UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): December 17, 2004
Pacificap Entertainment Holdings, Inc.
(Exact name of registrant as specified in its charter)
Nevada 000-31048 33-0766069
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(State or other jurisdiction (Commission File Number) (IRS Employer
of incorporation) Identification No.)
12268 Via Latina, Del Mar, California 92914
(Address of principal executive offices and Zip Code)
Registrant's telephone number, including area code (858) 481-2207
Copies to:
Gregory Sichenzia, Esq.
Andrea Cataneo, Esq.
Sichenzia Ross Friedman Ference LLP
1065 Avenue of the Americas
New York, New York 10018
Phone: (212) 930-9700
Fax: (212) 930-9725
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions (see General Instruction A.2. below):
[ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange
Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange
Act (17 CFR 240.13e-4(c))
Item 1.01 Entry into a Material Definitive Agreement.
On December 17, 2004, we entered into a Securities Purchase Agreement with
AJW Offshore, Ltd., AJW Qualified Partners, LLC, AJW Partners, LLC and New
Millennium Capital Partners II, LLC for the sale of (i) $2,800,000 in secured
convertible notes and (ii) warrants to purchase 2,800,000 shares of our common
stock.
The investors are obligated to provide us with the funds as follows:
o $1,400,000 was disbursed on December 17, 2004;
o $700,000 will be disbursed within five days of filing a registration
statement covering the number of shares of common stock underlying the
secured convertible notes and the warrants; and
o $700,000 will be disbursed within five days of the effectiveness of
the registration statement.
The secured convertible notes bear interest at 10%, mature two years from
the date of issuance, and are convertible into our common stock, at the
investors' option, at the lower of:
o $0.02; or
o 60% of the average of the three lowest intraday trading prices for the
common stock on the Over-The-Counter Bulletin Board for the 20 trading
days before but not including the conversion date.
The full principal amount of the secured convertible notes, plus a default
interest rate of 15%, is due upon a default under the terms of secured
convertible notes. In addition, we granted the investors a security interest in
substantially all of our assets, including the assets of our wholly owned
subsidiaries, and intellectual property. We are required to file a registration
statement with the Securities and Exchange Commission within 45 days of closing,
which will include the common stock underlying the secured convertible notes and
the warrants. If the registration statement is not declared effective within 90
days from the date of closing, we are required to pay liquidated damages to the
investors. In the event that we breach any representation or warranty in the
Securities Purchase Agreement, we are required to pay liquidated damages in
shares of our common stock or cash, at the election of the investors, in an
amount equal to three percent of the outstanding principal amount of the secured
convertible notes per month plus accrued and unpaid interest.
The warrants are exercisable until five years from the date of issuance at
a purchase price of $0.02 per share. The investors may exercise the warrants on
a cashless basis if the shares of common stock underlying the warrants are not
then registered pursuant to an effective registration statement. In the event
the investors exercise the warrants on a cashless basis, we will not receive any
proceeds. In addition, the exercise price of the warrants will be adjusted in
the event we issue common stock at a price below market, with the exception of
any securities issued as of the date of the warrants or issued in connection
with the secured convertible notes issued pursuant to the Securities Purchase
Agreement.
Upon an issuance of shares of common stock below the market price, the
exercise price of the warrants will be reduced accordingly. The market price is
determined by averaging the last reported sale prices for our shares of common
stock for the five trading days immediately preceding such issuance as set forth
on our principal trading market. The exercise price shall be determined by
multiplying the exercise price in effect immediately prior to the dilutive
issuance by a fraction. The numerator of the fraction is equal to the sum of the
number of shares outstanding immediately prior to the offering plus the quotient
of the amount of consideration received by us in connection with the issuance
divided by the market price in effect immediately prior to the issuance. The
denominator of such issuance shall be equal to the number of shares outstanding
after the dilutive issuance.
The conversion price of the secured convertible notes and the exercise
price of the warrants may be adjusted in certain circumstances such as if we pay
a stock dividend, subdivide or combine outstanding shares of common stock into a
greater or lesser number of shares, or take such other actions as would
otherwise result in dilution of the investors' position.
The investors have agreed to restrict their ability to convert their
secured convertible notes or exercise their warrants and receive shares of our
common stock such that the number of shares of common stock held by them in the
aggregate and their affiliates after such conversion or exercise does not exceed
4.9% of the then issued and outstanding shares of our common stock.
