As filed with the Securities and Exchange Commission on December 13, 1999
Registration No. 333-90459
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
PRE-EFFECTIVE AMENDMENT NO. 2
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
(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
(408) 288-8199
(Name and address and telephone number of agent for service)
------------------------
COPIES TO:
GREGORY SICHENZIA, ESQ.
SICHENZIA ROSS & FRIEDMAN LLP
135 WEST 50TH STREET, FLOOR 20
NEW YORK, NY 10020
(212) 664-1200
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. [ ]
The registrant hereby amends this Registration Statement on such due 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 of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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 Unit(3) Offering Price
- ---------------------------- --------------- ---------------- ----------------- ----------
<S> <C> <C> <C> <C>
Common Stock, $0.0001 par value 6,007,251 $0.4375 $2,628,172 $730.63
</TABLE>
(1) Includes: (i) shares of common stock that have been issued or are
reserved for issuance upon the conversion of 7% Convertible Debentures due
September 30, 2002 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) shares of common stock that have been
issued or are reserved for issuance on the exercise of common stock Purchase
Warrants issued as payment for legal services, (iv) shares of common stock
that have been issued or are reserved for issuance upon the exercise of common
stock Purchase Warrants issued to financial consultants of American Champion,
(v) shares of common stock issuable upon conversion of convertible debentures
and exercise of warrants, in excess of the number of shares registered on Form
S-3 filed with the SEC on July 22, 1999, file number 333-82963.
(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) Equals the closing price for the American Champion's Common Stock as
traded on the Nasdaq Smallcap Market on September 30, 1999.
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
<PAGE>
PROSPECTUS
AMERICAN CHAMPION ENTERTAINMENT, INC.
6,007,251 Shares of common stock
This prospectus relates to the sale of up to 6,007,251 shares of common stock
of American Champion Entertainment, Inc. offered by certain holders of
American Champion securities. The shares may be offered by the selling
stockholders from time to time in regular brokerage transactions in
transactions directly with market makers or in certain privately negotiated
transactions. 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.
Each of the selling stockholders may be deemed to be an "underwriter," as such
term is defined in the Securities Act of 1933.
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 October 29, 1999 the closing sale price of the
common stock and the common stock purchase warrants on Nasdaq SmallCap Market
was $0.4375 and $0.188, 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 8.
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 December __,1999.
<PAGE>
TABLE OF CONTENTS
Page
Company 5
Risk Factors 5
Material Changes 10
Incorporation of Certain Documents by Reference 10
Available Information 11
Use of Proceeds 12
Certain Market Information 12
Dividend Policy 12
Issuance of Common Stock to Selling Stockholders 13
Selling Stockholders 13
Plan of Distribution 15
Legal Matters 16
Experts 16
<PAGE>
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. and its wholly-owned subsidiary
American Champion Marketing Group, Inc.
America's Best Karate owns, manages and operates one karate studio in the San
Francisco Bay Area under the name "ABK," that provides karate instruction to
students of all ages and skill levels. American Champion Media is a media
production and marketing company. Through American Champion Media and American
Champion Marketing Group, American Champion:
* develops, produces and markets "Adventures with Kanga Roddy," a television
program for pre-school and primary school children (the "Kanga Roddy Series");
and
* licenses merchandising rights related to the Kanga Roddy Series and other
intellectual properties through acquisitions.
* develops, produces and markets various audio tapes, video tapes and
workbooks that specialize in fitness information.
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, and its telephone number is
(408) 288-8199.
<PAGE>
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.
We have a history of losses and expect to incur future losses. We sustained
operating losses of $801,416 in the year ended December 31, 1997, $1,323,561
in the year ended December 31, 1998 and $1,445,748 in the six months ended
June 30, 1999. 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 12 episodes
of the Kanga Roddy Series we are obligated to deliver is estimated to be $2.6
million.
If we are unable to obtain financing, we will be unable to continue with
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 distribution agreement and a continuing distribution agreement
with KTEH, the public broadcasting station serving the San Jose, California
area, which obligate us to deliver a total of 41 episodes of the Kanga Roddy
Series. To date, we have completed 29 episodes of the Kanga Roddy Series.
