SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Form 1O-QSB
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the Quarterly Period Ended September 30, 1998
[ ] Transition report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934, For the transition period from
___________ to ____________
Commission File Number 333-18967
AMERICAN CHAMPION ENTERTAINMENT, INC.
(Exact Name of Registrant as Specified in its Charter)
Delaware 94-3261987
(State or Other Jurisdiction or (IRS Employer Identification Number)
Incorporation or Organization)
1694 The Alameda, Suite 100, San Jose, California 95126-2219
(408) 288-8199
(Registrant's Address of Principal Executive Offices and Telephone Number)
(No Change)
Former Name, Former Address and Former Fiscal Year, if Changed Since Last
Report
Indicate by check mark whether the registrant: (1) 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 (2) has been subject to such filing requirements for the past 90
days.
Yes ..X.. No .....
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING
THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents
and reports required to be filed by Section 12, 13 or 15 (d) of the
Securities Exchange Act of 1934 subsequent to the distribution of
securities under a plan confirmed by a court.
Yes ..... No .....
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of the latest practicable date.
Class Outstanding at September 30, 1998
- ------------------------------ -----------------------------
Common Stock, $.0001 par value 3,844,285 shares
Transitional Small Business Disclosure Format (check one)
Yes ..... No ..X..
Exhibit Index on Page 25
<PAGE>
AMERICAN CHAMPION ENTERTAINMENT, INC.
Form 10-QSB
September 30, 1998
TABLE OF CONTENTS
PART I - Financial Information Page
Item 1. Financial Statements 3
Consolidated Balance Sheet as of September 30, 1998 3
Consolidated Statements of Operations for
the three month periods and the nine month periods
ended September 30, 1998 and 1997 4
Consolidated Statements of Cash Flows for
the nine month periods end September 30, 1998 and 1997 5
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and analysis of
Financial Condition and Results of Operations 10
PART II - Other Information
Item 1. Legal Proceedings 12
Item 6. Exhibits and Reports on Form 8-K 12
Signatures 12
Exhibit Index 13
Exhibits 15
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1- Financial Statements - (unaudited)
AMERICAN CHAMPION ENTERTAINMENT, INC.
Condensed Consolidated Balance Sheets
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997
------------ ------------
<S> <C> <C>
Assets (unaudited)
Current assets:
Cash....................................... $178,021 $1,795,657
Account receivable......................... 9,440 220,817
Loans receivable, related parties.......... 113,973 114,773
Current portion of note receivable 6,401 0
Current portion of film costs.............. 1,200,000 655,500
Prepaid expenses and other................. 99,497 96,556
------------ ------------
Total current assets....................... 1,607,332 2,883,303
Property and equipment, net.................. 421,153 255,423
Other Assets
Film costs, net.............................. 3,471,597 1,789,917
Note receivable 46,458 0
Other assets................................. 34,852 35,152
------------ ------------
$5,581,392 $4,963,795
============ ============
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable and accrued expenses...... $576,764 $199,344
Deferred revenues, current portion......... 137,759 282,056
Loans payable, related parties............. 150,864 37,255
Long-term debt, current portion............ 6,307 5,856
Obligations under capital leases,
current portion.......................... 10,945 10,157
Other...................................... 4,216 4,216
------------ ------------
Total current liabilities.................. 886,855 538,884
------------ ------------
Long-term liabilities:
Deferred revenues.......................... 55,179 261,464
Long-term Debt............................. 1,069,037 58,343
Obligations under capital leases........... 89,392 6,565
Other...................................... 2,108 4,216
------------ ------------
Total long-term liabilities................ 1,215,716 330,588
------------ ------------
Stockholders' Equity:
Common stock, $.0001 par value, 3,832,345 o.t. 5,573,716 5,529,419
Common stock warrants...................... 275,775 149,500
Accumulated deficit........................ (2,370,670) (1,584,596)
------------ ------------
Total stockholders' equity ................ 3,478,821 4,094,323
------------ ------------
$5,581,392 $4,963,795
============ ============
</TABLE>
See accompanying notes.
<PAGE>
AMERICAN CHAMPION ENTERTAINMENT, INC.
Condensed Consolidated Statements of Operations
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
--------------------- ---------------------
1998 1997 1998 1997
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
REVENUE:
Tuition and related fees......... $53,048 $249,034 $371,980 $676,446
Accessories and video sales...... 13,191 14,459 36,067 54,209
Film income...................... 47,499 -- 294,166 0
Interest income.................. 625 29,136 29,723 29,136
---------- ---------- ---------- ----------
Total revenue.................... 114,363 292,629 731,936 759,791
---------- ---------- ---------- ----------
COSTS AND EXPENSES:
Cost of sales.................... 1,878 10,122 15,870 36,097
Amortization of film costs....... 21,973 -- 106,993 0
Salaries and payroll taxes....... 237,627 200,145 636,213 581,283
Rent............................. 90,893 100,408 248,590 334,273
Selling, general and
administrative................. 225,707 68,031 615,633 193,043
Interest......................... 46,575 7,714 64,237 103,544
Write off of film costs.......... 0 -- 0 0
Write off of loan fees........... 0 -- 0 0
Facilities closure costs......... 0 57,000 0 57,000
---------- ---------- ---------- ----------
Total costs and expenses......... 624,653 443,420 1,687,536 1,305,240
---------- ---------- ---------- ----------
Net Loss From Operations............($510,290) ($150,791) ($955,600) ($545,449)
Gain On Sale Of Studio 61,503 0 176,976 0
Net Loss Before Income Tax (448,787) (150,791) (778,624) (545,449)
Income Tax 0 0 7,450 0
Net Loss (448,787) (150,791) (786,074) (545,449)
Accumulated Deficit (2,370,670) (1,328,631) (2,370,670) (1,328,631)
Weighted average number of shares
outstanding...................... 3,834,529 3,341,360 3,833,073 2,813,086
========== ========== ========== ==========
Net loss per share................. ($0.12) ($0.05) ($0.21) ($0.19)
========== ========== ========== ==========
</TABLE>
See accompanying notes.
<PAGE>
AMERICAN CHAMPION ENTERTAINMENT, INC.
