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
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(Former name or former address, if changed since last report.)
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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.