-----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, C4qGul5Ucz78YWhtdF9hF4vnawnKujZo1lBeJmEjaP14mYdENjAZgWDGIlaRmI/H enQ+BZb/Yh7BsF1adBrWKQ== 0001034840-99-000013.txt : 19990518 0001034840-99-000013.hdr.sgml : 19990518 ACCESSION NUMBER: 0001034840-99-000013 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990331 FILED AS OF DATE: 19990517 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: 99627845 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, 1999 [ ] 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 Identification Number) Incorporation or Organization) 1694 The Alameda, Suite 100, San Jose, California 95126-2219 (408) 288-8199 (Registrant's Address of Principal Executive Offices and Telephone Number) (No Change) 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, 1999 - ------------------------------ ----------------------------- Common Stock, $.0001 par value 7,269,050 shares Transitional Small Business Disclosure Format (check one) Yes ..... No ..X.. Exhibit Index on Page 25 AMERICAN CHAMPION ENTERTAINMENT, INC. Form 10-QSB March 31, 1999 TABLE OF CONTENTS PART I - Financial Information Page Item 1. Financial Statements 3 Consolidated Balance Sheet as of March 31, 1999 3 Consolidated Statements of Operations for the three month periods ended March 31, 1999 and 1998 4 Consolidated Statements of Cash Flows for the three month periods ended March 31, 1999 and 1998 5 Notes to Consolidated Financial Statements 7 Item 2. Management's Discussion and analysis of Financial Condition and Results of Operations 10 PART II - Other Information Item 1. Legal Proceedings 12 Item 6. Exhibits and Reports on Form 8-K 12 Signatures 12 Exhibit Index 13 Exhibits 15 PART I - FINANCIAL INFORMATION ITEM 1- Financial Statements - (unaudited) AMERICAN CHAMPION ENTERTAINMENT, INC. Condensed Consolidated Balance Sheets (unaudited)
March 31, December 31, 1999 1998 ------------ ------------ Cash...................................... ($9,748) $2,763 Account receivable........................ 225,937 37,675 Loans receivable, related parties......... 114,937 114,937 Prepaid expenses ......................... 48,019 56,267 Property and equipment,................... 379,981 395,330 Film costs, net........................... 6,119,221 5,381,329 Note receivable........................... 80,424 80,424 Other assets.............................. 11,360 11,673 ------------ ------------ $6,970,131 $6,080,398 ============ ============ Liabilities Accounts payable and accrued expenses..... 954,775 $1,122,307 Note payable, related parties............. 129,069 137,037 Other..................................... -- -- Deferred revenues......................... 36,336 78,020 Notes payable............................. 349,978 831,266 Obligations under capital leases.......... 6,565 6,565 ------------ ------------ Total long-term liabilities............... 1,476,723 2,175,195 ------------ ------------ Stockholders' Equity: Preferred stock, $.0001 per share, 3,000,000 shares authorized, none issued or outstanding..................... -- -- Common stock, $.0001 par value; 20,000,000 shares authorized; paid in capital........................... 8,311,737 6,522,459 Common stock warrants...................... 352,026 290,901 Accumulated deficit........................ (3,170,355) (2,908,157) ------------ ------------ Total stockholders' equity ................ 5,493,408 3,905,203 $6,970,131 $3,905,203 ============ ============
See accompanying notes. AMERICAN CHAMPION ENTERTAINMENT, INC. Condensed Consolidated Statements of Operations (unaudited)
Three Months Ended March 31, --------------------- 1999 1998 ---------- ---------- REVENUE: Tuition and related fees......... $61,353 $126,905 Accessories and video sales...... 0 13,401 Film income...................... 225,637 215,000 Interest income.................. 0 26,692 ---------- ---------- Total revenue.................... 286,990 381,998 ---------- ---------- COSTS AND EXPENSES: Cost of sales.................... 0 8,711 Amortization of film costs....... 138,252 73,332 Salaries and payroll taxes....... 10,019 215,634 Rent............................. 42,328 84,616 Selling, general and administrative................. 315,831 236,117 Interest......................... 42,718 8,901 ---------- ---------- Total costs and expenses......... 549,148 627,311 ---------- ---------- Net Loss From Operations............($262,158) ($245,313) Gain On Sale Of Studio 0 115,473 Net Loss Before Income Tax (262,158) (129,840) Income Tax 40 5,050 Net Loss (262,198) (134,890) Accumulated Deficit (3,170,355) (1,719,486) Weighted average number of shares outstanding...................... 6,097,269 3,832,345 ========== ========== Net loss per share................. ($0.04) ($0.04) ========== ==========
See accompanying notes. AMERICAN CHAMPION ENTERTAINMENT, INC. Condensed Consolidated Statements of Cash Flows (unaudited)