Condensed Consolidated Statements of Cash Flows
(unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
Sept 30,
-----------------------
1998 1997
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss........................................ ($786,074) ($545,449)
Adjustments to reconcile net loss to
net cash used for operating activities:
Gain on sale of studio...................... ($176,976) $0
Depreciation and amortization............... 160,746 29,539
Write off of film costs..................... 0 --
Interest amortization, debt issue costs..... 25,313 48,772
Rent concession amortization................ (2,108) (3,162)
Loss on property and equipment.............. 0 440
Common stock issued related to salary....... 0 72,225
Common stock issued related to loan fees.... 0 65,000
Decrease in:
Accounts receivable........................... 211,377 --
Prepaid expenses and other.................... (3,005) (145,986)
Increase in: 0 0
Accounts payable and accrued expenses......... 377,420 (128,122)
Deferred revenues............................. (226,465) (248,002)
Other liabilities............................. 0 --
----------- -----------
Net cash used for operating activities..... (419,772) (854,745)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment.............. (129,600) (126,593)
Payments for film costs......................... (2,334,513) (848,687)
Payments on loans receivable, related parties... 1,164 (27,579)
Deposits........................................ 0 16,705
----------- -----------
Net cash used for investing activities..... (2,462,949) (986,154)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stocks......... 0 6,748,020
Proceeds from issuance of warrants.............. 16,900 149,500
Deferred Offering costs......................... 0 (1,314,870)
Rescission of common stock...................... 0 --
Proceeds of short-term debts.................... 0 (102,112)
Proceeds (payments) of loans from related
parties....................................... 113,609 (292,017)
Proceeds (payments) on long-term debt........... 1,139,504 (65,344)
Principal payments on capital leases............ (4,928) (23,022)
----------- -----------
Net cash provided by financing activities.. 1,265,085 5,100,155
----------- -----------
NET INCREASE IN CASH............................ (1,617,636) 3,259,256
CASH, beginning of period....................... 1,795,657 28,763
----------- -----------
CASH, end of period............................. $178,021 $3,288,019
=========== ===========
Cash paid during the year for:
Interest.................................... $51,738 $67,782
State income taxes.......................... 5,050 1,600
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Equipment acquired through capital lease.... 88,500 0
Warrants isssued in connection with debentures 109,375 0
Loan fees associated with debentures 102,800 0
Debentures converted to common stock 44,300 0
Common stock issued for short-term debt 0 27,000
Debts converted to equity 0 133,500
Common stock to be issued related to film costs 0 26,000
</TABLE>
See accompanying notes.
<PAGE>
PART I - FINANCIAL INFORMATION
Notes to Consolidated Financial Statements
Note 1 - Nature of Operations and Summary of Significant Accounting Policies
Nature of Operations and Consolidation - The consolidated
financial statements include the accounts of American Champion
Entertainment, Inc. (the "Company") and its wholly owned
subsidiary, America's Best Karate ("ABK") which owns 100% of
American Champion Media, Inc. ("AC Media"). The Company and AC
Media were formed during 1997. Pursuant to an Agreement and Plan
of Merger, dated as of July 14, 1997, the Company entered into a
reorganization transaction pursuant to which the Company acquired
all of the issued and outstanding shares of ABK (the
"Reorganization"). The financial statements included herein give
effect to the Reorganization in which the Company became the
successor to ABK. All significant intercompany accounts and
transactions have been eliminated in consolidation.
AC Media focuses on operating and managing all media-related
programs for the Company. These programs consist of fitness
information video tapes, books and audio tapes and production of
educational television programs for children which emphasize
martial arts values and fun. ABK focuses solely on operating and
managing the Company's karate studios which are located in the
San Francisco Bay Area.
Significant accounting policies of the Company are set forth in
the Company's financial statements for the year ended December
31, 1997 included in the Company's Form 10-KSB as filed with the
Securities and Exchange Commission ("SEC") on March 30, 1998.
Note 2 - Basis of Reporting
The accompanying unaudited financial statements have been
prepared in accordance with generally accepted accounting
principles for interim financial information and with the
instructions to Form 10-QSB. Accordingly, they do not include
all of the information and disclosures required by generally
accepted accounting principles for completed financial
statements. In the opinion of management, such statements
include all adjustments (consisting only of normal recurring
items) which are considered necessary for a fair presentation of
the financial position of the Company at September 30, 1998 and
the results of its operations and its cash flows for the nine
months periods ended September 30, 1998 and 1997. The
accompanying unaudited financial statements should be read in
conjunction with the financial statements and notes for the year
ended December 31, 1997 included in the Company's Form 10-KSB as
filed with the SEC on March 30, 1998.
<PAGE>
Note 3 - Uses of Estimates, Risks and Uncertainties
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
Significant estimates used in these financial statements include
the recovery of film costs which has a direct relationship to the
net realizable value of the related asset. It is at least
reasonably possible that management's estimate of revenue from
films could change in the near term which could have a material
adverse effect on the Company's financial condition.
Note 4 - Film Costs
Film costs consist of the capitalized costs related to the
production of videos and program for television as follows:
Television program
Adventures With Kanga Roddy $4,676,633
Videos
Montana Exercise Video 148,253
Strong Mind Fit Body 18,042
--------
4,842,928
--------
Less accumulated depreciation 171,331
--------
4,671,597
Less current portion of film costs 1,200,000
--------
Long-term portion of film costs $3,471,597
==========
Production of the first seven episodes of The Adventures of Kanga
Roddy was completed during 1997. Six additional episodes were
completed during the three months ended March 31, 1998.
Production for another seven episodes started in September 1998
and was completed on October 20, 1998.
Both videos were completed in 1996, but only the Strong Mind Fit
Body video has been released.
Note 5 - Related Party Transactions
Advances to stockholders were $113,973 at September 30, 1998.
In November 1996, the Company agreed to pay to two participants
of the Montana Exercise Video the sum of $50,000 from the
proceeds of the intended initial public offering and another
$50,000 will be paid 30 days prior to the release date. These two
participants are stockholders of the Company.
<PAGE>
Note 6 - Sale of Karate Studios
During the three months ended September 30, 1998, the Company
sold two karate studios to their managers, one in Danville and
one in Newark.
For the Danville studio, the Company received a note receivable
of $22,980 due in 60 monthly payments of $383 beginning October
1, 1998. The Company retained all advance payments of enrollment
fees which were $61,805.51 on September 30, 1998; however, the
Company is liable for any future refunds to students enrolled
prior to August 31, 1998. The Company reduced the liability for
advance payments of enrollment fees to $38,475 which is included
in deferred revenue.
For the Newark studio, the Company received $1 and retained all
advance payments of enrollment fees which were $37,591.72 on
September 30, 1998; however, the Company is liable for any future
refunds to students enrolled prior to September 30, 1998. The
Company reduced the liability for advance payments of enrollment
fees to $27,386 which is included in deferred revenue.
Management will evaluate this liability quarterly in light of
cancellations to date and expected future cancellations.
Note 7 - Financing through the sale of convertible debentures
During the quarter ended September 30, 1998, the Company sold
$1,250,000 in convertible debentures to two investors. The terms
of this transaction were filed by the Company on Form S-3 with
the SEC on August 12, 1998. The proceeds from which will be used
for production expenses.
