<PAGE> 1
As filed with the Securities and Exchange Commission on December 23, 1998
Registration No. 333-67879
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
AMERICAN CHAMPION ENTERTAINMENT, INC.
(Name of Small Business Issuer in its Charter)
DELAWARE
(State or other jurisdiction of incorporation or organization)
7812
(Primary Standard Industrial
Classification Code Number)
94-3261987
(I.R.S. Employer Identification Number)
1694 THE ALAMEDA, SUITE 100
SAN JOSE, CALIFORNIA 95126-2219
(408) 288-8199
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
ANTHONY K. CHAN
PRESIDENT AND CHIEF EXECUTIVE OFFICER
1694 THE ALAMEDA, SUITE 100
SAN JOSE, CALIFORNIA 95126-2219
(408) 288-8199
(Name and address and telephone number of agent for service)
------------------------
COPIES TO:
LAWRENCE B. LOW, ESQ.
JAMES Y.M. WU, ESQ.
PRESTON GATES & ELLIS LLP
ONE MARITIME PLAZA, SUITE 2400
SAN FRANCISCO, CALIFORNIA 94111
(415) 788-8822
Approximate date of commencement of proposed sale to the public:
As soon as practicable after the effective date of this Registration
Statement.
If the only securities being registered on this Form are being
offered pursuant to dividend or interest reinvestment plans, please
check the following box. __
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, as amended ("Securities Act"), other than
securities offered only in connection with dividend or interest
reinvestment plans, check the following box. _X_
If this Form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act, please check
the following box and list the Securities Act registration statement
number of the earlier effective registration statement for the same
offering. __
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. __
If delivery of the prospectus is expected to be made pursuant to
Rule 434, please check the following box. __
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
Title of Each Proposed Proposed Amount of
Class of Maximum Maximum Registration
Securities to Amount to be Offering Price Aggregate Fee
be Registered Registered (1)(2) Per Share Offering Price
- -------------- ------------ ---------------- ---------------- ----------
<S> <C> <C> <C> <C>
Common Stock, $0.0001 par value 1,187,774(3) $4.7906 $5,690,179.82 $1,724.30(4)
Common Stock, $0.0001 par value 3,629,500 $1.3375 $4,854,456.25 $1,471.05
</TABLE>
- -----------------
<PAGE> 2
The Registrant hereby amends this Registration Statement on such
date or dates as may be necessary to delay its effective date until the
Registrant shall file a further amendment which specifically states
that this Registration Statement shall thereafter become effective in
accordance with Section 8(a) of the Securities Act or until this
Registration Statement shall become effective on such date as the
Commission, acting pursuant to said Section 8(a), may determine.
Pursuant to Rule 429 under the Securities Act, the prospectus
included as part of this Registration Statement shall be deemed to be a
combined prospectus which shall also relate to the Registrant's
Registration Statement (File Number 333-60511) and Amendment No. 1 to
such prior Registration Statement. This Registration Statement and the
Registration Statement being amended hereby are collectively referred
to herein as the "Registration Statement."
(1) Includes: (i) shares of common stock that have been issued or are
reserved for issuance upon the conversion of 7% Convertible Debentures Due
July 1, 2000 issued and to be issued by American Champion; (ii) shares of
common stock that have been issued or are reserved for issuance on the
exercise of common stock Purchase Warrants issued in connection with the
issuance of the debentures; (iii) 255,000 shares of common stock pursuant to
registration rights held by existing stockholders; and (iv) 75,000 shares of
common stock that have been issued or are reserved for issuance on the
exercise of common stock Purchase Warrants issued to JW Charles Securities,
Inc. in connection with the sale of the debentures.
(2) In the event of a stock split, stock dividend or similar transaction
involving the common stock, in order to prevent dilution, the number of shares
registered shall be automatically increased to cover additional shares in an
indeterminate amount in accordance with Rule 416(a) under the Securities Act
of 1933, as amended.
(3) Registered pursuant to the Registrant's Registration Statement, File
Number 333-60511, as amended by Amendment No. 1 thereto.
(4) This amount was paid when 1,187,774 shares of common stock of the
Registrant were first registered pursuant to Registration Statement, File
Number 333-60511, as amended by Amendment No. 1 thereto.
<PAGE> 3
The information in this preliminary prospectus is not complete and may
be changed. These securities may not be sold until the registration
statement filed with the Securities and Exchange Commission is
effective. This preliminary prospectus is not an offer to sell nor
does it seek an offer to buy these securities in any jurisdiction where
the offer or sale is not permitted.
SUBJECT TO COMPLETION, DATED __________, 1998
PROSPECTUS
AMERICAN CHAMPION ENTERTAINMENT, INC.
4,817,274 Shares of common stock
This prospectus relates to the sale of up to approximately 4,817,274
shares of common stock of American Champion Entertainment, Inc. offered
by certain holders of American Champion securities. These 4,817,274
shares of common stock include:
(1) shares of common stock that have been issued or are
issuable upon the conversion of 7% Convertible Debentures due July 1,
2000 issued by American Champion, and may be issuable upon the
conversion of convertible securities that American Champion may issue
to satisfy future financing needs;
(2) 49,500 shares of common stock that are issuable on the
exercise of Common Stock Purchase Warrants issued in connection with
the debentures;
(3) 255,000 shares of common stock subject to registration
rights held by certain stockholders; and
(4) 75,000 shares of common stock that are issuable on the
exercise of Common Stock Purchase Warrants issued to JW Charles
Securities, Inc. in connection with the sale of the debentures.
The actual number of shares of common stock issued or issuable upon
conversion of the debentures is subject to adjustment, depending upon,
among other factors, the future market price of the common stock. We
may need to register on a separate registration statement additional
shares of common stock because of changes in the market price. See
"Risk Factors-Potential Volatility of Stock Price."