Based on production of 29 episodes completed to date, we now estimate that the
average cost of developing and producing each episode of the Kanga Roddy
Series is $220,000 and that it will require an additional $2.6 million of
additional financing to complete the remaining 12 episodes of the Kanga Roddy
Series. On September 24, 1999, we sold 7% convertible debentures in the
principal amount of $1,000,000.
We are dependent on the success of the Kanga Roddy Series, and we cannot be
certain that the initial television viewership of the Kanga Roddy Series will
be maintained. 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. We cannot be certain that the initial
television viewership of the Kanga Roddy Series will be maintained.
Furthermore, 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.
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. 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.
Our lack of significant experience with television programming or licensing
and merchandising could adversely affect our business. 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 29 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.
The loss of the services of any of the above individuals, or of other key
personnel, could adversely affect our business. We are dependent on the
efforts and abilities of Anthony Chan and George Chung, our founders and
principal executive officers, and Jan D. Hutchins, President of American
Champion Media. We have entered into employment agreements, effective as of
August 5, 1997, with such individuals. We are also dependent on the efforts
and abilities of Joy Tashjian, President and CEO of American Champion
Marketing Group, a newly formed and wholly owned subsidiary; with whom we have
entered into an employment agreement effective on June 3, 1999. 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>
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. 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.
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.
We may have to return America's Best Karate membership fees pursuant to the
terms of our standard contract with our students. Pursuant to the terms of its
standard contract with its students, ABK is required to refund:
(1) all funds received if a student cancels within three (3) days of signing a
membership contract,
(2) 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, and
(3) the outstanding amount of fees set forth in (1) and (2) above prior and up
to the time of sale of our ABK studios.
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
prospects.
Messrs. Chan and Chung are in a position to strongly influence the election of
directors as well as affairs of American Champion. 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
9.7% of the outstanding shares prior to this offering and approximately
6.6% 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.
We have purchased liability insurance for our karate studios. In the event of
a claim brought by students or instructors injured during karate classes, 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, 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 us.
If we do not continue to fulfill Nasdaq maintenance requirements, our
securities may be delisted from Nasdaq market. American Champion's common
stock is listed on Nasdaq SmallCap Market. The Securities and Exchange
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 $5,100,000 in net tangible assets and approximately $5,000,000
in market value of securities in the public float, with a bid price under $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. Our share price has been under
$1.00 per share continuously since August 9, 1999.
<PAGE>
If we are unable to satisfy the maintenance requirements for Nasdaq SmallCap
Market and our common stock continues to trade below the minimum bid price of
$1.00 per share, 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 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.
This prospectus contains forward looking statements and their 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.
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>
MATERIAL CHANGES
Between May 19, 1999 and June 7, 1999, American Champion issued to its
management an aggregate of 3.71 million options pursuant to its 1997 Stock Plan
and the Non-Employee Directors Stock Option Plan. Of such options, 3.36
million were issued to the officers and directors of American Champion as a
group. The following table sets forth the options issued to certain of American
Champion's directors and officers:
Name Position Number of Options Date of Grant
George Chung Chairman of the Board 100,000 May 19, 1999
1,000,000 June 7, 1999
Anthony K. Chan President & CEO 100,000 May 19, 1999
1,000,000 June 7, 1999
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 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 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; and
2. The description of American Champion's common stock contained in American
Champion's Registration Statement on Form SB-2; and
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; and
4. American Champion's Proxy Statement for the 1999 Annual Meeting of
Stockholders held on May 5, 1999; and
5. American Champion's Annual Report on Form 10-KSB and it's amendment filed on
November 15, 1999 for its fiscal year ended December 31, 1998; and
6. American Champion's Quarterly Reports on Form 10-QSB for the quarter period
ended September 30, 1999; and
7. American Champion's Definitive Proxy Statement for a Special Meeting of
Stockholders to be held on December 10, 1999.
