-----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, D+Q0txv30ohJBk91rTC81uXcVQXFuuOEhH5P6uiijc9PLF+80z9TeTmeq4rspvuz CyuqsqTMdUzzA9l+xsa4aw== 0001034840-00-000012.txt : 20000516 0001034840-00-000012.hdr.sgml : 20000516 ACCESSION NUMBER: 0001034840-00-000012 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 20000331 FILED AS OF DATE: 20000515 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: 10QSB SEC ACT: SEC FILE NUMBER: 000-22833 FILM NUMBER: 630952 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 10QSB 1 FORM 10QSB SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 Form 1O-QSB [X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the Quarterly Period Ended March 31, 2000 [ ] Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934, For the transition period from ___________ to ____________ Commission File Number 333-18967 AMERICAN CHAMPION ENTERTAINMENT, INC. (Exact Name of Registrant as Specified in its Charter) Delaware 94-3261987 (State or Other Jurisdiction or (IRS Employer Incorporation or Organization) Identification Number) 1694 The Alameda, Suite 100, San Jose, California 95126 (408) 288-8199 (Registrant's Address of Principal Executive Offices and Telephone Number) (Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report) Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ..X.. No ..... APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS: Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13 or 15 (d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes ..... No ..... APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares outstanding of each of the registrant's classes of common stock, as of the latest practicable date. Class Outstanding at March 31, 2000 ------------------------- -------------------------- Common Stock, $.0001 par value 6,368,647 shares Transitional Small Business Disclosure Format (check one) Yes.... No ..X.. Exhibit Index on Page AMERICAN CHAMPION ENTERTAINMENT, INC. Form 10-QSB March 31, 2000 TABLE OF CONTENTS PART I - Financial Information Item 1. Financial Statements Consolidated Balance Sheet as of March 31, 2000 Consolidated Statements of Operations for the three month periods ended March 31, 2000 and 1999 Consolidated Statements of Cash Flows for the three month periods ended March 31, 2000 and 1999 Notes to Consolidated Financial Statements Item 2. Management's Discussion and analysis of Financial Condition and Results of Operations PART II - Other Information Item 1. Legal Proceedings Item 4. Submission of Matters to a Vote of Security Holders Item 6. Exhibits and Reports on Form 8-K Signatures Exhibit Index Exhibits PART I - FINANCIAL INFORMATION ITEM 1- Financial Statements - (unaudited) AMERICAN CHAMPION ENTERTAINMENT, INC. Condensed Consolidated Balance Sheets
March 31, March 31, 2000 1999 ------------ ------------ Assets (unaudited) Cash...................... 472,970 ($9,748) Account receivable....... 490,182 225,937 Loans receivable, related parties.. 114,937 114,937 Prepaid expenses.......... 28,397 48,019 Investments............... 203,110 - Property and equipment,... 293,861 379,981 Film costs, net........... 7,556,803 6,119,222 Note receivable........... 354,814 80,424 Other assets.............. 132,785 11,360 ------------ ------------ Total assets.............. 9,647,859 6,970,131 ============ ============ Liabilities Accounts payable and accrued expenses................ 591,008 954,775 Note payable, related parties.... - 129,069 Other..................... 3,389 - Deferred revenues......... 16,920 36,336 Long-term debt............ 597,396 356,543 ------------ ------------ Total liabilities......... 1,208,713 1,476,723 Stockholders' Equity: Preferred stock............. - - Common stock, paid in capital.... 21,875,447 9,227,888 Common stock warrants............ 0 352,026 Accumulated deficit.............. (13,436,301) (4,086,506) ------------ ------------ Total stockholders' equity ...... 8,439,146 5,493,408 Total liabilities and stockholders' equity........ 9,647,859 6,970,131 ============ ============
See accompanying notes. AMERICAN CHAMPION ENTERTAINMENT, INC. Condensed Consolidated Statements of Operations (unaudited)
Three Months Ended March 31, ----------------------------------- 2000 1999 --------------- --------------- REVENUE: Tuition and related fees......... $42,186 $61,351 Accessories and video sales...... 105 - Film income...................... 1,978 225,637 Interest income.................. 6,578 - --------------- --------------- Total revenue.................... 50,847 286,990 COSTS AND EXPENSES: Cost of sales.................... 775 - Amortization of film costs....... - 138,252 Salaries and payroll taxes....... 300,474 10,019 Rent............................. 28,907 42,328 Selling, general and administrative................. 2,945,840 315,831 Debenture conversion expense..... 18,134 - Interest......................... 21,614 42,716 Beneficial conversion feature of debentures.................. 264,964 316,198 -------------- --------------- Total costs and expenses......... 3,580,708 865,344 -------------- --------------- Net Loss From Operations........... ($3,529,861) ($578,354) Gain On Sale of Studio............. - - Net Loss Before Income Tax......... (3,529,861) (578,354) Income Tax......................... - 40 Net Loss........................... (3,529,861) (578,394) Accumulated Deficit................ (13,436,301) (4,086,506) Weighted average number of shares outstanding (Footnote 1)......... 5,933,431 1,524,318 =============== =============== Net loss per share (Footnote 1).... ($0.59) ($0.38) (Footnote 1) Adjusted for 1:4 reverse split of common stock on January 4, 2000.
See accompanying notes. WCS51 Condensed Consolidated Statements of Cash Flows (unaudited)
Three Months Ended March 31, ------------------------- 2000 1999 ------------ ------------ CASH FLOWS FROM OPERATING ACTIVITIES: Net loss........................................ ($3,529,861) ($578,394) Adjustments to reconcile net loss to net cash used for operating activities: Non-cash charge related to beneficial conversion feature of debentures.......... 264,964 316,198 Depreciation and amortization............... 30,057 168,132 Conversion of debenture interest to common stock.. 11,185 - Amortization of original issue discount on long-term debt......................... 18,134 5,432 Securities issued for services.............. 2,365,747 150,000 Amortization of deferred consulting expenses 93,299 - Decrease (Increase) in: Accounts receivable........................... (8,733) (188,262) Prepaid expenses and other.................... (20,937) 8,561 Increase (Decrease) in: Accounts payable and accrued expenses......... (452,328) (172,071) Deferred revenues............................. - (41,684) ------------ ------------ Net cash used for operating activities..... (1,228,473) 332,090 ------------ ------------ CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of property and equipment.............. (3,606) (7,133) Payments for film costs......................... (11,033) (883,542) ------------ ------------ Net cash used for investing activities..... (14,639) (890,675) ------------ ------------ CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from exercise of common stock options.. 335,690 - Proceeds from issuance of warrants.............. - 540,000 Proceeds (Payments) on loans from related parties.. (85,611) (7,968) Proceeds from exercise of warrants.............. 459,750 - Proceeds on notes payable....................... 1,250,000 914,096 Payments on notes payable....................... (275,405) (235,874) Principal payments on capital leases............ (856) - ------------ ------------ Net cash provided by financing activities.. 1,683,568 1,210,254 ------------ ------------ NET INCREASE IN CASH............................ 440,456 (12,511) CASH, beginning of period....................... 32,514 2,763 ------------ ------------ CASH, end of period............................. $472,970 ($9,748) ============ ============ SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid during the year for: Interest.................................... - $42,718 State income taxes.......................... - $40 SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES: Long-term debt converted to equity........... $725,000 $1,103,818 Beneficial conversion feature of debentures.. $264,964 $316,198 Common stock and warrants issued related to services................................... $2,007,482 - Common stock warrants issued with debt....... $283,476 $61,125 Stock Warrants issued to consultants......... $358,265 $150,000
See accompanying notes. NOTES TO FINANCIAL STATEMENTS March 31, 2000 Note 1 - Nature of Operations and Summary of Significant Accounting Policies Nature of Operations and Consolidation - The consolidated financial statements include the accounts of American Champion Entertainment, Inc. (the "Company") and its wholly owned subsidiary, America's Best Karate ("ABK") which owns 100% of American Champion Media, Inc. ("AC Media"). The Company and AC Media were formed during 1997. Pursuant to an Agreement and Plan of Merger, dated as of July 14, 1997, the Company entered into a reorganization transaction pursuant to which the Company acquired all of the issued and outstanding shares of ABK (the "Reorganization"). The financial statements included herein give effect to the Reorganization in which the Company became the successor to ABK. All significant intercompany accounts and transactions have been eliminated in consolidation. AC Media focuses on operating and managing all media-related programs for the Company. These programs consist of fitness information video tapes, books and audio tapes and production of educational television programs for children which emphasize martial arts values and fun. ABK focuses solely on operating and managing the Company's karate studios which are located in the San Francisco Bay Area. Revenue Recognition - AC Media - Revenue from films is recognized on the accrual method. Film costs are amortized using the individual-film-forecast-computation method which amortizes costs in the ratio that current gross revenues bear to anticipated total gross revenues from all sources. The management of AC Media periodically reviews its estimates of future revenues for each master and if necessary a revision is made to amortization rates and a write down to net realizable value may occur. Concentration of Credit Risk - Financial instruments which potentially subject the Company to concentrations of credit risk are cash and accounts receivable arising from its normal business activities. The Company places its cash with high credit quality financial institutions. The amount on deposit in any one institution that exceeds federally insured limits is subject to credit risk. To reduce credit risk, the Company requires advanced payments from students and thus, no student fees receivable is recorded. Film Costs - Film costs consist of the capitalized costs related to the production of original film masters for videos and television programs. The net film costs are presented on the balance sheet at the net realizable value for each master. Fair Values of Financial Instruments - The carrying value of cash, receivables, accounts payable and short-term borrowings approximates fair value due to the short maturity of these instruments. The carrying value of long-term obligations approximates fair value since the interest rates either fluctuate with the lending banks' prime rates or approximate market rate. None of the financial instruments are held for trading purposes. NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 1999 Note 1 - Nature of Operations and Summary of Significant Accounting Policies (continued) Basic Loss Per Share - Net loss per share is based on the weighted average outstanding shares issued. Because the Company has a net loss, the common stock equivalents would have an anti-dilutive effect on earnings per share. Accordingly, basic earnings per share and diluted earnings per share are the same. Income Taxes - Deferred tax assets and liabilities are recognized for the expected tax consequences of temporary differences between the tax bases of assets and liabilities and their reported amounts. The Company and its Subsidiaries file a consolidated tax return. Presentation - Because of the Company's reduced activity in its karate instruction segment, management believes utilizing a classified balance sheet presentation is no longer appropriate, as the operating cycle of the media-related segment of the Company is expected exceed 12 months. Accordingly, an unclassified presentation is utilized for the accompanying balance sheet, which is an acceptable method under SFAS No. 53, "Financial Reporting by Producers and Distributors of Motion Picture Films". Reclassifications - Certain reclassifications have been made to the 1999 amounts to conform to the current presentation. Note 2 - Basis of Reporting The accompanying unaudited financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-QSB. Accordingly, they do not include all of the information and disclosures required by generally accepted accounting principles for completed financial statements. In the opinion of management, such statements include all adjustments (consisting only of normal recurring items) which are considered necessary for a fair presentation of the financial position of the Company at March 31, 2000 and the results of its operations and its cash flows for the three months periods ended March 31, 2000 and 1999. The accompanying unaudited financial statements should be read in conjunction with the financial statements and notes for the year ended December 31, 1999 included in the Company's Form 10-KSB as filed with the SEC on March 30, 2000. Note 3 - Uses of Estimates, Risks and Uncertainties The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates used in these financial statements include the recovery of film costs which has a direct relationship to the net realizable value of the related asset. It is at least reasonably possible that management's estimate of revenue from films could change in the near term which could have a material adverse effect on the Company's financial condition and results of operations. Note 4 - Film Costs Film costs consist of the capitalized costs related to the production of videos and programs for television as follows: March 31, 2000 1999 -------------- ----------- Television program The Adventures with Kanga Roddy............. $8,077,669 $8,077,669 Videos Montana Exercise Video...................... 