The shares may be offered by the selling stockholders from time to time
in transactions (which may include block transactions) on the Nasdaq
SmallCap Market, in negotiated transactions, through a combination of
such methods of sale, or otherwise, at fixed prices that may be
changed, at market prices prevailing at the time of sale, or at
negotiated prices. For additional information on the methods of sale,
you should refer to the section entitled "Plan of Distribution." We
will not receive any of the proceeds from the sale of the shares by the
selling stockholders. We have agreed to bear all expenses of
registration of the shares other than legal fees and expenses, if any,
of counsel or other advisors of the selling stockholders. The selling
stockholders will bear any commissions, discounts, concessions or other
fees, if any, payable to broker-dealers in connection with any sale of
their shares.
Each of the selling stockholders may be deemed to be an "underwriter"
within the meaning of the Securities Act of 1933, as amended.
On July 31, 1997, the common stock and our redeemable common stock
purchase warrants began trading on the Nasdaq SmallCap Market under the
symbols "ACEI" and "ACEIW," respectively. On November 18, 1998 the
closing sale price of the common stock and the common stock purchase
warrants on Nasdaq SmallCap Market was $1.3125 and $0.4375,
respectively. See "Certain Market Information."
The securities offered hereby are speculative and involve a high degree
of risk and substantial dilution. Only investors who can bear the risk
of loss of their entire investment should invest. See "Risk Factors"
beginning on page 9.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or
determined if this prospectus is truthful or complete. Any
representation to the contrary is a criminal offense.
The date of this prospectus is _______________, 1998.
<PAGE> 4
TABLE OF CONTENTS
Page
Incorporation of Certain Documents by Reference 5
Available Information 5
Company 6
The Offering 6
Risk Factors 8
Use of Proceeds 12
Certain Market Information 12
Dividend Policy 12
Selling Stockholders 13
Plan of Distribution 14
Legal Matters 14
Experts 14
<PAGE> 5
INFORMATION INCORPORATION BY REFERENCE
The Securities and Exchange Commission (the "Commission") allows
us to "incorporate by reference" certain of our publicly-filed
documents into this prospectus, which means that information included is
considered part of this prospectus. Information that we file with the
Commission subsequent to the date of this prospectus will automatically
update and supersede this information. We incorporate by reference the
documents listed below and any future filings made with the Commission
under all documents subsequently filed by us pursuant to Section 13(a),
13(c), 14 or 15(d) of the Securities Exchange Act of 1934, as amended,
until the selling stockholders have sold all the shares.
The following documents filed with the Commission are incorporated
herein by reference:
1. American Champion's Registration Statement on Form SB-2 for
its initial public offering that became effective on
July 30, 1997;
2. The description of American Champion's common stock
contained in American Champion's Registration Statement on
Form SB-2;
3. Post-Effective Amendment No. 1 to American Champion's
Registration Statement on Form SB-2, as filed with the
Commission on July 2, 1998 and declared effective on
July 17, 1998;
4. American Champion's Proxy Statements for the 1998 Annual
Meeting of Stockholders held on May 29, 1998 and the Special
Meeting of Stockholders held on September 23, 1998;
5. American Champion's Annual Report on Form 10-KSB for its
fiscal year ended December 31, 1997; and
6. American Champion's Quarterly Reports on Form 10-QSB for the
quarter periods ended September 30, 1998, June 30, 1998 and
March 31, 1998.
The Company will provide without charge to each person to whom a
copy of this prospectus has been delivered, on written or oral request a
copy of any or all of the documents incorporated by reference in this
prospectus, other than exhibits to such documents. Written or oral
requests for such copies should be directed to Anthony K. Chan, American
Champion Entertainment, Inc., 1694 The Alameda, Suite 100, San Jose,
California 95126-2219 (telephone: (408) 288-8199).
ADDITIONAL INFORMATION AVAILABLE TO YOU
This prospectus is part of a Registration Statement on Form S-3
that we filed with the Commission. Certain information in the
Registration Statement has been omitted from this prospectus in
accordance with the rules of the Commission. We file the annual,
quarterly and special reports, proxy statements and other information
with the Commission. You can inspect and copy the Registration
Statement as well as reports, proxy statements and other information we
have filed with the Commission at the public reference room maintained
by the Commission at 450 Fifth Street, NW, Washington, D.C. 20549, and
at the following Regional Offices of the Commission: Seven World Trade
Center, New York, New York 10048, and Northwest Atrium Center, 500 West
Madison Street, Chicago, Illinois 60661. You can obtain copies from
the public reference room of the Commission at 450 Fifth Street, NW,
Washington, D.C. 20549, upon payment of certain fees. You can call the
Commission at 1-800-732-0330 for further information about the public
reference room. We are also required to file electronic versions of
these documents with the Commission, which may be accessed through the
Commission's World Wide Web site at http://www.sec.gov. Our common
stock is quoted on The Nasdaq National Market Reports, proxy and
information statements and other information concerning American
Champion may be inspected at The Nasdaq Stock Market at 1735 K Street,
NW, Washington, D.C. 20006.
<PAGE> 6
COMPANY
American Champion Entertainment, Inc. is a holding company, for
our wholly-owned subsidiary, America's Best Karate and its wholly-owned
subsidiary, American Champion Media, Inc.
America's Best Karate owns, manages and operates two karate
studios in the San Francisco Bay Area under the name "ABK," that
provide karate instruction to students of all ages and skill levels.
American Champion Media is a media production and marketing company.
Through American Champion Media, American Champion: (1) develops,
produces and markets "ADVENTURES WITH KANGA RODDY," a television
program for pre-school and primary school children (the "Kanga Roddy
Series"), (2) licenses merchandising rights related to the Kanga Roddy
Series, and (3) develops, produces and markets various audio tapes,
video tapes and workbooks that specialize in fitness information.
American Champion has developed and produced twenty half-hour episodes
of the Kanga Roddy Series.
