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Filed Pursuant to Rule 424(b)(3)
Registration Statement No. 333-60511
PROSPECTUS
AMERICAN CHAMPION ENTERTAINMENT, INC.
1,187,774 Shares of Common Stock
This Prospectus relates to the sale of up to approximately 1,187,774
shares of common stock, par value $.0001 per share (the common stock
are generally referred to hereafter as the "Common Stock"), of
American Champion Entertainment, Inc. (the "Company") offered for the
account of certain stockholders of the Company (the "Selling
Stockholders"). These 1,187,774 shares of Common Stock (the
"Shares") include (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 the Company (the
"Debentures"), based on the trading prices of the Common Stock prior
to July 31, 1998; (ii) 49,500 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 Debentures (the
"Debenture Warrants"); (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 (the "JW Warrants"). The actual number of shares of Common
Stock issued or issuable upon conversion of the Debentures is subject
to adjustment and could be materially less or more than the above
estimated amount, depending upon factors that cannot be predicted by
the Company at this time, including, among others, the future market
price of the Common Stock. 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. The Selling Stockholders may effect such
transactions by selling the Shares to or through broker-dealers, who
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
Company will not receive any of the proceeds from the sale of the
Shares by the Selling Stockholders. The Company has agreed to bear all
expenses of registration of the Shares, but all selling and other
expenses incurred by the Selling Stockholders will be borne by the
Selling Stockholders.
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 (the "Securities Act"), and 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 commissions or discounts under
the Securities Act. See "Selling Stockholders" and "Plan of
Distribution."
On July 31, 1997, the Common Stock and the Company's redeemable Common
Stock purchase warrants (the "Warrants") began trading on the Nasdaq
SmallCap Market ("NASDAQ") under the symbols "ACEI" and "ACEIW,"
respectively. On July 31, 1998 the closing sale price of the Common
Stock and the Warrants on NASDAQ was $6.2500 and $1.3125, 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.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
NOR HAS THE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED OR INCORPORATED BY REFERENCE
IN THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY
THE COMPANY, THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF ANY OFFER TO BUY THE SHARES OF COMMON STOCK BY ANYONE
IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT
AUTHORIZED, OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS
NOT QUALIFIED TO DO SO OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE
SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS
NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY
IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY
TIME SUBSEQUENT OT THAT DATE HEREOF.
The date of this Prospectus is August 20, 1998.
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THIS PROSPECTUS CONTAINS FORWARD-LOOKING STATEMENTS, AS DEFINED IN THE
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 (THE "PSLRA"), THAT INVOLVE
KNOWN AND UNKNOWN RISKS, INCLUDING, WITHOUT LIMITATION, STATEMENTS CONTAINING
THE WORDS "BELIEVES," "ANTICIPATES," "ESTIMATES," EXPECTS," "MAY" AND
WORDS OF SIMILAR IMPORT FOR STATEMENTS OF MANAGEMENT'S OPINION. SEE "RISK
FACTORS-FORWARD LOOKING STATEMENTS AND ASSOCIATED RISKS" CONTAINED HEREIN.
CERTAIN PERSONS PARTICIPATING IN THE OFFERING MADE HEREBY MAY ENGAGE IN
TRANSACTIONS THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE
COMMON STOCK, INCLUDING PURCHASES OF THE COMMON STOCK TO STABILIZE ITS MARKET
PRICE, PURCHASES OF THE COMMON STOCK TO COVER SOME OR ALL OF A SHORT POSITION
IN THE COMMON STOCK MAINTAINED BY SUCH PERSONS AND THE IMPOSITION OF PENALTY
BIDS. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "PLAN OF DISTRIBUTION."
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TABLE OF CONTENTS
Page
Incorporation of Certain Documents by Reference 4
Available Information 4
Company 5
Risk Factors 9
Use of Proceeds 12
Certain Market Information 12
Dividend Policy 12
Selling Stockholders 13
Plan of Distribution 14
Legal Matters 14
Experts 14
Additional Information 15
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INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Securities and Exchange Commission
(the "Commission") are incorporated herein by reference:
1. The Company's Registration Statement on Form SB-2 for its initial
public offering that became effective on July 30, 1997;
2. The description of the Company's Common Stock contained in the
Company's Form SB-2;
3. Post-Effective Amendment No. 1 to the Company's Registration
Statement on Form SB-2, as filed with the Commission on July 2,
1998 and declared effective on July 17, 1998; and
4. The Company's Proxy Statement for the 1998 Annual Meeting of
Stockholders;
5. The Company's Annual Report on Form 10-KSB for its fiscal year
ended December 31, 1997; and
6. The Company's Quarterly Report on Form 10-QSB for the quarter
period ended March 31, 1998.
