As filed with the Securities and Exchange Commission on February 26, 1999
Registration No. 333-72253
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
AMERICAN CHAMPION ENTERTAINMENT, INC.
(Name of Small Business Issuer in its Charter)
DELAWARE
(State or other jurisdiction of incorporation or organization)
7812
(Primary Standard Industrial
Classification Code Number)
94-3261987
(I.R.S. Employer
Identification Number)
1694 THE ALAMEDA, SUITE 100
SAN JOSE, CALIFORNIA 95126-2219
(408) 288-8199
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
ANTHONY K. CHAN
PRESIDENT AND CHIEF EXECUTIVE OFFICER
1694 THE ALAMEDA, SUITE 100
SAN JOSE, CALIFORNIA 95126-2219
(408) 288-8199
(Name and address and telephone number of agent for service)
------------------------
COPIES TO:
LAWRENCE B. LOW, ESQ.
PRESTON GATES & ELLIS LLP
ONE MARITIME PLAZA, SUITE 2400
SAN FRANCISCO, CALIFORNIA 94111
(415) 788-8822
Approximate date of commencement of proposed sale to the public: As soon as
practicable after the effective date of this Registration Statement.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the
following box. __
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, as amended ("Securities Act"), other than securities offered only in
connection with dividend or interest reinvestment plans, check the following
box. _X_
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. __
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. __
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. __
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
Title of Each Proposed Proposed Amount of
Class of Maximum Maximum Registration
Securities to Amount to be Offering Price Aggregate Fee
be Registered Registered (1)(2) Per Share Offering Price
- -------------- ------------ ---------------- ---------------- ----------
<S> <C> <C> <C> <C>
Common Stock, $0.0001 par value 2,500,000 $1.84375 $4,609,375 $1,281.41
</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 January 1, 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;
and (iii) shares of common stock that have been reserved for issuance
on the exercise of common stock purchase warrants issued to
consultants of AmericanChampion.
(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.
PROSPECTUS
AMERICAN CHAMPION ENTERTAINMENT, INC.
2,500,000 Shares of common stock
This prospectus relates to the sale of up to 2,500,000 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 February 2, 1999 the
closing sale price of the common stock and the common stock purchase
warrants on Nasdaq SmallCap Market was $1.969 and $0.500, 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 March 1,1999.
TABLE OF CONTENTS
Page
Company 5
Risk Factors 6
Incorporation of Certain Documents by Reference 9
Available Information 9
Use of Proceeds 10
Certain Market Information 10
Dividend Policy 10
Issuance of Common Stock to Selling Stockholders 11
Selling Stockholders 12
Plan of Distribution 14
Legal Matters 14
Experts 14
COMPANY
American Champion Entertainment, Inc. is a holding company, for
our wholly-owned subsidiary, America's Best Karate and its wholly-owned
subsidiary, American Champion Media, Inc.
America's Best Karate owns, manages and operates one karate studio
in the San Francisco Bay Area under the name "ABK," that provide karate
instruction to students of all ages and skill levels. American Champion
Media is a media production and marketing company. Through American
Champion Media, American Champion:
? 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
? 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 95126-2219, and its
telephone number is (408) 288-8199.
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 $641,583, $801,416 and $786,074 in 1996,
1997 and the nine months ended September 30, 1998, respectively. We
expect to incur significant additional operating losses for the
foreseeable future as we continue to develop, produce and market our
media projects, including the Kanga Roddy Series. The development and
production costs (exclusive of marketing costs) for the remaining 21
episodes of the Kanga Roddy Series we are obligated to deliver is
estimated to be $5.04 million.
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 20 episodes of the Kanga Roddy Series.
Based on production of 20 episodes completed to date, we now estimate that the
average cost of developing and producing each episode of the Kanga Roddy
Series is $240,000 and that it will require an additional $5.04 million of
additional financing to complete the remaining 21 episodes of the Kanga Roddy
Series. On January 19, 1999, we sold 7% convertible debentures in the
principal amount of $950,000. On February 19, 1999 we signed an engagement
letter with JW Genesis Capital Markets, LLC, to act as placement agent, for
the sale of up to $4,500,000 of Series C Preferred Stock of American Champion,
which preferred stock would be convertible into common stock of American
Champion. There can be no assurances that such Series C Preferred Stock
financing or any other financing will be available at all or on terms
acceptable.
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 20
half-hour episodes. However, the television and licensing and
merchandising businesses are complicated and the absence of experience
in such businesses could adversely affect our business.