Note 8 - Home Video Distributor and International TV Distributor
In August 1998, the Company signed non-exclusive contracts with
Kreative Video Products, Inc. of Chatsworth, California, for the
domestic distribution of the Kanga Roddy series and the Montana
Exercise Video. The Kanga Roddy series will be released in the
fourth quarter 1998 while the Montana Exercise Video is slated
for early 1999 release.
In the same month, the Company signed an exclusive contract with
Portfolio Entertainment of Toronto, Ontario, for the
international TV distribution of the Kanga Roddy series.
Note 9 - Subsequent Events
Subsequent to the end of the quarter, the Company completed the
sale of the remainder of convertible debentures in the amount of
$550,000 to two additional investors.
Note 10 - Year 2000
Management has assessed the Company's Year 2000 issued and has
determined that the consequences of its Year 2000 issues would
not have a material effect on the Company's business, results of
operations, or financial conditions.
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 2 - Management's Discussion And Analysis Of
Financial Condition And Results Of Operations
Forward Looking Information
The Private Securities Litigation Reform Act of 1995 provides a "safe
harbor" from liability for forward-looking statements. Certain
information included in this Form 10-QSB and other materials filed or
to be filed by the Company with the Securities and Exchange Commission
(as well as information included in oral statements or other written
statements made or to be made by or on behalf of the Company) are
forward-looking, such as statements relating to operational and
financing plans, capital uses and resources, competition, and demands
for the Company's products and services. Such forward-looking
statements involve important risks and uncertainties, many of which
will be beyond the control of the Company. These risks and
uncertainties could significantly affect anticipated results in the
future, both short-term and long-term, and accordingly, such results
may differ from those expressed in forward-looking statements made by
or on behalf of the Company. These risks and uncertainties include, but
are not limited to, the acceptance by the television viewer and public
television stations of the television series - ADVENTURES WITH KANGA
RODDY, production delays and/or cost overruns with respect to such
series, changes in external competitive market factors or in the
Company's internal budgeting process which might impact trends in the
Company's results of operations, unanticipated working capital or other
cash requirements, changes in the Company's business strategy or an
inability to execute its strategy due to unanticipated change in the
industries in which it operates; and various competitive factors that
may prevent the Company from competing successfully in the marketplace.
The following section discusses the significant operating changes,
business trends, financial condition, earnings and liquidity that have
occurred in the three-month period ended September 30, 1998. This
discussion should be read in conjunction with the Company's
consolidated financial statements and notes appearing elsewhere in this
report.
Results of Operations
Revenues. For the three months ended September 30, 1998, the
Company's total revenue decreased to $114,363, a decrease of $178,266
or 61% as compared to total revenue for the three months ended
September 30, 1997 of $292,629. This decrease is mainly due to the
closure of the Company's karate studios, including two studios which
were sold to former employees within this quarter. Film income derived
from sponsorship revenue for the television show "Adventures With
Kanga Roddy" partially offset the decrease in total revenue.
The Company's revenues from the operation of its karate studios
for the three months ended September 30, 1998 was $53,048, an decrease
of 79% from revenues of $249,034, for the three months ended
September 30, 1997. The decrease is attributable to closure of the
Company's karate studios.
For the three months ended September 30, 1998, film income was
$47,499. Film income was derived from sponsorship revenue for the television
show "Adventures With Kanga Roddy". On April 29, 1998, the Company executed a
sponsorship agreement with Sara Lee Corporation, the parent company of Hanes
Corporation ("Hanes"), which provides for Hanes' corporate sponsorship of the
"Adventures With Kanga Roddy" show. The sponsorship amount was $95,000 for the
sponsorship period from May 1998 through October 1998.
<PAGE>
Costs and Expenses. Revenue from the Company's karate
studios and film business was offset by the amortization of film costs of
$21,973, calculated in proportion to the revenue generated by the
television show in this third quarter to total expected revenues from
the television show.
The Company's expenses for salaries and payroll taxes increased by
$37,482, or 19%, to $237,627 for the three months ended September 30, 1998,
from $200,145 for the comparable period in 1997. The increase was the
combined result of a decrease in karate studio personnel offset by an increase
in administrative and marketing personnel.
Rent expense decreased by $9,515, or 9%, to $90,893 for the three
months ended September 30, 1998, from $100,408 for the comparable period in
1997. The decrease is due to the closure of karate studios, but is partially
offset by the increased expense of the new Company's new corporate office which
the Company has occupied since the end of July 1998. The Company currently
operates a total of two studios in California.
Total selling, general and administrative expenses increased by
$157,676, or 232%, to $225,707 for the three months ended September 30, 1998,
from $68,031 for the comparable period in 1997. This increase is primarily
due to increased promotional expenses related to the television show,
depreciation of production equipment and legal and accounting fees.
Interest expense increased $38,861 to $46,575 for the three months
ended September 30, 1998, from $7,714 for the comparable period in 1997.
This increase is attributable to accrued interest on debentures the Company
sold during this quarter.
As a result of the foregoing factors, the Company's net loss for the
three months ended September 30, 1998 was $448,787 which represented an
increase of $297,996 or 198%, from $150,791 for the comparable period in
1997. Net loss per share increased to $0.12 for the three months ended
September 30, 1998 from $0.05 for the comparable period in 1997. Weighted
average number of shares outstanding increased to 3,834,529 for the three
months ended September 30, 1998 from 3,341,360 for the comparable period in
1997, due to shares issued upon the conversion of convertible debentures sold
by the Company during this quarter.
Liquidity And Capital Resources
Cash decreased for the nine months ended September 30, 1998 by
$1,617,636 to $178,021. The decrease in cash is attributable to $2,334,513 of
investments in the production of Adventures With Kanga Roddy, offset by
$1,265,085 which was raised by the Company through financing activities. Net
operating cash loss was $419,772.
As of September 30, 1998, total long-term debt was $1,075,344 and
loans payable to related parties was $150,864. In addition, deferred
revenues were $137,759 (current portion) and $55,179 (long-term
liabilities) at September 30, 1998. Deferred revenues represent pre-paid
tuition for the karate studios and booked revenue from sponsorship
activities and cannot be immediately recognized.
Due to the closure of the Company's two karate studios in Las
Vegas, lease obligations were restructured with the property
owners. For these two leases, the Company is obligated to pay a total
of approximately $4,150 monthly until April 2000, and thereafter $1,500
monthly until November 2002.
