SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-KSB

               [X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

          [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

                  For the fiscal year ended: December 31, 2004

                        Commission file number 000-31048

                     PACIFICAP ENTERTAINMENT HOLDINGS, INC.
             (Exact name of registrant as specified in its charter)

           Nevada                                     33-0766069
           ------                                     ----------
(State or other jurisdiction of                    (I.R.S. Employer
incorporation or organization)                    Identification No.)

9150 Wilshire Boulevard, Suite 242 Beverly Hills, California         90212
--------------------------------------                               -----
(Address of principal executive offices)                           (zip code)

                    Issuer's Telephone Number: (310) 550-5800

         Securities registered under Section 12(b) of the Exchange Act:
                                      None

         Securities registered under Section 12(g) of the Exchange Act:
                          Common Stock, $.001 par value
                                (Title if Class)

     Indicate  by check mark  whether the  registrant  (a) has filed all reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934  during  the  preceding  12 months  (or for such  shorter  period  that the
registrant was required to file such reports),  and (b) has been subject to such
filing requirements for the past 90 days. Yes X No

     Indicate by check mark if disclosure of delinquent  filers pursuant to Item
405 of Regulation S-B is not contained herein, and will not be contained, to the
best of registrant's  knowledge,  in definitive proxy or information  statements
incorporated  by reference  in Part III of this Form 10-KSB or any  amendment to
this Form 10-KSB. [ ]

     As of April 15, 2005 the aggregate market value of the registrant's  Common
Stock held by non-affiliates of the registrant was approximately $411,099, based
upon the closing sales price on the Nasdaq  Over-The-Counter  Bulletin Board for
that date.

     The number of shares of Common  Stock,  $0.001 par  value,  outstanding  on
April 15, 2005, was 46,376,501 shares, held by approximately 1,442 stockholders.

     The issuer's  revenues for its most recent  fiscal year ended  December 31,
2004 were $0.

  Transitional Small Business Disclosure Format (check one): Yes ______ No X__



<PAGE>




                     PACIFICAP ENTERTAINMENT HOLDINGS, INC.
                          ANNUAL REPORT ON FORM 10-KSB
                   For the Fiscal Year Ended December 31, 2004

<TABLE>
<CAPTION>
                                TABLE OF CONTENTS

PART I                                                                                                                   Page
<S>        <C>                                                                                                            <C>
      Item 1.   Business.........................................................................................          1
      Item 2.   Properties.......................................................................................          8
      Item 3.   Legal Proceedings................................................................................          8
      Item 4.   Submission of Matters to a Vote of Security Holders..............................................          8

PART II
      Item 5.   Market for Registrant's Common Equity and Related Stockholder Matters............................          9
      Item 6.   Management's Discussion and Analysis of Financial Condition and Results Of Operations............         14
      Item 7.   Financial Statements.............................................................................         22
      Item 8.   Changes in and Disagreements with Accountants on Auditing and Financial Disclosure...............         23
      Item 8A.  Controls and Procedures.........................................................................          23
      Item 8B.  Other Information................................................................................         23

PART III
      Item 9.   Directors and Executive Officers of the Registrant...............................................         24
      Item 10.  Executive Compensation...........................................................................         26
      Item 11.  Security Ownership of Certain Beneficial Owners and Management...................................         28
      Item 12.  Certain Relationships and Related Transactions...................................................         29

PART IV
      Item 13.  Exhibits.........................................................................................         30
      Item 14.  Principal Accountant Fees and Services .... .....................................................         35

      Signatures.................................................................................................         37

</TABLE>


<PAGE>

     This form 10-KSB contains forward-looking  statements within the meaning of
the federal  securities laws. These  forward-looking  statements are necessarily
based  on  certain   assumptions  and  are  subject  to  significant  risks  and
uncertainties.  These  forward-looking  statements  are  based  on  management's
expectations  as of the date  hereof,  and the Company  does not  undertake  any
responsibility  to update any of these  statements in the future.  Actual future
performance  and results  could  differ from that  contained  in or suggested by
these  forward-looking  statements as a result of factors set forth in this Form
10-KSB  (including  those sections  hereof  incorporated by reference from other
filings with the Securities and Exchange Commission), in particular as set forth
in the  "Management's  Discussion  and Analysis and Results of Operation"  under
Item 6.

     In this form 10-KSB references to "PACIFICAP",  "the Company",  "we," "us,"
and "our" refer to PACIFICAP ENTERTAINMENT HOLDINGS, INC.

                                     PART I

ITEM 1.  DESCRIPTION OF BUSINESS

OVERVIEW

     We are a development stage company engaged in the film financing  business.
Our  business  plan  was  modeled  to  restructure  the  risk  profile  of  film
production, while maximizing the ancillary profits from marketing, merchandising
and  licensing.  Our  management  has over 20 years of  experience in financing,
marketing and merchandising in the movie, music, and corporate industry.

Organizational/Historical Background

     In  September  of  1999,  we  changed  our  business   model  from  a  shoe
manufacturing and distributing  company to an entertainment  company focusing on
the nostalgic sports broadcasting business. On December 17, 1999, we amended our
Articles of Incorporation to change our name to Cavalcade of Sports Media, Inc.,
and on  December  22,  1999,  Cavalcade  of  Sports  Network,  Inc.,  a New York
corporation,  was merged with and into the Company,  leaving Cavalcade of Sports
Media, Inc., the Nevada corporation, as the survivor.

     On September 19, 2003, we completed a plan and agreement of  reorganization
with Pacificap Entertainment Holdings,  Inc., a privately-held company organized
under  the  laws of the  State  of  California  with no  significant  assets  or
operations.

     Pursuant to the  reorganization  plan,  all previously  outstanding  common
stock  owned  by  Pacificap  stockholders  was  exchanged  for an  aggregate  of
18,000,000 shares of our common stock.

     After the merger took  effect,  the  President of the  dissolved  Pacificap
Entertainment,  Inc., Michael Riley, joined the Board of Directors.  As a result
of the  transaction,  our  control  changed,  we changed  our name to  Pacificap
Entertainment  Holdings,  Inc.  from  Cavalcade  of Sports  Media,  Inc.  and we
effected a one for thirty reverse stock split

     On December 21, 2004, we acquired all of the intangible  assets and certain
liabilities  of Battleship  VFX, Inc.  ("Battleship")  in exchange for 4,582,106
shares (the  "Acquisition  Shares") of our common stock issued to Brenda Michel,
the sole owner of Battleship.  In addition,  we are obligated to issue 3,054,737
announced it has signed an agreement to acquire the television production arm of
Battleship VFX, Inc.  ("Battleship"),  a cutting-edge  pioneer of 3D and special
effects  properties.  Battleship Founder Brenda Michel's retention was also part
of the agreement.

Recent Developments

     On December 21, 2004, we acquired all of the intangible  assets and certain
liabilities  of Battleship  VFX, Inc.  ("Battleship")  in exchange for 4,582,106
shares (the  "Acquisition  Shares") of our common stock issued to Brenda Michel,
the sole owner of Battleship.  In addition,  we are obligated to issue 3,054,737
shares (the "Earn-out Shares") of our common stock to Ms. Michel upon Ms. Michel
generating  $500,000 in gross revenues for our company.  The Acquisition  Shares
and the Earn-out Shares are subject to weighted-average anti-dilution protection
for a period of three years from issuance.

                                       1
<PAGE>
     Furthermore,  we  agreed to enter  into an  employment  agreement  with Ms.
Michel, pursuant to which we will employ Ms. Michel for a term of two years at a
salary of $150,000 per year. The employment  agreement will automatically  renew
every two years so long as Ms. Michel has  satisfactorily  performed pursuant to
the employment agreement and the terms of the acquisition.  We can terminate Ms.
Michel  for  cause  if she is  found  by a court  to  have  engaged  in  willful
misconduct,  gross negligence or convicted of a crime that constitutes a felony.
In the event we terminate Ms. Michel's contract for any reason other than cause,
we are  obligated  to pay Ms.  Michel an amount  equal to two years salary and a
non-recourse loan in exchange for all of our common stock owned by Ms. Michel at
that time. The amount of the  non-recourse  loan shall be the purchase price for
the common stock from Ms. Michel,  which shall be weighted  average price of our
common stock for the thirty days prior to Ms. Michel's termination.  The Company
and Battleship are in discussions to modify this agreement.

New Business Plan

     We are now  following  the business  plan adopted by  Pacificap,  which had
developed a structured  approach  that evolved from altering the risk profile of
investing in movies,  while  participating  in the equity  profit of the film by
participating in the following ways:

     -    Leveraging film-financing funding;

     -    Aligning with strategic content providers;

     -    Acting as a merchant  bank from the risk profile in the  production of
          films;

     -    Developing  continued cash flow from production fees,  licensing fees,
          marketing, and merchandising; and

     -    Participating  in the  equity  profit of each film  without  deploying
          corporate capital.

     By  employing  a  unique,  securitized  and  cross-collateralized   capital
structure  used by the major film  studios,  our  business  plan will attempt to
mitigate the risks normally associated with independent filmmaking. By producing
commercially-driven yet uncompromising entertainment, we hope our business model
will also be a vehicle capable of generating returns for investors. Each picture
will be of a quality that is consistent with a major studio theatrical  release,
with a  production  budget  between $15  million and $150  million and a minimum
marketing  budget of $15 million.  The Company will be  responsible  for funding
owning and exploiting the  intellectual  property that will be created from each
individual project.

THE MARKET

     Filmed  entertainment has proven to be remarkably  recession-proof over the
years. Even during the recent economic downturn the revenues generated by movies
have grown. In 2002, according to Kagan Catalogue, the domestic box office gross
revenues  reached $9.5 billion  representing a 13% increase over the prior year.
Admissions volume also grew at a rate of 10%.  Internationally,  American cinema
precuts and their cultural influence  continued to expand as well.  According to
our research, last year, for the first time, overseas box office receipts exceed
domestic  receipts,  achieving  $9.6  billion,  a 20% jump from the year before,
while  admissions  volume  exceeded  7  billion,  a  7.5%  increase  over  2001.
Additionally, new technology continues to create incremental sources of revenue.
DVD player  penetration grew by 50% in the United States last year, and the sale
of movies on DVD  increased  by 84%.  The cable and  satellite  industries,  two
ancillary revenue streams,  are embracing video on demand, which currently has a
household  penetration  of  approximately  5.5 million homes and generates  $500
million in annual revenue.

FILM FINANCE

Traditional Film Finance

     In the past, the most common methods of motion picture  financing have been
"equity  pre-sale",   "rights  pre-sale",  "studio  output",  and  "first  look"
arrangements.

                                       2
<PAGE>
     o    In  an  "equity  pre-sale"  deal,  for  example,  a  producer  circles
          investors  prior to the making of a film and equity  investors pay all
          costs.  P&A  (distribution)  expenses  are  usually  financed  by  the
          distributor, but are recouped in fist position pushing all risk to the
          investors.
     o    In a "rights  pre-sale"  deal,  a producer  offers the film to foreign
          (usually)  or other  distributors  who agree to  purchase  some of the
          distribution  rights upon completion of the film. If approximately 1.3
          to 1.5 times the cost of the film can be pre-sold, a production lender
          loans   the   funds  to   produce   the   picture,   subject   to  the
          credit-worthiness of the obligated distributors.
     o    In a "studio-output" (financing) deal, the owner of a script enters an
          agreement  with a studio that likes the  concept.  The studio  manages
          production,  funds  production and, almost always retains all proceeds
          generated from the film. The script owner can often receive a moderate
          fee and a "net"  profit  participation  typically  around 5%. This net
          profit participation,  after allocation of studio overhead, is rarely,
          if ever, paid.
     o    In a "first look"  (financing)  deal, a studio  enters into a contract
          relationship  with a filmmaker  or star  agreeing to pay  overhead and
          development  expenses in exchange  for a priority  position to produce
          and distribute  that person's  films. If the studio rejects a project,
          the filmmaker or star may present the project to other studios.

     Over the last decade,  however,  a new trend has  developed  in  Hollywood:
Studios  are   mitigating   the   capital-intensive   nature  of  filmmaking  by
co-financing  and  co-producing  movies  with  others  as well  as  distributing
portfolios of movies financed by third parties.

The New World of Co-Financing

     Since the mid-1990s,  virtually every major studio has mitigated  financial
exposure by  splitting  ownership  of film  portfolios  with  partners.  Sharing
ownership  of films both reduces the impact of  box-office  failures on a studio
and lessens the capital  burden induced by the  mega-budget  films towards which
studios have trended.

     In a co-financing deal for a portfolio of movies, a studio  distributes the
entire slate of films in exchange for a distribution  fee (usually 10-15%) and a
participation  in the profits equal to their financing  contribution to the film
budgets. For example, according to publicly available information,  Warner Bros.
relies on partners such as  Australia-based  Village Roadshow  Pictures Ltd. for
about a third of its annual 25-film schedule;  the studio fills another third by
distributing  pictures  financed by others.  These  partners  have revealed that
under this  arrangement,  Warner Bros. and Village Roadshow share all production
and marketing costs on movies they jointly finance, and split all profits, after
the studio takes a distribution fee. Warner Bros.  recently agreed to extend and
expand its deal with Village Roadshow for an additional 40 films.

     Sony Pictures  Entertainment  receives half of its feature-film output from
Revolution  Studios.  A selection of other production  companies with co-finance
studio output arrangements  includes Beacon,  Spyglass,  Lakeshore,  Regency and
Morgan  Creek.  Most  of  these  co-finance  companies  have  assembled  foreign
pre-sales,  while  relaying  on the major  studies  for  domestic  distribution.
Others, such as Gaylord Films and the Anshutz Entertainment Companies,  Crusader
and Walden Media,  depend upon the production  company  principal owner matching
funds with the studio.

     Under our co-financing  arrangement,  Pacificap and the distributing studio
will each finance 50% of the production and marketing  costs, and will split the
related profits (after the pre-arranged  distribution fees, third-party fees and
distribution expenses).  The studio will both share risk with investors and will
provide guidance to the project on elements critical to globally-released films.
Investors will therefore benefit from an extensive alignment of interest between
the project and the studio/distributor.

COMPETITIVE ADVANTAGES

     Our business model offers several distinct competitive advantages.

     Budgets. Historically,  films with budgets ranging from $15 million to $150
million have been more likely to achieve  profitability.  By raising  sufficient
financing and producing films within this historically  acceptable budget range,
the project ensures that the quality and  profitability of its films will not be
limited by budget constraints.

                                       3
<PAGE>
     Additionally, as an independent company, we will be able to produce movies,
within these budget levels, at a lower cost than if production were completed by
a major studio carrying the burden of rich, preexisting agreements (i.e. talent,
music rights).

     Talent.  By  leveraging  its  guaranteed  global major studio  distribution
agreement combined with the industry stature of the partner producing companies,
each project will be positioned to more effectively  attract the highest-quality
projects from the best filmmakers and talent.

     Ratings. By predominantly  producing movies rated G and PG, the project has
the highest  probability,  based upon studies of historic  performance  (as more
fully  described  below),  of achieving  above-average  returns  relative to the
industry's averages, which contain a higher percentage of R-rated movies.

     In other  words,  we are taking a  structured  approach  that  evolved from
altering the risk profile of investing  in movies,  while  participating  in the
equity profit of the film.

     The  operating  schematic  is  made  up of  several  divisions:  the  urban
division; the animation division; and the specialty opportunity division.

     This  genre has a  specific  appeal to a young  demographic  segment of the
population   that  is  10-25  years  of  age,   and  in  our   opinion,   highly
merchandisable.  By targeting this segment,  we will directly address one of the
entertainment  industry's most lucrative  sectors: a $60 billion dollar teen and
youth market.  Content providers in this space can be affiliated with the music,
sports and fashion industry. Examples of these types of films would be "American
Pie", "Final Destination", " Barbershop", and "Drumline".

     We  believe  the key to  successfully  exploiting  this genre is to develop
partnerships  with  content  providers  with a history  of  elevating  financial
returns through lower production  cost. We are currently in negotiations  with a
number of reputable content providers in this market space,  although we have no
definitive agreements in place at this time.

Animation Division

     Historically,  computer  animated  motion  pictures have cost on average in
excess of $100 million per film to produce.  Recent technological  advances make
it possible  to produce  comparable  quality  films for under $30  million.  Our
animation's  mission is to create  family  entertainment  franchises/brands  and
launch as full-length  computer animated motion pictures and exploit them in all
markets  worldwide.  We will  provide a  platform  so the  animated  movies  can
merchandise and license products on international bases.

     Some pertinent facts about this market include:

     * The  Largest  historical  licensing/merchandising  properties  have  been
motion  pictures (Star Wars,  Lion King,  Pokeman,  Batman).  All have generated
retail product sales in excess of $1 billion and continue to generate revenue.

     * Family  entertainment  properties  generate  more home video  revenue per
title than non-family entertainment films. Parents tend to purchase these videos
rather than rent.  Shrek has  generated  over $400 million in video  revenue and
continues to sell well. "Ice Age" is expected to be the largest home video title
in the history of 20th Century Fox.

     * Computer animated  theatrically  released films are an excellent platform
for  introducing  kid's  franchises/brands  into the  marketplace.  A successful
franchise  will generate  significant  revenues for many years from a variety of
markets.

     * Video Games based on computer-animated films are among the hottest titles
in the gaming business.

     * Toys based on entertainment  licenses  represent over 60% of the industry
in the U.S.

     Our present  management team has over 20 years of experience in promotions;
licensing  and  merchandising  with movie  studios,  music  studios and business
entities.  For  example,  management  has  previously  developed  marketing  and
merchandising  alliances with McDonald's,  Disney,  Paramount,  and many others,

                                       4
<PAGE>
although we currently do not have any alliances  with these  companies in place.
This   strategically   positions  us  to  drive  corporate  revenue  and  create
shareholder value by:

     *  Partnering   with  animation   studios  that  can  closely  monitor  the
development and labor-intensive computer animation work;

     * Partnering  with major motion  picture  studios to finance the prints and
advertising and/or distribute the films;

     *  Retaining  control  of  underlying  property  rights  and  managing  the
exploitation of those rights through TV, video games, publishing, merchandising,
and licensing;

     *  Creating  a  recognized  branded  enterprise  with  long-term  value;

     * Pre-selling licensing/merchandising rights and video game rights; and

     * Seeking tax-related incentives offered by governments worldwide.

     Pacificap  intends  to  form  strategic  alliances  with  entities  in  the
following industries:

     Film/TV
     Video Games
     Toys/Licensing
     Advertising/Consumer products
     Retail

Special Opportunity Division

     Special opportunity films are those that are brand oriented,  have a unique
marketing opportunity and have an existing viewer base. This category of film is
either event driven or franchise driven.

     An event driven  project would be one that has an existing fan base such as
sports (NFL Football) or a sports event (NASCAR  Racing) or a topical event that
has a strong viewer  appeal.  These films  monetize an existing fan  demographic
through fan attendance, and are highly merchandisable through fan loyalty.

     Franchise  driven  films are those  that are  popular  through  an  already
existing public profile within a different medium. The most obvious is a popular
book series  that has core  support  and will lend  itself to  marketing,  video
games, merchandising, and licensing.

     It is our strategy to have corporate sponsorship, which allows corporations
to participate in the negative costs as well as branding  through  merchandising
and marketing.  This provides lower  production  cost and greater return on each
film.  Our strength is our experience in product  branding in the  entertainment
industry.

PORTFOLIO

     While the average  return of a motion picture is close to 12%, the standard
deviation  of  returns  is high;  therefore,  the  likelihood  of a single  film
achieving  this average  return is quite low. This means that the  risk-adjusted
return on single films is too low to adequately compensate equity investors.

     With our  business  model,  however,  assets  will be  pooled  to  create a
portfolio   of   feature-quality,    widely-released,    completion-bonded   and
globally-distributed  films,  designed to eliminate the risks  associated with a
single film  project.  Modeling and analysis of historical  performance  suggest
that a  "portfolio"  effect  tends to be achieved  when 14 or more  pictures are
produced and distributed over a five- to six-year period. When a portfolio of 20
pictures can be distributed over this period,  the likelihood of the transaction
repaying its senior debt is greater than 99% and the  probability  of generating
positive  returns to equity  investors is over 90%.  Furthermore,  in simulation
models using  randomly  selected  historical  film  performance,  this structure
generates  returns  for  investors  which can exceed  50%;  given the  leveraged
structure,  the actual returns can be even higher.  This means that, even in the
case where a portfolio  of films is  randomly  selected  from actual  historical
data, the structure mitigates the equity investors' exposure to single-film risk
without significantly mitigating the opportunity for strong gains.

                                       5
<PAGE>
DISTRIBUTION

     The  actual  results  from past films  suggest  that a movie that is widely
distributed  tends  to  recoup  most  of its  costs,  even  if the  quality  and
commercial  appeal  of the movie  turn out to be below  average.  Conversely,  a
"good" film can fail to  generate  acceptable  receipts if it is not  adequately
distributed.

     A securitized  film structure  like this Project  require that each film be
"widely  released" on a global basis.  While there tend to be many  variables in
the final terms of such a  distribution  arrangement,  a wide release  typically
means  that each film is  theatrically  released  in the U.S.  and  Canada  (the
"Domestic"  market) on 1,500 or more screens and on a similar  number of screens
within a reasonably short period of time overseas (the "International"  market).
To ensure  complete  distribution of the entire  portfolio,  the lender tends to
require that the distribution partner maintain an investment-grade credit rating
- the senior  unsecured  debt rating of the entity or its parent company must be
BBB -  SS&P)/Baa3  (Moody's)  or higher.  The film  distributors  that meet this
qualification   and  thus  that  are  eligible   candidates  for  the  Project's
distribution partner(s) are Fox, Disney, Sony, Paramount, Warner, and Universal.
This correspondingly  protects the equity investors with the increased certainty
that the  films  will  continue  to be  distributed  throughout  the life of the
Project.

CAPITAL CONSTRAINTS

     The cost of producing a  high-quality  motion picture is  significant.  The
amount of capital  available  to a filmmaker  will impact the quality of a film.
The industry  standard  minimum budget for  feature-quality  films is around $15
million. Historically,  very few films with smaller budgets have achieved strong
commercial success.

     The aggregate  capital  needed to finance the 50% share of twenty  globally
released feature films, with average  production costs of $58 million,  plus 50%
of the distribution costs, is over $1 billion. However, since the movies will be
made and released over a period of five years, and because feature films tend to
generate most of their global  revenue within the first 18 months after release,
a  revolving  debt  structure  can be used to reduce the overall  borrowing  and
required equity.

     With the  protection  of a  portfolio  of films and a  properly  structured
distribution  agreement,  $85  million  of equity can be  leveraged  with a $300
million  senior  revolving  debt  facility and be  sufficient  to finance  these
production, operation and distribution costs.

TRANSACTION COSTS

     The costs of assembling  the multitude of  transactions  necessary to raise
capital  and/or  pre-sell  the  rights  to a  single  movie as  distinct  from a
portfolio  are  prohibitively  large.  When  added to the  cost of the  multiple
transactions   involved  in  any  motion  picture  production  effort  -  script
acquisitions and revision,  corporate infrastructure,  legal, financial tracking
and reporting, etc., the transaction costs tend to materially reduce the returns
to equity investors.  Our business model mitigates these risks by spreading many
such  costs over many  movies  thereby  dramatically  reducing  individual  film
transaction costs.

     Another  critical risk is the potential for cost  overruns,  which can most
seriously  impact  return on  investment.  While our  business  model  initially
addresses this risk with a proven  management team, each film produced will also
have an investment-grade completion bond in order to insure against overruns.

ACCOUNTABILITY

     The  entertainment  industry has a reputation  for frequent  litigation and
obscure  accounting.  Our business model,  however,  is designed to operate with
full professional  transparency,  accountability and integrity.  The securitized
debt structure will require stringent controls and reporting  procedures,  which
protects equity investors and clarifies cash management and reporting.  All cash
receipts from the  distribution of the films in this transaction will be subject
to a cash flow allocation  arrangement  whereby parties to the transaction  will
receive pre-agreed allocations of cash flows. For the investors this means that:
(i)  credible  non-studio  parties  will  be  involved  in  the  accounting  and
disbursement  of cash;  (ii) any and all  claims to cash that are  senior to the
investor  will be  understood  at the outset of the  transaction;  and (iii) all
parties will have regular detailed  reports of cash flows and the  functionality
of the  deal.  We will  engage a  third-party  firm to act an  administrator  to

                                       6
<PAGE>
monitor,  account for and  administer the cash flow reports.  The  administrator
will, in conjunction with the bank custodial agent, oversee the disbursements of
funds to the accounts of the parties to the transaction.

BUSINESS PRACTICE

     While written agreements are necessary,  the spirit of any agreement is the
correct measure of ethics.  The business  model's  structure  includes a team of
professionals with complementary skills who also have the demonstrated  maturity
in their convictions to fully embrace and enforce the principles upon which this
business model is being founded.  The project's  management and oversight  board
will not only honor all contractual arrangements but also ultimately adhere to a
standard  that  demands  the utmost in  business  ethics and  morality  and that
embraces a system of checks and balances.

Cavalcade of Sports Media Division

     Our Cavalcade of Sports division is engaged in the broadcast  entertainment
business,  focusing on nostalgic sports  entertainment and ethnic  broadcasting.
Additionally,  our business plan includes our making of multiple acquisitions of
small to medium sized low- power  television  stations to further our  broadcast
capability, while exploring syndication and advertising revenue opportunities.

     Our nostalgic  sports  division  offers a programming  format that features
college and professional sports, as well as international sports competitions of
many  varieties,  with  emphasis on the more popular  sports,  such as baseball,
football,  basketball, hockey and boxing. We plan to expand, and vary the format
to include  certain live sporting events as well as "talking head" sports shows.
Our channel  will be offered,  at no charge,  to the various  cable TV operators
(e.g., Comcast, Adelphi, AOL Time Warner) and to the satellite TV ("small dish")
operators  (e.g.,  Dish Network,  Direct TV, Echostar and Pegasus).  Our revenue
will be generated from advertisers, direct response marketers and infomercials.

     In April of 2004, we signed an agreement to create "The Boxing  Channel" in
conjunction  with Global Boxing  Promotions of Las Vegas.  This development will
allow Pacificap's Cavalcade of Sports division to showcase its nostalgic fights,
which includes some of the greatest  fights  recorded,  featuring  Archie Moore,
Carmen Basilio,  Joe Louis,  Muhammad Ali,  George Forman and many others.  This
channel is associated with Sterling  Promotions of Las Vegas,  Nevada.  Sterling
Promotions President,  Sterling McPherson,  a former lightweight champion,  will
produce live boxing matches as well as innovative  boxing  programs for this new
seven-day a week channel.

     We own  approximately  5,000 hours of vintage sports film with negotiations
in process to acquire in excess of an  additional  2,500 hours of  footage.  The
Cavalcade  library  includes vintage sporting events and coverage dating back to
the 1940's,  with over 10,000 hours of programming  available to us. Although in
our financial  statements,  we have recorded no value for the library due to its
non-use for the past two years,  we intend to utilize it in the near future.  It
is our mission to deliver compelling, informative and historic programming in an
efficient  fashion.  Cavalcade  will  provide  an  entertaining  and  economical
nostalgic sports programming alternative. Sports programming is big business. In
1997,  ESPN paid $175  million  to buy U.S.  Classic  Sports  Network.  In 2001,
Classic Sports was valued at $1 billion and reached 43 million homes.

Film Library

     Our film library consists of approximately  several hundred tapes,  many of
which  have  been  transferred  to Beta SP  format  and some of which are in the
process of being  transferred.  As of April 1, 2005, we own approximately  5,000
hours of sports footage, of which approximately 3,500 hours have been digitized.

     During the year ended  December 31, 2003, we performed an evaluation of our
film library for purposes of determining the implied fair value of the assets at
December 31, 2003. The test indicated that the recorded  remaining book value of
our film library  exceeded its fair value,  as  determined  by  discounted  cash
flows. As a result,  upon  completion of the assessment,  we recorded a non-cash
impairment  charge of  $372,304,  net of tax, or $0.12 per share during the year
ended  December 31, 2003 to reduce the carrying value of the film library to its
estimated value of $0.