Three Months Ended March 31, ----------------------- 1999 1998 ----------- ----------- CASH FLOWS FROM OPERATING ACTIVITIES: Net loss........................................ ($262,198) ($134,890) Adjustments to reconcile net loss to net cash used for operating activities: Gain on sale of studio...................... $0 ($115,473) Depreciation and amortization............... 168,132 88,805 Amortization of original issue discounts on long-term debt......................... 5,432 0 Rent concession amortization................ 0 (2,108) Stock warrants issued to consultants 150,000 0 Decrease (Increase) in: Accounts receivable........................... (188,262) -- Prepaid expenses and other.................... 8,561 20,087 Increase (Decrease) in: Accounts payable and accrued expenses......... (172,071) 181,703 Deferred revenues............................. (41,684) (72,779) Other liabilities............................. 0 -- ----------- ----------- Net cash used for operating activities..... (332,090) (34,655) ----------- ----------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of property and equipment.............. (7,133) (13,226) Payments for film costs......................... (883,542) (1,187,489) ----------- ----------- Net cash used for investing activities..... (890,675) (1,200,715) ----------- ----------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from issuance of warrants.............. 540,000 0 Proceeds (payments) of loans from related parties....................................... (7,968) (1,752) Proceeds on long-term debt...................... 914,096 0 Payments on long-term debt...................... (235,874) (1,938) Principal payments on capital leases............ 0 (2,428) ----------- ----------- Net cash provided by financing activities.. 1,210,254 (6,118) ----------- ----------- NET INCREASE IN CASH............................ (12,511) (1,241,488) CASH, beginning of period....................... 2,763 1,795,657 ----------- ----------- CASH, end of period............................. ($9,748) $554,169 =========== =========== SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid during the year for: Interest.................................... $42,718 $8,901 State income taxes.......................... $40 $5,050 SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCIAL ACTIVITIES: Warrants isssued in connection with debt 61,125 0 Long-term debt converted to equity 1,103,818 0
See accompanying notes. PART I - FINANCIAL INFORMATION Notes to Consolidated Financial Statements 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. ABK - Substantially all ABK's students are required to sign a student enrollment agreement (the "Enrollment Agreement") covering a period from 36 to 48 months to complete a black belt course or a 2nd degree black belt course, respectively. The students have the option to (a) make an initial fee payment equal to 2-5 months of instruction with the remaining amount payable monthly over the remaining term of the agreement, (starting with the month following enrollment), or (b) make one or more lump sum payments for the entire course at a significant discount. Revenues are recognized over the term of the Enrollment Agreement. A student may cancel an Enrollment Agreement at any time. A refund, if any, is made if the student's advanced payments exceed the elapsed portion of the course, prorated at $75 per month (additional family members prorated at $45 per person per month). The elapsed portion of the course is the number of months between the course starting date and the cancellation date. Fee payments subject to refund are shown in the financial statements as deferred revenue, which will be recognized as revenue in the future years if there is no cancellation by the student. See Note 18 related to sales of studios. 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. Cash and Cash Equivalents - The Company considers certain highly liquid instruments purchased with original maturities of year or less to be cash equivalents. The Company had cash equivalents of $ -0- and $1,496,000 at December 31, 1998 and 1997, respectively. Property and Equipment - Property and equipment is stated at cost. Depreciation for furniture and fixtures and certain equipment is computed using the straight-line method over an estimated useful life of five years. Leasehold improvements are amortized using the straight-line method over the term of the respective leases. Leased assets under capital lease agreements are amortized using the straight-line method over the shorter of the estimated useful lives or the length of the lease terms, ranging from two to five years. 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 approximate fair value due to the short maturity of these instruments. The carrying value of long-term obligations approximate 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. Basic Loss Per Share - Statement of Financial Accounting Standards (SFAS) No. 128 was adopted by the Company during the year ended December 31, 1997. Basic 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 1997 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, 1999 and the results of its operations and its cash flows for the three months periods ended March 31, 1999 and 1998. The accompanying unaudited financial statements should be read in conjunction with the financial statements and notes for the year ended December 31, 1998 included in the Company's Form 10-KSB as filed with the SEC on March 31, 1999. 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 amounts reported in the financial statements and accompanying notes. 