<PAGE>
Recent Developments
On November 3, 1998 the Company completed the sale of $550,000 of
convertible debentures to two investors pursuant to a private offering in
which, to date, the Company raised an aggregate of $1,800,000. Proceeds will
be used for the production of Adventures With Kanga Roddy.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
On April 24,1998, the Company filed a Complaint for Declaratory Relief in the
U.S. District Court, Northern District of California, against William Charles
Jeffreys, requesting a judicial determination of the Company's rights in
certain intellectual property associated with the Adventures with Kanga Roddy
show, and that Mr. Jeffreys has no such rights. Mr. Jeffreys filed an answer
to the Company's complaint on June 15, 1998 along with a counterclaim. On
July 6 the Company filed an answer to Mr. Jeffreys counterclaim. The Company
contests all of Mr. Jeffreys' claims to an interest in certain of the
Company's intellectual property and intends to vigorously protect its
ownership and rights to such intellectual property.
On July 28, 1998, in a correspondence written to Mr. Jeffreys'
attorney, an examiner of the Performing Arts Section of the Library of
Congress stated: "Examination of the facts presented does not establish
a basis for considering Mr. Jeffreys' contributions to this work to be
copyrightable. Lacking such basis, we will refuse registration."
Subsequently on September 2, 1998, Mr. Jeffreys filed an amended
counterclaim in which his claim against the Company for copyright
infringement has been dropped.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits. See the Exhibit Index beginning on page 24.
(b) Reports on Form 8-K. No reports on Form 8-K were filed
during the quarter for which this report is filed.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Company has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
AMERICAN CHAMPION ENTERTAINMENT, INC.
(Registrant)
Dated: November 16, 1998 By: /s/ Anthony K. Chan
Anthony K. Chan, Chief Executive Officer
<PAGE>
INDEX TO EXHIBITS
Exhibit No. Exhibit
1.1(1) Form of Underwriting Agreement
3.1(1) Amended and Restated Certificate of Incorporation dated April 24, 1997
3.11(5) Amended and Restated Certificate of Incorporation dated June 4, 1998
3.2(1) Bylaws
4.1(1) Specimen stock certificate
4.2(1) Warrant Agreement with form of Warrant
4.3(1) Form of Underwriters' Warrant
4.41(4) Securities Purchase Agreement dated July 2, 1998
4.42(4) Form of Debenture dated July 2, 1998
4.43(4) Joint Escrow Instructions
4.44(4) Registration Rights Agreement dated July 2, 1998
4.45(4) Form of Warrant dated July 2, 1998
5(1) Opinion of Sheppard, Mullin, Richter & Hampton LLP
10.1(1) 1997 Stock Plan
10.2(1) Form of Stock Option Agreement for 1997 Stock Plan
10.3(1) 1997 Non-Employee Directors Stock Option Plan
10.4(1) Form of Non-Employee Directors Stock Option Agreement
10.8(1) Promissory Note dated December 15, 1994 made payable by Messrs.
Chung and Chan and their wives in favor of Michael Triantos M.D.
Inc. Money Purchase and Profit Sharing Pension Plans Trust
10.9(1) Employment Agreement between the Company and George Chung dated
March 4, 1997, effective upon the closing date of the Offering
10.10(1) Employment Agreement between the Company and Anthony Chan dated
March 4, 1997, effective upon the closing date of the Offering
10.11(1) Employment Agreement between the Company and Don Berryessa dated
March 4, 1997, effective upon the closing date of the Offering
10.12(1) Employment Agreement between the Company, AC Media and Jan
Hutchins dated March 4, 1997, effective upon the closing date of
the Offering
10.13(1) Convertible Loan Agreement dated as of May 5, 1995, between ABK
and David Y. Lei
10.15(1) Amended Deal Memo between ABK and Rick Fichter dated February
23, 1997, with respect to payments related to the Kanga Roddy
Series
10.17(1) Form of Indemnification Agreement
10.19(1) Letter dated October 29, 1996 from the Company to Tim Pettitt
regarding certain payments to the Montanas
10.20(1) Distribution Agreement dated June 18, 1996 by and between
America's Best Karate and InteliQuest
10.21(1) Distribution Agreement, dated May 6, 1997, by and between KTEH,
San Jose Public Television and American Champion Media, Inc.
10.22(1) Letter Agreement, dated June 1997, between AC Media, Inc. and
Sega of America, Inc.
10.23(1) Business Loan Agreement between America's Best Karate and Karen
Shen
10.24(1) Business Loan Agreement between America's Best Karate and Thomas
J. Woo
10.25(2) Licensing Agent Agreement, dated July 25, 1997, between American
Champion Media, Inc. and Sega of America, Inc.
10.26(3) Continuous Distribution Agreement dated April 20, 1998 between
KTEH, San Jose and American Champion Media, Inc.
10.27(3) Sponsorship Agreement dated April 29, 1998 between Sara Lee
Corporation and American Champion Media, Inc.
10.28(3) Engagement Agreement dated April 24, 1998 between JW Charles
and American Champion Entertainment, Inc.
10.29(5) Amendment to Employment Agreement with George Chung, dated July 1,
1998
10.30(5) Amendment to Employment Agreement with Anthony Chan, dated July 1,
1998
10.31(5) Amendment to Employment Agreement with Don Berryessa, dated July 1,
1998
10.32(5) Amendment to Employment Agreement with Jan Hutchins, dated July 1,
1998
10.33(5) Amendment to Employment Agreement with Mae Lyn Woo, dated July 1,
1998
10.34(5) Amendment to Employment Agreement with Kristen Simpson, dated July 1,
1998
10.35 International Distribution Agreement with Portfolio Entertainment
dated August 19, 1998
10.36 Video Distribution Agreement for the Kanga Roddy Series with Kreative
Video Products dated August 19, 1998
10.37 Video Distribution Agreement for the Montana Exercise Video with
Kreative Video Products dated August 21, 1998
21.1(1) Subsidiaries of the Registrant
23.1(2) Consent of Moss Adams, LLP
27.1 Financial Data Schedule
(1) Filed as an exhibit with the registrant's Form SB-2 filed with the
SEC on March 21, 1997 or Form SB-2/A filed March 3 and June
20, 1997 and incorporated by reference herein.
(2) Filed as an exhibit with the registrant's Form 10-KSB filed with the
SEC on March 30, 1998 and incorporated by reference herein.
(3) Filed as an exhibit with the registrant's Form 10-QSB filed with the
SEC on May 15, 1998 and incorporated by reference herein.
(4) Filed as an exhibit with the registrant's Form S-3 filed with the SEC
on August 3, 1998 and incorporated by reference herein.
(5) Filed as an exhibit with the registrant's Form 10-QSB filed with the
SEC on August 7, 1998 and incorporated by reference herein.
<PAGE>
EXHIBIT 10.35
AGREEMENT made this 20th day of August 1998
BETWEEN American Champion Media Inc.
1694 The Alameda, Suite 100
San lose, California 95126
U.S.A.
(herein called "Producer")
OF THE FIRST PART
-AND-
Portfolio Entertainment Inc.