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>
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 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:
High Low
1997
Third Quarter $5.500 $4.125
Fourth Quarter $8.000 $4.813
1998
First Quarter $9.625 $7.750
Second Quarter $9.563 $6.563
Third Quarter $7.000 $3.500
Fourth Quarter $3.625 $0.969
1999
First Quarter $3.000 $1.063
Second Quarter $2.438 $0.781
Third Quarter $1.656 $0.516
Fourth Quarter, Up to October 29, 1999 $0.531 $0.344
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 June 30, 1999, as reported by our transfer agent, shares of common stock
were held by approximately 1700 stockholders 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. We
do not plan to pay dividends to holders of the common stock for the reasonably
foreseeable future. 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>
ISSUANCE OF COMMON STOCK TO SELLING STOCKHOLDERS
The shares covered by this prospectus include:
(1) Up to 4,000,000 shares of common stock that have been issued or are
issuable, assuming the conversion rate of $0.25 per share to allow for
fluctuation in market price, upon the conversion of 7% Convertible Debentures
due September 30, 2002 issued by American Champion;
(2) 100,000 shares of common stock that are issuable upon the exercise of
Common Stock Purchase Warrants issued in connection with the debentures;
(3) 52,000 shares of Common Stock that are issued and issuable upon the
exercise of common stock Purchase Warrants issued by American Champion in
connection to the debentures for related legal fees;
(4) 874,167 shares of Common Stock Purchase Warrants issued by American
Champion to financial consultants;
(5) 985,584 shares of common stock issuable on conversion of convertible
debentures and exercise of warrants, in excess of the number of shares
registered on Form S-3 filed with the SEC on July 22, 1999, file number
333-82963.
Debentures and Debenture Warrants. On September 24, 1999, 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 $1,000,000 of American Champion's
debentures, and American Champion agreed to issue to the purchasers warrants to
purchase up to 100,000 shares of common stock.
The debentures are convertible into a number of shares of American Champion's
common stock based on lower of $0.7490625 or 75% of the market price of the
common stock at the time of conversion. The market price for purposes of
conversion of the debentures is the average closing bid price of the common
stock as reported by Bloomberg, LP for the five (5) trading days ending on the
trading day immediately preceding the date that the debentures are converted.
The actual number of shares of common stock issued or issuable upon conversion
of the debentures is subject to adjustment, depending upon the future market
price of the common stock and other factors.
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.
<PAGE>
SELLING STOCKHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of the common stock as of September 30, 1999 by each of the selling
stockholders assuming the conversion of the debentures of $1,000,000 principal
amount and a conversion rate of $0.25 per share (in order to provide a cushion
for any fluctuations in the market price of the common stock, we have agreed
with certain of the selling stockholders to include in this prospectus the
number of shares of common stock which could be issuable upon conversion of
the debentures at an assumed conversion price of $0.25 per share plus the
number of shares issuable upon exercise of the debenture warrants) as
provided in the debenture; 5,000 shares of Common Stock issuable upon the
exercise of Common Stock Purchase Warrants that were issued by American
Champion in connection to the debentures for legal fees; and 874,167 shares of
common stock issuable upon the exercise of Common Stock Purchase Warrants that
were issued by American Champion to financial consultants. 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 the 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 September 30, 1999 (1) Hereunder Are Sold(1)(2)
Shares That
May be Offered
Name Shares Percent(2) Hereunder Shares Percent
- ---------------------------- ------------ ------------ ---------------------------------------
<S> <C> <C> <C> <C> <C>
Amro International S.A. 1,184,000 10.17% 1,184,000 -- --
Endeavour Capital Fund S.A. 1,151,430 9.91% 1,151,430 -- --
Esquire Trade and Finance 1,025,000 8.92% 1,025,000
Austinvest Anstalt Balzers 1,025,000 8.92% 1,025,000 -- --
Samuel M. Krieger 6,666 * 6,666 -- --
Ronald Nussbaum 3,334 * 3,334 -- --
Alan Elkes 75,000 * 75,000 -- --
David Avidon 55,000 * 55,000 -- --
Justyn Feldman 52,500 * 52,500 -- --
David Mugrabi 52,500 * 52,500 -- --
Glen Beyer 37,500 * 37,500 -- --
Piedmont Consulting, Inc. 50,000 * 50,000 -- --
Olympia Partners, LLC. 586,667 5.31% 586,667 -- --
Donner Corp. International 20,000 * 20,000 -- --
Scott Rosen 159,792 1.50% 159,792 -- --
Eva Rosen 159,792 1.50% 159,792 -- --
Peter T. Roselle 80,896 * 80,896 -- --
Steve Chananya 120,344 1.14% 120,344 -- --
LCBS Corp. 25,000 * 25,000 -- --
David Reimer 2,500 * 2,500 -- --
Canadian Advanyage LP 86,430 * 86,430 -- --
Sichenzia, Ross & Friedman LLP 42,500 * 42,500 -- --
David Y. Lei 5,400 * 5,400 -- --
- ------------------------------
* Less than one percent (1%).