All documents subsequently filed by the Company pursuant to
Section 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), prior to the termination of this offering shall
be deemed incorporated herein by reference.
Any statement contained herein or in a document incorporated or deemed
to be incorporated by reference herein shall be deemed to be modified or
superseded for purposes of this Prospectus to the extent that a statement
contained herein or in any other subsequently filed document which also is or
is deemed to be incorporated by reference herein modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this Prospectus.
The Company will provide without charge to each person to whom a copy of
this Prospectus has been delivered, on the written or oral request of such
person, a copy of any or all of the foregoing documents incorporated by
reference in this Prospectus. 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).
AVAILABLE INFORMATION
The Company has filed with the Commission a Registration Statement on
Form S-3 (together with all amendments and exhibits thereto, the
"Registration Statement") under the Securities Act of 1933, as amended (the
"Securities Act"), with respect to the securities offered by this
Prospectus. This Prospectus, filed as part of such Registration Statement,
does not contain all of the information set forth in, or annexed as exhibits
to, the Registration Statement, certain portions of which have been omitted
in accordance with the rules and regulations of the Commission. For further
information with respect to the Company and this offering, reference is made
to the Registration Statement including the exhibits filed therewith. The
Registration Statement may be inspected and copies may be obtained from the
Public Reference Section at the Commission's principal office, 450 Fifth
Street, N.W., Judiciary Plaza, Washington, D.C. 20549, and at the New York
Regional Office, 7 World Trade Center, New York, New York 10048, upon payment
of the fees prescribed by the Commission. Statements contained in this
Prospectus as to the contents of any contract or other document are not
necessarily complete and where the contract or other document has been filed
as an exhibit to the Registration Statement, each such statement is qualified
in all respects by such reference to the applicable document filed with the
Commission.
The Company is subject to the reporting requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith is required to file reports, proxy statements and other information
with the Commission. Such reports, proxy statements and other information
can be inspected and copied at the public reference facilities of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549; at its New York
Regional Office, 7 World Trade Center, New York, New York 10048; and at its
Pacific Regional Office, 5670 Wilshire Boulevard, 11th Floor, Los Angeles,
California 90036-3648, and copies of such material can be obtained from the
Commission's Public Reference Section at the prescribed rates. The
Commission maintains a Web site (http://www.sec.gov) that contains reports,
proxy and information statements and other information regarding registrants
that file electronically. The Company furnishes its stockholders with annual
reports containing audited financial statements and such other periodic
reports as the Company deems appropriate or as may be required by law.
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COMPANY
The following discussion is qualified in its entirety by the more
detailed information and financial statements, including the notes thereto,
appearing elsewhere in this Prospectus. Unless the context otherwise
requires, references in this Prospectus to the Company are references to the
Company and its subsidiaries, American Champion Media, Inc. and America's
Best Karate. Except as otherwise noted, all information in the Prospectus
assumes no exercise of outstanding options to purchase shares of the
Company's Common Stock or the Warrants.
General
American Champion Entertainment, Inc. (the "Company") is a Delaware
corporation headquartered in San Jose, California and incorporated on
February 5, 1997. The Company was formed as a holding company for its
wholly-owned subsidiary, America's Best Karate, a California corporation
("ABK"), formed in June 1991, and ABK's wholly-owned subsidiary, American
Champion Media, Inc., a Delaware corporation ("AC Media"), formed in
February 1997.
ABK owns, manages and operates a chain of karate schools with four
locations in the San Francisco Bay Area. ABK's schools provide karate
instruction to students of all ages and skill levels. AC Media is a media
production and marketing company. Through AC Media, the Company is involved
in (i) the development, production and marketing of "ADVENTURES WITH KANGA
RODDY," a television program aimed at pre-school and primary school children
(the "Kanga Roddy Series"), (ii) the licensing of merchandising rights
related to the Kanga Roddy Series, and (iii) the development, production and
marketing of various audio tapes, video tapes and workbooks that specialize
in fitness information.
The Kanga Roddy Series
The Company has developed and produced thirteen half-hour episodes of
the Kanga Roddy Series. The Kanga Roddy Series uses martial arts values such
as humility, discipline and respect, with the added elements of song,
contemporary music, dance, vibrant colors and exciting movements designed to
capture its targeted pre-school and primary school children audience's
attention. The Kanga Roddy Series features a six-foot tall kangaroo
character named Kanga Roddy who is a martial arts expert. Unlike other
martial arts programs which feature violence, Kanga Roddy never fights
because he understands that conflict can always be resolved with knowledge,
compassion, humility, respect and an open mind.
