any of the shares offered hereby will be sold. However if we do not raise a minimum of $50,000 from public investors, our president, Gust Kepler, will purchase the number of shares necessary to raise a minimum of $50,000 in this offering.
DETERMINATION OF OFFERING PRICE
There is no established public market for the shares of common stock being registered. As a result the offering price and other terms and conditions relative to the shares of common stock offered hereby have been arbitrarily determined by us and do not necessarily bear any relationship to assets, earnings, book value or any other objective criteria of value. In addition, no investment banker, appraiser or other independent, third party has been consulted concerning the offering price for the shares or the fairness of the offering price.
USE OF PROCEEDS
The net proceeds to G2 Ventures from the sale of shares offered hereby, assuming all of the shares offered hereby are sold, of which no assurances are given, are estimated to be $65,000, after deducting the estimated cash expenses of the Offering of approximately $10,000.
The following table sets forth the anticipated use of the net proceeds of this Offering in the event that 1,000,000 shares are sold or all 1,500,000 shares are sold.
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USE OF PROCEEDS 1,000,000 SHARES 1,500,000 SHARES
SOLD SOLD
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REPAYMENT OF LOAN
TO Gust Kepler N/A $20,000
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RECORDING COSTS
ARTIST 1 $10,000 $10,000
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-------------------- ----------------------------- ----------------------------- RECORDING COSTS ARTIST 2 $10,000 $10,000 -------------------- ----------------------------- ----------------------------- CD MANUFACTURING $ 2,500 $ 2,500 -------------------- ----------------------------- ----------------------------- ACCOUNTING $ 5,000 $ 5,000 -------------------- ----------------------------- ----------------------------- ADMINISTRATIVE $ 12,550 $ 12,500 -------------------- ----------------------------- ----------------------------- Offering Expenses $10,000* $10,000* -------------------- ----------------------------- ----------------------------- TOTAL $40,000 $65,000 -------------------- ----------------------------- ----------------------------- |
* Does not include $5,000 legal fee paid by our predecessor, G-2 Companies and 250,000 shares of our common stock, valued at $12,500, to be issued to our counsel.
Our president, Gust Kepler, has loaned us $44,794 to cover our operating expenses to date including operating expenses of our predecessor, G2 Companies, and expenses associated with this offering. $24,794 was converted into 3,500,000 shares of stock issued at $.007 per share and $20,000 remains as a payable to him. Mr. Kepler has agreed that we must sell all 1,500,000 shares offered to be paid the $20,000 he is owed out of the proceeds of this offering.
Mr. Kepler will sell the shares offered hereby. He will not receive any commission or other compensation for his efforts.
In the event that we receive the maximum proceeds of $75,000, Mr. Kepler believes that the $65,000 net proceeds will provide us with sufficient funds to meet our requirements for approximately twelve (12) months following the receipt of this maximum amount.
The above table sets forth our estimates of the manner in which we expect to use the proceeds generated from this offering. However, Mr. Kepler has the right to change these allocations in his sole discretion. Accordingly, Mr. Kepler will have significant flexibility in applying the net proceeds of the offering.
DILUTION
At June 30, 2003 we had a negative net tangible book value of ($5,458). The following table sets forth the dilution to persons purchasing shares in this offering without taking into account any changes in our net tangible book value, except the sale of 1,500,000 shares or 1,000,000 shares at offering price less offering expenses. The net tangible book value per share is determined by subtracting total liabilities from our tangible assets, then dividing by the total number of shares of common stock outstanding.
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Before Offering 1,500,000 1,000,000
shares sold shares sold
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Public offering price per N/A $0.05 $0.05
share
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Net tangible book value -0- N/A N/A
per share of common stock
before the offering
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Pro forma net tangible N/A 1.2 cents .7 cent
book value per share of
common stock after the
offering
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Increase to net tangible N/A 1.2 cents .7 cents
book value per share
attributable to purchase
of common stock by new
investors
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Dilution to new investors N/A 3.8 cents 4.3 cents
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MANAGEMENT'S PLAN OF OPERATION
Over the next twelve months we expect our primary expenses to be recording costs, manufacturing, and administrative. Our business plan is such that if we are not successful in licensing or selling the rights to our master recordings we will not generate net profits from our activities as a record label. We may not be capable of generating additional revenues based on management activity as discussed in Description of Business. If we do generate revenue, we will not generate profits necessary to sustain operations. If we are successful in raising the entire $75,000 proposed to be raised in this offering, that should be sufficient to allow us to conduct business for at least a one year period. If we are unable to raise this entire $75,000 amount, our ability to continue as a going concern may be jeopardized and we may be required to cease conducting operations in less than a year.
However, Gust Kepler has agreed to loan G2 Ventures up to an additional $50,000 to enable G2 Ventures to complete its development activities discussed below.
Development Schedule and Milestones
Artist: Jeremiah Donnelly
Jeremiah Donnelly has written sufficient material to record a full-length CD. (10 songs or more) G2 Ventures has completed photo shoots and developed photographs that will be used for marketing and promotional purposes.
G2 Ventures plans to record tracks for his full-length CD on or before completion of this offering. The recording process from start to finish will take approximately 60-90 days. Mixing and mastering of these recordings will take an additional 30 days. These recording costs are expected to be $10,000 as specified in the Use of Proceeds table . After the mixing and mastering process is complete, the masters will be sent to a third party manufacturer where up to 1000 units is will be pressed. The cost for manufacturing 1000 CD units expected to be $2500 as specified in the Use of Proceeds table.
When the inventory of compact discs is delivered, G2 Ventures we will send out promotional packages to major record labels and related music industry personnel. A marketing campaign will begin including live showcases and performances by the artist. Test marketing of the artist's product will also take place in certain retail locations as well as at live concert events. This entire process could take up to 180 days or longer. Costs to G2 Ventures is expected to be $1,200.
Artist: One Up
One Up has written sufficient material to record a full length CD, (10 songs or more) G2 Ventures has not completed photo shoots for this artist. Currently G2 Ventures is working on a logo and conceptual ideas for this artist. Our costs for this stage of One Ups promotions are expected to be $1000.
G2 Ventures plans to begin recording of One Up's full-length CD 30 to 60 days after commencing recording for Jeremiah Donnelly. G2 Ventures plans to stagger the production and also the marketing and promotional schedules to efficiently maximize exposure for each artist.
The recording process will take approximately 60-90 days. Mixing and mastering the final recordings will take an additional 30 days. Our recording costs are expected to be $20,000. After the mixing and mastering process is complete the masters will be sent to a third party manufacturer where up to 1000 units will be pressed. Our pressing costs are expected to be $2,500.
When the inventory of compact discs is delivered G2 Ventures, we will send out promotional packages to major record labels and related music industry personnel. A marketing campaign will begin including live showcases and performances by the artist. Test marketing of the artist's product will also take place in certain retail locations as well as at live concert events. This entire process could take up to 180 days or longer. Costs to G2 Ventures is expected to be $1,000.
The offering will remain open until 120 days after this registration statement becomes effective unless we determine, in our sole discretion, to cease selling efforts. In addition, we may extend the offering for an additional 90 days in our discretion if we think extending the offering will generate enough additional sales of the shares to justify such extension. If we do extend the offering, we will provide written notification to all offerees of the extension.
DESCRIPTION OF BUSINESS
General
G2 Ventures was incorporated under the laws of the state of Texas on March 21,2003 and is in its early developmental stages of becoming an independent record label and artist management company. On April 1, 2003, we acquired the operation of G2 Companies, a company that was also in the early development stage of becoming an independent record label. Mr. Kepler was the principal shareholder, president and sole director of G2 Companies from September 2002, until we acquired its operations. We currently rely on the financing of Mr. Kepler to fund our start-up activities. To achieve any degree of success, of which there is no certainty, G2 Ventures, must produce high quality recorded music and sell or license the music to a third party. We currently have two artists under exclusive recording contracts. Our plan is to record high quality master recordings, have them manufactured by a third party in CD format for the purpose of distributing them as promo material to major record labels in an attempt to license or sell the publishing rights.
Additionally, G2 Ventures intends to manage artists as another source of generating revenue. G2 Ventures recently negotiated a contract for artist Track
10, to travel to Southeast Asia to perform for US Troops. This contract generated gross revenues of $30,681 in June of 2003. G2 Ventures intends to manage artists that are signed to recording contracts as well as artist that do not have recording contracts with G2 Ventures. Management fees range from 10% to 20% of gross revenues earned by the artist.
The music industry is highly competitive and comprised of approximately six major recorded music companies which dominate the market along with their subsidiary labels. These labels are (1) Time/Warner; (2) Sony Music Group; (3) Bertelsmann Music Group; (4) Polygram; (5) Thorn-EMI; and (6) Universal Music Group. These labels and their subsidiaries are our target market. There is no assurance that any of these major labels or their subsidiaries will have any interest in licensing our artist.
We currently have two artists under recording contract. They are Jeremiah Donnelly and One Up.
Jeremiah Donnelly, 25, is a singer-songwriter specializing in alternative rock and pop rock. Having previously held the title of lead vocalist for the band Track 10, Jeremiah already commands a dedicated following of fans. With a youthful image and innovative sound, Jeremiah's roots, rock and blues influences include him in a genre among artists such as Jack Johnson, Pete Yorn, and John Mayer.
Jeremiah Donnelly toured the southwest extensively with his former band Track 10 between 2000 and 2002. At that time Track 10 opened for major label acts including Blue October, The Old 97's, and Stroke 9. In addition, Track 10 was frequently invited to open for renowned independent artists including Ian Moore and Monte Montgomery.
In the Fall of 2001, Track 10 had two of the most requested songs on their hometown station, Hits 106.1, in Kearney, Nebraska. The songs "Stratosphere" and "Devil Girl" from their self-titled debut release.
Prior to Track 10, Donnelly also was the front man and rhythm guitarist for Slappy Yellow, a band he founded while in high school in Kearney, NE.
One Up is a five member band that creatively mixes elements of metal, hip-hop, alternative, hardcore and rap to concoct a unique techno-rock hybrid for an original and marketable sound. Combining influences that range from Metallica and Nine Inch Nails to Outcast and Dr. Dre, One Up's diverse tastes and exceptional talent keep current with a fresh sound and modern edge.
One Up members Neil Swanson and Justin Jones already bring a cult-like following to their new band, as they still own the affection from fans of their previous band, TEK3.
TEK3 held a dominant presence in the D/FW local music scene for three years. Independently releasing an album titled Unfadeable in 1999 helped push TEK3 into headlining performances in local venues. Alongside their regional popularity TEK3 had the opportunity to support national recording artists by sharing the stage with artists such as Eminem, Papa Roach, Nonpoint, 2 Live Crew and more.
Featured on a nationally released compilation album from www. AlternativeAddiction.com and on the DVD and soundtrack for Wildest Parties on Earth 2002: Panama City, TEK3 also received added promotion from Internet marketing and streaming audio online. TEK3 also received airplay from 97.1 KEGL and 105.3 KYNG and played promotional events for both stations that are in Dallas' #5 radio market.
Recognized as unique in both their genre and influences, which range from heavy metal to techno, One Up has successfully captured TEK3's original passion and spirit and molded it to fit an edgy, modern approach.
DESCRIPTION OF PROPERTY
Gust Kepler will personally provide, without charge, office space for G2 Ventures, for twelve months from August 1, 2003 to July 31, 2004.
G2 Ventures, does not intend to acquire any properties in the immediate future.
Intellectual Property Rights
Our operations will be dependent upon the intellectual property rights to our records. International copyright laws including those in the United States and Texas protect any master recordings we produce.
Regulation
We do not foresee any material effects of federal, state, or local regulation on any aspect of our operations. However, changes in laws or regulations may adversely affect our operations.
DIRECTOR AND EXECUTIVE OFFICER
Gust Kepler, age 38, is President, Chief Executive Officer, Chief Financial
Officer, Secretary, and sole Director. Mr. Kepler has extensive knowledge and
experience in the music and entertainment industries. Mr. Kepler's involvement
in the music industry began in 1977 when he joined his first rock band at age
13. After playing in various bands throughout high school, Mr. Kepler played and
produced various projects between 1985 and 1987. Mr. Kepler served as executive
producer on his first full-length record for the band "Lead" in 1994.
In 1996 Mr. Kepler founded Parallax Entertainment, Inc., an independent record label and internet promotional concern. Mr. Kepler was directly responsible for all production, packaging, marketing and promotion at Parallax Entertainment, Inc. Over this five year period, Parallax had gross revenues of $102,291 and aggregate losses of approximately $4,257,323. Mr. Kepler sold controlling interest in Parallax Entertainment, Inc. in July 2002. Also, Mr. Kepler was the principal shareholder, president and chief executive officer of our predecessor, G2 Companies, from September 2002 until we acquired its operations on April 1, 2003. During that approximate seven month period, G2 Companies had zero revenue and aggregate losses of $58,966.
Mr. Kepler is the sole officer and director of G2 Ventures, Inc. He receives no compensation of any kind at this time. Mr. Kepler was elected our sole director on April 1, 2003 as for a one year term. We do not have an employment contract with him.
EXECUTIVE COMPENSATION
We currently have one employee, Gust Kepler. He works over 40 hours per week for us. At present, Mr. Kepler is not paid a salary but does own a significant amount of our common stock. Although we have no plans for paying Mr. Kepler a salary during the next six months, if our revenues generate enough profits, we expect to pay Mr. Kepler a salary.
Although we have no current plan in existence, we may adopt a plan to pay or accrue compensation to our officers and directors for services rendered. We have no stock option, retirement, incentive or profit sharing plan or program for the benefit of officers, directors or employees but our director, Mr. Kepler, may recommend the adoption of one or more of such programs in the future.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Gust Kepler has made non-interest bearing loans to us and our predecessor, G2 Companies, in the aggregate amount of $44,794 as of June 30, 2003. On April 1, 2003, $24,794 was converted into 3,500,000 shares at $0.007 per share. As of the date of this registration, we still owe Mr. Kepler $20,000. We believe the terms of the loan from Mr. Kepler are more favorable than might otherwise be available to a company with few assets and no operating history.
SECURITIES OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The following table sets forth certain information with respect to the beneficial ownership of our common stock, before and after giving effect to the sale of the maximum number of shares of common stock offered, by our directors, officers and persons who own more than 5% of our outstanding common stock. All shareholders have sole voting and investment power over the shares beneficially owned.
Beneficial Ownership Of Common Stock*
-------------------- --------------- --------------- -------------- ------------
Name Shares Owned % of class % of Class Assuming
Before After 1,000,000
Offering Offering shares sold
-------------------- --------------- --------------- -------------- ------------
Gust C. Kepler 3,300,000 94% 63% 73%
-------------------- --------------- --------------- -------------- ------------
Nicole Evenson 200,000 6% 4% 4%
-------------------- --------------- --------------- -------------- ------------
Officer and 5%
shareholder as
a group (2
persons) 3,500,000 100% 67% 77%
-------------------- --------------- --------------- -------------- ------------
|
o As part of his compensation for representing G2 Ventures in connection with this offering, we have agreed to issue to our counsel, Carl A. Generes, 250,000 restricted shares of stock upon the effective date of this registration statement.
MARKET FOR COMMON EQUITY AND RELATED SHAREHOLDER MATTERS
This is our initial public offering so there is currently no public trading market for our common stock. We hope to have a market maker attempt to have our common stock prices listed on the bulletin board maintained by the National Association of Securities Dealers. To be eligible to have our common stock quoted on the bulletin board, we will be required to file with the Securities and Exchange Commission periodic reports required by the Securities Exchange Act of 1934 and thus be a "reporting" company, a step we will accomplish upon the effective date of this registration statement.
None of our common stock is subject to outstanding options or rights to purchase nor do we have any securities that are convertible into our common stock. We have not agreed to register any of our stock for anyone nor do we presently have in effect employee stock options or benefit plans that would involve the issuing of additional shares of our common stock. As of the date of this prospectus there were 3,500,000 shares issued and outstanding. All of these shares were issued in a private transaction without registration under the act and are therefore restricted securities. Mr. Kepler owns 3,500,000 and Nicole Evenson, who does contract clerical work for us, owns 200,000 shares.
