8-K 1 dec2320048k.txt 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 -------------------------------------------------------------------------------- (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. 2 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 ------------------ ------------------------------------------------------------ 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. 3 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. 4 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 ----------------------------------- Edward Litwak Chief Executive Officer 5