-----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, T06QAMthUw2crMZc2Blp9wrwdaZduIRB5rlJ1+xLcI5HURy388jj4CKZwRL5hN4K AG9j0xUgtHqE6N5VN7fQ5w== 0001144204-04-020771.txt : 20041201 0001144204-04-020771.hdr.sgml : 20041201 20041201083311 ACCESSION NUMBER: 0001144204-04-020771 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 20031130 FILED AS OF DATE: 20041201 DATE AS OF CHANGE: 20041201 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CHELL GROUP CORP CENTRAL INDEX KEY: 0000797313 STANDARD INDUSTRIAL CLASSIFICATION: CABLE & OTHER PAY TELEVISION SERVICES [4841] IRS NUMBER: 112805051 STATE OF INCORPORATION: NY FISCAL YEAR END: 0831 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-18066 FILM NUMBER: 041175874 BUSINESS ADDRESS: STREET 1: 14 METEOR DR STREET 2: BLDG 18 CITY: ETOBICOKE ONTARIO STATE: A6 ZIP: M9W 1A4 BUSINESS PHONE: 4166756666 MAIL ADDRESS: STREET 1: 14 METEOR DR STREET 2: ETOBICOKE CITY: ONTARIO CANADA STATE: A6 ZIP: M9W 1A4 FORMER COMPANY: FORMER CONFORMED NAME: NETWORKS NORTH INC DATE OF NAME CHANGE: 19980811 FORMER COMPANY: FORMER CONFORMED NAME: NTN CANADA INC DATE OF NAME CHANGE: 19961016 FORMER COMPANY: FORMER CONFORMED NAME: TRIOSEARCH INC DATE OF NAME CHANGE: 19880718 10-Q 1 form.txt ================================================================================ UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) |X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended November 30, 2003 OR |_| 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: 0-18222 ------------- Chell Group Corporation (Exact Name of Registrant as Specified in Its Charter) ------------- New York 11-2805051 (State or Other Jurisdiction of (I.R.S. Employer Incorporation or Organization) Identification No.) 150, 630 - 8th Avenue SW, Calgary AB T2P 1G6 (Address of Registrant's Principal Executive Offices) (Zip Code) Registrant's telephone number, including area code: (403) 303-8258 ------------- 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 No |X| Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act) Yes |_| No |X| As of November 30, 2004, the number of shares issued and outstanding of the Company's common stock, par value $0.001 per share was 32,129,417. ================================================================================ CHELL GROUP CORPORATION AND SUBSIDIARIES INDEX PART I - FINANCIAL INFORMATION
Page ITEM 1. Financial Statements Consolidated Balance Sheets as of November 30, 2003 (Unaudited) and August 31, 2003 3 Consolidated Statements of Operations for the three ended November 30, 2003 and 2002 (Unaudited) 4 Consolidated Statements of Cash Flows for the three months ended November 30, 2003 and 2002 (Unaudited) 5 Notes to Unaudited Consolidated Financial Statements 6 ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 10 ITEM 3. Quantitative and Qualitative Disclosures About Market Risk 13 ITEM 4. Controls and Procedures 14 PART II - OTHER INFORMATION ITEM 1. Legal Proceedings 14 ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds 14 ITEM 3. Defaults upon Senior Securities 14 ITEM 4. Submissions of Submissions of Matters to a Vote of Security Holders 14 ITEM 5. Other Information 14 ITEM 6. Exhibits 14 Signatures 17
Item 1. FINANCIAL STATEMENTS CHELL GROUP CORPORATION CONSOLIDATED BALANCE SHEETS (Expressed in Canadian dollars)
================================================================================================================== November 30, 2003 August 31, 2003 (unaudited) (audited) $ $ - ------------------------------------ ------------------------------- ------------------------- ------------------- ASSETS Current Cash and cash equivalents 458,448 327,685 Accounts receivable, trade - net of allowance for doubtful accounts of $462,058 and $356,195, respectively 4,447,784 3,560,286 Other receivables -- -- Inventory 160,618 208,340 Prepaid expenses 46,623 76,077 Buildings held for sale 1,161,001 1,177,045 - -------------------------------------------------------------------- ------------------------- ------------------- Total current assets 6,274,474 5,349,433 - -------------------------------------------------------------------- ------------------------- ------------------- Property and equipment, net 510,768 638,143 Goodwill 276,794 276,794 Other assets 117,496 63,600 Net assets of discontinued operations - assets held for sale 870,358 969,292 - -------------------------------------------------------------------- ------------------------- ------------------- 8,049,890 7,297,262 - -------------------------------------------------------------------- ------------------------- ------------------- LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT) Current Bank overdraft 696,861 908,432 Bank indebtedness 4,256,989 3,935,166 Accounts payable and accrued liabilities 6,049,500 5,469,224 Accrued interest payable 1,470,197 1,347,220 Income Taxes payable 46,569 -- Deferred revenue 245,895 297,243 S-term advances 272,192 312,191 Current portion, long-term debt 1,268,145 1,305,301 Payable on acquisition 4,852,976 4,852,976 Loan payable, related party 1,020,000 1,020,000 Mortgages of buildings held for sale 1,083,333 1,114,583 Convertible debt 7,624,912 7,978,676 - -------------------------------------------------------------------- ------------------------- ------------------- Total current liabilities 28,887,569 28,541,012 - -------------------------------------------------------------------- ------------------------- ------------------- Long-term debt, net of current portion 101,950 113,392 Liabilities of discontinued operations 1,559,167 1,546,454 - -------------------------------------------------------------------- ------------------------- ------------------- Total liabilities 30,548,686 30,200,858 - -------------------------------------------------------------------- ------------------------- ------------------- Preferred Series B shares: 454,545 shares [August 2003 - 454,545] 7,294 7,294 Shareholders' equity (deficit) Common stock 14,295,410 common shares [August 2003 - 10,504,913] 959,754 733,997 Additional paid in capital 26,614,448 26,655,538 Accumulated other comprehensive income 1,689,660 1,150,558 Accumulated deficit (51,769,952) (51,450,983) - -------------------------------------------------------------------- ------------------------- ------------------- Total shareholders' equity (deficit) (22,506,090) (22,910,890) - -------------------------------------------------------------------- ------------------------- ------------------- 8,049,890 7,297,262 - -------------------------------------------------------------------- ------------------------- -------------------
The accompanying notes are an integral part of these consolidated financial statements 3 CHELL GROUP CORPORATION INC. CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE MONTHS ENDED NOVEMBER 30, 2003 AND NOVEMBER 30, 2002 (Expressed in Canadian dollars - unaudited)