We have never paid dividends and do not expect to declare any in the foreseeable future. Instead, we expect to retain all earnings for our growth. Although we have no specific limitations on our ability to pay dividends, investors should not purchase shares in this offering if their intent is to receive dividends.
LEGAL PROCEEDINGS
There are no legal proceedings currently pending or threatened against us.
DESCRIPTION OF SECURITES
Common Stock
G2 Ventures, Inc. is authorized to issue 200,000,000 shares of common stock, par value .001 per share. Holders of common stock are entitled to one vote per share and to receive dividends or other distributions when and if declared by the board of directors. As of July 31, 2003 there were 3,500,000 shares of common stock outstanding held by two shareholders of record. G2 Ventures, also has authorized 1,000,000 shares of preferred stock. No shares are outstanding.
Our common stock does not have preemptive rights, meaning that our common shareholders' ownership interest would be diluted if additional shares of common stock are subsequently issued and the existing shareholders are not granted the right, in the discretion of the Board of Directors, to maintain their percentage ownership interest in G2 Ventures. This lack of protection from dilution to minority shareholders could allow our Board of Directors to issue additional shares of our common stock to persons friendly with our existing management, thus preventing any change in control of G2 Ventures.
Upon any liquidation, dissolution or winding-up of G2 Ventures, our assets, after the payment of debts and liabilities and any liquidation preferences of, and unpaid dividends on, any class of preferred stock then outstanding, will be distributed pro-rata to the holders of the common stock. The holders of the common stock have no right to require us to redeem or purchase their shares.
The holders of common stock are entitled to share equally in dividends, if and when declared by our Board of Directors, out of funds legally available therefor, subject to the priorities given to any class of preferred stock which may be issued.
Preferred Stock
G2 Ventures, is authorized to issue 1,000,000 shares of preferred stock, $.001 par value per share. We have no preferred shares issued and outstanding. However, the Board of Directors may later determine to issue our preferred stock. If issued, the preferred stock may be created and issued in one or more
series and with such designations, rights, preference and restrictions as shall be stated and expressed in the resolution(s) providing for the creation and issuance of such preferred stock. If preferred stock is issued and we are subsequently liquidated or dissolved, the preferred stockholders would have preferential rights to receive a liquidating distribution for their shares prior to any distribution to common shareholders.
Although we have no present intent to do so, we could issue shares of preferred stock with such terms and privileges that a third party acquisition of G2 Ventures could be difficult or impossible, thus entrenching our existing management in control of G2 Ventures indefinitely.
Dividend Policy
To date, we have not paid any dividends. The payment of dividends, if any, on our common stock in the future is within the sole discretion of our Board of Directors and will depend upon our earnings, capital requirements, financial condition, and other relevant factors. Our sole director, Mr. Kepler, does not intend to declare any dividends on the common stock in the foreseeable future, but instead intends to retain all earnings, if any, for use in our business operations.
Transfer Agent
We will use Securities Transfer Corporation located at 2591 Dallas Parkway Ste. 102 Frisco, TX. 75034 as our transfer agent.
DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION FOR
SECURITIES ACT LIABILITIES
Our Articles and of our Bylaws provide that we shall indemnify our officers or directors against expenses incurred in connection with the defense of any action in which they are made parties by reason of being our officers or directors, except in relation to matters as which such director or officer shall be adjudged in such action to be liable for negligence or misconduct in the performance of his duty. One of our officers or directors could take the position that this duty on our behalf to indemnify the director or officer may include the duty to indemnify the officer or director for the violation of securities laws.
Insofar as indemnification for liabilities arising under the Securities Act of 1933 (the "Act") may be permitted to our directors, officers and controlling persons pursuant to our Articles of Incorporation, Bylaws, Texas laws or otherwise, we have been advised that in the opinion of the Securities and Exchange Commission, such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by us of
expenses incurred or paid by one of our directors, officers, or control persons, and the successful defense of any action, suit or proceeding) is asserted by such director, officer or control person in connection with the securities being registered, we will, unless in the opinion of our counsel the matter has been settled by a controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.
LEGAL MATTERS
Carl A. Generes, Esq., attorney at law, Dallas, Texas has passed upon the validity of the common stock covered by this registration statement for G2 Ventures. For representing G2 Ventures in this matter, Mr. Generes has been paid $5,000 by its predecessor, G2 Companies. In addition, G2 Ventures will issue to Mr. Generes, upon the effective date of this registration statement, 250,000 shares of restricted common stock. Based upon the $0.05 per share offering price of the shares covered by this prospectus, the value of these 250,000 shares to be issued to Mr. Generes is $12,500.
EXPERTS
The financial statements included in the registration statement on Form SB-2 have been audited by Turner, Stone & Company, LLP, independent certified accountants, to the extent and for the periods set forth in his report, and are included herein in reliance upon the authority of said firm as experts in auditing and accounting.
FINANCIAL STATEMENTS
AUDITORS' OPINION............................................................F-1
BALANCE SHEETS...............................................................F-2
STATEMENTS OF OPERATIONS.....................................................F-3
STATEMENTS OF STOCKHOLDERS' EQUITY...........................................F-4
STATEMENTS OF CASH FLOWS.....................................................F-5
NOTES TO FINANCIAL STATEMENTS..........................................F-6 - F-8
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G2 Ventures, Inc.
(A Development Stage Company)
Financial Statements
and
Independent Auditors' Report
Seven Months Ended July 31, 2003
and
Periods September 26, 2002 (inception) through
December 31, 2002 and July 31, 2003
AUDITORS' OPINION............................................................F-1 BALANCE SHEETS...............................................................F-2 STATEMENTS OF OPERATIONS.....................................................F-3 STATEMENTS OF STOCKHOLDERS' EQUITY...........................................F-4 STATEMENTS OF CASH FLOWS.....................................................F-5 NOTES TO FINANCIAL STATEMENTS...........................................F6 - F-8 |
Board of Directors and Stockholders
G2 Ventures, Inc.
Dallas, Texas
We have audited the accompanying balance sheets of G2 Ventures, Inc. (a development stage company) as of July 31, 2003 and December 31, 2002, and the related statements of operations, stockholders' deficit, and cash flows for the seven months ended July 31, 2003 and for the periods September 26, 2002 (inception) through December 31, 2002 and through July 31, 2003. These financial statements are the responsibility of the company's management. Our responsibility is to express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about 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 audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of G2 Ventures, Inc. at July 31, 2003 and December 31, 2002, and the results of its operations and its cash flows for the seven months ended July 31, 2003 and for the periods September 26, 2002 (inception) through December 31, 2002 and through July 31, 2003 in conformity with accounting principles generally accepted in the United States of America.
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As also discussed in Note 1 to the financial statements, the Company has a loss from operations and has no working capital both of which raise substantial doubt about its ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Turner, Stone & Company, L.L.P.
Certified Public Accountants
August 26, 2003
G2 VENTURES, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEETS
JULY 31, 2003 AND DECEMBER 31, 2002
Assets
------
2003 2002
-------- --------
Current assets:
Cash $ 91 $ 3,606
Accounts receivable, trade 15,651 --
-------- --------
Total current assets 15,742 3,606
Other assets -- --
-------- --------
$ 15,742 $ 3,606
======== ========
Liabilities and Stockholders' Deficit
-------------------------------------
Current liabilities:
Accounts payable, trade $ 1,860 $ 6,549
Stockholder advance 20,000 20,000
-------- --------
Total current liabilities 21,860 26,549
-------- --------
Commitments and contingencies -- --
Stockholders' deficit:
Preferred stock, $.001 par value,
1,000,000 shares authorized, no
shares issued and outstanding, no
rights or preferences determined -- --
Common stock, $.001 par value,
200,000,000 and 0, respectively,
shares authorized, 3,500,000 and 0,
respectively, shares issued and outstanding 3,500 --
Paid in capital in excess of par 41,290 17,796
Deficit accumulated during the
development stage (50,908) (40,739)
-------- --------
Total stockholders' deficit (6,118) (22,943)
-------- --------
$ 15,742 $ 3,606
======== ========
|
The accompanying notes are an integral part of the financial statements.
G2 VENTURES, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
SEVEN MONTHS ENDED JULY 31, 2003
AND PERIODS SEPTEMBER 26, 2002 (INCEPTION) THROUGH
DECEMBER 31, 2002 AND THROUGH JULY 31, 2003
Cumulative
July 31, December 31, From
2003 2002 Inception
------------ ------------ ------------
Revenues $ 30,681 $ -- $ 30,681
Cost of revenues 14,020 -- 14,020
------------ ------------ ------------
16,661 -- 16,661
Operating expenses:
General and administrative 26,830 40,739 67,569
------------ ------------ ------------
Loss before income taxes (10,169) (40,739) (50,908)
Provision for income taxes -- -- --
------------ ------------ ------------
Net loss $ (10,169) $ (40,739) $ (50,908)
============ ============ ============
Net loss per share $ (.00) $ (.01) $ (.01)
|
The accompanying notes are an integral part of the financial statements.
G2 VENTURES, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF STOCKHOLDERS' EQUITY
SEVEN MONTHS ENDED JULY 31, 2003
AND PERIOD SEPTEMBER 26, 2002 (INCEPTION) THROUGH DECEMBER 31, 2002
Additional
Preferred Stock Common Stock Paid-In Accumulated
Shares Amount Shares Amount Capital Deficit Total
----------- ----------- ----------- ----------- ----------- ----------- ---------
Balance at September 26, 2002 - $ -- -- $ -- $ -- $ -- $ --
Contributed capital - -- -- -- 17,796 -- 17,796
Net loss - -- -- -- -- (40,739) (40,739)
----------- ----------- ----------- ----------- ----------- ----------- ---------
Balance at December 31, 2002 - -- -- -- 17,796 (40,739) (22,943)
Issuance of common stock
for cash - -- 3,500,000 3,500 23,494 -- 26,994
Net loss - -- -- -- -- (10,169) (10,169)
----------- ----------- ----------- ----------- ----------- ----------- ---------
Balance at July 31, 2003 - $ -- 3,500,000 $ 3,500 $ 41,290 $ (50,908) $ (6,118)
=========== =========== =========== =========== =========== =========== =========
|
The accompanying notes are an integral part of the financial statements.
G2 VENTURES, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
SEVEN MONTHS ENDED JULY 31, 2003
AND PERIODS SEPTEMBER 26, 2002 (INCEPTION) THROUGH
DECEMBER 31, 2002 AND THROUGH JULY 31, 2003
Reconciliation of Net Loss to Net Cash
--------------------------------------
Provided by Operating Activities
--------------------------------
Cumulative
July 31, December 31, From
2003 2002 Inception
------------ ------------ ------------
Net loss $ (10,169) $ (40,739) $ (50,908)
------------ ------------ ------------
Adjustments to reconcile net loss
to cash used in operating activities:
Increase in accounts receivable (15,651) -- (15,651)
Increase (decrease) in accounts payable (4,689) 6,549 1,860
------------ ------------ ------------
Net cash used in operating activities (30,509) (34,190) (64,699)
------------ ------------ ------------
Cash flows from financing activities:
Proceeds from issuance of common stock 26,994 -- 24,994
Additional capital contributed -- 4,142 4,142
Stockholder advances -- 33,654 33,654
------------ ------------ ------------
Net cash provided by financing activities 26,994 37,796 64,790
------------ ------------ ------------
Net increase (decrease) in cash (3,515) 3,606 91
Cash at beginning of year 3,606 -- --
------------ ------------ ------------
Cash at end of year $ 91 $ 3,606 $ 91
============ ============ ============
Supplemental Disclosure of Non Cash
-----------------------------------
Investing and Financing Activities
----------------------------------
Stockholder advances forgiven as
additional paid in capital $ -- $ 17,176 $ 17,796
|
The accompanying notes are an integral part of the financial statements.
G2 VENTURES, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
G2 Ventures, Inc. (the Company) was incorporated on March 21, 2003 in the State of Texas. Effective April 1,2003, the Company acquired the operations and assets of G2 Companies, Inc.(G2C) (formerly Hartland Investments, Inc.) a Delaware corporation, the controlling interest in which was owned by the Company's principal shareholder, Gust Kepler. In this non-arms length transaction, G2C assigned it's two artist contracts to the Company in consideration of the shareholders forgiveness of $17,000 in loans to G2C as additional paid-in capital and the assumption by the Company of $20,000 of advances payable to the shareholder. G2C is, therefore, a "predecessor" of the Company.
For financial reporting purposes the transaction has been treated as a recapitalization of G2C with the Company being the legal survivor and G2C being the accounting survivor and the operating entity. That is, the historical financial statements prior to April 1, 2003 are those of G2C and its operations, even though they are labeled as those of the Company. Retained earnings of G2C related to its operations, is carried forward after the recapitalization. Operations prior to the recapitalization are those of the accounting survivor, G2C, which began September 26, 2002. Earnings per share for the periods prior to the recapitalization are restated to reflect the equivalent number of shares outstanding for the entire period operations were conducted. Upon completion of the transaction, the financial statements become those of the operating company, with adjustments to reflect the changes in equity structure and receipt of the assets and liabilities of G2C.
The financial statements of the Company have been prepared assuming the Company will continue as a going concern. However, the Company has incurred an initial operating loss and has no working capital. These conditions give rise to substantial doubt about the Company's ability to continue as a going concern. Management is continuing to seek additional equity capital to fund its operations. Management believes that these steps will provide the Company with adequate funds to sustain its growth and continued existence. There is, however, no assurance that the steps taken by management will meet all of the Company's needs or that is will continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
For purposes of these statements cash includes demand deposits, time deposits and short-term cash equivalent investments with maturities of three months or less.
G2 VENTURES, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Advertising dollars are invested in promotional material, web-site and logo development and are expensed as incurred. For the seven months ended July 31, 2003 and the periods September 26, 2002 (inception) through December 31, 2002 and through July 31, 2003, advertising expense totaled $834, $1,705 and $2,539, respectively.
Basic loss per share amounts are computed using the weighted-average number of common stock shares outstanding during the periods. Diluted loss per share amounts are not presented because there were no common equivalent share amounts outstanding during the periods. For the seven months ended July 31, 2003 and the periods September 26, 2002 (inception) through December 31, 2002 and through July 31, 2003, basic loss per share amounts are computed using 3,500,000 weighted average common stock shares outstanding, assuming retroactively their issuance on September 26, 2002.
2. COMMITMENTS AND CONTINGENCIES
The Company was obligated under a non-cancelable operating lease for its Dallas office, which expired on April 30, 2003. This lease did not contain a renewal option. For the seven months ended July 31, 2003 and the periods September 26, 2002 (inception) through December 31, 2002 and through July 31, 2003, rental expense totaled $3,400, $3,400 and $6,800, respectively. Subsequent to April 30, 2003, the Company is using office space provided by its majority stockholder without charge. However, the fair value of the space provided is not material.
During December 2002, the Company entered into contracts with a recording artist, which granted the Company certain recording, distribution and copyrights of the artist. The Company agreed to promote and produce the albums produced by the artist. The agreement is for a period of nine months and contains three irrevocable options to extend the agreement for one year each. The agreement provides for recording advance payments of $10,000 to $75,000 less applicable recording costs plus royalties from 12% to 20% on albums produced by the artist.
G2 VENTURES, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
3. INCOME TAXES
The Company accounts for corporate income taxes in accordance with Statements of Financial Accounting Standards (SFAS) No. 109. Under SFAS No. 109, deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statements carrying amounts of existing assets and liabilities and their respective tax bases. In addition, future tax benefits, such as those from net operating loss carry forwards, are recognized to the extent that realization of such benefits is more likely than not. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.
A reconciliation of income tax expense (benefit) at the statutory federal rate of 34% to income tax expense (benefit) at the Company's effective tax rate for the seven months ended July 31, 2003 and the period September 26, 2002 (inception) through December 31, 2002 is as follows:
2003 2002
-------- --------
Tax expense (benefit) computed at statutory rate $ 17,309 $ 13,792
Less valuation allowance (17,309) (13,792)
-------- --------
Income tax expense (benefit) $ -- $ --
======== ========
|
At July 31, 2003 and December 31, 2002, the Company had approximately $51,000 and $40,000, respectively, of net operating losses available to offset future taxable income. These carry forwards expires in the year 2022 and creates the only component of the Company's deferred tax asset of approximately $17,300 and $13,800, respectively, which is fully offset by a valuation allowance. There are no deferred tax liabilities.