American Champion was incorporated on February 5, 1997 under the
laws of Delaware. American Champion's executive offices are located at
1694 the Alameda, Suite 100, San Jose, California 95126-2219, and its
telephone number is (408) 288-8199.
THE OFFERING
The shares covered by this prospectus include:
(1) shares of common stock that have been issued or are
issuable upon the conversion of 7% Convertible Debentures due July 1,
2000 issued by American Champion, and may be issuable upon the
conversion of convertible securities that American Champion may issue
to satisfy future financing needs;
(2) 49,500 shares of common stock that are issuable on the
exercise of Common Stock Purchase Warrants issued in connection with
the debentures;
(3) 255,000 shares of common stock subject to registration
rights held by certain stockholders; and
(4) 75,000 shares of common stock that are issuable on the
exercise of Common Stock Purchase Warrants issued to JW Charles
Securities, Inc. in connection with the sale of the debentures.
Debentures and Debenture Warrants. On July 2, 1998, we entered
into a Securities Purchase Agreement for the sale of the debentures and
debenture warrants. Pursuant to the agreement, the purchasers agreed
under certain terms and conditions to purchase up to $1.8 million of
American Champion's debentures, and American Champion agreed to issue
to the purchasers warrants to purchase up to 49,500 shares of common
stock. Pursuant to the agreement, on July 6, 1998, September 23, 1998
and November 3, 1998, American Champion issued to the purchasers and
their assignees all such debentures and warrants.
The debentures are convertible into a number of shares of
American Champion's common stock based on 75% of market price of the
common stock at the time of conversion. As of the date of this
prospectus, market price for purposes of conversion of the debentures
is the lowest trade price on Nasdaq SmallCap Market on the date that
the debentures are converted, as reported in the Wall Street Journal.
At our option, we may redeem the debentures at any time prior to
conversion for an amount equal to the accrued and unpaid interest under
the debentures plus 122.5% of the outstanding principal under the
debentures. As of the date of this prospectus, the purchasers have
converted $886,442 of debentures into 1,044,087 shares of common stock
at conversion prices ranging from $4.519 to $0.769. Prior to
September 25, 1998, the conversion rate for the debentures was subject
to a floor price of $$3.28875 per share. The conversion rate is no
longer subject to such floor price. The warrants to purchase 49,500
shares of American Champion's common stock expire on July 6, 2003 and
provide for an exercise price of $7.56125 per share.
We may issue additional convertible securities that are
convertible to shares of American Champion's common stock, to satisfy
future financing needs.
<PAGE> 7
The agreement also requires that we file with the Commission this
registration statement to register the common stock issuable upon
conversion of the debentures and upon exercise of the debenture
warrants to allow the purchasers to resell such common stock to the
public.
Registration Rights. On March 18, 1997, we entered into
agreements with certain existing stockholders pursuant to which we
granted certain registration rights with respect to the 255,000 shares
of common stock issued to certain existing stockholders. The inclusion
of such shares in this prospectus satisfies our registration
obligations under the agreement.
JW Charles Securities, Inc. Warrants. Additionally, JW Charles
Securities, Inc. received a warrant to purchase 75,000 shares of
American Champion's common stock, subject to certain anti-dilution
adjustments. The exercise price for the JW warrant is $7.56125, and
the JW warrant expires on July 1, 2001.
<PAGE> 8
RISK FACTORS
You should carefully consider the risks described below before
making an investment decision. The risks and uncertainties described
below are not the only ones facing American Champion. Additional risks
and uncertainties not presently known to us or that we currently deem
immaterial may also impair our business operations. The actual
occurrence of the following risks could adversely affect our business.
In such case, the trading price of our common stock could decline, and
you may lose all or part of your investment.
This prospectus also contains forward-looking statements that
involve risks and uncertainties. Our actual results could differ
materially from those anticipated in the forward-looking statements as
a result of certain factors, including the risks described below and
elsewhere in this prospectus.
History of Losses and Expectation of Future Losses. We sustained
operating losses of $641,583, $801,416 and $786,074 in 1996, 1997 and
the nine months ended September 30, 1998, respectively. We expect to
incur significant additional operating losses for the foreseeable
future as we continue to develop, produce and market our media
projects, including the Kanga Roddy Series. The development and
production costs (exclusive of marketing costs) for the remaining 21
episodes of the Kanga Roddy Series we are obligated to deliver is
estimated to be $5.04 million.
Need to Obtain Financing for future production of the Kanga Roddy
Series. Our development and production of the Kanga Roddy Series
requires substantial amounts of capital. We have entered into a
continuing distribution agreement with KTEH, the public broadcasting
station serving the San Jose, California area, which obligate us to
deliver a total of 28 episodes of the Kanga Roddy Series. To date, we
have completed 7 episodes of the Kanga Roddy Series. Based on
production of 21 episodes completed to date, we now estimate that the
average cost of developing and producing each episode of the Kanga
Roddy Series is $240,000 and that it will require an additional
$5.04 million of additional financing to complete the remaining 21
episodes of the Kanga Roddy Series. We have no current arrangements
with respect to such additional financing and there can be no
assurances that additional financing will be available at all or on
terms acceptable.
Dependence on the Success of the Kanga Roddy Series. We are dependent
on the success of the Kanga Roddy Series, which in turn is dependent
upon unpredictable and volatile factors beyond our control, such as
children's preferences. The Kanga Roddy Series is currently shown on
public television stations which reach approximately 40 million
households. Although the Kanga Roddy Series has received positive
acclaim and positive Nielsen ratings on its estimated audience, the
show must attract a significant television audience over a long period
of time before we realize significant revenue and profitability. To
attract a significant television audience for the Kanga Roddy Series
over a long period of time, we need to complete additional episodes of
the Kanga Roddy Series. We cannot be certain that the initial
television viewership of the Kanga Roddy Series will be maintained.