148,253 148,253 Strong Mind Fit Body........................ 18,042 18,042 ----------- ----------- 8,243,964 8,243,964 Less accumulated amortization............... 690,831 690,831 ----------- ----------- 7,553,133 7,553,133 =========== =========== Production of the first seven episodes of The Adventures with Kanga Roddy was completed during 1997. The Company completed 9 and 13 additional episodes during the years ended December 31, 1999 and 1998, respectively. Both exercise videos were completed in 1996, but only the Strong Mind Fit Body video has been released. Note 8 -Beneficial Conversion Feature of Debentures The Company accounts for the beneficial conversion feature of its 7% convertible debentures issued during the quarter in accordance with EITF D-60, "Accounting for Convertible Securities with Beneficial Conversion Features or Contingently Adjustable Conversion." The application of EITF D-60 resulted in the recognition of a non-cash charge to interest expense of $264,964 for the quarter ended March 31, 2000 corresponding increase to additional paid in capital. These amounts are included in interest expense. PART I - FINANCIAL INFORMATION ITEM 2 - Management's Discussion And Analysis Of Financial Condition And Results Of Operations Forward Looking Information The Private Securities Litigation Reform Act of 1995 provides a "safe harbor" from liability for forward-looking statements. Certain information included in this Form 10-QSB and other materials filed or to be filed by the Company with the Securities and Exchange Commission (as well as information included in oral statements or other written statements made or to be made by or on behalf of the Company) are forward-looking, such as statements relating to operational and financing plans, capital uses and resources, competition, and demands for the Company's products and services. Such forward-looking statements involve important risks and uncertainties, many of which will be beyond the control of the Company. These risks and uncertainties could significantly affect anticipated results in the future, both short-term and long-term, and accordingly, such results may differ from those expressed in forward-looking statements made by or on behalf of the Company. These risks and uncertainties include, but are not limited to, the acceptance by television viewers and public television stations of the television series - ADVENTURES WITH KANGA RODDY, production delays and/or cost overruns with respect to such series, changes in external competitive market factors or in the Company's internal budgeting process which might impact trends in the Company's results of operations, unanticipated working capital or other cash requirements, changes in the Company's business strategy or an inability to execute its strategy due to unanticipated change in the industries in which it operates; and various competitive factors that may prevent the Company from competing successfully in the marketplace. The following section discusses the significant operating changes, business trends, financial condition, earnings and liquidity that have occurred in the three-month period ended June 30, 1999. This discussion should be read in conjunction with the Company's consolidated financial statements and notes appearing elsewhere in this report. Results of Operations Revenues. For the three months ended March 31, 2000, the Company's total revenue decreased to $50,847, a decrease of $236,143 or 82.3% as compared to $286,990 for the comparable period in 1999. This decrease is due to the reduction in the Company's karate studio operation. Costs and Expenses. There was no amortization of film costs for the three months ended March 31, 2000, due to no revenue generated from the television show within this period. Such amortization, if any, is calculated based upon the proportion to the revenue generated by the television show in this period compared to total expected revenues from the television show. The Company's expenses for salaries and payroll taxes increased to $300,474, an increase of $290,455 for the three months ended March 31, 2000 from $10,019 for the comparable period in 1999. The increase was the combined result of all salaries and payroll taxes charged to expense instead of capitalizing to production and an increase in marketing personnel. Rent expense decreased to $28,907 for the three months ended March 31, 2000, a decrease of $13,421 or 31.7% from $42,328 for the comparable period in 1999. The decrease in rents is due to the closure of karate studios. Total selling, general and administrative expenses increased to $2,945,840, an increase of $2,630,009 for the three months ended March 31, 2000 from $315,831 for the comparable period in 1999. This increase is primarily due to common stock and warrants issued for services and warrants issued with debt. Interest expense decreased to $21,614, a decrease of $21,102 or 49.4% for the three months ended March 31, 2000 from $42,716 for the comparable period in 1999. The beneficial conversion feature of debenture expense for the quarter ended March 31, 2000 is a non-cash charge of $264,964 compared with $316,198 for the comparable period in 1999 related to the convertible debentures issued within the quarter. The debentures are convertible to common stock of the Company with the shares to be issued upon conversion based on 75% of the fair value of the stock at the time of conversion. Since the debt can be converted at any time, the value of the discount as of the issuance date has been charged to interest expense with a corresponding increase to additional paid in capital. The balance of the increase is attributable to the interest accrued on convertible debentures and certain private loans of the Company. As a result of the foregoing factors, the Company's net loss increased to $3,529,861 during the three months ended March 31, 2000 from $578,354 for the comparable period in 1999. Net loss per share increased to $0.59 for the three months ended March 31, 2000 from $0.38 for the comparable period in 1999. Weighted average number of shares outstanding increased to 5,933,431 for the three months ended March 31, 2000 from 1,524,318 for the comparable period in 1999 primarily due to the conversion of debentures into the Company's common stock. The outstanding number of shares and net loss per share figures are adjusted for the 1:4 reverse split of the company's common stock on January 4, 2000. Liquidity And Capital Resources Cash increased for the three months ended March 31, 2000 by $440,456 of which $1,228,473 was net operating cash loss and $14,639 was used in the production of the Adventures With Kanga Roddy show, while financing activities resulted in an inflow of $1,683,568. Deferred consulting fees of $93,299 relate to common stock and warrants issued to consultants and are being amortized over the term of the consulting agreements which range from 12 to 24 months. As of March 31, 2000, total long-term debt was $597,396 and there is no loan payable to related parties. In addition, deferred revenues were $16,920 at March 31, 2000. Deferred revenues are pre-paid tuition for the karate studios and booked revenue from sponsorship activities which cannot be immediately recognized. Recent Developments On April 22, 2000, the Company produced a professional boxing event in the People's Republic of China. The event was broadcast throughout China, and the television network of Showtime distributed the program in the United States and Poland via satellite. On May 9, 2000, the Company's wholly own subsidiary American Champion Marketing Group, Inc. signed a licensing agreement with Irwin Toy Limited for the licensing of the characters from the television series "ReBoot". This program is owned by Mainframe Entertainment, Inc. who has signed a Licensing Agent Agreement with the Company for the marketing of several of its programs including "ReBoot". PART II - OTHER INFORMATION Item 1. Legal Proceedings. There is no on-going legal proceedings during the three months ended March 31, 2000. Item 4. Submission of Matters to a Vote of Security Holders There is no submission of matters to a vote of security holders during the three months ended March 31, 2000. Item 6. Exhibits and Reports on Form 8-K. (a) Exhibits. See the Exhibit Index beginning on page 16. (b) Reports on Form 8-K. No reports on Form 8-K were filed during the quarter for which this report is filed. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. AMERICAN CHAMPION ENTERTAINMENT, INC. (Registrant) Dated: March 15, 2000 By: /s/ Anthony K. Chan ------------------------------ Anthony K. Chan, Chief Executive Officer By: /s/ Mae Lyn Woo ------------------------------ Mae Lyn Woo, Vice President, Chief Financial Officer & Chief Operations Officer INDEX TO EXHIBITS Exhibit No. Exhibit 1.1(1) Form of Underwriting Agreement 3.1(1) Amended and Restated Certificate of Incorporation dated April 24, 1997 3.11(5) Amended and Restated Certificate of Incorporation dated June 4, 1998 3.2(1) Bylaws 4.1(1) Specimen stock certificate 4.2(1) Warrant Agreement with form of Warrant 4.3(1) Form of Underwriters' Warrant 4.41(4) Securities Purchase Agreement dated July 2, 1998 4.42(4) Form of Debenture dated July 2, 1998 4.43(4) Joint Escrow Instructions 4.44(4) Registration Rights Agreement dated July 2, 1998 4.45(4) Form of Warrant dated July 2, 1998 4.461(7) Securities Purchase Agreement dated January 19, 1999 4.462(7) Form of Debenture dated January 19, 1999 4.463(7) Joint Escrow Instructions dated January 19, 1999 4.464(7) Registration Rights Agreement dated January 19, 1999 4.465(7) Form of Warrant dated January 19, 1999 4.471(9) Securities Purchase Agreement dated June 17, 1999 4.472(9) Form of Debenture dated June 17, 1999 4.473(9) Joint Escrow Instructions dated June 17, 1999 4.474(9) Registration Rights Agreement dated June 17, 1999 4.475(9) Form of Warrants dated June 17, 1999 4.481(10) Securities Purchase Agreement dated September 24, 1999 4.482(10) Form of Debenture dated September 24, 1999 4.483(10) Joint Escrow Instructions dated September 24, 1999 4.484(10) Registration Rights Agreement dated September 24, 1999 4.485(10) Form of Warrants dated September 24, 1999 5(1) Opinion of Sheppard, Mullin, Richter & Hampton LLP 10.1(1) 1997 Stock Plan 10.2(1) Form of Stock Option Agreement for 1997 Stock Plan 10.3(1) 1997 Non-Employee Directors Stock Option Plan 10.4(1) Form of Non-Employee Directors Stock Option Agreement 10.8(1) Promissory Note dated December 15, 1994 made payable by Messrs. Chung and Chan and their wives in favor of Michael Triantos M.D. Inc. Money Purchase and Profit Sharing Pension Plans Trust 10.9(1) Employment Agreement between the Company and George Chung dated March 4, 1997, effective upon the closing date of the Offering 10.10(1) Employment Agreement between the Company and Anthony Chan dated March 4, 1997, effective upon the closing date of the Offering 10.11(1) Employment Agreement between the Company and Don Berryessa dated March 4, 1997, effective upon the closing date of the Offering 10.12(1) Employment Agreement between the Company, AC Media and Jan Hutchins dated March 4, 1997, effective upon the closing date of the Offering 10.13(1) Convertible Loan Agreement dated as of May 5, 1995, between ABK and David Y. Lei 10.15(1) Amended Deal Memo between ABK and Rick Fichter dated February 23, 1997, with respect to payments