- --------------------------------------------------------------------- ------------------- -------------------- 2003 2002 $ $ - --------------------------------------------------------------------- ------------------- -------------------- REVENUE Product sales 7,955,702 5,605,928 Service sales 588,413 478,065 - --------------------------------------------------------------------- ------------------- -------------------- 8,544,115 6,083,993 - --------------------------------------------------------------------- ------------------- -------------------- COST OF SALES Product sales 6,464,603 5,220,467 Service sales 228,758 58,909 - --------------------------------------------------------------------- ------------------- -------------------- 6,693,361 5,279,376 - --------------------------------------------------------------------- ------------------- -------------------- GROSS PROFIT 1,850,754 804,617 OPERATING EXPENSES Selling, general and administrative expenses 2,059,616 1,992,178 Depreciation and amortization 189,873 311,487 - --------------------------------------------------------------------- ------------------- -------------------- 2,249,489 2,303,665 - --------------------------------------------------------------------- ------------------- -------------------- Loss from operations (398,735) (1,499,048) Interest expense 342,285 589,700 Loss on disposal of investments/property -- 248,587 - --------------------------------------------------------------------- ------------------- -------------------- Loss before provision for income taxes (741,020) (2,337,335) Provision for income taxes -- 2,282 - --------------------------------------------------------------------- ------------------- -------------------- Loss from continuing operations (741,020) (2,339,617) - --------------------------------------------------------------------- ------------------- -------------------- Discontinued Operations Gain (loss) from discontinued operations (net of applicable income 422,051 (682,574) tax of $0) Gain on disposal on debt -- 2,051,215 - --------------------------------------------------------------------- ------------------- -------------------- Gain (loss) from discontinued operations 422,051 1,368,641 - --------------------------------------------------------------------- ------------------- -------------------- Net Loss (318,969) (970,976) Other comprehensive income - foreign currency translation 539,102 (395,956) - --------------------------------------------------------------------- ------------------- -------------------- Comprehensive Gain (loss) 220,133 (1,366,932) - --------------------------------------------------------------------- ------------------- -------------------- Loss per share: Basic and diluted from continuing operations (0.05) (0.26) Basic and diluted from discontinued operations 0.03 0.15 - --------------------------------------------------------------------- ------------------- -------------------- Net loss per share (0.02) (0.11) - --------------------------------------------------------------------- ------------------- -------------------- Basic weighted average number of common shares outstanding 14,218,487 9,028,239 Diluted weighted average number of common shares outstanding 14,218,487 9,028,239 - --------------------------------------------------------------------- ------------------- --------------------
The accompanying notes form an integral part of these consolidated financial statements. 4 CHELL GROUP CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE THREE MONTHS ENDED NOVEMBER 30, 2003 AND NOVEMBER 30, 2002 (Expressed in Canadian dollars - unaudited)
- -------------------------------------------------------------------- ---------- ---------- 2003 2002 $ $ - -------------------------------------------------------------------- ---------- ---------- OPERATING ACTIVITIES Net loss for the year from continuing operations (318,969) (970,976) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 227,816 1,629,176 Interest cost from amortization of discount 62,923 324,038 Provision for doubtful accounts 105,863 57,040 Loss on disposal/sale of capital assets -- 248,587 Due from stockholder -- 227,365 Gain on settlement of debt -- (2,051215) Changes in assets and liabilities: Decrease (increase) in accounts receivable, trade (916,440) 2,690,524 Decrease (increase) in income taxes receivable -- -- Decrease (increase) in inventory 47,722 (125,671) Decrease (increase) in prepaid expenses 56,448 9,813 Decrease (increase) in other accounts receivable -- -- Decrease (increase) in other assets (53,896) 160,714 Increase (decrease) in accounts payable and accrued liabilities 1,093,863 (598,619) Increase (decrease) in accrued interest payable 122,977 353,650 Increase (decrease) in deferred revenue (51,348) (326,111) Increase (decrease) in income taxes payable 139 30,252 - -------------------------------------------------------------------- ---------- ---------- Cash (used in) provided by operating activities 377,098 1,658,567 - -------------------------------------------------------------------- ---------- ---------- INVESTING ACTIVITIES Purchase of property and equipment (49,464) (44,306) Proceeds from disposal of property and equipment -- 265,289 - -------------------------------------------------------------------- ---------- ---------- Cash (used in) provided by investing activities (49,464) 220,983 - -------------------------------------------------------------------- ---------- ---------- FINANCING ACTIVITIES Bank Indebtedness 321,823 (379,222) Net borrowings on line of credit (211,571) (899,629) Payment to Logicorp shareholders (39,999) -- Borrowing from Logicorp shareholders 10,009 77,575 Payments on long-term debt (89,858) (464,960) - -------------------------------------------------------------------- ---------- ---------- Cash used in financing activities (9,596 (1,666,236) - -------------------------------------------------------------------- ---------- ---------- Effects of foreign loss 122,414 (442,198) - -------------------------------------------------------------------- ---------- ---------- Net (decrease) increase in cash and cash equivalents during the 440,452 (228,884) period from continuing operations Net (decrease) increase in cash and cash equivalents during the (309,689) 148,016 period from discontinue operations Cash and cash equivalents, beginning of period 327,685 107,258 - -------------------------------------------------------------------- ---------- ---------- Cash and cash equivalents, end of period 458,448 26,390 - -------------------------------------------------------------------- ---------- ---------- Income taxes paid -- -- Interest paid 140,016 158,866
The accompanying notes are an integral part of these consolidated financial statements. 5 CHELL GROUP CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE MONTHS ENDED NOVEMBER 30, 2003 AND NOVEMBER 30, 2002 (UNAUDITED) NOTE 1. BASIS OF PRESENTATION The accompanying financial statements for the interim periods are unaudited and reflect all adjustments (consisting only of normal recurring adjustments) which are, in the opinion of management, necessary for a fair presentation of the financial position and operating results for the periods presented. These financial statements should be read in conjunction with the financial statements and notes thereto, together with Management's Discussion and Analysis of Financial Condition and Results of Operations, contained in the Annual Report on Form 10-K of Chell Group Corporation (the "Company") (Commission No.0-18066), filed with the Securities and Exchange Commission on May 13, 2004. The results of operations for the three months ended November 30, 2003 are not necessarily indicative of the results for the full fiscal year ending August 31, 2004. NOTE 2. GENERAL The financial statements of the Company for the three months ended November 30, 2003 (the "2004 First Fiscal Quarter"), include the operations of the Company's wholly-owned subsidiaries Chell Merchant Capital Group Inc. ("CMCG"), Chell.com (USA) Inc., and 3484751 Canada Inc. The financial statements also include CMCG's wholly-owned subsidiaries Logicorp Data Systems Ltd. and Logicorp Service Group Ltd., 123557 Alberta Ltd., and 591360 Alberta Ltd., which will be together referred to as "Logicorp" and Logicorp's wholly-owned subsidiary eTelligent Solutions Inc. ("eTelligent). Discontinued operations consist of NTN Interactive Network Inc. ("NTNIN") which was sold on December 15, 2003. Effective August 8, 2004, the Company's previously wholly-owned subsidiaries, Logicorp Data Systems Inc., and Logicorp Service Group Inc. (together, "Logicorp") issued common shares to NewMarket Technologies, a publicly-traded company for US$2.1 million, such that NewMarket holds 51% of the outstanding equity securities of Logicorp. In exchange for 51% of these subsidiaries, NewMarket will pay $1.1 million in cash and $1.0 million will be paid to Logicorp according to the terms of a $1.0 million, 24-month promissory note. The financial statements of the Company for the three months ended November 30, 2002 (the "2003 First Fiscal Quarter"), include the operations of the Company's wholly-owned subsidiaries Chell Merchant Capital Group Inc. ("CMCG"), Chell.com (USA) Inc., and 3484751 Canada Inc. The financial statements also include CMCG's wholly-owned subsidiaries Logicorp Data Systems Ltd. and Logicorp Service Group Ltd., 123557 Alberta Ltd., and 591360 Alberta Ltd., which will be together referred to as "Logicorp" and Logicorp's wholly-owned subsidiary eTelligent Solutions Inc. ("eTelligent). Discontinued operations consist of NTN Interactive Network Inc. ("NTNIN") which was sold on December 15, 2003 and GalaVu Entertainment Network Inc. ("GalaVu") which was sold on April 25, 2003. Prior period's figures have been reclassified to be consistent with any reclassifications in the current period. NOTE 3. IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS In August 2001, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 144, Accounting for the Impairment or Disposal of Long-lived Assets (SFAS 144), that is applicable to financial statements issued for fiscal years beginning after December 15, 2001. The new rules on asset impairment supersede SFAS 121, Accounting for the impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of, and portions of Accounting Principles Board Opinion 30, "Reporting the Results of Operations." This Standard provides a single accounting model for long-lived assets to be disposed of and significantly changes the criteria that would have to be met to classify an asset as held-for-sale. Classification as held-for-sale is an important distinction since such assets are not depreciated and are stated at the lower of fair value and carrying amount. This Standard also requires expected future operating losses from discontinued operations to be displayed in the period(s) in which the losses are incurred, rather than as of the measurement date as presently required. The Company is currently assessing the potential impact of SFAS 144 on the operating results and financial position. 6 In June 2001, the Financial Accounting Standards Board issued Statements of Financial Accounting Standards No. 141, Business Combinations, and No. 142, Goodwill and Other Intangible Assets, effective for fiscal years beginning after December 15, 2001. Under the new rules, business combinations can no longer be reflected by using the pooling of interests method of accounting and goodwill (and intangible assets deemed to have indefinite lives) will no longer be amortized but will be subject to annual impairment tests in accordance with the Statements. Other intangible assets will continue to be amortized over their useful lives. NOTE 4 - SEGMENT INFORMATION (Unaudited) The following describes the performance by segment for the three months ended November 30, 2003 and 2002:
- --------------------------------------------------------------------------------------------------- For Three Months Ended November 30, 2003 November 30, 2002 $ $ - --------------------------------------------------------------------------------------------------- External revenue Systems Integration 8,544,115 6,083,993 - --------------------------------------------------------------------------------------------------- 8,544,115 6,083,993 - --------------------------------------------------------------------------------------------------- Operating profit (loss) Systems Integration (157,541) (669,884) Corporate (241,194) (829,164) - --------------------------------------------------------------------------------------------------- (398,735) (1,499,048) - --------------------------------------------------------------------------------------------------- Net income (loss) Systems Integration (251,165) (764,862) Corporate (489,855) (1,574,755) Discontinued operations 422,051 1,368,641 - --------------------------------------------------------------------------------------------------- (318,969) (970,976) - --------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------- As at November 30, 2003 November 30, 2002 $ $ - --------------------------------------------------------------------------------------------------- Total assets Systems Integration 5,354,543 3,839,986 Corporate 1,824,989 1,721,539 Discontinued operations 870,358 3,156,415 - --------------------------------------------------------------------------------------------------- 8,049,890 8,717,940 - ---------------------------------------------------------------------------------------------------
7 NOTE 5. EARNINGS PER SHARE Earnings per share were calculated in accordance with Statement of Financial Accounting Standards No. 128. The following table sets forth the computation of basic and diluted earnings per share for the three months ended November 30, 2003 and November 30, 2002:
- ----------------------------------------------------------------------------------------------------------- For Three Months Ended November 30, 2003 November 30, 2002 $ $ - ----------------------------------------------------------------------------------------------------------- Numerator: Net loss (numerator for basic and diluted loss per share) from continuing operations (741,020) (2,339,617) Net income (numerator for basic and diluted loss per share) from discontinued operations 422,051 1,368,641 - ----------------------------------------------------------------------------------------------------------- Net loss (numerator for basic and diluted loss per (318,969) (970,976) share) =========================================================================================================== Denominator for basic and diluted loss per share - -adjusted weighted average number of shares and 14,218,487 9,028,239 assumed conversions =========================================================================================================== Basic and diluted loss per share from continuing (0.05) (0.26) operations Basic and diluted loss per share from discontinued 0.03 0.15 operations - ----------------------------------------------------------------------------------------------------------- Net loss per share (0.02) (0.11) ===========================================================================================================