Licensing and Merchandising of the Kanga Roddy Series. Our strategy in
producing the Kanga Roddy Series includes the licensing of its
characters to others for the merchandising of a variety of products
ranging from toys to apparel. Our ability to successfully exploit the
merchandising opportunities afforded by the Kanga Roddy Series is
dependent on the popularity of the Kanga Roddy Series and the ability
of our characters to provide attractive merchandising features to its
customers. If we are unable to attract a significant television
audience for the Kanga Roddy Series, it is doubtful that any
significant licensing or merchandising opportunities will arise. Even
if the Kanga Roddy Series is popular with television audiences, we
cannot be certain that licensing opportunities will materialize as we
must compete with hundreds of owners of creative content who seek to
license their characters and properties to a limited number of
manufacturers and distributors.
Absence of Significant Experience with Television Programming or
Licensing and Merchandising. Prior to American Champion's involvement
with the Kanga Roddy Series, our business was primarily the operation
of its karate studios and the production of fitness video tapes and we
had no experience with the development and production of television
programming or with the licensing and merchandising of products. To
date, we have completed 20 half-hour episodes. However, the television
and licensing and merchandising businesses are complicated and the
absence of experience in such businesses could adversely affect our
business.
Dependence on Key Personnel. We are dependent on the efforts and
abilities of Anthony Chan and George Chung, our founders and principal
executive officers, and Don Berryessa, Vice President and Jan D.
Hutchins, President of American Champion Media. We have entered into
employment agreements, effective as of August 5, 1997, with such
individuals. None of such employment agreements contains non-
competition provisions. See "Management--Employment Agreements" of
American Champion's Post-Effective Amendment No. 1 to its Form SB-2
Registration Statement. The loss of the services of any of the above
individuals, or of other key personnel, could adversely affect our
business. We have obtained "key-man" life insurance with $1,000,000
coverage for each of Messrs. Chung and Chan.
<PAGE> 9
Dependence on Association with Joe Montana, Ronnie Lott and the San
Francisco 49ers. The success of the Kanga Roddy Series depends in part
on American Champion's continued association with former 49ers Joe
Montana and Ronnie Lott, and their wives, and the San Francisco 49ers.
Messrs. Montana and Lott have endorsed the Kanga Roddy Series in news
and television interviews and their wives are principal actors in the
Kanga Roddy Series. The failure of Joe Montana, Ronnie Lott, or their
wives, or the San Francisco 49ers, to continue to actively support the
Kanga Roddy Series could have an adverse impact on our ability to
market the Kanga Roddy Series. None of Joe Montana, Ronnie Lott, or
their wives, or the San Francisco 49ers are obligated to engage in any
business transactions or jointly participate in any opportunities with
American Champion, and the possibility exists that the current
relationships between the parties could materially change in the
future.
Our Markets are Highly Competitive. Each of the industries in which we
compete is highly competitive and most of the companies with which we
compete have greater financial and other resources than us. With
respect to our television production activities, we compete on the
basis of relationships and pricing for access to a limited supply of
facilities and talented creative personnel to produce its programs.
Our Kanga Roddy Series competes for time slots, ratings and related
advertising revenues and for the licensing and merchandising of
products related to the Kanga Roddy Series. Our fitness products
compete with many other products aimed at the fitness and weight loss
markets, including other video tapes, audio tapes and workbooks, and
various types of exercise machinery. Many of these competing products
are sponsored or endorsed by celebrities and sports figures, and are
marketed by companies having significantly greater resources than ours.
The martial arts industry is also highly competitive. American
Champion's competitors include a variety of small to medium sized
martial arts instructional centers, many of which may be better
established and better financed than ours.
Potential Return of Membership Fees. Pursuant to the terms of its
standard contract with its students, ABK is required to refund (i) all
funds received if a student cancels within three (3) days of signing a
membership contract and (ii) all "unearned" funds received in the
event the student dies, becomes permanently disabled, moves more than
twenty-five (25) miles away from ABK or ABK closes for more than thirty
(30) consecutive days. We do not currently maintain nor does it
anticipate maintaining a reserve account for return of membership fees.
As a consequence, we may be unable to refund membership fees which
could adversely affect on our business and its prospects.
Control by Messrs. Chan and Chung. As of the date of this prospectus,
Anthony Chan and George Chung, American Champion's founders and
principal executive officers, collectively beneficially own 1,016,276
shares of American Champion's outstanding common stock, representing
approximately 19.3% of the outstanding shares prior to this offering
and approximately 11.4% of the outstanding shares of common stock after
this offering (assuming no exercise of any outstanding options or any
warrants). Since holders of common stock do not have any cumulative
voting rights and directors are elected by a majority vote,
Messrs. Chan and Chung are in a position to strongly influence the
election of directors as well as the affairs of American Champion.
Anti-takeover Effects of Delaware Law. Section 203 of the General
Corporation Law of Delaware prohibits us from engaging in certain
business combinations with interested stockholders, as defined by
statute. These provisions may have the effect of delaying or
preventing a change of control of American Champion without action by
the stockholders, and therefore could adversely affect the price of our
common stock. See "Description of Securities" of American Champion's
Post-Effective Amendment No. 1 to its Form SB-2 Registration Statement.
Liability Insurance. We have purchased liability insurance for each of
our karate studios in the amount of $1,000,000 per occurrence and
$2,000,000 in the aggregate which we believe is sufficient for current
level of business operations. We cannot be certain, however, that the
present coverage will continue to be available in the future or that we
will be able to retain such coverage at a reasonable cost. Further, we
cannot be certain that such insurance will be sufficient to cover
potential claims, including without limitation, claims brought by
students or instructors injured during karate classes, or that
adequate, affordable insurance coverage will be available to us in the
future as we expand our operations. A successful claim against us in
excess of the liability limits or relating to an injury excluded under
the policy could adversely affect on us.
