-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, J9yfHPON045oaU58bMMj+Ei7ravnn8jXp7qNaPKa3YT6imVknojYxWrWyYL6semL UWeZEsrhd+AhTrYLJyrjWw== 0001034840-99-000014.txt : 19990521 0001034840-99-000014.hdr.sgml : 19990521 ACCESSION NUMBER: 0001034840-99-000014 CONFORMED SUBMISSION TYPE: POS AM PUBLIC DOCUMENT COUNT: 2 FILED AS OF DATE: 19990520 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMERICAN CHAMPION ENTERTAINMENT INC CENTRAL INDEX KEY: 0001034840 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-MOTION PICTURE & VIDEO TAPE PRODUCTION [7812] IRS NUMBER: 943261987 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: POS AM SEC ACT: SEC FILE NUMBER: 333-72253 FILM NUMBER: 99631256 BUSINESS ADDRESS: STREET 1: 26203 PRODUCTION AVENUE STREET 2: SUITE 5 CITY: HAYWARD STATE: CA ZIP: 94545 BUSINESS PHONE: 5107858750 MAIL ADDRESS: STREET 1: 26203 PRODUCTION AVENUE STREET 2: SUITE 5 CITY: HAYWARD STATE: CA ZIP: 94545 POS AM 1 FORM POS AM DATED MAY 20, 1999 As filed with the Securities and Exchange Commission on May 20, 1999 Registration No. 333-72253 ================================================================================ SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------ 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 95126-2219 (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: 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. _X_ If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box. __ CALCULATION OF REGISTRATION FEE
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 - -------------- ------------ ---------------- ---------------- ---------- Common Stock, $0.0001 par value 2,500,000 $1.84375 $4,609,375 $1,281.41
- ----------------- (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 $3.000 $1.063 Second Quarter (as of April 30, 1999) $1.313 $1.063 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. On March 1, 1999 the Board of Directors approved the repricing of the exercise price of warrants to 20% lower than the closing bid price as reported by Nasdaq on the day prior to the day of exercise for JW Genesis Financial Corporation, Dalton Kent Securities Group, Inc., Olympia Partners, LLC, and Josh Berkowitz.
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 - ------------------ -------------- ------------- ------------ ------------ ----------- 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%)
(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 20th day of May, 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.
Signature Capacities Date - --------------------------- ------------------------------------ ------------- /s/ ANTHONY K. CHAN President, Chief Executive Officer, May 20, 1999 - ------------------------ and Director (principal executive Anthony K. Chan officer) /s/ ANTHONY K. CHAN Chairman of the Board and Director May 20, 1999 - ------------------------ Anthony K. Chan (attorney-in-fact) George Chung /s/ ANTHONY K. CHAN Senior Vice President and Director May 20, 1999 - ------------------------- Anthony K. Chan (attorney-in-fact) Don Berryessa /s/ ANTHONY K. CHAN Vice President and Chief Financial May 20, 1999 - ----------------------- Officer (principal financial officer) Anthony K. Chan (attorney-in-fact) Mae Lyn Woo /s/ ANTHONY K. CHAN Director May 20, 1999 - ------------------------- Anthony K. Chan (attorney-in-fact) William T. Duffy /s/ ANTHONY K. CHAN Director May 20, 1999 - ------------------------- Anthony K. Chan (attorney-in-fact) Alan Elkes /s/ ANTHONY K. CHAN Director May 20, 1999 - ------------------------- Anthony K. Chan (attorney-in-fact) Jan D. Hutchins /s/ ANTHONY K. CHAN Director May 20, 1999 - ------------------------- Anthony K. Chan (attorney-in-fact) Ronald M. Lott
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) EX-4.3 2 FORM OF WARRANT 1 EXHIBIT 4.3 FORM OF WARRANT THESE SECURITIES AND THE SECURITIES ISSUABLE UPON THEIR EXERCISE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE TRANSFERRED UNLESS COVERED BY AN EFFECTIVE REGISTRATION STATEMENT UNDER SAID ACT, A "NO ACTION" LETTER FROM THE SECURITIES AND EXCHANGE COMMISSION WITH RESPECT TO SUCH TRANSFER, A TRANSFER MEETING THE REQUIREMENTS OF RULE 144 OF THE SECURITIES AND EXCHANGE COMMISSION, OR AN OPINION OF COUNSEL SATISFACTORY TO THE ISSUER TO THE EFFECT THAT ANY SUCH TRANSFER IS EXEMPT FROM SUCH REGISTRATION. AMERICAN CHAMPION ENTERTAINMENT, INC. COMMON STOCK PURCHASE WARRANT 1. Issuance; Certain Definitions. In consideration of good and valuable consideration, the receipt of which is hereby acknowledged by AMERICAN CHAMPION ENTERTAINMENT, INC. a Delaware corporation (the "Company"), or registered assigns (the "Holder") is hereby granted the right to purchase at any time until 5:00 P.M., New York City time, on January 31, 2002 (the "Expiration Date"), Thousand(1)( ) fully paid and nonassessable shares of the Company's Common Stock, par value $.0001 per share (the "Common Stock") at an initial exercise price per share (the "Exercise Price") of $ ,(2) subject to further adjustment as set forth herein. (1) Two thousand seven hundred fifty (2,750) for every $100,000 principal of Debentures purchased. (2) Price to be filled in equal to 125% of average closing bid price of Common Stock for 5 trading days ending on date before Closing Date. 2. Exercise of Warrants. This Warrant is exercisable in whole or in part at any time and from time to time at the Exercise Price per share of Common Stock payable hereunder, payable in cash or by certified or official bank check. Upon surrender of this Warrant Certificate with the annexed Notice of Exercise Form duly executed (which Notice of Exercise Form may be submitted either by delivery to the Company or by facsimile transmission as provided in Section 8 hereof), together with payment of the Exercise Price for the shares of Common Stock purchased, the Holder shall be entitled to receive a certificate or certificates for the shares of Common Stock so purchased. 