NOTE 6. SUBSEQUENT EVENTS [a] Sale of Buildings and Land During the fiscal year ended August 31, 2003, we owned an approximately 25,000 square foot parcel of land, located at 14 Meteor Drive in Toronto, Ontario, on which stands a 12,500 square foot, one story building. On December 19, 2003, we sold this land and building to an unrelated third party for approximately $730,000 and recorded a gain on the sale of approximately $100,000. During the fiscal year ended August 31, 2003, we owned an approximately 29,000 square foot parcel of land, located at 10 Meteor Drive, Toronto, Ontario, on which stands a 14,000 square foot, two story building. We sold this land and building to an unrelated party on March 7, 2004 for approximately $710,000. The Company anticipates a gain of approximately $70,000. [b] Logicorp Advances During 2003, B.O.T.B., an affiliated company, advanced Logicorp Data Systems $820,000. The advance is due on demand and did not carry a stated interest rate. Due to its long-term nature, the Company has imputed interest on the advance at a rate of 9%. [c] Resignation of Stephen McDermott (CEO) Effective April 28, 2004, Stephen McDermott resigned his posts of Chief Executive Officer and Chairman of the Board. David Bolink, current Board Member has been appointed Chief Executive Officer and Chairman of the Board. 8 [d] Sale of Logicorp Effective August 8, 2004, the Company's previously wholly-owned subsidiaries, Logicorp Data Systems Inc., and Logicorp Service Group Inc. (together, "Logicorp") issued common shares to NewMarket Technologies ("NewMarket"), a publicly-traded company for US$2.1 million, such that NewMarket holds 51% of the outstanding equity securities of Logicorp. In exchange for 51% of these subsidiaries, NewMarket will pay Logicorp $1.1 million in cash at closing. An additional $1.0 million will be paid to Logicorp according to the terms of a $1.0 million, 24-month promissory note. As a result of this transaction, the Company holds the remaining 49% of the outstanding shares of Logicorp. Twelve (12) months following the first anniversary of the purchase of the 51% interest, if Logicorp has achieved annual sales of at least $18,000,000 with at least a breakeven profit, Chell Group will have an option to require NewMarket to acquire the remaining 49% of the sellers remaining stock for a purchase price of $1,900,000 to be paid in NewMarket stock with piggyback registration rights. NewMarket will have an equal right to require the sale of Chell Group's remaining 49% stock position in Logicorp under the same performance conditions. [e]1109822 Alberta Inc. Subsequent to year end, on May 26, 2004, the Company founded a new Canadian subsidiary corporation, 1109822 Alberta Ltd. This wholly-owned subsidiary was created to act as a holding company for investments in various sectors, including electronic payment processing. 1109822 Alberta Ltd. has purchased 33 Units of a Canadian limited partnership, Tech Income Limited Partnership 1 ("Tech Income") for $495,000 (approximately US$390,000 at current exchange rates). Tech Income was founded in early 2004 with the objective of building products and services to compete in the growing online payment processing industry. Tech Income is currently carrying on business as "Broker Payment Systems" or "BPS". This is an electronic payment transfer system which facilitates payments and transfers of funds securely and in real time to and from equity brokerage firms for investing clients. BPS is currently marketing this system in the United States. Management of the Company (and its subsidiary) believes that the Chell Group can better profit from the expected growth in this sector by pooling resources with Tech Income (and its existing product offering) rather than by moving into this area alone. The most recent information provided to us by Tech Income (as at September 15, 2004) shows that 1109822 Alberta Ltd. holds approximately 32% of Tech Income's issued and outstanding units. This position may be diluted as Tech Income continues to sell units to other investors. The Company expects to account for this under the equity method of accounting. Broker Payment Management Inc., which works with Tech Income in distributing the BPS products and services, has been invested in directly by the Company ($495,000 was advanced on June 18, 2004). Chell Group currently (as at September 15, 2004) holds approximately 19% of Broker Payment Management Inc.'s equity shares. The Company expects to account for this under the cost method of accounting. 9 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS GENERAL Management is responsible for preparing the Company's consolidated financial statements and related information that appears in this Form 10-Q. Management believes that the consolidated financial statements fairly reflect the form and substance of transactions and reasonably present the Company's consolidated financial condition and results of operations in conformity with accounting principles generally accepted in the United States of America ("GAAP"). Management has included in the Company's consolidated financial statements amounts that are based on estimates and judgments, which it believes are reasonable under the circumstances. The Company maintains a system of internal accounting policies, procedures and controls intended to provide reasonable assurance, at the appropriate cost, that transactions are executed in accordance with the Company's authorization and are properly recorded and reported in the consolidated financial statements, and that assets are adequately safeguarded. The Company's operations are primarily conducted through its 100% owned subsidiaries: Logicorp Data Systems Ltd. ("LDS"), and Logicorp Service Group Ltd., ("LSG") and LDS wholly-owned subsidiary eTelligent Solutions Inc. ("eTelligent"). The following discussion addresses the financial condition and results of operations of the Company. This discussion should be read in conjunction with the Company's Annual Report on Form 10-K for the fiscal year ended August 31, 2003 and with the Company's unaudited consolidated interim financial statements as of November 30, 2003 and for the three month period ended November 30, 2003 and 2002 contained herein. Results for any interim periods are not necessarily indicative of results for any full year. CORPORATE BACKGROUND We are engaged in the business of providing interactive entertainment services and systems integration services. Our core businesses are the systems integration services provided by our Logicorp Data Systems Ltd. subsidiary and the interactive entertainment services provided by our NTN Interactive Network subsidiary. As of November 30, 2003, we had a working capital deficit of $22,613,095 and an accumulated deficit of $51,769,952. We generated revenues of $8,544,115 for the 2004 First Fiscal Quarter and incurred a net loss of $318,969. In addition, during the 2004 First Fiscal Quarter, net cash provided by operating activities was $377,098. We are in a transitional stage of operations and, as a result, the relationships between revenue, cost of revenue, and operating expenses reflected in the financial information included in this annual file do not represent future expected financial relationships. Accordingly, we believe that, at our current stage of operations period-to-period comparisons of results of operations are not meaningful. PLAN OF OPERATIONS Our business strategy is to divest ourselves of non-core operating and wind up all non-operating companies. While at the same time refocusing our energies in our core companies and bring these operations to profitable operations. Our core operations are the systems integration segment companies. We will be bringing our corporate entity current with all of its filings and will begin to petition for market status. While all the time looking for new opportunities that may arise in order to increase our value and profitability. 