                                       7
<PAGE>
Employees

     At April 8, 2005, we had 2 non-union employees, who are both executives. We
consider our relations with our employees to be good.

ITEM 2.  DESCRIPTION OF PROPERTY

     We maintain our  principal  office at 9150  Wilshire  Boulevard,  Suite 242
Beverly Hills,  California  90212.  Our telephone number at that office is (310)
550-5800. Beginning in November, 2004, the Company leases office space at a rate
of $4,502 per month on a four year lease.  We believe  that our  current  office
space  and  facilities  are  sufficient  to meet our  present  needs  and do not
anticipate any difficulty  securing  alternative or additional space, as needed,
on terms acceptable to us.

ITEM 3.  LEGAL PROCEEDINGS

     From time to time,  we may become  involved in various  lawsuits  and legal
proceedings which arise in the ordinary course of business.  However, litigation
is subject to inherent  uncertainties,  and an adverse  result in these or other
matters  may  arise  from  time to time  that may harm our  business.  Except as
disclosed  below,  we are currently not aware of any such legal  proceedings  or
claims that we believe will have,  individually or in the aggregate,  a material
adverse affect on our business, financial condition or operating results.

     On March 12, 2003, a complaint  was filed in the Supreme Court of the State
of New York,  County of New York County  entitled Simon Deutsche v. Cavalcade of
Sports Media,  Inc. (Index No.  108721/2003) for a recovery on a Capital Note of
$10,000 plus interest.  On June 2, 2003, the Court granted  summary  judgment in
favor of Simon  Deutsche  and  against  Cavalcade  in the amount of  $15,694.45.
Between June and August 2004, we paid this judgment in full.

     On or about  September  2004,  Fox Law  Offices,  P.A.  obtained  a default
judgment  against the Company in the amount of  $182,000.  The Company  moved to
vacate the default judgment,  and the parties are briefing on that motion in the
Supreme Court of the State of New York, County of New York. The Company believes
it has meritorious  defenses to the employee's  claims and intends to vigorously
defend itself  against the claim.  Management  believes the ultimate  outcome of
this  matter  will  not  have  a  material   adverse  effect  on  the  Company's
consolidated financial position or results of operations.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

     There were no matters  submitted  to a vote of  shareholders  in the fourth
quarter of 2004.

                                       8
<PAGE>
                                     PART II

ITEM 5.  MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

     Our  common  stock is quoted on the OTC  Bulletin  Board  under the  symbol
"PFEH".

     For the periods indicated,  the following table sets forth the high and low
bid  prices  per share of common  stock.  These  prices  represent  inter-dealer
quotations  without  retail  markup,   markdown,   or  commission  and  may  not
necessarily represent actual transactions.

                                      High($)                  Low ($)
                                      ------                  --------

  2003
  First Quarter                        0.39                    0.02
  Second Quarter                       0.07                    0.02
  Third Quarter (1)                    2.75                    0.04
  Fourth Quarter                       2.25                    0.80

  2004
  First Quarter                        1.18                    0.35
  Second Quarter                       0.48                    0.12
  Third Quarter                        0.34                    0.01
  Fourth Quarter                       0.06                    0.01

  2005
  First Quarter                        0.03                    0.01
  Second Quarter (2)                   0.01                    0.01

(1) Reflects a 1:30 reverse stock split. (2) As of April 15, 2005.

Dividends

     We have not begun business  operations and  accordingly  have not generated
any revenues  nor had net profits on  operations  and  therefore  are  currently
proscribed under the Delaware General Corporation Law from declaring  dividends.
We have not paid any cash dividends on our Common Stock or our Preferred  Stock.
Our Board of Directors has no present intention of declaring any cash dividends,
as we expect to re-invest  all profits in the business  for  additional  working
capital for continuity and growth.  The  declaration and payment of dividends in
the  future  will be  determined  by our  Board  of  Directors  considering  the
conditions then existing, including the Company's earnings, financial condition,
capital requirements, and other factors.

DESCRIPTION OF SECURITIES

Common Stock

     We are  authorized to issue up to 300,000,000  shares of common stock,  par
value $.001. As of April 15, 2004, there were 46,376,501  shares of common stock
outstanding.  Holders of the common  stock are entitled to one vote per share on
all matters to be voted upon by the  stockholders.  Holders of common  stock are
entitled to receive  ratably such  dividends,  if any, as may be declared by the
Board  of  Directors  out  of  funds  legally  available   therefor.   Upon  the
liquidation,  dissolution,  or winding up of our company,  the holders of common
stock are  entitled  to share  ratably  in all of our assets  which are  legally
available for distribution  after payment of all debts and other liabilities and
liquidation  preference of any outstanding common stock. Holders of common stock
have  no  preemptive,   subscription,   redemption  or  conversion  rights.  The
outstanding  shares  of  common  stock  are  validly  issued,   fully  paid  and
nonassessable.

                                       9
<PAGE>
Preferred Stock

     We are authorized to issue up to 50,000,000  shares of Preferred Stock, par
value  $.001.  As of April 15,  2005,  there were no shares of  preferred  stock
issued and outstanding.

Options

     None.

Warrants

     In connection with a Securities  Purchase Agreement dated June 10, 2004, we
issued  2,000,000  warrants to purchase shares of common stock. The warrants are
exercisable  until five years from the date of issuance  at a purchase  price of
$0.24 per share.  In  connection  with a  Securities  Purchase  Agreement  dated
December 17, 2004,  we issued  1,400,000  warrants to purchase  shares of common
stock and we are obligated to issue an additional 1,400,000 warrants to purchase
shares of common stock.  The warrants are exercisable  until five years from the
date of issuance at a purchase price of $0.02 per share.

Convertible Securities

     Not including  approximately 3,400,000 shares of common stock issuable upon
exercise of outstanding  options and warrants and 1,400,000 warrants that we are
obligated  to issue in the near  future,  approximately  680,000,000  shares  of
common stock are issuable upon  conversion of  outstanding  secured  convertible
notes issued pursuant to the Securities  Purchase Agreements dated June 10, 2004
and December 17, 2004. The 1,400,000 warrants to purchase shares of common stock
that we are  obligated to issue in the near future are to be issued  pursuant to
the Securities  Purchase  Agreement dated December 17, 2004, which requires that
700,000 warrants be issued together with $700,000 in secured  convertible  notes
within five days of the filing of a registration  statement and 700,000 warrants
be issued together with $700,000 in secured  convertible  notes within five days
from the effective date of the registration statement.

     To obtain funding for our ongoing operations,  we entered into a Securities
Purchase Agreement with four accredited  investors on June 10, 2004 for the sale
of (i) $2,000,000 in secured  convertible  notes,  and (ii) warrants to purchase
2,000,000 shares of our common stock.

     The investors provided us with an aggregate of $2,000,000 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.

     Accordingly,  we  have  received  a total  of  $1,400,000  pursuant  to the
Securities Purchase Agreement.

     The 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 a principal  market for the 20 trading days before but
          not including the conversion date.

     The full  principal  amount of the secured  convertible  notes are due upon
default  under  the  terms  of  secured  convertible  notes.  The  warrants  are
exercisable  until five years from the date of issuance  at a purchase  price of
$0.02 per share. In addition,  we have granted the investors a security interest
in substantially  all of our assets and  intellectual  property and registration
rights.

     To obtain funding for our ongoing operations,  we entered into a Securities
Purchase Agreement with four accredited  investors on June 10, 2004 for the sale
of (i) $2,000,000 in secured  convertible  notes,  and (ii) warrants to purchase
2,000,000 shares of our common stock.

                                       10
<PAGE>
     The investors provided us with an aggregate of $2,000,000 as follows:

     o    $700,000 was disbursed on June 10, 2004;

     o    $600,000 was disbursed on July 13, 2004; and

     o    $700,000 was disbursed on July 20, 2004.

     The 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    $0.35; or

     o    50% of the average of the three lowest intraday trading prices for the
          common stock on a principal  market for the 20 trading days before but
          not including the conversion date.

     The full  principal  amount of the secured  convertible  notes are due upon
default  under  the  terms  of  secured  convertible  notes.  The  warrants  are
exercisable  until five years from the date of issuance  at a purchase  price of
$0.24 per share. In addition,  we have granted the investors a security interest
in substantially  all of our assets and  intellectual  property and registration
rights.

     From 2000 to 2002,  we raised an  aggregate of $840,750 in capital from the
sale of 12% convertible subordinated capital notes, which became due as follows:
December 31, 2000,  $467,000  became due; on December 31, 2001,  $342,500 became
due; and on December 31, 2002,  $31,250 became due. The holders of the Notes had
the option to convert  unpaid note  principal  together  with accrued and unpaid
interest into shares of our common stock 30 days following the  effectiveness of
a registration statement of our common stock under the Securities Act of 1933 at


                                       11
<PAGE>
a rate of $1.25 per share,  however,  a  registration  statement  has never been
filed for the shares  underlying these Notes, and the Notes are in default.  The
convertible  instrument  stated that in the event the unpaid principal amount of
the Notes, together with any accrued and unpaid interest, were not converted, or
paid in full by December  31,  2000,  December  31, 2001 and  December  31, 2002
respectively, the interest would accrues at 18% per annum until paid in full. In
the past,  we have  issued  shares of our  restricted  common  stock to the Note
holders in consideration for accrued and unpaid interest,  and is in the process
of contacting  all these Note holders to obtain current  contact  information to
offer restricted shares in lieu of repayment of the capital notes.

Penny Stock Regulation.

     Shares of our common stock are subject to rules  adopted by the  Securities
and Exchange Commission that regulate broker-dealer practices in connection with
transactions  in "penny  stocks." Penny stocks are generally  equity  securities
with a price of less than $5.00  (other than  securities  registered  on certain
national  securities  exchanges or quoted on the NASDAQ  system,  provided  that
current  price and volume  information  with  respect to  transactions  in those
securities is provided by the exchange or system). The penny stock rules require
a  broker-dealer,  prior to a transaction in a penny stock not otherwise  exempt
from  those  rules,  deliver a  standardized  risk  disclosure  prepared  by the
Securities and Exchange Commission, which contains the following:

     o    A description  of the nature and level of risk in the market for penny
          stocks in both public offerings and secondary trading;
     o    A description  of the broker's or dealer's  duties to the customer and
          of the rights and remedies  available to the customer  with respect to
          violation to such duties or other requirements of securities' laws;
     o    A brief, clear,  narrative  description of a dealer market,  including
          "bid" and "ask"  prices for penny stocks and the  significance  of the
          spread between the "bid" and "ask" price;
     o    A toll-free telephone number for inquiries on disciplinary actions;
     o    Definitions of significant terms in the disclosure  document or in the
          conduct of trading in penny stocks; and
     o    Such other  information  and in such form (including  language,  type,
          size and format),  as the  Securities  and Exchange  Commission  shall
          require by rule or regulation.

     Prior to effecting any transaction in a penny stock, the broker-dealer also
must provide the customer the following:

     o    The bid and offer quotations for the penny stock;

     o    The  compensation  of the  broker-dealer  and its  salesperson  in the
          transaction;

     o    The number of shares to which such bid and ask prices apply,  or other
          comparable  information  relating  to the depth and  liquidity  of the
          market for such stock; and

     o    Monthly  account  statements  showing  the market  value of each penny
          stock held in the customer's account.

     In addition, the penny stock rules require that prior to a transaction in a
penny stock not otherwise exempt from those rules, the broker-dealer must make a
special written  determination that the penny stock is a suitable investment for
the purchaser and receive the purchaser's written  acknowledgment of the receipt
of a risk disclosure  statement,  a written agreement to transactions  involving
penny stocks, and a signed and dated copy of a written suitably statement.

     These  disclosure  requirements may have the effect of reducing the trading
activity in the secondary  market for a stock that becomes  subject to the penny
stock rules.  Holders of shares of our common stock may have difficulty  selling
those  shares  because  our common  stock will  probably be subject to the penny
stock rules for an indeterminate period of time.

Recent Sales of Unregistered Securities

     In December  2004, we issued 810,000 shares of common stock to a consultant
in exchange for services rendered.

     In December 2004, we issued  4,582,106 shares of common stock in connection
with the acquisition of Battleship VFX, Inc.

                                       12
<PAGE>

     During the year ended December 31, 2004, we issued 197,025 shares of common
stock as interest in connection to a debt obligation of the Company.

                                       13
<PAGE>
ITEM 6.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULT
         OF OPERATIONS.

     This report contains forward-looking statements.  Actual results and events
could differ materially from those projected,  anticipated,  or implicit, in the
forward-looking  statements  as a result of the risk factors set forth below and
elsewhere in this report.

     With the exception of historical matters,  the matters discussed herein are
forward-looking statements that involve risks and uncertainties. Forward-looking
statements include,  but are not limited to, statements  concerning  anticipated
trends  in  revenues  and net  income,  projections  concerning  operations  and
available cash flow. Our actual results could differ materially from the results
discussed in such  forward-looking  statements.  The following discussion of our
financial condition and results of operations should be read in conjunction with
our  financial  statements  and the related notes  thereto  appearing  elsewhere
herein.

Overview

Critical Accounting Policies

     The preparation of our consolidated financial statements in conformity with
accounting  principles  generally  accepted in the United States  requires us to
make  estimates  and  judgments  that affect our reported  assets,  liabilities,
revenues, and expenses, and the disclosure of contingent assets and liabilities.
We base our  estimates and  judgments on  historical  experience  and on various
other  assumptions we believe to be reasonable under the  circumstances.  Future
events,   however,  may  differ  markedly  from  our  current  expectations  and
assumptions.  While  there  are a  number  of  significant  accounting  policies
affecting  our  consolidated  financial  statements;  we believe  the  following
critical accounting policies involve the most complex,  difficult and subjective
estimates and judgments:

         o business combinations

         o stock-based compensation.

Business combinations

     The  Financial  Accounting  Standards  Board  (FASB)  issued  Statement  of
Financial  Accounting Standards ("SFAS") No. 141, Business  Combinations,  which
established  accounting and reporting  standards for business  combinations  and
requires that all business combinations be accounted for by the purchase method.
Under the purchase method of accounting,  the cost, including transaction costs,
is allocated to the underlying net assets,  based on their respective  estimated
fair values.  The excess of the purchase price over the estimated fair values of
the net assets acquired is recorded as goodwill.

     The judgments  made in  determining  the estimated fair values and expected
useful  lives  assigned  to each class of assets and  liabilities  acquired  can
significantly  impact net income. For example,  different classes of assets will
have useful lives that differ. Consequently,  to the extent a longer-lived asset
is ascribed greater value under the purchase method than a shorter-lived  asset,
there may be less amortization recorded in a given period.

     Determining  the fair value of certain assets and  liabilities  acquired is
subjective  in nature and often  involves the use of  significant  estimates and
assumptions. We use a one-year period following the consummation of acquisitions
to finalize estimates of the fair values of assets and liabilities acquired. Two
areas, in particular,  that require significant judgment are estimating the fair
values and related useful lives of identifiable  intangible assets.  While there
are a number of  different  methods  used in  estimating  the value of  acquired
intangibles,  there are two approaches  primarily used: the discounted cash flow
and market  comparison  approaches.  Some of the more significant  estimates and
assumptions inherent in the two approaches include:  projected future cash flows
(including  timing);  discount rate  reflecting  the risk inherent in the future
cash  flows;   perpetual  growth  rate;   determination  of  appropriate  market
comparables;  and the determination of whether a premium or a discount should be
applied to  comparables.  Most of the  foregoing  assumptions  are made based on
available historical information.

                                       14
<PAGE>
Stock-Based Compensation

     In December 2002, the FASB issued SFAS No. 148 - Accounting for Stock-Based
Compensation - Transition and Disclosure.  This statement  amends SFAS No. 123 -
Accounting  for  Stock-Based  Compensation,  providing  alternative  methods  of
voluntarily  transitioning  to the fair market value based method of  accounting
for stock based employee  compensation.  FAS 148 also requires disclosure of the
method used to account for stock-based  employee  compensation and the effect of
the method in both the annual and interim financial  statements.  The provisions
of this statement  related to transition  methods are effective for fiscal years
ending  after  December  15,  2002,  while  provisions   related  to  disclosure
requirements  are effective in financial  reports for interim periods  beginning
after December 31, 2003.

     We elected to continue to account for stock-based  compensation plans using
the  intrinsic  value-based  method  of  accounting  prescribed  by APB No.  25,
"Accounting for Stock Issued to Employees," and related  interpretations.  Under
the provisions of APB No. 25, compensation expense is measured at the grant date
for the difference between the fair value of the stock and the exercise price.

     From  its  inception,   the  Company  has  incurred  significant  costs  in
connection with the issuance of equity- based  compensation,  which is comprised
primarily  of our common  stock and  warrants  to acquire our common  stock,  to
non-employees.  The Company anticipates  continuing to incur such costs in order
to  conserve  its  limited  financial   resources.   The  determination  of  the
volatility, expected term and other assumptions used to determine the fair value
of equity based  compensation  issued to  non-employees  under SFAS 123 involves
subjective judgment and the consideration of a variety of factors, including our
historical  stock  price,  option  exercise  activity  to date and the review of
assumptions used by comparable enterprises.

     We account  for  equity  based  compensation,  issued to  non-employees  in
exchange for goods or services , in accordance  with the  provisions of SFAS No.
123 and EITF No. 96-18,  "Accounting for Equity  Instruments  That are Issued to
Other Than Employees for Acquiring,  or in  Conjunction  with Selling,  Goods or
Services".

Recent Accounting Pronouncements

     In November 2004, the Financial  Accounting  Standards  Board (FASB) issued
SFAS  151,  Inventory  Costs--  an  amendment  of ARB No.  43,  Chapter  4. This
Statement amends the guidance in ARB No. 43, Chapter 4, "Inventory  Pricing," to
clarify the accounting for abnormal amounts of idle facility  expense,  freight,
handling costs, and wasted material  (spoilage).  Paragraph 5 of ARB 43, Chapter
4, previously  stated that ". . . under some  circumstances,  items such as idle
facility expense,  excessive spoilage,  double freight, and rehandling costs may
be so abnormal as to require  treatment as current period  charges.  . . ." This
Statement  requires  that those items be recognized  as  current-period  charges
regardless  of whether they meet the  criterion of "so  abnormal."  In addition,
this Statement  requires that  allocation of fixed  production  overheads to the
costs  of  conversion  be  based  on  the  normal  capacity  of  the  production
facilities.  This  Statement is effective for inventory  costs  incurred  during
fiscal  years  beginning  after June 15, 2005.  Management  does not believe the
adoption  of this  Statement  will  have any  immediate  material  impact on the
Company.

     In December 2004, the FASB issued SFAS No.152,  "Accounting for Real Estate
Time-Sharing Transactions--an amendment of FASB Statements No. 66 and 67" ("SFAS
152) The amendments  made by Statement 152 This Statement  amends FASB Statement
No.  66,  Accounting  for  Sales of Real  Estate,  to  reference  the  financial
accounting and reporting guidance for real estate time-sharing transactions that
is  provided in AICPA  Statement  of Position  (SOP) 04-2,  Accounting  for Real
Estate Time-Sharing Transactions.  This Statement also amends FASB Statement No.
67,  Accounting for Costs and Initial Rental Operations of Real Estate Projects,
to state that the guidance for (a) incidental  operations and (b) costs incurred
to sell  real  estate  projects  does  not  apply  to real  estate  time-sharing
transactions.  The accounting  for those  operations and costs is subject to the
guidance in SOP 04-2.  This Statement is effective for financial  statements for
fiscal years beginning after June 15, 2005. with earlier application encouraged.
The Company does not anticipate  that the  implementation  of this standard will
have a material impact on its financial position,  results of operations or cash
flows.

     On December 16, 2004,  the Financial  Accounting  Standards  Board ("FASB")
published  Statement of Financial  Accounting  Standards No. 123 (Revised 2004),
Share-Based  Payment ("SFAS 123R").  SFAS 123R requires that  compensation  cost
related to  share-based  payment  transactions  be  recognized  in the financial
statements.  Share-based  payment  transactions  within  the  scope of SFAS 123R
include stock options,  restricted stock plans,  performance-based awards, stock
appreciation  rights,  and employee share purchase plans. The provisions of SFAS
123R are  effective  as of the first  interim  period that begins after June 15,
2005. Accordingly,  the Company will implement the revised standard in the third
quarter of fiscal year 2005. Currently, the Company accounts for its share-based
payment  transactions under the provisions of APB 25, which does not necessarily
require the recognition of compensation cost in the financial statements.

                                       15
<PAGE>
     Management is assessing the  implications of this revised  standard,  which
may materially  impact the Company's  results of operations in the third quarter
of fiscal year 2005 and thereafter.

     On  December  16,  2004,  FASB issued  Statement  of  Financial  Accounting
Standards No. 153, Exchanges of Nonmonetary  Assets, an amendment of APB Opinion
No. 29,  Accounting for Nonmonetary  Transactions (" SFAS 153").  This statement
amends APB Opinion 29 to eliminate the exception  for  nonmonetary  exchanges of
similar productive assets and replaces it with a general exception for exchanges

of nonmonetary assets that do not have commercial substance.  Under SFAS 153, if
a nonmonetary exchange of similar productive assets meets a commercial-substance
criterion and fair value is determinable,  the transaction must be accounted for
at fair  value  resulting  in  recognition  of any  gain or  loss.  SFAS  153 is
effective for  nonmonetary  transactions in fiscal periods that begin after June
15,  2005.  The Company  does not  anticipate  that the  implementation  of this
standard  will have a  material  impact on its  financial  position,  results of
operations or cash flows.

Results of Operations

     The Company is in the development  stage and to date, and has not generated
revenues.  The risks specifically  discussed are not the only factors that could
affect future performance and results. In addition the discussion in this annual
report  concerning us, our business and our operations  contain  forward-looking
statements.  Such  forward-looking  statements are  necessarily  speculative and
there are certain  risks and  uncertainties  that could cause  actual  events or
results to differ  materially  from those  referred  to in such  forward-looking
statements.  We do not have a policy of  updating  or  revising  forward-looking
statements and thus it should not be assumed that silence by our Management over
time means that  actual  events or results are  occurring  as  estimated  in the
forward-looking statements herein.

     As a  development  stage  company,  we  have  yet  to  earn  revenues  from
operations.  We may  experience  fluctuations  in  operating  results  in future
periods due to a variety of factors., including our ability to obtain additional
financing  in a timely  manner  and on terms  favorable  to us,  our  ability to
successfully  develop our  business  model,  the amount and timing of  operating
costs and  capital  expenditures  relating  to the  expansion  of our  business,
operations and infrastructure and the implementation of marketing programs,  key
agreements, and strategic alliances, and general economic conditions specific to
our industry.

     As a result of limited  capital  resources and no revenues from  operations
from its inception,  the Company has relied on the issuance of equity securities
to non-employees in exchange for services.  The Company's management enters into
equity compensation  agreements with non-employees if it is in the best interest
of the Company under terms and conditions  consistent  with the  requirements of
Financial   Accounting   Standards   No.  123,   "Accounting   for  Stock  Based
Compensation." In order to conserve its limited operating capital resources, the
Company anticipates  continuing to compensate  non-employees for services during
the next twelve months.  This policy may have a material effect on the Company's
results of operations during the next twelve months.

Revenues

     We have generated no operating revenues from operations from our inception.
We believe we will begin earning  revenues  from  operations in 2005 from actual
operation as the Company transitions from a development stage company to that of
an active growth and acquisition stage company.

                                       16
<PAGE>
Costs and Expenses

     From our inception through December 31, 2004, the Company had not generated
any revenues and have incurred  cumulative losses of $48,005,439.  A significant
part  of  the  overall  costs  are  associated   principally  with  equity-based
compensation  to  employees  and  consultants,  product  development  costs  and
professional services rendered.

Liquidity and Capital Resources

     As of December  31,  2004,  the Company  had a working  capital  deficit of
$2,551,196 as compared to a deficit of $2,803,641 as of December 31, 2003.  From
the  Company's  inception  to  December  31,  2004 the  Company  has  incurred a
operating  cash flow deficit of $3,351,206  which as been  principally  financed
through the issuance of capital and other notes  payable of  $3,231,473  (net of
repayments); private placement of our common stock of $272,200 and advances from
Company shareholders, officers, and other parties of $275,602.

     While  the  Company  has  raised  funds to meet  its  working  capital  and
financing needs in the past,  additional  financing is required in order to meet
our current and projected cash flow deficits from  operations  and  development.
Although the Company is seeking  financing to support its working capital needs,
the Company has no  commitments  or  assurances  that it will be  successful  in
raising the funds required.

     The  Company  believes  that it will be  successful  in meeting the working
capital  needs  to fund  the  current  level of  operating  activities,  capital
expenditures and debt and other obligations through the next 12 months. However,
if during that period or thereafter, the Company is not successful in generating
sufficient  capital  resources,  on terms acceptable to the Company,  this could
have a material adverse effect on the Company's business,  results of operations
liquidity and financial condition.

     The  independent  auditor's  report  on the  Company's  December  31,  2004
financial  statements  included in this Annual  Report states that the Company's
recurring  losses  raise  substantial  doubts  about the  Company's  ability  to
continue as a going concern.

     The  Company  entered  into  a  Securities  Purchase  Agreement  with  four
accredited  investors  on June 10,  2004 for the  issuance  of an  aggregate  of
$2,000,000  of  convertible  notes  ("Convertible  Notes"),  and attached to the
Convertible  Notes were warrants to purchase  2,000,000  shares of the Company's
common stock. The Convertible  Notes accrues interest at 10% per annum,  payable
and due two years from the date of the note.  The  noteholder  has the option to
convert any unpaid note principal to the Company's common stock at a rate of the
lower of (i)  $0.35 or (ii) 50% of the  average  of the  three  lowest  intraday
trading  prices for the common  stock on a  principal  market for the 20 trading
days before but not including conversion date.

     As of December 31, 2004,  the Company  issued to the investors  Convertible
Notes under the above  described  agreement in a total amount of  $2,000,000  in
exchange for net proceeds of $1,356,565.  The proceeds that the Company received
was net of prepaid  interest  of  $400,000  calculated  at 10% per annum for the
aggregate of $2,000,000 of convertible notes for two years, and related fees and
costs of  $243,435.  Prepaid  interest  and  capitalized  financing  costs  were
amortized over the maturity period (two years) of the convertible notes.


                                       17
<PAGE>
     The  Company  entered  into  a  Securities  Purchase  Agreement  with  four
accredited  investors  on December  17, 2004 for the issuance of an aggregate of
$2,800,000  of  convertible  notes  ("Convertible  Notes"),  and attached to the
Convertible  Notes were warrants to purchase  2,800,000  shares of the Company's
common stock, The Convertible Notes accrues interest at 10% per annum subject to
certain default previsions which increases the rate to 15% per annum, payable on
quarterly  beginning  in 2005 on  March  31st,  June  30th,  September  30th and
December  31st and with note maturity due three years from the date of the note.
The note  holder has the option to convert  any  unpaid  note  principal  to the
Company's  common  stock at a rate of the  lower of (i) $0.02 or (ii) 60% of the
average of the three lowest  intraday  trading  prices for the common stock on a
principal  market for the 20 trading  days before but not  including  conversion
date. As of December 31, 2004; the Company is in default with certain provisions
of the Agreement, therefore the rate in effect as of December 31 2004 is 15% per
annum.

     As of December 3l, 2004,  the Company  issued to the investors  Convertible
Notes under the  agreement  described  above in a total amount of  S1,400,000 in
exchange for net  proceeds of  $1,116,002  and the  investors  are  obligated to
provide the Company with an  additional  $1,400,000  of cash in exchange for two
other convertible promissory notes, each in the amount of $700,000. The proceeds
that the Company received net of related fees and costs of $283,998. Capitalized
financing  costs were  amortized  over the maturity  period (three years) of the
convertible notes. As of December 31, 2004, the Company has accrued interest, at
a default rate of 15% per annum of $8,055.