4. RELATED PARTIES
During the seven months ended July 31, 2003 and the periods September 26, 2002 (inception) through December 31, 2002 and through July 31, 2003, the Company received cash operating advances of $0, $33,654 and $33,654, respectively, from the major stockholder of the Company. The advances are non-interest bearing, unsecured and due upon demand as funds are available. During each of the periods September 26, 2002 (inception) through December 31, 2002 and through July 31, 2003, $13,654 of the advances was contributed by the stockholder as additional paid in capital.
5. FINANCIAL INSTRUMENTS
The Company's financial instruments, which potentially subject the Company to credit risks and none of which are held for trading purposes, consist of its cash. The Company maintains its cash in bank deposit accounts, which, at times, may exceed federally insured limits. The Company has not experienced any such losses in such accounts, and does not believe it is subject to any credit or other risks involving its cash.
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
Item 25. Other Expenses of Issuance and Distribution
The estimated expenses of the registration, all of which will be paid by G2 Ventures, are as follows:
SEC Filing fee $ 25
Printing Expense $ 3,000
Accounting Fees and Expenses $ 6,000
Legal Fees and Expenses $ 17,500*
Blue Sky Fees and Expenses $ 75
Miscellaneous $ 900
------------
TOTAL $ 27,500
|
*$5,000 was paid by predecessor and $12,500 to be paid in stock.
Item 26. Recent Sales of Unregistered Securities
On April 1, 2003, G2 Ventures issued 3,500,000 restricted shares of common stock to Gust Kepler in consideration of Gust Kepler's forgiveness of $24,794 in indebtedness owed to Gust Kepler. G2 Ventures relied on Section 4(2) of the Securities Act of 1933 as its exemption from the registration requirements of such Act. Mr. Kepler agreed to hold the shares for investment purposes only and to transfer such shares only in a registered offering or in reliance upon an available exemption therefrom.
Item 27. Exhibits
2.1 Sale of Assets Agreement between G2 Ventures, Inc. and G2 Companies,
Inc.
3.1 Articles of Incorporation of G2 Ventures, Inc.*
3.2 Bylaws of G2 Ventures, Inc. *
4.1 Specimen Stock Certificate for Common Shares.
5.1 Opinion of Carl A. Generes, Esq.
10.1 Exclusive Recording Artist Agreement between G2 Ventures, Inc. and
Jeremiah Donnelly.
10.2 Exclusive Recording, Artist Agreement between G2 Ventures, Inc. and
OneUp.
23.1 Consent of Turner, Stone & Company, L.L.P.
23.2 Consent of Carl A. Generes, Esq., included in his opinion, Exhibit 5.1.
|
II-1
Item 28. Undertakings.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a post-effective amendment to the registration statement:
(a) To include any prospectus required under Section 10(a) (3) of the Securities Act
(b) To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or most recent post-effective amendment thereof) which, individually or in the aggregate, represents a fundamental change in the information set forth in the registration statement.
(c) To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement.
(2) That, for the purpose of determining any liability under the Securities Act, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any of the securities being registered that remain unsold at the termination of the offering.
"Insofar as indemnification for liabilities arising under the Securities Act of 1933 (the "Act") may be permitted to directors, officers and controlling persons of the small business issuer pursuant to the foregoing provisions, or otherwise, the small business issuer has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable."
In the event that a claim for indemnification against such liabilities (other than the payment by the small business issuer of expenses incurred or paid by a director, officer or controlling person of the small business issuer in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the small business issuer will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.
II-2
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, G2 Ventures, Inc. certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form SB-2 and has duly caused this registration statement to be signed on its behalf by the undersigned thereunto duly authorized, in the City of Dallas, State of Texas, on the 7th day of September, 2003.
G2 VENTURES , INC.
By: /s/ Gust Kepler
--------------------------------------------------------
Gust Kepler, President, Chief Executive Officer and
Chief Financial Officer
|
In accordance with the requirements of the Securities Act of 1933, this Registration statement was signed by the following persons in the capacities and on the dates indicated.
By: /s/ Gust Kepler , President, Chief Executive Officer and ----------------- Chief Financial Officer September 7, 2003 |
II-3
EXHIBIT INDEX
Exhibits
2.1 Sale of Assets Agreement between G2 Ventures, Inc. and G2 Companies,
Inc.
3.1 Articles of Incorporation of G2 Ventures, Inc.*
3.2 Bylaws of G2 Ventures, Inc. *
4.1 Specimen Stock Certificate for Common Shares.
5.1 Opinion of Carl A. Generes, Esq.
10.1 Exclusive Recording Artist Agreement between G2 Ventures, Inc. and
Jeremiah Donnelly.
10.2 Exclusive Recording, Artist Agreement between G2 Ventures, Inc. and
OneUp.
23.1 Consent of Turner, Stone & Company, L.L.P.
23.2 Consent of Carl A. Generes, Esq., included in his opinion, Exhibit 5.1.
|
II-4
Exhibit 2.1
SALE OF ASSETS AGREEMENT
This Sale of Assets Agreement is entered into as of the 1st day of April 2003 by and between G2 Companies, Inc., a Delaware corporation ("Seller") and G2 Ventures, Inc., a Texas Corporation ("Purchaser").
WHEREAS, the Seller was engaged in the business of managing and promoting recording musicians and is the owner of assets including, but not limited to, equipment, inventories, contract rights, and miscellaneous assets used in connection with the operation of its business;
WHEREAS, the Purchaser desires to purchase, and the Seller desires to sell, all the operating assets used or useful, or intended to be used, in the operation of the Seller's business.
NOW THEREFORE, IT IS AGREED AS FOLLOWS:
Section 1. Assets Purchased.
The Seller agrees to sell to the Purchaser and the Purchaser agrees to purchase from the Seller, on the terms and conditions set forth in this Agreement, the assets set forth on Schedule 1 hereto ("Assets").
Section 2. Excluded Assets. Excluded from this sale and purchase are the Seller's accounts receivable, cash, notes receivable, prepaid accounts, the corporate seals, minute books, stock transfer books, general ledger and other accounting records (except as otherwise provided herein), other records related exclusively to the organization, existence or share capitalization of the Seller, its affiliates, subsidiaries, and any other assets of the business not specified in Schedule 1 hereto, together with the Seller's rights under any contract between the Seller and any third party and to which consent to assignment to the Purchaser is required, but has not been obtained on the Closing Date. The Seller shall make its general ledger and other accounting records available for inspection by the Purchaser from time to time upon reasonable request.
Section 3. Liabilities Assumed.
3.1 Except as otherwise provided below, at Closing, the Purchaser agrees to assume and pay, discharge or perform, as appropriate, only the liabilities and obligations of the Seller specifically itemized on Schedule 3 hereto ("Assumed Liabilities").
3.2 Notwithstanding Section 3.1, the Purchaser shall not assume, agree to pay, discharge or perform, or incur, as the case may be, any of the following liabilities:
3.2.1 liabilities (including principal and interest) arising out of loans and other indebtedness owing to any person or entity, excluding only the Assumed Liabilities;
3.2.2 liabilities of the Seller not arising in the ordinary course of its business incurred or accrued prior to the Closing, unless an Assumed Liability; and
3.2.3 any liability or obligation owing to current or former employees of the Seller and/or arising out of or in connection with an employee benefit plan, unless an Assumed Liability;
3.3 The obligations of the Purchaser under this Section are subject to whatever rights the Purchaser may have under this Agreement or otherwise for breach by the Seller of any representation, warranty, covenant or agreement contained in this Agreement, including but not limited to any right of indemnification provided by this Agreement.
Section 4. Purchase Price. The purchase price for the Assets shall be the assumption of the liabilities set forth on Schedule 3 hereto.
Section 5. Closing.
5.1 Time and Place. The closing ("Closing") of the sale and purchase of the Assets shall take place at the offices of Seller on April 1,2003 ("Closing Date").
5.2 Obligations of Seller at the Closing. At the Closing, the Seller shall deliver to the Purchaser the following:
5.2.1 one or more bills of sale from the Seller conveying all of the Assets to the Purchaser;
5.2.2 a copy of the resolutions of the Seller's board of directors and shareholders, authorizing the execution, delivery and performance of this Agreement and any other agreement to be entered into by the Seller in connection herewith, and the transactions contemplated hereby;
Section 6. Seller's Obligation Prior to Closing.
6.1 Seller's Operation of Business Prior to Closing. The Seller agrees that between the date of this Agreement and the Closing Date, the Seller will:
6.1.1 Continue to operate the business that is the subject of this Agreement in the usual and ordinary course and in substantial conformity with all applicable laws, ordinances, regulations, rules, or orders, and will use its best efforts to preserve its business organization and preserve the continued operation of its business with its customers, suppliers, and others having business relations with the Seller.
6.1.2 Not assign, sell, lease, or otherwise transfer or dispose of any of the assets used in the performance of its business, whether now owned or hereafter acquired, except in the normal and ordinary course of business and in connection with its normal operation.
6.1.3 Maintain all of its assets other than inventories in its present condition, reasonable wear and tear and ordinary usage excepted, and maintain the inventories at levels normally maintained.
6.2 Access to Premises and Information. At reasonable times prior to the Closing Date, the Seller will provide the Purchaser and its representatives with reasonable access during business hours to the assets, titles, contracts, and records of the Seller and furnish such additional information concerning the Seller's business as the Purchaser from time to time may reasonably request.
6.3 Conditions and Best Efforts. The Seller will use its best efforts to effectuate the transactions contemplated by this Agreement and to fulfill all the conditions of the obligations of the Seller under this Agreement, and will do all acts and things as may be required to carry out its respective obligations under this Agreement and to consummate and complete this Agreement.
Section 7. Covenants of Purchaser Prior to Closing.
7.1 Conditions and Best Efforts. The Purchaser will use its best efforts to effectuate the transactions contemplated by this Agreement and to fulfill all the conditions of the Purchaser's obligations under this Agreement, and shall do all acts and things as may be required to carry out the Purchaser's obligations and to consummate this Agreement.
7.2 Confidential Information. If for any reason the sale of Assets is not closed, the Purchaser will not disclose to third parties any confidential information received from the Seller in the course of investigating, negotiating, and performing the transactions contemplated by this Agreement.
Section 8. Seller's Representations and Warranties. The Seller represents and warrants to the Purchaser as follows:
8.1 Corporate Existence. The Seller is now, and on the Closing Date will be, a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware, has all requisite corporate power and authority to own its properties and assets and carry on its business and is good standing in each jurisdiction in which such qualification is required.
8.2 Corporation Power and Authorization. The Seller has full corporate authority to execute and deliver this Agreement and any other agreement to be executed and delivered by the Seller in connection herewith, and to carry out the transactions contemplated hereby. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby have been duly authorized by all necessary corporate and shareholder action. No other corporate proceedings by the Seller will be necessary to authorize this Agreement or the carrying out of the transactions contemplated hereby. This Agreement constitutes a valid and binding Agreement of the Seller in accordance with its terms.
8.3 Conflict with Other Agreements, Consents and Approvals. With respect to (i) the articles of incorporation or bylaws of the Seller, (ii) any applicable law, statute, rule or regulation, (iii) any contract to which the Seller is a party or may be bound, or (iv) any judgment, order, injunction, decree or ruling of any court or governmental authority to which the Seller is a party or subject, the execution and delivery by the Seller of this Agreement and any other agreement to be executed and delivered by the Seller in connection herewith and the consummation of the transactions contemplated hereby will not (a) result in any violation, conflict or default, or give to others any interest or rights, including rights of termination, cancellation or acceleration, (b) require any authorization, consent, approval, exemption or other action by any court or administrative or governmental body which has not been obtained, or any notice to or filing with any court or administrative or governmental body which has not been given or done.
8.4 Compliance with Law. The Seller's use and occupancy of the Assets, wherever located, has been in compliance with all applicable federal, state, local or other governmental laws or ordinances, the non-compliance with which, or the violation of which, might have a material adverse affect on the Assets, the Assumed Liabilities or the financial condition, results of operations or anticipated business prospects of the Purchaser, and the Seller has received no claim or notice of violation with respect thereto. Without in any way limiting the generality of the foregoing, the Seller is in compliance with, and is subject to no liabilities under, any and all applicable laws, governmental rules, ordinances, regulations and orders pertaining to the presence, management, release, discharge, or disposal of toxic or hazardous waste material or substances, pollutants (including conventional pollutants) and contaminants. The Seller has obtained all material permits, licenses, franchises and other authorizations necessary for the conduct of its business.
8.5 Financial Statements. Attached hereto on Schedule 8.5 are the Seller's audited (reviewed) financial statements for the period ended December 31, 2002 ("Financial Statements"). The Financial Statements are in accordance with the books and records of the Seller and are true, correct, and complete; fairly present financial conditions of the Seller at the dates of such Financial Statements and the results of its operations for the periods then ended; and were prepared in accordance with generally accepted accounting principles applied on a basis consistent with prior accounting periods. Except as described in this Agreement, since December 31, 2002 there has been no material adverse change in the financial condition of the Seller.
8.5 Tax and Other Returns and Reports. (i) All federal, state, local and foreign tax returns and reports (including without limitation all income tax, social security, payroll, unemployment compensation, sales and use, excise, privilege, property, ad valorem, franchise, license, and school) required to be filed by the Seller by the Closing ("Tax Returns") have been filed with the appropriate governmental agencies in all jurisdictions in which such returns and reports are required to be filed, and all such returns and reports properly reflect the taxes of the Seller for the periods covered thereby; (ii) all federal, state, and local taxes, assessments, interest, penalties, deficiencies, fees and other governmental charges or impositions, including those enumerated above with respect to the Tax Returns, which are called for by the Tax Returns, or which are claimed to be due from the Seller by notice from any taxing authority, or upon or measured by its properties, assets or income ("Taxes"), have been properly accrued or paid by or at the Closing if then due and payable; and (iii) the reserves for Taxes contained in the Financial Statements are adequate to cover the tax liabilities of the Seller as of that date, and nothing other than tax on operations subsequent to the date of the Financial Statements has occurred subsequent to that date to make any of such reserves inadequate.
8.6 Title to Assets. Except as described in Schedule 1 of this Agreement, the Seller holds good and marketable title to the Assets, free and clear of restrictions on or conditions to transfer or assignment, and free and clear of liens, pledges, charges, or encumbrances.
8.7 Litigation. The Seller has no knowledge of any claim, litigation, proceeding, or investigation pending or threatened against the Seller that might result in any material adverse change in the business or condition of Assets being conveyed under this Agreement.
8.8 Accuracy of Representations and Warranties. None of the representations or warranties of the Seller contain or will contain any untrue statement of a material fact or omit or will omit or misstate a material fact necessary in order to make statements in this Agreement not misleading. The Seller knows of no fact that has resulted, or that in its reasonable judgment will result in a material change in the business, operations, or assets of the Seller that has not been set forth in this Agreement or otherwise disclosed to the Purchaser.
Section 9. Representations of Purchaser. The Purchaser represents and warrants to Seller as follows:
9.1 Authorization. The Purchaser has full authority to execute and deliver this Agreement and any other agreement to be executed and delivered by the Purchaser in connection herewith, and to carry out the transactions contemplated hereby. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby have been duly authorized by all necessary action. No other corporate proceedings by the Purchaser will be necessary to authorize this Agreement or the carrying out of the transactions contemplated hereby. This Agreement constitutes a valid and binding Agreement of Purchaser, in accordance with its terms.
9.2 Accuracy of Representations and Warranties. None of the representations or warranties of the Purchaser contains or will contain any untrue statement of a material fact or omit or will omit or misstate a material fact necessary in order to make the statements contained herein not misleading.
Section 10. Conditions Precedent to Purchaser's Obligations. The obligation of the Purchaser to purchase the Assets is subject to the fulfillment, prior to or at the Closing Date, of each of the following conditions, any one or portion of which may be waived in writing by the Purchaser:
10.1 Representations, Warranties and Covenants of Seller. The representations and warranties of the Seller contained herein and the information contained in the Schedules and any other documents delivered by the Seller in connection with this Agreement shall be true and correct in all material respects at the Closing; and the Seller shall have performed all obligations and complied with all agreements, undertakings, covenants and conditions required by this Agreement to be performed or complied with by it prior to the Closing.