10 We expect our general and administrative costs to increase in future periods due to our operating as a public company whereby we will incur added costs for filing fees, increased professional services and insurance costs. RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED NOVEMBER 30, 2003 COMPARED TO THE THREE MONTHS ENDED NOVEMBER 30, 2002. The Company's total revenues for the 2004 First Fiscal Quarter were $8,544,115, compared to $6,083,993 for the 2003 First Fiscal Quarter, an increase of $2,460,122 or 40.4%. eTelligent was purchased on June 1, 2002, so there are no comparative financials for the 2003 First Fiscal Quarter. eTelligent's total revenue for the 2004 First Fiscal Quarter was $538,887 or 21.9% of the total increase. Like for like revenues increased $1,921,235 or 31.6%. Logicorp experience stronger sales in the 2004 First Fiscal Quarter than it did in the 2003 First Fiscal Quarter. Total cost of sales for the 2004 First Fiscal Quarter were $6,693,361 compared to $5,279,376 for the 2003 First Fiscal Quarter, and increase of $1,413,982 or 26.8%. The decrease is consummate with the decreased level of sales. eTelligent was purchased on June 1, 2002, so there are no comparative financials for the 2003 First Fiscal Quarter. eTelligent's total revenue for the 2004 First Fiscal Quarter was $216,225 or 15.3% of the total increase. Like for like cost of sales increased $1,197,757 or 22.7%. Logicorp experience stronger sales in the 2004 First Fiscal Quarter than it did in the 2003 First Fiscal Quarter. Total selling, general and administrative expenses for the 2004 First Fiscal Quarter were $2,059,616, compared to $1,992,178 for the 2003 First Fiscal Quarter, an increase of $67,438 or 3.4%. eTelligent was purchased on June 1, 2002, so there are no comparative financials for the 2003 First Fiscal Quarter. eTelligent's total selling, general and administrative expenses for the 2004 First Fiscal Quarter were $322,017. Like for like selling, general and administrative expenses decreased $254,579 or 12.8%. The decrease was the result of decreased staffing levels and lower legal and accounting fees. Depreciation and amortization for the 2004 First Fiscal Quarter were $189,873, compared to $311,487 for the 2003 First Fiscal Quarter, a decrease of $121,614 or 39.0%. The decrease results from some assets becoming fully depreciated. Interest and bank charges for the 2004 First Fiscal Quarter were $342,285, compared to $589,700 for the 2003 First Fiscal Quarter, a decrease of $247,415 or 42.0%. The decrease results from the complete amortization of the discount on convertible debt. In the 2004 First Fiscal Quarter, there was only one month amortization compared to three in the 2003 First Fiscal Quarter. There was a no loss on the disposal of investments/property in the 2004 First Fiscal Quarter compared to a loss of $248,587 for the 2003 First Fiscal Quarter. The loss in the 2003 First Fiscal Quarter resulted from the loss on the sale of a building and property. There was no provision for income taxes recorded in the 2004 First Fiscal Quarter compared with a $2,282 provision for income taxes for the 2003 First Fiscal Quarter. As the tax provision is based upon the individual companies' taxable income, a minimal provision was incurred, as not all the companies are in a taxable position. There are no deferred tax assets recorded by the Company. As a result of all of the above, the net loss from continuing operations for the 2004 First Fiscal Quarter was $741,020, compared to net loss of $2,339,617 for the 2003 First Fiscal Quarter, a decrease of $1,598,597. The decrease was primarily the result of increased sales. The gain from discontinued operations for the 2004 First Fiscal Quarter was $422,051, compared to gain of $1,368,641 for the 2003 First Fiscal Quarter, a decrease of $946,590. In the 2003 First Fiscal Quarter there was a gain on the disposal of debt and there is no corresponding gain in the 2004 First Fiscal Quarter. In addition, GalaVu was sold in April 2003 and thus there is no loss ($381,486 for the 2003 First Fiscal Quarter) associated with this discontinued subsidiary for the 2004 First Fiscal Quarter. The discontinued subsidiary of NTN experienced a net income of $422,051 for the 2004 First Fiscal Quarter, compared to a loss of $301,088 for the 2003 First Fiscal Quarter. 11 As a result of all of the above, the net loss for the 2004 First Fiscal Quarter was $318,969, compared to net loss of $970,976 for the 2003 First Fiscal Quarter, a decrease of $652,007. The 2004 First Fiscal Quarter reduced loss resulted primarily from increased sales levels offset by a decrease in the gains from discontinued operations. LIQUIDITY AND CAPITAL RESOURCES The Company's working capital deficit changed from $23,191,579 at August 31, 2003 to $22,613,095 at November 30, 2003, a decrease of $578,484. For the 2004 First Fiscal Quarter, the Company had a net increase of cash of $130,763 compared to a net decrease of $80,868 in the 2003 First Fiscal Quarter. Cash used in operating activities for the 2004 First Fiscal Quarter was $377,098 compared to $1,658,567provided by operating activities in the 2003 First Fiscal Quarter. In 2004, the major items that contributed to cash being used in operating activities were as follows: increase in accounts receivable of $916,440, increase of other assets of $53,396 and decrease in deferred revenue. The major items that contributed to cash being provided by operating activities were as follows: net loss with non-cash expenses added back of $77,633, the increase in accounts payable and accrued liabilities of $1,093,863 and the increase accrued interest of $122,977. In fiscal 2003, the major items that contributed to cash being provided by operating activities were as follows: the decrease in accounts receivable of $2,690,524 and the increase in accrued interest payable of $353,650. The major items that contributed to cash being used in operating activities were as follows: the increase in accounts payable and accrued liabilities of $598,619, an increase in inventory of $125,671 and the decrease in accrued revenue of $326,111. Cash used in investing activities in the 2004 First Fiscal Quarter was $49,464 compared to the $220,983 provide by investing activities in the 2003 First Fiscal Quarter, a decrease of $270,447. The decrease was primarily the result no proceeds from the disposal of property and equipment of $265,289 in the 2004 First Fiscal Quarter. Cash used in financing activities in the 2004 First Fiscal Quarter was $9,595, compared to the $1,666,236 provided in the 2003 First Fiscal Quarter. Our business plan for 2004 contemplates obtaining additional working capital through refinancings or restructurings of our existing loan agreements, reducing operating overhead (which has already begun through workforce consolidation), and the possible sale of some of our existing subsidiaries. Our management is of the opinion that they will be able to obtain enough working capital and that together with funds provided by operations, there will be sufficient working capital for the Company's requirements. CAUTIONARY STATEMENTS RELEVANT TO FORWARD-LOOKING INFORMATION FOR THE PURPOSE OF SAFE HARBOR PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995. The Company and its representatives may, from time to time, make written or oral forward-looking statements with respect to their current views and estimates of future economic circumstances, industry conditions, company performance and financial results. These forward-looking statements are subject to a number of factors and uncertainties, which could cause the Company's actual results and experiences to differ materially from the anticipated results and expectations, expressed in such forward-looking statements. The Company cautions readers not to place undue reliance on any forward-looking statements, which speak only as of the date made. Among the factors that may affect the operating results of the Company are the following: (i) fluctuations in the cost and availability of raw materials, such as feed grain costs in relation to historical levels; (ii) market conditions for finished products, including the supply and pricing of alternative proteins which may impact the Company's pricing power; (iii) risks associated with leverage, including cost increases attributable to rising interest rates; (iv) changes in regulations and laws, including changes in accounting standards, environmental laws, occupational and labor laws, health and safety regulations, and currency fluctuations; and (v) the effect of, or changes in, general economic conditions. 12 This management discussion and analysis of the financial condition and results of operations of the Company may include certain forward-looking statements, within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, including, without limitation, statements with respect to anticipated future operations and financial performance, growth and acquisition opportunity and other similar forecasts and statements of expectation. Words such as expects, anticipates, intends, plans, believes, seeks, estimates, should and variations of those words and similar expressions are intended to identify these forward-looking statements. Forward-looking statements made by the Company and its management are based on estimates, projections, beliefs and assumptions of management at the time of such statements and are not guarantees of future performance. The Company disclaims any obligations to update or review any forward-looking statements based on the occurrence of future events, the receipt of new information or otherwise. Actual future performance, outcomes and results may differ materially from those expressed in forward-looking statements made by the Company and its management as a result of a number of risks, uncertainties and assumptions. Representative examples of these factors include, without limitation, general industrial and economic conditions; cost of capital and capital requirements; shifts in customer demands; changes in the continued availability of financial amounts and the terms necessary to support the Company's future business. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Inflation The rate of inflation has had little impact on the Company's operations or financial position during the three months ended November 30, 2003 and November 30, 2002 and inflation is not expected to have a significant impact on the Company's operations or financial position during the 2004 Fiscal Year. Foreign Exchange Risk The Company pays a number of its suppliers, including its licensor and principal supplier, NTN Communications, Inc., in US dollars, in addition the Company holds a large amount of US dollar debt, and fluctuations in the value of the Canadian dollar against the US dollar will have an impact on its gross profit as well as its net income. If the value of the Canadian dollar falls against the US dollar, the cost of sales of the Company will increase thereby reducing its gross profit and net income. Conversely, if the value of the Canadian dollar rises against the US dollar, its gross profit and net income will increase. As of November 30, 2003, the Company had outstanding indebtedness of approximately $5.3 million denominated in U.S. dollars. The potential foreign exchange loss resulting from a hypothetical 10% increase for the three months ended November 30, 2003 in the devaluation of the Cdn/US dollar exchange rate would be approximately $530,000. This loss would be reflected in the balance sheet as increases in the principal amount of its dollar-denominated indebtedness and in the income statement as an increase in foreign exchange losses, reflecting the increased cost of servicing dollar-denominated indebtedness. This analysis does not take into account the positive effect that the hypothetical increase would have on accounts receivable and other assets denominated in U.S. dollars. 13 ITEM 4. CONTROLS AND PROCEDURES As of the end of the period covered by this quarterly report, an evaluation was performed under the supervision and with the participation of the Company's management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company's disclosure controls and procedures (as defined in Section 13a-15(e) and 15d-15(3) of the Securities Exchange Act of 1934, as amended). Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the design and operation of these disclosure controls and procedures were effective. There have been no significant changes in the Company's internal controls over financial reporting that occurred during the Company's second fiscal quarter that has materially affected or is reasonably likely to materially affect, the Company's internal control over financial reporting. PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS None. ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS None. ITEM 3. DEFAULTS UPON SENIOR SECURITIES None. ITEM 4. SUBMISSIONS OF MATTERS TO A VOTE OF SECURITY HOLDERS None. ITEM 5. OTHER INFORMATION None. ITEM 6. EXHIBITS (a) Exhibits The following list sets forth the applicable exhibits (numbered in accordance with Item 601 of Regulation S-K) required to be filed with this Quarterly Report on Form 10-Q: 14