124 Merton St., Suite 202
Toronto, Ontario
M4S 2Z2
(herein called "Distributor")
OF THE SECOND PART
1. GRANT OF RIGHTS
a) Producer hereby grants to Distributor the sole and exclusive right
to distribute, license, sub-license, market and exploit the series
entitled "Kanga Roddy" (the "Series") in its original and all other
languages, in all media including, without limitation, all forms of
television (including free, pay, cable, satellite, hotel/motel, closed
circuit (including systems installed on airlines and ships, and on
armed forces bases) and non-theatrically in the territories (the
"Territory") and for the term described in Schedule "A" attached
hereto hereinafter provided. Producer hereby grants to Distributor the
exclusive right to distribute all further television episodes of the
Series on the same terms provided herein. Such rights (herein called
"Rights") include the rights to:
i) make minor cuts or edits to meet censorship and time segment
requirements with consent from the Producer, provided that Distributor
shall not delete the credits or copyright notice as they appear in the
Series and to.
ii) insert Distributor's standard credit and logo. Producer grants to
Distributor the right to use clips and stills from the Series and the
names and likenesses of all persons who appear in connection with the
Series for the purpose of advertising and reasonable business
judgement, to maximize the exploitation of the Rights granted
hereunder.
2. TERM
The initial term of this Agreement shall commence on the execution of
this Agreement and shall expire three years later. Upon expiration or
termination, all rights shall revert to the Producer.
3. DELIVERY
a) Producer shall deliver to Distributor the following elements of
the Series as are necessary for Distributor to perform its services
hereunder including, specifically, those items described in Schedule
"B".
<PAGE>
b) Producer shall deliver the Series to the Distributor in conformity
with international broadcast standards and practices: in the event that
any of Distributor's licensees of the Series rejects the Product due to
non-conformity with such standards and practices, Distributor may, at
its option, terminate this Agreement and be relieved of all its
obligations hereunder. If there is a termination by the Distributor, it
should not be relieved of its obligations to pay any monies due and
owing to the Producer.
c) Producer shall, at its sole expense, secure and maintain copyright
protection for the Series by registering copyright therein within (90)
days of its first transmission and shall ensure that the appropriate
copyright notice is embodied in the credits on the Series.
4. COMPENSATION
a) In consideration for the services Distributor is rendering to
Producer hereunder, Distributor shall retain as its sole and exclusive
property from all sales of the Series, the distribution fees expressed
as a percentage of Gross Receipts as set out in Schedule "A" and all
reasonable and verifiable direct distribution expenses incurred in
connection with the distribution of the Series. Such expenses include,
without limitation: long distance phone calls, fax, photocopying,
delivery, bank charges, a pro rata share of direct pre-market
promotion, shipping, customs brokers, duplication of screening
cassettes and Series master tapes, PAL duplication, promotional
material, duplication i.e. slides and black & white prints, and any
direct publicity or promotional costs e.g. paid advertising,
withholding taxes (excluding income taxes) and costs incurred in
connection with the collection of monies owed.
b) "Gross Receipts" shall be defined to mean all monies actually
received by Distributor or its sub-distributors relating to the
exploitation of the Series.
c) After the termination of this Agreement, Distributor shall
nevertheless be entitled to receive distribution fees and recoupment of
distribution expenses due to it in respect of all agreements, for
exploitation of the Series in the Territory made by or on behalf of the
Producer between the dates of the commencement and termination of
rights granted to Distributor hereunder.
5. REPORTS AND ACCOUNTING
a) The Distributor shall give photo copies, within 10 (ten) business
days after execution to the Producer of all contracts into which the
Distributor shall enter for the exploitation of the Rights.
b) Distributor shall report all sales and account to Producer in
writing within sixty (60) days after the end of each calendar quarter
hereunder. The reports shall contain such information and data as
conform with normal and standard industry practice and such other
information data as shall be mutually agreed to between Distributor and
Producer, including copies of all contracts into which the Distributor
shall enter for the exploitation of the Rights. In this connection, it
is agreed that the reports shall include the following categories of
deductions to be made from Gross Receipts: Distributor's distribution
fees, distribution expenses, withholding taxes and any costs of
litigation directly tied to the distribution of the Series. Distributor
shall consult Producer with regard to paid advertising and printing
expenses.
c) After retaining Distributor's distribution fees and deducting
distribution expenses, withholding taxes and any costs of litigation,
Distributor shall attach to the report(s) a Cheque payable to Producer
in the appropriate amount of the balance of Gross Receipts received
during the period covered by the report(s). With respect to blocked
funds, Distributor will report such funds to Producer and, to the
extent permitted by applicable law, Producer will have the right to
require Distributor to deposit Producer's share of such funds in its
bank account in the country where such funds are blocked.
<PAGE>
d) Distributor shall keep true, complete and accurate books of
account and records pertaining to all financial transactions in
connection with the performance of Distributor's obligations under this
Agreement. Such books and records shall be available for inspection by
Producer or its representatives at Distributor's place of business
during normal business hours upon 24 hours notice to Distributor.
Producer or its representatives shall have the right to make copies of
the pertinent parts of all such books and records that directly relate
to such financial transactions.
e) Any dispute or objection relating to a statement may be raised
within two (2) years of the date of such statement. Thereafter
Producer's rights in connection with such error, dispute or statement
are forever waived. In the event that the Distributor's record is found
in excess of 10% error, the cost of the audit into the distributor's
record shall be assumed by the Distributor, provided that the
discrepancy noted in the audit is in excess of US$2,OOO (two thousand).
6. PROMOTIONAL MATERIALS AND LOAN MATERIAL
a) Producer shall furnish the Distributor with samples of advertising
materials, presentation reel, audition prints and/or video cassettes
for Series. Such items shall be shipped to the Distributor directly
upon request. If such items are supplied in insufficient quantities for
reasonable promotion, the Distributor shall have the right to prepare
with the Producer's approval video-cassettes for audition purposes with
respect to Series and, in such event, the Producer shall, out of sales
receipts, reimburse the Distributor for the cost of preparation of such
video-cassettes, unless such costs have been paid for by a third party.
In like manner, if brochures, flyers, or paper publicity are inadequate
for reasonable promotion, the Distributor has the right to prepare
brochures and, in this event, the Producer shall, out of sales
receipts, reimburse the Distributor for the cost of preparation of such
brochures, unless paid for by a third party .
b) At the expiration of the term of this Agreement, the Distributor
shall return to the Producer all such audition material as shall then
be in the Distributor's possession, at the Producer's expense.
c) Producer shall supply the Distributor on a loan basis all
materials described in Schedule "B".