3. Reservation of Shares. The Company hereby agrees that at all times during the term of this Warrant there shall be reserved for issuance upon exercise of this Warrant such number of shares of its Common Stock as shall be required for issuance upon exercise of this Warrant (the "Warrant Shares"). 4. Mutilation or Loss of Warrant. Upon receipt by the Company of evidence satisfactory to it of the loss, theft, destruction or mutilation of this Warrant, and (in the case of loss, theft or destruction) receipt of reasonably satisfactory indemnification, and (in the case of mutilation) upon surrender and cancellation of this Warrant, the Company will execute and deliver a new Warrant of like tenor and date and any such lost, stolen, destroyed or mutilated Warrant shall thereupon become void. 5. Rights of the Holder. The Holder shall not, by virtue hereof, be entitled to any rights of a stockholder in the Company, either at law or equity, and the rights of the Holder are limited to those expressed in this Warrant and are not enforceable against the Company except to the extent set forth herein. 6. Protection Against Dilution. 6.1 Adjustment Mechanism. If an adjustment of the Exercise Price is required pursuant to this Section 6, the Holder shall be entitled to purchase such number of additional shares of Common Stock as will cause (i) the total number of shares of Common Stock Holder is entitled to purchase pursuant to this Warrant, multiplied by (ii) the adjusted Exercise Price per share, to equal (iii) the dollar amount of the total number of shares of Common Stock Holder is entitled to purchase before adjustment multiplied by the total Exercise Price before adjustment. 6.2 Capital Adjustments. In case of any stock split or reverse stock split, stock dividend, reclassification of the Common Stock, recapitalization, merger or consolidation, or like capital adjustment affecting the Common Stock of the Company, the provisions of this Section 6 shall be applied as if such capital adjustment event had occurred immediately prior to the date of this Warrant and the original Exercise Price had been fairly allocated to the stock resulting from such capital adjustment; and in other respects the provisions of this Section shall be applied in a fair, equitable and reasonable manner so as to give effect, as nearly as may be, to the purposes hereof. A rights offering to stockholders shall be deemed a stock dividend to the extent of the bargain purchase element of the rights. 6.3 Adjustment for Spin Off. If, for any reason, prior to the exercise of this Warrant in full, the Company spins off or otherwise divests itself of a part of its business or operations or disposes all or of a part of its assets in a transaction (the "Spin Off") in which the Company does not receive compensation for such business, operations or assets, but causes securities of another entity (the "Spin Off Securities") to be issued to security holders of the Company, then (a) the Company shall cause (i) to be reserved Spin Off Securities equal to the number thereof which would have been issued to the Holder had all of the Holder's unexercised Warrants outstanding on the record date (the "Record Date") for determining the amount and number of Spin Off Securities to be issued to security holders of the Company (the "Outstanding Warrants") been exercised as of the close of business on the trading day immediately before the Record Date (the "Reserved Spin Off Shares"), and (ii) to be issued to the Holder on the exercise of all or any of the Outstanding Warrants, such amount of the Reserved Spin Off Shares equal to (x) the Reserved Spin Off Shares multiplied by (y) a fraction, of which (I) the numerator is the amount of the Outstanding Warrants then being exercised, and (II) the denominator is the amount of the Outstanding Warrants; and (b) the Exercise Price on the Outstanding Warrants shall be adjusted immediately after consummation of the Spin Off by multiplying the Exercise Price by a fraction (if, but only if, such fraction is less than 1.0), the numerator of which is the Average Market Price of the Common Stock (as defined below) for the five (5) trading days immediately following the fifth trading day after the Record Date, and the denominator of which is the Average Market Price of the Common Stock on the five (5) trading days immediately preceding the Record Date; and such adjusted Exercise Price shall be deemed to be the Exercise Price with respect to the Outstanding Warrants after the Record Date. As used herein, the term "Average Market Price of the Common Stock" means the average closing bid price of a share of Common Stock, as reported by Bloomberg, LP or, if not so reported, as reported on the over-the-counter market for the relevant period. 