Exhibit Number Description of Exhibit Location ------ ---------------------- -------- 2.1 Stock Purchase Agreement, dated October 1, 1996, among Connolly-Daw Holdings Inc., 1199846 Ontario Ltd., Douglas Connolly, Wendy Connolly and NTN Interactive Network Inc., minus Schedules thereto.................... +1, Exh. 10.1 3.1 Articles of Incorporation, as amended to date p. 59 3.2 By-Laws, as amended to date p. 62 4.1 Specimen Stock Certificate p. 71 10.1 License Agreement, dated March 23, 1990, between NTN Communications, Inc. and NTN Interactive Network Inc. +2, Exh. 10.9 10.2 Stock Purchase Agreement, dated as of October 4, 1994, between NTN Canada and NetStar Enterprises Inc. (formerly, Labatt Communications Inc.)...... +3, Exh. A 10.3 Option, dated as of October 4, 1994, registered in the name of NetStar Enterprises Inc. (formerly, Labatt Communications Inc)................... +3, Exh. B 10.4 Designation Agreement dated as of October 4, 1994, among NTN Canada, Inc., NTN Interactive Network Inc. and NetStar Enterprises Inc. (formerly Labatt Communications Inc.) +3, Exh. C 10.5 Registration Rights Agreement, dated as of October 4, 1994, between NTN Canada and NetStar Enterprises Inc. (formerly, Labatt Communications Inc.) +3, Exh. D 10.6 Promissory Note of NTN Interactive Network Inc. registered in the name of Connolly-Daw Holdings, Inc. +1, Exh. 10.2 10.7 Promissory Note of NTN Interactive Network Inc., registered in the name of 1199846 Ontario Ltd. +1, Exh. 10.3 10.8 Option Agreement, dated October 1, 1996, among Connolly-Daw Holdings Inc., NTN Interactive Network Inc. and NTN Canada, Inc................... +1, Exh. 10.5 10.9 Option Agreement, dated October 1, 1996, among 1199846 Ontario Ltd., NTN Interactive Network Inc. and NTN Canada, Inc. +1, Exh. 10.6 10.10 Registration Rights Agreement, dated October 1, 1996, among NTN Canada, Inc., Connolly-Daw Holdings Inc. and 1199846 Ontario Ltd................. +1, Exh. 10.4 10.11 Employment Agreement dated as of August 31, 1994, between NTN Interactive Network Inc. and Peter Rona +4, Exh. 10.11 10.12 Management Agreement dated October 1, 1996, between Magic Lantern Communications Ltd. and Connolly-Daw Holdings Inc. +4, Exh. 10.12 10.13 Employment Agreement dated October 1, 1996, between Magic Lantern Communications Ltd. and Douglas Connolly +4, Exh. 10.13 10.14 Employment Agreement dated October 1, 1996, between Magic Lantern Communications Ltd. and Wendy Connolly +4, Exh. 10.14 10.15 Asset Purchase Agreement, dated September 10, 1999, by and between 1373224 Ontario Limited, Networks North Inc. and Arthur Andersen Inc., to acquire the property and assets of GalaVu Entertainment Inc., from the person appointed by the court of competent jurisdiction as the receiver or receiver and manager of the property, assets and undertaking of GalaVu. +5, Exh. 10.15 10.16 Promissory Note, dated September 10, 1999, by and between 1373224 Ontario Limited, as Debtor, and the Holder, as Creditor. +5, Exh. 10.16 10.17 General Security Agreement, dated September 10, 1999, by and between 1373224 Ontario Limited, to acquire the property and assets of GalaVu Entertainment Inc., from the person appointed by the court of competent jurisdiction as the receiver or receiver and manager of the property, assets and undertaking of GalaVu. +5, Exh. 10.17 10.18 Securities Pledge Agreement, dated September 10, 1999, by and between 1373224 Ontario Limited to acquire the property and assets of GalaVu Entertainment Inc., from the person appointed by the court of competent jurisdiction as the receiver or receiver and manager of the property, assets and undertaking of GalaVu. +5, Exh. 10.18 10.19 Certificate to the Escrow Agent certifying that the conditions of Closing have been satisfied or waived. +5, Exh. 10.19 10.20 Certificate to the Escrow Agent certifying that the conditions of Closing have not been satisfied or waived. +5, Exh. 10.20
15 10.21 Occupancy and Indemnity Agreement, dated September 10, 1999, by and between 1373224 Ontario Limited to acquire the property and assets of GalaVu Entertainment Inc., from the person appointed by the court of competent jurisdiction as the receiver or receiver and manager of the property, assets and undertaking of GalaVu. +5, Exh. 10.21 10.22 Order of the Ontario Superior Court of Justice, dated September, 1999, approving the transaction contemplated herein, and vesting in the Purchaser the right, title and interest of GalaVu and the Receiver, if any, in and to the Purchased Assets, free and clear of the right, title and interest of any other person other than Permitted Encumbrances....... +5, Exh. 10.22 10.23 Bill of Sale, dated September 13, 1999, by and between 1373224 Ontario Limited to acquire the property and assets of GalaVu Entertainment Inc., from the person appointed by the court of competent jurisdiction as the receiver or receiver and manager of the property, assets and undertaking of GalaVu. +5, Exh. 10.23 10.24 Covenant of Networks North Inc. for valuable consideration to allot and issue and pay to the Receiver 100,000 common shares in accordance with the Purchase Agreement date September 10, 1999, between 1373224 Ontario Limited and the Receiver +5, Exh. 10.24 10.25 Agreement of Purchase and Sale dated August 4, 2000 by and among Networks North Inc., Networks North Acquisition Corp., Chell.com Ltd. and Cameron Chell . +6, Exh. A 10.26 Valuation of Chell.com Ltd. as of May 31, 2000 by Stanford Keene......... +6, Exh. B. 10.27 Share Purchase Agreement by and among Chell Group Corporation, Chell Merchant Capital Group, Inc., Melanie Johannesen, Randy Baxandall, Morris Chynoweth, Elaine Chynoweth, the Johannesen Family Trust, the Baxandall Family Trust, the Merc Family Trust, Logicorp Data Systems Ltd., 123557 Alberta Ltd., Logicorp Service Group Ltd. and 591360 Alberta Ltd................................................................ +7, Exhibit 2.1 10.28 Share Purchase Agreement, dated as of April 25, 2003 between DVOD Networks Inc., and Chell Group Corporation, minus schedules thereto; 10.29 Assignment of Debt and Security, dated April 25, 2003 between Chell Group Corporation and DVOD Networks Inc; 10.30 Assignment of Debt and Security, dated April 25, 2003 among NTN Interactive Network Inc., DVOD Networks Inc and GalaVu Entertainment Network Inc.; 10.31 Form of Assignment of Debt and Security, dated April 25, 2003 among 488605 Ontario Limited, Ruth Margel and DVOD Networks Inc., minus schedules thereto. 10.32 Stock Purchase Agreement dated as of August 2, 2004, by and among +5, Exh. 10.25 NewMarket Technology, Inc., the Registrant and Logicorp Data Systems, Ltd. 10.33 Bonus Agreement entered into August 2, 2004, by and between the +5, Exh. 10.26 Registrant and NewMarket Technology. 10.34 Form of Promissory Note issued by NewMarket Technology, Inc. to Logicorp +5, Exh. 10.27 Data Systems, Ltd. 10.35 Unanimous Shareholders Agreement dated August 2, 2004 by and among +5, Exh. 10.28 NewMarket Technology, Inc., the Registrant and Logicorp Data Systems, Ltd. 10.36 Registration Rights Agreement dated as of August 2, 2004, is entered into +5, Exh. 10.29 by and among NewMarket Technology, Inc., and the Registrant...... 21 List of Subsidiaries p. 19
16 31.1 Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 31.2 Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 32.1 Certification of the Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 32.2 Certification of the Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 - ---------------- +1 All Exhibits so indicated are incorporated herein by reference to the exhibit listed above in the Company's Current Report on Form 8-K (Date of Report: October 2, 1996) (File No. 0-18066), filed on October 17, 1996. +2 All Exhibits so indicated are incorporated herein by reference to the exhibit listed above in the Annual Report on Form 10-K of NTN Communications, Inc., for its fiscal year ended December 31, 1990) (File No. 2-91761-C), filed on April 1, 1991. +3 All Exhibits so indicated are incorporated herein by reference to the exhibit listed above in the Company's Current Report on Form 8-K (Date of Report: October 4, 1994) (File No. 0-18066), filed on October 18, 1994. +4 All Exhibits so indicated are incorporated herein by reference to the exhibit listed above in the Company's Annual Report on Form 10-K (Date of Report: November 27, 1996) (File No. 0-18066), filed on December 16, 1996. +5 All Exhibits so indicated are incorporated herein by reference to the exhibit listed above in the Company's 8-K (Date of Report: September 13, 1997) (File No. 0-18066), filed on December 16, 1996. +6 All Exhibits so indicated are incorporated herein by reference to the exhibit number listed above in the Definitive Proxy Statement on Form 14A of the Registrant (File No. 000-18066), filed with the Securities and Exchange Commission on August 8, 2000. +7 All Exhibits so indicated are incorporated herein by reference to the exhibit number listed above in the Company's Current Report on Form 8-K (Date of Report: December 13, 2001) (File No. 0-18066), filed on December 28, 2001. ++ Filed electronically pursuant to Item 401 of Regulation S-T. + Incorporated by reference. See Exhibit Index. 