     Since our inception,  we have been seeking additional  third-party funding.
During such time,  we have  retained a number of  different  investment  banking
firms to assist us in locating available funding;  however, we have not yet been
successful in obtaining any of the  long-term  funding  needed to make us into a
commercially  viable  entity.  Although  we are  continuing  with our efforts to
obtain funding to maintain our operations,  we cannot assure you that we will be
successful  or that  any  funding  we  receive  will be  received  timely  or on
commercially reasonable terms. Due to our working capital deficiency,  and if we
do not receive adequate financing, we will be unable to pay our vendors, lenders
and other creditors if we cease our operations,  since the net realizable  value
of our non-current  assets will not generate adequate cash. We currently have no
commitments  for financing.  There is no guarantee that we will be successful in
raising the funds required.

     Until such time, if at all, as we receive  adequate  funding,  we intend to
continue to defer payment of all of our  obligations  which are capable of being
deferred, which actions have resulted in some vendors demanding cash payment for
their goods and services in advance,  and other vendors  refusing to continue to
do  business  with  us.  In the  event  that  we  are  successful  in  obtaining
third-party  funding, we do not expect to generate a positive cash flow from our
operations  for  at  least  several  years,   if  at  all,  due  to  anticipated
expenditures  for  research  and  development  activities,   administrative  and
marketing activities, and working capital requirements and expect to continue to
attempt to raise further capital through one or more further private placements.

Product Research and Development

     We do not anticipate  performing  research and development for any products
during the next twelve months.

Acquisition or Disposition of Plant and Equipment

     We do not  anticipate  the  sale  of any  significant  property,  plant  or
equipment during the next twelve months. We do not anticipate the acquisition of
any significant  property,  plant or equipment during the next 12 months,  other
than computer  equipment and peripherals used in our day-to-day  operations.  We
believe we have sufficient resources available to meet these acquisition needs.

Number of Employees

     From our  inception  through the period ended  December  31, 2004,  we have
relied on the services of outside consultants for services and had no employees.
In order for us to attract and retain quality  personnel,  we anticipate we will
have to offer  competitive  salaries  to  future  employees.  We  anticipate  an
employment  base of four (4) full and part  time  employees  during  the next 12
months. These employees will be Ed Litwak, our Chief Executive Officer,  Michael

                                       18
<PAGE>
Riley,  our President,  a CFO/  Treasurer to be hired,  a National  Distribution
Manager and an Administrative  Assistant.  The Company has entered into an three
year Employment Agreement with Ed Litwak.

     The  Company  also plans to use the advice of its  Advisory  Board on an as
needed  basis.  As we  continue  to expand,  we will incur  additional  cost for
personnel. This projected increase in personnel is dependent upon our generating
revenues and obtaining sources of financing.  There is no guarantee that we will
be successful in raising the funds required or generating revenues sufficient to
fund the projected increase in the number of employees.

Trends, Risks and Uncertainties

     We have sought to identify what we believe to be the most significant risks
to our business,  but we cannot predict whether,  or to what extent, any of such
risks may be realized nor can we guarantee that we have  identified all possible
risks that might arise.  Investors  should  carefully  consider all of such risk
factors before making an investment decision with respect to our Common Stock.

Risk Factors

     Much of the information included in this annual report includes or is based
upon  estimates,   projections  or  other  "forward-looking   statements".  Such
forward-looking  statements  include any projections or estimates made by us and
our  management  in  connection  with  our  business  operations.   While  these
forward-looking  statements,  and any assumptions upon which they are based, are
made in good faith and reflect our current  judgment  regarding the direction of
our business, actual results will almost always vary, sometimes materially, from
any estimates, predictions, projections, assumptions or other future performance
suggested herein.

     Such estimates,  projections or other "forward-looking  statements" involve
various risks and  uncertainties  as outlined  below. We caution the reader that
important  factors  in some  cases  have  affected  and,  in the  future,  could
materially  affect actual results and cause actual results to differ  materially
from  the  results  expressed  in  any  such  estimates,  projections  or  other
"forward-looking statements".

     Our common shares are considered speculative.  Prospective investors should
consider carefully the risk factors set out below.

We Have a History Of Losses Which May Continue,  Which May Negatively Impact Our
Ability to Achieve Our Business Objectives.

     We incurred net losses of $4,623,614  for the year ended  December 31, 2004
and  $35,405,841 for the year ended December 31, 2003. We cannot assure you that
we can achieve or sustain  profitability  on a quarterly  or annual basis in the
future. Our operations are subject to the risks and competition  inherent in the
establishment  of a business  enterprise.  There can be no assurance that future
operations  will be profitable.  Revenues and profits,  if any, will depend upon
various factors,  including whether we will be able to continue expansion of our
revenue.  We may not achieve our business  objectives and the failure to achieve
such goals would have an adverse impact on us.

If We Are Unable to Obtain  Additional  Funding Our Business  Operations Will be
Harmed and If We Do Obtain Additional  Financing Our Then Existing  Shareholders
May Suffer Substantial Dilution.

     We will  require  additional  funds to  sustain  and  expand  our sales and
marketing  activities.  We anticipate  that we will require up to  approximately
$750,000 to fund our continued operations for the next twelve months,  depending
on revenue from operations.  Additional  capital will be required to effectively
support the operations and to otherwise implement our overall business strategy.
There can be no  assurance  that  financing  will be  available in amounts or on
terms  acceptable to us, if at all. The inability to obtain  additional  capital
will  restrict  our  ability to grow and may reduce our  ability to  continue to
conduct business operations. If we are unable to obtain additional financing, we
will  likely be  required to curtail our  marketing  and  development  plans and
possibly  cease our  operations.  Any  additional  equity  financing may involve
substantial dilution to our then existing shareholders.

                                       19
<PAGE>
Our Independent  Registered  Public  Accounting Firm Have Expressed  Substantial
Doubt About Our Ability to  Continue  As a Going  Concern,  Which May Hinder Our
Ability to Obtain Future Financing.

     In their report dated March 31, 2005,  our  independent  registered  public
accounting firm stated that our financial statements for the year ended December
31, 2004 were prepared  assuming that we would continue as a going concern.  Our
ability to continue as a going  concern is an issue raised as a result of losses
for the years ended  December 31, 2004 and 2003 in the amounts of $4,623,641 and
$35,405,841,  respectively  and being in default  under the terms of our capital
notes and notes payable  obligations.  . We continue to experience net operating
losses.  Our ability to continue as a going concern is subject to our ability to
generate  a  profit  and/or  obtain  necessary  funding  from  outside  sources,
including  obtaining  additional  funding  from  the  sale  of  our  securities,
increasing   sales  or  obtaining  loans  and  grants  from  various   financial
institutions  where possible.  Our continued net operating  losses increases the
difficulty  in  meeting  such  goals and there  can be no  assurances  that such
methods will prove successful.

If We Are Unable to Retain the Services of Messrs. Litwak and Riley or If We Are
Unable to Successfully  Recruit Qualified  Managerial and Sales Personnel Having
Experience in Business, We May Not Be Able to Continue Our Operations.

     Our success depends to a significant  extent upon the continued  service of
Mr. Edward  Litwak,  our President,  Chief  Financial  Officer,  Treasurer and a
director and Mr. Michael Riley, our Chairman of the Board.  Loss of the services
of Messrs.  Litwak or Riley could have a material  adverse effect on our growth,
revenues,  and prospective business. We do not maintain key-man insurance on the
life of Messrs. Litwak or Riley. In addition, in order to successfully implement
and manage our business  plan,  we will be dependent  upon,  among other things,
successfully   recruiting   qualified  managerial  and  sales  personnel  having
experience in business.  Competition for qualified individuals is intense. There
can be no assurance  that we will be able to find,  attract and retain  existing
employees  or  that  we will be able  to  find,  attract  and  retain  qualified
personnel on acceptable terms.

Many Of Our  Competitors  Are  Larger  and  Have  Greater  Financial  and  Other
Resources  Than We Do and Those  Advantages  Could Make It  Difficult  For Us to
Compete With Them.

     The movie production industry is extremely competitive and includes several
companies that have achieved  substantially  greater market shares than we have,
and have longer  operating  histories,  have  larger  customer  bases,  and have
substantially greater financial, development and marketing resources than we do.
If overall  demand for our products  should  decrease it could have a materially
adverse affect on our operating results.

Our  Trademark  and Other  Intellectual  Property  Rights May not be  Adequately
Protected Outside the United States, Resulting in Loss of Revenue.

     We believe that our trademarks,  whether licensed or owned by us, and other
proprietary rights are important to our success and our competitive position. In
the course of our international expansion, we may, however,  experience conflict
with  various  third  parties who acquire or claim  ownership  rights in certain
trademarks.  We cannot  assure that the actions we have taken to  establish  and
protect  these  trademarks  and other  proprietary  rights  will be  adequate to
prevent imitation of our products by others or to prevent others from seeking to
block sales of our products as a violation  of the  trademarks  and  proprietary
rights of others.  Also, we cannot assure you that others will not assert rights
in, or ownership of, trademarks and other proprietary  rights of ours or that we
will  be  able  to  successfully   resolve  these  types  of  conflicts  to  our
satisfaction. In addition, the laws of certain foreign countries may not protect
proprietary rights to the same extent, as do the laws of the United States.

If We Fail to Remain Current on Our Reporting Requirements,  We Could be Removed
From the OTC Bulletin Board Which Would Limit the Ability of  Broker-Dealers  to
Sell Our Securities and the Ability of Stockholders to Sell Their  Securities in
the Secondary Market.

     Companies  trading on the OTC Bulletin Board, such as us, must be reporting
issuers under Section 12 of the Securities Exchange Act of 1934, as amended, and
must be current in their reports  under  Section 13, in order to maintain  price
quotation  privileges on the OTC Bulletin Board. If we fail to remain current on
our reporting requirements,  we could be removed from the OTC Bulletin Board. As
a result,  the market liquidity for our securities  could be severely  adversely
affected by limiting the ability of  broker-dealers  to sell our  securities and
the ability of stockholders to sell their securities in the secondary market.

                                       20
<PAGE>
Our  Common  Stock is  Subject  to the  "Penny  Stock"  Rules of the SEC and the
Trading Market in Our  Securities is Limited,  Which Makes  Transactions  in Our
Stock Cumbersome and May Reduce the Value of an Investment in Our Stock.

     The  Securities  and  Exchange  Commission  has  adopted  Rule 15g-9  which
establishes the definition of a "penny stock," for the purposes  relevant to us,
as any equity  security  that has a market price of less than $5.00 per share or
with an  exercise  price of less  than  $5.00  per  share,  subject  to  certain
exceptions.  For any  transaction  involving a penny stock,  unless exempt,  the
rules require:

     o    that a broker or dealer approve a person's account for transactions in
          penny stocks; and
     o    the broker or dealer receive from the investor a written  agreement to
          the transaction,  setting forth the identity and quantity of the penny
          stock to be purchased.

In order to approve a person's  account for  transactions  in penny stocks,  the
broker or dealer must:

     o    obtain financial  information and investment  experience objectives of
          the person; and
     o    make a reasonable  determination that the transactions in penny stocks
          are suitable for that person and the person has  sufficient  knowledge
          and  experience in financial  matters to be capable of evaluating  the
          risks of transactions in penny stocks.

The broker or dealer  must also  deliver,  prior to any  transaction  in a penny
stock, a disclosure  schedule prescribed by the Commission relating to the penny
stock market, which, in highlight form:

     o    sets  forth  the  basis  on  which  the  broker  or  dealer  made  the
          suitability determination; and
     o    that the broker or dealer  received a signed,  written  agreement from
          the investor prior to the transaction.

Generally,  brokers may be less willing to execute  transactions  in  securities
subject  to the  "penny  stock"  rules.  This  may  make it more  difficult  for
investors to dispose of our common stock and cause a decline in the market value
of our stock.

     Disclosure also has to be made about the risks of investing in penny stocks
in both public  offerings  and in  secondary  trading and about the  commissions
payable to both the  broker-dealer  and the registered  representative,  current
quotations  for the  securities  and the rights  and  remedies  available  to an
investor  in  cases  of fraud in  penny  stock  transactions.  Finally,  monthly
statements  have to be sent  disclosing  recent price  information for the penny
stock held in the account and information on the limited market in penny stocks.

                                       21
<PAGE>

ITEM 7.  FINANCIAL STATEMENTS

                       SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549



                       FINANCIAL STATEMENTS AND SCHEDULES

                           DECEMBER 31, 2004 AND 2003





                     PACIFICAP ENTERTAINMENT HOLDINGS, INC.
                          (A development stage company)


                                       22
<PAGE>


                     PACIFICAP ENTERTAINMENT HOLDINGS, INC.
                          (A development stage company)

                          Index to Financial Statements
<TABLE>
<CAPTION>

-------------------------------------------------------------------------------------------------------------

                                                                                                 Page No.
                                                                                                 --------
<S>                                                                                                 <C>
Report of Registered Independent Certified Public Accounting Firm                                  F-3

Consolidated Balance Sheets at December 31, 2004 and 2003                                          F-4

Consolidated  Statements  of  Losses  for  the years ended December 31, 2004 and
2003, and for the period July 29, 1997 (date of inception) to December 31, 2004                    F-5

Consolidated  Statements  of  Deficiency  in Stockholders'  Equity for the years
ended December 31, 2004 and 2003, and  for  the  period  July 29,  1997 (date of
inception) to December 31, 2004                                                                F-6  - F-16

Consolidated Statements of Cash Flows for the years ended December 31,  2004 and
2003, and for the period July 29, 1997 (date of inception) to December 31, 2004                F-17 - F-20

Notes to Consolidated Financial Statements                                                     F-21 - F-42
</TABLE>






                                       F-2
<PAGE>

                    RUSSELL BEDFORD STEFANOU MIRCHANDANI LLP
                          Certified Public Accountants

          REPORT OF INDEPENDENT REGISTERED CERTIFIED PUBLIC ACCOUNTANTS

Board of Directors
Pacificap Entertainment Holdings, Inc.
Beverly Hills, California

     We have audited the accompanying  consolidated  balance sheets of Pacificap
Entertainment Holdings, Inc. and its wholly-owned  subsidiaries (the "Company"),
a development  stage  Company,  as of December 31, 2004 and 2003 and the related
consolidated statements of losses,  deficiency in stockholders' equity, and cash
flows for the  years  then  ended  and for the  period  July 29,  1997  (date of
inception)  to  December  31,  2004.   These   financial   statements   are  the
responsibility of the company's management.  Our responsibility is to express an
opinion on these financial statements based upon our audits.

     We conducted our audits in accordance  with standards of the Public Company
Accounting  Oversight Board (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  misstatements.  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 our audits
provide a reasonable basis for our opinion.

     In our opinion,  the consolidated  financial  statements  referred to above
present fairly, in all material respects, the consolidated financial position of
the Company as of December 31, 2004 and 2003,  and the results of its operations
and its cash flows for the years  then  ended,  and from July 29,  1997 (date of
inception)  to December 31,  2004,  in  conformity  with  accounting  principles
generally accepted in the United States of America.

     The  accompanying  consolidated  financial  statements  have been  prepared
assuming the Company will continue as a going concern. As discussed in Note N to
the consolidated financial statements, the Company has suffered recurring losses
from  operations,  is in default under the terms of its debt obligations and has
not  established a source of revenue.  This raises  substantial  doubt about its
ability to continue as a going  concern.  Management's  plans in regard to these
matters are also  described in Note N. The  financial  statements do not include
any adjustments that might result from the outcome of this uncertainty.


                                 /s/ RUSSELL BEDFORD STEFANOU MIRCHANDANI LLP
                                 --------------------------------------------
                                     Russell Bedford Stefanou Mirchandani LLP
                                     Certified Public Accounting Firm
McLean, Virginia
March 31, 2005


                                      F-3

<PAGE>

                     PACIFICAP ENTERTAINMENT HOLDINGS, INC.
                          (A development stage company)
                           CONSOLIDATED BALANCE SHEETS
                           DECEMBER 31, 2004 and 2003
<TABLE>
<CAPTION>
                                                                                                      2004                 2003
                                                                                                      ----                 ----
<S>                                                                                             <C>                    <C>
ASSETS
Current assets:
Cash and cash equivalents ............................................................          $    269,715           $      1,062
                                                                                                -------------          -------------
Total current assets .................................................................               269,715                  1,062

Property and equipment:
Office furniture, net of accumulated depreciation of $1,682 and
$1,020 at December 31, 2004 and December 31, 2003, respectively ......................                 8,799                    670

Other assets:

Prepaid interest (Note E) ............................................................               303,502                   --
Financing costs, net of accumulated amortization of $63,637 and $0
at December 31, 2004 and 2003, respectively (Note E) .................................               422,653                   --

Restricted Cash (Note M )........................................................                    235,903                   --

Other ................................................................................                 4,502                   --
                                                                                                -------------          -------------
Total other assets ...................................................................               966,560                   --

Total assets .........................................................................          $  1,245,074           $      1,732
                                                                                                =============          =============
LIABILITIES AND (DEFICIENCY IN) STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses (Note D) .......................................          $    989,556           $    979,137

Other accrued liabilities ............................................................               380,000                380,000

Notes payable , current portion (Note F) .............................................             1,131,165              1,136,165

Advances from related parties (Note I) ...............................................               275,190                264,401

Other advances .......................................................................                45,000                 45,000
                                                                                                -------------          -------------
Total current liabilities ............................................................             2,820,911              2,804,703


Notes payable, long-term portion, net of debt discount (Note E) ......................               603,262                   --

Commitments and contingencies (Note L) ...............................................                  --                     --

(Deficiency in) stockholders' equity:
Preferred stock, par value, $0.001 per share; 50,000,000 shares
authorized; none issued and outstanding at December 31, 2004 and
2003 (Note G) ........................................................................                  --                     --
Common stock, par value, $0.001 per share; 300,000,000 shares
authorized; 38,336,501 and 21,818,255 shares issued at December
31, 2004 and 2003, respectively (Note G) .............................................                38,337                 21,818

Additional paid-in capital ...........................................................            45,788,003             40,557,036

Deficit accumulated during development stage .........................................           (48,005,439)           (43,381,825)
                                                                                                -------------          -------------
Total (deficiency in) stockholders' equity ...........................................            (2,179,099)            (2,802,971)

Total liabilities and (deficiency in) stockholders' equity ...........................          $  1,245,074           $      1,732
                                                                                                -------------          -------------
           See accompanying notes to consolidated financial statements
</TABLE>

                                      F-4
<PAGE>


                     PACIFICAP ENTERTAINMENT HOLDINGS, INC.
                          (A development stage company)
                        CONSOLIDATED STATEMENTS OF LOSSES
<TABLE>
<CAPTION>
                                                                                                                    For the Period
                                                                                                                 July 29, 1997 (Date
                                                                          For the Year ended December 31,          of Inception) to
                                                                           2004                   2003             December 31, 2004
                                                                           ----                   ----           -------------------
<S>                                                                    <C>                     <C>                     <C>
Costs and Expenses:
Selling, general and administrative ........................           $  3,112,184            $  5,625,850            $ 13,225,158
Acquisition of Pacificap Entertainment
Holdings, Inc. (Note B) ....................................                   --                29,160,000              29,160,000

Acquisition of Cineports.com, Inc. .........................                   --                      --                 2,248,461

Impairment of film library (Note C) ........................                   --                   372,304                 372,304

Impairment of investment ...................................                   --                      --                    62,500

Depreciation ...............................................                    662                     340                 197,867
                                                                       -------------           -------------           -------------
Total operating expenses ...................................              3,112,846              35,158,494              45,266,290


Loss from operations .......................................             (3,112,846)            (35,158,494)            (45,266,290)

Other income (expenses):

Other income ...............................................                   --                      --                   114,758

Interest (expenses), net ...................................             (1,510,768)               (247,347)             (2,285,694)
                                                                       -------------           -------------           -------------
Total other (expenses) .....................................             (1,510,768)               (247,347)             (2,170,936)

Loss from continuing operations, before
income taxes and discontinued operations ...................             (4,623,614)            (35,405,841)            (47,437,226)

Provision for income taxes .................................                   --                      --                      --
                                                                       -------------           -------------           -------------
Loss from continuing operations, before
discontinued operations ....................................             (4,623,614)            (35,405,841)            (47,437,226)

Loss from discontinued operations ..........................                   --                      --                  (352,905)
Income (loss) on disposal of
discontinued operations, net ...............................                   --                      --                    78,974
                                                                       -------------           -------------           -------------
Net (loss) .................................................           $ (4,623,614)           $(35,405,841)           $(47,711,157)
                                                                       =============           =============           =============

Cumulative effect of accounting change .....................                   --                      --                  (294,282)
                                                                       -------------           -------------           -------------
Net loss applicable to common shares .......................           $ (4,623,614)           $(35,405,841)           $(48,005,439)
                                                                       =============           =============           =============

Loss per common share (basic and

assuming dilution) (Note J) ................................           $      (0.18)           $     (11.49)           $     (10.94)
                                                                       =============           =============           =============
Continuing operations ......................................           $      (0.18)           $     (11.49)           $     (10.94)
                                                                       =============           =============           =============
Discontinued operations ....................................           $       --              $       --              $      (0.08)
                                                                       =============           =============           =============
Weighted average shares outstanding ........................             26,130,548               3,081,611               4,386,205
                                                                       -------------           -------------           -------------
</TABLE>

           See accompanying notes to consolidated financial statements

                                       F-5
<PAGE>

                     PACIFICAP ENTERTAINMENT HOLDINGS, INC.
                   (FORMERLY CAVALCADE OF SPORTS MEDIA, INC.)
                          (A development stage company)
          CONSOLIDATED STATEMENTS OF DEFICIENCY IN STOCKHOLDERS' EQUITY
   FOR THE PERIOD JULY 29, 1997 (DATE OF INCEPTION) THROUGH DECEMBER 31, 2003
<TABLE>
<CAPTION>
                                                                                                     Deficit
                                                                                 Common               Accumulated
                                                                                 Stock    Additional  During
                                            Preferred  Stock    Common   Stock   subscri   Paid       Development Treasury
                                             Shares    Amount   Shares   Amount  -ption   in Capital  Stage        Stock      Total
                                            ---------- ------- --------  ------- ---------- --------- ---------  -------- ----------
<S>                                            <C>      <C>       <C>      <C>      <C>        <C>     <C>          <C>        <C>
Shares issued at date of inception (July
29, 1997) to founders in exchange for
contribution of organization costs valued
at $27.38 per shares, as restated                  -  $      -      422  $     1 $      -  $ 11,552   $     -    $      -  $ 11,553

Net Loss                                           -         -        -        -        -         -         -           -         -
Balance at December 31, 1997                       -  $      -      422  $     1 $      -  $ 11,552         -    $      -  $ 11,553
                                          ==========  ======== ======== ======== ========= ======== ========= =========== ==========
Shares issued December 22, 1998 to
consultants in exchange for services
valued at $.054 per shares                         -         -   37,083       37        -     1,965         -           -     2,002
Shares issued December 22, 1998 to
President in exchange for debt valued at
$.054 per shares                                   -         -  277,778      278        -    14,722         -           -    15,000
Operating expenses incurred by principal
shareholder                                        -         -        -        -        -     8,925         -           -     8,925

Net loss                                           -         -        -        -        -         -  (212,773)          -  (212,773)
                                         ----------- --------- -------- -------- -------- --------- ----------  --------- ----------
Balance at December 31, 1998                       -   $     -  315,283 $    316 $      -  $ 37,164  (212,773)  $       -  (175,293)
                                         =========== ========= ======== ======== ======== ========= ========== ========== ==========
Shares issued on April 13, 1999 for cash
in connection with private placement at
$30.08 per share                                   -         -      133        -        -     4,000         -           -     4,000
Shares issued on April 13, 1999 to
consultants in exchange for services
valued at $30.00per share                          -         -    6,000        6        -   179,994         -           -   180,000
Shares issued May 28, 1999 in exchange
for services valued at $.001 per share       855,000       855        -        -        -         -         -           -       855
Contribution of shares to treasury o
September 30, 1999 by principal
shareholder                                        -         -  (94,048)       -        -        94         -         (94)        -
Shares issued on November 12, 1999 for
cash in connection with private placement
at $3.00 per share                                 -         -   33,333       33        -    99,967         -           -   100,000
Release of shares held in treasury and
acquisition of Cavalcade of Sports
Network, Inc on December 16, 1999                  -         -   94,048        -        -   282,050         -          94   282,144
Operating expenses incurred by principal
shareholder                                        -         -        -        -        -     6,000         -           -     6,000

Net Loss                                           -         -        -        -        -         -  (438,045)          -  (438,045)
                                         ----------- --------- -------- -------- --------  -------- ---------- ----------- ---------
Balance at December 31, 1999                 855,000  $    855  354,749 $    355  $     - $ 609,269  (650,818)          -   (40,339)
                                         =========== ========= ======== ======== ======== ========= ========== =========== =========
</TABLE>
           See accompanying notes to consolidated financial statements

                                       F-6
<PAGE>
                     PACIFICAP ENTERTAINMENT HOLDINGS, INC.
                   (FORMERLY CAVALCADE OF SPORTS MEDIA, INC.)
                          (A development stage company)
    CONSOLIDATED STATEMENTS OF DEFICIENCY IN STOCKHOLDERS' EQUITY (Continued)
   FOR THE PERIOD JULY 29, 1997 (DATE OF INCEPTION) THROUGH DECEMBER 31, 2003
<TABLE>
<CAPTION>


                                           Preferred     Stock        Common                      Common Stock    Additional Paid
                                            Shares        Amount      Shares      Stock Amount    Subscription       in Capital
                                           ---------     -------      --------    ------------    ------------    ---------------
<S>                                            <C>           <C>        <C>           <C>             <C>                 <C>
Balance Forward
                                              855,000     $  855      354,749     $      355         $      -      $    609,269
Shares issued in March 2000 in exchange
for debt at $37.50 per share                        -          -        2,060              2                -            77,245
Shares issued March 28, 2000 in
exchange for services at $37.50 pershare            -          -           70              -                -             2,625
Shares issued April 27, 2000 in
exchange for services at $37.50 per
share                                               -          -          250              -                -             9,375
Shares issued May 8, 2000 in exchange
for services at $37.50 per share                    -          -          417              1                -            15,624
Shares issued May 17, 2000 in exchange
for services at 37.50 per share                     -          -          833              1                -            31,249
Shares issued June 2000 in exchange for
debt at $37.59 per share                            -          -          133              -                -             5,000
Shares issued June 2000 in exchange for
services at $37.46 per share                        -          -          589              1                -            22,082
Shares issued July 25, 2000 in exchange
for debt at $37.88 per share                        -          -           33              -                -             1,250
Shares issued August 2000, in exchange
for services at $37.50 per share                    -          -        2,167              2                -            81,248
Conversion of preferred stock on
September 18, 2000                          (855,000)      (855)            -              -                -                 -
Shares issued October 13, 2000, in
exchange for services at $37.86 per
share                                               -          -           35              -                -             1,325
Shares issued October 30, 2000 in
exchange for services at $37.48 per
share                                               -          -          667              1                -            24,999
Shares issued November 9, 2000 in
exchange for services at $37.65 per
share                                               -          -           83              -                -             3,125
Shares issued December 1, 2000 in
exchange for services at $36.76 per
share                                               -          -           17              -                -               625
Operating expenses incurred by
principal shareholder                               -          -            -              -                -             6,000

Net Loss                                            -          -            -              -                -                 -
                                          ----------- ---------- ------------    -----------        ---------      ------------
Balance at December 31, 2000                        -   $      -      362,103      $     363        $       -      $    891,041
                                          =========== ========== ============    ===========        =========      ============
</TABLE>