10.2 Conditions of the Business. There shall have been no material adverse change in the manner of operation of the Seller's business prior to the Closing Date.
10.3 No Suits or Actions. At the Closing Date no suit, action, or other proceeding shall have been threatened or instituted to restrain, enjoin, or otherwise prevent the consummation of this Agreement or the contemplated transactions.
Section 11. Conditions Precedent to Obligations of the Seller. The obligations of the Seller to consummate the transactions contemplated by this Agreement are subject to the fulfillment, prior to or at the Closing Date, of each of the following conditions, any one or a portion of which may be waived in writing by the Seller:
11.1 Representations, Warranties, and Covenants of Purchaser. All representations and warranties made in this Agreement by the Purchaser shall be true as of the Closing Date as fully as though such representations and warranties had been made on and as of the Closing Date, and the Purchaser shall not have violated or shall not have failed to perform in accordance with any covenant contained in this Agreement.
Section 12. Purchaser's Acceptance. The Purchaser represents and acknowledges that it has entered into this Agreement on the basis of its own examination, personal knowledge, and opinion of the value of the business. The Purchaser has not relied on any representations made by the Seller other than those specified in this Agreement. The Purchaser further acknowledges that the Seller has not made any agreement or promise to repair or improve any of the leasehold improvements, equipment, or other real or personal property being sold to the Purchaser under this Agreement, and that the Purchaser takes all such property in the condition existing on the date of this Agreement, except as otherwise provided in this Agreement.
Section 13. Risk of Loss. The risk of loss, damage, or destruction to any of the equipment, inventory, or other personal property to be conveyed to the Purchaser under this Agreement shall be borne by the Seller to the time of Closing. In the event of such loss, damage, or destruction, the Seller, to the extent reasonable, shall replace the lost property or repair or cause to repair the damaged property to its condition prior to the damage. If replacement, repairs, or restorations are not completed prior to Closing, then the purchase price shall be adjusted by an amount agreed upon by the Purchaser and the Seller that will be required to complete the replacement, repair, or restoration following Closing. If the Purchaser and the Seller are unable to agree, then the Purchaser, at its sole option and notwithstanding any other provision of this Agreement, upon notice to the Seller, may rescind this Agreement and declare it to be of no further force and effect, in which event there shall be no Closing of this Agreement and all the terms and provisions of this Agreement shall be deemed null and void. If, prior to Closing, any of the real properties that are included in the Assets are materially damaged or destroyed, then the Purchaser may rescind this Agreement in the manner provided above unless arrangements for repair satisfactory to all parties involved are made prior to Closing.
Section 14. Miscellaneous Provisions.
Section 14.1 Notices. Any notices permitted or required under this Agreement shall be deemed given upon the date of personal delivery or 48 hours after deposit in the United States mail, postage fully prepaid, return receipt requested, addressed to Seller at:
14110 N. Dallas Parkway
Suite 365
Dallas, Texas 75254
Purchaser at:
14110 N. Dallas Parkway
Suite 365
Dallas, Texas 75254
or at any other address as any party may, from time to time, designate by notice given in compliance with this section.
Section 14.2 Survival. Any of the terms and covenants contained in this Agreement which require the performance of either party after the Closing shall survive the Closing.
Section 14.3 Waiver. The waiver by either party of the breach of any provision of this Agreement by the other party shall not operate or be construed as a waiver of any subsequent breach.
Section 14.4 Assignment. Except as otherwise provided within this Agreement, neither party hereto may transfer or assign this Agreement without prior written consent of the other party.
Section 14.5 Law Governing. This Agreement shall be governed by and construed in accordance with the laws of the State of Texas.
Section 14.5 Titles and Captions. All article, section and paragraph titles or captions contained in this Agreement are for convenience only and shall not be deemed part of the context nor affect the interpretation of this Agreement.
Section 14.6 Entire Agreement. This Agreement contains the entire understanding between and among the parties and supersedes any prior understandings and agreements among them respecting the subject matter of this Agreement.
Section 14.7 Agreement Binding. This Agreement shall be binding upon the heirs, executors, administrators, successors and assigns of the parties hereto.
Section 14.8 Further Action. The parties hereto shall execute and deliver all documents, provide all information and take or forbear from all such action as may be necessary or appropriate to achieve the purposes of this Agreement.
Section 14.9 Good Faith, Cooperation and Due Diligence. The parties hereto covenant, warrant and represent to each other good faith, complete cooperation, due diligence and honesty in fact in the performance of all obligations of the parties pursuant to this Agreement. All promises and covenants are mutual and dependent.
Section 14.10 Counterparts. This Agreement may be executed in several counterparts and all so executed shall constitute one Agreement, binding on all the parties hereto even though all the parties are not signatories to the original or the same counterpart.
Section 14.11 Parties in Interest. Nothing herein shall be construed to be to the benefit of any third party, nor is it intended that any provision shall be for the benefit of any third party.
Section 14.13 Savings Clause. If any provision of this Agreement, or the application of such provision to any person or circumstance, shall be held invalid, the remainder of this Agreement, or the application of such provision to persons or circumstances other than those as to which it is held invalid, shall not be affected thereby.
Signed this 1st day of April 2003.
Seller Purchaser ------ --------- G2 Companies, Inc. G2 Ventures, Inc. By:______________________ By:______________________ Gust Kepler, President Gust Kepler, President |
EXHIBIT 3.1
ARTICLES OF INCORPORATION
of
G2 Ventures, Inc.
I, the undersigned natural person, acting as an incorporator of a corporation (hereinafter referred to as the "Corporation") under the Texas Business Corporation Act, as amended (the "TBCA"), do hereby adopt the following Articles of Incorporation for the Corporation:
The name of the Corporation is G2 Ventures, Inc.
The Corporation's period of duration is perpetual.
The purpose for which the Corporation is organized is to transact any and all lawful business for which corporations may be incorporated under the TBCA.
No holders of any shares of stock (whether now or hereafter authorized)
of the Corporation shall, as such holders, have any preemptive or preferential
right to receive, purchase, or subscribe for (i) any unissued or treasury shares
of any class of stock (whether now or hereafter authorized) or the Corporation;
(ii) any obligations, evidence of indebtedness, or other securities of the
Corporation, whether convertible into or exchangeable for, or carrying or
accompanied by any rights to receive, purchase, or subscribe for, any such
unissued or treasury shares; (iii) any right of subscription for or to receive,
or any warrant or option for the purchase of, any of the foregoing securities;
or (iv) any other securities that may be issued or sold by the Corporation,
other than such right or rights (if any) as the Board of Directors of the
Corporation, in its sole and absolute discretion, may determine at any time or
from time to time.
The Corporation is authorized to issue shares of two classes of stock to be designated "common stock" and "preferred stock." The Corporation is authorized to issue a total number of 200,000,000 common shares; the par value of each share is $0.001, and 1,000,000 preferred shares; the par value of each share is $0.001.
The Corporation will not commence business until it has received consideration for the issuance of its stock amounting to $1,000.00 in value consisting of money, labor done, or property actually received, or any combination thereof.
Except where otherwise provided in these Article of Incorporation or Bylaws of the Corporation, the holders of the common stock shall have exclusive voting rights and powers at shareholders' meetings, including the exclusive right to notice of such shareholders' meetings.
Cumulative voting for the election of directors is prohibited.
The Board of Directors of the Corporation shall adopt the initial Bylaws of the Corporation and may thereafter alter, amend, or repeal the Bylaws of the Corporation or may adopt new Bylaws, subject to the shareholders' concurrent right to alter, amend or repeal the Bylaws or to adopt new Bylaws. Any or all Bylaws altered, amended, repealed, or adopted by the shareholders shall not be altered, amended, re-enacted, or repealed by the Board of Directors of the Corporation.
Any action of the Corporation that, under the provisions of the TBCA, is required to be authorized or approved by the holders of two-thirds, or any other specified fraction that is in excess of one-half, or any specified percentage that is in excess of 50%, of the outstanding shares of the Corporation shall, notwithstanding any such provision of the TBCA, be deemed effectively and properly authorized or approved if authorized by the vote of a simple majority of the outstanding shares of the corporation. Nothing contained in this Article Ten is intended to require shareholder authorization or approval of any action of the Corporation whatsoever unless such authorization or approval is specifically required by the other provisions of these Article of Incorporation, the Bylaws of the Corporation, or the TBCA. Any action that may
be taken, or is required by the TBCA to be taken, at any annual or special meeting of the shareholders of the Corporation may be taken without a meeting, without prior notice, and without a vote if a written consent or consents setting forth the action so taken shall be signed by the holder or holders of shares having not less than the minimum number of votes that otherwise would be necessary to take such action at a meeting at which the holders of all shares entitled to vote on the action were present and all of such shares were voted.
A contract or transaction between the Corporation and any other Person (as used herein the term "Person" shall mean an individual, firm, trust, estate, partnership, joint venture, association, corporation, political subdivision or instrumentality, or other entity) shall not be affected or invalidated by the fact that (i) any director, officer, or security holder of the Corporation is also a party to, or has a direct or indirect interest in, such contract or transaction; or (ii) any director, officer, or security holder of the Corporation is in any way connected with such other Person or with any of its officers or directors.
Every person who may become a director of the Corporation is hereby relieved from any liability that might otherwise exist from contracting with the Corporation for the benefit of himself or herself or of any Person in which he or she has any interest, whether or not the interested director's presence at a meeting or his or her vote or votes were necessary to obligate the Corporation in such transaction, if any such interest shall have been disclosed to, or known to, the Corporation's directors or shareholders who shall have approved such transaction.
The Corporation shall indemnify and hold harmless directors, officers, employees, and agents of the Corporation, and may purchase and may maintain liability insurance for such persons, as and to the extent permitted by the TBCA.
The Corporation is authorized to purchase, directly or indirectly, its own shares of stock to the extent of the unreserved and unrestricted surplus available thereof, without submitting such purchase to a vote of the shareholders of the Corporation.
The Board of Directors is expressly authorized, without the consent of the shareholders, except so far as such consent is herein or by law required, to issue and sell or otherwise dispose of, for any purpose, the Corporation's bonds, notes, debentures, or other securities or obligations, upon such terms and for such consideration as the Board of Directors shall deem advisable, and to authorize and cause to be executed mortgages, pledges, charges, and liens upon all or part of the real and personal property rights, interests, and franchises of the Corporation, including contract rights, whether at the time owned or thereafter acquired.
The address of the initial registered office of the Corporation is 14110 N. Dallas Parkway, Suite 365, Dallas, TX 75254, and the name of its initial registered agent as such address is Gust C. Kepler.
The number of directors constituting the initial Board of Directors of the Corporation is one, and the name and address of the person who is to serve as director until the first annual meeting of shareholders, and until his successor is elected and qualified is:
NAME ADDRESS
---- -------
Gust C. Kepler 14110 N. Dallas Parkway
Suite 365
Dallas, TX 75254
|
The name and address of the incorporator is:
NAME ADDRESS
---- -------
Gust C. Kepler 14110 N. Dallas Parkway
Suite 365
Dallas, TX 75254
|
IN WITNESS WHEREOF, I have executed this document as of the 17th day of March, 2003.
EXHIBIT 3.2
BYLAWS
of
G2 Ventures, Inc.
A Texas Corporation
1.01. Registered Office and Agent. The registered office and registered agent of G2 Ventures, Inc. (hereinafter referred to as the "Corporation") shall be designated from time to time by the appropriate filing by the Corporation in the office of the Secretary of State of Texas.
1.02. Other Offices. The Corporation may also have offices at such other places, both within and without the State of Texas, as the Board of Directors may from time to time determine or the business of the Corporation may require.
2.01. Annual Meetings. An annual meeting of the shareholders of the Corporation shall be held during each calendar year on such date and at such time as shall be designated from time to time by the Board of Directors and stated in the notice of the meeting, and if a legal holiday, then on the next business day following, at the time specified in the notice of the meeting. At such meeting, the shareholders shall elect directors and transact such other business as may properly be brought before the meeting.
2.02. Special Meetings. A special meeting of the shareholders maybe called at any time by the President, the Board of Directors, or the holders of not less than 10 percent of all shares entitled to vote at such meeting. Only such business shall be transacted at a special meeting as may be stated or indicated in the notice of such meeting.
2.03. Place of Meetings; Unanimous Written Consent. The annual meeting
of shareholders may be held at any place within or without the State of Texas as
may be designated by the Board of Directors. Special meetings of shareholders
may be held at any place within or without the State of Texas as may be
designated by the person or persons calling such special meeting as provided in
Section 2.02. If no place for a meeting is designated, it shall be held at the
registered office of the Corporation. A written instrument or instruments signed
by all of the shareholders of the Corporation shall be sufficient to approve or
ratify any business or action otherwise required to be voted upon at, and may be
executed in lieu of, an annual or special shareholders' meeting.
CUSIP
G2 VENTURES, INC.
INCORPORATED UNDER THE LAWS OF THE STATE OF TEXAS
SEE REVERSE FOR
COMMON STOCK CERTAIN DEFINITIONS
SPECIMAN
This
certifies
that
is the owner of
FULLY PAID AND NON-ASSESSABLE SHARES OF THE COMMON STOCK, $0.0001 PAR VALUE, OF
G2 VENTURES, INC.
(hereinafter called the "Corporation"), transferable on the books of the Corporation by the holder hereof in person or by duly authorized attorney, upon surrender of the Certificate properly endorsed. This certificate and the shares represented hereby are issued and shall be held subject to all the provisions of the Certificate of Incorporation and the Bylaws of the Corporation, as amended (copies of which are on file at the office of the Transfer Agent), to all of which the holder of this Certificate by acceptance hereof assents. This Certificate is not valid unless countersigned and registered by the Transfer Agent and Registrar. Witness the facsmile seal of the Corporation and the facsimile signatures of its duly authorized officers.
DATE:
[CORPORATE SEAL OMITTED]
Countersigned:
PRESIDENT SECURITIES TRANSFER CORPORATION
P.O. Box 701629
Dallas, TX 75370
By:
SECRETARY ___________________________________
TRANSFER AGENT-AUTHORIZED SIGNATURE
|
THE LAW OFFICE OF CARL A. GENERES
Exhibit 5.1
September 8, 2003
G2 Ventures, Inc.
14110 N. Dallas Parkway
Suite 365
Dallas, Texas 75254
RE: SB 2 Registration Statement
Ladies and Gentlemen:
You have requested our opinion with respect to certain matters in connection with the filing by G2 Ventures, Inc., a Texas corporation, of a Registration Statement on Form SB-2 with the Securities and Exchange Commission covering the registration of 1,500,000 shares of the Company's common stock, $0.0001 par value, for sale to the public on a best efforts basis. This opinion is being furnished in accordance with the requirements of Item 601(b)(5)(i) of Regulation S-B.
In connection with this opinion, we have examined and relied upon the Registration Statement and related Prospectus, the Articles of Incorporation, as amended and the Company's Bylaws, as amended, the corporate proceedings taken by G2 Ventures, Inc. in connection with the issuance of the shares, and the originals or copies certified to our satisfaction of such records, documents, certificates, memoranda and other instruments as in our judgment are necessary or appropriate to enable us to render the opinion expressed below. We have assumed the genuineness and authenticity of all documents submitted to us as copies thereof and the due execution and delivery of all documents as a prerequisite to the effectiveness thereof.
On the basis of the foregoing, and in reliance thereon, we are of the opinion that the said 1,500,000 shares will be validly issued, fully paid and non-assessable upon payment therefore as provided in the said Registration Statement.
-2- September 8, 2003
I consent to the reference to me under the caption "Legal Matters" in the Prospectus included in the Registration Statement and to the filing of this opinion as Exhibit 5 to the Registration Statement. Our opinion is expressly limited to the matters set forth above and we render no opinion, whether by implication or otherwise, as to any other matters relating to G2 Ventures, Inc. or the outstanding shares.