No Intention to Pay Dividends. We have not and has no present
intention to declare or pay cash dividends. Any earnings which we may
realize in the foreseeable future will be retained to finance our
growth.
Nasdaq Maintenance Requirements; Possible Delisting of Securities from
Nasdaq Market; Risks of Low priced Stocks. American Champion's common
stock is listed on Nasdaq SmallCap Market. The Commission has approved
rules imposing criteria for listing of securities on Nasdaq SmallCap
Market, including standards for maintenance of such listing. For
continued listing, a company, among other things, must have $2,000,000
in net tangible assets, $1,000,000 in market value of securities in the
public float and a minimum bid price of $1.00 per share. We currently
have approximately $4,000,000 in net tangible assets and approximately
$4,200,000 in market value of securities in the public float, with a
bid price over $1.00 per share. If we are unable to satisfy Nasdaq
SmallCap Market's maintenance criteria in the future, our securities
may be delisted from Nasdaq SmallCap Market. In such event, trading,
if any, in our securities would thereafter be conducted in the over
counter market in the so called "pink sheets" or the NASD's
"Electronic Bulletin Board." As a consequence of such delisting, an
investor would likely find it more difficult to dispose of, or to
obtain quotations as to, the price of our securities.
<PAGE> 10
Penny Stock Regulation. If we are unable to satisfy the maintenance
requirements for Nasdaq SmallCap Market and our common stock falls
below the minimum bid price of $1.00 per share for the continued
quotation, trading would be conducted on the "pink sheets" or the
NASD's Electronic Bulletin Board. If the common stock is not quoted on
Nasdaq SmallCap Market, or we do not have $2,000,000 in stockholders'
equity, trading in the common stock would be covered by Rule-15g 9
promulgated under the Securities Exchange Act of 1934, as amended, for
non Nasdaq SmallCap Market and non exchange listed securities. Under
such rule, broker dealers who recommend such securities to persons
other than established customers and accredited investors must make a
special written suitability determination for the purchaser and receive
the purchaser's written agreement to a transaction prior to sale.
Securities are exempt from this rule if the market price is at least
$5.00 per share.
The Commission adopted regulations that generally define a penny
stock to be any equity security that has a market price of less than
$5.00 per share, subject to certain exceptions. Such exceptions
include an equity security listed on Nasdaq SmallCap Market, and an
equity security issued by an issuer that has:
(1) net tangible assets of at least $2,000,000, if such issuer
has been in continuous operation for three years,
(2) net tangible assets of at least $5,000,000, if such issuer
has been in continuous operation for less than three years,
or
(3) average revenue of at least $6,000,000 for the preceding
three years.
Unless an exception is available, the regulations require the delivery,
prior to any transaction involving a penny stock, of a disclosure
schedule explaining the penny stock market and the risks associated
therewith.
If American Champion's securities were to become subject to the
regulations applicable to penny stocks, the market liquidity for its
securities would be severely affected, limiting the ability of broker
dealers to sell the securities and the ability of purchasers of the
securities offered hereby to sell their securities in the secondary
market. There is no assurance that trading in American Champion's
securities will not be subject to these or other regulations that would
adversely affect the market for such securities.
Potential Volatility of Stock Price. The trading price of the Common
stock is subject to wide fluctuations in response to variations in
operating results of American Champion and other companies that operate
in our markets, general economic conditions in the industries in which
we compete and the strength of the domestic and international economy,
to name a few. Since the beginning of 1998 to December 18, 1998, our
stock has traded from a high of $9.625 to a low of $0.969. Some
fluctuations, particularly those affecting the market prices for many
small companies, have often been unrelated to the operating performance
of the specific companies.
Forward Looking Statements and Associated Risks. This prospectus
contains certain forward-looking statements, including among others:
(1) anticipated trends in our financial condition and results
of operations; and
(2) our business strategy for developing, producing,
distributing, licensing and merchandising the Kanga Roddy
Series.
These forward-looking statements are based largely on our current
expectations and are subject to a number of risks and uncertainties.
Actual results could differ materially from these forward-looking
statements. In addition to the other risks described elsewhere in this
"Risk Factors" discussion, important factors to consider in evaluating
such forward-looking statements include:
(1) changes in external competitive market factors or in
American Champion's internal budgeting process which might
impact trends in our results of operations;
(2) unanticipated working capital or other cash requirements;
(3) changes in our business strategy or an inability to execute
our strategy due to unanticipated change in the industries
in which we operate; and
(4) various competitive factors that may prevent us from
competing successfully in the marketplace.
<PAGE> 11
In light of these risks and uncertainties, many of which are described
in greater detail elsewhere in this "Risk Factors" discussion, we
cannot be certain that the events predicted in forward-looking
statements contained in this prospectus will in fact occur.
<PAGE> 12
USE OF PROCEEDS
We will not receive any of the proceeds from the sale of the
shares offered hereunder by the selling stockholders. The offering is
made to fulfill our contractual obligations to the selling stockholders
to register the common stock held by or which are issuable to the
selling stockholders.
CERTAIN MARKET INFORMATION
American Champion's common stock commenced trading on the Nasdaq
SmallCap Market SmallCap Market under the symbol "ACEI" on August 1,
1997. The range of high and low reported closing sales prices for the
common stock as reported by Nasdaq SmallCap Market since the
commencement of trading were as follows:
ACEI High Low
1997
Third Quarter $5.50 $4.125
Fourth Quarter $8.00 $4.813
1998
First Quarter $9.625 $7.75
Second Quarter $9.563 $6.563
Third Quarter $7.00 $3.438
Fourth Quarter $3.688 $0.938
(through December 18, 1998)
The prices set forth above reflect inter dealer prices, without
retail mark-up, mark-down or commission and may not necessarily
represent actual transactions.