7. Transfer to Comply with the Securities Act; Registration Rights. (a) This Warrant has not been registered under the Securities Act of 1933, as amended, (the "Act") and has been issued to the Holder for investment and not with a view to the distribution of either the Warrant or the Warrant Shares. Neither this Warrant nor any of the Warrant Shares or any other security issued or issuable upon exercise of this Warrant may be sold, transferred, pledged or hypothecated in the absence of an effective registration statement under the Act relating to such security or an opinion of counsel satisfactory to the Company that registration is not required under the Act. Each certificate for the Warrant, the Warrant Shares and any other security issued or issuable upon exercise of this Warrant shall contain a legend on the face thereof, in form and substance satisfactory to counsel for the Company, setting forth the restrictions on transfer contained in this Section. (b) Reference is made to the Registration Rights Agreement of even date herewith, to which the Company and the Holder (or Holder's direct or indirect assignor, if any) are parties (the "Registration Rights Agreement"). The Warrant Shares are Registrable Securities, as that term is used in the Registration Rights Agreement. Subject to the provisions of the Registration Rights Agreement, the Company agrees to file an amendment, which shall include the Warrant Shares, to its registration statement on Form S-3 (as so amended, the "Registration Statement"), pursuant to the Act, by the Required Filing Date and to have the registration of the Warrant Shares completed and effective by the Required Effective Date (as those terms are defined in the Registration Rights Agreement). 8. Notices. Any notice or other communication required or permitted hereunder shall be in writing and shall be delivered personally, telegraphed, telexed, sent by facsimile transmission or sent by certified, registered or express mail, postage pre-paid. Any such notice shall be deemed given when so delivered personally, telegraphed, telexed or sent by facsimile transmission, or, if mailed, two days after the date of deposit in the United States mails, as follows: (i) if to the Company, to: AMERICAN CHAMPION ENTERTAINMENT, INC. 1694 The Alameda, Suite 100 San Jose, CA 95126-2219 Attn: Anthony K. Chan, President Telephone No.: (408) 288-8199 Telecopier No.: (408) 288-8098 with a copy to: Preston Gates & Ellis LLP One Maritime Plaza, Suite 2400 San Francisco, CA 94111 Attn: Lawrence B. Low, Esq. Telephone No.: (415) 788-8822 Telecopier No.: (415) 788-8819 (ii) if to the Holder, to: ATTN: Telephone No.: ( ) - Telecopier No.: ( ) - with a copy to: Krieger & Prager, Esqs. 319 Fifth Avenue New York, New York 10016 Telephone No.: (212) 689-3322 Telecopier No. (212) 213-2077 Any party may by notice given in accordance with this Section to the other parties designate another address or person for receipt of notices hereunder. 9. Supplements and Amendments; Whole Agreement. This Warrant may be amended or supplemented only by an instrument in writing signed by the parties hereto. This Warrant contains the full understanding of the parties hereto with respect to the subject matter hereof and thereof and there are no representations, warranties, agreements or understandings other than expressly contained herein and therein. 10. Governing Law. This Warrant shall be deemed to be a contract made under the laws of the State of Delaware and for all purposes shall be governed by and construed in accordance with the laws of such State applicable to contracts to be made and performed entirely within such State. 11. Counterparts. This Warrant may be executed in any number of counterparts and each of such counterparts shall for all purposes be deemed to be an original, and all such counterparts shall together constitute but one and the same instrument. 12. Descriptive Headings. Descriptive headings of the several Sections of this Warrant are inserted for convenience only and shall not control or affect the meaning or construction of any of the provisions hereof. IN WITNESS WHEREOF, the parties hereto have executed this Warrant as of the __ th day of _____________ 1999. AMERICAN CHAMPION ENTERTAINMENT, INC. By:_________________________________ Name: Its: Attest: ________________________ Name: Title: NOTICE OF EXERCISE OF WARRANT The undersigned hereby irrevocably elects to exercise the right, represented by the Warrant Certificate dated as of , 1999, to purchase shares of the Common Stock, par value $.0001 per share, of AMERICAN CHAMPION ENTERTAINMENT, INC. and tenders herewith payment in accordance with Section 1 of said Common Stock Purchase Warrant. Please deliver the stock certificate to: Dated:______________________ By:__________________________________ CASH: $ _______________________ Number of Exercise List of warrant holders: Shares Price Expiration JW Genesis Financial Corporation 110,000 20% below Jan 31, 2002 market Dalton Kent Securities Group, Inc. 300,000 20% below July 4, 2001 market Olympia Partners, LLC 270,000 20% below July 4, 2001 market Josh Berkowitz 30,000 20% below July 4, 2001 market -----END PRIVACY-ENHANCED MESSAGE-----