Sincerely,
/s/ Carl A. Generes ------------------- Carl A. Generes Attorney and Counselor |
4315 WEST LOVERS LANE o DALLAS, TEXAS o 75209
Phone: 214-352-8674 o Fax: 214-352-8852
CGENERES@GENERESLAW.COM, PGENERES@GENERESLAW.COM
EXHIBIT 10.1
This Agreement is made as of the 5th day of December, 2002 by and between G2 COMPANIES, INC. (hereinafter "G2") and Joseph Donnelly, individually p/k/a "Jeremiah Donnelly" (hereinafter "Artist").
1. ARTIST'S WARRANTIES AND REPRESENTATIONS
1.01. Artist represents and warrants that: (a) it is authorized, empowered and able to enter into and fully perform its obligations under this Agreement; (b) neither this Agreement nor the fulfillment thereof by any party infringes upon the rights of any other person or entity; (c) it has not and will not do anything that impairs G2's rights under this Agreement, nor will it permit any other person or entity to do so; and (d) Artist is resident in the United States of America for income tax purposes.
1.02. Artist further represents and warrants that: (a) there now exist no prior recorded performances by Artist other than those listed on the attached Exhibit A and that no recordings from those Masters will be released during the term hereof; (c) none of the Masters delivered to G2 by Artist, nor the performances embodied thereon, nor any other Materials, nor any use thereof by G2 or its grantees, licensees or assigns, will violate or infringe upon the rights of any third party. "Materials," as used in this Paragraph, means all Controlled Compositions, each name used by Artist, any logo used by Artist, and all other musical, artistic, literary and other materials, ideas and other intellectual properties furnished by Artist or any other producer engaged by Artist and contained or used in connection with any Masters made hereunder, or the packaging, sale, advertising or other exploitation thereof.
2. TERM AND RECORDING COMMITMENT
2.01. The Term of this Agreement shall be for an Initial Period commencing on the date hereof and expiring nine months thereafter.
2.02. Artist hereby grants to G2 three (3) separate and irrevocable options to extend the Term of this Agreement for further periods (the "Option Periods") commencing immediately upon the expirations of the Initial Period and expiring one year after delivery to G2 of the Minimum Recording Commitment for said Option Period. Each option shall be exercised by written notice from G2 to Artist postmarked or delivered before upon the expiration of the prior terms; provided that, G2 shall have a thirty day right to cure any inadvertent failure to exercise such option.
2.03. During the Term of this Agreement (as the same may be extended) Artist agrees to produce and Artist shall deliver to G2 Masters comprising sound alone sufficient to comprise the following (the "Minimum Recording Commitment"):
(a) during the Initial Period- - one (1) Album (the "First Album")
(b) during the First Option Period- - one (1) Album (the "Second Album")
(c) during the Second Option Period- - one (1) Album (the "Third Album")
(d) during the Third Option Period- - one (1) Album (the "Fourth Album")
2.04. Notwithstanding anything else herein to the contrary:
(a) Each Album shall be delivered to G2 within four (4) months after the commencement of the applicable Initial Period of Option Period. The Album currently being recorded by the Artist shall, when delivered, count as the Minimum Recording Commitment for the Initial Period.
(b) Artist shall not commence the recording of any Album hereunder earlier than three (3) months following the delivery to G2 of the prior album.
(c) G2 shall not be obliged to accept delivery of any Album hereunder earlier than one year following the date of delivery to G2 of the prior album. If any such premature delivery is tendered, the contractual date of deliver hereunder of such Album shall be deemed to be the date one year following the date of delivery of the prior album, provided that the prior album has been recorded and delivered in all respects in accordance with the provisions of this Agreement and comprises acceptable Masters as herein provided.
(d) In the event that, during the Initial Period of the Option Periods, Artist produces more than the Minimum Recording Commitment, G2 shall as its sole option be entitled to treat such additional material (or some of it) as counting towards the Minimum Recording Commitment (or not) but said additional material shall be and remain the sole and exclusive property of G2 subject to the provisions of this Agreement.
(e) Each Album delivered shall consist of not less than ten (10) Masters and not less than forty-five (45) nor more than seventy-four (74) minutes of Artist's performances. Each Master shall consist of not less than two minutes and thirty seconds of Artist's performances. No Album consisting of Artist's "live" performances shall be deemed to be in fulfillment of any of Artist's obligations hereunder except that upon mutual consent, in writing, a live recording may be accepted in fulfillment of Artist's Minimum Recording Commitment. If any such performances are recorded during the Term hereof, G2 shall be the owner thereof and shall have the right to exploit same under the same terms as contained herein for the First Album, except that no advance will be paid to Artist. No Multiple Albums shall be delivered hereunder without G2's prior written consent; any such Multiple Album delivered to and accepted by G2 shall be deemed a single Album for all purposes hereof. No Mini-Album shall form part of the Minimum Recording Commitment unless expressly agreed in writing by G2 at its absolute discretion.
(f) Artist shall deliver to G2 each Master hereunder in the form of a digital two-track stereo tape master, as well as reference discs which are representative of such tape masters. Artist shall also deliver at the same time any multi-track master tapes recorded in connection with the same project. The two-track stereo master tape shall be fully edited, mixed, equalized and leadered for the production of parts from which satisfactory Phonograph Records can be manufactured.
(g) As used in this Agreement, "delivery" shall mean the receipt of all tape masters as provided herein, as well as Artist's submission to G2 in written form of all necessary information, consents, licenses and permissions that G2 requires to manufacture, distribute and release the Masters as Phonograph Records, including, but not limited to, mechanical licenses, credits, musician and producer releases, and any information required to be delivered to unions or other third parties. Payment of funds due at delivery by G2 shall not be deemed a waiver of information or documents required hereunder.
(h) Artist shall be available to G2 and shall perform for the purposes of making such music videos at such time and places as G2 shall reasonably agree with Artist. The cost of making such music videos shall be deemed advances hereunder and shall be fifty percent (50%) recoupable from all sources, excluding Mechanical Royalties, payable to Artist hereunder.
3. GRANT OF RIGHTS
3.01. During the Term of this Agreement, Artist shall furnish to G2 its exclusive recording services throughout the Universe. Any contract entered into by Artist or on Artist's behalf during the Term hereof or any extensions thereof for Artist's performances in television or radio broadcasts or motion pictures or stage productions shall specifically exclude the right to use any recording of such performance for the manufacture and sale of Phonograph Records or music videos unless previously authorized in writing by G2. Artist shall promptly deliver to G2 copies of the pertinent provisions of each such contract and Artist will cooperate fully with G2 in any controversy dispute or litigation which may arise in relation to the rights of G2 under this Paragraph.
3.02. Artist hereby grants and assigns to G2 all rights of every kind and the complete, unconditional, exclusive, perpetual, unencumbered title throughout the Universe in and all results and products of Artist's services and performances hereunder, any and all Masters, records, tapes, sound recordings, music videos, long form videos, and other material of every kind made or authorized by G2 hereunder or otherwise produced during the Option Terms and which include the voice, instrumental or other sound and/or visual effects, services, or performances of Artist, including without limitation the right to record, reproduce, broadcast, transmit, publish, sell, exhibit, distribute, advertise, exploit, perform, and use the same separately or in combination with any other material for any purpose in any manner, under any label, trademark, or other identification and by any means or method, whether known or not now known, invented, used or contemplated, and to refrain from all or any part thereof.
3.03. Without in any way limiting the generality of the foregoing, Artist hereby grants to G2 the following rights throughout the Universe which G2 may use or refrain from using as it elects in G2's sole discretion:
(a) the exclusive right during the Term hereof to manufacture, distribute, and sell anywhere in the Universe Phonograph Records and music videos reproducing Artist's performances;
(b) the exclusive right for the full periods of copyright to manufacture, distribute, and sell throughout the Universe Phonograph Records and music videos produced from Masters made during the Option Terms hereunder;
(c) the exclusive right for the full periods of copyright to manufacture, distribute, and sell throughout the Universe Phonograph Records and music videos produced from masters made during the Option Terms hereunder;
(d) the exclusive right to authorize public performances in the Universe of Phonograph Records and music videos produced during the Option Terms hereunder;
(e) the right to permit and authorize others to exercise, directly or through persons designated by them, any and all G2's rights hereunder.
3.04. (a) Each Master (including all sound recordings embodied thereon) produced hereunder or embodying Artist's performances and recorded during the Initial Term shall belong to Artist. Artist grants G2 a security interest in and to its copyright in the First Album to secure recoupment of all sums expended by G2 in the recording and promotion of all Albums recorded under this Agreement. Artist further agrees to execute any document reasonably necessary to perfect such security interest. In the event Artist fails to execute any such documents or instruments Artist hereby irrevocably grants G2 power of attorney, coupled with any interest, to execute all such security agreements.
(b) Each Master (including all sound recordings embodied thereon) produced hereunder or embodying Artist's performances and recorded during the Option Terms shall, from the inception of its creation, be considered a "work made for hire" for G2 within the meaning of the U.S. Copyright Law. If it is determined that a Master does not so qualify then such Master, together with all rights in it (including the sound recording copyright), shall be deemed, and hereby transferred and assigned to G2 by this Agreement. Artist agrees to execute and deliver to G2 any and all documents or instruments which G2 may request in order to confirm G2's acquisition and/or title to the Masters (including the copyright) as described herein. In the event Artist fails to execute any such documents or instruments Artist hereby irrevocably grants to G2 power of attorney, coupled with an interest, to execute all such documents of conveyance. All Masters recorded by Artist from the inception of the recording thereof and all reproductions derived therefrom, together with the performances embodied thereon, shall be entirely the property of G2 in perpetuity, throughout the Universe, free of any claim whatsoever by Artist or any persons deriving any rights or interests therefrom.
3.05. Artist shall not authorize or permit Artist's performances to be recorded for any purpose without obtaining an express written approval of G2, and Artist shall take reasonable measures to prevent the manufacture, distribution and sale of Phonograph Records or music videos containing its performances (and the use of Artist's name and likeness in connection therewith) by any person or entity other than G2, its successors, licensees and assigns.
3.06. Artist grants G2 the right to include any Master produced and delivered hereunder in a soundtrack or compilation album, at any time, and without any further advance, except that royalties shall be payable as provided herein.
3.07. As used in this Agreement, "Phonograph Records" shall include any and all mechanical reproductions of the Masters produced and delivered hereunder, in any format, whether now known or unknown, including but not limited to compact discs, cassette tapes, vinyl records, DAT tapes or any future format.
4. RECORDING COSTS AND PROCEDURES
4.01. Advances payable to Artist pursuant to this Agreement are and shall be inclusive of all costs incurred in the course of producing and recording Masters hereunder (including without limitation, the costs of studio time, musician fees, union payments, instrument hire, producer's fees, and the cost of tape editing, mixing, remixing and masters, advances, and other similar costs customarily regarded in the industry as being recording costs.) All such costs are sometimes herein referred to as "recording costs" and shall constitute advances recoupable from royalties payable hereunder. G2 shall, in accordance with the provisions of this Agreement, deduct and retain out of said advances such sums as may be necessary to pay the said recording coasts. In the event that, as a result of an event within the control of the Artist but unapproved by G2, any recording costs shall exceed the amount of the recording fund specifically referred to in Paragraph 5.01. below, then the excess costs shall (if paid by G2) constitute a loan to Artist payable on demand and without prejudice to G2's other rights and the same shall, at G2's election, be recoverable by G2 out of any monies payable by G2 to Artist or on Artist's behalf hereunder. Any recording cost that exceeds the amount of the recording fund specifically referred to in Paragraph 5.01 below, but which has been approved by G2, shall be treated as an increase in said recording fund.
4.02. G2 and Artist shall, prior to the commencement of any recording:
(a) mutually designate the producer(s) of all Masters hereunder; and (b) agree
on a budget for recording costs. G2 shall not unreasonably withhold its consent
to any budget for recording costs that is less than ninety percent (90%) of the
recording fund for that album as specified in Paragraph 5.01. G2 has previously
approved the budgets for the First and Second Albums.
4.03. Artist shall be properly rehearsed and shall appear at the times and places designated by G2 after consultation with and reasonable notice to Artist from time to time for all recording sessions required hereunder and at each session Artist shall tender their professional services to the best of their ability. G2 and Artist shall mutually designate the material to be recorded and each Master shall be subject to G2's approval as technically and commercially satisfactory. Upon G2's request, Artist shall re-record any material until a Master, which in G2's sole judgment is satisfactory, shall be obtained.
4.04. The Masters delivered to G2 by Artist under this Agreement and the performances embodied therein shall be produced in accordance with the rules and the regulations of the American Federation of Musicians, the American Federation of Television and Radio Artists and all other unions having jurisdiction. Artist is or will become and remain, to the extent necessary to fulfill this Agreement, a member in good standing of all labor unions or guilds in which membership may be required for the performance of Artist's services hereunder.
4.05. Artist shall not perform for or in connection with (and shall not permit any other person or entity to use Artist's name or likeness in connection with) the recording or exploitation of any Phonograph Record embodying any Composition recorded by Artist under this Agreement prior to a date five (5) years subsequent to the expiration or termination of the term of this Agreement, or any extensions thereof.
4.06. Without limiting the foregoing, G2 shall not be required to make any payments of any kind for, or in connection with, the acquisition, exercise or exploitation of rights by G2 except as specifically provided in this Agreement. Artist shall be solely responsible for all sums due to labor unions or guilds, individual musicians, producers and all other persons or entities entitled to received royalties or other payments in connection with the sale of Phonograph Records derived from Masters hereunder, although G2 will undertake to make all such payments to the extent of the recording fund specified in Paragraph 5.01, and Artist's liability to producers for royalties shall be limited to two percent of retail. None of the persons whose performances are embodied in the Masters or whose services are used in recording the Masters shall be bound by any otherwise bound or restricted, Artist shall obtain all necessary clearances in writing.
5. ADVANCES AND RECORDING FUND
5.01. As advances against and recoupable from royalties payable hereunder, G2 agrees to pay with respect to each Album constituting the Minimum Recording Commitment hereunder a sum equal to the amount by which the applicable sum set forth below ("Album Recording Fund") exceeds the sum of the documented receipts for the recording costs concerned and any other advances made to Artist prior to delivery of the applicable Album:
Album Recording Fund: First Album $XXXXXX
Second Album $XXXXXX
Third Album $XXXXXX
Fourth Album $XXXXXX
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5.02. If net sales through normal retail channels in the United States for which royalties are payable pursuant to Paragraph 6.01(a) below, net of applicable reserves of any album shall exceed seventy-five thousand (75,000) units as of the date nine (9) months after the initial release of that album in the United States, then the Album Recording Fund on the next subsequent album shall be increases by ____________________ ($______).
5.03. The advances due under Paragraph 5.01 shall be payable promptly following the deliver to G2 of (a) the Minimum Recording Commitment; (b) the documents required under Paragraph 2.4(g); and (c) all invoices pertaining to the recording of the Minimum Recording Commitment. With respect to payments to be made following delivery, G2 shall have the right to withhold ten percent (10%) for ninety (90) days to provide for anticipated costs which have not yet been paid.
5.04. All advances paid to Artist or on Artist's behalf shall be recoupable against the royalties payable under this Agreement, from whatever the source, except that advances shall not be recoupable against Mechanical Royalties except as provided for in Paragraph 8.01.
6. ROYALTIES
6.01. Subject to Artist's compliance with all obligations required of Artist hereunder and subject as otherwise granted herein, G2 will pay to Artist for the rights granted herein and for the services performed hereunder the royalties set out below, being percentages of one hundred percent (100%) of G2's published wholesale price, exclusive of taxes and duties actually paid by G2, and the container cost deductions specified below for all records and music videos manufactured, sold and not returned, and for which G2 is paid reproducing exclusively Masters recorded hereunder, namely:
(a) With respect to the sales for distribution in the United States of Albums reproducing exclusively Masters hereunder: _______ percent (__%).
(b) The royalty rate with respect to 12-inch singles shall be _______ percent (__%).
(c) The royalty rate with respect of 7-inch singles and other records shall be _______ percent (__%).
(d) The royalty rate with respect to the following is _______ percent (__%): records sold to any government body, PX sales, sales to educational institutions, record clubs, soundtrack records, compilation records, budget records (defined as a record which is sold as wholesale price of at least fifty percent but less than eighty percent of G2's published wholesale price), and EP records (defined as records containing between three and nine Masters): except that the royalty rate for compilations releases exclusively on the G2 label shall be _______ percent (__%). Royalties for soundtracks and compilations on which Artist appears with other performers shall be pro-rated in the same proportion that Artist's Master bear to the entire album.