           See accompanying notes to consolidated financial statements

                                       F-7
<PAGE>
                     PACIFICAP ENTERTAINMENT HOLDINGS, INC.
                   (FORMERLY CAVALCADE OF SPORTS MEDIA, INC.)
                          (A development stage company)
    CONSOLIDATED STATEMENTS OF DEFICIENCY IN STOCKHOLDERS' EQUITY (Continued)
   FOR THE PERIOD JULY 29, 1997 (DATE OF INCEPTION) THROUGH DECEMBER 31, 2003
<TABLE>
<CAPTION>

                                                  Deficit
                                                  Accumulated
                                                  During               Treasury
                                                  DevelopmentStage       Stock         Total
                                                  ----------------  ------------ --------------
<S>                                                       <C>              <C>            <C>
Balance Forward
                                                       (650,818)              -        (40,339)
Shares issued in March 2000 in exchange
for debt at $37.50 per share                                  -               -         77,247
Shares issued March 28, 2000 in
exchange for services at $37.50 per
share                                                         -               -          2,625
Shares issued April 27, 2000 in
exchange for services at $37.50 per
share                                                         -               -          9,375
Shares issued May 8, 2000 in exchange
for services at $37.50 per share                              -               -         15,625
Shares issued May 17, 2000 in exchange
for services at 37.50 per share                               -               -         31,250
Shares issued June 2000 in exchange for
debt at $37.59 per share                                      -               -          5,000
Shares issued June 2000 in exchange for
services at $37.46 per share                                  -               -         22,083
Shares issued July 25, 2000 in exchange
for debt at $37.88 per share                                  -               -          1,250
Shares issued August 2000, in exchange
for services at $37.50 per share                              -               -         81,250
Conversion of preferred stock on
September 18, 2000                                            -               -           (855)
Shares issued October 13, 2000, in
exchange for services at $37.86 per
share                                                         -               -          1,325
Shares issued October 30, 2000 in
exchange for services at $37.48 per
share                                                         -               -         25,000
Shares issued November 9, 2000 in
exchange for services at $37.65 per
share                                                         -               -          3,125
Shares issued December 1, 2000 in
exchange for services at $36.76 per
share                                                         -               -            625
Operating expenses incurred by
principal shareholder                                         -               -          6,000

Net Loss                                               (856,968)              -       (856,968)
                                                   -------------     -----------    -----------
Balance at December 31, 2000                       $ (1,507,786)      $       -     $ (616,382)
                                                   =============     ===========    ===========

           See accompanying notes to consolidated financial statements

                                       F-8
<PAGE>
                     PACIFICAP ENTERTAINMENT HOLDINGS, INC.
                   (FORMERLY CAVALCADE OF SPORTS MEDIA, INC.)
                          (A development stage company)
    CONSOLIDATED STATEMENTS OF DEFICIENCY IN STOCKHOLDERS' EQUITY (Continued)
   FOR THE PERIOD JULY 29, 1997 (DATE OF INCEPTION) THROUGH DECEMBER 31, 2003
                               Preferred      Stock                                   Common Stock
                                Shares       Amount     Common Shares  Stock Amount   Subscription
                              ------------ ------------ -------------- -------------- --------------
Balance Forward                         -  $         -        362,103  $         363  $           -
Shares issued in January
2001, in exchange for
services at $37.50 per share            -            -          6,667              7              -
Shares issued in April
2001, in exchange for
services at $37.50 per share            -            -          4,000              4              -
Shares issued in April
2001, in exchange for
advances from officers at
$37.50 per share                        -            -          3,333              3              -
Shares issued in  2001, in
exchange for services at
$37.50 per share                        -            -          2,500              3              -
Shares issued in  2001, in
exchange for services at
$37.50 per share                        -            -          1,000              1              -
Fractional shares                       -            -             (5)             -              -
Shares canceled  in
November 2001, for services
that were not performed and
shares were previously
issued in October 2001                  -            -           (667)            (1)             -
Shares issued in December
2001, to board of directors
members for services at
37.50 per share                         -            -          2,100              2              -
Operating expenses incurred
by principal shareholder                -            -              -              -              -

Net loss                                -            -              -              -              -
                              ------------ ------------ -------------- -------------- --------------
Balance at December 31, 2001            -  $         -        381,031  $         382  $           -
                              ============ ============ ============== ============== ==============

           See accompanying notes to consolidated financial statements

                                      F-9

<PAGE>
                     PACIFICAP ENTERTAINMENT HOLDINGS, INC.
                   (FORMERLY CAVALCADE OF SPORTS MEDIA, INC.)
                          (A development stage company)
    CONSOLIDATED STATEMENTS OF DEFICIENCY IN STOCKHOLDERS' EQUITY (Continued)
   FOR THE PERIOD JULY 29, 1997 (DATE OF INCEPTION) THROUGH DECEMBER 31, 2003

                                                              Deficit Accumulated
                                           Additional Paid     During Development      Treasury
                                              in Capital             Stage              Stock         Total
                                          ----------------- ----------------------- ------------- -------------
Balance Forward                           $        891,041  $           (1,507,786) $          -  $   (616,382)

Shares issued in January
2001, in exchange for
services at $37.50 per share                       249,993                       -             -       250,000
Shares issued in April
2001, in exchange for
services at $37.50 per share                       149,996                       -             -       150,000
Shares issued in April
2001, in exchange for
advances from officers at
$37.50 per share                                   124,997                                             125,000
Shares issued in  2001, in
exchange for services at
$37.50 per share                                    93,747                       -             -        93,750
Shares issued in  2001, in
exchange for services at
$37.50 per share                                    37,499                       -             -        37,500

Fractional shares                                        -                       -             -             -
Shares canceled  in
November 2001, for services
that were not performed and
shares were previously
issued in October 2001                             (24,999)                      -             -       (25,000)
Shares issued in December
2001, to board of directors
members for services at
37.50 per share                                     78,748                       -             -        78,750
Operating expenses incurred
by principal shareholder                             6,000                       -             -         6,000

Net loss                                                 -              (1,257,584)            -    (1,257,584)
                                          ----------------- ----------------------- ------------- -------------
Balance at December 31, 2001              $      1,607,022             $(2,765,370) $          -  $ (1,157,966)
                                          ================= ======================= ============= =============

           See accompanying notes to consolidated financial statements

                                      F-10
<PAGE>
                     PACIFICAP ENTERTAINMENT HOLDINGS, INC.
                   (FORMERLY CAVALCADE OF SPORTS MEDIA, INC.)
                          (A development stage company)
    CONSOLIDATED STATEMENTS OF DEFICIENCY IN STOCKHOLDERS' EQUITY (Continued)
   FOR THE PERIOD JULY 29, 1997 (DATE OF INCEPTION) THROUGH DECEMBER 31, 2003


                                                                Preferred    Stock       Common     Stock
                                                                 Shares      Amount      Shares     Amount
                                                                ---------- ----------- ----------- ----------
Balance Forward                                                         -  $        -     381,031  $     382
Shares issued in January 2002, in exchange for investment at
$37.50 per share                                                        -           -       1,667          2
Shares issued in March 2002, in exchange for services at
$37.50 per share                                                        -           -       8,333          8
Shares issued in June 2002, in exchange for services at
approximately $40.15 per share                                          -           -      18,890         19
Shares issued in June 2002, in exchange for debts at $37.50
per share                                                               -           -       2,667          2
Shares issued in July 2002, in exchange for services at
$10.84 per share                                                        -           -         717          1
Shares issued in July 2002, in connection with acquisition of
Cineports.com, Inc. at approximately $7.50 per share (Note B)           -           -     159,653        160
Shares issued in August 2002, in exchange for services at
approximately $10.84 per share                                          -           -       2,133          2
Shares issued in September 2002, in exchange for services at
approximately $10.84 per share                                          -           -      10,000         10
Shares issued in October 2002, in exchange for services at
approximately $11.69 per share                                          -           -       4,000          4
Shares issued in October 2002 for cash in connection with
private placement at $6.94 per share                                    -           -      18,018         18
Shares issued in October 2002, in exchange for interest at
approximately $11.68 per share                                          -           -         507          -
Shares issued in November 2002, in exchange for services at
approximately $8.70 per share                                           -           -       1,667          2
Shares issued in November 2002 for cash in connection with
private placement at $10.20 per share                                   -           -       1,000          1
Shares issued in November 2002 for cash in connection with
private placement at $7.50 per share                                    -           -       4,000          4
Shares issued in November 2002, in exchange for debts at
$37.49 per share                                                        -           -         867          1
Shares issued in November 2002, in exchange for interest at
$37.56 per share                                                        -           -         217          -
Shares issued in December 2002, in exchange for services at
approximately $12.26 per share                                          -           -       9,333          9
Warrants issued in connection with acquisition of Cineports
(Note B)                                                                -           -           -          -
Options issued in exchange for services rendered (Note H)               -           -           -          -

Net loss                                                                -           -           -          -
                                                                ---------- ----------- ----------- ----------
Balance at December 31, 2002                                            -  $        -     624,700  $     625
                                                                ========== =========== =========== ==========

           See accompanying notes to consolidated financial statements

                                      F-11
<PAGE>
                     PACIFICAP ENTERTAINMENT HOLDINGS, INC.
                   (FORMERLY CAVALCADE OF SPORTS MEDIA, INC.)
                          (A development stage company)
    CONSOLIDATED STATEMENTS OF DEFICIENCY IN STOCKHOLDERS' EQUITY (Continued)
   FOR THE PERIOD JULY 29, 1997 (DATE OF INCEPTION) THROUGH DECEMBER 31, 2003
                                                                                          Deficit
                                                                                        Accumulated
                                                                         Additional       During
                                                                          Paid in      Development    Treasury
                                                                          Capital         Stage         Stock       Total
                                                                      -------------- --------------- ---------- -------------
Balance Forward                                                       $   1,607,022  $   (2,765,370) $       -  $ (1,157,966)
Shares issued in January 2002, in exchange for investment at
$37.50 per share                                                             62,498               -          -        62,500
Shares issued in March 2002, in exchange for services at
$37.50 per share                                                            312,492               -          -       312,500
Shares issued in June 2002, in exchange for services at
approximately $40.15 per share                                              758,356               -          -       758,375
Shares issued in June 2002, in exchange for debts at $37.50
per share                                                                    99,998               -          -       100,000
Shares issued in July 2002, in exchange for services at
$10.84 per share                                                              7,769               -          -         7,770
Shares issued in July 2002, in connection with acquisition of
Cineports.com, Inc. at approximately $7.50 per share (Note B)             1,197,237               -          -     1,197,397
Shares issued in August 2002, in exchange for services at
approximately $10.84 per share                                               23,127               -          -        23,129
Shares issued in September 2002, in exchange for services at
approximately $10.84 per share                                              108,410               -          -       108,420
Shares issued in October 2002, in exchange for services at
approximately $11.69 per share                                               46,736               -          -        46,740
Shares issued in October 2002 for cash in connection with
private placement at $6.94 per share                                        124,982               -          -       125,000
Shares issued in October 2002, in exchange for interest at
approximately $11.68 per share                                                5,920               -          -         5,920
Shares issued in November 2002, in exchange for services at
approximately $8.70 per share                                                14,498               -          -        14,500
Shares issued in November 2002 for cash in connection with
private placement at $10.20 per share                                        10,199               -          -        10,200
Shares issued in November 2002 for cash in connection with
private placement at $7.50 per share                                         29,996               -          -        30,000
Shares issued in November 2002, in exchange for debts at
$37.49 per share                                                             32,499               -          -        32,500
Shares issued in November 2002, in exchange for interest at
$37.56 per share                                                              8,150               -          -         8,150
Shares issued in December 2002, in exchange for services at
approximately $12.26 per share                                              114,371               -          -       114,380
Warrants issued in connection with acquisition of Cineports
(Note B)                                                                  1,051,065               -          -     1,051,065

Options issued in exchange for services rendered (Note H)                   661,365               -          -       661,365

Net loss                                                                          -      (5,210,614)         -    (5,210,614)
                                                                      -------------- --------------- ---------- -------------
Balance at December 31, 2002                                          $   6,276,690  $   (7,975,984) $       -  $ (1,698,669)
                                                                      ============== =============== ========== =============

           See accompanying notes to consolidated financial statements

                                      F-12
<PAGE>
                     PACIFICAP ENTERTAINMENT HOLDINGS, INC.
                   (FORMERLY CAVALCADE OF SPORTS MEDIA, INC.)
                          (A development stage company)
    CONSOLIDATED STATEMENTS OF DEFICIENCY IN STOCKHOLDERS' EQUITY (Continued)
   FOR THE PERIOD JULY 29, 1997 (DATE OF INCEPTION) THROUGH DECEMBER 31, 2003


                                                                               Preferred    Share       Common       Share
                                                                                 Shares     Amount      Shares       Amount
                                                                               ----------- ---------- ------------ ----------
Balance forward                                                                         -  $       -      624,700  $     625
Shares issued in January 2003 in exchange for services at approximately
$4.63 per share                                                                         -          -       56,300         56
Shares issued in February 2003 in exchange for services at $2.10 per share              -          -       36,683         37
Shares issued in February 2003 for cash in connection with private placement
at $1.20 per share                                                                      -          -        6,667          6
Shares issued in February 2003 in exchange for services at $1.50 per share              -          -        6,667          6
Shares issued in April, 2003 in exchange for services at $.90 per share                 -          -       14,000         14
Shares issued in April 2003 in exchange for expenses paid by shareholders at
$.90 per share                                                                          -          -       22,222         22
Shares issued in April 2003 in exchange for financing expenses at $.90 per
share                                                                                   -          -       22,960         23
Shares issued in April 2003 for cash in connection with private placement at
$1.20 per share                                                                         -          -        4,333          4
Shares issued in May 2003 in exchange for financing expenses at $1.65 per
share                                                                                   -          -        2,591          3
Shares issued in May 2003 in exchange for services at $1.50 per share                   -          -       17,667         18
Shares issued in May 2003 for cash in connection with private placement at
$.90 per share                                                                          -          -       16,667         17
Shares issued in May 2003 in exchange for expenses paid by shareholders at
$.90 per share                                                                          -          -       22,167         22
Shares issued in July 2003 in exchange for services at $2.10 per share                  -          -       13,850         14
Shares issued in July 2003 in exchange for debts at $.70 per share                      -          -       14,334         14
Shares issued in July 2003 in exchange for financing expenses at $3.60 per
share                                                                                   -          -       37,487         38
Shares issued in August 2003 in exchange for services at $3.14 per share                -          -       37,667         38
Shares issued in August 2003 in exchange for debts at $.81 per share                    -          -       43,667         44
Shares issued in September 2003 in exchange for services at $1.80 per share             -          -      264,916        265
Fractional shares issued in September 2003 due to rounding resulted from
reverse stock split                                                                     -          -        1,210          1
Shares issued in October 2003 in exchange for financing expenses at $2.00
per share                                                                               -          -       50,000         50
Shares issued in October 2003 in exchange for services at $1.59 per share               -          -    2,405,000      2,405
Shares issued in November 2003 in exchange for services at $1.18 per share              -          -       43,000         43
Shares issued in November 2003 in exchange for interest expenses at $1.25
per share                                                                               -          -       10,000         10
Shares issued in November 2003 in exchange for financing expenses at $1.75
per share                                                                               -          -       14,000         14
Shares issued in December 2003 in exchange for services at $1.28 per share              -          -       29,500         29
Shares issued in connection with acquisition of Pacificap (Note B)                      -          -   18,000,000     18,000

Net loss                                                                                -          -            -          -
                                                                               ----------- ---------- ------------ ----------
Balance at December 31, 2003                                                            -  $       -   21,818,255  $  21,818
                                                                               =========== ========== ===========  ==========

           See accompanying notes to consolidated financial statements

                                      F-13
<PAGE>
                     PACIFICAP ENTERTAINMENT HOLDINGS, INC.
                   (FORMERLY CAVALCADE OF SPORTS MEDIA, INC.)
                          (A development stage company)
    CONSOLIDATED STATEMENTS OF DEFICIENCY IN STOCKHOLDERS' EQUITY (Continued)
   FOR THE PERIOD JULY 29, 1997 (DATE OF INCEPTION) THROUGH DECEMBER 31, 2003
                                                                                               Deficit
                                                                                              Accumulated
                                                                               Additional       during
                                                                                Paid in       Development   Treasury
                                                                                Capital          Stage        Stock        Total
                                                                             --------------- -------------- ----------- ------------
Balance forward                                                              $    6,276,690  $  (7,975,984) $        -  $(1,698,669)
Shares issued in January 2003 in exchange for services at approximately
$4.63 per share                                                                     260,434              -           -      260,490
Shares issued in February 2003 in exchange for services at $2.10 per share           77,000              -           -       77,037
Shares issued in February 2003 for cash in connection with private placement
at $1.20 per share                                                                    7,994              -           -        8,000
Shares issued in February 2003 in exchange for services at $1.50 per share            9,994              -           -       10,000
Shares issued in April, 2003 in exchange for services at $.90 per share              12,586              -           -       12,600
Shares issued in April 2003 in exchange for expenses paid by shareholders at
$.90 per share                                                                       19,978              -           -       20,000
Shares issued in April 2003 in exchange for financing expenses at $.90 per
share                                                                                20,641              -           -       20,664
Shares issued in April 2003 for cash in connection with private placement at
$1.20 per share                                                                       4,996              -           -        5,000
Shares issued in May 2003 in exchange for financing expenses at $1.65 per
share                                                                                 4,272              -           -        4,275
Shares issued in May 2003 in exchange for services at $1.50 per share                25,882              -           -       25,900
Shares issued in May 2003 for cash in connection with private placement at
$.90 per share                                                                       14,983              -           -       15,000
Shares issued in May 2003 in exchange for expenses paid by shareholders at
$.90 per share                                                                       19,978              -           -       20,000
Shares issued in July 2003 in exchange for services at $2.10 per share               29,006              -           -       29,020
Shares issued in July 2003 in exchange for debts at $.70 per share                    9,986              -           -       10,000
Shares issued in July 2003 in exchange for financing expenses at $3.60 per
share                                                                               134,915              -           -      134,953
Shares issued in August 2003 in exchange for services at $3.14 per share            117,762              -           -      117,800
Shares issued in August 2003 in exchange for debts at $.81 per share                 35,456              -           -       35,500
Shares issued in September 2003 in exchange for services at $1.80 per share         280,085              -           -      280,350
Fractional shares issued in September 2003 due to rounding resulted from
reverse stock split                                                                      (1)             -           -            -
Shares issued in October 2003 in exchange for financing expenses at $2.00
per share                                                                            99,950              -           -      100,000
Shares issued in October 2003 in exchange for services at $1.59 per share         3,826,895              -           -    3,829,300
Shares issued in November 2003 in exchange for services at $1.18 per share           50,707              -           -       50,750
Shares issued in November 2003 in exchange for interest expenses at $1.25
per share                                                                            12,490              -           -       12,500
Shares issued in November 2003 in exchange for financing expenses at $1.75
per share                                                                            24,486              -           -       24,500
Shares issued in December 2003 in exchange for services at $1.28 per share           37,871              -           -       37,900
Shares issued in connection with acquisition of Pacificap (Note B)               29,142,000              -           -   29,160,000

Net loss                                                                                  -    (35,405,841)          -  (35,405,841)
                                                                             --------------- -------------- ----------- ------------
Balance at December 31, 2003                                                 $   40,557,036  $( 43,381,825) $        -  $(2,802,971)


           See accompanying notes to consolidated financial statements

                                      F-14
<PAGE>


                     PACIFICAP ENTERTAINMENT HOLDINGS, INC.
                          (A development stage company)
    CONSOLIDATED STATEMENTS OF DEFICIENCY IN STOCKHOLDERS' EQUITY (Continued)
   FOR THE PERIOD JULY 29, 1997 (DATE OF INCEPTION) THROUGH DECEMBER 31, 2004




                                                                             Preferred  Share        Common        Share
                                                                              Shares     Amount      Shares       Amount
                                                                             ---------- ---------- ------------ ------------
Balance forward
                                                                                     -     $        21,818,255     $ 21,818
                                                                             ========== ========== ============ ============
Shares issued in January 2004 in exchange for accrued interest at
approximately $1.01 per share                                                        -          -      145,166          145
Shares issued in January 2004 in exchange for services at approximately
$1.01 per share                                                                                        125,000          125

Shares issued in February 2004 in exchange for services at $0.66 per share           -          -      537,886          538
Shares issued in February 2004 in exchange for expenses paid by
shareholders at $0.66 per share                                                      -          -      150,000          150

Shares issued in March 2004 in exchange for services at $0.52 per share              -          -      293,250          293
Shares issued in April 2004 in exchange for services at approximately
$0.40 per share                                                                      -          -      615,000          615
Shares issued in May 2004 in exchange for services at approximately $0.25
per share                                                                            -          -      770,000          770
Shares issued in May 2004 in exchange for interest expense at
approximately $0.30 per share                                                        -          -       10,000           10
Shares issued in July, 2004 in exchange for interest expense at
approximately $0.28 per share                                                        -          -       44,275           45
Shares issued in July 2004 in exchange for services at approximately $0.27
per share                                                                            -          -    1,388,538        1,389
Shares issued in July 2004 in exchange for convertible notes payable at
approximately $0.07 per share                                                        -          -    1,100,000        1,100
Shares issued in August 2004 in exchange for services at approximately
$0.02 per share                                                                      -          -      250,000          250
Shares issued in September 2004 in exchange for convertible notes payable
at approximately $0.01 per share                                                     -          -    1,100,000        1,100
Shares issued in October 2004 in exchange for convertible notes payable at
approximately $0.01 per share                                                        -          -    1,100,000        1,100
Shares issued in November 2004 in exchange for convertible notes payable
at approximately $0.01 per share                                                     -          -    1,100,000        1,100
Shares issued in December 2004 in exchange for convertible notes payable
at approximately $0.01 per share                                                     -          -    2,200,000        2,200
Shares issued in December 2004 in exchange for services at approximately
$0.02 per share                                                                      -          -      810,000          810
Shares issued in December 2004 in exchange for interest expense at
approximately $0.02 per share                                                        -          -      197,025          197
Shares issued in December 2004 in exchange for acquisition costs at
approximately $0.02 per share                                                        -          -    4,582,106        4,582
Beneficial conversion feature of convertible notes payable (Note E)                  -          -            -            -
Value of warrants attached to convertible debentures (Note E)                        -          -            -            -

Net loss                                                                             -          -            -            -
                                                                             ---------- ---------- ------------ ------------
Balance at December 31, 2004                                                         -     $        38,336,501     $ 38,337
                                                                             ---------- ---------- ------------ ------------
           See accompanying notes to consolidated financial statements

                                      F-15

<PAGE>
                     PACIFICAP ENTERTAINMENT HOLDINGS, INC.
                          (A development stage company)
    CONSOLIDATED STATEMENTS OF DEFICIENCY IN STOCKHOLDERS' EQUITY (Continued)
   FOR THE PERIOD JULY 29, 1997 (DATE OF INCEPTION) THROUGH DECEMBER 31, 2004




                                                                                                 Deficit
                                                                                               Accumulated
                                                                                Additional       during
                                                                                 Paid in       Development   Treasury
                                                                                 Capital          Stage        Stock       Total
                                                                                ------------- -------------- ---------- ------------
                                                                                                               $
Balance forward                                                                   40,557,036  $(43,381,825)       -     $(2,802,971)
                                                                                ============= ============== ========== ============
Shares issued in January 2004 in exchange for accrued interest at
approximately $1.01 per share                                                        146,473              -          -      146,617
Shares issued in January 2004 in exchange for services at approximately
$1.01 per share                                                                      126,125                                126,250

Shares issued in February 2004 in exchange for services at $0.66 per share           325,828              -          -      326,366
Shares issued in February 2004 in exchange for expenses paid by
shareholders at $0.66 per share                                                      127,350              -          -      127,500

Shares issued in March 2004 in exchange for services at $0.52 per share              151,637              -          -      151,930
Shares issued in April 2004 in exchange for services at approximately
$0.40 per share                                                                      243,635              -          -      244,250
Shares issued in May 2004 in exchange for services at approximately $0.25
per share                                                                            194,980              -          -      195,750
Shares issued in May 2004 in exchange for interest expense at
approximately $0.30 per share                                                          2,990              -          -        3,000
Shares issued in July, 2004 in exchange for interest expense at
approximately $0.28 per share                                                         12,354              -          -       12,400
Shares issued in July 2004 in exchange for services at approximately $0.27
per share                                                                            372,400              -          -      373,789
Shares issued in July 2004 in exchange for convertible notes payable at
approximately $0.07 per share                                                         75,900              -          -       77,000
Shares issued in August 2004 in exchange for services at approximately
$0.02 per share                                                                        4,750              -          -        5,000
Shares issued in September 2004 in exchange for convertible notes payable
at approximately $0.01 per share                                                       6,490              -          -        7,590
Shares issued in October 2004 in exchange for convertible notes payable at
approximately $0.01 per share                                                          4,950              -          -        6,050
Shares issued in November 2004 in exchange for convertible notes payable
at approximately $0.01 per share                                                       4,730              -          -        5,830
Shares issued in December 2004 in exchange for convertible notes payable
at approximately $0.01 per share                                                      13,750              -          -       15,950
Shares issued in December 2004 in exchange for services at approximately
$0.02 per share                                                                       15,390              -          -       16,200
Shares issued in December 2004 in exchange for interest expense at
approximately $0.02 per share                                                          3,742              -          -        3,939
Shares issued in December 2004 in exchange for acquisition costs at
approximately $0.02 per share                                                         87,060              -          -       91,642
Beneficial conversion feature of convertible notes payable (Note E)                2,817,018              -          -    2,817,018
Value of warrants attached to convertible debentures (Note E)                        493,415              -          -      493,415

Net loss                                                                               -         (4,623,614)         -   (4,623,614)

Balance at December 31, 2004                                                      45,788,003  $ (48,005,439)   $     -  $(2,179,099)
                                                                                ------------- -------------- ---------- ------------
</TABLE>
           See accompanying notes to consolidated financial statements

                                      F-16
<PAGE>
                     PACIFICAP ENTERTAINMENT HOLDINGS, INC.
                          (A development stage company)
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>

                                                                                                       For the Period
                                                                                                       July 29, 1997 (Date
                                                                   For The Year Ended December 31,     of Inception)  to
                                                                           2004             2003       December 31, 2004
                                                                           ----             ----       -----------------
<S>                                                                     <C>             <C>             <C>
Cash flows from operating activities:
Net loss for the period from continuing operations ..................   $ (4,623,614)   $(35,405,841)   $(47,731,508)

Loss from discontinued operations ...................................           --              --          (352,905)

Disposal of business segment, net ...................................           --              --            78,974
Adjustments to reconcile net losses  to net cash (used in)
operating activities:

Cumulative effect of accounting change ..............................           --              --           294,282

Depreciation ........................................................            662             340         197,867

Organization and acquisition costs expensed .........................           --              --            11,553

Common stock issued in exchange for services (Note G) ...............      1,439,537       4,731,144       8,527,333
Common stock issued in exchange for previously incurred debt
(Note G) ............................................................           --              --           233,498

Common stock issued in exchange for interest (Note G) ...............         19,336          12,500          45,906
Common stock issued in exchange for expenses paid by
shareholders (Note G) ...............................................        127,500          40,000         192,500
Common stock issued in connections with acquisition of
Pacificap (Note G) ..................................................           --        29,160,000      29,160,000
Common stock issued in connection with acquisition of
Battleship VFX, Inc. (Note G) .......................................         91,642            --            91,642
Common stock issued in exchange for financing expenses (Note
G) ..................................................................           --           284,392         284,392
Common stock issued in connection with acquisition of
Cineports (Note G) ..................................................           --              --         1,197,396

Warrants issued in connection with acquisition of Cineports .........           --              --         1,051,065

Stock options issued in exchange for services rendered ..............           --              --           661,365

Preferred stock issued in exchange for services (Note G) ............           --              --               855

Conversion of preferred stock (Note G) ..............................           --              --              (855)
Reclassification of notes payable (Note E and F).....................         15,280            --            15,280
Amortization and write-off of debt discount - beneficial
conversion feature of convertible notes payable (Note E) ............        771,619            --           771,619
Amortization and write-off of debt discount - value of
warrants attached to convertible notes payable (Note E) .............        149,216            --           149,216

