8-K/A 1 d37495_8ka.txt AMENDMENT TO FORM 8-K SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 Form 8-K/A CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported) March 19, 2002 CHELL GROUP CORPORATION (Exact name of registrant as specified in its charter) NEW YORK 005-524525 112805051 (State or other jurisdiction (Commission (IRS Employer of incorporation) File Number) Identification No.) 14 METEOR DRIVE, TORONTO, ONTARIO CANADA, M9W 1A4 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (416) 675-6666 -------------------------------------------------------------- (Former name or former address, if changed since last report.) ------------------------------------------------------------------------------ Item 2. Acquisition or Disposition of Assets Chell Group Corporation through NTN Interactive Network, Inc, a wholly owned subsidiary of Chell Group Corporation, pursuant to a Share Purchase Agreement (the "Agreement") dated as of March 18, 2002 by and among Magic Vision Media, Inc., NTN Interactive Network, Inc. and Magic Lantern Communications Ltd. ("Magic Lantern"), a wholly owned subsidiary of Chell Group Corporation, sold all of the issued and outstanding shares of the capital stock of Magic Lantern Communications, Ltd. to Magic Vision Media, Inc., at a purchase price of CDN $1,850,000. The Agreement, among other things, provides that the parties will enter into an agreement, providing for the rental of the space currently occupied by Magic Lantern at offices of Chell Group Corporation pursuant to the same terms with respect to the rental of said space by Magic Lantern prior to the date of the closing of the Agreement. The foregoing description is qualified in its entirety by reference to the complete text of the Agreement, a copy of which is filed as Exhibit 2.1 to this current report on Form 8-K. 2 Item 7. Financial Statements and Exhibits (a) Pro Forma condensed consolidated statements of operations for the Registrant and Magic Lantern Communications Ltd. for the six months ended February 28, 2002 and for the year ended August 31, 2001. (b) Set forth below is a list of the Exhibits applicable to this Current Report on Form 8-K/A numbered in accordance with Item 601 of Regulation S-K. 2.1 Share Purchase Agreement by and among Magic Vision Media, Inc., NTN Interactive Network, Inc, and Magic Lantern Communications Ltd + 99.1 Press Release dated March 20, 2002 + + Incorporated by reference. See Exhibit Index SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. Chell Group Corporation a New York Corporation Date: June 3, 2002 By: /s/ Don Pagnutti ------------------------------------- Don Pagnutti, Chief Financial Officer All of the above Exhibits are incorporated by reference to the exhibit number listed above in the Form 8-K of the Registrant (File No. 000-18066), filed with the Securities and Exchange Commission on April 3, 2002. 3 EXHIBIT INDEX Exhibit Number Description of Exhibit Location ------- ---------------------- -------- 2.1 Share Purchase Agreement by and Exhibit "A" among Magic Vision Media, Inc., NTN Interactive Network, Inc, and Magic Lantern Communications Ltd 99.1 Press Release dated March 20, 2002 Exhibit "B" 4 CHELL GROUP CORPORATION PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited - Expressed in Canadian dollars) On March 18, 2002, Chell Group Corporation ("Chell"), through its wholly-owned subsidiary, NTN Interactive Network Inc. sold all of the issued and outstanding shares of the capital stock of its wholly owned subsidiary Magic Lantern Communications Ltd. ("Magic") to Magic Vision Media, Inc. at a purchase price of $1,850,000 payable in cash. The following unaudited pro forma condensed consolidated balance sheet as of February 28, 2002, assumes the sale of Magic occurred on February 28, 2002. The pro forma condensed consolidated statements of operations for the six months ended February 28, 2002 and for the year ended August 31, 2001 assume the sale of Magic occurred on September 1, 2000. The pro forma condensed financial statements are not intended to be indicative of the financial position or results of operations which actually would have been realized had the disposition of Magic occurred at the date assumed, nor of the future results of operations of the consolidated entity. The accompanying pro forma condensed financial statements should be read in conjunction with the historical financial statements and notes of Chell. CHELL GROUP CORPORATION Pro Forma Condensed Consolidated Balance Sheet As at February 28, 2002 (Unaudited - Expressed in Canadian Dollars)