Each episode of the Kanga Roddy Series focuses on a group of children
at a community center and their teachers (played by Jennifer Montana and
Karen Lott, wives of former San Francisco 49ers football players, Joe Montana
and Ronnie Lott) working on activities such as reading, physical fitness and
arts and crafts. During these activities, the children encounter an ethical
or social problem which causes uneasiness or unhappiness among some of the
children. The teachers sense the problem and suggest that the children seek
help from their friend, Uncle Pat, the proprietor of a rare bookstore played
by Pat Morita. Uncle Pat, with the assistance of his pet bookworm,
Shakespeare, magically transports the children to the land of Hi-Yah where
Kanga Roddy lives.
Once in the land of Hi-Yah, Kanga Roddy and his friend Bantu, a female
African snake, help the children solve their problem by giving examples
presented through songs. Kanga Roddy gets inspiration for the proper
solution to the problem through flashbacks to lessons learned from his
martial arts teacher, Zatochi, a wise old snow monkey. The children also
learn a physical activity each time they visit Kanga Roddy such as balance,
jumping or kicking. When the children return to the community center, they
review what they have learned with their teachers.
In May 1997, the Company and KTEH, the public broadcasting station
serving the San Jose, California area, entered into a Distribution Agreement
(the "Distribution Agreement") which grants KTEH the exclusive right to
distribute, advertise, market or otherwise exploit the Kanga Roddy Series on
public broadcast affiliated stations throughout the United States for a two-
year period. KTEH has cleared the broadcast of the Kanga Roddy Series with
47 other public broadcast stations which the Company believes broadcast to
approximately 56% of the households in the United States (approximately 47
million households). Under the terms of the Distribution Agreement, KTEH is
entitled to 15% of monies collected by KTEH (plus distribution expenses) from
its exploitation of the distribution rights granted to it with the balance to
be paid to the Company. KTEH has paid the Company an advance of $430,000.
The $430,000 advance will be deducted from all royalties payable to the
Company by KTEH. Under the Distribution Agreement, the Company has also
committed to sharing with KTEH (i) 8% of revenues from the sale (less fees
and commissions) and licensing of non-broadcast ancillary rights of
educational products such as video tapes, books and music tapes and (ii) 5%
of gross profits (less fees and commissions) of the Company from the sale and
licensing of toys and clothing. The Company has also granted KTEH a right of
first refusal with respect to broadcast rights to the Kanga Roddy Series not
granted to KTEH in the Distribution Agreement.
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On April 20, 1998, the Company entered into a Continuing Distribution
Agreement with KTEH for the distribution of 26 more half-hour Kanga Roddy
shows and two one-hour specials. Under the Continuing Distribution
Agreement, KTEH receives the exclusive domestic broadcast rights to the new
episodes for two years and agrees to pay the Company $30,000 for each half-
hour program and $60,000 for each of the two one-hour shows.
On April 29, 1998, the Company executed a sponsorship agreement with
Sara Lee Corporation, the parent company of Hanes, which provides for Hanes'
corporate sponsorship of the Adventures With Kanga Roddy show. Basketball
legend Michael Jordon stars in the Hanes campaigns.
The Company's strategy includes pursuing licensing and merchandising
opportunities related to the Kanga Roddy Series. Characters developed in a
popular series, and often the series itself, achieve a high level of
recognition and popularity, making them valuable licensing and merchandising
assets. Among the most popular licensed items are toys, clothing, food,
dinnerware/lunch boxes, watches and soft vinyl goods such as boots, backpacks
and raincoats. The Company plans to retain worldwide rights to the
characters and images developed in the Kanga Roddy Series, to protect its
rights to such characters and images through appropriate registration, and to
license their use to manufacturers for specific products. There is no
assurance, however, that the Company will be able to successfully retain or
protect its rights through registration, or to license its properties. The
Company also hopes to realize revenues through the distribution of the Kanga
Roddy Series in the home video market, although there is no assurance that
the Company will be able to do so. If the Kanga Roddy Series does not attain
and maintain widespread television distribution, or widespread popularity, it
is unlikely that any significant licensing or merchandising opportunities or
revenue will arise or be maintained.