related to the Kanga Roddy Series 10.17(1) Form of Indemnification Agreement 10.19(1) Letter dated October 29, 1996 from the Company to Tim Pettitt regarding certain payments to the Montanas 10.20(1) Distribution Agreement dated June 18, 1996 by and between America's Best Karate and InteliQuest 10.21(1) Distribution Agreement, dated May 6, 1997, by and between KTEH, San Jose Public Television and American Champion Media, Inc. 10.22(1) Letter Agreement, dated June 1997, between AC Media, Inc. and Sega of America, Inc. 10.23(1) Business Loan Agreement between America's Best Karate and Karen Shen 10.24(1) Business Loan Agreement between America's Best Karate and Thomas J. Woo 10.25(2) Licensing Agent Agreement, dated July 25, 1997, between American Champion Media, Inc. and Sega of America, Inc. 10.26(3) Continuous Distribution Agreement dated April 20, 1998 between KTEH, San Jose and American Champion Media, Inc. 10.27(3) Sponsorship Agreement dated April 29, 1998 between Sara Lee Corporation and American Champion Media, Inc. 10.28(3) Engagement Agreement dated April 24, 1998 between JW Charles and American Champion Entertainment, Inc. 10.29(5) Amendment to Employment Agreement with George Chung, dated July 1, 1998 10.30(5) Amendment to Employment Agreement with Anthony Chan, dated July 1, 1998 10.31(5) Amendment to Employment Agreement with Don Berryessa, dated July 1, 1998 10.32(5) Amendment to Employment Agreement with Jan Hutchins, dated July 1, 1998 10.33(5) Amendment to Employment Agreement with Mae Lyn Woo, dated July 1, 1998 10.34(5) Amendment to Employment Agreement with Kristen Simpson, dated July 1, 1998 10.35(6) International Distribution Agreement with Portfolio Entertainment dated August 19, 1998 10.36(6) Video Distribution Agreement for the Kanga Roddy Series with Kreative Video Products dated August 19, 1998 10.37(6) Video Distribution Agreement for the Montana Exercise Video with Kreative Video Products dated August 21, 1998 10.38(8) Consultant Agreement between Olympia Partners, LLC, Dalton Kent Securities Group, Inc. and American Champion Entertainment, Inc. 10.39(8) Merchant Licensing Agreement between Timeless Toys and American Champion Media, Inc. 10.40(8) Loan Agreement between Olympia Partners and American Champion Entertainment, Inc. 10.41(8) SEGA Agreement termination letter. 10.42(8) Consultant Agreement between American Champion Entertainment, Inc. and Trademark Management 10.43(11) Termination of Kreative Video Products, Inc. 10.44(11) Video Products distribution agreement between Fast Forward Marketing, Inc. and American Champion Entertainment. Inc. 10.45(11) Consultant Agreement between Chris Scoggin, LTD. And American Champion Entertainment, Inc. 10.46(12) Consulting Services Agreement between Consor, Inc., and American Champion Marketing Group, Inc. 10.47(12) Licensing Agreement between Brighter Child Interactive, LLC and American Champion Media, Inc. 10.48(13) Licensing Agreement between Prestige Toys and American Champion Marketing Group, Inc. 10.49(13) Stock Exchange Agreement between Great Wall International Sports Media Company and American Champion Entertainment, Inc. 10.50 Licensing Agent Agreement between Funschool.com Corporation and American Champion Marketing Group, Inc. (portions deleted pursuant to request for confidential treatment) 10.51 Licensing Agent Agreement between Mainframe Entertainment, Inc. and American Champion Marketing Group, Inc. (portions deleted pursuant to request for confidential treatment) 10.52 Stock Exchange Agreement between Beijing Wisdom Network Technology Company, Ltd. and American Champion Entertainment, Inc. 21.1(1) Subsidiaries of the Registrant 27.1 Financial Data Schedule (shown on EDGAR format only) (1) Filed as an exhibit with the registrant's Form SB-2 filed with the SEC on March 21, 1997 or Form SB-2/A filed March 3 and June 20, 1997 And incorporated by reference herein. (2) Filed as an exhibit with the registrant's Form 10-KSB filed with the SEC on March 30, 1998 and incorporated by reference herein. (3) Filed as an exhibit with the registrant's Form 10-QSB filed with the SEC on May 15, 1998 and incorporated by reference herein. (4) Filed as an exhibit with the registrant's Form S-3 filed with the SEC On August 3, 1998 and incorporated by reference herein. (5) Filed as an exhibit with the registrant's Form 10-QSB filed with the SEC on August 7, 1998 and incorporated by reference herein. (6) Filed as an exhibit with the registrant's Form 10-QSB filed with the SEC on November 16, 1998 and incorporated by reference herein. (7) Filed as an exhibit with the registrant's Form S-3 filed with the SEC On Feburary 12, 1999 and incorporated by reference herein. (8) Filed as an exhibit with the registrant's Form 10-KSB filed with the SEC on March 31, 1999 and incorporated by reference herein. (9) Filed as an exhibit with the registrant's Form S-3 filed with the SEC on July 16, 1999 and incorporated by reference herein. (10) Filed as an exhibit with the registrant's Form S-3 filed with the SEC on November 5, 1999 and incorporated by reference herein. (11) Filed as an exhibit with the registrant's Form 10-QSB filed with the SEC on August 16, 1999 and incorporated by reference herein. (12) Filed as an exhibit with the registrant's Form 10-QSB filed with the SEC on November 17, 1999 and incorporated by reference herein. (13) Filed as an exhibit with the registrant's Form 10-KSB filed with the SEC on March 30, 2000 and incorporated by reference herein EX-10.50 2 LICENSING AGENT AGREEMENT WITH FUNSCHOOL.COM CORPORATION EXHIBIT 10.50 Licensing Agent Agreement This Licensing Agent Agreement (the "Agreement") is entered into on February 10, 2000 by and between American Champion Marketing Group, Inc., a Delaware corporation with offices at 1694 The Alameda, Suite 100, San Jose, California 95126 ("ACMG") and funschool.com Corporation, a California corporation with offices at 465 Fairchild Drive, Suite 105, Mountain View, California 94043. This Agreement is being entered into with respect to the following facts: A. funschool.com is the sole owner and has the exclusive right to license the trademark, brand name, logo, characters, actors likeness, voice and related properties known as: i) funschool.com ii)Browser The Bus iii)Worm iv)Globe Boy v) Gator vi) Sitting Cow (collectively called the "Properties") based upon the Internet Sites "sites" B. funschool.com desires to appoint ACMG as its exclusive agent for purposes of licensing and merchandising the Properties for use on or in connection with all categories of merchandise products (e.g., clothing, toys, sporting goods, etc. collectively the "Products"), and ACMG desires to accept such appointment in accordance with the terms and conditions set forth in this Agreement. 1. Subject to the provisions set forth below in this paragraph 1, funschool.com hereby appoints ACMG to represent funschool.com as its exclusive agent for purposes of licensing and merchandising the Properties to third parties for use on and in connection with the Products throughout the world (the "Territory"). 2. Client shall pay ACMG as consideration for the aforementioned services a monthly retainer of (deleted pursuant to request for confidential treatment) per month for the term of 6 months from February 10, 2000 -July 9, 2000. Any expenses related to travel, client entertainment, telephone, faxing, in accordance with services being performed in this agreement, shall be discussed with Client in advance, and payable by Client upon receipt of invoice. 3. ACMG shall submit each proposed licensing arrangement to funschool.com in the form of a term sheet providing reasonable detail as to the proposed transaction. Funschool.com shall forward to ACMG any proposed changes to terms promptly following receipt. Based on the terms approved by funschool.com, ACMG shall prepare or have prepared a merchandise license agreement ("License Agreement") incorporating the agreed terms and such other terms and conditions as are customary and reasonable. No license Agreement shall be entered into without funschool.com's prior consent. funschool.com shall have approval over the Products and over the material terms of the License Agreements, which approval shall be exercised in funschool.com's sole discretion. ACMG hereby waives any claim it may have that funschool.com did not exercise its approval rights in good faith with respect to any proposed License Agreement. funschool.com shall respond to ACMG within twenty-one (21) days with respect to its approval or disapproval of any proposed License Agreements. All License Agreements shall be entered into in the name of funschool.com, with ACMG as the exclusive agent, and shall be executed by funschool.com and ACMG. 4. ACMG shall do the following with respect to the properties: (a) Provide a strategic plan to funschool.com (b) Seek out, negotiate and present for approval and execution by funschool.com, business opportunities relative to the merchandising and licensing of the properties. (c) Monitor and oversee the licensing, promotion and marketing programs with all existing or hereinafter acquired third party licensees ("Licensees"). (d) Whenever necessary, conduct personal visits to Licensees' manufacturing facilities, to ensure conformance with the quality control provisions of the License Agreements. (e) Engage in other such activities as the parties may mutually agree and use its best efforts to maximize revenue generated from the exploitation of the rights granted hereunder and to enhance the value and the reputation of the Properties. (f) appropriate, attend the Consumer Electronics Show, the Toy Fair, the annual Licensing Show, MAGIC, American Book Association, House-wares, SHOPA, MIPCOM, MIP and other trade shows to exhibit and display the Properties. 5. funschool.com agrees to reimburse ACMG for all expenses incurred by ACMG in connection with the licensing and merchandising of the Products which are pre-approved by funschool.com, including, but not limited to, presentations, press kits, style guides, art work, design materials, display materials, trade show expenses specifically related to the Properties (including travel expenses thereto and promotional materials). Such reimbursement to ACMG shall be made by funschool.com within 30 days from ACMG's submission of expense relating to the licensing and merchandising of the Properties and any travel and legal expenses not specifically related thereto and that it will receive no compensation except as specified in this paragraph 7 below. 6. As feasible, funschool.com will attempt to obtain and maintain appropriate trademark and copyright protection throughout the Territory with respect to the products. ACMG shall advise funschool.com in writing of any suspected or known infringement of the Properties. 7. All royalties, fees and revenues from licensee, distributors and any other parties relating to the Properties in this agreement shall be remitted directly to funschool.com. ALL monies, excluding advances and guarantees, received by ACMG, funschool.com Corporation or any of its agents or affiliated companies, from the licensing, merchandising or other disposition of the Products utilizing the Properties or from any other rights granted hereunder ("Gross Receipts") shall be applied in the following order and priority: (a) First, ACMG as the exclusive licensing agent, shall be entitled to (deleted pursuant to request for confidential treatment) of the Gross Receipts for Domestic Licensing (United States). For International Territories ACMG will receive (deleted pursuant to request for confidential treatment) of the Gross Receipts. (b) Second, ACMG shall be reimbursed any outstanding amount of expenses described in paragraph 5 above. (c) Third, all sums remaining after the payment to ACMG of the sums specified in subparagraphs 8(a) and 8(b) above shall be paid to funschool.com. (d) Upon the expiration or earlier termination of this Agreement, ACMG shall (provided the Agreement has not been terminated for ACMG's fraud, misrepresentation or other tortuous or illegal conduct) continue to be entitled to receive the foregoing fee and expenses with respect to any License Agreements entered into during the Term for the greater of (i) the actual Term of each such License Agreement; or (ii) six (6) months from the date of commencement of each such License Agreement; provided ACMG continues to service such License Agreements as provided in paragraph 4 above. 