7. WARRANTY
a) Producer warrants that Producer has the right to grant Distributor
the rights granted herein, that Distributor's exercise of those rights
will not infringe or violate the rights of any third party; that
Producer has the right and authority to enter into this Agreement, that
Producer has not entered into any agreement inconsistent with the terms
hereof and that the rights granted hereunder are free and clear of any
encumbrances. Producer to supply Distributor with termination letter
from any and all expired or terminated distribution agreements.
b) Producer warrants that it has obtained the necessary music
synchronization licenses for the exploitation and exhibition of the
Series as contemplated herein; and that all musical compositions in the
Series are controlled by ASCAP, BMI or another performing rights
society haying jurisdiction, or are in the public domain, or are
controlled by Producer (in which case licenses therefore are hereby
granted at no cost to Distributor).
<PAGE>
c) Distributor warrants that it has the right to enter into this
Agreement. Distributor further warrants that it will not duplicate or
otherwise reproduce the Series in any manner, nor contractually permit
any of its sublicensees to do so, except specifically in connection
with the distribution of the Series as permitted hereunder. Distributor
will use its reasonable efforts to obtain the return of such items.
8. INDEMNIFICATION
a) Each party shall indemnify and hold the other party, such parties
parent and affiliated entities, licensees, assigns, and their
respective agents, successors, officers, and employees, harmless from
and against any and all liabilities, claims, losses, or damages
(including reasonable attorney's fees and expenses) arising out of or
in connection with the breach or alleged breach of the indemnifying
party's representations, warranties, agreements and/or undertakings
contained herein.
b) Upon written request of and at the option of the indemnitee, which
request will be promptly given, the indemnitor will assume the defense
of any claim, demand or action against such indemnitee and will, upon
request by the indemnitee, allow the indemnitee to participate in the
defence thereof, such participation to be at the expense of the
indemnitee. Settlement by the indemnitee shall be made only with the
prior written consent of the indemnitor, which consent shall not be
unreasonably withheld.
9. DEFAULT
Without prejudice to any other rights which either party may have
against the other, this Agreement may be terminated at the option of
each of the parties in either of the following events:
a) If the other party shall be in material default hereunder and
shall have failed to cure such default within thirty (30) days after
written notice thereof; or
b) If the other party shall be adjudicated a bankrupt or make a
general assignment for the benefit of its creditors.
Distributor shall nevertheless be entitled to receive distribution fees
due to it in respect of all agreements made by on behalf of the
Producer between the date of the commencement and termination of rights
granted hereunder for the term of the series in the Territory.
10. ERRORS AND OMISSIONS
Producer agrees to obtain errors and omissions insurance covering
claims in amount acceptable to Distributor in respect of the Series by
not later than delivery of the Series.
Such errors and omissions insurance shall be in effect for a period of
five years from the date of delivery and shall name Distributor as an
additional named insured as its interest may appear, must be issued by
a recognized insurance company specializing in the issue of errors and
omissions insurance.
<PAGE>
11. RETURN OF MATERIALS
At the end of the term of this Agreement, Distributor will destroy or
return to Producer at Producer's expense the copies of the Series and
the materials set out in Schedule "B" subject to normal wear and tear.
In the event that Producer requests the destruction of these materials,
Distributor will provide Producer with a certificate of destruction of
the materials.
12. NOTICES
Any notice required to be given hereunder shall be given in writing and
delivered personally or sent by prepaid telegram or registered mail to
each of the parties at their respective addresses hereinabove set forth
or at such other addresses as any party may hereafter notify the other
of in such manner. Any notice sent by telegram or by certified mail
shall be deemed given on the day such notice is given to the telegraph
office or mailed, as the case may be.
13. MISCELLANEOUS
This Agreement shall not be construed so as to constitute a partnership
or a joint venture between the parties hereto, and no party is deemed
to be the representative or the agent of the other except as herein
otherwise provided.
14. APPLICABLE LAW
This Agreement shall be construed according to the laws of the Province
of Ontario applicable to contracts made and wholly to be performed
therein.
<PAGE>
15. BINDING AGREEMENT
This Agreement constitutes and contains the entire understanding
between the parties and cannot be changed or modified except in writing
signed by both of the parties hereto.
Please indicate your agreement with the foregoing by signing in the
space provided below for your signature.
Yours very truly,
PORTFOLIO ENTERTAINMENT INC.
Per:
/s/ Joy Rosen August 21, 1998
- ---------------------------------------
(Distributor) Date
ACCEPTED AND AGREED TO:
Per:
/s/ Anthony K. Chan August 21, 1998
- ---------------------------------------
(Producer) Date
<PAGE>
SCHEDULE "A"
------------
SERIES: Kanga Roddy (39 x 30)
TERRITORIES: World excluding U.S.A. but to include Puerto Rico
RIGHTS: Television (cable, free, pay, satellite, etc)
Non-Theatrical
DISTRIBUTION
FEE: 35% of all gross television and non-theatrical sales
In territories where a sub-distributor is used,
combined fees will not exceed 45%
SCHEDULE "B"
------------
MATERIALS TO BE SUPPLIED:
A) 1 - Digital Betacam Videotape of each episode. Separate audio
tracks for music + effects and narration. No blacks.
B) Synopses of each episode, promotional information and
presentation reel.
C) Music cue sheets and production cue sheet.
D) Selection of at least 10 colour transparencies of Series.
E) Cast and crew bios.
F) Post-production script of each episode.
G) List of residual obligations of series.
H) Sales One-Sheet.
<PAGE>
EXHIBIT 10.36
NON-EXCLUSIVE DISTRIBUTION AGREEMENT
BETWEEN: Kreative Video Products, Inc.
21638 Lassen Street, Chatsworth, CA 91311
(hereinafter referred to as "Company") of the one part
AND: American Champions Media, Inc.
1694 The Alameda, Suite 100
San Jose, CA 95126
(hereinafter referred to as "Producer/Artist") of the other part
DATED: 8 19, 1998
WHEREAS:
The Producer/Artist is the sole copyright owner for the Licensed
Territory (as hereinafter defined) of the Programs (as hereinafter
defined) and has agreed with the Company who together with its
subsidiaries, affiliates and licensees is a distributor of such
programs in the Licensed Territory to grant non-exclusively to the
Company all of the rights and privileges hereinafter defined.
I. TERM
(a) The term (hereinafter referred to as `term') of this Agreement
shall consist of an initial period of ONE (1) year commencing as of the
date of this Agreement (the first contract period) plus the additional
`contract period', if any, by which the term may be extended by mutual
written agreement of the parties.
(b) Producer/Artist hereby grants to the company, on a non-exclusive
basis, the right to distribute, including but not limited to seeking
purchase orders from buyers, the program on video cassette within the
territory as defined below. Upon receipt of a purchase order, and
subsequent payment of purchase order, from a buyer directed to
Producer/Artist through the Company, Producer/Artist agrees that any
further purchase orders from that particular buyer or the company he or
she works for will be credited to the Company account per the terms of
this Agreement for a period of (12) twelve months from the date of that
particular purchase order.
