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): March 1, 2006
PACIFICAP ENTERTAINMENT HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
Nevada 000-31048 33-0766069
(State or other jurisdiction (IRS Employer (Commission File
of incorporation) Identification No.) Number)
9150 Wilshire Boulevard, Suite 242 Beverly Hills, CA 90212
(Address of principal executive offices and Zip Code)
Registrant's telephone number, including area code: (310) 246-0090
Copies to:
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 4.02 Non-Reliance on Previously Issued Financial Statements or a
Related Audit Report or Completed Interim Review
On March 1, 2006, authorized officers of Pacificap Entertainment Holdings, Inc.
(the "Company") concluded that its financial statements for the year ended
December 31, 2004 should no longer be relied upon. The errors were discovered in
connection with a comment raised by the Securities and Exchange Commission
("SEC") in their review and comment on our Securities Act filings on Form SB-2.
The SEC requested that we provide information regarding Company's accounting for
its convertible debt instruments and their embedded conversion features. Upon
reviewing and updating our accounting and disclosures of our convertible debt
instruments , we discovered our errors. Upon this determination, management and
the Board of Directors were alerted to the facts and circumstances regarding the
errors in accounting for the convertible debt.
The Company accounted for and disclosed the convertible promissory notes as
conventional convertible debt. After further review, the Company determined the
conversion option embedded in the convertible notes did not meet the definition
of a "conventional convertible debt instrument" because of the option lacked a
fixed conversion price.
Therefore, management re-evaluated the convertible notes and embedded conversion
feature under the guidelines of SFAS No. 133 and EITF Issue No. 00-19, and has
concluded that the embedded conversion option did not meet the SFAS No. 133
paragraph 11(a) scope exception. Accordingly, management assessed the conversion
feature against the additional criteria required for equity classification
included in paragraphs 12-32 of EITF Issue No. 00-19 and determined that the
number of shares to be delivered is not capped and therefore the Company did not
have sufficient authorized and unissued shares of its common stock to settle the
obligation as of the date of the financial statements.
As a result of the above analysis , the Company has concluded the embedded
conversion option:
o Does not meet the paragraph 11(a) scope exception in SFAS No. 133
o Should be bifurcated from the host instrument ; and
o should be accounted for as a derivative liability under SFAS No. 133.
Accordingly, the Company will restate its financial statements for the year
ended December 31, 2004 and the quarterly periods ended March 31, 2005, June 30,
2005 and September 30, 2005 filed with the SEC disclosing and accounting for the
embedded conversion option as a derivative .
Authorized officers of the Company discussed this matter with the Company's
independent public accounting firm who agreed that the Company's financial
statements for the year ended December 31, 2004 and the quarters ended March 31,
2005, June 30, 2005 and September 30, 2005 respectively, could not be relied
upon and needed to be restated. The Company filed restated December 31, 2004
financial statements in the Company's December 31, 2005 Annual Report of SEC
Form 10KSB. The Company filed restated 2005 quarterly financial statements in
its Quarterly Reports on SEC Form 10QSB for the quarters ended March 31, 2006,
June 30, 2006 and September 30, 2006, respectively.
As a result of this restatement, (1) the Company's reported net loss for the
year ended December 31, 2004 increased by $323,000 from $(4,623,614) to
$(4,946,614), (2) the Company's loss per share increased by $0.01 from $(0.18)
to $(.19) per share, (3) the Company's deficiency accumulated during the
development stage increased by $323,000 from $(48,005,439) to $(48,328,439), (4)
net convertible note decreased by $213,111 from $603,262 to $390,151, (5)
derivative liability relating to convertible debentures increased by $3,801,741
from $0 to $3,801,741, (6) Increase warrant liability relating to convertible
debentures $44,802 from $0 to $44,802, (7) the Company's additional paid in
capital decreased by $3,310,432 from $45,788,003 to $42,477,571 and (8) the
restatements had no net effect on the total cash using in operating activities
and total cash provided by financing activities.
The following are reconciliations of the Company's restatement of the
Consolidated Balance Sheet as of December 31, 2004 and Consolidated Statement of
Losses for the fiscal year ended December 31, 2004.
Pacificap Entertainment Holdings, Inc.
(A Development Stage Company)
Consolidated Balance Sheet
December 31, 2004
As Reported Adjustment Restated
------------- ------------- ------------
ASSETS
CURRENT ASSETS:
Cash and equivalents $ 269,715 $ 269,715
------------- ------------
Total current assets 269,715 269,715
PROPERTY AND EQUIPMENT 8,799 8,799
OTHER ASSETS:
Prepaid interest 303,502 303,502
Financing costs, net of amortization 422,653 422,653
Restricted cash 235,903 235,903
Other 4,502 4,502
------------- ------------
966,560 966,560
$ 1,245,074 $ 1,245,074
============= ============
LIABILITIES AND DEFICIENCY IN STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 989,556 $ 989,556
Other accrued liabilities 380,000 380,000
Notes payable, current portion 1,131,165 1,131,165
Advances from related parties 275,190 275,190
Other advances 45,000 45,000
------------- ------------
Total current liabilities 2,820,911 2,820,911
Notes payable, long-term portion, net of debt
discount 603,262 (213,111) 390,151
Derivative liability relating to convertible
debentures - 3,801,741 3,801,741
Warrant liability relating to convertible
debentures 44,802 44,802
COMMITMENTS AND CONTINGENCIES - -
DEFICIENCY IN STOCKHOLDERS' EQUITY
Preferred stock - -
Common stock 38,337 38,337
Additional paid-in-capital 45,788,003 (3,310,432) 42,477,571
Accumulated deficit during development stage (48,005,439) (323,000) (48,328,439)
------------- ------------- ------------
Deficiency in stockholders' equity (2,179,099) (3,633,432) (5,812,531)
------------- ------------- ------------
$ 1,245,074 $ 1,245,074
============= ============
Pacificap Entertainment Holdings, Inc.
(A Development Stage Company)
Consolidated Statement of Losses
For the Year Ended December 31, 2004
As Reported Adjustments Restated
------------- ------------- ------------
Costs and Expenses:
Selling, General and Administrative $ 3,112,184 $ 3,112,184
Depreciation 662 662
------------- ------------
Total Operating Expense 3,112,846 3,112,846
Loss from Operations (3,112,846) (3,112,846)
Unrealized loss related to adjustment of
derivative and warrant liability to fair
value of underlying securities - (446,543) (446,543)
Interest Income (Expense) (1,510,768) 123,543 (1,387,225)
Provision for Income Tax - -
------------- ------------
Net Loss $ (4,623,614) (323,000) $ (4,946,614)
============= ============= ============
Loss per common share (basic and assuming
dilution) $ (0.18) $ 0.01 $ (0.19)
============= ============= ============
Weighted average common shares outstanding 26,130,548 26,130,548 26,130,548
Complete Description
The foregoing description of the revised condensed financial data is not a
complete summary. You are urged to read the complete document on Form 10-KSB
filed for the fiscal year ended December 31, 2005, which can be found on the
website of the U.S. Securities and Exchange Commission at www.sec.gov.
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.
/s/ Mark Schaftlein
--------------------
Date: February 23, 2007 Mark Schaftlein
President