-------------------------------------------------------------------------------------------------------------- February 28, 2002 Pro forma Pro forma adjustments February 28, 2002 $ $ $ -------------------------------------------------------------------------------------------------------------- ASSETS Current Cash and cash equivalents 97,381 1,850,000 1,947,381 Short-term investments -- -- -- Accounts receivable, trade - net of allowance for doubtful accounts of $225,071 9,486,825 -- 9,486,825 Other receivables 459,968 -- 459,968 Income taxes receivable 165,005 -- 165,005 Inventory 1,825,015 -- 1,825,015 Prepaid expenses 310,793 -- 310,793 -------------------------------------------------------------------------------------------------------------- Total current assets 12,344,987 1,850,000 14,194,987 -------------------------------------------------------------------------------------------------------------- Property and equipment, net 7,710,280 -- 7,710,280 Licenses, net of accumulated amortization 236,524 -- 236,524 Goodwill, net of accumulated amortization 13,609,273 -- 13,609,273 Investment in Wareforce 176,518 -- 176,518 Deposit on purchase 1,689,710 -- 1,689,710 Other assets, net of amortization 614,540 -- 614,540 Net assets from discontinued operations 2,488,932 (2,488,932) -- -------------------------------------------------------------------------------------------------------------- 38,870,764 (638,932) 38,231,832 -------------------------------------------------------------------------------------------------------------- LIABILITIES AND SHAREHOLDERS' EQUITY Current Accounts payable - trade 11,893,626 -- 11,893,626 Accrued liabilities 2,006,124 -- 2,006,124 Current portion of long-term debt 9,905,300 -- 9,905,300 -------------------------------------------------------------------------------------------------------------- Total current liabilities 23,805,050 -- 23,805,050 -------------------------------------------------------------------------------------------------------------- Long-term debt , net of current portion 4,978,074 -- 4,978,074 Deferred income taxes payable 30,000 -- 30,000 -------------------------------------------------------------------------------------------------------------- Total liabilities 28,813,124 -- 28,813,124 -------------------------------------------------------------------------------------------------------------- Commitments and Contingent liabilities Shareholders' equity Share capital Preferred shares 7,294 -- 7,294 14,942,540 common shares [August 2001 - 9,028,239] 1,040,524 -- 1,040,524 Capital in excess of par value 25,366,699 -- 25,366,699 Accumulated deficit (16,356,877) (638,932) (16,995,809) -------------------------------------------------------------------------------------------------------------- Total shareholders' equity 10,057,640 (638,932) 9,418,708 -------------------------------------------------------------------------------------------------------------- 38,870,764 (638,932) 38,231,832 --------------------------------------------------------------------------------------------------------------
CHELL GROUP CORPORATION Pro forma Condensed Consolidated Statement of Operations For the Six months ended February 28, 2002 (Unaudited - Expressed in Canadian Dollars)
------------------------------------------------------------------------------------------------- Pro forma Historical Adjustments Pro forma $ $ $ ------------------------------------------------------------------------------------------------- REVENUE Product sales 9,062,129 -- 9,062,129 Service sales 558,243 -- 558,243 Network services 3,274,309 -- 3,274,309 Pay-TV 2,736,561 -- 2,736,561 Other 9,647 -- 9,647 ------------------------------------------------------------------------------------------------- 15,640,889 -- 15,640,889 ------------------------------------------------------------------------------------------------- COST OF SALES Product sales 8,290,472 -- 8,290,472 Service sales 497,354 -- 497,354 Network services 1,223,105 -- 1,223,105 Pay-TV 1,301,516 -- 1,301,516 ------------------------------------------------------------------------------------------------- 11,312,447 -- 11,312,447 ------------------------------------------------------------------------------------------------- EXPENSES Selling, general and administrative expenses 4,819,575 -- 4,819,575 Interest and bank charges 1,236,522 -- 1,236,522 Write off of leasehold improvements -- -- -- Depreciation and amortization 1,137,948 -- 1,137,948 ------------------------------------------------------------------------------------------------- 7,194,045 -- 7,194,045 ------------------------------------------------------------------------------------------------- Loss before undernoted (2,865,603) -- (2,865,603) ------------------------------------------------------------------------------------------------- Provision for income taxes -- -- -- ------------------------------------------------------------------------------------------------- Loss from continuing operations (2,865,603) -- (2,865,603) Loss from discontinued operations (net of income tax) (854,744) 854,744 -- ------------------------------------------------------------------------------------------------- Loss and comprehensive loss for the period (3,720,347) 854,744 (2,865,603) ================================================================================================= Earnings (loss) per share: Basic and diluted from continuing operations (0.26) (0.26) Basic and diluted from discontinued operations (0.08) -- ------------------------------------------------------------------------------------------------- Net loss per share (0.34) (0.26) -------------------------------------------------------------------------------------------------
CHELL GROUP CORPORATION Pro forma Statement of Operations For the year ended August 31, 2001 (Unaudited - Expressed in Canadian Dollars)
------------------------------------------------------------------------------------------------- Pro forma Historical Adjustments Pro forma $ $ $ ------------------------------------------------------------------------------------------------- REVENUE Network services 6,300,891 -- 6,300,891 Pay-TV 6,651,913 -- 6,651,913 Event programming 403,993 -- 403,993 Advertising sponsorship 231,991 -- 231,991 Video and software sales 3,113,725 (3,113,725) -- Video dubbing 682,870 (682,870) -- Digital encoding 820,396 (820,396) -- Other 16,595 16,595 ------------------------------------------------------------------------------------------------- 18,222,374 (4,616,991) 13,605,383 ------------------------------------------------------------------------------------------------- COST OF SALES Network services 2,384,303 -- 2,384,303 Pay-TV 2,937,189 -- 2,937,189 Event programming 255 -- 255 Video and software sales 1,249,851 (1,249,851) -- Video dubbing 244,670 (244,670) -- Digital encoding 1,843 -- 1,843 ------------------------------------------------------------------------------------------------- 6,818,111 (1,494,521) 5,323,590 ------------------------------------------------------------------------------------------------- EXPENSES Selling, general and administrative 16,250,171 (3,596,380) 12,653,791 Write-off of leaseholds 355,560 -- 355,560 Bad debts 171,407 (86,901) 84,506 Interest and bank charges 881,398 (16,503) 864,895 Depreciation and amortization 3,040,407 (507,218) 2,533,189 ------------------------------------------------------------------------------------------------- 20,698,943 (4,207,002) 16,491,941 ------------------------------------------------------------------------------------------------- Loss before the undernoted items (9,294,680) 1,084,532 (8,210,148) Loss from equity investment in Engyro (301,100) -- (301,100) Minority interest (27,061) 27,061 -- Provision for income taxes -- -- -- ------------------------------------------------------------------------------------------------- Loss from continuing operations (9,622,841) 1,111,593 (8,511,248) Loss from discontinued operations (net of income tax) (1,603,384) -- (1,603,384) ------------------------------------------------------------------------------------------------- Net loss and comprehensive loss for the year (11,226,225) 1,111,593 (10,114,632) ================================================================================================= Earnings (loss) per share: Basic and diluted from continuing operations (1.15) (1.01) Basic and diluted from discontinued operations (0.19) (0.19) ------------------------------------------------------------------------------------------------- Net loss per share (1.34) (1.21) -------------------------------------------------------------------------------------------------
CHELL GROUP CORPORATION Assumptions To Pro forma Condensed Consolidated Financial Statements (Unaudited - Expressed in Canadian Dollars) Assumptions to Pro Forma Condensed Consolidated Balance Sheet as at February 28, 2002 1. The sale of Magic is assumed to have occurred on February 28, 2002 and accordingly all operations, assets and liabilities of Magic have been removed. 2. Proceeds from the sale were $1,850,000 payable in cash. Assumptions to Pro Forma Statement of Operations for the year ended August 31, 2001 and the six months ended February 28, 2002 1. The sale of Magic is assumed to have occurred on September 1, 2000 and therefore all fiscal 2001 and fiscal 2002 operations of Magic have been removed. 2. Proceeds from the sale were $1,850,000 payable in cash.