2. TERRITORY
The expression `Licensed Territory' shall in this Agreement mean North
America which includes the US, Canada, Mexico, and Hawaii.
3. PROGRAMS
The rights granted hereunder by the Producer/Artist are for the
following programs:
Kanga Roddy Volumes 1-6
<PAGE>
4. PRODUCER/ARTIST WARRANTIES
The Producer/Artist hereby warrants, undertakes and represents that:
(a) The Producer/Artist has full and unencumbered right, power and
authority to enter into and fully perform this Non-Exclusive Agreement
and to grant all rights herein granted to the Company.
(b) The Producer/Artist shall be responsible for duplicating, shipping
and invoicing customers once the distributor has provided purchase
orders.
(c) The Producer/Artist accepts responsibility for any and all third
party payments related to the production of the programs including but
not limited to synchronization rights, musical copyrights, talent fees
and union/guild residuals.
(d) Left out intentionally.
(e) Neither the `Materials' nor any use of the material by the Company
will violate or infringe upon the rights of any person, company or
corporation. `Materials' as used in this sub-paragraph shall mean any
musical, artistic and literary materials, ideas and other intellectual
properties furnished by the Producer/Artist and contained in or used
in connection with any video made or other exploitation thereof.
(f) The Producer/Artist shall not enter any agreement which would
interfere with the full and prompt performance of their obligations
hereunder.
(g) Left out intentionally.
(h) The Producer/Artist will at all times defend, indemnify and hold
harmless the Company and any licensees of the Company from and against
any and all claims, damages, liabilities, costs and expenses, including
but not limited to all legal expenses and counsel fees arising out of
any breach by the Producer/Artist of any warranty, representation or
agreement made by the Producer/Artist hereunder.
(i) The Producer/Artist agrees that in the event illicit, non-
authorized copies of the Programs are discovered in the Licensed
Territory, Producer/Artist shall cooperate with the Company or its
licensees in any action which the Company wishes to institute against
such infringes of the rights granted to the Company hereunder.
Similarly, the Company agrees to cooperate with the Producer/Artist in
the event the Producer/Artist desires to institute proceedings against
such infringes.
5. Commission
The Producer/Artist shall pay to the company $1.00 (one dollar) for
each video cassette bought and paid for. The Producer/Artist is not
responsible for paying commissions until the Producer/Artist has been
paid by the customer. However, Producer/Artist must use it's full
endeavors to be paid promptly.
6. ACCOUNTING
True and correct accounts shall be kept by the Producer/Artist in
respect of all sales and income generated by rights granted hereunder
and a statement of commissions calculated to be due to the Company as
of the 3Oth of the following month.
<PAGE>
7. NOTICE
(a) Except as otherwise specifically provided herein, all notices
hereunder shall be in writing and shall be given by registered or
certified mail or telegraph (prepaid) at the respective addresses
hereby set forth or such other addresses as may be designated by either
party. Such notice shall be deemed given when mailed or delivered to a
telegraph's office, except that notice of change of address shall be
effective only from the date of its receipt.
(b) A copy of all notices given by Producer/Artist must be sent to the
office: as above.
(c) A copy of all notices given by Company to Producer/Artist must be
sent to the office of: at the above address.
8. MISCELLANEOUS
(a) This Agreement contains the entire understanding of the parties
hereto relating to the subject matter hereof and cannot be changed or
terminated by the Producer/Artist or the Company except by an
instrument signed by an Officer of the Company and the Producer/Artist.
Any waiver made by either party of any term or condition of this
Agreement in any instance shall not be deemed or construed as a waiver
of such term or condition for the future, or of any subsequent breach
thereof. All remedies, rights, undertaking, obligations and agreements
contained in this Agreement shall be cumulative and none of them shall
be in limitation of any other remedy, right, undertaking,
obligation or agreement of either party.
(b) Nothing in this Agreement is to be construed as establishing a
relationship of employer-employee, joint venture, partnership, or
otherwise, and both parties are considered as independent contractors.
(c) No breach of this Agreement on the part of either party shall be
deemed material unless the non-breaching party shall have given the
breaching party notice of such breach and the breaching party shall
fail to discontinue the practice complained of or otherwise cure such
breach, within thirty (30) days after receipt of such notice, if such
breach is reasonably capable of being cured within the thirty (30) day
period, or otherwise if the party proceeds with reasonable diligence to
complete the curing of such breach.
9. APPLICABLE LAW
(a) This Agreement has been entered into in the State of California and
the validity, interpretation and legal effect of this Agreement shall
be governed by the laws of the State of California applicable to
contracts entered into and performed entirely within the State of
California, with respect to the determination of any claim, dispute or
disagreement which may arise out of the interpretation, performance, or
breach of this Agreement.
(b) If any part of this Agreement shall be determined to be invalid or
unenforceable by a court of competent jurisdiction or by any other
legally constituted body having jurisdiction to make such
determination, the remainder of the Agreement shall remain in full
force and effect.
10. TERMINATION
In the event that the Company files for Bankruptcy protection, this
Agreement becomes null and void and all rights granted to the Company
revert back to the Producer/Artist.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first written above.
For and on behalf of For and on behalf of
Kreative Video Products, Inc. American Champion Media, Inc.
/s/ Philip Knowles /s/ Anthony K. Chan
- ------------------ --------------------
PHILIP KNOWLES ANTHONY K. CHAN
President, CEO CEO
<PAGE>
EXHIBIT 10.37
NON-EXCLUSIVE DISTRIBUTION AGREEMENT
BETWEEN: Kreative Video Products, Inc.
21638 Lassen Street, Chatsworth, CA 91311
(hereinafter referred to as "Company") of the one part
AND: American Champions Media, Inc.
1694 The Alameda, Suite 100
San Jose, CA 95126
(hereinafter referred to as "Producer/Artist") of the other part
DATED: 8 21, 1998
WHEREAS:
The Producer/Artist is the sole copyright owner for the Licensed
Territory (as hereinafter defined) of the Programs (as hereinafter
defined) and has agreed with the Company who together with its
subsidiaries, affiliates and licensees is a distributor of such
programs in the Licensed Territory to grant non-exclusively to the
Company all of the rights and privileges hereinafter defined.
I. TERM
(a) The term (hereinafter referred to as `term') of this Agreement
shall consist of an initial period of ONE (1) year commencing as of the
date of this Agreement (the first contract period) plus the additional
`contract period', if any, by which the term may be extended by mutual
written agreement of the parties.