On December 18, 1998, as reported by our transfer agent, shares
of common stock were held by approximately 700 shareholders of record.
DIVIDEND POLICY
We intend to retain future earnings, if any, that may be
generated from our operations to finance the operations and expansion
of American Champion and, accordingly, do not plan, for the reasonably
foreseeable future, to pay dividends to holders of the common stock.
Any decision as to the future payment of dividends will depend on the
results of our operations and financial position and such other factors
as our Board of Directors, in its discretion, deems relevant.
<PAGE> 13
SELLING STOCKHOLDERS
The following table sets forth certain information regarding the
beneficial ownership of the common stock as of December 18, 1998 by
each of the selling stockholders assuming the conversion of the
debentures of $910,710 principal amount (the amount outstanding as of
December 18, 1998) and a conversion rate of $1.003125 per share, based
on application of the formula for computing the conversion rate
(assuming, for the purpose of the following table, that the conversion
date is December 18, 1998) as provided in the debenture, the exercise
of the debenture warrants to purchase 49,500 shares of common stock and
the exercise of the warrants held by JW Charles Securities, Inc. to
purchase 75,000 shares of common stock. Unless otherwise indicated
below, to the knowledge of American Champion, all persons listed below
have sole voting and investment power with respect to the shares of
common stock, except to the extent authority is shared by spouses under
applicable law.
The information included below is based upon information provided
by the selling stockholders. Because the selling stockholders may
offer all, some or none of their shares, no definitive estimate as to
the number of shares that will be held by the selling stockholders
after such offering can be provided and the following table has been
prepared on the assumption that all shares offered under this
prospectus will be sold.
<TABLE>
<CAPTION>
Common Stock to be
Beneficially Owned
Common Stock Beneficially if All Shares Offered
Owned on December 18,1998(1) Hereunder Are Sold(1)
-------------------------------- -------------------------------
Shares That
May be Offered
Name Shares Percent Hereunder Shares Percent
- ------------------ -------------- ------------- ------------ ------------ -----------
<S> <C> <C> <C> <C> <C>
David Braver 4,000 * 4,000 -- --
Sarine Chaki 20,000 * 20,000 -- --
Susan Cohen 5,000 * 5,000 -- --
William Edwin Gay, Jr. 6,000 * 6,000 -- --
Scott Gerard 60,000 * 60,000 -- --
Albert Levine 31,000 * 31,000 -- --
Keith E. Loisell 19,000 * 19,000 -- --
Peter Marsh 60,000 * 60,000 -- --
Rory Nichols 25,000 * 25,000 -- --
Brian Schuster 25,000 * 25,000 -- --
The Endeavour Capital Fund S.A. 552,211 8.89 552,211 -- --
Amro International S.A. 881,043 14.18 881,043 -- --
Advantage (Bermuda) Fund S.A. 283,220 4.56 283,220 -- --
Canadian Advantage L.P. 287,824 4.63 287,824 -- --
JW Charles Securities, Inc. 75,000 1.21 75,000 -- --
-------- -------- --------- ---------- ---------
2,334,298 33.47% 2,334,298 -- --
- -----------------------
* Less than one percent (1%)
</TABLE>
(1) As required by regulations of the Commission, the number of shares
shown as beneficially owned include shares which can be purchased
within 60 days after December 18, 1998. The actual number of shares
of common stock beneficially owned is subject to adjustment and
could be materially more or less than the estimated amount indicated
depending upon, among other factors, the market price of the common
stock.
<PAGE> 14
PLAN OF DISTRIBUTION
Sales of the shares may be effected by or for the account of the
selling stockholders from time to time in transactions (which may
include block transactions) on the Nasdaq SmallCap Market, in
negotiated transactions, through a combination of such methods of sale,
or otherwise, at fixed prices that may be changed, at market prices
prevailing at the time of sale or at negotiated prices. The selling
stockholders may effect such transactions by selling the shares
directly to purchasers, through broker-dealers acting as agents of the
selling stockholders, or to broker-dealers acting as agents for the
selling stockholders, or to broker-dealers who may purchase shares as
principals and thereafter sell the shares from time to time in
transactions (which may include block transactions) on the Nasdaq
SmallCap Market, in negotiated transactions, through a combination of
such methods of sale, or otherwise. In effecting sales, broker-dealers
engaged by a selling stockholder may arrange for other broker-dealers
to participate. Such broker-dealers, if any, may receive compensation
in the form of discounts, concessions or commissions from the selling
stockholders and/or the purchasers of the shares for whom such broker-
dealers may act as agents or to whom they may sell as principals, or
both (which compensation as to a particular broker-dealer might be in
excess of customary commissions).
The selling stockholders and any broker-dealers or agents that
participate with the selling stockholders in the distribution of the
shares may be deemed to be "underwriters" within the meaning of the
Securities Act of 1933, as amended. Any commissions paid or any
discounts or concessions allowed to any such persons, and any profits
received on the resale of the shares purchased by them may be deemed to
be underwriting commission or discounts under the Securities Act.
We have agreed to bear all expenses of registration of the shares
other than legal fees and expenses, if any, of counsel or other
advisors of the selling stockholders. The selling stockholders will
bear any commissions, discounts, concessions or other fees, if any,
payable to broker-dealers in connection with any sale of their shares.
We have agreed to indemnify the selling stockholders, or their
transferees or assignees, against certain liabilities, including
liabilities under the Securities Act of 1933, as amended, or to
contribute to payments the selling stockholders or their respective
pledgees, donees, transferees or other successors in interest, may be
required to make in respect thereof.
LEGAL MATTERS
The valid issuance of the shares of common stock offered hereby
has been passed upon for American Champion by Preston Gates & Ellis
LLP, San Francisco, California.