Amortization of financing costs (Note E) ............................         63,637            --            63,637

Amortization of prepaid interest (Note E) ...........................         96,498            --            96,498

Impairment of film library (Note C) .................................           --           372,304         372,304

Write off of  acquired asset ........................................           --              --             5,000

Write off of  un-collectable other receivable .......................           --              --            30,000

Debt forgiveness from creditors .....................................           --              --          (139,992)

Write off of capitalized production costs ...........................           --              --           150,273
Write off of other investment previously paid with common
stock ...............................................................           --              --            62,500

Expenses paid by principal shareholders .............................           --            90,090         117,015
Changes in:

Prepaid expenses ....................................................         (4,502)           --            (4,502)

Other receivable ....................................................           --              --           (30,000)

Accounts payable and accrued expenses, net ..........................        157,036         495,980       1,046,586

Net cash (used in) operating activities .............................     (1,696,153)       (219,091)     (3,351,206)

           See accompanying notes to consolidated financial statements

                                      F-17
<PAGE>

                     PACIFICAP ENTERTAINMENT HOLDINGS, INC.
                          (A development stage company)
                CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

                                                                                               For the Period
                                                                                               July 29, 1997 (Date
                                                            For The Year Ended December 31,    of Inception) to
                                                                2004              2003         December 31, 2004
                                                           ------------        ------------    -------------
Cash flows from investing activities:

Acquisition of film library and footage production costs          --             --             (183,080)

Acquisition of office furniture ........................        (8,791)          --              (10,481)

Cash acquired in connection with acquisition ...........          --             --               35,207
                                                           --------------    --------------   --------------
Net cash (used in) investing activities ................        (8,791)          --             (158,354)

Cash flows from financing activities:

Advances from related parties, net of repayments .......        10,789         34,858            230,602

Other advances, net ....................................          --             --               45,000

Proceeds from (repayments of) notes payable ............       (15,000)       153,000          1,253,665
Proceeds from issuance of long-term convertible debt,
net of costs fees and restricted cash held in escrow
(Notes E and M)) .......................................     2,277,808           --            2,277,808

Repayments of convertible notes payable (Note E) .......      (300,000)          --             (300,000)

Proceeds from issuance of common stock .................          --           28,000            272,200
                                                           --------------    --------------   --------------
Net cash provided by financing activities ..............     1,973,597        215,858          3,779,275


Net increase (decrease) in cash and equivalents ........       268,653         (3,233)           269,715

Cash and cash equivalents at the beginning of the period         1,062          4,295               --
                                                           --------------    --------------   --------------
Cash and cash equivalents at the end of the period .....   $   269,715    $     1,062        $   269,715
                                                           --------------    --------------   --------------

           See accompanying notes to consolidated financial statements


                                      F-18
<PAGE>


                     PACIFICAP ENTERTAINMENT HOLDINGS, INC.
                          (A development stage company)
                CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

                                                                                             For the Period
                                                                                             July 29, 1997 (Date
                                                           For The Year Ended December 31,   of Inception)  to
                                                                2004             2003        December 31, 2004
                                                                ----             ----        -------------------
Supplemental Disclosures of Cash Flow Information:
Cash paid during the period for interest ...............   $     96,807   $       --         $     96,807

Cash paid during the period for taxes ..................           --             --                 --

Common stock issued in exchange for services ...........      1,439,537      4,731,144          8,527,333
Common stock issued in exchange for previously incurred
debt ...................................................           --             --              233,498

Common stock issued in exchange for interest expense ...         19,336         12,500             45,906

Common stock issued in exchange for accrued interest ...        146,617           --              146,617
Common stock issued in exchange for expenses paid by
shareholders ...........................................        127,500         40,000            192,500
Common stock issued in connections with acquisition of
Pacificap ..............................................           --       29,160,000         29,160,000
Common stock issued in connection with acquisition of
Battleship VFX, Inc. ...................................         91,642           --               91,642

Common stock issued in exchange for financing expenses .           --          284,392            284,392
Common stock issued in connection with acquisition of
Cineports ..............................................           --             --            1,197,396
Warrants issued in connection with acquisition of
Cineports ..............................................           --             --            1,051,065

Stock options issued in exchange for services rendered .           --             --              661,365

Preferred stock issued in exchange for services ........           --             --                  855

Conversion of preferred stock ..........................           --             --                 (855)

Write off of  acquired asset ...........................           --             --                5,000

Write off of  un-collectable other receivable ..........           --             --               30,000

Debt forgiveness from creditors ........................           --             --             (139,992)

Write off of capitalized production costs ..............           --             --              150,273
Write off of other investment previously paid with
common stock ...........................................           --             --               62,500

Impairment of film library .............................           --          372,304            372,304

Expenses paid by principal shareholders ................           --           90,090            117,015

Common stock issued in exchange for shareholder advances           --           45,500             45,500

Restricted cash held in escrow..........................        235,903           --              235,903

           See accompanying notes to consolidated financial statements

                                      F-19
<PAGE>

                     PACIFICAP ENTERTAINMENT HOLDINGS, INC.
                          (A development stage company)
                CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

                                                                                            For the Period
                                                                                            July 29, 1997(Date
                                                        For The Year Ended December 31,     of Inception)to
                                                               2004           2003          December 31, 2004
                                                               ----           ----          -----------------
Supplemental Disclosures of Cash Flow Information:
Beneficial conversion feature of convertible notes
payable ...............................................      2,907,018        --            2,907,018

Value of warrants attached to convertible notes payable        493,415        --              493,415
Amortization of debt discount - beneficial conversion
feature of convertible notes payable ..................        771,619        --              771,619
Amortization of debt discount - value of warrants
attached to convertible notes payable .................        149,216        --              149,216
Capitalized financing costs in connection with issuance
of long-term convertible notes payable ................        486,290        --              486,290
Prepaid interest expense in connection with issuance of
long-term convertible notes payable ...................        400,000        --              400,000
Acquisition:

Assets acquired .......................................           --          --              379,704

Goodwill ..............................................           --          --              490,467

Accumulated deficit ...................................           --          --                 --

Liabilities assumed ...................................           --          --             (588,027)

Common stock issued ...................................           --          --             (282,144)
                                                          ------------    ------------   ------------
Net cash paid for acquisition .........................   $       --      $   --         $       --
                                                          ============    ============   ============
Liabilities disposed of in disposition of business, net   $       --      $   --         $     79,374

Net cash received in disposition of business ..........   $       --      $   --         $       --
                                                          ============    ============   ============
Acquisition of Pacificap (Note B):
Assets acquired .......................................   $       --      $   --         $       --

Liabilities assumed ...................................           --          --                 --

Acquisition costs .....................................           --      29,160,000       29,160,000

Common stock issued ...................................           --     (29,160,000)     (29,160,000)
                                                          ------------    ------------   ------------
Net cash paid for acquisition .........................   $       --      $   --         $       --
                                                          ------------    ------------   ------------
</TABLE>

          See accompanying notes to consolidated financial statements

                                      F-20

<PAGE>
                     PACIFICAP ENTERTAINMENT HOLDINGS , INC.
                         (A development stage company )
                   NOTES TO CONSOLIDATED FINANCIAL STA TEMENTS
                           DECEMBER 31, 2004 AND 2003

NOTE A-SUMMARY OF ACCOUNTING POLICIES

A summary of the significant  accounting  policies applied in the preparation of
th e accompanying financial statements follows.

Business and Basis of Presentation

Pacificap Entertainment Holdings, Inc. (the "Company"),  formerly Cavalcade of S
ports Media,  Inc., is in the development stage and its efforts in the past have
been principally  devoted to developing a sports enterta inment business,  which
will provide 24 hours per day  broadcasting  from a library of nostalgic  sports
films and footage to paid  subscribers.  To date the Company  has  generated  no
revenues,  has incurred expenses, and has sustained losses.  Consequently,  it s
operations  are  subject to all risks  inherent  in the  establishment  of a new
business  enterprise.  For the period from inception thr ough December 31, 2003,
the Company has accumulated losses of $48,005,439.

Change of Control

On  September  19,  2003,  the  Company   completed  a  Plan  and  Agreement  of
Reorganization  ("Plan")  with  Pacificap   Entertainment   Holdings,   Inc.,  a
private-held company organized under the laws of the State of California with no
significant  assets  or  operations.   Pursuant  to  the  Plan,  all  previously
outstanding  common stock owned by Pacificap  stockholders  was exchanged for an
aggregate of 18,000,000 shares of the Company's common stock.

As a result of the transaction,  the Company's control changed and the Company's
new management took the following steps to restructure the Company:

     o    Changed the Company's name to Pacificap  Entertainment  Holdings, Inc.
          from Cavalcade of Sports Media, Inc.
     o    Focused the  Company's  efforts on  developing  a film  financing  and
          marketing  company  modeled to  restructure  the risk  profile of film
          production,  while  maximizing the ancillary  profits from  marketing,
          merchandising and licensing (see Note B).
     o    The  Company's  Board of Directors  effected a one for thirty  reverse
          stock split (see Note G). All references in the consolidated financial
          statements  and notes to financial  statements,  numbers of shares and
          share amounts have been restated to reflect the reverse split.

The  consolidated   financial  statements  include  the  accounts  of  Pacificap
Entertainment  Holdings,  Inc. and its wholly-owned  subsidiaries,  Cavalcade of
Sports Network, Inc, Cineports.com,  Inc., Sports Broadcasting Network, Inc. and
Ethnic Broadcasting  Company,  Inc.  Significant  intercompany  transactions and
accounts have been eliminated in consolidation.

Cash and Cash Equivalents

For purposes of the Statements of Cash Flows,  the Company  considers all highly
liquid debt  instruments  purchased with a maturity date of three months or less
to be cash equivalents.



                                      F-21
<PAGE>

                     PACIFICAP ENTERTAINMENT HOLDINGS, INC.
                          (A development stage company)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2004 AND 2003

NOTE A-SUMMARY OF ACCOUNTING POLICIES (Continued)

Property and Equipment

Property and equipment are stated at cost.  When retired or otherwise  disposed,
the related  carrying value and  accumulated  depreciation  are removed from the
respective  accounts  and the net  difference  less  any  amount  realized  from
disposition,  is  reflected  in  earnings.  For  financial  statement  purposes,
property  and  equipment  are  recorded  at  cost  and  depreciated   using  the
straight-line method over their estimated useful lives of 5 years.

Long-Lived Assets

The Company has adopted  Statement of  Financial  Accounting  Standards  No. 144
("SFAS  144").  The  Statement  requires  that  long-lived  assets  and  certain
identifiable intangibles held and used by the Company be reviewed for impairment
whenever events or changes in circumstances indicate that the carrying amount of
an asset may not be recoverable.  Events relating to recoverability  may include
significant  unfavorable changes in business conditions,  recurring losses, or a
forecasted  inability to achieve  break-even  operating results over an extended
period. The Company evaluates the recoverability of long-lived assets based upon
forecasted  undiscounted cash flows. Should an impairment in value be indicated,
the carrying value of intangible assets will be adjusted,  based on estimates of
future discounted cash flows resulting from the use and ultimate  disposition of
the asset.  SFAS No. 144 also  requires  assets to be disposed of be reported at
the lower of the carrying amount or the fair value less costs to sell.

Income Taxes

The Company has implemented the provisions on Statement of Financial  Accounting
Standards No. 109, "Accounting for Income Taxes" ("SFAS 109"). SFAS 109 requires
that income tax accounts be computed using the liability method.  Deferred taxes
are  determined  based  upon the  estimated  future tax  effects of  differences
between  the  financial   reporting  and  tax  reporting  bases  of  assets  and
liabilities given the provisions of currently enacted tax laws.

Net Loss Per Common Share

The Company computes earnings per share under Financial  Accounting Standard No.
128, "Earnings Per Share" ("SFAS 128"). Net loss per common share is computed by
dividing net loss by the weighted  average  number of shares of common stock and
dilutive common stock equivalents  outstanding during the year.  Dilutive common
stock  equivalents  consist of shares  issuable upon  conversion of  convertible
preferred  shares and the exercise of the  Company's  stock options and warrants
(calculated using the treasury stock method). During the year ended December 31,
2004 and 2003,  and for the period  from July 29,  1997 (date of  inception)  to
December  31,  2004,   common  stock  equivalents  are  not  considered  in  the
calculation of the weighted average number of common shares outstanding  because
they would be anti-dilutive, thereby decreasing the net loss per common share.

Use of Estimates

The preparation of financial  statements in conformity  with generally  accepted
accounting principles requires management to make estimates and assumptions that
affect certain  reported amounts and  disclosures.  Accordingly,  actual results
could differ from those estimates.

                                      F-22

<PAGE>

                     PACIFICAP ENTERTAINMENT HOLDINGS, INC.
                          (A development stage company)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2003 AND 2002

NOTE A-SUMMARY OF ACCOUNTING POLICIES (Continued)

Revenue Recognition

For revenue from product  sales,  the Company  recognizes  revenue in accordance
with Staff Accounting  Bulletin No. 104, REVENUE RECOGNITION  ("SAB104"),  which
superceded Staff Accounting  Bulletin No. 101, REVENUE  RECOGNITION IN FINANCIAL
STATEMENTS  ("SAB101").  SAB 101 requires  that four basic  criteria must be met
before  revenue can be  recognized:  (1)  persuasive  evidence of an arrangement
exists;  (2)  delivery  has  occurred;  (3)  the  selling  price  is  fixed  and
determinable;  and (4)  collectibility is reasonably  assured.  Determination of
criteria (3) and (4) are based on  management's  judgments  regarding  the fixed
nature of the selling prices of the products delivered and the collectibility of
those  amounts.  Provisions  for discounts  and rebates to customers,  estimated
returns and  allowances,  and other  adjustments  are  provided  for in the same
period the related sales are recorded.  The Company defers any revenue for which
the product has not been  delivered or is subject to refund until such time that
the  Company  and the  customer  jointly  determine  that the  product  has been
delivered or no refund will be required.

SAB  104   incorporates   Emerging  Issues  Task  Force  00-21  ("EITF  00-21"),
MULTIPLE-DELIVERABLE  REVENUE ARRANGEMENTS.  EITF 00-21 addresses accounting for
arrangements that may involve the delivery or performance of multiple  products,
services and/or rights to use assets.  The effect of implementing  EITF 00-21 on
the Company's  consolidated financial position and results of operations was not
significant.

Advertising

The Company  follows the policy of charging the costs of advertising to expenses
as incurred.  The Company  incurred no advertising  costs during the years ended
December  31,  2004 and 2003,  and for the  period  from July 29,  1997 (date of
inception) to December 31, 2004.

Research and Development

The Company  accounts for research and development  costs in accordance with the
Financial   Accounting  Standards  Board's  Statement  of  Financial  Accounting
Standards No. 2 ("SFAS 2"),  "Accounting  for Research and  Development  Costs".
Under SFAS 2, all research and  development  costs must be charged to expense as
incurred.  Accordingly,  internal research and development costs are expensed as
incurred.  Third-party  research and  developments  costs are expensed  when the
contracted  work has been performed or as milestone  results have been achieved.
Company-sponsored  research and  development  costs  related to both present and
future  products are expensed in the period  incurred.  The Company  incurred no
expenditures on research and product development for the year ended December 31,
2004,  2003,  and the period from July 29, 1997 (date of  inception) to December
31, 2004.

Liquidity

To date the Company has generated no revenues,  has incurred  expenses,  and has
sustained   losses.  As  shown  in  the  accompanying   consolidated   financial
statements,  the Company incurred a net loss of $4,623,614 during the year ended
December 31, 2004 and  $35,405,841  during the year ended December 31, 2003. The
Company's  current  liabilities  exceeded its current assets by $2,551,196 as of
December 31, 2004. For the period from inception  through December 31, 2004, the
Company has accumulated losses of $48,005,439.  Consequently, its operations are
subject to all risks inherent in the establishment of a new business enterprise.

                                      F-23
<PAGE>

                     PACIFICAP ENTERTAINMENT HOLDINGS, INC.
                          (A development stage company)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2004 AND 2003

NOTE A-SUMMARY OF ACCOUNTING POLICIES (Continued)

Concentrations of Credit Risk

Financial  instruments and related items, which potentially  subject the Company
to  concentrations  of credit risk,  consist primarily of cash, cash equivalents
and related party  receivables.  The Company  places its cash and temporary cash
investments with credit quality institutions.  At times, such investments may be
in excess of the FDIC  insurance  limit.  The Company  periodically  reviews its
trade  receivables  in  determining  its  allowance for doubtful  accounts.  The
Company does not have accounts receivable and allowance for doubtful accounts at
December 31, 2004 and 2003.

Comprehensive Income

Statement of Financial  Accounting  Standards No. 130 ("SFAS  130"),  "Reporting
Comprehensive  Income,"  establishes  standards for reporting and  displaying of
comprehensive  income,  its components and accumulated  balances.  Comprehensive
income is defined to include all changes in equity except those  resulting  from
investments by owners and distributions to owners. Among other disclosures, SFAS
130 requires  that all items that are required to be  recognized  under  current
accounting  standards as  components  of  comprehensive  income be reported in a
financial  statement  that is  displayed  with  the  same  prominence  as  other
financial  statements.  The  Company  does not have any  items of  comprehensive
income in any of the periods presented.

Fair Value of Financial Instruments

Statement of Financial  Accounting  Standards No. 107,  "Disclosures  About Fair
Value of  Financial  Instruments,"  requires  disclosure  of the  fair  value of
certain financial instruments.  The carrying value of cash and cash equivalents,
accounts receivable, accounts payable and short-term borrowings, as reflected in
the balance sheets, approximate fair value because of the short-term maturity of
these instruments.

Stock Based Compensation

In December 2002, the FASB issued  Statement of Financial  Accounting  Standards
No. 148 ("SFAS 148"),  "Accounting for Stock-Based  Compensation-Transition  and
Disclosure-an  amendment  of SFAS  123." This  statement  amends  SFAS No.  123,
"Accounting for Stock-Based  Compensation,"  to provide  alternative  methods of
transition  for a voluntary  change to the fair value based method of accounting
for stock-based employee  compensation.  In addition,  this statement amends the
disclosure requirements of SFAS No. 123 to require prominent disclosures in both
annual and  interim  financial  statements  about the method of  accounting  for
stock-based employee  compensation and the effect of the method used on reported
results.  The  Company  has  chosen  to  continue  to  account  for  stock-based
compensation  using the intrinsic value method  prescribed in APB Opinion No. 25
and related interpretations. Accordingly, compensation expense for stock options
is  measured as the excess,  if any, of the fair market  value of the  Company's
stock at the date of the grant over the  exercise  price of the related  option.
The Company has adopted the annual disclosure  provisions of SFAS No. 148 in its
financial  reports for the year ended  December 31, 2004 and 2003 and will adopt
the interim  disclosure  provisions  for its  financial  reports for  subsequent
period.  The  Company  has  no  awards  of  stock-based  employee   compensation
outstanding at December 31, 2004.


                                      F-24
<PAGE>

                     PACIFICAP ENTERTAINMENT HOLDINGS, INC.
                          (A development stage company)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2004 AND 2003

NOTE A-SUMMARY OF ACCOUNTING POLICIES (Continued)

Segment Information

Statement of Financial Accounting Standards No. 131, "Disclosures about Segments
of an Enterprise and Related Information" ("SFAS 131") establishes standards for
reporting   information   regarding   operating  segments  in  annual  financial
statements and requires selected  information for those segments to be presented
in interim financial  reports issued to stockholders.  SFAS 131 also establishes
standards for related  disclosures  about  products and services and  geographic
areas.  Operating  segments are identified as components of an enterprise  about
which separate discrete financial information is available for evaluation by the
chief operating  decision maker, or  decision-making  group, in making decisions
how to allocate  resources and assess  performance.  The  information  disclosed
herein  materially  represents all of the financial  information  related to the
Company's principal operating segment.

New Accounting Pronouncements

In November 2004, the Financial  Accounting  Standards  Board (FASB) issued SFAS
151,  Inventory  Costs-- an amendment of ARB No. 43,  Chapter 4. This  Statement
amends the guidance in ARB No. 43,  Chapter 4,  "Inventory  Pricing," to clarify
the accounting for abnormal amounts of idle facility expense,  freight, handling
costs,  and  wasted  material  (spoilage).  Paragraph  5 of ARB 43,  Chapter  4,
previously  stated  that ". . . under  some  circumstances,  items  such as idle
facility expense,  excessive spoilage,  double freight, and rehandling costs may
be so abnormal as to require  treatment as current period  charges.  . . ." This
Statement  requires  that those items be recognized  as  current-period  charges
regardless  of whether they meet the  criterion of "so  abnormal."  In addition,
this Statement  requires that  allocation of fixed  production  overheads to the
costs  of  conversion  be  based  on  the  normal  capacity  of  the  production
facilities.  This  Statement is effective for inventory  costs  incurred  during
fiscal  years  beginning  after June 15, 2005.  Management  does not believe the
adoption  of this  Statement  will  have any  immediate  material  impact on the
Company.

In  December  2004,  the FASB issued SFAS  No.152,  "Accounting  for Real Estate
Time-Sharing Transactions--an amendment of FASB Statements No. 66 and 67" ("SFAS
152) The amendments  made by Statement 152 This Statement  amends FASB Statement
No.  66,  Accounting  for  Sales of Real  Estate,  to  reference  the  financial
accounting and reporting guidance for real estate time-sharing transactions that
is  provided in AICPA  Statement  of Position  (SOP) 04-2,  Accounting  for Real
Estate Time-Sharing Transactions.  This Statement also amends FASB Statement No.
67,  Accounting for Costs and Initial Rental Operations of Real Estate Projects,
to state that the guidance for (a) incidental  operations and (b) costs incurred
to sell  real  estate  projects  does  not  apply  to real  estate  time-sharing
transactions.  The accounting  for those  operations and costs is subject to the
guidance in SOP 04-2.  This Statement is effective for financial  statements for
fiscal years beginning after June 15, 2005. with earlier application encouraged.
The Company does not anticipate  that the  implementation  of this standard will
have a material impact on its financial position,  results of operations or cash
flows.




                                      F-25
<PAGE>

                     PACIFICAP ENTERTAINMENT HOLDINGS, INC.
                          (A development stage company)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2004 AND 2003

NOTE A-SUMMARY OF ACCOUNTING POLICIES (Continued)

New Accounting Pronouncements (Continued)

On  December  16,  2004,  the  Financial  Accounting  Standards  Board  ("FASB")
published  Statement of Financial  Accounting  Standards No. 123 (Revised 2004),
Share-Based  Payment ("SFAS 123R").  SFAS 123R requires that  compensation  cost
related to  share-based  payment  transactions  be  recognized  in the financial
statements.  Share-based  payment  transactions  within  the  scope of SFAS 123R
include stock options,  restricted stock plans,  performance-based awards, stock
appreciation  rights,  and employee share purchase plans. The provisions of SFAS
123R are  effective  as of the first  interim  period that begins after June 15,
2005. Accordingly,  the Company will implement the revised standard in the third
quarter of fiscal year 2005. Currently, the Company accounts for its share-based
payment  transactions under the provisions of APB 25, which does not necessarily
require  the  recognition  of  compensation  cost in the  financial  statements.
Management is assessing the  implications  of this revised  standard,  which may
materially  impact the  Company's  results of operations in the third quarter of
fiscal year 2005 and thereafter.

On December 16, 2004, FASB issued  Statement of Financial  Accounting  Standards
No. 153,  Exchanges of Nonmonetary  Assets,  an amendment of APB Opinion No. 29,
Accounting for Nonmonetary Transactions (" SFAS 153"). This statement amends APB
Opinion 29 to  eliminate  the  exception  for  nonmonetary  exchanges of similar
productive  assets and  replaces it with a general  exception  for  exchanges of
nonmonetary assets that do not have commercial  substance.  Under SFAS 153, if a
nonmonetary  exchange of similar productive assets meets a  commercial-substance
criterion and fair value is determinable,  the transaction must be accounted for
at fair  value  resulting  in  recognition  of any  gain or  loss.  SFAS  153 is
effective for  nonmonetary  transactions in fiscal periods that begin after June
15,  2005.  The Company  does not  anticipate  that the  implementation  of this
standard  will have a  material  impact on its  financial  position,  results of
operations or cash flows.

Reclassifications

Certain reclassifications have been made in prior year's financial statements to
conform to classifications used in the current year.

NOTE B - BUSINESS COMBINATIONS

On  September  19,  2003,  the  Company   completed  a  Plan  and  Agreement  of
Reorganization    ("Plan")   with   Pacificap   Entertainment   Holdings,   Inc.
("Pacificap"),  a private-held  company organized under the laws of the State of
California  with  no  significant  assets  or  operations.  Pacificap  is a film
financing and marketing  company and is uniquely modeled to restructure the risk
profile  of  film  production,  while  maximizing  the  ancillary  profits  from
marketing, merchandising and licensing.

Pursuant to the Plan, all previously outstanding common stock owned by Pacificap
stockholders  was  exchanged  for  an  aggregate  of  18,000,000  shares  of the
Company's common stock. The Company accounted the shares issued in November 2003
at the  fair  market  value  at  the  date  of  acquisition.  Subsequent  to the
acquisition,  the Company changed its name to Pacificap  Entertainment Holdings,
Inc.

                                      F-26
<PAGE>


                     PACIFICAP ENTERTAINMENT HOLDINGS, INC.
                          (A development stage company)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2004 AND 2003

NOTE B - BUSINESS COMBINATIONS (Continued)

The following summarizes the acquisition of Pacificap:

       Issuance of 18,000,000 shares of common stock       $ 29,160,000
       Assets acquired                                                -
       Liabilities assumed                                            -
       Acquisition costs                                   $ 29,160,000

NOTE C - FILM LIBRARY

The  Company's  film library is comprised of nostalgic  sports film and footage.
Cost principally  consists of direct  acquisition costs of the films and footage
of  previously  televised  programs  and  events,   post-production  costs,  and
production  overhead.  During the year ended  December  31,  2003,  the  Company
management  performed an  evaluation  of its  intangible  assets for purposes of
determining  the implied fair value of the assets at December 31, 2003. The test
indicated that the recorded  remaining  book value of its film library  exceeded
its fair value,  as  determined  by  discounted  cash flows.  As a result,  upon
completion of the assessment,  management  recorded a non-cash impairment charge
of $372,304,  net of tax, or $0.12 per share during the year ended  December 31,
2003 to reduce the carrying value of the film library to its estimated  value of
$ 0.  Considerable  management  judgment is  necessary  to estimate  fair value.
Accordingly,   actual  results  could  vary   significantly   from  managements'
estimates.

NOTE D - ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

Accounts  payable and accrued  liabilities  at December 31, 2004 and 2003 are as
follows:

                                                   2004              2003
                                                   ----              ----
        Accrued expenses                        $ 160,591         $ 316,820
        Accrued interest                          828,965           662,317
        Total                                   $ 989,556         $ 979,137

NOTE E - CONVERTIBLE PROMISSORY NOTES PAYABLE

A summary of convertible  promissory notes payable at December 31, 2004 and 2003
is as follows:
<TABLE>
<CAPTION>
                                                                        2004                  2003
                                                                     -----------          -----------
<S>                                                                  <C>                  <C>
  Convertible notes payable ("Convertible Notes"); interest
  rate 10% per annum; due two years from the date of the
  note; noteholder has the option to convert unpaid note
  principal the Company's common stock at the lower of (i)
  $0.35 or (ii) 50% of the average of the three lowest
  intraday trading prices for the common stock on a principal
  market for the twenty trading days before but not including        $ 1,592,860          $      -
  conversion date.   The Company granted the noteholder a
  security interest in substantially all of the Company's
  assets and intellectual property and registration rights.