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 Don Berryessa, Vice President and
Jan D. Hutchins, President of American Champion Media. We have entered
into employment agreements, effective as of August 5, 1997, with such
individuals. None of such employment agreements contains non-
competition provisions. See "Management--Employment Agreements" of
American Champion's Post-Effective Amendment No. 1 to its Form SB-2
Registration Statement. The loss of the services of any of the above
individuals, or of other key personnel, could adversely affect our
business. We have obtained "key-man" life insurance with $1,000,000
coverage for each of Messrs. Chung and Chan.
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 ABK 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 17.96% of the outstanding
shares prior to this offering and approximately 14.10% 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. We have
purchased liability insurance for each of our karate studios in the
amount of $1,000,000 per occurrence and $2,000,000 in the aggregate
which we believe is sufficient for current level of business operations.
We cannot be certain, however, that the present coverage will continue
to be available in the future or that we will be able to retain such
coverage at a reasonable cost. Further, we cannot be certain that such
insurance will be sufficient to cover potential claims, including
without limitation, claims brought by students or instructors injured
during karate classes, or that adequate, affordable insurance coverage
will be available to us in the future as we expand our operations. A
successful claim against us in excess of the liability limits or
relating to an injury excluded under the policy could adversely affect
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 $4,000,000 in net
tangible assets and approximately $4,200,000 in market value of
securities in the public float, with a bid price over $1.00 per share.
If we are unable to satisfy Nasdaq SmallCap Market's maintenance
criteria in the future, our securities may be delisted from Nasdaq
SmallCap Market. In such event, trading, if any, in our securities
would thereafter be conducted in the over counter market in the so
called "pink sheets" or the NASD's "Electronic Bulletin Board." As a
consequence of such delisting, an investor would likely find it more
difficult to dispose of, or to obtain quotations as to, the price of our
securities.
If we are unable to satisfy the maintenance requirements for Nasdaq
SmallCap Market and our common stock falls below the minimum bid price
of $1.00 per share for the continued quotation, trading would be
conducted on the "pink sheets" or the NASD's Electronic Bulletin Board.
If the common stock is not quoted on Nasdaq SmallCap Market, or we do
not have $2,000,000 in stockholders' equity, trading in the common stock
would be covered by Rule-15g 9 promulgated under the Securities Exchange
Act of 1934 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.
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;
2. The description of American Champion's common stock contained
in American Champion's Registration Statement on Form SB-2;
3. Post-Effective Amendment No. 1 to American Champion's
Registration Statement on Form SB-2, as filed with the
Commission on July 2, 1998 and declared effective on July 17,
1998;
4. American Champion's Proxy Statements for the 1998 Annual
Meeting of Stockholders held on May 29, 1998 and the Special
Meeting of Stockholders held on September 23, 1998;
5. American Champion's Annual Report on Form 10-KSB for its
fiscal year ended December 31, 1997; and
6. American Champion's Quarterly Reports on Form 10-QSB for the
quarter periods ended September 30, 1998, June 30, 1998 and
March 31, 1998.
The Company will provide without charge to each person to whom a
copy of this prospectus has been delivered, on written or oral request a
copy of any or all of the documents incorporated by reference in this
prospectus, other than exhibits to such documents. Written or oral
requests for such copies should be directed to Anthony K. Chan, American
Champion Entertainment, Inc., 1694 The Alameda, Suite 100, San Jose,
California 95126-2219 (telephone: (408) 288-8199).
ADDITIONAL INFORMATION AVAILABLE TO YOU
This prospectus is part of a Registration Statement on Form S-3
that we filed with the Commission. Certain information in the
Registration Statement has been omitted from this prospectus in
accordance with the rules of the Commission. We file the annual,
quarterly and special reports, proxy statements and other information
with the Commission. You can inspect and copy the Registration
Statement as well as reports, proxy statements and other information we
have filed with the Commission at the public reference room maintained
by the Commission at 450 Fifth Street, NW, Washington, D.C. 20549, and
at the following Regional Offices of the Commission: Seven World Trade
Center, New York, New York 10048, and Northwest Atrium Center, 500 West
Madison Street, Chicago, Illinois 60661. You can obtain copies from the
public reference room of the Commission at 450 Fifth Street, NW,
Washington, D.C. 20549, upon payment of certain fees. You can call the
Commission at 1-800-732-0330 for further information about the public
reference room. We are also required to file electronic versions of
these documents with the Commission, which may be accessed through the
Commission's World Wide Web site at http://www.sec.gov. Our common
stock is quoted on The Nasdaq National Market Reports, proxy and
information statements and other information concerning American
Champion may be inspected at The Nasdaq Stock Market at 1735 K Street,
NW, Washington, D.C. 20006.