10. "Key Representative". It is hereby acknowledged that funschool.com is a prior client from Joy Tashjian and at such a time as Ms. Tashjian may no longer be with ACMG, funschool.com shall have the right to terminate it's Agreement with ACMG, funschool.com would remain obligated to compensate ACMG for all ongoing commitments in accordance with paragraph 3 of this document. The parties have agreed to the terms of this license contained above. American Champion Marketing Group, Inc. funschool.com Corporation, Inc. By: /s/ Joy Tashjian By: /s/ Kristen Johnson Joy Tashjian Kristen Johnson President & CEO Executive VP of Business Development 2/14/00 2/14/00 EX-10.51 3 LICENSING AGENT AGREEMENT WITH MAINFRAME ENTERTAINMENT, INC. Exhibit 10.51 Licensing Agent Agreement This Licensing Agent Agreement (the "Agreement") is entered into on January 10, 2000 by and between American Champion Marketing Group, Inc., a Delaware corporation with offices at 1694 The Alameda, Suite 100, San Jose, CA 95126 ("ACMG") and Mainframe Entertainment, Inc., a Canadian corporation with offices at 2025 West Broadway, Suite 500, Vancouver, British Columbia, Canada V6J-1Z6 ("Mainframe"). This Agreement is being entered into with respect to the following facts: A. Mainframe is the sole owner and has the exclusive right to license the trademark, brand name, logo, characters, actors likeness, voice and related properties known as: Re-Boot, Dot's Bots, and Scary Godmother, subject to the provisions below, (collectively called the "Properties") based upon the television of the same Properties to be broadcast and/ or currently being broadcast on television ("Programs"). B. Mainframe desires to appoint ACMG as its exclusive agent for purposes of licensing and merchandising the Properties for use on or in connection with all categories of merchandise products (e.g., clothing, toys, sporting goods, etc.), services (collectively the "Products"), and ACMG desires to accept such appointment in accordance with the terms and conditions set forth in this Agreement. Grant of rights herein,Products as defined herein, and ACMG's appointment herein, specifically excludes the following: (i) The right to produce and distribute animated or live action television episodes, series, video-grams or films of any length in any and all media whether known or hereafter devised; (ii) Agent will receive a reduced commission of (deleted pursuant to request for confidential treatment) based on Gross Receipts on the Irwin Toy License Agreement for Re-Boot Property excluding any royalties or advances collecting or owing that relate to reporting periods prior to the commencement of the Term hereunder. Agent would receive a (deleted pursuant to request for confidential treatment) commission based on Gross Receipts upon execution of any other Master Toy Agreement or Toy Agreement with any party other then Irwin. Agent may exploit any secondary toy rights that are not included in the master toy agreement; (iii) All forms of computer assisted or optically driven or interactive media (including CD-ROM, CDI, CD-1, 3D0, DVI or similar mediums); (iv) Theme parks, amusement parks, IMAX, or other large- formed theatrical venues location based entertainment centers, game centers, motion simulation rides, theatre sales outlets, live theatrical productions; (v) All rights that form part of any third party distribution or broadcast agreements or negotiations entered into by Mainframe with respect to the programs where such rights are required by such third party distribution or broadcasters as a condition of licensing or distributing the Program(s). (vi) All rights relating to any existing likeness or retained rights (vii) All music publishing rights (viii) All rights related to the sale of stock footage (ix) Sales in or in connection with facilities owned, operated, or controlled by Mainframe and its affiliated and/or subsidiary companies (x) All revenues associated with the creation of customized artwork or animation (xi) Mainframe shall retain the non-exclusive right to exploit e-commerce (xii) The provisions of paragraph 2(B) below 1. Subject to the provisions set forth below in this paragraph 1, Mainframe hereby appoints ACMG to represent Mainframe as its exclusive agent for purposes of licensing and merchandising the Properties to third parties for use on and in connection with the Products throughout the world excluding Japan Singapore, malaysia, Taiwan, Indonesia, Vietnam, Hong Kong and South Korea (the "Territory") 2 (a). ACMG shall submit each proposed licensing arrangement to Mainframe for its approval in the form of a term sheet providing reasonable detail as to the proposed transaction. Mainframe shall forward to ACMG any proposed changes to terms promptly following receipt. Based on the terms approved by Mainframe, ACMG shall prepare or have prepared a merchandise license agreement ("License Agreement") incorporating the agreed terms and such other terms and conditions as are customary and reasonable. No license Agreement shall be entered into without Mainframe's prior written consent. Mainframe shall have approval over the Products and over the material terms of the License Agreements, which approval shall be exercised in Mainframe's sole discretion. ACMG hereby waives any claim it may have that Mainframe did not exercise its approval rights in good faith with respect to any proposed License Agreement. Mainframe shall respond to ACMG within fourteen (14) days with respect to its approval or disapproval of any proposed License Agreements. Failure by Mainframe to so respond shall be deemed as disapproval of any such License Agreement. All License Agreements shall be entered into in the name of Mainframe, with ACMG as the exclusive agent, and shall be executed by Mainframe and ACMG. 2(b). ACMG acknowledges that with the respect to the Property "Scary Godmother all rights to so called "collectable" or "hobby" items which are intended to sell fewer than 15,000 units of any particular item have been retained by Jill Thompson and/or Strus Entertainment, Inc. In addition, Thompson has retained all comic book, hard cover, trade paperback, activity and coloring books, comic strips and graphic novel publishing rights, as well as the right to produce calendars, stationary, and greeting cards: and Thompson shall have meaningful consultation in connection with the creation of style guides. 3. This Agreement shall be effective as of the date first abouve mentioned and shall continue for the term of three (3) years (the "term"). Commencing sixty (60) days prior to the expiration of the such initial term, ACMG and Mainframe shall negotiate in good faith with respect to extending the term for some additional period of time. The initial term and any extension thereof is referred to herein as the "Term." 4. ACMG shall do the following with respect to the Properties: (a) Seek out, negotiate and present for approval and execution by Mainframe, business opportunities relative to the merchandising and licensing of the Properties. (b) Monitor and oversee the licensing, promotion and marketing programs with all existing or hereinafter acquired third party licensee ("Licensees"). (c) Whenever necessary, conduct personal visits to Licensees' manufacturing facilities, to ensure conformance with the quality control trademark and copyright provisions of the License Agreements. (d) Engage in other such activities as the parties may mutually agree and use its best efforts to maximize revenue generated from the exploitation of the rights granted hereunder and to enhance the value and the reputation of the Properties (e) If appropriate, attend the Consumer Electronics Show, the Toy fair, the annual Licensing Show, MAGIC, American Book Association, House-wares, SHOPA, MIPCOM, MIP and other trade shows to exhibit and display the Properties. (f) Keep accurate books of account and records concerning this Agreement and all License Agreements. (g) Fulfill all its obligations under all License Agreements including but not limited to the collection of royalties, reports and statements of licensees. 5. Mainframe shall be responsible for all costs associated with style guides development and any other collateral materials that Mainframe may deem necessary. Mainframe may, at such sole discretion, contribute to the cost of certain key marketing and promotional events such as launches, representation at trade shows, and special presentations. ACMG shall prepare and submit to Mainframe for Mainframe's approval, an annual marketing plan setting out ACMG's proposed activities and costs associated therewith for the marketing and promotion of the Rights. 6. Mainframe shall have the responsibility at its own cost and expense for obtaining and maintaining appropriate trademark and copyright protection throughout the Territory with respect to the Products. ACMG shall promptly advise Mainframe in writing of any suspected or known infringement of the Properties which comes to ACMG's attention. 7. Any compensation for services not already contemplated by this Agreement shall be separately negotiated between Mainframe and ACMG. 8. ALL monies, including advances and guarantees, received by ACMG, Mainframe or any of their respective agents or affiliated companies, from the licensing, merchandising or other disposition of the Products utilizing the Properties or from any other rights granted hereunder, but after deduction of any contractual share of such monies payable by Mainframe to any broadcasters of the program ("Gross Receipts") shall be applied as follows: (a) ACMG shall be entitled to (fifty percent) to 50% commission on all Gross Receipts received exclusive of any subagents commissions and all of ACMG's expenses: and (b) The balance of Gross Receipts shall be retained by or remitted to mainframe in accordance with the provisions below. (c) Upon the expiration or earlier termination of this Agreement, the agency appointed hereunder shall terminate immediately provided that ACMG shall (provided the Agreement has not been terminated for ACMG's fraud, misrepresentation or other tortuous or illegal conduct) continue to be entitled to receive the foregoing fee and expenses with respect to any License Agreements entered into during the Term for the greater of (i) the actual Term of each such License Agreement; or (ii) two (2) years from the date of commencement of each such License Agreement; provided ACMG continues to service such License Agreements as provided in paragraph 4 abouve. 9(a) ACMG shall be obligated to collect all monies due from the third party licensees in a timely manner. Upon receipt of monies, all such monies shall be deposited into a segregated interest-bearing bank account to be held in trust for Mainframe provided that ACMG may deduct its fees from such monies at such a time as it accounts and pays Mainframe all monies due to Mainframe. ACMG shall provide written accounts to Mainframe on not less than a quarterly basis within fifteen (15) days following each calendar quarter, with the appropriate payment accompanying each such account. (b) Mainframe shall have the right upon, seventy-two (72) hours notice, during reasonable business hours, to audit, to inspect and take extracts form the books and records of ACMG relating to this Agreement or any License Agreement. In the event there is any discrepancy in favour of Mainframe between the amount actually paid to Mainframe and the amount due to it, ACMG shall immediately remit such payment. All costs of the audit shall be borne to Mainframe, unless the amount of the discrepancy is five (5%) percent or more of the amount reported, in which case the cost of the audit shall be borne to ACMG. 10. Each of the parties (the "indemnifying Party") will all times defend, indemnify and hold the other (including its directors, officers, shareholders, partners, agents, employees and permitted assigns) harmless from and against any and all claims, damages, loss of profits, liabilities, costs and expenses (including reasonable attorney's fees) arising out of the indemnifying Party's breech of any of the covenants, representations or warranties contained in this Agreement, including the unauthorized grant or use by ACMG of the Properties. 11.(a) Mainframe shall have the right to immediately terminate this Agreement if: (i) ACMG shall fail to deliver any remittance, report or statement as and when due hereunder, but in no event later than ten (10) days following the date when originally due. (ii) a petition in bankruptcy or for reorganization is filed by or against ACMG under any bankruptcy act now or hereafter in force, or if ACMG makes and assignment for the benefit of its creditors, or if a receiver, trustee, receiver-manager, liquidator or other custodian is appointed for all or a substantial part of ACMG's assets, and the order of appointment is not contest or has been contested but is not vacated within thirty (30)days; or if ACMG assigns or encumbers this Agreement in whole or part contrary to the terms hereof; or if all or a substantial part of ACMG's assets is sequested or levied against or attached and the order of sequestration, levy or attachment is not contest or has been contested but is not vacated within thirty (30) days. (iii) mainframe is merged with an arm's length company or a majority of Mainframe's shares are required by an arm's length company and it is a requirement of any such arrangement that the rights granted to ACMG hereunder revert to mainframe or such new company. (b) Either party hereto shall be deemed in default hereunder and a non-defaulting party may: (i) terminate this Agreement on ten (10) days written notice to the other, unless the default has been remedied; or (ii) terminate this Agreement immediately in the event the default cannot be remedied, If the defaulting party breeches any material representation, covenant or warranty made hereunder or breeches or defaults in the performance of any other material provision herein on its part to be performed. 