                                      F-27
<PAGE>

                     PACIFICAP ENTERTAINMENT HOLDINGS, INC.
                          (A development stage company)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2004 AND 2003

NOTE E - CONVERTIBLE PROMISSORY NOTES PAYABLE (Continued)

                      (Continued)                                       2004                   2003
  Debt Discount - beneficial conversion feature, net
  of accumulated amortization and write-off (upon                       (937,859)                -
  repayment) of $416,224 and $341,051, respectively,
  at December 31, 2004.

  Debt Discount - value attributable to warrants
  attached to notes, net of accumulated amortization
  and write-off (upon repayment) of $75,984 and
  $70,819, respectively, at December 31, 2004.                          (158,061)                -
                                                                     -----------          -----------
  Subtotal                                                             $ 496,940           $     -

  Convertible notes payable ("Second Convertible
  Notes"); interest rate 10% per annum (default
  interest 15% per annum); due three years from the
  date of the note; noteholder has the option to
  convert unpaid note principal the Company's common
  stock at the lower of (i) $0.02 or (ii) 60% of the
  average of the three lowest intraday trading prices                 $1,400,000           $     -
  for the common stock on a principal market for the
  twenty trading days before but not including
  conversion date.   The Company granted the
  noteholder a security interest in substantially all
  of the Company's assets and intellectual property
  and registration rights.

  Debt Discount - beneficial conversion feature, net
  of accumulated amortization of $14,343 at December
  31, 2004.                                                           (1,107,539)                -

  Debt Discount - value attributable to warrants
  attached to notes, net of accumulated amortization
  of $2,411 at December 31, 2004.                                       (186,139)                -
                                                                     -----------          -----------
 Subtotal                                                             $  106,322          $      -
                                                                     -----------          -----------
  Total                                                                  603,262
  Less: current portion                                                        -                 -
                                                                     -----------          -----------
  Long term portion                                                   $  603,262          $      -
                                                                     -----------          -----------
</TABLE>
                                      F-28
<PAGE>

                     PACIFICAP ENTERTAINMENT HOLDINGS, INC.
                          (A development stage company)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2004 AND 2003

NOTE E - CONVERTIBLE PROMISSORY NOTES PAYABLE (Continued)

Convertible Note

The Company  entered into a Securities  Purchase  Agreement with four accredited
investors on June 10, 2004 for the issuance of an  aggregate  of  $2,000,000  of
convertible notes ("Convertible  Notes"),  and attached to the Convertible Notes
were warrants to purchase  2,000,000  shares of the Company's  common stock. The
Convertible  Notes accrues interest at 10% per annum,  payable and due two years
from the date of the note.  The  noteholder has the option to convert any unpaid
note principal to the Company's common stock at a rate of the lower of (i) $0.35
or (ii) 50% of the average of the three lowest  intraday  trading prices for the
common  stock on a  principal  market  for the 20  trading  days  before but not
including conversion date.

As of December 31, 2004, the Company issued to the investors  Convertible  Notes
in a total amount of $2,000,000 in exchange for net proceeds of $1,356,565.  The
proceeds  that the  Company  received  was net of prepaid  interest  of $400,000
calculated at 10% per annum for the aggregate of $2,000,000 of convertible notes
for two years,  and related  fees and costs of  $243,435.  Prepaid  interest and
capitalized  financing costs were amortized over the maturity period (two years)
of the convertible notes.

In  accordance  with  Emerging  Issues  Task Force Issue  98-5,  Accounting  for
Convertible  Securities  with a Beneficial  Conversion  Features or Contingently
Adjustable  Conversion Ratios ("EITF 98-5"),  the Company recognized an imbedded
beneficial  conversion  feature  present in the  Convertible  Note.  The Company
allocated a portion of the proceeds equal to the intrinsic value of that feature
to additional paid-in capital.  The Company recognized and measured an aggregate
of  $1,695,135 of the  proceeds,  which is equal to the  intrinsic  value of the
imbedded  beneficial  conversion  feature,  to additional  paid-in capital and a
discount  against the  Convertible  Note.  The debt  discount  attributed to the
beneficial  conversion feature is amortized over the Convertible Note's maturity
period (two years) as interest expense.

In connection  with the placement of the Convertible  Notes,  the Company issued
non-detachable  warrants  granting  the holders  the right to acquire  2,000,000
shares of the  Company's  common stock at $0.24 per share.  The warrants  expire
five years from the  issuance.  In accordance  with  Emerging  Issues Task Force
Issue 00-27,  Application of Issue No. 98-5 to Certain  Convertible  Instruments
("EITF - 0027"),  the Company  recognized the value attributable to the warrants
in the amount of $304,865 to additional  paid-in capital and a discount  against
the  Convertible  Note. The Company valued the warrants in accordance  with EITF
00-27  using the  Black-Scholes  pricing  model and the  following  assumptions:
contractual  terms of 5 years,  an average risk free interest  rate of 3.38%,  a
dividend yield of 0%, and volatility of 74%. The debt discount attributed to the
value of the warrants issued is amortized over the  Convertible  Note's maturity
period (two years) as interest expense.

The Company  amortized the  Convertible  Notes debt  discount  attributed to the
beneficial  conversion  feature  and the  value  of the  attached  warrants  and
recorded  non-cash  interest  expense  of  $492,208  and $0 for the  year  ended
December 31, 2004 and 2003,  respectively.  As of December 31, 2004, the Company
has repaid to note holders  $300,000 of principal  amount in cash,  and the note
holders  have  agreed to  convert  a portion  of the  principal  amount  into an
aggregate  of  6,600,000  shares of the  Company's  common  stock  (Note G). The
Company  valued the common  shares  issued at $112,420 and has accounted for the
conversion of debt, while the noteholders  valued the common shares at $107,140.
At December 31, 2004, the Company has adjusted the principal amount of the notes
payable  outstanding  based  on  noteholder's  calculation  and has  charged  to
operations the difference of $5,280 as financing expense. In connection with the
repayment and conversion of notes payable, the Company wrote off the unamortized
debt discount  attributed to the beneficial  conversion feature and the value of
the attached warrants in the amount of $341,051 and $70,819, respectively, as of
December 31, 2004.


                                      F-29
<PAGE>
                     PACIFICAP ENTERTAINMENT HOLDINGS, INC.
                          (A development stage company)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2004 AND 2003


NOTE E - CONVERTIBLE PROMISSORY NOTES PAYABLE (Continued)

Second Convertible Note

The Company  entered into a Securities  Purchase  Agreement with four accredited
investors on December 17, 2004 for the issuance of an aggregate of $2,800,000 of
convertible  notes  ("Second  Convertible  Notes"),  and  attached to the Second
Convertible  Notes were warrants to purchase  2,800,000  shares of the Company's
common stock.  The Second  Convertible  Notes accrues  interest at 10% per annum
(15% if the  Company  is in  default  under  the  terms of the note  agreement),
payable and due three years from the date of the note.  The  noteholder  has the
option to convert any unpaid note  principal to the Company's  common stock at a
rate of the lower of (i) $0.02 or (ii) 60% of the  average  of the three  lowest
intraday  trading  prices for the common stock on a principal  market for the 20
trading days before but not including conversion date.

On December 17, 2004, the Company  issued to the investors a Second  Convertible
Note in the amount of $1,400,000, and the investors are obligated to provide the
Company with additional $1,400,000 of cash in exchange for two other convertible
promissory  notes in the amount of $700,000  each. As of December 31, 2004,  the
Company issued to the investors  Second  Convertible  Notes in a total amount of
$1,400,000 in exchange for proceeds of $1,157,146, net of related fees and costs
of  $242,854.  The  proceeds  were  deposited  directly  into an escrow  account
pursuant to an Escrow  Agreement the Company  agreed with (Note M).  Capitalized
financing  costs were  amortized  over the maturity  period (three years) of the
convertible notes.  Pursuant to the Securities Purchase  Agreement,  the Company
was required to file a  registration  statement with the Securities and Exchange
Commission  within 45 days after  closing,  which will  include the common stock
underlying  the secured  convertible  notes and the warrants.  As of the date of
this report, the registration statement has not been filed.

In  accordance  with  Emerging  Issues  Task Force Issue  98-5,  Accounting  for
Convertible  Securities  with a Beneficial  Conversion  Features or Contingently
Adjustable  Conversion Ratios ("EITF 98-5"),  the Company recognized an imbedded
beneficial  conversion  feature  present in the  Second  Convertible  Note.  The
Company allocated a portion of the proceeds equal to the intrinsic value of that
feature to additional  paid-in capital.  The Company  recognized and measured an
aggregate of $1,121,883 of the proceeds,  which is equal to the intrinsic  value
of the imbedded beneficial conversion feature, to additional paid-in capital and
a discount against the Second Convertible Note. The debt discount  attributed to
the  beneficial  conversion  feature is  amortized  over the Second  Convertible
Note's maturity period (three years) as interest expense.

In connection with the placement of the Second  Convertible  Notes,  the Company
issued  non-detachable  warrants  granting  the  holders  the  right to  acquire
1,400,000  shares of the Company's common stock at $0.02 per share. The warrants
expire five years from the  issuance.  In accordance  with Emerging  Issues Task
Force  Issue  00-27,  Application  of  Issue  No.  98-5 to  Certain  Convertible
Instruments  ("EITF - 0027"),  the Company  recognized the value attributable to
the  warrants  in the amount of  $188,550 to  additional  paid-in  capital and a
discount against the Second Convertible Note. The Company valued the warrants in
accordance  with  EITF  00-27  using  the  Black-Scholes  pricing  model and the
following  assumptions:  contractual  terms of 5 years,  an  average  risk  free
interest rate of 3.50%, a dividend yield of 0%, and volatility of 107%. The debt
discount  attributed to the value of the warrants  issued is amortized  over the
Second Convertible Note's maturity period (three years) as interest expense.

The Company amortized the Second  Convertible Notes debt discount  attributed to
the  beneficial  conversion  feature and the value of the attached  warrants and
recorded non-cash interest expense of $16,755 and $0 for the year ended December
31, 2004 and 2003, respectively.

                                      F-30
<PAGE>

                     PACIFICAP ENTERTAINMENT HOLDINGS, INC.
                          (A development stage company)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2004 AND 2003

NOTE F - NOTES PAYABLE
<TABLE>
<CAPTION>
Notes payable at December 31, 2004 and 2003 are as follows:

                                                                                   2004                   2003
                                                                                   ----                   ----
<C>                                                                               <C>                     <C>
12 % convertible subordinated payable, unsecured and due December 31,
2000; Noteholder has the option to convert unpaid note principal
together with accrued and unpaid interest to the Company's common
stock thirty (30) days following the effectiveness of the
registration of the Company's common stock under the Securities Act
of 1933 at a rate of $1.25 per share. In the event the unpaid
principal amount of the notes, together with any accrued and unpaid
interest, are not converted, or paid in full by December 31, 2000,
then interest accrues at 18% per annum until paid in full. The
Company is in default under the terms of the Note Agreements. (a)                  $ 467,000             $ 457,000

12 % convertible subordinated payable, unsecured and due December 31,
2001; Noteholder has the option to convert unpaid note principal
together with accrued and unpaid interest to the Company's common
stock thirty (30) days following the effectiveness of the
registration of the Company's common stock under the Securities Act
of 1933 at a rate of $1.25 per share.   In the event the unpaid
principal amount of the notes, together with any accrued and unpaid
interest, are not converted, or paid in full by December 31, 2001,
then interest accrues at 18% per annum until paid in full. The
Company is in default under the terms of the Note Agreements.                       342,500                342,500

12 % convertible subordinated payable, unsecured and due December 31,
2002; Noteholder has the option to convert unpaid note principal
together with accrued and unpaid interest to the Company's common
stock thirty (30) days following the effectiveness of the
registration of the Company's common stock under the Securities Act
of 1933 at a rate of $1.25 per share.   In the event the unpaid
principal amount of the notes, together with any accrued and unpaid
interest, are not converted, or paid in full by December 31, 2002,
then interest accrues at 18% per annum until paid in full. The
Company is in default under the terms of the Note Agreements.                        31,250                 31,250

Note payable on demand to accredited investor; interest  payable
monthly at 18% per annum; unsecured; guaranteed by the Company's
President                                                                            52,415                 52,415

Note payable on demand to accredited investor; interest  payable
monthly at 18% per annum; unsecured; guaranteed by the Company's
President                                                                           100,000                100,000

Note payable on demand to accredited investor; interest  payable
monthly at 8% per annum; unsecured                                                        -                153,000

</TABLE>
                                      F-31
<PAGE>

                     PACIFICAP ENTERTAINMENT HOLDINGS, INC.
                          (A development stage company)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2004 AND 2003

<TABLE>
<CAPTION>
NOTE F - NOTES PAYABLE (Continued)

                             (Continued)                                          2004                   2003
<S>                                                                             <C>                   <C>
Note payable in monthly installments of interest only at 4% per
annum; guaranteed by Company shareholder; maturity date of the loan
is July 28, 2005.                                                                 13,000                      -
Note payable on demand to an investor; interest  payable monthly at
10% per annum; unsecured                                                          75,000                      -
Note payable on demand to an investor; interest  payable monthly at
10% per annum; unsecured                                                          50,000                      -
                                                                              ------------          -------------
                                                                               1,131,165              1,136,165
                                                                              ------------          -------------
Less: current portion                                                         (1,131,165)            (1,136,165)
                                                                              $        -            $         -
                                                                              ============          =============
</TABLE>
(a) During the year ended  December  31, 2004,  one of the note holders  claimed
that the common shares that the noteholder received in prior years in connection
with  conversion  of $10,000 of notes  payable had low market value and demanded
the Company to issue additional shares. As of December 31, 2004, the Company has
not yet resolved the issue with the noteholder and has accounted for the $10,000
of notes payable as notes payable outstanding.

During the year ended  December  31,  2003,  the Company  issued an aggregate of
127,038 shares of its common stock to note holders in exchange for notes payable
and unpaid accrued interest. As of December 31, 2004 and 2003, the conversion of
debt to equity has not been completed and the additional numbers of shares to be
issued are still to be  determined.  The Company  accounted  the 127,038  shares
issued to notes  holders  during the year ended  December  31, 2003 as financing
expenses at the fair  market  value of the time the shares  were  issued.  Total
financing expenses charged to operations during the year ended December 31, 2003
amounted  $284,392.  In January 2004, the Company issued an aggregate of 145,166
shares of its common stock to note holders in exchange for accrued interest. The
shares were valued at $146,617, which approximately the fair market value at the
day the shares were issued (Note G).

NOTE G - CAPITAL STOCK

The Company has  authorized  50,000,000  shares if preferred  stock,  with a par
value of $.001 per share.  As of December 31, 2004 and 2003,  the Company has no
preferred stock issued and outstanding.  The company has authorized  300,000,000
shares of common  stock,  with a par value of $.001 per share.  On  September 4,
2003,  the  Company  effected a one  one-for-thirty  reverse  stock split of its
authorized  and  outstanding  shares of common  stock,  $.001 par  value.  Total
authorized  shares and par value remain the  unchanged.  All  references  in the
financial  statements and notes to financial  statements,  numbers of shares and
share amounts have been retroactively restated to reflect the reverse split. The
Company has and 38,336,501  shares of common stock issued and  outstanding as of
December 31, 2004 and 2003, respectively.

The Company's  predecessor was Tren Property Corp., an inactive  company with no
significant  operations  incorporated under the laws of the State of Delaware in
July  1997.  The  Company  issued  422  shares  of common  stock to the  initial
shareholders in exchange for initial  organization  costs.  The stock issued was
valued at $11,553, which represents the fair value of the services received.


                                      F-32
<PAGE>
                     PACIFICAP ENTERTAINMENT HOLDINGS, INC.
                          (A development stage company)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2004 AND 2003

NOTE G - CAPITAL STOCK (Continued)

In April 1998, the  shareholders  of Tren Property Corp.  exchanged all of their
outstanding  shares on a share for share basis for shares of the common stock of
Gemma  Global,  Inc.,  an  inactive  company  with  no  significant  operations,
organized under the laws of the State of Nevada ("Company"). Tren Property Corp.
changed its name to Gemma Global, Inc.

In  December  1998,  the  Company  issued  37,083  shares  of  common  stock  to
non-employees in exchange for legal and financial  advisory services rendered to
the  Company.  The stock  issued was valued at  approximately  $2,002 per share,
which represents the fair value of the services  received,  which did not differ
materially from the value of the stock issued.

In December  1998, the Company issued 277,778 shares of common stock in exchange
for a $15,000  loan payable to the  Company's  principal  shareholder  and Chief
Executive Officer.

In March 1999, the Company was renamed  Pioneer 2000,  Inc. In December 1999 the
Company was renamed Cavalcade of Sports Media, Inc.

In April 1999,  the Company  issued 133 shares of common  stock in exchange  for
$4,000 in connection with a private placement memorandum.

In April 1999, the Company issued 6,000 shares of common stock to a non-employee
in exchange for financial  advisory services rendered to the Company.  The stock
issued  was valued at  $180,000,  which  represents  the fair value of the stock
issued, which did not differ materially from the value of the services received.

In May 1999, the Company authorized and issued a series of 855,000 shares of the
Company's  preferred  stock as convertible  preferred  stock ("1999 Global Group
Series") to the Company's  management and advisors who had been  unsuccessful in
developing  the Company's  shoe apparel  business  segment in exchange for those
individuals  continuing to devote their services to developing the shoe business
segment.  The stock issued was valued at  approximately  $.001 per share,  which
represents the fair value of the stock issued,  which did not differ  materially
from the value of the services rendered.

In December  1999,  the Company issued 33,333 shares of common stock in exchange
for $75,000 and payment of $ 25,000 of Company  expenses,  in connection  with a
private placement to accredited investors.

In  connection  with the  acquisition  of Cavalcade of Sports  Network,  Inc. in
December 1999, the Company assumed $380,000 of liability  representing  advances
by private investors to Cavalcade of Sports Network, Inc. Subject to the Company
registering  its common  stock,  the Company  has agreed to offer  shares of the
Company's  common stock to the investors in exchange for the advances based upon
the price per share of the registration.

In September  2000,  the holders of the  Company's  preferred  stock  elected to
convert  their shares to common stock of Global  Group  International,  Inc. The
Company  cancelled all previously  issued and outstanding  855,000 shares of the
convertible preferred stock.



                                      F-33
<PAGE>

                     PACIFICAP ENTERTAINMENT HOLDINGS, INC.
                          (A development stage company)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2004 AND 2003

NOTE G - CAPITAL STOCK (Continued)

During the year ended  December  31,  2000,  the Company  issued 2,226 shares of
common stock in exchange for debts assumed by the Company in connection with its
acquisition of Cavalcade of Sports  Network,  Inc. The Company valued the shares
issued at $83,497,  which approximated the fair value of the shares at the dates
of issuance.

During the year ended  December 31, 2000, the Company issued 5,128 shares of the
Company's  common stock to consultants in exchange for services  provided to the
Company.  The Company valued the shares issued at $192,283,  which  approximated
the fair value of the  shares  issued  during  the  periods  the  services  were
rendered.  The  compensation  cost of $192,283 was charged to income  during the
year ended December 31, 2000.

During the year ended December 31, 2001, the Company issued 15,600 shares of the
Company's  common stock to consultants in exchange for services  provided to the
Company.  The Company valued the shares issued at $585,000,  which  approximated
the fair value of the  shares  issued  during  the  periods  the  services  were
rendered.  The  compensation  cost of $585,000 was charged to income  during the
year ended December 31, 2001.

During the year ended  December 31, 2001, the Company issued 3,333 shares of the
Company's  common  stock to the  President of the Company in exchange for monies
advanced to the Company. The Company valued the shares issued at $125,000, which
approximated the fair value of the shares at the date of issuance.

In connection with the acquisition of Cineports (see Note B), the Company issued
an  aggregate  of 159,653  shares of the  Company's  restricted  common stock to
Cineports's  shareholders  in July 2002.  The shares were valued at  $1,197,396,
which did not differ  materially from the fair value of the shares issued during
the period the acquisition occurred.

During the year ended  December  31,  2002,  the Company  issued an aggregate of
55,073  shares of common  stock to  consultants  for  services  in the amount of
$1,385,814.  All  valuations of common stock issued for services were based upon
the value of the services  rendered,  which did not differ  materially  from the
fair value of the  Company's  common stock  during the period the services  were
rendered.  In  addition,  the Company  issued  3,533  shares of common  stock in
exchange for $132,500 of previously  incurred debt and 724 shares for $14,070 of
previously  accrued  interest.  The Company  also issued an  aggregate of 23,018
shares of common  stock in exchange for $165,200 net of costs and fees and 1,667
shares for  $62,500  of  investment.  The  Company  determined  the value of the
investment  was impaired and recorded an impairment  loss of $62,500  during the
year ended December 31, 2002.

In January  2003,  the Company  issued an aggregate  of 56,300  shares of common
stock to consultants  for services in the amount of $260,490.  All valuations of
common  stock  issued for  services  were  based upon the value of the  services
rendered,  which did not differ  materially from the fair value of the Company's
common stock during the period the services were rendered.

In February  2003,  the Company  issued an aggregate of 43,350  shares of common
stock to  consultants  for services in the amount of $87,037.  All valuations of
common  stock  issued for  services  were  based upon the value of the  services
rendered,  which did not differ  materially from the fair value of the Company's
common stock  during the period the services  were  rendered.  In addition,  the
Company  issued an  aggregate  of 6,667  shares of common  stock in exchange for
$8,000 net of costs and fees.

                                      F-34
<PAGE>

                     PACIFICAP ENTERTAINMENT HOLDINGS, INC.
                          (A development stage company)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2004 AND 2003

NOTE G - CAPITAL STOCK (Continued)

In April 2003,  the Company issued an aggregate of 14,000 shares of common stock
to consultants  for services in the amount of $12,600.  All valuations of common
stock  issued for services  were based upon the value of the services  rendered,
which did not  differ  materially  from the fair value of the  Company's  common
stock during the period the services  were  rendered.  In addition,  the Company
issued an  aggregate  of 4,333 shares of common stock in exchange for $5,000 net
of costs and fees.  The Company  also issued an  aggregate  of 22,222  shares of
common  stock to  shareholders  in exchange  for  operating  expenses of $20,000
previously paid by the shareholders.

In May 2003, the Company issued an aggregate of 17,667 shares of common stock to
consultants  for  services in the amount of $25,900.  All  valuations  of common
stock  issued for services  were based upon the value of the services  rendered,
which did not  differ  materially  from the fair value of the  Company's  common
stock during the period the services  were  rendered.  In addition,  the Company
issued an aggregate of 16,667 shares of common stock in exchange for $15,000 net
of costs and fees.  The Company  also issued an  aggregate  of 22,167  shares of
common  stock to  shareholders  in exchange  for  operating  expenses of $20,000
previously paid by the shareholders.

In July 2003,  the Company  issued an aggregate of 13,850 shares of common stock
to consultants  for services in the amount of $29,020.  All valuations of common
stock issued for services were based upon value of the services rendered,  which
did not differ  materially  from the fair value of the  Company's  common  stock
during the period the services were rendered. In addition, the Company issued an
aggregate of 14,334 shares of common stock in exchange for $10,000 of previously
incurred debt.

In August 2003, the Company issued an aggregate of 37,667 shares of common stock
to consultants for services in the amount of $117,800.  All valuations of common
stock issued for services were based upon value of the services rendered,  which
did not differ  materially  from the fair value of the  Company's  common  stock
during the period the services were rendered. In addition, the Company issued an
aggregate of 43,667 shares of common stock in exchange for $35,500 of previously
incurred debt.

In September  2003,  the Company issued an aggregate of 264,916 shares of common
stock to consultants  for services in the amount of $280,350.  All valuations of
common stock issued for services were based upon value of the services rendered,
which did not  differ  materially  from the fair value of the  Company's  common
stock during the period the services were rendered.

In October 2003, the Company  issued an aggregate of 2,405,000  shares of common
stock to consultants for services in the amount of $3,829,300. All valuations of
common stock issued for services were based upon value of the services rendered,
which did not  differ  materially  from the fair value of the  Company's  common
stock during the period the services were rendered.

In November  2003,  the Company  issued an aggregate of 43,000  shares of common
stock to  consultants  for services in the amount of $50,750.  All valuations of
common stock issued for services were based upon value of the services rendered,
which did not  differ  materially  from the fair value of the  Company's  common
stock during the period the services  were  rendered.  In addition,  the Company
issued an aggregate of 10,000  shares of common stock in exchange for $12,500 of
accrued interest.


                                      F-35
<PAGE>

                     PACIFICAP ENTERTAINMENT HOLDINGS, INC.
                          (A development stage company)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2004 AND 2003

NOTE G - CAPITAL STOCK (Continued)

In December  2003,  the Company  issued an aggregate of 29,500  shares of common
stock to  consultants  for services in the amount of $37,900.  All valuations of
common stock issued for services were based upon value of the services rendered,
which did not  differ  materially  from the fair value of the  Company's  common
stock during the period the services were rendered.

The Company also issued an aggregate  of  18,000,000  shares of its common stock
pursuant to a Plan and  Agreement  of  Reorganization  ("Plan")  with  Pacificap
Entertainment  Holdings,  Inc.  ("Pacificap").  The Company accounted the shares
issued at the fair market value at the date of acquisition,  which approximately
$29,160,000.  The  Company  charged  the  acquisition  costs of  $29,160,000  to
operations for the year ended December 31, 2003 and the Company changed its name
to Pacificap  Entertainment  Holdings,  Inc.  subsequent to the acquisition (see
Note B).

During the year ended  December  31,  2003,  the Company  issued an aggregate of
127,038  shares of common stock to its note  holders in exchange  for  financing
expenses of $284,392.

In January  2004,  the Company  issued an aggregate of 145,166  shares of common
stock to its note  holders in exchange  for  $146,617 of accrued  interest.  The
Company  also  issued  an  aggregate  of  125,000  shares  of  common  stock  to
consultants  in exchange for services in the amount of $126,250.  All valuations
of common  stock  issued for  services  were  based  upon value of the  services
rendered,  which did not differ  materially from the fair value of the Company's
common stock during the period the services were rendered.

In February  2004,  the Company  issued an aggregate of 537,886 shares of common
stock to  consultants  in exchange for  services in the amount of $326,366.  All
valuations  of common  stock  issued for  services  were based upon value of the
services  rendered,  which did not differ  materially from the fair value of the
Company's common stock during the period the services were rendered. The Company
also issued an aggregate of 150,000 to a shareholder in exchange for $127,500 of
expenses previously paid by the shareholder on behalf of the Company.

In March 2004, the Company issued an aggregate of 293,250 shares of common stock
to  consultants  in  exchange  for  services  in the  amount  of  $151,930.  All
valuations  of common  stock  issued for  services  were based upon value of the
services  rendered,  which did not differ  materially from the fair value of the
Company's common stock during the period the services were rendered.

In April 2004, the Company issued an aggregate of 615,000 shares of common stock
to  consultants  in  exchange  for  services  in the  amount  of  $244,250.  All
valuations  of common  stock  issued for  services  were based upon value of the
services  rendered,  which did not differ  materially from the fair value of the
Company's common stock during the period the services were rendered.

In May 2004,  the Company  issued an aggregate of 770,000 shares of common stock
to  consultants  in  exchange  for  services  in the  amount  of  $195,750.  All
valuations  of common  stock  issued for  services  were based upon value of the
services  rendered,  which did not differ  materially from the fair value of the
Company's common stock during the period the services were rendered. The Company
also issued an  aggregate of 10,000  shares of common  stock to a noteholder  in
exchange for interest expense of $3,000.


                                      F-36
<PAGE>

                     PACIFICAP ENTERTAINMENT HOLDINGS, INC.
                          (A development stage company)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2004 AND 2003

NOTE G - CAPITAL STOCK (Continued)

In July 2004,  the Company  issued an aggregate  of  1,388,538  shares of common
stock to  consultants  in exchange for  services in the amount of $373,789.  All
valuations  of common  stock  issued for  services  were based upon value of the
services  rendered,  which did not differ  materially from the fair value of the
Company's common stock during the period the services were rendered. The Company
also issued an  aggregate of 44,275  shares of common  stock to a noteholder  in
exchange for interest  expense of $12,400.  Additionally,  the Company issued an
aggregate of 1,100,000 shares of common stock in exchange for convertible  notes
payable of $77,000 (Note C).