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:
ACEI 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 (up to Feb 24, 1999) $3.000 $1.125
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 February 2, 1999, as reported by our transfer agent, shares of
common stock were held by approximately 750 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.
ISSUANCE OF COMMON STOCK
TO SELLING STOCKHOLDERS
The shares covered by this prospectus include:
(1) Up to 1,838,875 shares of common stock that have been issued
or are issuable upon the conversion of 7% Convertible Debentures due
January 1, 2002 issued by American Champion;
(2) 61,125 shares of common stock that are issuable on the
exercise of Common Stock Purchase Warrants issued in connection with the
debentures; and
(3) 600,000 shares of common stock that are issuable on the
exercise of Common Stock Purchase Warrants issued to our consultants;
Debentures and Debenture Warrants. On January 19, 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
$950,000 of American Champion's debentures, and American Champion agreed
to issue to the purchasers and placement agent warrants to purchase up
to 61,125 shares of common stock.
The debentures are convertible into a number of shares of American
Champion's common stock based on lower of $2.01 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.
SELLING STOCKHOLDERS
The following table sets forth certain information regarding the
beneficial ownership of the common stock as of February 2, 1999 by each
of the selling stockholders assuming the conversion of the debentures of
$950,000 principal amount and a conversion rate of $0.5166 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 $0.5166 per share plus the number of
shares issuable upon exercise of the debenture warrants) as provided in
the debenture, the exercise of the debenture warrants to purchase 26,125
shares of common stock, the exercise of the common stock purchase
warrants to purchase 600,000 shares of common stock, and the exercise of
the warrants held by JW Genesis Financial Corporation to purchase 35,000
shares of common stock. Unless otherwise indicated below, to the
knowledge of American Champion, all persons listed below have sole
voting and investment power with respect to the shares of common stock,
except to the extent authority is shared by spouses under applicable
law.
The information included below is based upon information provided
by the selling stockholders. Because the selling stockholders may offer
all, some or none of their shares, no definitive estimate as to the
number of shares that will be held by the selling stockholders after 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 February 2, 1999(1) Hereunder Are Sold(1)(3)
-------------------------------- -------------------------------
Shares That
May be Offered
Name Shares Percent(2) Hereunder Shares Percent
- ------------------ -------------- ------------- ------------ ------------ -----------
<S> <C> <C> <C> <C> <C>
The Endeavour Capital Fund S.A. 664,997 10.52 490,808 174,189 2.99
Amro International S.A. 413,271 6.81 392,646 20,625 *
Canadian Advantage L.P. 596,533 9.54 588,970 7,563 *
JW Genesis Financial Corporation 110,000 1.91 35,000 75,000 1.31
Dalton Kent Securities Group, Inc. 430,000 7.06 300,000 130,000 2.25
Olympia Partners, LLC 662,646 10.48 662,646 -- --
Josh Berkowitz 30,000 * 30,000 -- --
- -----------------------
* 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 February 2, 1999 through the conversion of debentures, the
exercise of any debenture warrant or warrants held by JW Genesis
Financial Corporation 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 February 2, 1999), plus the shares, if any, which would
be issued to such stockholder upon conversion of debentures held or
exercise of any warrants. On February 2, 1999, American Champion had
5,658,720 shares outstanding.
(3) The shares hereunder do not include shares which we anticipate to
be sold under a separate registration statement and prospectus.
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 Preston Gates & Ellis LLP,
San Francisco, California.
EXPERTS
The balance sheet of American Champion Entertainment, Inc. as of
February 5, 1997, and the financial statements of America's Best Karate
as of December 31, 1996, and for the year then ended have been
incorporated by reference herein and in the registration statement in
reliance upon the reports of Moore Stephens P.C., independent certified
public accountants, also incorporated by reference herein, and upon the
authority of such firm as experts in accounting and auditing.
The financial statements of American Champion as of December 31,
1997, and for the year then ended have been 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.
Effective October 8, 1997, the Board of Directors of American
Champion, dismissed Moore Stephens, P.C., and such firm no longer acts
as American Champion's principal accountant. Moore Stephens' report on
the American Champion's financial statements dated February 5, 1997, the
date of the American Champion's incorporation, did not contain an
adverse opinion or a disclaimer of opinion and was not qualified or
modified as to uncertainty, audit scope or accounting principles. Moore
Stephens' report on the financial statements for the past two years
relating to America's Best Karate, predecessor to American Champion,
dated January 31, 1997, did not contain an adverse opinion or a
disclaimer of opinion and was not qualified or modified as to audit
scope or accounting principles; however, such report did include a
modification of the auditor's standard report, noting that certain
factors raised substantial doubt about America's Best Karate's ability
to continue as a going concern. During American Champion's and its
predecessor's two most recent fiscal years and the interim period
through October 8, 1997, there were no disagreements between American
Champion or its predecessor and Moore Stephens on any matter of
accounting principles or practices, financial statement disclosure, or
auditing scope or procedures, which, if not resolved to the satisfaction
of Moore Stephens, would have caused it to make reference to the subject
matter of the disagreements in connection with its report.