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, December 31, 1999 1998 ----------- ----------- Television program The Adventures of Kanga Roddy............... $6,331,909 $5,455,764 Videos Montana Exercise Video...................... 148,253 148,253 Strong Mind Fit Body........................ 18,042 18,042 ----------- ----------- 6,498,204 5,622,059 Less accumulated amortization............... 378,984 240,730 ----------- ----------- 6,119,220 5,381,329 =========== =========== Production of the first seven episodes of The Adventures of Kanga Roddy was completed during 1997. Thirteen additional episodes were completed during the year ended December 31, 1998. Seven additional episodes were completed during the quarter ended March 31, 1999. Both videos were completed in 1996, but only the Strong Mind Fit Body video has been released. During 1997, management wrote down the capitalized costs for this video by $105,000. Note 5 - Related Party Transactions Loans to stockholders were $114,937 and $114,773 at December 31, 1998 and 1997, respectively. In November 1996, the Company agreed to pay to two participants of the Montana Exercise Video the sum of $50,000 from the proceeds of the initial public offering and another $50,000, which is included in accounts payable at December 31, 1998, will be paid 30 days prior to the release date. These two participants are stockholders of the Company. During 1998 and 1997, the Company paid $67,500 and $60,000, respectively, to two shareholders for story lines and scripts for the production of the television series "The Adventures with Kanga Roddy". Note 6 - Sale of Karate Studios During the year ended December 31, 1998, the Company sold four karate studios to the locations' general managers. The Company received notes receivable totaling $86,500 due in monthly payments of $333 to $1,000 including interest imputed at 10%. The Company has guaranteed payments of a studio lease, which are $4,673 per month through March 2000. The Company retained all advance payments of enrollment fees, which were approximately $310,000 as of the closing dates; however, the Company is liable for any future refunds to students enrolled prior to the closing dates. The Company reduced the liability for advance payments of enrollment fees related to these studios to $35,000, which is included in deferred revenue. Management will evaluate this liability quarterly in light of cancellations to date and expected future cancellations. Note 7 - Financing through the sale of convertible debentures During the quarter ended March 31, 1999, the Company sold $950,000 in convertible debentures to four investors. The terms of this transaction were filed by the Company on Form S-3 with the SEC on February 12, 1999. The proceeds from which will be used for production expenses. As of March 31, 1999 the outstanding principle amount of the debentures was $220,000; while $730,000 of debentures and accrued interests were converted into 871,719 shares of common stock. Note 8 - Common Stock Purchase Warrants During the quarter ended March 31, 1999, the Company issued 600,000 warrants to purchase the Company's common stock. These warrants were issued to consultants for services provided to the Company. The Company received no proceeds upon issuance of the warrants. All holders exercised their rights to convert the warrants to common stock on March 5, 1999. The Company received total proceeds of $540,000 and issued one share of common stock for each warrant exercised. Note 9 - Subsequent Events Financing - Subsequent to quarter ended March 31, 1999, the Company issued convertible debentures totaling $1,250,000. The interest rate on the Debentures is 7% per annum, payable in cash or in shares of the Company's Common Stock. The Debentures mature May 1, 2002 and may be converted to shares of Common Stock. The Company also issued 125,000 warrants in connection with these debentures. The Company received no proceeds from these warrants. Note 10 - Year 2000 In the opinion of management, no material adverse effect on either results of operations, cash flows or financial position is anticipated due to the modifications or replacement of existing information systems in order to accommodate year 2000 implications. 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 the television viewer 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 September 30, 1998. 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, 1999, the Company's total revenue decreased to $286,990, a decrease of $95,008 or 25% as compared to total revenue for the three months ended March 31, 1998 of $381,998. This decrease is mainly due to the closure of the Company's karate studios, which have been reduced to only one studio for the quarter. The Company's revenues from the operation of its karate studios for the three months ended March 31, 1999 was $61,353, an decrease of 52% from revenues of $126,905, for the three months ended March 31, 1998. The decrease is attributable to closure of the Company's karate studios. For the three months ended March 31, 1999, film income was $225,637. Film income was derived from the delivery of seven episodes of the company's television show "Adventures With Kanga Roddy" to the San Jose Public TV station KTEH, which was invoiced for $30,000 for each episode for distribution fees, and also the Company received $5,000 in advanced royalty payment from Timeless Toys. Costs and Expenses. Revenue from the Company's karate studios and film business was offset by the amortization of film costs of $138,252, calculated in proportion to the revenue generated by the television show in this first quarter to total expected revenues from the television show. The Company's expenses for salaries and payroll taxes was only $10,019 for the three months ended March 31, 1999, a reduction of 95% from $215,634 for the comparable period in 1998. The decrease was due to payroll of the Company's management included in capitalized film costs. Rent expense decreased by $42,288, or 50%, to $42,328 for the three months ended March 31, 1999, from $84,616 for the comparable period in 1998. The decrease is due to the closure of karate studios, but is partially offset by the increased expense of the Company's new corporate office which the Company has occupied since the end of July 1998. The Company currently operates only one studio in California. Total selling, general and administrative expenses increased by $79,714, or 34%, to $315,831 for the three months ended March 31, 1999, from $236,117 for the comparable period in 1998. This increase is primarily due to increased promotional expenses related to the television show, depreciation of production equipment and legal and accounting fees. Interest expense increased by $33,817 to $42,718 for the three months ended March 31, 1999, from $8,901 for the comparable period in 1998. This increase is attributable to accrued interests on debentures the Company sold during this quarter. As a result of the foregoing factors, the Company's net loss for the three months ended March 31, 1999 was $262,198 which represented an increase of $127,308 from $134,890 for the comparable period in 1998. Net loss per share remained unchanged at $0.04 for the three months ended March 31, 1999 from the comparable period in 1998. Weighted average number of shares outstanding increased to 6,097,269 for the three months ended March 31, 1999 from 3,832,345 for the comparable period in 1998, due to shares issued upon the conversion of convertible debentures sold by the Company during 1998 and also during this quarter. Liquidity And Capital Resources Cash decreased for the three months ended March 31, 1999 by $12,511 to ($9,748). The decrease in cash is attributable to $890,675 of investments in the production of Adventures With Kanga Roddy, and $332,090 in net cash used for operating activities, offset by $1,210,254 which was raised by the Company through financing activities. As of March 31, 1999, total long-term debt was $1,476,723 and loans payable to related parties was $129,069. In addition, deferred revenues were $36,336 at March 31, 1999. Deferred revenues represent pre-paid tuition for the karate studios and booked revenue from sponsorship activities and cannot be immediately recognized. Recent Developments In May 1999 the Company sold $1,250,000. The interest rate on the Debentures is 7% per annum, payable in cash or in shares of the Company's Common Stock. The Debentures mature May 1, 2002 and may be converted to shares of Common Stock. The Company also issued 125,000 warrants in connection with these debentures. The Company received no proceeds from these warrants. Proceeds will be used for the production of Adventures With Kanga Roddy. PART II - OTHER INFORMATION Item 1. Legal Proceedings On April 24, 1998, the Company filed a Complaint for Declaratory Relief in the U.S. District Court, Northern District of California, against William Charles Jeffreys, requesting a judicial determination of the Company's rights in certain intellectual property associated with the Adventures with Kanga Roddy show, and that Mr. Jeffreys has no such rights. Mr. Jeffreys filed an answer to the Company's complaint on June 15, 1998 along with a counterclaim. The Company disputes all claims of Mr. Jeffreys to an interest in certain of the Company's intellectual property. In February 1999, Mr. Jeffreys and the Company have agreed to settle the lawsuit and counterclaim for $36,000 which the Company will pay Mr. Jeffreys in twelve monthly payments of $3,000 each beginning in March of 1999. With exception of the foregoing, no lawsuits or proceedings are currently pending against the Company. Item 6. Exhibits and Reports on Form 8-K. (a) Exhibits. See the Exhibit Index beginning on page 24. (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 17, 1999 By: /s/ Anthony K. Chan Anthony K. Chan, Chief Executive 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 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 21.1(1) Subsidiaries of the Registrant 23.1(8) Consent of Moss Adams, LLP 27.1 Financial Data Schedule (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. EX-27 2 FINANCIAL DATA SCHEDULE
5 THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACT FROM THE CONDENSED CONSOLIDATED BALANCE SHEET AND THE STATEMENT OF INCOME AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1 3-MOS DEC-31-1998 JAN-01-1999 MAR-31-1999 (9,748) 0 225,937 0 0 6,970,131 379,981 0 6,970,131 1,476,723 0 0 0 8,311,737 352,026 6,970,131 0 286,990 0 0 549,148 0 42,718 (262,158) 0 0 0 (262,158) 40 (262,198) ($0.04) ($0.04)
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