In July 1997, the Company and SEGA of America, Inc. ("SEGA") entered
into a Licensing Agent Agreement appointing SEGA as the Company's non-
exclusive agent for purposes of licensing and merchandising the "Kanga
Roddy" trademark brand name characters and logo and home video distribution
of the Kanga Roddy Series (the "SEGA Agreement"). Pursuant to the SEGA
Agreement, SEGA has agreed to solicit and negotiate licensing and
merchandising agreements on behalf of the Company, and monitor and oversee
the licensing, promotion and marketing programs in consideration for 30% of
all monies or other consideration payable to the Company under any agreement
entered into during the three year period following execution of the SEGA
Agreement by the Company which was secured or serviced by SEGA. Upon the
expiration or termination of the SEGA Agreement, SEGA will continue to be
entitled to receive such consideration with respect to any License Agreement
for the greater of (i) the actual term of each such License Agreement; or
(ii) five years from the date of commencement of each such License Agreement.
In addition, in the event SEGA enters into any master toy, home video or
master apparel license, SEGA will immediately become the exclusive agent for
the Company for purposes of licensing and merchandising the "Kanga Roddy"
name to third parties for use on or in connection with merchandise products
throughout the world. The SEGA Agreement is not conditioned on the Company's
receiving any minimum amount from the persons or entities introduced by SEGA.
Fitness Products
The Company develops, produces and markets various video tapes, audio
tapes and workbooks that specialize in fitness information and education
("Fitness Products"). The Company's first Fitness Product, entitled
"STRONG MIND FIT BODY," consists of video tapes, audio tapes and a workbook,
intended to teach motivational techniques to start and stay with an exercise
program in order to lose weight. In June 1996, the Company entered into a
Distribution Agreement with InteliQuest, a Utah general partnership. In
1997, the Company's revenue were offset by a write off of film cost of
$105,000 resulting from the Company's determination that it is unlikely that
it will generate significant revenue from sales of "STRONG MIND FIT BODY"
program.
The Company's second Fitness Product, entitled the "MONTANA EXERCISE
VIDEO," is a cardio kick-boxing video starring former superstar quarterback
Joe Montana and his wife Jennifer, both of whom have trained at the Company's
karate schools. The Company has not commenced distribution of this Fitness
Product.
Karate Studios
The Company manages and operates a chain of company owned karate
studios with four locations in the San Francisco Bay Area under the name
"ABK." Each of the Company's instructors, all of whom are black belts, have
undergone a rigorous training program conducted by Messrs. Chung and Chan
(both members of the Karate Black Belt Hall of Fame) and/or other instructors
of ABK. Each karate studio conducts approximately 40 forty-five minute
classes each week. The classes are generally comprised of 10 to 15 students
and taught by one to three instructors. The Company's black belt course
requires approximately 36 months of study and its second degree black belt
program requires approximately 48 months of study. Classes are organized by
skill level and age group. Students may take as many classes as are
available each week without additional charge. Fees, if paid in advance, are
generally $1,800 and $2,400 for the black belt and second degree black belt
programs, respectively. At each karate studio, the Company also sells
martial arts related products, such as uniforms, other clothing and safety
equipment.
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During 1997, the Company closed five studios, which were not operating
profitably and on March 31, 1998, the Company sold a karate studio to its
general manager. The Company was able to retain approximately 65% of the
students who attended the closed studios by combining them with other nearby
ABK studios. As of December 31, 1997, there were approximately 1,350
students enrolled at the Company's five karate studios. The Company believes
that the average age of the Company's students is approximately 12 years old.
At these enrollment levels the Company estimates that it is currently
operating at approximately 75% of its total capacity. See "Management's
Discussion and Analysis or Plan of Operation - Results of Operations" of the
Company's Post-Effective Amendment No. 1 to its Form SB-2 Registration
Statement.
In connection with the sale of a studio on March 31, 1998, the Company
received a note receivable of $52,859 due in 70 monthly payments of $1,000
including interest imputed at 10%. The Company has guaranteed payments of
the studio lease which are $4,673 per month through March 2000. The Company
retained all advance payments of enrollment fees which were $156,536 at
March 31, 1998; however, the Company is liable for any future refunds to
students enrolled prior to March 31, 1998. As of March 31, 1998, the Company
reduced the liability for advance payments of enrollment fees to $19,000
which is included in deferred revenue. Management will evaluate this
liability quarterly in light of cancellations to date and expected future
cancellations.
The Company's executive offices are located at 1694 the Alameda,
Suite 100, San Jose, California 95126-2219, and its telephone number is
(408) 288-8199.