In August 2004,  the Company  issued an  aggregate  of 250,000  shares of common
stock to a  consultant  in exchange  for  services in the amount of $5,000.  All
valuations  of common  stock  issued for  services  were based upon value of the
services  rendered,  which did not differ  materially from the fair value of the
Company's common stock during the period the services were rendered.

In September 2004, the Company issued an aggregate of 1,100,000 shares of common
stock in exchange for convertible note payable of $7,590.

In October 2004, the Company  issued an aggregate of 1,100,000  shares of common
stock in exchange for convertible note payable of $6,050.

In November 2004, the Company issued an aggregate of 1,100,000  shares of common
stock in exchange for convertible note payable of $5,830.

In December 2004, the Company issued an aggregate of 2,200,000  shares of common
stock in exchange for convertible note payable of $15,950. The Company issued an
aggregate  of 810,000  shares of common  stock to a  consultant  in exchange for
services in the amount of $16,200.  All  valuations  of common  stock issued for
services  were based upon value of the services  rendered,  which did not differ
materially  from the fair value of the Company's  common stock during the period
the services were rendered. The Company issued an aggregate of 197,025 shares of
common  stock to in  exchange  for  accrued  interset  in the  amount of $3,939.
Additionally,  the Company issued an aggregate of 4,582,106 shares of its common
stock,  valued at $91,642,  in connection  with an  acquisition  agreement  with
Battelship VFX, Inc. (`Battleship').  The Company acquired no tangile assets and
assumed no liabilities of Battleship. The Company also entered into a consulting
agreement with  Battleship's  sole owner (see Note L). The Company has accounted
for the common shares  issued as  acquisition  costs and has charged  $91,642 to
operations during the year ended December 31, 2004.

NOTE H - STOCK OPTIONS AND WARRANTS

Stock Options

The Company did not grant any stock options  during the year ended  December 31,
2004 and 2003. All previously  granted stock options  expired as of December 31,
2004.  Transactions  involving  options issued to consultants  are summarized as
follows:


                                      F-37
<PAGE>

                     PACIFICAP ENTERTAINMENT HOLDINGS, INC.
                          (A development stage company)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2004 AND 2003

NOTE H - STOCK OPTIONS AND WARRANTS

Stock Options (Continued)
<TABLE>
<CAPTION>
                                                                                         Weighted Average
                                                               Number of Options         Price Per Share
                                                               -----------------         --------------
<S>                                                                  <C>              <C>
       Outstanding at January 1, 2003                                   118,333          $        35.70
          Granted                                                             -                       -
          Exercised                                                           -                       -
          Canceled or expired                                         (101,667)                   28.20
                                                               -----------------         --------------
       Outstanding at December 31, 2003                                  16,666                   81.00
          Granted                                                             -                       -
          Exercised                                                           -                       -
          Canceled or expired                                           (16,666)                  81.00
                                                               -----------------         --------------
       Outstanding at December 31, 2004                                       -          $            -
                                                               -----------------         --------------
</TABLE>
Warrants

The Company  granted an aggregate of  3,400,000  warrants  during the year ended
December 31, 2004 in connection with issuance of convertible notes payable (Note
E). The Company did not grant any  compensatory  warrants  during the year ended
December  31,  2004 and 2003.  The  following  table  summarizes  the changes in
warrants  outstanding  and the  related  prices for the shares of the  Company's
common  stock,  after  giving  effect to 1:30  reverse  split in common stock in
September 2003.
<TABLE>
<CAPTION>

                              Warrants Outstanding                             Warrants Exercisable
                              --------------------                             ---------------------
                                          Weighted Average         Weighed                 Weighted
                                        Remaining Contractual      Average                 Average
           Exercise        Number            Life                 Exercise      Number     Exercise
            Prices         Outstanding     (Years)                 Price      Exercisable   Price
           --------        -----------  ---------------------     --------    -----------  ---------
<S>           <C>           <C>               <C>                  <C>         <C>            <C>
             $0.24          2,000,000         4.52                 $0.24       2,000,000      $0.24
             $0.02          1,400,000         4.96                  0.02       1,400,000       0.02
           --------        -----------  ---------------------     --------    -----------  ---------
                            3,400,000         4.70                $ 0.15       3,400,000     $ 0.15
                           -----------  ---------------------     --------    -----------  ---------

Transactions involving warrants issued to non-employees are summarized as follows:

                                                                                         Weighted Average
                                                                Number of Shares         Price Per Share
                                                                ----------------         -----------------
       Outstanding at January 1, 2003                                  206,091                $  36.00
          Granted                                                            -                       -
          Exercised                                                          -                       -
          Canceled or expired                                                -                       -
                                                                ----------------         -----------------
       Outstanding at December 31, 2003                                206,091                   36.00
          Granted                                                    3,400,000                    0.15
          Exercised                                                          -                       -
          Canceled or expired                                         (206,091)                  36.00
                                                                ----------------         -----------------
       Outstanding at December 31, 2004                              3,400,000                $   0.15
                                                                ----------------         -----------------

</TABLE>
                                      F-38

<PAGE>

                     PACIFICAP ENTERTAINMENT HOLDINGS, INC.
                          (A development stage company)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2004 AND 2003

NOTE I - RELATED PARTY TRANSACTIONS

The Company's  President has advanced  funds to the Company for working  capital
purposes since the Company's  inception in July 1997. No formal  repayment terms
or arrangements exist. The amount of the advances due the Company's President at
December 31, 2004 and 2003 were $270,125 and $209,311, respectively, net of cash
repayments.

The Company's Chairman of the Board paid $90,090 of office expenses on behalf of
the Company during the year ended December 31, 2003. No formal  repayment  terms
or  arrangements  exist.  The Company has repaid the  Chairman of the Board from
time to time,  and the net amount of the  advances  due at December 31, 2004 and
2003 was $5,090 an d$55,090, respectively.

The Company's  principal  shareholders paid $40,000 of office expenses on behalf
of the Company  during the year ended  December  31, 2003.  No formal  repayment
terms or arrangements exist. The Company issued an aggregate of 44,390 shares of
its common stock to the shareholders  during the year ended December 31, 2003 in
exchange for the $40,000 previously incurred debt (Note G).

During the year ended  December  31,  2004,  the Company  issued an aggregate of
150,000 to a shareholder in exchange for $127,500 of expenses previously paid by
the shareholder on behalf of the Company (Note G).

NOTE J - LOSSES PER SHARE

The following  table  presents the  computation  of basic and diluted losses per
share:

<TABLE>
<CAPTION>
                                                                                                      For the period July
                                                                                                       29, 1997 (Date of
                                                                                                      Inception) through
                                                               2004                     2003          December 31, 2004
                                                               ----                     ----          -------------------
<S>                                                         <C>                      <C>                   <C>
Net income loss available to Common stockholders            $(4,623,614)             $(35,405,841)         $ (48,005,439)
                                                            ------------             -------------    -------------------
Basic and diluted earning (loss) per share                  $     (0.18)             $     (11.49)         $      (10.94)
Continuing operations                                       $     (0.18)             $     (11.49)         $      (10.88)
                                                            ============             =============    ===================
Discontinued operations                                     $         -              $          -          $       (0.06)
Weighted average common shares outstanding                   26,130,648                 3,081,611              4,386,205
</TABLE>
Net loss per share is based upon the weighted  average of shares of common stock
outstanding. In September 2003, a one (1) for thirty (30) reverse stock split of
the  Company's  common  stock  was  effected  (See  Note  G).  Accordingly,  all
historical  weighted  average  share and per share amounts have been restated to
reflect the reverse stock split.




                                      F-39
<PAGE>

                     PACIFICAP ENTERTAINMENT HOLDINGS, INC.
                          (A development stage company)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2004 AND 2003

NOTE K - INCOME TAXES

Financial  Accounting  Standard No. 109 requires the recognition of deferred tax
liabilities and assets for the expected  future tax  consequences of events that
have been included in the financial statement or tax returns. Under this method,
deferred  tax  liabilities  and assets are  determined  based on the  difference
between  financial  statements  and tax bases of assets  and  liabilities  using
enacted tax rates in effect for the year in which the  differences  are expected
to reverse.  Temporary differences between taxable income reported for financial
reporting purposes and income tax purposes are insignificant.

For income tax reporting purposes,  the Company's aggregate unused net operating
losses approximate $48,000,000 which expire through 2024, subject to limitations
of Section 382 of the Internal Revenue Code, as amended.  The deferred tax asset
related to the  carryforward  is  approximately  $16,800,000.  The  Company  has
provided a valuation  reserve  against the full amount of the net operating loss
benefit,  because in the opinion of management based upon the earning history of
the Company,  it is more likely than not that the benefits will not be realized.
Due to significant changes in the Company's ownership,  the Company's future use
of its existing net operating losses may be limited.

Components of deferred tax assets as of December 31, 2004 are as follows:

                Non current:
                Net operating loss carryforward                   $16,800,000
                Valuation allowance                               (16,800,000)
                                                                  ------------
                Net deferred tax asset                            $         -
                                                                  ============

NOTE L - COMMITMENTS AND CONTINGENCIES

Lease Commitments

The Company  currently leases office space in Beverly Hills,  California for its
corporate use under a  non-cancelable  operating lease expiring in November 2008
at rate of $4,502 per month, plus stipulated annual adjustments. Rental expenses
charged to operations for the year ended December 31, 2004 and 2003 were $22,102
and $34,615, respectively.

Commitments for minimum rentals under  non-cancelable lease at December 31, 2004
are as follows:

              2005                     $  54,024
              2006                        54,024
              2007                        54,024
              2008                        45,020
                                       ---------
                                       $ 207,092
                                       ---------

Employment and Consulting Agreements

The Company has an employment  agreement with the Company's  President and Chief
Executive Officer. In addition to salary and benefit  provisions,  the agreement
includes defined  commitments  should the employee terminate the employment with
or without  cause.  The Company  also has  consulting  agreements  with  outside
contractors,  certain  of whom  are also  Company  stockholders,  directors  and
officers.  The  Agreements  are  generally  for a term of one to two years  from
inception and renewable unless either the Company or Consultant  terminates such
agreement by written notice.

In connection with the acquisition of certain  Battleship  assets (see Note G) ,
the Company is obligated to issue  3,054,737  shares (the "Earn-out  Shares") of
the Company's common stock to the former owner of Battleship, subject to certain
terms and conditions.

In addition,  the Company has agreed to enter into an employment  agreement with
the former owner of  Battleship.  In addition to salary and benefit  provisions,
the agreement will include defined commitments should the employee terminate the
employment with or without cause.



                                      F-40
<PAGE>
                     PACIFICAP ENTERTAINMENT HOLDINGS, INC.
                          (A development stage company)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2004 AND 2003

NOTE L - COMMITMENTS AND CONTINGENCIES (Continued)

Litigation

As described in Note F, the Company is in default under the terms of its Capital
Note  Agreements.  In December  2002, two of the Company's  capital  noteholders
filed a complaint  against the Company in the Supreme  Court of the State of New
York,  Nassau County. In March 2003, the Court granted summary judgment in favor
of each  noteholder in the amount of $35,774 plus interest at 18% per annum from
September 4, 2002. The Court also awarded summary  judgment  personally  against
the Company's  President in the amount of $25,000.  As of December 31, 2003, the
Company has repaid one of the  noteholders  a total of $18,350 and has  recorded
all unpaid principal amount of the capital notes and unpaid accrued interest. As
of December  31,  2004,  the Company  has not  resolved  the issue with the note
holdedrs,  and has included all unpaid principal amount of the capital notes and
unpaid accrued interest in its current liabilities.

On or about September 2004, Fox Law Offices,  P.A.  obtained a default  judgment
against the Company in the amount of $182,000.  The Company  moved to vacate the
default  judgment,  and the parties  are  briefing on that motion in the Supreme
Court of the State of New York,  County of New York. The Company believes it has
meritorious  defenses to the employee's  claims and intends to vigorously defend
itself  against the claim.  Management  believes  the  ultimate  outcome of this
matter will not have a material  adverse  effect on the  Company's  consolidated
financial position or results of operations.

The Company is subject to other legal proceedings and claims, which arise in the
ordinary  course of its  business.  Although  occasional  adverse  decisions  or
settlements may occur, the Company  believes that the final  disposition of such
matters  should not have a material  adverse  effect on its financial  position,
results of operations or liquidity.

NOTE M - RESTRICTED CASH

Pursuant  to the  Securities  Purchase  Agreement  and an Escrow  Agreement  the
Company  entered  into on  December  17,  2004 (Note E), the  Company  agreed to
deposit the proceeds  from the issuance of the Second  Convertible  Note into an
escrow  account,  and the Escrow Agent has agreed to receive,  hold and pay such
funds, upon the terms and subject to the conditions agreed by among the Company,
the investors, and the Escrow Agent.



                                      F-41
<PAGE>

                     PACIFICAP ENTERTAINMENT HOLDINGS, INC.
                          (A development stage company)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2004 AND 2003

NOTE M - RESTRICTED CASH (Continued)

The Escrow Agent shall hold the Escrow Account only in accordance with the terms
and  conditions of the Escrow  Agreement,  and the Escrow Agent shall invest the
monies in the Escrow  Account  ("Escrow  Amount")  in an interest  bearing  bank
account with, or certificates of deposit or time deposits with, maturities of no
more than thirty (30) days issued by, a domestic  commercial  bank or such other
bank or other financial  institution as it normally holds such funds. The Escrow
Agent shall release the Escrow Amount,  or a portion thereof,  upon receipt,  at
any time,  of joint  written  instructions  from the Company  and the  investors
directing  the  manner in which the  distribution  of the  Escrow  Amount,  or a
portion thereof, is to be made; provided,  however, that the Escrow Amount shall
only be released to the Company for the  acquisition  of  Battleship  VFX,  Inc.
(Note G); provided further than any remaining  Escrow Amount  subsequent to such
acquisition  shall be released  to the  Company for working  capital and general
corporate  purposes.  As of December  31, 2004,  the Escrow  Amount has not been
released to the Company and the balance amounted $235,903.

NOTE N - GOING CONCERN MATTERS

The accompanying consolidated financial statements have been prepared on a going
concern basis, which contemplates the realization of assets and the satisfaction
of  liabilities in the normal course of business.  As shown in the  accompanying
financial  statements  during the years ended  December  31, 2004 and 2003,  the
Company   incurred  losses  from  operations  of  $4,623,641  and   $35,405,841,
respectively.  In addition,  the Company is currently in default under the terms
of the Capital Notes and notes payable  obligations  (see Note F). These factors
among others may indicate that the Company will be unable to continue as a going
concern for a reasonable period of time.

The Company is actively pursuing additional equity financing through discussions
with  investment  bankers and private  investors.  There can be no assurance the
Company will be successful in its effort to secure additional equity financing.

If  operations  and cash  flows  continue  to  improve  through  these  efforts,
management  believes  that the Company can  continue  to  operate.  However,  no
assurance  can be given that  management's  actions  will  result in  profitable
operations or the resolution of its liquidity problems.

The  Company's  existence  is  dependent  upon  management's  ability to develop
profitable operations and resolve its liquidity problems. Management anticipates
the Company will attain  profitable status and improve its liquidity through the
continued  developing,  marketing  and selling of its  services  and  additional
equity  investment  in the  Company.  The  accompanying  consolidated  financial
statements do not include any  adjustments  that might result should the Company
be unable to continue as a going concern.

                                      F-42
<PAGE>

ITEM 8.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
         FINANCIAL DISCLOSURE

         None.

ITEM 8A. CONTROLS AND PROCEDURES

     Evaluation of Disclosure Controls and Procedures:  As of December 31, 2004,
the Company's management carried out an evaluation, under the supervision of the
Company's  Chief  Executive  Officer  and the  Chief  Financial  Officer  of the
effectiveness  of the design and operation of the Company's system of disclosure
controls  and  procedures  pursuant to the  Securities  and Exchange  Act,  Rule
13a-15(e) and 15d-15(e) under the Exchange Act). Based upon that evaluation, the
Chief Executive Officer and Chief Financial Officer concluded that the Company's
disclosure  controls  and  procedures  were  effective,  as of the date of their
evaluation,  for the purposes of recording,  processing,  summarizing and timely
reporting material  information required to be disclosed in reports filed by the
Company under the Securities Exchange Act of 1934.

     Changes in internal  controls:  There were no changes in internal  controls
over  financial  reporting,  known  to the  Chief  Executive  Officer  or  Chief
Financial  Officer that occurred  during the period  covered by this report that
has  materially  affected,  or is likely to  materially  effect,  the  Company's
internal control over financial reporting.

ITEM 8B. OTHER INFORMATION

         None.


                                       23
<PAGE>

                                    PART III

ITEM 9   DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

Directors and Executive Officers

     Set forth below are the directors  and  executive  officers of the Company,
their ages and positions held with the Company, as follows

Name                       Age              Position
--------------------------------------------------------------------------------
Edward E. Litwak           62       President, Chief Financial Officer,
                                    Treasurer and Director
Michael Riley              52       Chairman of the Board of Directors
Robert Stulman             67       Secretary
Donald P. Parson           67       Director

     Directors   are  elected  to  serve  until  the  next  annual   meeting  of
stockholders  and until their  successors are elected and  qualified.  Currently
there are three seats on our board of directors.

     Currently,  our inside  Directors are not  compensated  for their services,
although their expenses in attending meetings are reimbursed.  Outside Directors
are compensated with shares of Common Stock:  12,000 shares as a "signing bonus"
for the agreement to serve, and 1,000 shares for each month of service.  Outside
Directors also have their expenses in attending  meetings  reimbursed.  Officers
are  elected by the Board of  Directors  and serve until  their  successors  are
appointed by the Board of  Directors.  Biographical  resumes of each officer and
director are set forth below.

     Edward  E.  Litwak  has been our  President  since  December  of 1998 and a
director  since our  incorporation  in 1997.  Prior to becoming  President,  Mr.
Litwak served as a consultant to the Company, which was previously headed by his
daughter,  Ms. Karen Prentice.  From June 1, 1995 to the present, Mr. Litwak has
been President of Satellite Today, a cable network in development.  From January
1, 1997 until December  1998, Mr. Litwak also served as the licensing  agent for
Jennicor, LLC. From March 1, 1994 to June 1, 1995 he was Chairman of Merchandise
Entertainment  Television  Holdings,  Inc. From June 1, 1991 to June 30, 1994 he
was President of Designers International,  Inc. Mr. Litwak also served as Sports
Directions  Director for a program series  entitled the JeanNate Grand Prix. Mr.
Litwak attended Cornell University where he majored in business.

     Michael  Riley became  Chairman of the Board in  September of 2003.  He has
worked for over 20 years in banking,  corporate finance,  and international law.
From 2001 to the present,  Mr.  Riley has served as Chairman of Imperial  Credit
Industries,  Inc.  In  addition,  he was  Chairman,  until it's sale,  of one of
Hollywood's  largest  independent  entertainment  financing  entities,  the  Lew
Horwitz  Organization.  This led Mr. Riley to establish  and develop the current
entertainment,  financing and marketing corporation of Pacificap  Entertainment,
Inc. Mr. Riley established  Recreational  Holdings, the largest consolidation of
automotive/marine/recreational  retailing in the United  States.  Mr. Riley also
served as Assistant  State  Attorney for the 17th  Judicial  Circuit in Florida,
special counsel to federal and state law enforcement agencies, and has conducted
seminars throughout the United States.

     Robert Stulman has been our Secretary  since September of 1997. He has been
associated  with us during our  pre-incorporation  period,  from January 1, 1997
through March of 1999.  From 1991 to December 31, 1996 he was Vice  President in
charge of Importing Footwear for L. J. Global, Inc. in New York City.

     Donald P. Parson is a member of our Board of Directors, having joined us on
September  19, 2000.  For the past six years,  beginning in 1994, he has been of
counsel to  Satterlee  Stephens  Burke & Burke  LLP.  Mr.  Parson has  practiced
corporate,  financial,  business  and  banking law since  1968.  Mr.  Parson has
previously  served as counsel to several brokerage firms and in the formation of
four New York and  Connecticut  chartered  banks. He is a director of two mutual
funds,  Philadelphia  Fund,  Inc.  and  Eagle  Growth  Shares,  Inc.,  and  Home
Diagnostics, Inc., a medical device company.


                                       24
<PAGE>
Limitation of Liability of Directors

     Our Articles of  Incorporation,  as amended,  provide to the fullest extent
permitted  by Nevada law,  our  directors  or officers  shall not be  personally
liable to us or our  shareholders  for damages for breach of such  director's or
officer's  fiduciary  duty.  The effect of this  provision  of our  Articles  of
Incorporation,  as  amended,  is to  eliminate  our rights and our  shareholders
(through  shareholders'  derivative  suits on behalf of our  company) to recover
damages  against a director or officer for breach of the fiduciary  duty of care
as a director or officer (including breaches resulting from negligent or grossly
negligent  behavior),  except under certain  situations  defined by statute.  We
believe that the indemnification provisions in our Articles of Incorporation, as
amended,  are necessary to attract and retain qualified persons as directors and
officers.

Election of Directors and Officers.

     Directors   are  elected  to  serve  until  the  next  annual   meeting  of
stockholders  and until  their  successors  have  been  elected  and  qualified.
Officers  are  appointed  to serve until the  meeting of the Board of  Directors
following the next annual  meeting of  stockholders  and until their  successors
have been elected and qualified.

     No Executive Officer or Director of the Company has been the subject of any
order,  judgment,  or  decree  of any Court of  competent  jurisdiction,  or any
regulatory agency  permanently or temporarily  enjoining,  barring suspending or
otherwise limiting him from acting as an investment advisor, underwriter, broker
or dealer in the securities  industry,  or as an affiliated person,  director or
employee  of an  investment  company,  bank,  savings and loan  association,  or
insurance  company or from engaging in or continuing  any conduct or practice in
connection  with any such activity or in connection with the purchase or sale of
any securities.

     No Executive  Officer or Director of the Company has been  convicted in any
criminal  proceeding  (excluding  traffic  violations)  or is the  subject  of a
criminal proceeding which is currently pending.

     No  Executive  Officer or  Director  of the  Company is the  subject of any
pending legal proceedings.

Section 16(a) Beneficial Ownership Reporting Compliance

     Section  16(a) of the  Securities  Exchange  Act of 1934,  as amended  (the
"Exchange Act"),  requires  Pacificap  Entertainment  Holdings,  Inc.  executive
officers and directors,  and persons who  beneficially own more than ten percent
of the Company's  common stock, to file initial reports of ownership and reports
of changes in ownership with the SEC. Executive officers,  directors and greater
than ten percent  beneficial  owners are required by SEC  regulations to furnish
Pacificap  Entertainment  Holdings,  Inc. with copies of all Section 16(a) forms
they file.  Based upon a review of the  copies of such  forms  furnished  to the
Company  and  written   representations  from  Company  executive  officers  and
directors,  the Company  believes that during the year ended 2004,  the officers
and directors  filed all of their  respective  Section 16(a) reports on a timely
basis.

Audit Committee

     We do not have an Audit  Committee,  our board of  directors  during  2004,
performed  some  of  the  same  functions  of  an  Audit  Committee,   such  as:
recommending a firm of  independent  certified  public  accountants to audit the
annual financial  statements;  reviewing the independent auditors  independence,
the  financial  statements  and their audit report;  and reviewing  management's
administration of the system of internal accounting  controls.  The Company does
not currently have a written audit committee charter or similar document.

                                       25
<PAGE>
Nominating Committee

     We do not have a Nominating  Committee or Nominating Committee Charter. Our
board of directors performed some of the functions  associated with a Nominating
Committee.  We have  elected not to have a  Nominating  Committee  at this time,
however,  our Board of Directors  intend to continually  evaluate the need for a
Nominating Committee.

Code of Conduct

     We have adopted a written code of conduct that governs all of our officers,
directors,  employees and  contractors.  The code of conduct  relates to written
standards that are reasonably designed to deter wrongdoing and to promote:

     (1)  Honest and ethical  conduct,  including the ethical handling of actual
          or apparent  conflicts of interest  between  personal and professional
          relationships;
     (2)  Full, fair, accurate,  timely and understandable disclosure in reports
          and documents that are filed with, or submitted to, the Commission and
          in other public communications made by an issuer;
     (3)  Compliance with applicable governmental laws, rules and regulations;
     (4)  The  prompt  internal  reporting  of  violations  of  the  code  to an
          appropriate person or persons identified in the code; and
     (5)  Accountability for adherence to the code.

Compensation Committee

     We  currently  do not  have  a  compensation  committee  of  the  board  of
directors. Until a formal committee is established,  if at all, our entire board
of directors  will review all forms of  compensation  provided to our  executive
officers, directors,  consultants and employees including stock compensation and
loans.

ITEM 10. EXECUTIVE COMPENSATION

Termination of Employment

     There are no compensatory  plans or arrangements,  including payments to be
received  from the  Company,  with  respect  to any person  associated  with the
Company which would in any way result in payments to any such person  because of
his resignation,  retirement,  or other termination of such person's  employment
with the Company or its  subsidiaries,  or any change in control of the Company,
or a change in the  person's  responsibilities  following a change in control of
the Company.

Executive Compensation

     The following table sets forth the cash compensation of the Company's newly
elected  executive  officers and  directors  during of the years 2004,  2003 and
2002. The remuneration  described in the table represents  compensation received
from Pacificap Entertainment Holdings, Inc. and does not include the cost to the
Company  of  benefits  furnished  to the  named  executive  officers,  including
premiums for health  insurance and other  benefits  provided to such  individual
that are extended in connection with the conduct of the Company's business.  The
value  of such  benefits  cannot  be  precisely  determined,  but the  executive
officers named below did not receive other  compensation in excess of the lesser
of $50,000 or 10% of such officer's cash compensation.

                                       26
<PAGE>
<TABLE>
<CAPTION>
                           SUMMARY COMPENSATION TABLE

                               ANNUAL COMPENSATION

                                                             Other
                                                             Annual      Restricted     Options      LTIP
   Name & Principal                Salary        Bonus       Compen-       Stock         SARs       Payouts      All Other
       Position           Year       ($)          ($)        sation ($)   Awards($)       (#)         ($)      Compensation
------------------------ ------- ------------ ------------ ------------ ------------- ----------- ------------ --------------
<S>                       <C>     <C>              <C>          <C>          <C>         <C>          <C>            <C>
Edward Litwak             2004    140,000          0            0            -            -            -             -
  President               2003     40,000          0            0            -            -            -             -
                          2002     32,000          0            0            -            -            -             -
------------------------ ------- ------------ ------------ ------------ ------------- ----------- ------------ --------------
Michael Riley             2004    140,000          0            0            -            -            -             -
  Chairman of the Board   2003     40,000          0            0            -            -            -             -
                          2002          0          0            0            -            -            -             -
------------------------ ------- ------------ ------------ ------------ ------------- ----------- ------------ --------------
</TABLE>

Option/SAR Grants in Last Fiscal Year

         None.

Stock Option Plans

         None.

Employment Agreements

Ed Litwak

     On September  18, 2003,  we entered into a three-year  employment  contract
with automatic  one-year  renewals for an additional year upon reaching  certain
annual  objectives,  with Ed  Litwak  to serve as  Interim  President  and Chief
Executive  Officer for a period of up to six months or we hire a new  President.
Upon our hiring of a new President,  Mr. Litwak's position shall be President of
our  Cavalcade  Broadcast  Division.  The base  salary  under the  agreement  is
$120,000 per annum, plus benefits.

                                       27
<PAGE>

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     The  following  table  presents  information,  to the best of the Company's
knowledge,  about the beneficial ownership of its common stock on April 15, 2005
relating to the  beneficial  ownership  of the  Company's  common stock by those
persons known to  beneficially  own more than 5% of the Company's  capital stock
and by its  directors  and  executive  officers.  The  percentage  of beneficial
ownership for the following table is based on 46,376,501  shares of common stock
outstanding.