Effective October 8, 1997, American Champion engaged Moss Adams
LLP as its principal accountant. Such engagement was approved by the
American Champion's Board of Directors. During American Champion's two
most recent fiscal years and any subsequent interim period through
October 8, 1997, American Champion did not consult Moss Adams LLP
regarding the application of accounting principals to a specified
transaction, the type of audit opinion that might be rendered on
American Champion's financial statements or any matter that was the
subject of disagreement or a reportable event.
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 6
Incorporation of Certain Documents by Reference 9
Available Information 9
Use of Proceeds 10
Certain Market Information 10
Dividend Policy 10
Issuance of Common Stock to Selling Stockholders 11
Selling Stockholders 12
Plan of Distribution 14
Legal Matters 14
Experts 14
AMERICAN CHAMPION ENTERTAINMENT, INC.
2,500,000 SHARES OF COMMON STOCK
------------------------
PROSPECTUS
_______________
March 1, 1999
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table shows the estimated expenses of the issuance
and distribution of the securities offered hereby (all such expenses will
be borne by American Champion):
Registration fee $ 1,281.41
Legal fees and expenses 15,000.00
Accounting fees and expenses 3,000.00
Miscellaneous, including Nasdaq listing fees 10,000.00
Total............ ...........................$ 29,281.41
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.
ITEM 16. EXHIBITS
The exhibits filed as part of this Registration Statement are as
follows:
Number Description
4.1* Securities Purchase Agreement, dated January 19, 1999, by
and among American Champion and the Buyers as defined
therein.
4.2* 7% Convertible Debentures due January 1, 2002.
4.3* Common Stock Purchase Warrant.
5.1 Opinion of Preston Gates & Ellis LLP regarding legality of
securities being registered.
23.1 Consent of Preston Gates & Ellis LLP (included in its
opinion filed as Exhibit 5.1).
23.2* Consent of Moss Adams LLP.
23.3* Consent of Moore Stephens P.C.
(*Previously filed)
ITEM 17. UNDERTAKINGS
The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing
of the Registrant's annual report pursuant to Section 13(a) or Section
15(d) of the Securities Exchange Act of 1934 that is incorporated by
reference in the registration statement shall be deemed to be a new
registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the Registrant pursuant to its Certificate of
Incorporation, its Bylaws, or otherwise, the Registrant has been advised
that in the opinion of the Securities Exchange Commission such
indemnification is against public policy as expressed in the Securities
Act of 1933 and is, therefore, unenforceable. If a claim for
indemnification against such liabilities (other than the payment of the
Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered,
the Registrant will, unless in the opinion of its counsel the matter has
been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against a
public policy as expressed in the Securities Act of 1933 and will be
governed by the final adjudication of such issue.
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this Registration Statement to:
(i) Include any prospectus required by
section 10(a)(3) of the Securities Act of 1933;
(ii) Reflect in the prospectus any facts or events
arising after the effective date of the registration
statement (or the most recent post-effective amendment
thereof) which, individually or in the aggregate, represent a
fundamental change in the information set forth in the
registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the
total dollar value of securities offered would not exceed
that which was registered) and any deviation from the low or
high and of the estimated maximum offering range may be
reflected in the form of prospectus filed with the Commission
pursuant to Rule 424(b) if, in the aggregate, the changes in
volume and price represent no more than 20% change in the
maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective
registration statement;
(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.
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 26th day of February, 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, February 26, 1999
- ------------------------ and Director (principal executive
Anthony K. Chan officer)
/s/ ANTHONY K. CHAN Chairman of the Board and Director February 26, 1999
- ------------------------
Anthony K. Chan (attorney-in-fact)
George Chung
/s/ ANTHONY K. CHAN Senior Vice President and Director February 26, 1999
- -------------------------
Anthony K. Chan (attorney-in-fact)
Don Berryessa
/s/ ANTHONY K. CHAN Vice President and Chief Financial February 26, 1999
- ----------------------- Officer (principal financial officer)
Anthony K. Chan (attorney-in-fact)
Mae Lyn Woo
/s/ ANTHONY K. CHAN Director February 26, 1999
- -------------------------
Anthony K. Chan (attorney-in-fact)
William T. Duffy
/s/ ANTHONY K. CHAN Director February 26, 1999
- -------------------------
Anthony K. Chan (attorney-in-fact)
Alan Elkes
/s/ ANTHONY K. CHAN Director February 26, 1999
- -------------------------
Anthony K. Chan (attorney-in-fact)
Jan D. Hutchins
/s/ ANTHONY K. CHAN Director February 26, 1999
- -------------------------
Anthony K. Chan (attorney-in-fact)
Ronald M. Lott
</TABLE>
EXHIBITS INDEX
The exhibits filed as part of this Registration Statement are as
follows:
Number Description
4.1* Securities Purchase Agreement, dated January 19, 1999, by
and among American Champion and the Buyers as defined
therein.