Recent Developments
On July 2, 1998, the Company entered into the Securities Purchase
Agreement for the sale of the Debentures and Debenture Warrants (the
"Agreement"). Pursuant to the Agreement, the Endeavour Capital Fund S.A.
and Amro International S.A. (the "Investors") agreed under certain terms and
conditions to invest up to $1.8 million into the Company in the Debentures,
and the Company agreed, among other things, to issue to the Investors the
Debenture Warrants. Pursuant to the Agreement, the Company issued to the
Investors on July 6, 1998 $1.0 million in Debentures (the "Initial
Debentures") and warrants to purchase 27,500 shares of the Company's Common
Stock.
Subject to certain conditions, the Investors will purchase from the
Company an additional $800,000 in Debentures in two tranches of $500,000 (the
"First Tranche") and $300,000 (the "Second Tranche"), respectively. The
First Tranche will be made 30 days after the effectiveness of the
registration statement, of which the Prospectus is a part and the Second
Tranche will be completed 30 days after the completion of the First Tranche.
The terms and conditions pursuant to which the Debentures and Debenture
Warrants were issued are summarized as follows:
* The interest rate on the Debentures is 7% per annum, payable in cash
or in shares of the Company's Common Stock.
* Date of maturity is July 1, 2000.
* The Debentures are convertible into the number of shares of the
Company's Common Stock equal to the principal amount and accrued and
unpaid interest outstanding under the Debentures on the conversion
date divided by the greater of:
(I) the lower of: (a) 75% of the Market Price on the conversion
date or (b) 117.5% of the Market Price on the date the Debenture is
issued (for the Initial Debentures, this amount was $7.725625 per
share); or (II) 50% of the Market Price of the Company's stock on the date
the Debenture is issued, subject to adjustments, (the "Floor Price")(for the
Initial Debentures the Floor Price was $3.2875 per share).
* If at any time after November 3, 1998 (for the Initial Debentures),
the Company's Common Stock is trading at a Market Price, for ten
consecutive trading days, at a level such that 75% of such Market
Price is less than the Floor Price, then the Company is required to
pay to the Investors an amount equal to 2.5% of the outstanding
principal of the Debentures for every 30-day period that the Market
Price of the Company's Common Stock is at such level (the "Low
Market Amount"). The Low Market Amount is calculated on a pro rata
basis (i.e. approximately 0.083% per day) for the first 30-day
period only that 75% of the Market Price is less than the Floor
Price. Thereafter, the Company must pay the full Low Market Amount
(2.5% of the outstanding principal amount) for each subsequent 30-
day period or part thereof.
(1) Market Price is defined in the Agreement as (x) the average closing bid
price of the Common Stock as reported by Bloomberg, LP or the average closing
bid price on the over-the-counter market, (i) if a period of time is specified
in the relevant provision of the Debenture, for such period, and (ii) if no
period of time is specified in the relevant provision of the Debenture, then
for the 5 days ending on the trading day immediately preceding the relevant
date, or (y) if the Common Stock is listed on a stock exchange, the lowest
trade price on such exchange on the date indicated in the Debenture as
reported in the Wall Street Journal.
<PAGE> 8
* If the Company does not timely pay the Low Market Amount, then the
Investors have the right to convert the Debentures, until the Low
Market Amount is paid in full, except that the conversion rate
discussed above is determined as if there is no Floor Price.
* In no event (subject to certain exceptions, including a Company
default under any Debenture or the Agreement) shall an Investor be
entitled to convert any Debenture to the extent that, after such
conversion, the sum of (1) the number of shares of Common Stock
beneficially owned by the Investor and its affiliates, and (2) the
number of shares of Common Stock issuable upon the conversion of the
Debenture would result in beneficial ownership by the Investor and
its affiliates of more than 9.99% of the outstanding shares of
Common Stock.
* At its option, the Company 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. The Debentures may not be converted
after the Company gives notice of its intent to redeem pursuant to
the Agreement.
* Debenture Warrants to purchase 2,750 shares of the Company's Common
Stock were and will be granted to the Investors for each $100,000 in
Debentures issued. The Debenture Warrants expire on July 6, 2003
and provide for an exercise price of $7.56125 per share.
The Agreement also has the following additional term:
* The Company is required to 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 Investors to resell such Common Stock to the
public.
The terms and conditions pursuant to which the JW Warrants were issued
are summarized as follows:
* JW Charles Securities, Inc. received a warrant to purchase 75,000
shares of the Company'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> 9
RISK FACTORS
The securities offered hereby are highly speculative and should be
purchased only by persons who can afford to lose their entire investment in
the Company. Each prospective investor should carefully consider the
following risk factors, as well as all other information set forth elsewhere
in this Prospectus.