12. ACMG hereby assigns and grants to Mainframe, its successors and assigns, a first priority lien and a continuing security interest, and a mortgage, pledge and assignment in and to all of the rights granted to ACMG hereunder and all rights derived by ACMG pursuant to its exercise of such rights to secure (a) all sums which Mainframe is entitled to receive or otherwise be paid hereunder; (b) all rights to which Mainframe is entitled hereunder; and (c) the performance and observance by ACMG of all of its obligations now or hereafter existing hereunder to be performed and observed. 13. This Agreement may not be observed by ACMG without the prior written consent of Mainframe. Mainframe shall have the right to assign this Agreement provided it remains liable for its obligations hereunder to the extent not performed by its assignee(s) unless agreed to in writing by ACMG which permission shall not be unreasonably withheld. 14. This Agreement shall be governed by and constructed in accordance with the laws of the Province of British Columbia and the laws of Canada applicable therein; and the parties irrevocably attorn to the exclusive jurisdiction of the courts of said province with respect to all matters pertaining to this Agreement. 15. "Key Representative". It is hereby acknowledged that Mainframe Entertainment is a prior relationship of Joy Tashjian and at such a time as Ms. Tashjian may no longer be with ACMG, Mainframe Entertainment shall have the right to terminate it's Agreement with ACMG. Mainframe Entertainment would remain obligated to compensate ACMG for all ongoing commissions in accordance with Paragraph 3 of this document. The parties have agreed to the terms of this license contained above. American Champion Marketing Group, Inc. Mainframe Entertainment, Inc. By: /s/ Joy Tashjian By: /s/ Brett Gannon Joy Tashjian Brett Gannon_____ (President/CEO) Chief Financial Officer 3/16/00 3/18/00 EX-10.52 4 STOCK EXCHANGE AGREEMENT WITH BEIJING WISDOM NETWORK TECHNOLOGY CO. LTD. Exhibit 10.52 AGREEMENT CONCERNING THE EXCHANGE OF COMMON STOCK AMONG AMERICAN CHAMPION ENTERTAINMENT, INC. ("ACEI") BEIJING WISDOM NETWORK TECHNOLOGY COMPANY, LTD. ("B.A.Network") and THE SHAREHOLDERS OF BEIJING WISDOM NETWORK TECHNOLOGY COMPANY, LTD. TABLE OF CONTENTS Page No. ARTICLE 1 - EXCHANGE OF SECURITIES 9 1.1 - Issuance of Shares 9 1.2 - Exemption from Registration 9 ARTICLE 2 - REPRESENTATIONS AND WARRANTIES OF B.A. Network 9 2.1 - Organization 9 2.2 - Capital 10 2.3 - Subsidiaries 10 2.4 - Directors and Officers 10 2.5 - Financial Statements 10 2.6 - Investigation of Financial Condition 10 2.7 - Compliance with Laws 10 2.8 - Litigation 11 2.9 - Authority 11 2.10 - Ability to Carry Out Obligations 11 2.11 - Full Disclosure 11 2.12 - Material Contracts 11 2.13 - Indemnification 12 2.14 - Transactions with Officers and Directors 12 2.15 - Background of Officers and Directors 12 2.16 - Employee Benefits 13 ARTICLE 3 - REPRESENTATIONS AND WARRANTIES OF ACEI 13 3.1 - Organization 13 3.2 - Capital 13 3.3 - Subsidiaries 14 3.4 - Directors and Officers 14 3.5 - Financial Statements 14 3.6 - Absence of Changes 14 3.7 - Absence of Undisclosed Liabilities 14 3.8 - Tax Returns 14 3.9 - Investigation of Financial Condition 14 3.10 - Trade Names and Rights 14 3.11 - Compliance with Laws 15 3.12 - Litigation 15 3.13 - Authority 15 3.14 - Ability to Carry Out Obligations 15 3.15 - Validity of ACEI Shares 15 3.16 - Full Disclosure 15 3.17 - Assets 15 3.18 - Material Contracts 16 3.19 - Compliance With SEC Reporting Requirements 16 ARTICLE 4 - REPRESENTATIONS AND WARRANTIES OF SHAREHOLDERS 16 4.1 - Share Ownership 16 4.2 - Investment Intent 16 4.3 - (deleted) 17 4.4 - Legend 17 ARTICLE 5 - COVENANTS 17 5.1 - Investigative Rights 17 5.2 - Conduct of Business 18 ARTICLE 6 - CONDITIONS PRECEDENT TO ACEI'S PERFORMANCE 18 6.1 - Conditions 18 6.2 - Accuracy of Representations 18 6.3 - Performance 18 6.4 - Absence of Litigation 18 6.5 - Acceptance by B.A. Network Shareholders 18 6.6 - Officer's Certificate 19 6.7 - Opinion of Counsel to B.A. Network 19 ARTICLE 7 - CONDITIONS PRECEDENT TO B.A. Network'S PERFORMANCE 19 7.1 - Conditions 19 7.2 - Accuracy of Representations 19 7.3 - Performance 20 7.4 - Absence of Litigation 20 7.5 - Current Status 20 7.6 - Directors of ACEI 20 7.7 - Officers of ACEI 20 7.8 - blank 20 7.9 - Officer's Certificate 20 7.10 - Opinion of Counsel 20 ARTICLE 8 - CLOSING 20 8.1 - Closing 20 ARTICLE 9 - MISCELLANEOUS 21 9.1 - Captions and Headings 21 9.2 - Memos, Attachments and Exhibits 21 9.3 - No Oral Change 21 9.4 - Non-Waiver 22 9.5 - Entire Agreement 22 9.6 - Member to B.A. Network's Board of Directors 22 9.7 - Choice of Law 22 9.8 - Counterparts 22 9.9 - Notices 22 9.10 - (deleted) 23 9.11 - Binding Effect 23 9.12 - Mutual Cooperation 23 9.13 - Announcements 23 9.14 - Expenses 23 9.15 - Survival of Representations and Warranties 23 9.16 - Exhibits 24 EXHIBITS Exhibit 1.1 Allocation of B.A. Network Shares Exhibit 2.2 Authorized Capital of B.A. Network Exhibit 2.4 Directors and Officers of B.A. Network Exhibit 2.5 B.A. Network Financial Statements Exhibit 2.12 Material Contracts Exhibit 3.2 Outstanding options and warrants of ACEI Exhibit 3.3 Subsidiaries of ACEI Exhibit 3.4 Directors and Officers of ACEI Exhibit 3.5 ACEI Financial Statements Exhibit 7.10 Opinion of Counsel of ACEI Exhibit A B.A. Network's Revenue Projections AGREEMENT AGREEMENT, made as of the 27th day of March , 2000, by and among American Champion Entertainment, Inc. of the United States of America, a Delaware corporation ("ACEI"), Beijing Wisdom Network Technology Company, Ltd., a corporation formed under the laws of the People's Republic of China ("B.A. Network") and the shareholders of Beijing Wisdom Network Technology Company, Ltd. (the "Shareholders"). This agreement is subject to review by the U.S. Securities and Exchange Commission ("SEC") and approval by the shareholders of ACEI, and shall become effective immediately upon satisfactory review by the SEC and approval by the shareholders at a meeting of the shareholders of ACEI. Once approval by shareholders is obtained, ACEI shall notify B.A. Network of the effectiveness of this agreement within the same day. WHEREAS, ACEI desires to acquire 80.00% of all of the issued and outstanding shares of B.A. Network, in exchange for a total value of $4,672,050 of either ACEI authorized but unissued shares of the common stock, $.0001 par value (the "Exchange Stock"), or partially in cash; and such Exchange Stock and cash, shall be granted in three parts: I. A number of shares equal to $300,000 in value, included in the Exchange Stock, or $300,000 in cash, is payable to B.A. Network as Part I of the exchange transaction. B.A. Network shall have to right to choose between payment in shares or in cash, and B.A. Network shall provide ACEI official written notice of its choice of payment not later than three business days after to the date of effectiveness of this agreement. 1.1 If B.A. Network elects to be paid in cash, then ACEI shall transfer by wire the amount of $300,000 into an account specified by B.A. Network within ten business days from the date of effectiveness of this agreement. 1.2 If B.A. Network elects to be paid in shares, then ACEI shall issue and transfer $300,000 in value of ACEI shares into a stock account specified by B.A. Network within ten business days from the date of effectiveness of this agreement. 1.2.1 The price of the shares shall be based on the average of the daily closing sales prices from the date of the Letter of Intent to the date of effectiveness of this agreement. 1.2.2 The shares shall have registration rights and become freely tradable without restrictions upon effectiveness of registration. II. For the year 2000, ACEI shall grant B.A. Network the amount of US$1,184,097 in shares of ACEI, or in cash, according to the following projections, as part II of the exchange transaction. B.A. Network shall have to right to choose between payment in shares or in cash, and B.A. Network shall provide ACEI official written notice of its choice of payment not later than three business days after to the delivery of reviewed financial statements to ACEI via one of the big five U.S. accounting firms. B.A. Network Revenue Projections 2000 2001 2002 (To be annually audited & quarterly reviewed by acceptable U.S. accounting firm.) Exchange Rate - RMB / US$ : 8.3 / 1 Gross Revenue (RMB) 65,000,000 80,000,000 95,000,000 Gross Revenue (US$) $7,831,325 $9,638,554 $11,445,783 Gross Revenue (US$) x 80.00% $6,265,060 $7,710,843 $9,156,627 EBITDA (earnings before interests, taxes, depreciation & amortization) EBITDA (RMB) 3,250,000 4,000,000 4,750,000 EBITDA (US$) $391,566 $481,928 $572,289 EBITDA (US$) x 80.00% $313,253 $385,542 $457,831 18% of Gross Revenue, payable $1,127,711 $1,387,952 $1,648,193 in ACEI common stock 18% of EBITDA, payable $56,386 $69,398 $82,410 in ACEI common stock Total payable in ACEI common stock $1,184,097 $1,457,349 $1,730,603 Total payments over years 2000 to 2002, to be paid in ACEI common stock, $4,372,050 2.1 If B.A. Network elects to be paid in cash, and upon the delivery of reviewed financial statements to ACEI via one of the big five U.S. accounting firms, then ACEI shall make the following quarterly payments: 2.1.1 Within 10 business days, ACEI shall make payment by wire transfer to an account specified by B.A. Network of the amount of (Gross Revenue + EBITDA) x 80% x 18% x 50% for Gross Revenue and EBITDA amounts that are less than or equal to the figures in the above table, and (Gross Revenue + EBITDA) x 80% x 18% x 20% for Gross and EBITDA amounts that are more than the figures in the above table. 2.1.2 Within 6 months, ACEI shall make payment by wire transfer to an account specified by B.A. Network of the amount of (Gross Revenue + EBITDA) x 80% x 18% x 20% for Gross Revenue and EBITDA amounts that are less than or equal to the figures in the above table, and (Gross Revenue + EBITDA) x 80% x 18% x 40% for Gross and EBITDA amounts that are more than the figures in the above table. 2.1.3 Within 9 months, ACEI shall make payment by wire transfer to an account specified by B.A. Network of the amount of (Gross Revenue + EBITDA) x 80% x 18% x 20% for Gross Revenue and EBITDA amounts that are less than or equal to the figures in the above table. 2.1.4 Within 12 months, ACEI shall make payment by wire transfer to an account specified by B.A. Network of the amount of (Gross Revenue + EBITDA) x 80% x 18% x 10% for Gross Revenue and EBITDA amounts that are less than or equal to the figures in the above table, and (Gross Revenue + EBITDA) x 80% x 18% x 40% for Gross and EBITDA amounts that are more than the figures in the above table. 2.2 If B.A. Network elects to be paid in shares, and within ten business days from the delivery of quarterly reviewed financial statements to ACEI via one of the big five U.S. accounting firms, then ACEI shall issue and transfer the amount of ACEI common stock, based on 80% X 18% of the Gross Revenue and EBITDA according to the figures in the above table, into a stock account specified by B.A. Network. The price of the shares shall be the average of the closing sales prices of ACEI shares within the applicable quarter, and be subject to the following restrictions: 2.2.1 For amounts less than and equal to the above tabulation, 50% shall not have restrictions, 20% shall be restricted from sales for 6 months from the date of issuance, 20% restricted for 9 months, and 10% restricted for 12 months. 2.2.2 For amounts more than the above tabulation, 20% shall not have restrictions, 40% shall be restricted from sales for 6 months from the date of issuance, and 40% shall be restricted for 12 months. III. As part III of the exchange transaction, ACEI shall issue shares of ACEI common stock to B.A. Network for the years 2001 and 2002, based of figures in the above table. 3.1 Within ten business days from the delivery of quarterly reviewed financial statements to ACEI via one of the big five U.S. accounting firms, then ACEI shall issue and transfer the amount of ACEI common stock, based on 80% X 18% of the Gross Revenue and EBITDA according to the figures in the above table, into a stock account specified by B.A. Network. 3.2 The price of the shares shall be the average of the closing sales prices of ACEI shares within the applicable quarter, and be subject to the following restrictions: 3.2.1 For amounts less than and equal to the above tabulation, 50% shall not have restrictions, 20% shall be restricted from sales for 6 months from the date of issuance, 20% restricted for 9 months, and 10% restricted for 12 months. 