</TABLE>
(1) The number and percentage of shares beneficially owned is determined in
accordance with Rule 13d-3 of the Securities Exchange Act of 1934, and the
information is not necessarily indicative of beneficial ownership for any
other purpose. Under such rule, beneficial ownership includes any shares as
to which the selling stockholder has sole or shared voting power or investment
power and also any shares which the selling stockholder has the right to
acquire within 60 days of September 30, 1999 through the conversion of
debentures and the exercise of any debenture warrant, or other right.
Pursuant to the terms of the Securities Purchase Agreement for the sale of the
debentures and debenture warrants, except under certain circumstances, no
holder of the debentures may convert its debentures into common stock, if such
conversion would result in the holder beneficially owning more than 9.99% of
the outstanding common stock. All shares which may be issued on conversion of
the debentures are included in the table notwithstanding such limitation.
Accordingly, the number of shares indicated above as beneficially owned by
certain selling stockholders exceeds the actual number of shares such selling
stockholder may be entitled to on conversion. The actual number of shares of
common stock issuable upon the conversion of the debentures and exercise of
the debenture warrants is subject to adjustment depending on, among other
factors, the future market price of the common stock, and could be materially
less or more than the number estimated in the table.
(2) The percentage interest of each selling stockholder is based on the
number of shares of common stock beneficially owned by such stockholder
divided by the sum of the outstanding shares of common stock (as of September
30, 1999), plus the shares, if any, which would be issued to such stockholder
upon conversion of debentures held or exercise of any warrants. On September
30, 1999, American Champion had 10,463,585 shares outstanding.
(3) The shares hereunder do not include shares which we anticipate to be
sold under a separate registration statement and prospectus.
<PAGE>
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. 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 of
1933.
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 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 Sichenzia Ross & Friedman LLP, New York,
New York.
EXPERTS
The balance sheet and financial statements of American Champion Entertainment,
Inc. for the years ended December 31, 1997 and December 31, 1998 have been
incorporated by reference herein and in the registration statement in reliance
upon the reports of Moss Adams LLP, independent certified public accountants,
also incorporated by reference herein, and upon the authority of such firm as
experts in accounting and auditing.
<PAGE>
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
Company 5
Risk Factors 5
Material Changes 10
Incorporation of Certain Documents by Reference 10
Available Information 11
Use of Proceeds 12
Certain Market Information 12
Dividend Policy 12
Issuance of Common Stock to Selling Stockholders 13
Selling Stockholders 13
Plan of Distribution 15
Legal Matters 16
Experts 16
AMERICAN CHAMPION ENTERTAINMENT, INC.
6,007,251 SHARES OF COMMON STOCK
------------------------
PROSPECTUS
_______________
December __, 1999
<PAGE>
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 $ 730.63
Legal fees and expenses 8,000.00
Accounting fees and expenses 2,000.00
Miscellaneous, including Nasdaq listing fees 7,500.00
Total........................................................$ 18,230.63
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>
ITEM 16. EXHIBITS
The exhibits filed as part of this Registration Statement are as follows:
Number Description
4.1* Securities Purchase Agreement, dated September 24, 1999, by and
among American Champion and the Buyers as defined therein.
4.2* 7% Convertible Debentures due September 30, 2002.
4.3* Common Stock Purchase Warrant.
5.1 Opinion of Sichenzia Ross & Friedman LLP regarding legality of
securities being registered.
23.1 Consent of Sichenzia Ross & Friedman LLP (included in its
opinion filed as Exhibit 5.1).
23.2* Consent of Moss Adams LLP.
* 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;
(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>
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 Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of San Jose, California on the 13th day of December,
1999.
By: /s/ Anthony K. Chan
Anthony K. Chan
Chief Executive Officer
Each person whose signature appears below constitutes and appoints Anthony K.