History of Losses and Deficits; Uncertainty of Attaining Profitability. The
Company sustained operating losses of $641,583, $801,416 and $337,287 in
1996, 1997 and the six months ended June 30, 1998, respectively. The Company
expects to incur significant additional operating losses for the foreseeable
future as it continues to develop, produce and market its media projects,
including the Kanga Roddy Series. There can be no assurance that the Company
will ever achieve profitability.
Liquidity and Financing Requirements; Dependence on Offering Proceeds. The
Company's venture into media projects, including the development and
production of the Kanga Roddy Series, requires substantial amounts of
capital. Although the Company was able to finance the production of the
pilot and the first 13 episodes of the Kanga Roddy Series with its own funds
and the proceeds of the IPO, the Company is dependent upon the proceeds of
additional financing to produce the remainder of the 28 episodes of the Kanga
Roddy Series it is obligated to deliver pursuant to the Continuing
Distribution Agreement between KTEH and the Company. On July 2, 1998, the
Company entered into the Agreement for the sale of $1,800,000 of 7%
Convertible Debentures due July 1, 2000 (the "Debentures"), the Debenture
Warrants and the JW Warrants. On such date, the Company sold Debentures in
the principal amount of $1,000,000 and Common Stock Purchase Warrants to
purchase 27,500 shares of Common Stock. The sale of the Debentures in the
principal amount of $800,000 and, Debenture Warrants to purchase 22,000
shares of Common Stock is, subject to certain conditions, expected to occur
within sixty (60) days of the date of this Prospectus. The Company believes
that the net proceeds of the sale of the Debentures, together with funds
generated from operations, if any, will be sufficient to produce the next 7
episodes. In the event that production costs are higher than expected, or
the Company is forced to use funds earmarked for production for other
purposes, the Company could be required to modify its operations or to seek
additional financing sooner than currently anticipated. The Company has no
current arrangements with respect to such additional financing and there can
be no assurance that such additional financing will be available at all or on
terms acceptable to the Company. The Company's failure to obtain such
additional financing will materially adversely affect its ability to produce
further episodes of the Kanga Roddy Series.
Dependence on the Success of the Kanga Roddy Series. The Company is
dependent on the success of the Kanga Roddy Series, which in turn is
dependent upon unpredictable and volatile factors beyond the Company's
control, such as children's preferences, competing programming and the
availability of other entertainment activities for children. The failure of
the Company to attract a significant television audience for the Kanga Roddy
Series over a long period of time would have a material adverse effect on the
Company's financial condition and results of operations, and in all
likelihood on the market price of the Company's securities. There is no
assurance that the Kanga Roddy Series will be successful or that, if
successful initially, that television viewership of the Kanga Roddy Series
will be maintained.
Licensing and Merchandising. The Company's 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. The
ability of the Company 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 the Company's
characters to provide attractive merchandising features to its customers. If
the Company is 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, there is no assurance that licensing
opportunities will materialize as the Company 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 its involvement with the Kanga Roddy Series, the
Company has had no significant experience with the development and production
of television programming or with the licensing and merchandising of
products. As a result, the Company could enter into contracts or make other
agreements that are on less than optimal terms. The television and licensing
and merchandising businesses are complicated and the absence of experience in
such businesses could materially and adversely affect the financial condition
and results of operations of the Company.
Dependence on Key Personnel. The Company is dependent on the efforts and
abilities of Anthony Chan and George Chung, the Company's founders and
principal executive officers, and Don Berryessa, Vice President and Jan D.
Hutchins, President of AC Media. The Company has entered into employment
agreements, effective as of August 5, 1997, with each of such individuals.
None of such employment agreements contains non-competition provisions. See
"Management--Employment Agreements" of the Company'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
have a material adverse effect on the business of the Company. The Company
has obtained "key-man" life insurance with $1,000,000 coverage for each of
Messrs. Chung and Chan.
<PAGE> 10
Dependence on Association with Joe Montana, Ronnie Lott and the San Francisco
49ers. The success of the Kanga Roddy Series depends in part on the
Company's continued association with former 49ers Joe Montana and Ronnie
Lott, and their wives, and the San Francisco 49ers. 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 a material adverse
impact on the 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 the Company, and the possibility exists that the current
relationships between the parties could materially change in the future.
Competition. Each of the industries in which the Company competes is highly
competitive and most of the companies with which the Company competes have
greater financial and other resources than the Company. With respect to the
Company's television production activities, the Company competes on the basis
of relationships and pricing for access to a limited supply of facilities and
talented creative personnel to produce its programs. The Company's 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. The Company's 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 the Company. The martial arts industry is also highly
competitive. The Company'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 the Company.