(e) Foreign royalty rate: The rate for the records manufactured by G2 or G2's affiliates and sold outside the United States will be _________ and __________ percent (______%) of the applicable royalty except that the royalty rate for masters licensed by G2 outside the United States shall be _____ percent (__%) of the net income therefrom. Net income shall mean all income received less third party out of pocket expenses to establish the license, third party out of pocket collection costs, foreign currency exchange, wire transfer fees and applicable taxes.
(f) Royalty rate for music videos sold and not returned shall be ___ percent (__%) of G2's published wholesale price.
7. ROYALTY PAYMENTS
7.01. Royalties earned hereunder will be accrued semi-annually and paid, less all advances, taxes, and any other charges, within sixty (60) days following each June 30th and December 31st for the preceding six (6) month period, in accordance with G2's regular accounting practices. G2 shall, however, have the right to establish reasonable reserves for returns and exchanges, said reserves not to exceed thirty percent (30%). Each reserve established hereunder shall be liquidated at the end of the following semi-annual period. If G2 makes any overpayment of royalties (e.g., by reason of an accounting error or paying royalties on Records returned later), G2 shall have the right to offset such overpayment against any subsequent payment due to Artist from G2.
7.02. Each royalty payment hereunder shall be accompanied by a statement in accordance with G2's regular accounting practices. Said statements shall be provided to Artist within sixty (60) days of the end of each calendar quarter, even though royalty payments are semi-annual. Each statement shall become binding upon Artist and Artist shall neither have nor make any claim against G2 with respect to such statement, unless Artist shall advise G2, in writing, of the specific basis of such claim within one (1) year after the date G2 mails such statement. G2's accounting books and records will be kept and maintained in accordance with generally accepted accounting principles, consistently applied.
7.03. Artist shall not be entitled to recover damages or to terminate
this Agreement for any reason because of a claimed breach by G2 of its material
obligations hereunder, unless G2 has failed to remedy such breach within sixty
(60) days following receipt of written notice thereof. Artist will not have the
right to sue G2 in connection with any royalty accounting, or sue G2 for
royalties accrued by Artist during the period a royalty accounting covers,
unless Artist commences the suit within two (2) years after the date when the
statement in question is rendered to Artist. If Artist commences suit on any
controversy or claim concerning royalty accountings rendered to Artist under
this Agreement, the scope of the proceeding will be limited to determination of
the amount of royalties due for the accounting periods covered and reasonable
attorney fees, and the court will have no authority to consider any other issues or award any relief except recovery of any royalties found owing. Artist's recovery of any such royalties and attorney's fees will be the sole remedy available to Artist by reason of G2's royalty accountings. Without limiting the generality of the preceding sentence, Artist will not have any right to seek termination of this Agreement or avoid the performance of their obligations under it by reason of any such claim. Artist's remedy for G2's willful refusal to permit it to record its Minimum Recording Commitment shall be limited to termination of this Agreement.
7.04. G2 agrees that Artist may, not more than once during any calendar
year, but only once with respect to any statement rendered hereunder, audit its
books and records for the purpose of determining the accuracy of G2's statements
to Artist. If Artist wishes to perform any such audit, Artist will be required
to notify G2 at least thirty (30) days before the date when Artist plans to
begin the audit. If Artist's audit has not been completed within one (1) month
from the time Artist begins it, G2 may require Artist to terminate it on seven
(7) days notice to Artist and G2 will not be required to permit Artist to
continue the examination after the end of that seven (7) day period. Artist
shall not be entitled to examine any manufacturing records or any other records
which do not specifically report sales of Records or calculation of net receipts
on which royalties are accruable hereunder. All audits shall be made during
regular business hours, and shall be conducted on Artist's behalf by an
independent Certified Public Accountant. Each examination shall be made at
Artist's sole expense at G2's regular place of business in the United States,
where the books and records are maintained.
8. MECHANICAL LICENSES AND ROYALTIES
8.01. All Controlled Compositions (defined as musical compositions composed in whole or in part by any individual member of Artist) are hereby licensed to G2 and its licenses for reproduction on Phonograph Records anywhere in the Universe. Royalties for the mechanical license herein granted shall be at a rate equal to seventy-five percent (75%) of the current minimum U.S. statutory rate (including the "long work" rate, if applicable) for royalty-bearing records sold and not returned and for which G2 is paid, excluding any instance where G2 and Artist are sharing income under Paragraph 6.01(e) above. In no event shall the mechanical royalties payable hereunder for any Album exceed ten (10) times the rate set forth above. The foregoing also applies to music videos, as well as to any instance where such a license must be executed in favor of G2, G2 shall not recoup from mechanical royalties due to Artist any advances payable to Artist except: (a) excess recording costs under Paragraph 4.01; (b) overpayments under Paragraph 701; and (c) any advances or cash or consigned materials (or the like) to Artist.
8.02. If any record contains one or more compositions which are not Controlled Compositions, then G2 will have the right to reduce the amount of Mechanical Royalties payable on the Controlled Compositions by an amount equal to the amount of mechanical royalties payable on non-Controlled Compositions.
9. TRADEMARKS
9.01. Artist shall perform under the professional name, "Jeremiah Donnelly". Artist warrants and represents that it is the sole owner of such name in connections with Phonograph Records during the term hereof. Artist shall not use a different name in connection with Phonograph Records unless Artist and G2 mutually agree in writing. Artist agrees that G2 may cause a search to be instituted for the purpose of determining whether any professional name used by Artist has been or is being used by another person in connection with Phonograph Records. G2 may cause one or more federal applications for trademark protection to be made in favor of Artist for Phonograph Records and/or entertainment purposes. Any amounts up to One Thousand Seven Hundred Dollars ($1,700.00) expended by G2 pursuant to this Paragraph shall be deemed Advances hereunder. If the trademark search indicates that such name should not be used, G2 and Artist shall mutually agree on a substitute name for Artist. Nothing contained herein shall release Artist from its indemnification of G2 with respect to Artist's use of such name.
10. FREE GOODS
10.01. No royalties shall be payable with respect to records given away or furnished on a "no charge" basis to one-stops, rack jobbers, distributors, dealers, radio stations, television stations or film companies, theatrical hooking agencies, print media, music publishers or the like, provided that such records do not exceed one hundred (100) non-royalty bearing Singles out of every one thousand (1,000) Singles distributed and one hundred (100) non-royalty bearing Albums out of every one thousand (1,000) Albums. Any record sold for less than fifty percent (50%) of G2's published wholesale price will be a non-royalty bearing record.
10.02. During each applicable contract period, G2 shall provide Artist with fifteen (15) non-royalty bearing copies of Artist's then current Album at no charge to the Artist.
11. CONTAINER COSTS
11.01. G2's container deduction shall be a sum equal to: one dollar ($1.00) for singles, one dollar and fifty cents ($1.50) for LPs and cassettes, two dollars ($2.00) for double LP sets and compact discs, three dollars ($3.00) for double cassettes, and four dollars ($4.00) for other formats, including double compact disks, and all video formats.
12. INDEMNIFICATIONS
12.01. Artist agrees to and does hereby indemnify, save and hold G2 and its licensees harmless of and from any and all liability, loss, damage, cost, or expense (including all legal expenses and reasonable attorney fees) arising out of or connected with any breach of this Agreement or any claim which is inconsistent with any of the warranties or representations made by Artist in this Agreement, and Artist agrees to reimburse G2 on demand for any payment made or incurred by G2 with respect to the foregoing if the claim concerned is settled or has resulted in a final judgment against G2 or its licensees. Pending the determination of any claim with respect to which G2 is entitled to indemnity, G2 may withhold monies which would be otherwise payable to Artist up to the amount of its potential liability.
13. DEFAULT AND TERMINATION
13.01. In the event of any default or breach by Artist in the performance of any of Artist's obligations hereunder, G2 may, without prejudice to its other rights, claims or remedies, suspend its obligations hereunder for the duration of such default or breach and until the same has been cured and may, at its option, extend the Term for a period equal to all or any part of the period of such default or breach, and in such event the dates for the exercise by G2 of the Option Periods hereunder and the dates of commencement of each subsequent Option Period shall be extended accordingly.
14. FORCE MAJEAUR
14.01. If G2's material performance hereunder is delayed or becomes impossible or impractical because of any act of God, fire, earthquake, strike, act of government or any order, regulation, ruling, or action of any labor union or association of artist affecting G2 or Artist or the phonograph record industry, G2, upon notice to Artist may suspend its obligations under this Agreement for a period not to exceed one (1) year, and in such event the number of days equal to the number of days of such suspension shall be added to the then-current period of the Term thereof. In the event that G2's material performance hereunder is delayed or becomes impossible or impractical because of any civil strife, G2, upon notice to Artist, may suspend its obligations under this Agreement for the duration of such delay, impossibility or impracticability and in such event the number of days equal to the number of days of such suspension shall be added to the then-current period of the Term thereof.
15. MERCHANDISING
15.01. Artist hereby grants G2 the exclusive right to manufacture, sell, license, distribute and exploit, through the Universe and by mail-order and through retail sources of, without limitation, all merchandise or every kind featuring the Artist (name/logo/likeness), during the term of this Agreement.
15.02. It is expressly agreed and understood that any contract for the purpose of merchandising Artist entered into by G2 during the Term shall continue in full force and effect in accordance with the provisions thereof for a period not to exceed one (1) year following the expiration of the term of this Agreement.
15.03. In the case of such products or property manufactured and sole by G2 or by any associated company, Artist shall be entitled to a royalty of ______ percent (__%) of the adjusted gross receipts therefrom. As used in this paragraph, the term "adjusted gross" shall mean gross revenues from the sale of applicable merchandise, less venue commissions and state sales tax where
collected and actually paid. In the event that G2 licenses to other any of its rights under this clause then Artist shall received _____ percent (__%) of the net receipts therefrom. As used in this paragraph, the term "net receipts" shall be calculated as gross revenues from the sale of the applicable merchandise, less the cost actually incurred and paid by G2 or its licensing company for manufacturing; sales personnel salaries and/or commissions, venue commissions and state sales tax where collected and actually paid.
15.04. Artist has the right of approval of all merchandising artwork, so long as said approval is that unreasonably withheld. During the Term of this Agreement, Artist shall cause the inclusion of G2's logo and proper name at a reasonable size and position on all merchandise.
15.05. No royalties shall be payable with respect to merchandise given away or furnished on a no-charge basis. Upon Artist's request, G2 shall provide Artist with twenty (20) non-royalty-bearing samples of each item of merchandise at no charge.
16. ARTWORK
16.01. Artist agrees that G2 is the owner of any and all artwork, LP jacket art, and promotional artistic renderings undertaken or completed within the Option Terms of this Agreement. Artist shall have the right to use artwork which has been mutually approved by G2 and Artist for the purpose of Merchandising.
17. NOTICES
17.01. All notices, demands or the like which are required to be given hereunder shall be in writing and may be served upon the other party personally by Registered Mail, Return Receipt Requested or by telecopy (facsimile). Notice to Artist will be received by:__________________________________________________
18. PROMOTIONS AND ADVERTISING CAMPAIGNS
18.01. Any promotional monies spent by G2 on behalf of Artist are fifty percent (50%) recoupable from monies otherwise due to Artist from G2, excluding Mechanical Royalties, notwithstanding the source. Any promotional monies spent on behalf of Artist in combination with other G2 Artist shall be recoupable from Artist on a pro-rata basis.
18.02. G2 is not obligated to produce a promotional video for Artist, but if G2 undertakes to produce said video, the cost is fifty percent (50%) recoupable from royalties, excluding Mechanical Royalties, notwithstanding the source. The cost of producing nonpromotional videos intended for resale are fully recoupable.
19. CONTROLLING LAW
19.01. This Agreement is entered into and performable in Dallas County, Texas and the validity, interpretation and legal effect of this agreement shall be governed by Texas law. Venue for any legal action shall be in Dallas County, Texas.
20. REMEDIES
20.01. Artist acknowledges, recognizes and agrees that his services hereunder are of a special, unique, unusual, extraordinary and intellectual character which gives them a peculiar value, the loss of which cannot be reasonably or adequately compensated for by damages in an action of law. Inasmuch as a breach of such services will cause G2 irreparable damages, G2 shall be entitled to injunctive and other equitable relief, in addition to whatever legal remedies are available, to prevent or cure any such breach or threatened breach.
21. HEADINGS
21.02. The headings of the clauses herein are intended for convenience only, and shall not be of any effect in construing the contents of this Agreement.
22. RELATIONSHIP
22.01. Artist has the status of an independent contractor and nothing herein contained shall contemplate or constitute Artist of its members as G2's agents or employees. This Agreement does not and shall not be construed to create a partnership or joint venture between the parties to this Agreement.
23. VALIDITY AND MODIFICATIONS
23.01. The invalidity or unenforceability of any provision shall not affect the validity or enforceability of any other provision. This Agreement contains the entire understanding of the parties relating to its subject matter. No change of this Agreement will be binding unless signed by all parties hereto or their duly authorized representatives. A waiver by either party of any provision of this Agreement in any instance shall not be deemed to waive it for the future. All remedies, rights, undertakings and obligations contained in this Agreement shall be cumulative and none of them shall limit any other remedy, right, undertaking or obligation.
24. ASSIGNMENT
24.01. G2 may assign its rights under this Agreement in whole or in part.
25. LEGAL REPRESENTATION
25.01. Artist, by their signature hereto, confirms that G2 has advised Artist to take independent legal counsel, from a lawyer specializing generally in the music business and specifically in the negotiation of recording agreements, on the terms and conditions of this Agreement and on the obligations being undertaken by Artist in executing the Agreement.
26. COOPERATION
26.01. Artist shall execute such other documentation and shall give further assurances as may reasonably be necessary or desirable for the purpose of vesting, confirming, protecting or further assuring any of the rights granted herein.
27. DISCLAIMER
27.01. G2 has not made and does not hereby make any representation or warranty with respect to the extent of the sales of records or the exploitation of the music videos hereunder.
SIGNED THIS 5th DAY OF DECEMBER, 2002.
G2 COMPANIES, INC.
By:_______________________________
Gust Kepler, President
14110 North Dallas Parkway
Suite 365
Dallas, TX 75254
ARTIST:
P/k/a:____________________________
By:_______________________________
Printed Name: Joseph Donnelly
EXHIBIT 10.2
This Agreement is made as of the __th day of January , 2003 by and between G2 COMPANIES, INC. (hereinafter "G2") and Neil Swanson and Justin Jones, both individually and jointly, and p/k/a "OneUp" (hereinafter "Artist").
1. ARTIST'S WARRANTIES AND REPRESENTATIONS
1.01 Artist represents and warrants that: (a) it is authorized, empowered and able to enter into and fully perform its obligations under this Agreement; (b) neither this Agreement nor the fulfillment there of by any party infringes upon the rights of any other person or entity; (c) it has not and will not do anything that impairs G2's rights under this Agreement, nor will it permit any other person or entity to do so; and (d) Artist is resident of the United States of America for income tax purposes.
1.02. Artist further represents and warrants that: (a) there now exist no prior recorded performances by Artists other than those listed on the attached Exhibit A; (b) that it owns all of the rights in and to the Masters listed in Exhibit A; (c) none of the Masters delivered to G2 by Artists, nor the performances embodied thereon, nor any other Materials, nor any use thereof by G2 or its grantees, licensees or assigns, will violate or infringe upon the rights of any third party. "Materials," as used by this Paragraph means all Controlled Compositions, each name used by Artists, any logo used by Artist, and all other musical, artistic, literary and other materials, ideas and other intellectual properties furnished by Artist or any other producers engaged by Artist and contained or used in connection with any Masters made hereunder, or the packaging, sale, advertising or other exploitation thereof. Notwithstanding the foregoing, the parties acknowledge that the recordings listed in Exhibit A are being acquired by G2 under this Agreement, and shall count toward Artist's Minimum Recording Commitment. In addition, the parties acknowledge that Artist has already begun recording its Minimum Recording Commitment for the Initial Period.