     Beneficial  ownership is  determined  in  accordance  with the rules of the
Securities and Exchange Commission and does not necessarily  indicate beneficial
ownership  for any  other  purpose.  Under  these  rules,  beneficial  ownership
includes  those  shares of common stock over which the  stockholder  has sole or
shared voting or investment  power. It also includes shares of common stock that
the  stockholder  has a right to acquire  within 60 days through the exercise of
any option,  warrant or other right. The percentage ownership of the outstanding
common stock,  however,  is based on the assumption,  expressly  required by the
rules of the Securities and Exchange Commission,  that only the person or entity
whose ownership is being reported has converted  options or warrants into shares
of our common stock.



NAME AND ADDRESS                                   NUMBER OF       PERCENTAGE OF
OF OWNER                        TITLE OF CLASS     SHARES OWNED(1)    CLASS (2)
--------------------------------------------------------------------------------
Edward E. Litwak                Common Stock        1,214,043 (3)       2.62%
12868 Via Latina
Del Mar, California 92014

Michael Riley                   Common Stock        4,000,000 (4)       8.63%
12868 Via Latina
Del Mar, California 92014

Robert Stulman                  Common Stock           40,000               *
12868 Via Latina
Del Mar, California 92014

Donald P. Parson                Common Stock           12,500               *
12868 Via Latina
Del Mar, California 92014

All Officers and Directors      Common Stock        5,266,543 (3)(4)   11.36%
As a Group (4 persons)

----------------------------
Brenda Michel                   Common Stock        4,582,106 (5)      11.30%
12868 Via Latina
Del Mar, California 92014

Clinton Hall, LLC               Common Stock        3,000,000           6.47%
161 Store Ridge Court
East Aurora, New York 14052

Bill Curtis                     Common Stock        7,000,000 (6)      15.09%

     * Less than 1%.

(1)  Beneficial  Ownership is  determined  in  accordance  with the rules of the
Securities and Exchange  Commission and generally  includes voting or investment
power with respect to  securities.  Shares of common stock subject to options or
warrants  currently  exercisable or  convertible,  or exercisable or convertible
within  60 days of April 15,  2005 are  deemed  outstanding  for  computing  the
percentage  of the person  holding  such  option or  warrant  but are not deemed
outstanding for computing the percentage of any other person.

(2) Based upon 46,376,501 shares issued and outstanding on April 15, 2005.

                                       28
<PAGE>
(3) Includes  1,188,908  shares held by Karen  Prentice.  Karen  Prentice is the
daughter of Edward Litwak,  President of the Company, and Edward Litwak may have
a beneficial interest in those shares.

(4) Includes 1,000,000 shares held by Kaitlin Riley and 1,000,000 shares held by
Conor Riley. Kaitlin and Conor Riley are the children of Michael Riley, Chairman
of the  Board  of  Directors  of the  Company,  and  Michael  Riley  may  have a
beneficial interest in those shares.

(5) Shares are  currently  being held in escrow  pending,  and  subject  to, the
completion of the acquisition of the assets of Battleship VFX, Inc.

(6) Includes  1,000,000  shares owned by each of: S-1  Investments,  LLC; C.H.I.
LLC; Rancho LLC; J. Capital  Partners;  A. Jackson Trust Company;  Sofi, LLC and
Kiva, LLC, each of which Mr. Curtis has voting control over.

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     The  Company's  President  has  advanced  funds to the  Company for working
capital purposes since the Company's inception in July 1997. No formal repayment
terms or  arrangements  exist.  The  amount of the  advances  due the  Company's
President   at  December  31,  2004  and  2003  were   $270,100  and   $209,311,
respectively, net of cash repayments.

     The  Company's  Chairman  of the Board paid  $90,090 of office  expenses on
behalf of the  Company  during  the year  ended  December  31,  2003.  No formal
repayment  terms or  arrangements  exist.  The Company has repaid $85,000 to the
Chairman of the Board and the net amount of the  advances  due at  December  31,
2004 and 2003 were $5,090 and $55,090, respectively.

     The Company's  principal  shareholders  paid $40,000 of office  expenses on
behalf of the  Company  during  the year  ended  December  31,  2003.  No formal
repayment terms or arrangements exist. The Company issued an aggregate of 44,390
shares of its common stock to the  shareholders  during the year ended  December
31, 2003 in exchange for the $40,000 previously incurred debt .

     We have no policy  regarding  entering into  transactions  with  affiliated
parties.

                                       29
<PAGE>

                                     PART IV

ITEM  13.         EXHIBITS

Exhibit No.       Description

3.1       Certificate of  Incorporation  of Tren Property Corp.,  filed July 29,
          1997 in Delaware,  filed as Exhibit 3(1) to the registration statement
          on Form  10-SB  filed  with  the  Commission  on  March  20,  2001 and
          incorporated herein by reference.

3.2       Articles of Incorporation  of Gemma Global,  Inc., filed July 22, 1997
          in Nevada, filed as Exhibit 3(2) to the registration statement on Form
          10-SB filed with the  Commission  on March 20,  2001 and  incorporated
          herein by reference.

3.3       Reorganization  Agreement  between Tren Property  Corp.  and Edward E.
          Litwak,   dated  January  1,  1998,  filed  as  Exhibit  3(3)  to  the
          registration  statement  on Form 10-SB  filed with the  Commission  on
          March 20, 2001 and incorporated herein by reference.

3.4       Certificate of Amendment to the Certificate of  Incorporation  of Tren
          Property Corp.,  changing its corporate name to Gemma Global, Inc. and
          increasing  capital  structure,  filed  February 23, 1998 in Delaware,
          filed as  Exhibit  3(4) to the  registration  statement  on Form 10-SB
          filed with the Commission on March 20, 2001 and incorporated herein by
          reference.

3.5       Certificate  of Ownership and Merger of Gemma  Global,  Inc. (a Nevada
          Corporation)   with  and  into  Tren   Property   Corp.   (a  Delaware
          Corporation),  filed  February 23, 1998 in Delaware,  filed as Exhibit
          3(5) to the  registration  statement  on Form  10-SB  filed  with  the
          Commission on March 20, 2001 and incorporated herein by reference.

3.6       Articles/Certificate  of  Merger  of  Gemma  Global,  Inc.  (a  Nevada
          Corporation)  with and into Gemma Global,  Inc. formerly Tren Property
          Corp. (a Delaware Corporation) filed March 4, 1998 in Nevada, filed as
          Exhibit  3(6) to the  registration  statement on Form 10-SB filed with
          the Commission on March 20, 2001 and incorporated herein by reference.

3.7       Articles of Incorporation  of Gemma Global,  Inc., filed March 5, 1998
          in Nevada, filed as Exhibit 3(7) to the registration statement on Form
          10-SB filed with the  Commission  on March 20,  2001 and  incorporated
          herein by reference.

3.8       Articles/Certificate  of Merger  (re-domestication)  of Gemma  Global,
          Inc.  (Delaware) with and into Gemma Global, Inc. (Nevada) filed April
          21, 1998, filed as Exhibit 3(8) to the registration  statement on Form
          10-SB filed with the  Commission  on March 20,  2001 and  incorporated
          herein by reference.

3.9       Articles  of  Amendment  to the  Articles  of  Incorporation  of Gemma
          Global,  Inc.,  changing  name to  Pioneer2000,  Inc.  and  increasing
          capital  structure,  filed  March 4, 1999 in Nevada,  filed as Exhibit
          3(9) to the  registration  statement  on Form  10-SB  filed  with  the
          Commission on March 20, 2001 and incorporated herein by reference.

3.10      Certificate of  Incorporation  of Cavalcade of Sports  Network,  Inc.,
          filed  June  22,  1998 in New  York,  filed  as  Exhibit  3(10) to the
          registration  statement  on Form 10-SB  filed with the  Commission  on
          March 20, 2001 and incorporated herein by reference.

3.11      Articles of Incorporation of Global Group  International,  Inc., filed
          March 23, 1999 in Nevada,  filed as Exhibit 3(11) to the  registration
          statement  on Form 10-SB filed with the  Commission  on March 20, 2001
          and incorporated herein by reference.

                                       30
<PAGE>
3.12      Certificate  of  Designation,   Powers,   Preferences  and  Rights  of
          1999-Global  Group  Series  of  Convertible   Preferred  Stock,  filed
          December  14,  1999  in  Nevada,   filed  as  Exhibit   3(12)  to  the
          registration  statement  on Form 10-SB  filed with the  Commission  on
          March 20, 2001 and incorporated herein by reference.

3.13      Articles of  Amendment,  filed  December 17, 1999 in Nevada,  filed as
          Exhibit 3(13) to the  registration  statement on Form 10-SB filed with
          the Commission on March 20, 2001 and incorporated herein by reference.

3.14      Articles of Merger of Cavalcade  of Sports  Network,  Inc.  (New York)
          with and into Cavalcade of Sports Media, Inc. (Nevada), filed December
          22,  1999 in  Nevada,  filed  as  Exhibit  3(14)  to the  registration
          statement  on Form 10-SB filed with the  Commission  on March 20, 2001
          and incorporated herein by reference.

3.15      Certificate  of Merger of Cavalcade of Sports  Network,  Inc. with and
          into Cavalcade of Sports Media,  Inc.,  filed December 30, 1999 in New
          York,  filed as Exhibit  3(15) to the  registration  statement on Form
          10-SB filed with the  Commission  on March 20,  2001 and  incorporated
          herein by reference.

3.16      Bylaws of the Registrant,  filed as Exhibit 3(16) to the  registration
          statement  on Form 10-SB filed with the  Commission  on March 20, 2001
          and incorporated herein by reference.

3.17      Articles of Incorporation of Sports Broadcasting Network,  Inc., filed
          November 25, 2002, filed as Exhibit 3.17 to the registration statement
          on  Form  SB-2  filed  with  the   Commission  on  July  8,  2004  and
          incorporated herein by reference.

3.18      Articles of Amendment, filed July 16, 2003 in Nevada, filed as Exhibit
          3(16) to the current  report on Form 8-K filed with the  Commission on
          July 23, 2003 and incorporated herein by reference.

3.19      Exchange Agreement with Pacificap  Entertainment  Holdings Inc., filed
          as  Exhibit  2(1) to the  current  report on Form 8-K  filed  with the
          Commission on September 24, 2003 and incorporated herein by reference.

3.20      Short Form  Articles of Merger  filed  October 23,  2003,  in Nevada ,
          filed as Exhibit 3.20 to the registration statement on Form SB-2 filed
          with  the  Commission  on July 8,  2004  and  incorporated  herein  by
          reference.

4.1       Common Stock Purchase Warrant with AJW Offshore,  Ltd., dated June 10,
          2004, filed as Exhibit 4.1 to the registration  statement on Form SB-2
          filed with the Commission on July 8, 2004 and  incorporated  herein by
          reference.

4.2       Common Stock Purchase  Warrant with AJW Partners,  LLC, dated June 10,
          2004, filed as Exhibit 4.2 to the registration  statement on Form SB-2
          filed with the Commission on July 8, 2004 and  incorporated  herein by
          reference.

4.3       Common Stock Purchase Warrant with AJW Qualified Partners,  LLC, dated
          June 10, 2004, filed as Exhibit 4.3 to the  registration  statement on
          Form SB-2 filed with the  Commission on July 8, 2004 and  incorporated
          herein by reference.

4.4       Common Stock Purchase Warrant with New Millennium Capital Partners II,
          LLC,  dated June 10,  2004,  filed as Exhibit 4.4 to the  registration
          statement on Form SB-2 filed with the  Commission  on July 8, 2004 and
          incorporated herein by reference.

4.5       Secured Convertible Note with AJW Offshore, Ltd., dated June 10, 2004,
          filed as Exhibit 4.5 to the registration  statement on Form SB-2 filed
          with  the  Commission  on July 8,  2004  and  incorporated  herein  by
          reference.

                                       31
<PAGE>
4.6       Secured Convertible Note with AJW Partners,  LLC, dated June 10, 2004,
          filed as Exhibit 4.6 to the registration  statement on Form SB-2 filed
          with  the  Commission  on July 8,  2004  and  incorporated  herein  by
          reference.

4.7       Secured Convertible Note with AJW Qualified Partners,  LLC, dated June
          10, 2004, filed as Exhibit 4.7 to the  registration  statement on Form
          SB-2 filed with the Commission on July 8, 2004 and incorporated herein
          by reference.

4.8       Secured Convertible Note with New Millennium Capital Partners II, LLC,
          dated  June  10,  2004,  filed  as  Exhibit  4.8 to  the  registration
          statement on Form SB-2 filed with the  Commission  on July 8, 2004 and
          incorporated herein by reference.

4.9       Securities Purchase Agreement, dated as of June 10, 2004, by and among
          Pacificap  Entertainment  Holdings,   Inc.,  AJW  Partners,  LLC,  AJW
          Qualified Partners, LLC, AJW Offshore, Ltd. and New Millennium Capital
          Partners II, LLC, filed as Exhibit 4.9 to the  registration  statement
          on  Form  SB-2  filed  with  the   Commission  on  July  8,  2004  and
          incorporated herein by reference.

4.10      Security Agreement,  dated as of June 10, 2004, by and among Pacificap
          Entertainment  Holdings,   Inc.,  AJW  Partners,  LLC,  AJW  Qualified
          Partners,  LLC, AJW Offshore, Ltd. and New Millennium Capital Partners
          II, LLC, filed as Exhibit 4.10 to the  registration  statement on Form
          SB-2 filed with the Commission on July 8, 2004 and incorporated herein
          by reference.

4.11      Intellectual  Property Security Agreement,  dated as of June 10, 2004,
          by and among  Pacificap  Entertainment  Holdings,  Inc., AJW Partners,
          LLC,  AJW  Qualified  Partners,   LLC,  AJW  Offshore,  Ltd.  and  New
          Millennium  Capital  Partners  II, LLC,  filed as Exhibit  4.11 to the
          registration  statement on Form SB-2 filed with the Commission on July
          8, 2004 and incorporated herein by reference.

4.12      Registration Rights Agreement, dated as of June 10, 2004, by and among
          Pacificap  Entertainment  Holdings,   Inc.,  AJW  Partners,  LLC,  AJW
          Qualified Partners, LLC, AJW Offshore, Ltd. and New Millennium Capital
          Partners II, LLC, filed as Exhibit 4.12 to the registration  statement
          on  Form  SB-2  filed  with  the   Commission  on  July  8,  2004  and
          incorporated herein by reference.

4.13      Guaranty and Pledge Agreement, dated as of June 10, 2004, by and among
          Pacificap  Entertainment  Holdings,   Inc.,  AJW  Partners,  LLC,  AJW
          Qualified  Partners,  LLC, AJW Offshore,  Ltd., New Millennium Capital
          Partners  II, LLC and  Michael  Riley,  filed as  Exhibit  4.13 to the
          registration  statement on Form SB-2 filed with the Commission on July
          8, 2004 and incorporated herein by reference.

4.14      Guaranty and Pledge Agreement, dated as of June 10, 2004, by and among
          Pacificap  Entertainment  Holdings,   Inc.,  AJW  Partners,  LLC,  AJW
          Qualified  Partners,  LLC, AJW Offshore,  Ltd., New Millennium Capital
          Partners  II, LLC and  Edward  Litwak,  filed as  Exhibit  4.14 to the
          registration  statement on Form SB-2 filed with the Commission on July
          8, 2004 and incorporated herein by reference.


4.15      Secured Convertible Note with AJW Offshore, Ltd., dated July 13, 2004.

4.16      Secured Convertible Note with AJW Partners, LLC, dated July 13, 2004.

4.17      Secured Convertible Note with AJW Qualified Partners,  LLC, dated July
          13, 2004.

4.18      Secured Convertible Note with New Millennium Capital Partners II, LLC,
          dated July 13, 2004.

4.19      Common Stock Purchase Warrant with AJW Offshore,  Ltd., dated July 13,
          2004.

                                       32
<PAGE>
4.20      Common Stock Purchase  Warrant with AJW Partners,  LLC, dated July 13,
          2004.

4.21      Common Stock Purchase Warrant with AJW Qualified Partners,  LLC, dated
          July 13, 2004.

4.22      Common Stock Purchase Warrant with New Millennium Capital Partners II,
          LLC, dated July 13, 2004.

4.23      Secured Convertible Note with AJW Offshore, Ltd., dated July 20, 2004.

4.24      Secured Convertible Note with AJW Partners, LLC, dated July 20, 2004.

4.25      Secured Convertible Note with AJW Qualified Partners,  LLC, dated July
          20, 2004.

4.26      Secured Convertible Note with New Millennium Capital Partners II, LLC,
          dated July 20, 2004.

4.27      Common Stock Purchase Warrant with AJW Offshore,  Ltd., dated July 20,
          2004.

4.28      Common Stock Purchase  Warrant with AJW Partners,  LLC, dated July 20,
          2004.

4.29      Common Stock Purchase Warrant with AJW Qualified Partners,  LLC, dated
          July 20, 2004.

4.30      Common Stock Purchase Warrant with New Millennium Capital Partners II,
          LLC, dated July 20, 2004.

4.31      Common Stock Purchase Warrant with AJW Offshore,  Ltd., dated December
          17, 2004,  filed as an exhibit to the current report on Form 8-K filed
          with the  Commission on December 23, 2004 and  incorporated  herein by
          reference.

4.32      Common Stock Purchase  Warrant with AJW Partners,  LLC, dated December
          17, 2004,  filed as an exhibit to the current report on Form 8-K filed
          with the  Commission on December 23, 2004 and  incorporated  herein by
          reference.

4.33      Common Stock Purchase Warrant with AJW Qualified Partners,  LLC, dated
          December 17, 2004,  filed as an exhibit to the current  report on Form
          8-K filed with the  Commission  on December 23, 2004 and  incorporated
          herein by reference.

4.34      Common Stock Purchase Warrant with New Millennium Capital Partners II,
          LLC,  dated  December  17,  2004,  filed as an exhibit to the  current
          report on Form 8-K filed with the  Commission on December 23, 2004 and
          incorporated herein by reference.

4.35      Secured  Convertible Note with AJW Offshore,  Ltd., dated December 17,
          2004, filed as an exhibit to the current report on Form 8-K filed with
          the  Commission  on  December  23,  2004 and  incorporated  herein  by
          reference.

4.36      Secured  Convertible  Note with AJW Partners,  LLC, dated December 17,
          2004, filed as an exhibit to the current report on Form 8-K filed with
          the  Commission  on  December  23,  2004 and  incorporated  herein  by
          reference.

4.37      Secured  Convertible  Note with AJW  Qualified  Partners,  LLC,  dated
          December 17, 2004,  filed as an exhibit to the current  report on Form
          8-K filed with the  Commission  on December 23, 2004 and  incorporated
          herein by reference.

4.38      Secured Convertible Note with New Millennium Capital Partners II, LLC,
          dated December 17, 2004,  filed as an exhibit to the current report on
          Form  8-K  filed  with  the   Commission  on  December  23,  2004  and
          incorporated herein by reference.

                                       33
<PAGE>
4.39      Securities Purchase  Agreement,  dated as of December 17, 2004, by and
          among Pacificap Entertainment  Holdings,  Inc., AJW Partners, LLC, AJW
          Qualified Partners, LLC, AJW Offshore, Ltd. and New Millennium Capital
          Partners  II, LLC,  filed as an exhibit to the current  report on Form
          8-K filed with the  Commission  on December 23, 2004 and  incorporated
          herein by reference.

4.40      Security  Agreement,  dated as of  December  17,  2004,  by and  among
          Pacificap  Entertainment  Holdings,   Inc.,  AJW  Partners,  LLC,  AJW
          Qualified Partners, LLC, AJW Offshore, Ltd. and New Millennium Capital
          Partners  II, LLC,  filed as an exhibit to the current  report on Form
          8-K filed with the  Commission  on December 23, 2004 and  incorporated
          herein by reference.

4.41      Intellectual  Property  Security  Agreement,  dated as of December 17,
          2004,  by  and  among  Pacificap  Entertainment  Holdings,  Inc.,  AJW
          Partners, LLC, AJW Qualified Partners, LLC, AJW Offshore, Ltd. and New
          Millennium  Capital  Partners  II,  LLC,  filed as an  exhibit  to the
          current  report on Form 8-K filed with the  Commission on December 23,
          2004 and incorporated herein by reference.

4.42      Registration  Rights Agreement,  dated as of December 17, 2004, by and
          among Pacificap Entertainment  Holdings,  Inc., AJW Partners, LLC, AJW
          Qualified Partners, LLC, AJW Offshore, Ltd. and New Millennium Capital
          Partners  II, LLC,  filed as an exhibit to the current  report on Form
          8-K filed with the  Commission  on December 23, 2004 and  incorporated
          herein by reference.

4.43      Guaranty and Pledge  Agreement,  dated as of December 17, 2004, by and
          among Pacificap Entertainment  Holdings,  Inc., AJW Partners, LLC, AJW
          Qualified  Partners,  LLC, AJW Offshore,  Ltd., New Millennium Capital
          Partners II, LLC and Michael Riley, filed as an exhibit to the current
          report on Form 8-K filed with the  Commission on December 23, 2004 and
          incorporated herein by reference.

4.44      Guaranty and Pledge  Agreement,  dated as of December 17, 2004, by and
          among Pacificap Entertainment  Holdings,  Inc., AJW Partners, LLC, AJW
          Qualified  Partners,  LLC, AJW Offshore,  Ltd., New Millennium Capital
          Partners II, LLC and Edward Litwak, filed as an exhibit to the current
          report on Form 8-K filed with the  Commission on December 23, 2004 and
          incorporated herein by reference.

10.1      Indemnification Agreement with Edward E. Litwak, filed as Exhibit 10.1
          to the registration  statement on Form 10-SB filed with the Commission
          on March 20, 2001 and incorporated herein by reference.

10.2      Indemnification Agreement with Carol Conners, filed as Exhibit 10.3 to
          the registration  statement on Form 10-SB filed with the Commission on
          March 20, 2001 and incorporated herein by reference.

                                       34
<PAGE>
10.3      Indemnification  Agreement with Michael Haynes,  filed as Exhibit 10.4
          to the registration  statement on Form 10-SB filed with the Commission
          on March 20, 2001 and incorporated herein by reference.

10.4      Indemnification  Agreement  with Don Parson,  filed as Exhibit 10.5 to
          the registration  statement on Form 10-SB filed with the Commission on
          March 20, 2001 and incorporated herein by reference.

10.5      Indemnification Agreement with Dennis Murphy, filed as Exhibit 10.6 to
          the registration  statement on Form 10-SB filed with the Commission on
          March 20, 2001 and incorporated herein by reference.

10.6      Indemnification Agreement with Edwin Ruh, filed as Exhibit 10.7 to the
          registration  statement  on Form 10-SB  filed with the  Commission  on
          March 20, 2001 and incorporated herein by reference.

10.7      License  Agreement with Jennifer  Gucci,  filed as Exhibit 10.8 to the
          registration  statement  on Form 10-SB  filed with the  Commission  on
          March 20, 2001 and incorporated herein by reference.

10.8      License  Agreement  with Gemma  Gucci,  filed as  Exhibit  10.9 to the
          registration  statement  on Form 10-SB  filed with the  Commission  on
          March 20, 2001 and incorporated herein by reference.

10.9      Assignment  of License  Agreements  to Gemma  Global,  Inc.,  filed as
          Exhibit 10.10 to the  registration  statement on Form 10-SB filed with
          the Commission on March 20, 2001 and incorporated herein by reference.

10.10     Gemma  Global,   Inc.  Assignment  of  License  Agreements  to  Global
          International,  Inc.,  filed  as  Exhibit  10.11  to the  registration
          statement  on Form 10-SB filed with the  Commission  on March 20, 2001
          and incorporated herein by reference.

10.11     Indemnification  Agreement with Michael Riley,  filed as Exhibit 10.15
          to the annual  report on Form 10-KSB filed with the  Commission on May
          11, 2004 and incorporated herein by reference.

10.12     Employment  Agreement  with Ed Litwak,  filed as Exhibit  10.16 to the
          annual report on Form 10-KSB filed with the Commission on May 11, 2004
          and incorporated herein by reference.

14.1      Code of  Ethics,  filed as Exhibit  14.1 to the annual  report on Form
          10-KSB  filed with the  Commission  on May 11,  2004 and  incorporated
          herein by reference.

23.1      Consent of Independent Certified Public Accountants

31.1      Certification  of Chief Executive  Officer pursuant to Rule 13a-14 and
          Rule 15d-14(a),  promulgated  under the Securities and Exchange Act of
          1934, as amended

31.2      Certification  of Chief Financial  Officer pursuant to Rule 13a-14 and
          Rule 15d 14(a),  promulgated  under the Securities and Exchange Act of
          1934, as amended

32.1      Certification  pursuant to 18 U.S.C. Section 1350, as adopted pursuant
          to Section  906 of the  Sarbanes-Oxley  Act of 2002  (Chief  Executive
          Officer)

32.2      Certification  pursuant to 18 U.S.C. Section 1350, as adopted pursuant
          to Section  906 of the  Sarbanes-Oxley  Act of 2002  (Chief  Financial
          Officer)

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

Audit Fees

     The  aggregate  fees  billed by our  auditors,  for  professional  services
rendered for the audit of the  Company's  annual  financial  statements  for the
years ended  December  31, 2003 and 2002,  and for the reviews of the  financial
statements included in the Company's Quarterly Reports on Form 10-QSB during the
fiscal years were $47,655 and $20,081, respectively.

                                       35
<PAGE>
Tax Fees

     Russell Bedford  Stefanou  Mirchandani LLP did not bill the Company for tax
related work during fiscal 2003 or 2002.

All Other Fees

     Russell Bedford  Stefanou  Mirchandani LLP did not bill the Company for any
other services during fiscal 2003 or 2002.

Policy  On Audit  Committee  Pre-Approval  Of Audit  And  Permissible  Non-Audit
Services Of Independent Auditors

     The Company  currently  does not have a  designated  Audit  Committee,  and
accordingly,  the Company's  Board of Directors'  policy is to  pre-approve  all
audit and permissible  non-audit services provided by the independent  auditors.
These services may include audit services,  audit-related services, tax services
and other services.  Pre-approval  is generally  provided for up to one year and
any  pre-approval  is  detailed  as to the  particular  service or  category  of
services and is generally subject to a specific budget. The independent auditors
and management  are required to  periodically  report to the Company's  Board of
Directors regarding the extent of services provided by the independent  auditors
in accordance with this pre-approval, and the fees for the services performed to
date.  The Board of  Directors  may also  pre-approve  particular  services on a
case-by-case basis.

                                       36
<PAGE>


                                   SIGNATURES

     Pursuant  to the  requirements  of  Section  13 or 15(d) of the  Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
our behalf by the undersigned, thereunto duly authorized.


                                  PACIFICAP ENTERTAINMENT HOLDINGS, INC.


Dated:  April 20, 2005            By: /s/ EDWARD LITWAK
                                  ---------------------
                                  Edward Litwak
                                  Chief Executive Officer (Principal Executive
                                  Officer)

Dated:  April 20, 2005            By: /s/ EDWARD LITWAK
                                  ---------------------
                                  Edward Litwak
                                  Chief Financial Officer (Principal Financial
                                  Officer)

     Pursuant to the  requirements of the Securities  Exchange Act of 1934, this
report  has  been  signed  below  by the  following  persons  on  behalf  of the
registrant and in the capacities and on the dates indicated.

SIGNATURE                          TITLE                              DATE

/s/ EDWARD LITWAK         President, Chief Financial Officer      April 20, 2005
-----------------------   and Director
    Edward Litwak

/s/ MICHAEL RILEY         Chairman of the Board of Directors      April 20, 2005
-----------------------
    Michael Riley

/s/ DONALD PARSON         Director                                April 20, 2005
-----------------------
    Donald Parson

/s/ ROBERT STULMAN        Director                                April 20, 2005
-----------------------
    Robert Stulman


                                       37