(b) Producer/Artist hereby grants to the company, on a non-exclusive
basis, the right to distribute, including but not limited to seeking
purchase orders from buyers, the program on video cassette within the
territory as defined below. Upon receipt of a purchase order, and
subsequent payment of purchase order, from a buyer directed to
Producer/Artist through the Company, Producer/Artist agrees that any
further purchase orders from that particular buyer or the company he or
she works for will be credited to the Company account per the terms of
this Agreement for a period of (12) twelve months from the date of that
particular purchase order.
2. TERRITORY
The expression `Licensed Territory' shall in this Agreement mean North
America which includes the US, Canada, Mexico, and Hawaii.
3. PROGRAMS
The rights granted hereunder by the Producer/Artist are for the
following programs:
Joe Montana. The Strong Mind, Fit Body Workout.
<PAGE>
4. PRODUCER/ARTIST WARRANTIES
The Producer/Artist hereby warrants, undertakes and represents that:
(a) The Producer/Artist has full and unencumbered right, power and
authority to enter into and fully perform this Non-Exclusive Agreement
and to grant all rights herein granted to the Company.
(b) The Producer/Artist shall be responsible for duplicating, shipping
and invoicing customers once the distributor has provided purchase
orders.
(c) The Producer/Artist accepts responsibility for any and all third
party payments related to the production of the programs including but
not limited to synchronization rights, musical copyrights, talent fees
and union/guild residuals.
(d) Left out intentionally.
(e) Neither the `Materials' nor any use of the material by the Company
will violate or infringe upon the rights of any person, company or
corporation. `Materials' as used in this sub-paragraph shall mean any
musical, artistic and literary materials, ideas and other intellectual
properties furnished by the Producer/Artist and contained in or used
in connection with any video made or other exploitation thereof.
(f) The Producer/Artist shall not enter any agreement which would
interfere with the full and prompt performance of their obligations
hereunder.
(g) Left out intentionally.
(h) The Producer/Artist will at all times defend, indemnify and hold
harmless the Company and any licensees of the Company from and against
any and all claims, damages, liabilities, costs and expenses, including
but not limited to all legal expenses and counsel fees arising out of
any breach by the Producer/Artist of any warranty, representation or
agreement made by the Producer/Artist hereunder.
(i) The Producer/Artist agrees that in the event illicit, non-
authorized copies of the Programs are discovered in the Licensed
Territory, Producer/Artist shall cooperate with the Company or its
licensees in any action which the Company wishes to institute against
such infringes of the rights granted to the Company hereunder.
Similarly, the Company agrees to cooperate with the Producer/Artist in
the event the Producer/Artist desires to institute proceedings against
such infringes.
5. Commission
The Producer/Artist shall pay to the company $1.00 (one dollar) for
each video cassette bought and paid for. The Producer/Artist is not
responsible for paying commissions until the Producer/Artist has been
paid by the customer. However, Producer/Artist must use it's full
endeavors to be paid promptly.
6. ACCOUNTING
True and correct accounts shall be kept by the Producer/Artist in
respect of all sales and income generated by rights granted hereunder
and a statement of commissions calculated to be due to the Company as
of the 3Oth of the following month.
<PAGE>
7. NOTICE
(a) Except as otherwise specifically provided herein, all notices
hereunder shall be in writing and shall be given by registered or
certified mail or telegraph (prepaid) at the respective addresses
hereby set forth or such other addresses as may be designated by either
party. Such notice shall be deemed given when mailed or delivered to a
telegraph's office, except that notice of change of address shall be
effective only from the date of its receipt.
(b) A copy of all notices given by Producer/Artist must be sent to the
office: as above.
(c) A copy of all notices given by Company to Producer/Artist must be
sent to the office of: at the above address.
8. MISCELLANEOUS
(a) This Agreement contains the entire understanding of the parties
hereto relating to the subject matter hereof and cannot be changed or
terminated by the Producer/Artist or the Company except by an
instrument signed by an Officer of the Company and the Producer/Artist.
Any waiver made by either party of any term or condition of this
Agreement in any instance shall not be deemed or construed as a waiver
of such term or condition for the future, or of any subsequent breach
thereof. All remedies, rights, undertaking, obligations and agreements
contained in this Agreement shall be cumulative and none of them shall
be in limitation of any other remedy, right, undertaking,
obligation or agreement of either party.
(b) Nothing in this Agreement is to be construed as establishing a
relationship of employer-employee, joint venture, partnership, or
otherwise, and both parties are considered as independent contractors.
(c) No breach of this Agreement on the part of either party shall be
deemed material unless the non-breaching party shall have given the
breaching party notice of such breach and the breaching party shall
fail to discontinue the practice complained of or otherwise cure such
breach, within thirty (30) days after receipt of such notice, if such
breach is reasonably capable of being cured within the thirty (30) day
period, or otherwise if the party proceeds with reasonable diligence to
complete the curing of such breach.
9. APPLICABLE LAW
(a) This Agreement has been entered into in the State of California and
the validity, interpretation and legal effect of this Agreement shall
be governed by the laws of the State of California applicable to
contracts entered into and performed entirely within the State of
California, with respect to the determination of any claim, dispute or
disagreement which may arise out of the interpretation, performance, or
breach of this Agreement.
(b) If any part of this Agreement shall be determined to be invalid or
unenforceable by a court of competent jurisdiction or by any other
legally constituted body having jurisdiction to make such
determination, the remainder of the Agreement shall remain in full
force and effect.
10. TERMINATION
In the event that the Company files for Bankruptcy protection, this
Agreement becomes null and void and all rights granted to the Company
revert back to the Producer/Artist.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first written above.
For and on behalf of For and on behalf of
Kreative Video Products, Inc. American Champion Media, Inc.
/s/ Philip Knowles /s/ Anthony K. Chan
- ------------------ --------------------
PHILIP KNOWLES ANTHONY K. CHAN
President, CEO CEO
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACT
FROM THE CONDENSED CONSOLIDATED BALANCE SHEET AND THE
STATEMENT OF INCOME AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 178,021
<SECURITIES> 0
<RECEIVABLES> 9,440
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,607,332
<PP&E> 421,153
<DEPRECIATION> 0
<TOTAL-ASSETS> 5,581,392
<CURRENT-LIABILITIES> 886,855
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0
0
<COMMON> 5,573,716
<OTHER-SE> (2,191,771)
<TOTAL-LIABILITY-AND-EQUITY> 5,581,392
<SALES> 13,191
<TOTAL-REVENUES> 114,363
<CGS> 1,878
<TOTAL-COSTS> (44,697)
<OTHER-EXPENSES> 622,775
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 46,575
<INCOME-CONTINUING> (510,290)
<DISCONTINUED> 0
<EXTRAORDINARY> 61,503
<CHANGES> 0
<INCOME-PRETAX> (448,787)
<INCOME-TAX> 0
<NET-INCOME> (448,787)
<EPS-PRIMARY> ($0.12)
<EPS-DILUTED> ($0.12)
</TABLE>