2. TERM AND RECORDING COMMITMENT
2.01 The Term of this Agreement shall be for an Initial Period commencing on the date hereof and expiring nine months thereafter.
2.02. Artist hereby grants G2 three (3) separate and irrevocable options to extend the Term of this Agreement for further periods (the "Option Periods"_ commencing immediately upon the expiration of the Initial Period and expiring nine months after delivery to G2 of the Minimum Recording Commitment for said Option Period. Each option shall be exercised when G2 sends a written notice to Artist that the option is being exercised at least sixty days prior to the commencement of the Option Period; provided that G2 shall have a right to cure any failure to send such a notice at any time up to ten days following receipt of a written notice from Artist that the deadline for exercising an option has passed.
2.03. During the Term of this Agreement (as the same may be extended) Artist agrees to produce and Artist shall deliver to G2 Masters comprising sound alone sufficient to comprise the following (the "Minimum Recording Commitment"):
(a) during the Initial Period- - one (1) Album (the "First Album")
(b) during the First Option Period- - one (1) Album (the "Second Album")
(c) during the Second Option Period- - one (1) Album (the "Third Album")
(d) during the Third Option Period- - one (1) Album (the "Fourth Album")
2.04. Notwithstanding anything else herein to the contrary:
(a) Each Album shall be delivered to G2 within five (5) months after the commencement of the applicable Initial Period or Option Period.
(b) Artist shall not commence the recording of any Album hereunder earlier than three (3) months following delivery to G2 of the prior album.
(c) G2 shall not be obliged to accept delivery of any Album hereunder earlier than nine months following the date of delivery to G2 of the prior album. If any such premature delivery is tendered, the contractual date of delivery hereunder of such Album shall be deemed to be the date one year following the date of delivery of the prior album, provided that the prior album has been recorded and delivered in all respects in accordance with the provisions of this Agreement and comprises acceptable Masters as herein provided.
(d) In the event that, during the Initial Period or the Option Periods, Artist produces more than the Minimum Recording Commitment, G2 shall as its sole option be entitled to treat such additional material (or some of it) as counting towards the Minimum Recording Commitment (or not) but said additional material shall be and remain the sole and exclusive property of G2 subject to the provisions of this Agreement.
(e) Each Album delivered shall consist of not less than ten (10) Masters and not less than forty-five (45) nor more than seventy-four (74) minutes of Artist's performances. Each Master shall consist of not less than two minutes and thirty seconds of Artist's performances. No album consisting of Artist's "live" performances shall be deemed to be in fulfillment of any Artist's obligations hereunder except that upon mutual consent, in writing, a live recording may be accepted in fulfillment of Artist's Minimum Recording Commitment. If any such performances are recording during the Term hereof, G2 shall be the owner thereof and shall have the right to exploit same under the same terms as contained herein for the First Album, except that no advance will be paid to Artist. No Multiple Albums shall be delivered hereunder without G2's prior written consent; any such Multiple Album delivered to and accepted by G2 shall be deemed a single album for all purposes hereof. No Mini-Album shall form part of the Minimum Recording Commitment unless expressly agreed in writing by G2 as its absolute discretion.
(f) Artist shall deliver to G2 each Master hereunder in the form of a digital two-track stereo tape master, as well as reference discs which are representative of such tape masters. Artist shall also deliver at the same time any multi-track master tapes recorded in connection with the same project. The two-track stereo master tape shall be fully edited, mixed, equalized and leadered for the production of parts from which satisfactory Phonograph Records can be manufactured.
(g) As used in this Agreement, "delivery" shall mean the receipt of all tape masters as provided herein, as well as Artist's submission to G2 in written form of all necessary information, consents, licenses and permission that G2 requires to manufacture, distribute and release the Masters as Phonograph Records, including, but not limited to, mechanical licenses, credits, musician and producer releases, and any information required to be delivered to unions or other third parties. Payment of funds due at delivery by G2 shall not be deemed a waiver of information or documents required hereunder.
(h) Artist shall be available to G2 and shall perform for the purposes of making such music videos at such times and places as G2 shall reasonable agree with Artist. The cost of making such music videos shall be deemed advances hereunder and shall be fifty percent (50%) recoupable from all sources, excluding Mechanical Royalties and merchandise royalties, payable to Artists hereunder.
(i) G2 shall release a minimum of one thousand copies of each Album delivered by Artist, within ninety days of its delivery. G2 shall have a right to cure any failure to timely make such release at any time up to ten days following the receipt of a written notice from Artists that the deadline release has passed. Failure to cure by G2 shall entitle Artist to buy the unreleased Masters for one hundred ten percent (110%) of the Recording Costs spent by G2 on the Masters, provided that Artist delivers written notice of its intent to buy the Masters within ten days of the expiration of G2's right to cure, and pays the purchase price in full within ninety days of delivery of its notice of intent.
3. GRANT OF RIGHTS
3.01. During the Term of the Agreement, Artist shall furnish to G2 its exclusive recording services throughout the Universe. Any contract entered into by Artist or on Artist's behalf during the Term hereof or any extensions thereof for Artist's performances in television or radio broadcasts or motion pictures or stage productions shall specifically exclude the right to use any recording of such performance for the manufacture and sale of Phonograph Records or music videos unless previously authorized in writing by G2, which authority shall not be unreasonably withheld.
Artist shall promptly deliver to G2 copies of the pertinent provisions of each such contract and Artist will cooperate fully with G2 in any controversy dispute or litigation which may arise in relation to the rights of G2 under this Paragraph.
3.02. Artist hereby grants and assigns to G2 all rights of every kind and the complete, unconditional, exclusive, perpetual, unencumbered title throughout the Universe in and to all results and products of Artist's services and performances hereunder (being the recording of musical performances and the sound recordings in Exhibit A), any and all Masters, records, tapes, sound recordings, music videos, long form videos, and other material of every kind made or authorized by G2 hereunder or otherwise produced during the Initial Term and/or Option Terms and which include the voice, instrumental or other sound and/or visual effects, services, or performances of Artist, including without limitation the right to record, reproduce, broadcast, transmit, publish, sell, exhibit, distribute, advertise, exploit, perform, and use the same separately or in any combination with any other material for any purpose in any manner, under any label, trademark, or other identification and by any means or method, whether known or not known, invented, used, or contemplated, and to refrain from all or any part thereof.
3.03. Without in any way limiting the generality of the foregoing, Artist hereby grants to G2 the following rights throughout the Universe which G2 may use or refrain from using as it elects in G2's sole discretion:
(a) the exclusive right during the Term hereof to manufacture, distribute, and sell anywhere in the Universe Phonograph Records and music videos produced from Masters made during the Terms hereunder;
(b) the exclusive right for the full periods of copyright to manufacture, distribute, and sell throughout the Universe Phonograph Records and music videos produced from Masters made during the Terms hereunder;
(c) the exclusive right in all media and forms to advertise, publicize, and exploit anywhere in the Universe Phonograph Records and music videos produced during the Terms hereunder by any and every means, particularly, but without limiting the generality of the foregoing, to use the name, including the professional name, approved photograph and/or likeness of, and approved biographical material concerning Artist for advertising, publicizing and otherwise exploiting said Phonograph Records and music videos, said approval not to be unreasonably withheld;
(d) the exclusive right to authorize public performances in the Universe of Phonograph Records and music videos produced during the Terms hereunder;
(e) the right to permit and authorize others to exercise, directly or through persons designated by them, any and all of G2's rights hereunder.
3.04. (a) Each Master (including all sound recordings embodied thereon) produced hereunder or embodying Artist's performances and recorded during the Terms shall, belong to Artist. Artist grants G2 a security interest in and to its copyright in the First Album to secure recoupment of all sums expended by G2 in the recording and promotion of all Albums recorded under this agreement. Artist further agrees to execute any document reasonably necessary to perfect such security interest. In the event Artist fails to execute any such documents or instruments Artist hereby irrevocably grants to G2 power of attorney, coupled with an interest, to execute all such security agreements.
(b) Each Master (including all sound recording embodied thereon produced hereunder or embodying Artist's performances recorded during the Terms shall, from the inception of its creation, be considered a "work made for hire" for G2 within the meaning of the U.S. Copyright Law. If it is determined that a Master does not so qualify, then such Master, together with all rights in it (including the sound recording copyright), shall be deemed, and are hereby transferred and assigned to G2 by this Agreement. Artist agrees to execute and deliver to G2 any and all documents or instruments which G2 may request in order to confirm G2's acquisition and/or title to the Masters (including the copyright) as described herein. In the event Artist fails to execute any such documents or instruments Artist hereby irrevocably grants to G2 power of attorney, coupled with an interest, to execute all such documents of conveyance. All Masters recorded by Artist from the inception of the recording thereof and all reproductions derived therefrom, together with the performances embodied thereon, shall be entirely the property of G2 in perpetuity, throughout the Universe, free of any claim whatsoever by Artist or any persons deriving any rights or interests therefrom.
3.05. Artist shall not authorize or permit Artist's performances to be recorded for any purpose without obtaining an express written approval of G2, and Artist shall take reasonable measures to prevent the manufacture, distribution and sale of Phonograph Records or music videos containing its performances (an the use of Artist's name and likeness in connection therewith) by any person or entity other than G2, its successors, licensees and assigns.
3.06. Artist grants G2 the right to include any Master produced and delivered hereunder in a soundtrack or compilation album, at any time, and without any further advance, except that royalties shall be payable as provided herein.
3.07. As used in this Agreement, "Phonograph Records" shall mean any and all mechanical reproductions of the Masters produced and delivered hereunder, in any format, whether now known or unknown, including but not limited to compact discs, cassette tapes, vinyl records, DAT tapes or any future format.
4. RECORDING COSTS AND PROCEDURES
4.01. Advances payable to Artist pursuant to this Agreement are and shall be inclusive of all costs incurred in the course of producing and recording Masters hereunder (including without limitation, the costs of studio time, musician fees, union payments, instrument hire, producer's fees, and the cost of tape editing, mixing, remixing and mastering, advances, and other similar costs customarily regarded in the industry as being recording costs). All such costs are sometimes herein referred to as "recording costs" and shall be paid by G2 and constitute advances recoupable from royalties payable
hereunder. G2 shall, in accordance with the provisions of this Agreement, deduct and retain out of said advances such sums as may be necessary to pay the said recording costs. In the event that, as a result of an event within the control of the Artist, any recording costs shall exceed the amount of the recording fund specifically referred to in Paragraph 5.01 below, then the excess costs shall (if paid by G2) constitute a loan to Artist payable on demand and without prejudice to G2's other rights and the same shall at G2's election, be recoverable by G2 out of any monies payable by G2 to Artist or on Artist's behalf hereunder.
4.02. G2 and Artist shall, prior to the commencement of any recording:
(a) mutually designate the producer(s) of all Masters hereunder; and (b) agree
on a budget for recording costs. G2 shall not unreasonably withhold its consent
to any budget for recording costs that is less than ninety percent (90%) of the
recording fund for that album as specified in Paragraph 5.01.
4.03. Artist shall be properly rehearsed and shall appear at the times and places designated by G2 after consultation with and reasonable notice to Artist from time to time for all recording sessions required hereunder and at each session Artist shall tender their professional services to the best of their ability. G2 and Artist shall mutually designate the material to be recorded and each Master shall be subject to G2's approval as technically satisfactory and similar in style to Artist's current performances. Upon G2's request, Artist shall re-record any material until a Master, which in G2's sole judgment is satisfactory, shall have been obtained.
4.04. The Masters delivered to G2 by Artist under this Agreement and the performances embodies therein shall be produced in accordance with the rules and regulations of the American Federation of Musicians, the American Federation of Television and Radio Artists and all other unions having jurisdiction. Artist is or will become and remain, to the extent necessary to fulfill this Agreement, a member in good standing of all labor unions or guilds in which membership may be required for the performance of Artist's services hereunder.
4.05. Artist shall not perform for or in connection with (and shall not permit any other person or entity to use Artist's name or likeness in connection with) the recording or exploitation of any Phonograph Record embodying any Composition recorded by artist under this Agreement prior to date four (4) years subsequent to the expiration or termination of the term of this Agreement, or any extensions thereof.
4.06. Without limiting the foregoing, G2 shall not be required to make
any payments of any kind for, or in connection with, the acquisition, exercise
or exploitation of rights by G2 except as specifically provided in this
Agreement. Artist shall be solely responsible for all sums due to labor unions
or guilds, individual musicians, producers and all other persons or entities
entitled to receive royalties or other payments in connection with the sale of
Phonograph Records derived from Masters hereunder, although G2 will undertake to
make all such payments to the extent of the recording fun specified in Paragraph
5.01. None of the persons whose performances are embodied in the Masters or
whose services are used in record the Masters shall be bound by any agreement
that would restrict such performances or services, or to the extent they are
otherwise bound or restricted, Artist shall obtain all necessary clearances in
writing.
5. ADVANCES AND RECORDING FUND
5.01. As advances against and recoupable from royalties payable
hereunder, G2 agrees to pay with respect to each Album constituting the Minimum
Recording Commitment hereunder a sum equal to the amount by which the greater of
(1) the applicable sum set forth below; or (2) a sum equal to two-thirds of the
royalties actually accruing to Artist on the immediate prior Album exceeds (3)
the sum of the documented receipts for the recording costs concerned and any
other advances made to Artist prior to delivery of the applicable Album ("Album
Recording Fund"):
Album Recording Fund: First Album $XXXXXX
Second Album $XXXXXX
Third Album $XXXXXX
Fourth Album $XXXXXX
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5.02. If net sales through normal retail channels in the United States for which royalties are payable pursuant to Paragraph 6.01(a) below, net of applicable reserves of any album shall exceed seventy-five thousand (75,000) unites as of the date nine (9) months after the initial release of that album in the United States, then the Album Recording Fun on the next subsequent album shall be increased by _______________ Dollars ($______).
5.03. The advances due under Paragraph 5.01 shall be payable promptly following the delivery to G2 of: (a) the Minimum Recording Commitment; (b) the documents required under the Paragraph 2.04(g); and (c) all invoices pertaining to the recording of the Minimum Recording Commitment. With respect to payments to be made following delivery G2 shall have the right to withhold ten percent (10%) for ninety (90) days to provide for anticipated costs which have no yet been paid.
5.04. All advances paid to Artist or on Artist's behalf shall be recoupable against the royalties payable under this Agreement, from whatever the source, except that advances shall not be recoupable against Mechanical Royalties except as provided for in Paragraph 8.01.
6. ROYALTIES
6.01. Subject to Artist's compliance with all obligations required of Artist hereunder and subject as otherwise granted herein, G2 will pay to the Artist for the rights granted percentages of one hundred percent (100%) of the G2's published wholesale price, exclusive of taxes and duties actually paid by G2, and the container cost deductions specified below for all records and music videos manufactured, sold and not returned, and for which G2 is paid, reproducing exclusively Masters recorded hereunder, namely:
(a) With respect to sales for distribution in the United States of Albums reproducing exclusively Masters hereunder: ________ percent (__%). This royalty reverts to ______ percent (__%) if this Agreement is assigned to a Major Record Label or a label distributed by a Major Record Label.
(b) The royalty rate with respect to 12-inch singles shall be ________ percent (__%). This royalty reverts to ________ percent (__%) if this Agreement is assigned to a Major Record Label or a label distributed by a Major Record Label.
(c) The royalty rate with respects of 7-inch singles and other records shall be ________ percent (__%). This royalty reverts to ________ percent (__%) if this Agreement is assigned to a Major Record Label or a label distributed by a Major Record Labor.
(d) The royalty rate with respect to the following is ________ percent (__%) [________ percent (__%) if this Agreement is assigned to a Major Record Label or a label distributed by a Major Record Label]: records sold to any government body, PX sales, sales to educational institutions, record clubs, soundtrack records, compilation records, budget records (defined as a record which is sold at a wholesale price of at least fifty percent but less than eighty percent of G2's published wholesale price), and EP records (defined as records containing between three and nine Masters); except that the royalty rate for compilations released exclusively on the G2 label shall be ________ percent (__%) [________ percent (__%) if this Agreement is assigned to a Major Record Label or a label distributed by a Major Record Label.] Royalties for soundtracks and compilations on which Artist appears with other performers shall be pro-rated in the same proportion that Artist's Master(s) bear to the entire album.