EXPERTS
The balance sheet of American Champion Entertainment, Inc. as of
February 5, 1997, and the financial statements of America's Best Karate
as of December 31, 1996, and for the year then ended have been
incorporated by reference herein and in the registration statement in
reliance upon the reports of Moore Stephens P.C., independent certified
public accountants, also incorporated by reference herein, and upon the
authority of such firm as experts in accounting and auditing.
The financial statements of American Champion as of December 31,
1997, and for the year then ended have been included herein and in the
registration statement in reliance upon the reports of Moss Adams LLP,
independent certified public accountants, appearing elsewhere herein,
and upon the authority of such firm as experts in accounting and
auditing.
Effective October 8, 1997, the Board of Directors of American
Champion, dismissed Moore Stephens, P.C., and such firm no longer acts
as American Champion's principal accountant. Moore Stephens' report on
the American Champion's financial statements dated February 5, 1997,
the date of the American Champion's incorporation, did not contain an
adverse opinion or a disclaimer of opinion and was not qualified or
modified as to uncertainty, audit scope or accounting principles.
Moore Stephens' report on the financial statements for the past two
years relating to America's Best Karate, predecessor to American
Champion, dated January 31, 1997, did not contain an adverse opinion or
a disclaimer of opinion and was not qualified or modified as to audit
scope or accounting principles; however, such report did include a
modification of the auditor's standard report, noting that certain
factors raised substantial doubt about America's Best Karate's ability
to continue as a going concern. During American Champion's and its
predecessor's two most recent fiscal years and the interim period
through October 8, 1997, there were no disagreements between American
Champion or its predecessor and Moore Stephens on any matter of
accounting principles or practices, financial statement disclosure, or
auditing scope or procedures, which, if not resolved to the
satisfaction of Moore Stephens, would have caused it to make reference
to the subject matter of the disagreements in connection with its
report.
<PAGE> 15
Effective October 8, 1997, American Champion engaged Moss Adams
LLP as its principal accountant. Such engagement was approved by the
American Champion's Board of Directors. During American Champion's two
most recent fiscal years and any subsequent interim period through
October 8, 1997, American Champion did not consult Moss Adams LLP
regarding the application of accounting principals to a specified
transaction, the type of audit opinion that might be rendered on
American Champion's financial statements or any matter that was the
subject of disagreement or a reportable event.
<PAGE> 16
No dealer, salesperson or other person is authorized to give any
information or to make any representations other than those contained
in this prospectus, and, if given or made, such information or
representations must not be relied upon as having been authorized by
American Champion. This prospectus does not constitute an offer to buy
any security other than the securities offered by this prospectus, or
an offer to sell or a solicitation of an offer to buy any securities by
any person in any jurisdiction where such offer or solicitation is not
authorized or is unlawful. Neither delivery of this prospectus nor any
sale hereunder shall, under any circumstances, create any implication
that there has been no change in the affairs of American Champion since
the date hereof.
TABLE OF CONTENTS
Page
Incorporation of Certain Documents by Reference 5
Available Information 5
Company 6
The Offering 6
Risk Factors 8
Use of Proceeds 12
Certain Market Information 12
Dividend Policy 12
Selling Stockholders 13
Plan of Distribution 14
Legal Matters 14
Experts 14
AMERICAN CHAMPION ENTERTAINMENT, INC.
4,817,274 SHARES OF COMMON STOCK
------------------------
PROSPECTUS
_______________
_________, 1998
<PAGE> 17
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table shows the estimated expenses of the issuance
and distribution of the securities offered hereby (all such expenses will
be borne by American Champion):
Registration fee $ 1,471.05
Legal fees and expenses 50,000.00
Accounting fees and expenses 3,000.00
Miscellaneous, including Nasdaq listing fees 20,000.00
Total...............................$ 74,471.05
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
American Champion's Certificate of Incorporation limits, to the
maximum extent permitted by Delaware law, the personal liability of
directors for monetary damages for breach of their fiduciary duties as a
director. American Champion's Bylaws provided that American Champion
shall indemnify its officers and directors and may indemnify its
employees and other agents to the fullest extent permitted by Delaware
law.
Section 145 of the Delaware General Corporation Law provides that a
corporation may indemnify a director, officer, employee or agent made a
party to an action by reason of that fact that he or she was a director,
officer, employee or agent of the corporation or was serving at the
request of the corporation against expenses actually and reasonably
incurred by him or her in connection with such action if he or she acted
in good faith and in a manner he or she reasonably believed to be in, or
not opposed to, the best interests of the corporation and with respect to
any criminal action, had no reasonable cause to believe his or her
conduct was unlawful.
Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers or persons
controlling American Champion pursuant to the foregoing provisions,
American Champion has been advised that in the opinion of the Commission,
such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable.
<PAGE> 18
ITEM 16. EXHIBITS
The exhibits filed as part of Amendment No. 1 to the Registration
Statement are as follows:
Number Description
4.1* Securities Purchase Agreement, dated July 2, 1998, by and
among American Champion and the Buyers as defined therein.
4.2* 7% Convertible Debentures due July 1, 2000.
4.3* Joint Escrow Instructions.
4.4* Registration Rights Agreements in connection with the
issuance of the debentures.
4.5* Common Stock Purchase Warrant.
4.6* Registration Rights Agreements for certain existing
Stockholders regarding 255,000 shares of common stock.
4.7* Assignment Agreement dated October 30, 1998 between The
Endeavor Capital Fund S.A., Amro International S.A.,
Advantage (Bermuda) Fund S.A. and Canadian Advantage L.P.
5.1 Opinion of Preston Gates & Ellis LLP regarding legality of
securities being registered.
23.1 Consent of Preston Gates & Ellis LLP (included in its
opinion filed as Exhibit 5.1).
23.2* Consent of Moss Adams LLP.
23.3* Consent of Moore Stephens P.C.