3.2.2 For amounts more than the above tabulation, 20% shall not have restrictions, 40% shall be restricted from sales for 6 months from the date of issuance, and 40% shall be restricted for 12 months. WHEREAS, the Shareholders desire to exchange their B.A. Network shares for the Exchange Stock as set forth herein; and WHEREAS, B.A. Network desires to assist ACEI in a business combination which will result in the Shareholders of B.A. Network owning approximately 16% of the then issued and outstanding shares of ACEI's Common Stock (with the understanding that since ACEI is currently in an expansion phase with multiple acquisition candidates in negotiation, the actual resulting ownership by B.A. Network of ACEI may be significantly less) and ACEI owning 80.00% of the issued and outstanding shares of B.A. Network's Capital Stock; NOW, THEREFORE, in consideration of the mutual promises, covenants and representations contained herein, the parties hereto agree as follows: ARTICLE I Exchange of Securities 1.1 Issuance of Shares. Subject to all of the terms and conditions of this Agreement, ACEI agrees to issue to the Shareholders the shares of the Exchange Stock, or partially in cash, as described above in exchange for 80.00% of all of the outstanding shares of B.A. Network capital stock owned by the Shareholders, as set forth on Exhibit 1.1. 1.2 Exemption from Registration. Except as specified above for issuance of shares with registration rights, the parties hereto intend that the Common Stock to be issued by ACEI to the Shareholder shall be exempt from the registration requirements of the Securities Act of 1933, as amended (the "Act") pursuant to Section 4(2) of the Act and the rules and regulations promulgated thereunder. ARTICLE 2 Representations and Warranties of B.A. Network B.A. Network and the Shareholders of B.A. Network represent to ACEI that: 2.1 Organization. B.A. Network is a corporation duly organized and validly existing and in good standing under the laws of the People's Republic of China and has all necessary corporate powers to own its properties and to carry on its business as now owned and operated by it, and is duly qualified to do business and is in good standing where its business requires qualification. (Further legal descriptions of B.A. Network, if necessary, such as transfer of assets and liabilities of another entity, etc). 2.2 Capital. The authorized capital stock of B.A. Network is as set forth on the annexed Exhibit 2.2, a copy of which is annexed hereto and made a part hereof. The shares currently outstanding are owned by the Shareholders. All of the issued and outstanding shares of B.A. Network are duly and validly issued, fully paid, and non-assessable. There are no outstanding subscriptions, options, rights, warrants, debentures, instruments, convertible securities, or other agreements or commitments obligating B.A. Network to issue or to transfer from treasury any additional shares of its capital stock of any class. 2.3 Subsidiaries. As of the date of this Agreement, B.A. Network does not have any subsidiaries or own any interest in any other enterprise. 2.4 (a) Directors and Officers. Exhibit 2.4 to this Agreement, the text of which is incorporated herein by reference, contains the names and titles of all directors and officers of B.A. Network as of the date of this Agreement. 2.5 (b) Financial Statements. The B.A. Network financial statements are to be audited by a reputable international auditing firm for the year ending December 31, 1999 which are annexed hereto as Exhibit 2.5 and must be delivered to ACEI prior to the Closing. Such financial statements are to be complete, accurate and fairly present the financial condition of B.A. Network as of the date thereof and the results of operations for the year ending December 31, 1999, for the business of B.A. Network that has been operated in the normal course. There are no material liabilities, either fixed or contingent, not reflected in such financial statements other than contracts or obligations in the ordinary and usual course of business; and no such contracts or obligations in the usual course of business constitute liens or other liabilities which, if disclosed, would materially alter the financial condition of B.A. Network as reflected in such financial statements. The financial statements of B.A. Network are incorporated herein by reference and deemed to be a part hereof. 2.6 Investigation of Financial Condition. Without in any manner reducing or otherwise mitigating the representations contained herein, ACEI and/or its attorneys shall have the opportunity to meet with accountants and attorneys of ACEI to discuss the financial condition of B.A. Network. B.A. Network shall make available to ACEI and/or its attorneys all books and records of B.A. Network. If the transaction contemplated hereby is not completed, all documents received by ACEI and/or its attorneys shall be returned to B.A. Network and all information so received shall be treated as confidential. 2.7 Compliance with Laws. B.A. Network has complied with and are not in violation of applicable national, state or local statutes, laws and regulations (including, without limitation, any applicable building, zoning or other law, ordinance or regulation) affecting its properties or the operation of its business. All national, state and local income tax returns required to be filed by B.A. Network have been filed and all required taxes have been paid or an adequate reserve therefor has been established in the financial statements. B.A. Network's tax returns have not been audited by any authority empowered to do so. 2.8 Litigation. Neither B.A. Network nor the Shareholders are a party to any suit, action, arbitration or legal, administrative or other proceeding, or governmental investigation pending or, to the best knowledge of B.A. Network and the Shareholders, threatened against or affecting B.A. Network or the Shareholders, their assets or financial condition, except for matters which would not have a material effect on B.A. Network, the Shareholders or their respective properties. Neither B.A. Network nor the Shareholders are in default with respect to any order, writ, injunction or decree of any national, state, local or foreign court, department, agency or instrumentality applicable to it. Neither B.A. Network nor Shareholders are engaged in any lawsuits to recover any material amount of moneys due to B.A. Network or Shareholders. 2.9 Authority. The Board of Directors of B.A. Network has authorized the execution of this Agreement and the consummation of the transactions contemplated herein, and upon obtaining any necessary shareholder approval, B.A. Network will have full power and authority to execute, deliver and perform this Agreement and this Agreement will be a legal, valid and binding obligation of B.A. Network, enforceable in accordance with its terms and conditions, except as may be limited by bankruptcy and insolvency laws and by other laws affecting the rights of creditors generally. 2.10 Ability to Carry Out Obligations. The execution and delivery of this Agreement by B.A. Network and the performance by B.A. Network of its obligations hereunder in the time and manner contemplated will not cause, constitute or conflict with or result in (a) any breach or violation of any of the provisions of or constitute a default under any license, indenture, mortgage, charter, instrument, articles of incorporation, by-laws, or other agreement or instrument to which B.A. Network or Shareholders are a party or by which either may be bound, nor will any consents or authorizations of any party other than those hereto be required; (b) an event that would permit any party to any agreement or instrument, to terminate it or to accelerate the maturity of any indebtedness or other obligation of B.A. Network or Shareholders; or (c) an event that would result in the creation or imposition of any lien, charge, or encumbrance on any asset of B.A. Network or Shareholders. 2.11 Full Disclosure. None of the representations and warranties made by B.A. Network and the Shareholders herein, or in any exhibit, certificate or memorandum furnished or to be furnished by B.A. Network, or on its behalf, contains or will contain any untrue statement of material fact, or omit any material fact, the omission of which would be misleading. 2.12 Material Contracts. Neither B.A. Network nor the Shareholders has any material contracts to which either is a party or by which they are bound, except for those agreements set forth on the annexed hereto as Exhibit 2.12. 2.13 Indemnification. B.A. Network and the Shareholders agree to defend and hold harmless ACEI, its officers and directors against and in respect of any and all claims, demands, losses, costs, expenses, obligations, liabilities, damages, recoveries and deficiencies, including interest, penalties and reasonable attorney's fees, that it shall incur or suffer, which arise out of, result from or relate to any breach of or failure by B.A. Network to perform any of its respective representations, warranties, covenants and agreements in this Agreement or in any exhibit or other instrument furnished or to be furnished by B.A. Network under this Agreement. 2.14 Transactions with Officers and Directors. Except as otherwise disclosed in B.A. Network's financial statements dated December 31, 1999 and delivered to ACEI, there have been, and through the date of Closing there will be (1) no bonuses or unusual compensation to any of the officers or directors of B.A. Network; (2) no loans, leases or contracts made to or with any of the officers or directors of B.A. Network; (3) no dividends or other distributions declared or paid by B.A. Network; and (4) no purchases by B.A. Network of any of its capital shares. 2.15 Background of Officers and Directors. During the past five year period, no officer or director of B.A. Network has been the subject of: (a) A petition under the U.S. Federal Bankruptcy laws or any other insolvency law or has a receiver, fiscal agent or similar officer been appointed by a court for the business or property of such person, or any partnership in which he was a general partner at or within two years before the time of such filing, or any corporation or business association of which he was an executive officer at or within two years before the time of such filing; (b) A conviction in the United States in a criminal proceeding or a named subject of a pending criminal proceeding (excluding traffic violations and other minor offenses); (c) Any order, judgment or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining him from, or otherwise limiting, the following activities: (i) Acting as a futures commission merchant, introducing broker, commodities trading advisor, commodity pool operator, floor broker, leverage transaction merchant, any other person regulated by the United States Commodity Futures Trading Commission or an associated person of any of the foregoing, or as an investment advisor, underwriter, broker or dealer in securities, or as an affiliated person, director or employee of any investment company, bank, savings and loan association or insurance company, or engaging in or continuing any conduct or practice in connection with such activity; (ii) Engaging in any type of business practice; or (iii) Engaging in any activity in connection with the purchase and sale of any security or commodity or in connection with any violation of U.S. Federal, State or other securities law or commodities law. (d) Any order, judgment, decree, not subsequently reversed, suspended or vacated, of any U.S. Federal, State or local authority barring, suspending, or otherwise limiting for more than 60 days the right of such person to engage in any activity described in the preceding sub- paragraph, or to be associated with persons engaged in any such activity; (e) a finding by any court of competent jurisdiction in a civil action or by the United States Securities and Exchange Commission to have violated any securities law, and the judgment in such civil action or finding by such Commission has not been subsequently reversed, suspended or vacated; or (f) a finding by any court of competent jurisdiction in a civil action or by the United States Commodity Futures Trading Commission to have violated any commodities law, and the judgment in such civil action or finding by such Commission has not been subsequently reversed, suspended or vacated. 2.16 Employee Benefits. B.A. Network does not have any pension plan, profit sharing or similar employee benefit plan. ARTICLE 3 Representations and Warranties of ACEI ACEI represents and warrants to B.A. Network that: 3.1 Organization. ACEI is a corporation duly organized, validly existing and in good standing under the laws of Delaware, and has all necessary corporate powers to own properties and to carry on business. 