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Under Guaranty and Pledge Agreements, Messrs. Edward J. Litwak and Michael
Riley, our Chief Executive Officer and Chairman of the Board, respectively,
agreed (i) to unconditionally guarantee the timely and full satisfaction of all
obligations, whether matured or unmatured, now or hereafter existing or created
and becoming due and payable to AJW Offshore, Ltd., AJW Qualified Partners, LLC,
AJW Partners, LLC and New Millennium Capital Partners II, LLC, their successors,
endorsees, transferees or assigns under the Securities Purchase Agreement and
other transaction documents to the extent of 25,135 shares of our common stock
owned by Mr. Litwak and 2,000,000 shares owned by Mr. Riley, and (ii) to grant
to AJW Offshore, Ltd., AJW Qualified Partners, LLC, AJW Partners, LLC and New
Millennium Capital Partners II, LLC, their successors, endorsees, transferees or
assigns a security interest in the 2,025,135 shares owned by Messrs. Litwak and
Riley, as collateral security for such obligations.
Item 2.03 Creation of a Direct Financial Obligation.
See Item 1.01 above.
Item 3.02 Unregistered Sales of Equity Securities.
See Item 1.01 above.
Item 9.01 Financial Statements and Exhibits.
(a) Financial statements of business acquired.
Not applicable.
(b) Pro forma financial information.
Not applicable.
(c) Exhibits.
Exhibit Number Description
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4.1 Securities Purchase Agreement, dated December 17, 2004, by
and among Pacificap Entertainment Holdings, Inc., AJW
Offshore, Ltd., AJW Qualified Partners, LLC, AJW Partners,
LLC and New Millennium Capital Partners II, LLC.
4.2 Callable Secured Convertible Note issued to AJW Offshore,
Ltd., dated December 17, 2004.
4.3 Callable Secured Convertible Note issued to AJW Qualified
Partners, LLC, dated December 17, 2004.
4.4 Callable Secured Convertible Note issued to AJW Partners,
LLC, dated December 17, 2004.
4.5 Callable Secured Convertible Note issued to New Millennium
Capital Partners II, LLC, dated December 17, 2004.
4.6 Stock Purchase Warrant issued to AJW Offshore, Ltd., dated
December 17, 2004.
4.7 Stock Purchase Warrant issued to AJW Qualified Partners,
LLC, dated December 17, 2004.
4.8 Stock Purchase Warrant issued to AJW Partners, LLC, dated
December 17, 2004.
4.9 Stock Purchase Warrant issued to New Millennium Capital
Partners II, LLC, dated December 17, 2004.
4.10 Registration Rights Agreement, dated as of December 17,
2004, by and among Pacificap Entertainment Holdings, Inc.,
AJW Offshore, Ltd., AJW Qualified Partners, LLC, AJW
Partners, LLC and New Millennium Capital Partners II, LLC.
4.11 Security Agreement, dated as of December 17, 2004, by and
among Pacificap Entertainment Holdings, Inc., AJW Offshore,
Ltd., AJW Qualified Partners, LLC, AJW Partners, LLC and New
Millennium Capital Partners II, LLC.
4.12 Intellectual Property Security Agreement, dated December 17,
2004, by and among Pacificap Entertainment Holdings, Inc.,
AJW Offshore, Ltd., AJW Qualified Partners, LLC, AJW
Partners, LLC and New Millennium Capital Partners II, LLC.
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4.13 Guaranty and Pledge Agreement, dated December 17, 2004, by
and among Pacificap Entertainment Holdings, Inc., Edward
Litwak, AJW Offshore, Ltd., AJW Qualified Partners, LLC, AJW
Partners, LLC and New Millennium Capital Partners II, LLC.
4.14 Guaranty and Pledge Agreement, dated December 17, 2004, by
and among Pacificap Entertainment Holdings, Inc., Michael
Riley, AJW Offshore, Ltd., AJW Qualified Partners, LLC, AJW
Partners, LLC and New Millennium Capital Partners II, LLC.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Pacificap Entertainment Holdings, Inc.
Date: December 23, 2004 /s/ EDWARD LITWAK
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Edward Litwak
Chief Executive Officer
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