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. The
Company does not currently maintain nor does it anticipate maintaining a
reserve account for return of membership fees other than in connection with
its sale of a studio on March 31, 1998. As a consequence, the Company may be
unable to refund membership fees which could have a material adverse effect
on the Company's business and its prospects.
Control by Messrs. Chan and Chung. As of the date of this Prospectus,
Anthony Chan and George Chung, the Company's founders and principal executive
officers, collectively beneficially own 1,016,276 shares of the Company's
outstanding Common Stock, representing approximately 26.5% of the outstanding
shares prior to this Offering and approximately 18.2% of the outstanding
shares of Common Stock after this offering (assuming no exercise of any
outstanding options or 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 the Company.
Anti-takeover Effects of Delaware Law. Section 203 of the General
Corporation Law of Delaware prohibits the Company 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 the Company without action by the stockholders, and therefore
could adversely affect the price of the Company's Common Stock. See
"Description of Securities" of the Company's Post-Effective Amendment No. 1
to its Form SB-2 Registration Statement.
Liability Insurance. The Company has purchased liability insurance for each
of its karate studios in the amount of $1,000,000 per occurrence and
$2,000,000 in the aggregate which the Company believes is sufficient for its
current level of business operations. There is no assurance, however, that
the present coverage will continue to be available in the future or that the
Company will be able to retain such coverage at a reasonable cost. Further,
there can be no assurance 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 the Company in the future as the
Company expands its operations. A successful claim against the Company in
excess of the liability limits or relating to an injury excluded under the
policy could have a material adverse effect on the Company.
No Intention to Pay Dividends. The Company has not and has no present
intention to declare or pay cash dividends. Any earnings which the Company
may realize in the foreseeable future will be retained to finance the growth
of the Company.
Nasdaq Maintenance Requirements; Possible Delisting of Securities from Nasdaq
Market; Risks of Low priced Stocks. The Company's Common Stock are listed on
NASDAQ. The Commission has approved rules imposing criteria for listing of
securities on NASDAQ, 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. If the Company is unable
to satisfy NASDAQ's maintenance criteria in the future, its securities may be
delisted from NASDAQ. In such event, trading, if any, in the Company's
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 the
Company's securities.
<PAGE> 11
Penny Stock Regulation. In the event that the Company is unable to satisfy
the maintenance requirements for NASDAQ and its 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. In the absence of the Common Stock being quoted on NASDAQ, or the
Company's having $2,000,000 in stockholders' equity, trading in the Common
Stock would be covered by Rule-15g 9 promulgated under the Exchange Act, for
non NASDAQ 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, and an equity security issued by an issuer that
has (i) net tangible assets of at least $2,000,000, if such issuer has been
in continuous operation for three years, (ii) net tangible assets of at least
$5,000,000, if such issuer has been in continuous operation for less than
three years, or (iii) 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 the Company's securities were to become subject to the regulations
applicable to penny stocks, the market liquidity for the 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 the Company'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 the Company and other companies that operate in the Company's
markets, general economic conditions in the industries in which the Company
competes and the strength of the domestic and international economy, to name
a few. The Company's stock traded from a high of $9.625 in the first quarter
of 1998 to a low of $4.125 in the third quarter of 1997. 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 (i) anticipated
trends in the Company's financial condition and results of operations and
(ii) the Company's business strategy for developing, producing, distributing,
licensing and merchandising the Kanga Roddy Series. These forward-looking
statements are based largely on the Company's 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
(i) 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; (ii) unanticipated working capital or other cash requirements;
(iii) 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 (iv) various competitive factors that may prevent the Company
from competing successfully in the marketplace. In light of these risks and
uncertainties, many of which are described in greater detail elsewhere in
this "Risk Factors" discussion, there can be no assurance that the events
predicted in forward-looking statements contained in this Prospectus will in
fact transpire.
<PAGE> 12
USE OF PROCEEDS
The Company will not receive any of the proceeds from the sale of the
Shares offered hereunder by the Selling Shareholders. The offering is made
to fulfill the Company's contractual obligations to the Selling Shareholders
to register the Shares held by the Selling Shareholders.
CERTAIN MARKET INFORMATION
The Company's Common Stock commenced trading on the NASDAQ 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
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 (through July 31, 1998) $7.00 $6.25
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 July 27, 1998, as reported by the Company's transfer agent, shares
of Common Stock were held by approximately 700 shareholders of record.