3.2 Capital. The authorized capital stock of ACEI consists of 40,000,000 shares of Common Stock, par value $.0001 per share and 6,000,000 shares of Preferred Stock, par value $.0001 per share, which may be issued in one or more series at the discretion of the board of directors. As of the date of this Agreement, there were approximately 6,000,000 shares of Common Stock outstanding, all of which were fully paid and non-assessable, and there was no Preferred Stock outstanding. Except for the Options and common stock purchase warrants as listed in Exhibit 3.2 and convertible debentures that ACEI has sold and that the underlying common stock are registered on Form S-3's filed with the U.S. Securities and Exchange Commission in February 2000, there are no outstanding subscriptions, options, rights, warrants, convertible securities, or other agreements or commitments obligating ACEI to issue or to transfer from treasury any additional shares of its capital stock of any class. 3.3 Subsidiaries. ACEI's subsidiaries are identified on Exhibit 3.3, annexed hereto and made a part hereof. 3.4 Directors and Officers. Exhibit 3.4, annexed hereto and hereby incorporated herein by reference, contains the names and titles of all directors and officers of ACEI as of the date of this Agreement. 3.5 Financial Statements. Exhibit 3.5, annexed hereto and incorporated herein by reference, consists of the ACEI audited financial statements as of December 31, 1998, and unaudited financial statements for the three month periods ended March 31, 1999 and June 30, 1999. 3.6 Changes Since December 31, 1998. Since December 31, 1998, there has been not been any adverse change in the financial condition and operations of ACEI. 3.7 Absence of Undisclosed Liabilities. As of December 31, 1998, ACEI does not have any material debt, liability, or obligation of any nature, whether accrued, absolute, contingent, or otherwise, and whether due or to become due, that is not reflected in ACEI balance sheet as of December 31, 1998 or as presented in the Notes to the Financial Statements. There have been no new liabilities incurred since December 31, 1998, except for those described in the reports for the three month periods ended March 31, 1999 and June 30, 1999 and those incurred in the ordinary course of business and in connection with this transaction. 3.8 Tax Returns. Within the times and in the manner prescribed by law, ACEI has filed all federal, state and local tax returns required by law and has paid all taxes, assessments and penalties due and payable. The provisions for taxes, if any, reflected in the balance sheet included in Exhibit 3.5 is adequate for any and all federal, state, county and local taxes for the period ending on the date of such balance sheet and for all prior periods, whether or not disputed. There are no present disputes as to taxes of any nature payable by ACEI. 3.9 Investigation of Financial Condition. Without in any manner reducing or otherwise mitigating the representations contained herein, B.A. Network shall have the opportunity to meet with ACEI's accountants and attorneys to discuss the financial condition of ACEI. ACEI shall make available to B.A. Network all books and records of ACEI. 3.10 Trade Names and Rights. Except for the subsidiaries of ACEI as described in Exhibit 3.3 which own trademark and copyrights of intellectual properties, ACEI does not use any trademark, service mark, trade name, or copyright in its business, or own any trademarks, trademark registrations or applications. To the best knowledge of ACEI, no person owns any trademark, trademark registration or application, service mark, trade name, copyright, or copyright registration or application the use of which is necessary or contemplated in connection with the operation of ACEI's business as a holding company. 3.11 Compliance with Laws. ACEI has complied with and is not in violation of applicable federal, state or local statutes, laws or regulations (including, without limitation, any applicable building, zoning, securities or other law, ordinance, or regulation) affecting its properties or the operation of its business. 3.12 Litigation. ACEI is not a party to any suit, action, arbitration, or legal, administrative, or other proceeding, or governmental investigation pending or, to the best knowledge of ACEI, threatened against or affecting ACEI or its business, assets or financial condition. ACEI is not engaged in any legal action to recovery moneys due to it. 3.13 Authority. The Board of Directors and Shareholders of ACEI have authorized the execution of this Agreement and the transactions contemplated herein, and ACEI has full power and authority to execute, deliver and perform this Agreement and this Agreement is the legal, valid and binding obligation of ACEI, is enforceable in accordance with its terms and conditions, except as may be limited by bankruptcy and insolvency laws and by other laws affecting the rights of creditors generally. 3.14 Ability to Carry Out Obligations. The execution and delivery of this Agreement by ACEI and the performance by ACEI of its obligations hereunder will not cause, constitute, or conflict with or result in (a) any breach or violation of any of the provisions of or constitute a default under any license, indenture, mortgage, charter, instrument, articles of incorporation, by-laws, or other agreement or instrument to which ACEI is a party, or by which it may be bound, nor will any consents or authorizations of any party other than those hereto be required; (b) an event that would permit any party to any agreement or instrument to terminate it or to accelerate the maturity of any indebtedness or other obligation of ACEI; or (c) an event that would result in the creation or imposition of any lien, charge, or encumbrance on any asset of ACEI. 3.15 Validity of ACEI Shares. The shares of ACEI Common Stock to be delivered pursuant to this Agreement, when issued in accordance with the provisions of this Agreement, will be duly authorized, validly issued, fully paid and non-assessable. 3.16 Full Disclosure. None of the representations and warranties made by ACEI herein, or in any exhibit, certificate or memorandum furnished or to be furnished by ACEI, or on its behalf, contains or will contain any untrue statement of material fact, or omit any material fact, the omission of which would be misleading. 3.17 Assets. ACEI has good and marketable title to all of its property free and clear of any and all liens, claims and encumbrances, except as disclosed in its financial statements. 3.18 Material Contracts. Except as otherwise disclosed in this agreement and in its Report on From 10-KSB for the year ended December 31, 1998 and the three month periods ended March 31, 1999 and June 30, 1999, ACEI has no material contracts to which it is a party or by which it is bound. 3.19 Complience With SEC Reporting Requirements. The Common Stock of ACEI is registered under Section 12 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). ACEI has duly filed all materials and documents required to be filed pursuant to all reporting obligations under either Section 13(a) or 15(d) of the Exchange Act prior to the consummation of the transaction contemplated hereby. The Common Stock of ACEI is currently traded on the Nasdaq SmallCap Market. ARTICLE 4 Representations and Warranties of Shareholders 4.1 Share Ownership. The Shareholders represent that they hold shares of B.A. Network's common stock as set forth in Exhibit 2.2 hereof, and that such shares are owned of record and beneficially by such shareholders, and such shares are not subject to any lien, encumbrance or pledge, and are restricted securities as defined in Rule 144 of the Securities Act of 1933. The Shareholders severally represent that they hold authority to exchange their shares pursuant to this Agreement. 4.2 Investment Intent. The Shareholders understand and acknowledge that the shares of Exchange Stock are being offered for exchange in reliance upon the exemption provided in Section 4(2) of the Securities Act of 1933 for non-public offerings; and The Shareholders make the following representations and warranties with the intent that same may be relied upon in determining the suitability of each such shareholder as a purchaser of securities. In the event the following representations and warranties may cause discrepancies from the meanings of above sections I, II, & III (particularly the descriptions of "not restricted" and "freely tradable"), then the meanings of above sections I, II, & III shall prevail. (a) The Shareholders acknowledge that the Exchange Stock being acquired solely for the account of such Shareholders, for investment purposes only, and not with a view towards or for sale in connection with any distribution thereof, and with no present intention of distributing or re-selling any part of the Exchange Stock; (b) The Shareholders agree not to dispose of his Exchange Stock, or any portion thereof unless and until counsel for ACEI shall have determined that the intended disposition is permissible and does not violate the Securities Act of 1933 or any applicable state securities laws, or the rules and regulations thereunder; (c) The Shareholders acknowledge that ACEI has made all documentation pertaining to all aspects of the herein transaction available to them and to their qualified representatives, if any, and has offered such person or persons an opportunity to discuss such transaction with the officers of ACEI; (d) The Shareholders represent that they have relied solely upon ACEI's Report on Form 10-KSB for the period ended December 31, 1998 and all other filings made by ACEI with the Securities and Exchange Commission and independent investigations made by the Shareholders or their representatives, if any; (e) The Shareholders represent that they are knowledgeable and experienced in making and evaluating investments of this nature and desire to acquire the Exchange Stock on the terms and conditions herein set forth; (f) The Shareholders represent that they are able to bear the economic risk of an investment, as a result of the herein transaction, in the Exchange Stock; (g) The Shareholders represent that they understand that an investment in the Exchange Stock is not liquid, and The Shareholders represent that they have adequate means of providing for their current needs and personal contingencies and have no need of liquidity in this investment; and (h) The Shareholders represent that they are an "accredited investor" as that term is defined in Rule 501 of Regulation D, promulgated under the Securities Act of 1933. 4.3 (deleted) 4.4 Legend. The Shareholders agree that the certificates evidencing the Exchange Stock acquired pursuant to this Agreement will have a legend placed thereon stating that the securities have not been registered under the Act or any state securities laws and setting forth or referring to the restrictions on transferability and sale of such securities. ARTICLE 5 Covenants 5.1 Investigative Rights. From the date of this Agreement until the Closing Date, ACEI and B.A. Network shall provide to each other, and such other party's counsels, accountants, auditors and other authorized representatives, full access during normal business hours and upon reasonable advance written notice of each party's properties, books, contracts, commitments and records for the purpose of examining the same. Each party shall furnish the other party with all information concerning each party's affairs as the other party may reasonably request. 5.2 Conduct of Business. Prior to the Closing, ACEI and B.A. Network shall each conduct its business in the normal course, and shall not sell, pledge, or assign any assets, without the prior written approval of the other party except in the regular course of business or as part of the transactions contemplated hereby. Neither ACEI nor B.A. Network shall amend its Articles of Incorporation or By-laws, declare dividends, redeem or sell stock or other securities, incur additional or newly funded liabilities, acquire or dispose of fixed assets, change employment terms, enter into any material or long term contract, guarantee obligations of any third party, settle or discharge any balance sheet receivable for less than its stated amount, pay more on any liability than its stated amount, or enter into any other transaction other than in the regular course of business. ARTICLE 6 Conditions Precedent to ACEI's Performance 6.1 Conditions. ACEI's obligations hereunder shall be subject to the satisfaction, at or before the Closing, of all the conditions set forth in this Article 6. ACEI may waive any or all of these conditions in whole or in part without prior notice; provided, however, that no such wavier of a condition shall constitute a waiver by ACEI of any other condition or of any of ACEI's other rights or remedies, at law or in equity, if B.A. Network or the Shareholders shall be in default of any of their representations, warranties or covenants under this Agreement. 