# UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549

# FORM 8-K

# CURRENT REPORT

Pursuant to Section 13
or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of
Earliest Event Reported):   February 18, 2005

CapSource Financial, Inc.
(Exact Name of Registrant as Specified in Charter)

|Colorado                        |  | 1-31730                  |  | 84-1334453                        | 
|------------------------------- |  | ------------------------ |  | --------------------------------- | 
|(State or Other Jurisdiction of |  | (Commission File Number) |  | (IRS Employer Identification No.) | 
|Incorporation)                  | 

2305 Canyon Boulevard, Suite 103, Boulder, CO
     80302(Address of Principal Executive Offices)
     (Zip Code)


Registrants telephone number, including area code:
     (303) 245-0515


Not Applicable
(Former Name or Former Address, if Changed Since Last Report)

Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

| | o |  | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
| | - |  | -------------------------------------------------------------------------------------

| | o |  | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
| | - |  | --------------------------------------------------------------------------------------

| | o |  | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
| | - |  | ------------------------------------------------------------------------------------------------------

| | o |  | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
| | - |  | ------------------------------------------------------------------------------------------------------

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# Item 3.02.   Unregistered Sales of Equity Securities

CapSource  Financial,  Inc.  disclosed that on February 18, 2005,  Randolph M. Pentel,  its Chairman and largest  shareholder,
converted  $1,100,000  of debt and accrued  interest owed to him by the company  pursuant to promissory  notes into common stock of the
company.   Prior to the conversion, Mr. Pentel held $2,032,521 of company debt.

The promissory notes being converted specified annual interest rates of between 6 1/2% and 10% and were not, by their original terms,
convertible into common stock of the company.  The conversion price for this debt was established by the companys board of directors
at $.80 per share.

A total of 1,375,000  shares of the companys  common stock was issued to Mr. Pentel in satisfaction  of the debt  represented
by the promissory notes.

After the issuance of the shares  represented by the conversion of the promissory  notes, the company has 11,165,999 shares of
its common stock  outstanding.  Of this amount Mr.  Pentel now owns  10,089,200  shares or 90.36% of the companys  outstanding  common
stock.  Prior to the debt conversion Mr. Pentel owned 8,714,200 shares or 89% of the total.

The debt converted is approximately 26% of the companys total outstanding debt as of February 18, 2005, the conversion date.  The
conversion will save the company approximately $77,000 in annual interest expense.

The transaction was made in reliance
upon the exemptions from registration provided under Section 4(2), or 4(6) of the
Securities Act, or Regulation D.

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SIGNATURE

Pursuant to the requirements
of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned
hereunto duly authorized.

|                        |                                                                         |                                       |  |                          | 
|----------------------- | ----------------------------------------------------------------------- | ------------------------------------- |  | ------------------------ | 
|                        |                                                                         | CAPSOURCE FINANCIAL, INC.(Registrant)
|Dated:   March 29, 2005 |                                                                         | By:                                   |  | /s/   Steven E. Reichert | 
|                        |                                                                        
|                        | Name:   Steven E. ReichertTitle:     Vice President and General Counsel |                                      

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