4.2* 7% Convertible Debentures due January 1, 2002.
4.3* Common Stock Purchase Warrant.
5.1 Opinion of Preston Gates & Ellis LLP regarding legality of
securities being registered.
23.1 Consent of Preston Gates & Ellis LLP (included in its
opinion filed as Exhibit 5.1).
23.2* Consent of Moss Adams LLP.
23.3* Consent of Moore Stephens P.C.
(* Previously filed)
<PAGE> 1
EXHIBIT 5.1
February 26, 1999
American Champion Entertainment, Inc.
1694 The Alameda, Suite 100
San Jose, CA 95126-2219
Ladies and Gentlemen:
At your request we have examined the Registration Statement No.
333-72253 filed by you with the Securities Exchange Commission (the
"Commission") on February 12, 1999 (the "Registration Statement") in
connection with the registration under the Securities Act of 1933, as
amended, of 2,500,000 shares of the Common Stock of American Champion
Entertainment, Inc. (the "Stock"). Capitalized terms not defined
herein have the meanings specified in the Securities Purchase Agreement
dated January 19, 1999 among the Company and the buyers named therein
(the "Agreement").
In the course of our representation, we have reviewed such
contracts and other documents as have been furnished to us by officers
of the Company in response to our requests for all contracts and other
documents that might be or are material to the Company or its assets,
liabilities, results of operations or prospects taken as a whole,
including but not limited to those filed by the Company with the
Commission. We have relied upon the completeness and accuracy of such
responses to our requests without performing any independent check or
verification. We have received from an officer of the Company a
certificate setting forth representations concerning factual matters
relating to various aspects of the matters covered by this opinion
letter.
We have assumed the completeness and authenticity of all
documents submitted to us as originals, the conformity to and
authenticity of the originals of all documents submitted to us as
copies, and the genuineness of all signatures appearing thereon, the
legal capacity of natural persons, and the validity, accuracy,
truthfulness, reliability and completeness as of the date of this
opinion of all statements of fact, including the representations and
warranties, contained therein. We have additionally assumed, with your
permission, that the Stock when issued will be evidenced by properly
executed and delivered certificates.
We are qualified to practice law in the State of California, and
we express no opinion on the law of any jurisdiction other than the
laws of the State of California, the General Corporation Law of the
State of Delaware and the federal laws of the United States. In
addition, we express no opinion as to choice of law or conflicts of
laws. We express no opinion as to compliance with federal, state or
foreign securities laws, except as expressly set forth herein. We have
also assumed in rendering our opinions that the issuance of the
Securities does not violate NASD Rule 4310(c)(25)(H)(i)(d)(2) and we
express no opinion regarding the applicability of such rule.
Based upon and subject to the foregoing, we are of the opinion
that the Stock, when issued and sold in the manner referred to in the
Registration Statement, will be legally issued, fully paid and
nonassessable.
Our opinion is limited to the matters expressly set forth in this
opinion letter, and no opinion is to be implied or may be inferred
beyond the matters expressly so stated. Such opinion is rendered as of
the date hereof and, therefore relates only to events that exist as of
that time. We disclaim any obligation to update our opinion for, or
advise you of, any facts, circumstances, events, changes in law or the
interpretation thereof, or developments which hereafter may be brought
to our attention and which may alter, affect or modify the opinion
expressed herein.
This letter is intended solely for the Company's use in
connection with the transactions contemplated by the Agreements.
Without our prior written consent, this letter or the opinion contained
herein may not be: (i) relied upon by any other party or for any other
purpose; (ii) quoted in whole or in part or otherwise referred to in
any report or document other than a closing memorandum relating to the
subject transactions; or (iii) furnished (the original or copies
thereof) to any party.
We consent to the use of this opinion as an exhibit to the
Registration Statement and further consent to all references to us in
the Registration Statement and any amendment thereto.
Sincerely yours,
PRESTON GATES & ELLIS LLP
/S/ PRESTON GATES & ELLIS LLP