Chan, with full power of substitution and resubstitution and each with full
power to act without the other, his true and lawful attorney-in-fact and agent,
for him and in his name, place and stead, in any and all capacities, to sign
any and all amendments (including post-effective amendments) and all other
documents in connection therewith, with the Securities and Exchange Commission
or any state, granting unto said attorneys-in-fact and agents, and each of
them, full power and authority to do and perform each and premises, as fully
to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents, or any of
them, or their, his substitutes or substitute, may lawfully do or cause to be
done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this 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 13, 1999
- ------------------------- (principal executive officer)
Anthony K. Chan and Director
/s/ ANTHONY K. CHAN Chairman of the Board and Director December 13, 1999
- -------------------------
Anthony K. Chan
(attorney-in-fact) for George Chung
/s/ ANTHONY K. CHAN Director December 13, 1999
- -------------------------
Anthony K. Chan
(attorney-in-fact) for William T. Duffy
/s/ ANTHONY K. CHAN Director December 13, 1999
- -------------------------
Anthony K. Chan
(attorney-in-fact) for Alan Elkes
/s/ ANTHONY K. CHAN Director December 13, 1999
- -------------------------
Anthony K. Chan
(attorney-in-fact) for E. David Gable
/s/ ANTHONY K. CHAN Director December 13, 1999
- -------------------------
Anthony K. Chan
(attorney-in-fact) for Jan D. Hutchins
/s/ ANTHONY K. CHAN Director December 13, 1999
- -------------------------
Anthony K. Chan
(attorney-in-fact) for Ronald M. Lott
/s/ ANTHONY K. CHAN Director December 13, 1999
- -------------------------
Anthony K. Chan
(attorney-in-fact) for Joy M. Tashjian
/s/ ANTHONY K. CHAN Vice President and Chief Financial December 13, 1999
- ------------------------- Officer (principal financial officer)
Anthony K. Chan
(attorney-in-fact) for Mae Lyn Woo
</TABLE>
<PAGE>
EXHIBIT INDEX
The exhibits filed as part of this Registration Statement are as follows:
Number Description
4.1* Securities Purchase Agreement, dated September 24, 1999, by and
among American Champion and the Buyers as defined therein.
4.2* 7% Convertible Debentures due September 30, 2002.
4.3* Common Stock Purchase Warrant.
5.1 Opinion of Sichenzia Ross & Friedman LLP regarding legality of
securities being registered.
23.1 Consent of Sichenzia Ross & Friedman LLP (included in its
opinion filed as Exhibit 5.1).
23.2* Consent of Moss Adams LLP.
* Previously filed
EXHIBIT 5.1
SICHENZIA, ROSS & FRIEDMAN LLP
Attorneys At Law
135 West 50th Street, 20th Floor
New York, New York 10020
_____________________
Telephone: (212) 664-1200
Facsimile: (212) 664-7329
E-Mail: [email protected]
December 13, 1999
VIA ELECTRONIC TRANSMISSION
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, DC 20549
Re: American Champion Entertainment, Inc.
Form S-3 Registration Statement
SEC File No. 333-90459
Ladies and Gentlemen:
We refer to the above-captioned registration statement on Form S-3
(the "Registration Statement") under the Securities Act of 1933, as
amended (the "Act"), filed by American Champion Entertainment, Inc., a
Delaware corporation (the "Company"), with the Securities and Exchange
Commission.
We have examined the originals, photocopies, certified copies or
other evidence of such records of the Company, certificates of officers of
the Company and public officials, and other documents as we have deemed
relevant and necessary as a basis for the opinion hereinafter expressed.
In such examination, we have assumed the genuineness of all signatures,
the authenticity of all documents submitted to us as certified copies or
photocopies and the authenticity of the originals of such latter
documents.
Based on our examination mentioned above, we are of the opinion that
the securities being registered to be sold pursuant to the Registration
Statement are duly authorized and will be, when sold in the manner
described in the Registration Statement, legally and validly issued, and
fully paid and nonassessable.
We hereby consent to the filing of this opinion as Exhibit 5.1 to
the Registration Statement and to the reference to our firm in the section
"Legal Matters" in the Registration Statement. In giving the foregoing
consent, we do not hereby admit that we are in the category of persons
whose consent is required under Section 7 of the Act, or the rules and
regulations of the Securities and Exchange Commission.
Very truly yours,
/s/ Sichenzia, Ross & Friedman, LLP
Sichenzia, Ross & Friedman, LLP