DIVIDEND POLICY
The Company intends to retain future earnings, if any, that may be
generated from the Company's operations to finance the operations and
expansion of the Company and, accordingly, does 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
operations and financial position of the Company and such other factors as
the Company's 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 July 31, 1998 by each of the
Selling Stockholders assuming the conversion of the Debentures of $1,800,000
principal amount and a conversion rate of $4.790625 per share, based on
application of the formula for computing the conversion rate as provided in
the Debenture (see "Recent Developments"), the exercise of the Debenture
Warrants to purchase 49,500 shares of Common Stock and the exercise of the JW
Warrants to purchase 75,000 shares of Common Stock. Unless otherwise
indicated below, to the knowledge of the Company, 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 July 31,1998(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 1.26 60,000 -- --
Albert Levine 31,000 * 31,000 -- --
Keith E. Loisell 19,000 * 19,000 -- --
Peter Marsh 60,000 1.26 60,000 -- --
Rory Nichols 25,000 * 25,000 -- --
Brian Schuster 25,000 * 25,000 -- --
The Endeavour Capital Fund S.A. 428,887 9.00 428,887 -- --
Amro International S.A. 428,887 9.00 428,887 -- --
JW Charles Securities, Inc. 75,000 1.57 75,000 -- --
-------- -------- --------- ---------- ---------
1,187,774 24.93% 1,187,774 -- --
- -----------------------
* 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 July 31, 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 factors which
cannot be predicated by the Company at this time, including, among others,
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.
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.
The Company has 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. Any commissions, discounts,
concessions or other fees, if any, payable to broker-dealers in connection
with any sale of the Shares will be borne by the Selling Stockholders selling
such Shares.
The Company has agreed to indemnify the Selling Stockholders, or their
transferees or assignees, against certain liabilities, including liabilities
under the Securities Act, 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 the Company by Preston Gates & Ellis LLP, San Francisco,
California.
EXPERTS
The financial statements of ABK as of December 31, 1996, and for the
year then ended have been included herein and in the registration statement
in reliance upon the reports of Moore Stephens P.C., independent certified
public accountants, appearing elsewhere herein, and upon the authority of
such firm as experts in accounting and auditing.
The financial statements of the Company 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 (the "Board" of
American Champion Entertainment, Inc. (the "Registrant"), dismissed Moore
Stephens, P.C. ("Moore Stephens"), and such firm will non longer be acting
as the Registrant's principal accountant. Moore Stephens' report on the
Registrant's financial statements dated February 5, 1997, the date of the
Registrant'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 the Registrant ("ABK"), 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 ABK's ability to
continue as a going concern. During Registrant's and its predecessor's two
most recent fiscal years and the interim period through October 8, 1997,
there were no disagreements between Registrant 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.
Effective October 8, 1997, Registrant engaged Moss Adams LLP as its
principal accountant. Such engagement was approved by the Registrant's Board
of Directors. During Registrant's two most recent fiscal years and any
subsequent interim period through October 8, 1997, Registrant 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
Registrant's financial statements or any matter that was the subject of
disagreement or a reportable event.
<PAGE> 15
ADDITIONAL INFORMATION
This Prospectus does not contain all information set forth in this
registration statement, certain parts of which are omitted in accordance with
the rules and regulations of the Commission. Statements contained herein
concerning the provisions of any documents are not necessarily complete and
in each instance, reference is made to the copy of such document filed as an
exhibit to the Registration Statement. Each such statement is qualified in
its entirety by such reference. A copy of the Registration Statement may be
inspected by anyone without charge at the Commission's principal office
located at 450 Fifth Street, N.W., Washington, D.C. 20549, the Pacific
Regional Office located at 5670 Wilshire Boulevard, 11th Floor, Los Angeles,
California 90036-3648, the New York Regional Office located at 7 World Trade
Center, 13th Floor, New York, New York 10048, and the Chicago Regional Office
located at Northwestern Atrium Center, 500 West Madison Street, Chicago,
Illinois 60661-2511, and copies of all or any part thereof may be obtained
from the Public Reference Branch of the Commission upon the payment of
certain fees prescribed by the Commission. The Commission maintains an
Internet Web Site that contains reports, proxy and information statements and
other information statements and other information regarding registrants that
file electronically with the Commission, including the Company, and that
address is http://www.sec.gov.
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
the Company. 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 the Company since the
date hereof.
<PAGE> 16
TABLE OF CONTENTS
Page
Incorporation of Certain Documents by Reference 6
Available Information 6
Company 7
Risk Factors 11
Use of Proceeds 14
Certain Market Information 14
Dividend Policy 14
Selling Stockholders 15
Plan of Distribution 16
Legal Matters 16
Experts 16
Additional Information 17
AMERICAN CHAMPION ENTERTAINMENT, INC.
1,187,774 SHARES OF COMMON STOCK
------------------------
PROSPECTUS
_______________
August 20, 1998
