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The short-term answer was convertible debentures, in which loans are secured by offering large amounts of discounted stock to lenders. Obviously, this is a very risky way to finance a company. "They call it a 'death spiral,'" Chan says. "Debentures are absolutely dilutive. But we had no other choice to fund the company. With the stock under pressure for so long, it was hard to find people to invest."
Don Berryessa had been with Chung and Chan from the start. At 17, he took karate lessons from Chung, and then began working for him, managing some of the studios to pay his way through business school at San Jose State University. For more than 10 years, Berryessa worked for Chung and Chan, eventually becoming a third business partner. He was the chief operating officer of American Champion, and the third casualty of the company going public.
Both Chung and Chan will only say of Berryessa's departure that he wanted to move on to other things. Berryessa says the pressure and never-ending workload of keeping a troubled company alive got to him. The goal of achieving a healthy stock price, he says, was not worth missing his wife and two young daughters. "There wasn't any fallout between us; I have nothing but respect for them, but we have different ideas about what work means," Berryessa says. "There's the 60-hour week, and the 80-hour week, and then there's an entire life devotion to making something happen. I put my heart in it, but George and Anthony put their heart and soul into it."
Chan, especially. It wasn't uncommon for him to take a red-eye flight to New York, spend the day meeting with investors, and be back working in the San Jose office that same night. Chung would often be on the road a week or two at a time, away from his 9-year-old daughter and 5-year-old son. "It's hard to work in that environment, always at that level," Berryessa says. "It wears on you."
Losing the karate studios didn't help morale, either. Everyone agreed that it was necessary to get rid of them to better focus the company, "but it was sad to see them go," Berryessa says.
"I know people won't understand," says Chan. "They'll say, 'Those guys couldn't even run karate schools, so how are they going to run a public company?' But we were a success. We got rich from those studios. That's how we bought our houses and fancy cars, certainly not from the IPO."
In fact, it was becoming evident the kangaroo wasn't going to pay off anytime soon. If Chung and Chan's dream were ever to be realized, they needed to -- well, diversify. "The idea of waiting five years to become profitable is not acceptable to shareholders," says Berryessa. "So George and Anthony are doing anything they can to make the company work."
Which, naturally, is where bringing cable Internet access to China comes in.
Chan's background, he says, gives him government and business connections in Beijing, and when the idea of wiring China was publicized last November, American Champion's stock price spiked sharply and then fell. Unfortunately, the company has a habit of cranking out press releases that announce intentions of deals, but not much of anything else. Many investors -- enticed by the low price and profit potential -- have bitten, but are now left wondering when all the deals will become a reality.
In April, American Champion did go to China -- to stage the country's first boxing match, in which Muhammad Ali's daughter, Laila, won in the fourth round of a fight against former prison guard Kristina King. The show also featured heavyweight Andrew Golota's knockout of Marcus Rhode. The matches were broadcast on Showtime, but the sight of half-empty stands in the Guangzhou province arena raised questions as to whether the event was a bust. American Champion had announced a sellout in advance ticket sales, so Chung and Chan attributed the weak showing to a rainstorm. Financial statements have yet to be released, though angry investors are clamoring for details. The fight wasn't even popular among the participants.
"There was no need to be in China. No one was interested in boxing there," says Johnny McClain, Ali's agent. "It was terrible. The food was bad, and the whole thing was not fun. I'm not ever doing it again."
On Chung: "He's a nice guy, but very inexperienced," McClain says. "I don't foresee him being a great promoter."
Chan, who says it was a logistical and bureaucratic nightmare to set up and execute a televised boxing match in mainland China, maintains American Champion has a future in boxing. "It is a tremendous boost to us now that we have become players in the boxing industry," Chan says. "We are hopeful the next event will be very financially rewarding now that we have the experience of the first one." Besides, he adds, he and Chung can bring higher standards to the sport. "One thing I'm proud of, is that if all the boxing promoters are crooks," Chan says, "then at least we can bring in a breath of fresh air."