(* Previously filed)
ITEM 17. UNDERTAKINGS
The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing
of the Registrant's annual report pursuant to Section 13(a) or Section
15(d) of the Securities Exchange Act of 1934 that is incorporated by
reference in the registration statement shall be deemed to be a new
registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the Registrant pursuant to its Certificate of
Incorporation, its Bylaws, or otherwise, the Registrant has been advised
that in the opinion of the Securities Exchange Commission such
indemnification is against public policy as expressed in the Securities
Act of 1933 and is, therefore, unenforceable. If a claim for
indemnification against such liabilities (other than the payment of the
Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered,
the Registrant will, unless in the opinion of its counsel the matter has
been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against a
public policy as expressed in the Securities Act of 1933 and will be
governed by the final adjudication of such issue.
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this Registration Statement to:
(i) Include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
(ii) Reflect in the prospectus any facts or events
arising after the effective date of the registration
statement (or the most recent post-effective amendment
thereof) which, individually or in the aggregate, represent a
fundamental change in the information set forth in the
registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the
total dollar value of securities offered would not exceed
that which was registered) and any deviation from the low or
high and of the estimated maximum offering range may be
reflected in the form of prospectus filed with the Commission
pursuant to Rule 424(b) if, in the aggregate, the changes in
volume and price represent no more than 20% change in the
maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective
registration statement;
<PAGE> 19
(iii) Include any material information with respect to
the plan of distribution not previously disclosed in the
registration statement or any material change to such
information in the registration statement;
provided, however, that paragraph (1)(i) and (1)(ii) do not apply if the
registration statement is on Form S-3 or Form S-8, and the information
required to be included in a post-effective amendment by those paragraphs
is incorporated by reference from periodic reports filed by the
registrant pursuant to section 13 or section 15(d) of the Securities
Exchange Act of 1934.
(2) That, for the purpose of determining any liability
under the Securities Act of 1933, each such post-effective amendment
shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-
effective amendment any of the securities being registered which remain
unsold at the termination of the offering.
<PAGE> 20
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it
meets all of the requirements for filing on Form S-3 and has duly caused
this Amendment No. 1 to the Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of
San Jose, California on the 23rd day of December, 1998.
By /s/ Anthony K. Chan
Anthony K. Chan
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this Amendment No.1
to the Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Capacities Date
- --------------------------- ------------------------------------ -------------
<S> <C> <C>
/s/ Anthony K. Chan President, Chief Executive Officer, December 23, 1998
- ------------------------- and Director (principal executive
Anthony K. Chan officer)
/s/Anthony K. Chan Chairman of the Board and Director December 23, 1998
- -------------------------
Anthony K. Chan (attorney-in-fact)
George Chung
/s/ Anthony K. Chan Vice President and Director December 23, 1998
- -------------------------
Anthony K. Chan (attorney-in-fact)
Don Berryessa
/s/ Anthony K. Chan Vice President and Chief Financial December 23, 1998
- ------------------------- Officer (principal financial officer)
Anthony K. Chan (attorney-in-fact)
Mae Lyn Woo
/s/ Anthony K. Chan Director December 23, 1998
- -------------------------
Anthony K. Chan (attorney-in-fact)
William T. Duffy
/s/ Anthony K. Chan Director December 23, 1998
- -------------------------
Anthony K. Chan (attorney-in-fact)
Alan Elkes
/s/ Anthony K. Chan Director December 23, 1998
- -------------------------
Anthony K. Chan (attorney-in-fact)
Jan D. Hutchins
/s/ Anthony K. Chan Director December 23, 1998
- -------------------------
Anthony K. Chan (attorney-in-fact)
Ronald M. Lott
</TABLE>
<PAGE> 21
EXHIBIT INDEX
The exhibits filed as part of Amendment No. 1 to the Registration
Statement are as follows:
Number Description
4.1* Securities Purchase Agreement, dated July 2, 1998, by and
among American Champion and the Buyers as defined therein.
4.2* 7% Convertible Debentures due July 1, 2000.
4.3* Joint Escrow Instructions.
4.4* Registration Rights Agreements in connection with the
issuance of the debentures.
4.5* Common Stock Purchase Warrant.
4.6* Registration Rights Agreements for certain existing
Stockholders regarding 255,000 shares of common stock.
4.7* Assignment Agreement dated October 30, 1998 between The
Endeavor Capital Fund S.A., Amro International S.A.,
Advantage (Bermuda) Fund S.A. and Canadian Advantage L.P.
5.1 Opinion of Preston Gates & Ellis LLP regarding legality of
securities being registered.
23.1 Consent of Preston Gates & Ellis LLP (included in its
opinion filed as Exhibit 5.1).
23.2* Consent of Moss Adams LLP.
23.3* Consent of Moore Stephens P.C.
(* Previously filed)
EXHIBIT 5.1
December 23, 1998
American Champion Entertainment, Inc.
1694 The Alameda, Suite 100
San Jose, CA 95126-2219
Ladies and Gentlemen:
At your request we have examined the Registration Statement
No. 333-67879, as amended, filed by you with the Securities Exchange
Commission (the "Commission") on November 24, 1998 (the "Registration
Statement") in connection with the registration under the Securities Act
of 1993, as amended, of 4,817,274 shares of the Common Stock of American
Champion Entertainment, Inc. (the "Stock").
As your counsel, we have examined the proceedings taken by you in
connection with the issuance and sale of up to 4,817,274 shares of the
Stock.
It is our opinion that up to 4,817,274 shares of the Stock, when
issued and sold in the manner referred to in the Registration Statement,
will be legally issued, fully paid and nonassessable.
We consent to the use of this opinion as an exhibit to the
Registration Statement and further consent to all references to us in the
Registrable Statement, the prospectus constituting a part thereof, and
any and all amendments thereto.
Very truly yours,
/s/ Preston Gates & Ellis LLP
Preston Gates & Ellis LLP