6.2 Accuracy of Representations. Except as otherwise permitted by this Agreement, all representations and warranties by Shareholders and B.A. Network in this Agreement or in any written statement that shall be delivered to ACEI by B.A. Network under this Agreement shall be true and accurate on and as of the Closing Date as though made at that time. 6.3 Performance. B.A. Network shall have performed, satisfied, and complied with all covenants, agreements and conditions required by this Agreement to be performed or complied with by it, on or before the Closing Date. 6.4 Absence of Litigation. No action, suit or proceeding before any court or any governmental body or authority, pertaining to the transaction contemplated by this Agreement or to its consummation, shall have been instituted or threatened against B.A. Network or the Shareholders on or before the Closing Date. 6.5 Acceptance by B.A. Network Shareholders. The holders of an aggregate of not less than 100% of the issued and outstanding shares of common stock of B.A. Network shall have agreed to exchange a percentage of their shares as stipulated in this Agreement, for shares of the Exchange Stock. 6.6 Officer's Certificate. B.A. Network shall have delivered to ACEI a certificate, dated the Closing Date, and signed by the President of B.A. Network, certifying that each of the conditions specified in Sections 6.2 through 6.5 hereof have been fulfilled. 6.7 Opinion of Counsel to B.A. Network. B.A. Network shall have delivered to ACEI an opinion of its Chinese and United States counsel, as applicable, dated the Closing date, to the effect that: (a) B.A. Network is a corporation duly organized, validly existing and in good standing under the laws of the People's Republic of China and the City of Beijing; (b) The authorized capital stock of B.A. Network is as set forth on the annexed Exhibit 2.2, a copy of which is annexed hereto and made a part hereof. All issued and outstanding shares are legally issued. (c) This Agreement has been duly and validly authorized, executed and delivered and constitutes the legal and binding obligation of B.A. Network, except as limited by bankruptcy and insolvency laws and by other laws affecting the rights of creditors generally; and ARTICLE 7 Conditions Precedent to B.A. Network's and Shareholders' Performance 7.1 Conditions. B.A. Network's and Shareholders' obligations hereunder shall be subject to the satisfaction, at or before the Closing, of all the conditions set forth in this Article 7. B.A. Network and Shareholders may waive any or all of these conditions in whole or in part without prior notice; provided, however, that no such waiver of a condition shall constitute a waiver by B.A. Network and Shareholders of any other condition or of any of B.A. Network's and Shareholders' rights or remedies, at law or in equity, if ACEI shall be in default of any of its representations, warranties or covenants under this Agreement. 7.2 Accuracy of Representations. Except as otherwise permitted by this Agreement, all representations and warranties by ACEI in this Agreement or in any written statement that shall be delivered to B.A. Network and Shareholders by ACEI under this Agreement shall be true and accurate on and as of the Closing Date as though made at that time. 7.3 Performance. ACEI shall have performed, satisfied, and complied with all covenants, agreements and conditions required by this Agreement to be performed or complied with by it, on or before the Closing Date. 7.4 Absence of Litigation. No action, suit or proceeding before any court or any governmental body or authority, pertaining to the transaction contemplated by this Agreement or to its consummation, shall have been instituted or threatened against ACEI on or before the Closing Date, except as disclosed herein. 7.5 Current Status. ACEI shall have prepared and filed with the Securities and Exchange Commission its Annual Report on Form 10-KSB for the period ended December 31, 1998 and its Quarterly Report on Form 10-QSB for the three month periods ended March 31, 1999 and June 30, 1999. 7.6 Directors of ACEI. ACEI's Board of Directors shall remain to serve until a new board is elected at the next annual meeting of stockholders in the year 2000. 7.7 Officers of ACEI. ACEI's officers shall remain in their office as per terms of their employment agreements. 7.8 Intentionally Left Blank 7.9 Officers' Certificate. ACEI shall have delivered to B.A. Network and Shareholders a certificate, dated the Closing Date and signed by the President of ACEI certifying that each of the conditions specified in Sections 7.2 through 7.7 have been fulfilled. 7.10 Opinion of Counsel. ACEI shall deliver an opinion of its counsel in the form annexed hereto as Exhibit 7.10; ARTICLE 8 Closing 8.1 Closing. The Closing of this transaction shall be held at the offices of Sichenzia, Ross & Friedman LLP, Esqs., 135 West 50th Street, New York, New York 10020, or such other place as shall be mutually agreed upon, on ______________________ , 2000 or such other date as shall be mutually agreed upon by the parties. At the Closing: (a) Shareholder shall present the certificates representing their shares of B.A. Network being exchanged to ACEI, and such certificates will be duly endorsed in blank; (b) Shareholders shall receive a certificate or certificates representing the number of shares of ACEI Common Stock for which the shares of B.A. Network common stock shall have been exchanged; (c) ACEI shall deliver an officer's certificate, as described in Section 7.9 hereof, dated the Closing Date, that all representations, warranties, covenants and conditions set forth in this Agreement on behalf of ACEI are true and correct as of, or have been fully performed and complied with by, the Closing Date; (d) ACEI shall deliver a resolution of its Board of Directors of ACEI approving this Agreement and each matter to be approved by the Directors of ACEI under this Agreement; (e) ACEI shall deliver an opinion of its counsel, as described in Section 7.10 hereof, dated the Closing Date; (f) B.A. Network shall deliver an officer's certificate, as described in Section 6.6 hereof, dated the Closing Date, that all representations, warranties, covenants and conditions set forth in this Agreement on behalf of B.A. Network are true and correct as of, or have been fully performed and complied with by, the Closing Date. (g) B.A. Network shall deliver an opinion of its counsel, as described in Section 6.7 hereof, dated the Closing Date; and (h) B.A. Network shall deliver resolutions of its Board of Directors approving this Agreement and each matter to be approved by the Directors of B.A. Network under this Agreement. ARTICLE 9 Miscellaneous 9.1 Captions and Headings. The Article and paragraph headings throughout this Agreement are for convenience and reference only, and shall in no way be deemed to define, limit, or add to the meaning of any provision of this Agreement. 9.2 Memos, Attachments & Exhibits. Any memos, attachments & exhibits signed by the parties are vital segments of this agreement and are valid and binding between the parties along with this agreement. 9.3 No Oral Change. This Agreement and any provision hereof may not be waived, changed, modified or discharged orally, but it can be changed by an agreement in writing, signed by the party against whom enforcement of any waiver, change, modification or discharge is sought. 9.4 Non-Waiver. Except as otherwise expressly provided herein, no waiver of any covenant, condition or provision of this Agreement shall be deemed to have been made unless expressly in writing and signed by the party against whom such waiver is charged; and (i) the failure of any party to insist in any one or more cases upon the performance of any of the provisions, covenants or conditions of this Agreement or to exercise any option herein contained shall not be construed as a waiver or relinquishment for the future of any such provisions, covenants or conditions; (ii) the acceptance of performance of anything required by this Agreement to be performed with knowledge of the breach of failure of a covenant, condition or provision hereof shall not be deemed a waiver of such breach or failure; and (iii) no waiver by any party of one breach by another party shall be construed as a waiver with respect to any other or subsequent breach. 9.5 Entire Agreement. This Agreement contains the entire agreement and understanding between the parties hereto and supersedes all prior agreements and understandings. 9.6 Member to B.A. Network's Board of Directors. Upon the effectiveness of this agreement, ACEI shall appoint one member to B.A. Network's Board of Directors. 9.7 Choice of Law. This Agreement and its application shall be governed by the laws of the United States of America and by the laws of the People's Republic of China. Disputes between the parties shall be settled amicable between the parties. In the event disputes cannot be settled by the parties themselves, then the matter shall be handed over to arbitration in a third country to be mutually agreed upon between the parties. 9.8 Counterparts. This Agreement may be executed simultaneously in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. This Agreement may be in the English and Chinese languages. In the event of discrepancies between the two languages, the parties shall amicably negotiate to settle the disputes. 9.9 Notices. All notices, requests, demands and other communications under this Agreement shall be in writing and shall be deemed to have been duly given on the date of service if served personally on the party to whom notice is to be given, or on the third day after mailing if mailed to the party to whom notice is to be given, by first class mail, registered or certified, postage prepaid, and properly addressed as follows: To ACEI: Mr. Anthony K. Chan President & CEO American Champion Entertainment, Inc. 1694 The Alameda, Suite 100 San Jose, CA 95126 U. S. A. Phone: 1-408-288-8199 Fax: 1-408-288-8098 E-mail: a.chan@americanchamp.com To B.A. Network: Mr. Lin, Tao General Manager Beijing Wisdom Network Technology Company, Ltd. No. 105 San Huan Bei Road, West Section Ke Yuan Building, A-809 Heiding District Beijing People's Republic of China Phone: 86-10-8841-5090 Fax: 86-10-8841-4987 E-mail: lintao@banet.com.cn 9.10 (deleted) 9.11 Binding Effect. This Agreement shall inure to and be binding upon the heirs, executors, personal representatives, successors and assigns of each of the parties to this Agreement. 9.12 Mutual Cooperation. The parties hereto shall cooperate with each other to achieve the purpose of this Agreement and shall execute such other and further documents and take such other and further actions as may be necessary or convenient to effect the transaction described herein. 9.13 Announcements. ACEI and B.A. Network will consult and cooperate with each other as to the timing and content of any announcements of the transactions contemplated hereby to the general public or to employees, customers or suppliers. 9.14 Expenses. Each party will pay its own legal, accounting and any other out-of-pocket expenses reasonably incurred in connection with this transaction, whether or not the transaction contemplated hereby is consummated. In no event shall one party be liable for any of the expenses of the other party. ACEI shall be responsible for the expenses of the audit, by one of the big five U.S. accounting firms, of B.A. Networks financial statements for the years ended December 31, 1999 and 2000 only. 9.15 Survival of Representations and Warranties. The representations, warranties, covenants and agreements of the parties set forth in this Agreement or in any instrument, certificate, opinion or other writing provided for in it, shall survive the Closing irrespective of any investigation made by or on behalf of any party. 9.16 Exhibits. As of the execution hereof, the parties hereto have provided each other with the Exhibits provided for hereinabove, including any items referenced therein or required to be attached thereto. Any material changes to the Exhibits shall be immediately disclosed to the other party. WHEREFORE, the above agreement is hereby agreed to and accepted as of the date first above written. AMERICAN CHAMPION ENTERTAINMENT, INC. By: /s/ Anthony K. Chan Anthony K. Chan President & CEO BEIJING WISDOM NETWORK TECHNOLOGY COMPANY, LTD. By: /s/ Lin, Tao Lin, Tao General Manager EX-27.1 5 FINANCIAL DATA SCHEDULE
5 THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATIO FROM THE CONDENSED CONSOLIDATED BALANCE SHEET AND STATEMENT OF INCOME AND IS QUALIFIED IN ITS ENTIRE REFERENCE TO SUCH FINANCIAL STATEMENTS. 1 3-MOS DEC-31-1999 JAN-01-2000 MAR-31-2000 472,970 0 490,182 0 0 9,647,859 293,861 0 9,647,859 1,208,713 0 0 0 21,875,447 (13,436,301) 9,647,859 105 50,847 775 775 3,579,933 0 21,614 (3,529,861) 0 0 0 (3,529,861) 0 (3,529,861) ($0.59) ($0.59)
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