17 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. CHELL GROUP CORPORATION By /s/ David Bolink Dated: November 30, 2004 --------------------------------------- David Bolink Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated. /s/ David Bolink Dated: November 30, 2004 ------------------------------------------- David Bolink Chief Executive Officer, Chief Accounting Officer EX-11 2 ex11.txt Exhibit 11. List of Subsidiaries of Chell Group Corporation as at November 30, 2003 Name of Subsidiary(1) Jurisdiction of Incorporation Chell Merchant Capital Group, Inc........................................Ontario Logicorp Data Systems Ltd. (2) ..........................................Alberta Logicorp Service Group Ltd. (2) .........................................Alberta 123557 Alberta Ltd. (2) .................................................Alberta 591360 Alberta Ltd. (2) .................................................Alberta eTelligent Solutions Inc. (3) ...........................................Alberta NTN Interactive Network Inc...............................................Canada 1113659 Ontario Ltd. ("Viewer Services) (4)..............................Ontario 3484751 Canada Inc........................................................Canada Chell.com (USA) Ltd.......................................................Nevada - ---------- Notes: (1) Unless otherwise indicated, all named entities are wholly-owned subsidiaries of Chell Group Corporation. (2) Wholly-owned subsidiary of Chell Merchant Capital Group. (3) Wholly-owned subsidiary of Logicorp Data Systems Ltd... (4) Wholly-owned subsidiary of NTN Interactive Network Inc. EX-31 3 ex31.txt Exhibit 31.1 CERTIFICATIONS PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 I, David Bolink, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Chell Group Corporation. ("Chell"); 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of Chell as of, and for, the periods presented in this quarterly report; 4. As the sole certifying officer I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for Chell and have: a. designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to Chell, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b. evaluated the effectiveness of Chell's disclosure controls and procedures and presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this quarterly report based on such evaluation; c. disclosed in this report any change in Chell's internal control over financial reporting that occurred during Chell's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, Chell's internal control over financial reporting; 5. As the sole certifying officer I have disclosed, based on my most recent evaluation of internal control over financial reporting, to Chell's auditors and the audit committee of Chell's board of directors: a. all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect Chell's ability to record, process, summarize and report financial information; and b. any fraud, whether or not material, that involves management or other employees who have a significant role in Chell's internal control over financial reporting. DATE: November 30, 2004 By: /s/ David Bolink ------------------------------------------------- David Bolink Chief Executive Officer, Chairman of the Board EX-31.2 4 ex31_2.txt Exhibit 31.2 I, David Bolink, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Chell Group Corporation. ("Chell"); 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of Chell as of, and for, the periods presented in this quarterly report; 4. As the sole certifying officer I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for Chell and have: a. designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to Chell, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b. evaluated the effectiveness of Chell's disclosure controls and procedures and presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this quarterly report based on such evaluation; c. disclosed in this report any change in Chell's internal control over financial reporting that occurred during Chell's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, Chell's internal control over financial reporting; 5. As the sole certifying officer I have disclosed, based on my most recent evaluation of internal control over financial reporting, to Chell's auditors and the audit committee of Chell's board of directors: a. all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect Chell's ability to record, process, summarize and report financial information; and b. any fraud, whether or not material, that involves management or other employees who have a significant role in Chell's internal control over financial reporting. DATE: November 30, 2004 By: /s/ David Bolink ------------------------------- David Bolink Chief Accounting Officer EX-32.1 5 ex32_1.txt EXHIBIT 32.1 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report on Form 10-Q of Chell Group Corporation (the "Company") for the period ending November 30, 2003 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, David Bolink, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. (S) 1350, as adopted pursuant to (S) 906 of the Sarbanes-Oxley Act of 2002, that: (1) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. By: /s/ David Bolink ----------------------------------------------- David Bolink Chief Executive Officer, Chairman of the Board November 29, 2004 A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to Chell Group Corporation and will be retained by Chell Group Corporation and furnished to the Securities and Exchange Commission or its staff upon request. EX-32.2 6 ex32_2.txt EXHIBIT 32.2 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report on Form 10-Q of Chell Group Corporation (the "Company") for the period ending November 30, 2003 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, David Bolink, Chief Accounting Officer of the Company, certify, pursuant to 18 U.S.C. (S) 1350, as adopted pursuant to (S) 906 of the Sarbanes-Oxley Act of 2002, that: (1) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and (2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. By: /s/ David Bolink ------------------------------------ David Bolink Chief Accounting Officer November 29, 2004 A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to Chell Group Corporation and will be retained by Chell Group Corporation and furnished to the Securities and Exchange Commission or its staff upon request. -----END PRIVACY-ENHANCED MESSAGE-----