(e) Foreign royalty rate: The rate for the records manufactured by G2 or G2's affiliates and sold in Canada will be eighty-five percent (85%) of the applicable royalty rate, and sales outside the United States and Canada will be seventy-five percent (75%) of the applicable royalty rate. The royalty rate for masters licensed by G2 outside the United States shall be fifty percent (50%) of the net income therefrom. Net income shall mean all income received less third party our of pocket expenses to establish the license, third party out of pocket collection costs, foreign currency exchange, wire transfer fees and applicable taxes.
(f) Royalty rate for music videos sold and not returned shall be twenty percent (20%) of G2's published wholesale price. The royalty rate for videos licensed by G2 shall be fifty percent (50%) of the net income therefrom.
7. ROYALTY PAYMENTS
7.01. Royalties earned hereunder will be accrued semi-annually and paid, less all advances, taxes, and any other charges, within sixty (6) days following each June 30th and December 31st for the preceding six (6) month period, in accordance with G2's regular accounting practices. G2 shall, however, have the right to establish reasonable reserves for returns and exchanges, said reserves not to exceed thirty percent (30%). Each reserve established hereunder shall be liquidated at the end of the following semi-annual period. If G2 makes any overpayment of royalties (e.g., by reason of an accounting error or paying royalties on Records returned later), G2 shall have the right to offset such overpayment against any subsequent payment due to Artist from G2, excluding mechanical royalties and merchandise royalties.
7.02. Each royalty payment hereunder shall be accompanied by a statement in accordance with G2's regular accounting practices. Each statement shall become binding upon Artist and Artist shall neither have nor make any claim against G2 with respect to such a statement, unless Artist shall advise G2, in writing, of the specific basis of such claim within two (2) years after the date G2 mails such statement. G2's accounting books and records will kept and maintained in accordance with generally accepted accounting principles, consistently applied.
7.03. Artist shall not be entitled to recover damages or to terminate
this Agreement for any reason because of a claimed breach by G2 of its material
obligations hereunder, unless G2 has failed to remedy such breach within sixty
(60) days following receipt of written notice thereof. Artist will not have the
right to sue G2 in connection with any royalty accounting, or sue G2 for
royalties accrued by Artist during the period a royalty accounting covers,
unless Artist commences the suit within two (2) years after the date when the
statement in question is rendered to Artist. If Artist commences suit on any
controversy or claim concerning royalty accountings rendered to Artist under
this Agreement, the scope of the proceeding will be limited to the determination
of the amount of royalties due for the accounting periods covered and reasonable
attorney fees, and the court will have no authority to consider any other issues
or award any relief except recovery of any royalties found owing. Artist's
recovery of any such royalties and attorney's fees will be the sole remedy
available to Artist by reason of G2's royalty accounting. Without limiting the
generality of the preceding sentence, Artist will not have the right to seek
termination of this Agreement or avoid the performance of their obligations
under it by reason of any such claim. However, in the event that G2 is found by
a court to have breached its obligation to account for an pay royalties to
Artist, then any unexercised options to extend the term of this agreement shall
be void. Artist's remedy for G2's willful refusal to permit it to record its
Minimum Recording Contract shall be an option to terminate this Agreement.
7.04. G2 agrees that Artist may, not more than once during any calendar year, but only once with respect to any statement rendered hereunder, audit its books and records for the purpose of determining the accuracy of G2's statements to Artist. If Artist wishes to perform any such audit, Artist will be required to notify G2 at least ten (10) days before the date when Artist plans to being the audit. If Artist's audit has not been completed within one (1) month from the time Artist begins in, G2 may require Artist to terminate it on seven (7)
days notice to Artist and G2 will not be required to permit Artist to continue the examination after the end of that seven (7) day period. Artist shall not be entitled to examine any manufacturing records or any other records which do no report sales of Records or calculation of net receipts on which royalties are accruable hereunder. All audits shall be made during regular business hours, and shall be conducted on Artist's behalf by an independent Certified Public Accountant and/or licensed attorney. Each examination shall be made at Artist's sole expense at G2's regular place of business in United States, where the books and records are maintained.
8. MECHANICAL LICENSE AND ROYALTIES
8.01. All Controlled Compositions (defined as musical compositions composed in whole or in part by any individual member of Artist) are hereby licensed to g2 and its licensees for reproduction on Phonograph Records anywhere in the Universe. Royalties for the mechanical license herein granted shall be at a rate equal to seventy-five percent (75%) of the minimum U.S. statutory rate in effect at the time the recording is first released (including the "long work" rate, if applicable) for royalty-bearing records sold and not returned and for which G2 is paid, excluding any instance where G2 and Artist are sharing income under Paragraph 6.01(e) above. In no event shall the mechanical royalties payable hereunder for any album exceed ten (10) times the rate set forth above. The foregoing also applies to music videos, as well as to any instance where such a license must be executed in favor of G2, G2 shall not recoup from mechanical royalties due to Artist any advances payable to Artist except any advances of cash or consigned materials (or the like) to Artist.
8.02. If any record contains one of more compositions which are not Controlled Compositions, then G2 will have the right to reduce the amount of Mechanical Royalties payable on the Controlled Compositions by an amount equal to the amount of mechanical royalties payable on non-Controlled Compositions.
9. TRADEMARKS
9.01. Artist shall perform under the professional name, "OneUp." Artist warrants and represents that it is the sole owner of such name in connection with Phonograph Records during the term hereof. Artist shall not use a different name in connection with Phonograph records unless Artist and G2 mutually agree in writing. Artist agrees that G2 may cause a search to instituted for the purpose of determining whether any professional name used by Artist has been or is being used by another person in connection with Phonograph Records. G2 may require Artist to file a federal application for trademark protection to be made in favor of Artist for Phonograph Record and/or entertainment purposes. Any amounts up to One Thousand Seven Hundred Dollars ($1,700.00) expended by Artist in successfully obtaining a requested trademark registration pursuant to this Paragraph shall be reimbursed by G2 and deemed Advances hereunder. If the trademark search indicates that such name should not be used, G2 and Artist shall mutually agree on a substitute name for Artist. Nothing contained herein shall release Artist from its indemnification of G2 with respect to Artist's use of such name.
10. FREE GOODS
10.01. No royalties shall be payable with respect to records given away or furnished on a "no charge" basis to one-stops, rack jobbers, distributors, dealers, radio stations, television stations or film companies, theatrical hooking agencies, print media, music publishers or the like, provided that such records do not exceed one hundred (100) non-royalty bearing Singles out of every one thousand (1,000) Singles distributed and one hundred (100) non-royalty bearing Albums out of every one thousand (1,000) Albums. Any record sold for less than fifty percent (50%) of G2's published wholesale price will be non-royalty bearing record.
10.02. During each applicable contract period, G2 shall provide Artist with thirty (30 ) non-royalty bearing copies of Artist's then current Album at no charge to the Artist.
11. CONTAINER COSTS
11.01. G2's container deduction shall be a sum equal to: one dollar ($1.00) for singles, one dollar and fifty cents ($1.50) for LPs and cassettes, two dollars ($2.00) for double LP sets and compact discs, three dollars ($3.00) for double cassettes, and four dollars ($4.00) for other formats, including double compact disks, and all video formats.
12. INDEMNIFICATION
12.01. Artist agrees to and does hereby indemnify, save and hold G2 and its licensees harmless of and from any and all liability, loss, damage, cost, or expense (including all legal expenses and reasonable attorney fees) arising out of or connected with any breach of this Agreement or any claim which is inconsistent with any of the warranties or representations made by Artist in this Agreement, and Artist agrees to reimburse G2 on demand for any payment made or incurred by G2 with respect to the foregoing if the claim concerned is settled or has resulted in a final judgment against G2 or its licensees. Pending the determination of any claim with respect to which G2 is entitled indemnity, G2 may withhold monies which would be otherwise payable to Artist up to the amount of it's potential liability.
12.02. G2 agrees to defend and does hereby indemnify, save and hold Artist harmless of and from any and all liability, loss, damage, cost, or expense (including all legal expenses and reasonable attorney fees) arising out of or connected with any claim which is inconsistent with any of the warranties or representations made by G2 in this Agreement, and G2 agrees to reimburse Artist on demand for any payment made or incurred by Artist with respect to the foregoing if the claim concerned is settled or has resulted in a final judgment against Artist.
13. DEFAULT AND TERMINATION
13.01. In the event of any default or breach by Artist in the performance of any of Artist's obligations hereunder, G2 may, without prejudice to its other rights, claims or remedies, suspend its obligations hereunder for
the duration of such default or breach and until the same has been cured and may, at its option, extend the Term for a period equal to all or any part of the period of such default or breach, and in such event the dates for the exercise by G2 of the Option Periods hereunder and the dates of commencement of each subsequent Option Period shall be extended accordingly.
14. FORCE MAJEUR
14.01. If G2's material performance hereunder is delayed or becomes impossible or impractical because of any act of God, fire, earthquake, strike, act of government or any order, regulation, ruling, or action of any labor union or association of artists effecting G2 or Artist under the phonograph record industry, G2, upon notice to Artist may suspend its obligations under this Agreement for a period not to exceed ninety days, and in such event the number of days equal to the number of days of such suspension shall be added on to the then-current period of the Term thereof. In the event that G2's material performance hereunder is delayed or becomes impossible or impractical because of any civil strife, G2, upon notice to Artist, may suspend its obligation of under this Agreement for the duration of such delay, impossibility or impracticability and in such event the number of days equal to the numbers of days of such suspension shall be added to the then-current period of the Term thereof.
15. MERCHANDISING
15.01. Artist hereby grants G2 the exclusive right to manufacture, sell, license, distribute and exploit, throughout the Universe and by mail-order and through retail sources of, without limitation, all merchandise of every kind featuring the Artist (name/logo/likeness), during the Term of this Agreement.
15.02. It is expressly agreed and understood that any contract for the purpose of merchandising Artist entered into by G2 during the Term shall continue in full force and effect in accordance with the provisions thereof for a period not to exceed one (1) year following the expiration of the term of this Agreement.
15.03. In the case of any such products or property manufactured and sold by G2 or by an associated company, Artist shall be entitled to a royalty of ________ percent (__%) of the adjusted gross receipts therefrom. As used in this paragraph, the term "adjusted gross" shall mean gross revenues from the sale of applicable merchandise, less venues commissions and state sales tax where collected and actually paid. In the event that G2 licenses to others any of its rights under this clause, then Artist shall receive ________ percent (__%) of the net receipts therefrom. As used in this paragraph, the term "net receipts" shall be calculated as gross revenues from the sale of the applicable merchandise, less the cost actually incurred and paid by G2 or its licensing company for manufacturing; sales personnel salaries and/or commissions, venue commissions and state sales tax where collected and actually paid.
15.04. Artist has the right of approval of all merchandising artwork, so long as said approval is not unreasonable withheld. During the Term of this Agreement, Artist shall cause the inclusion of G2's logo and proper name at a reasonable size and position on all merchandise.
15.05. No royalties shall be payable with respect to merchandise given away or furnished on a no-charge basis. Upon Artist's request, G2 shall provide Artist with twenty (20) non-royalty-bearing samples of each item of merchandise at no charge.
15.06. The parties agree to negotiate in good faith a long-form agreement for the sale of merchandise that is consistent with the terms contained herein.
16. ARTWORK
16.01. Artist agrees that G2 is the owner of any and all artwork, LP jacket art, and promotional artistic renderings undertaken or completed within the Term of this Agreement. Artist shall have the right to use artwork which has been mutually approved by G2 and Artist for the purpose of merchandising.
17. NOTICES
17.01. All notices, demands or the like which are required to be given hereunder shall be in writing and may be served upon the other party personally by Registered Mail, Return Receipt Requested, or by telecopy (facsimile). Notice to Artist will be received by:_____________________________________________________
18. PROMOTIONS AND ADVERTISING CAMPAIGNS
18.01. Any promotional monies spent by G2 on behalf of Artist are fifty percent (50%) recoupable from movies otherwise due to Artist from G2, excluding Mechanical Royalties and merchandise royalties, notwithstanding the source. Container costs shall not be considered promotional monies. Any promotional monies spent on behalf of Artist in combination with other G2 Artists shall be recoupable from Artists on a pro-rata basis.
18.02. G2 is not obligated to produce a promotional video for Artist, but if G2 undertakes to produce said video, the cost is fifty percent (50%) recoupable from royalties, excluding Mechanical Royalties and merchandise royalties, not withstanding the source. The cost of producing nonpromotional videos intended for resale are fully recoupable.
19. CONTROLLING LAW
19.01. The Agreement is entered into and performable in Dallas County, Texas and the validity, interpretation and legal effect of this Agreement shall be governed by Texas law. Venue for any legal action shall be in Dallas County, Texas.
20. REMEDIES
20.01. Artist acknowledges, recognizes and agrees that his services hereunder are of a special, unique, unusual, extraordinary and intellectual character which gives them a peculiar value, the loss of which cannot be reasonably or adequately compensated for by damages in an action of law. Inasmuch as a breach of such services will cause G2 irreparable damages, G2 shall be entitled to injunctive and other equitable relief, in addition to whatever legal remedies are available, to prevent or cure any such breach or threatened breach.
21. HEADINGS
21.01. The headings of the clauses herein are intended for convenience only, and shall not be of any effect in construing the contents of this Agreement.
22. RELATIONSHIP
22.01. Artist has the status of an independent contractor and nothing herein contained shall contemplate or constitute Artist or its members as G2's agents or employees. This Agreement does not and shall not be construed to create a partnership or joint venture between the parties to this Agreement.
23. VALIDITY AND MODIFICATIONS
23.01. The invalidity or unenforceability of any provision shall not affect the validity or enforceability of any other provision. This Agreement contains the entire understanding of the parties relating to its subject matter. No change of this Agreement will be binding unless signed by all parties hereto or their duly authorized representatives. A waiver by either party of any provision of this Agreement in any instance shall not be deemed to waive it for the future. All remedies, rights, undertakings and obligations contained in this Agreement shall be cumulative and none of them shall limit any other remedy, right, undertaking or obligation.
24. ASSIGNMENT
24.01. G2 may assign its rights under this Agreement in whole or in part to any Major Record Label or its subsidiary or legal successor. G2 may assigns its rights under this Agreement in whole or in part to any other Company with Artist's consent, such consent not to be unreasonably withheld.
25. LEGAL REPRESENTATION
25.01. Artist, by their signature hereto, confirms that G2 has advised Artist to take independent legal counsel, from a lawyer specializing generally in the music business and specifically in the negotiation of recording agreements, on the terms and conditions of this Agreement and on the obligations being undertaken by Artist in executing the Agreement.
26. COOPERATION
26.01. Artist shall execute such other documentation and shall give such further assurances as may reasonably be necessary or desirable for the purpose of vesting, confirming, protecting or further assuring any of the rights granted herein.
27. DISCLAIMER
27.01. G2 has not made and does not hereby make any representation or warranty with respect to the extent of the sale of records or the exploitation of music videos hereunder.
SIGNED THIS ___ DAY OF JANUARY, 2003.
G2 COMPANIES, INC.
By:_______________________________
Gust Kepler, President
14110 North Dallas Parkway
Suite 365
Dallas, TX 75254
ARTIST
p/k/a_____________________________
By:_______________________________
Printed Name: Neil Swanson
By:_______________________________
Printed Name: Justin Jones
EXHIBIT A
Appendix Of Existing Commercial Releases
Date Title Song Title Label
EXHIBIT B
APPROVED LABELS
The Board of Directors and Stockholders
G2 Ventures, Inc.
Dallas, Texas
We consent to the use and inclusion in this Form SB-2 Registration Statement and the Prospectus, which is part of this Registration Statement, of our report dated August 26, 2003 on our audit of the financial statements of G2 Ventures, Inc. at July 31, 2003 and December 31, 2002 and for the seven months and periods September 26, 2002 (inception) through December 31, 2002 and July 31, 2003.
We also consent to the reference of our Firm under the caption "Experts" in the Registration Statement and Prospectus.
Turner, Stone & Company, L.L.P.
Certified Public Accountants
Dallas, Texas
September 9, 2003