FORM 10-Q/A NO. 1

                       Securities and Exchange Commission
                              Washington D.C. 20549

      AMENDMENT NO. 1 TO QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

For the fiscal quarter ended: MAY 31, 2001
Commission file number: 0-18066

                          CHELL GROUP CORPORATION INC.
                           F/K/A NETWORKS NORTH, INC.
             (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.)

                          800 THIRD AVENUE, 21ST FLOOR
                            NEW YORK, NEW YORK 10022
                    (Address of principal executive offices)
                                   (Zip Code)

                                 (416) 675-0874
              (Registrant's telephone number, including area code)

      Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.

                                 Yes |X| No |_|

Indicate the number of shares outstanding of each of the registrant's classes of
      common stock, as of July 13, 2001: 9,028,239 shares of common stock,
                           par value $.0467 per share.

<PAGE>

                          CHELL GROUP CORPORATION INC.
                     (FORMERLY KNOWN AS NETWORKS NORTH INC.)
                                AND SUBSIDIARIES

                   INDEX TO CONSOLIDATED FINANCIAL INFORMATION

                     FOR THE NINE MONTHS ENDED MAY 31, 2001

<TABLE>
<CAPTION>
PART I - FINANCIAL INFORMATION

Item 1.  FINANCIAL STATEMENTS:                                                                        PAGE
<S>                                                                                                    <C>
     Consolidated Balance Sheets -
          as at May 31, 2001 (unaudited) and August 31, 2000                                            1

     Consolidated Statements of Operations and Retained Earnings (Deficit) -
          For the Nine Months Ended May 31, 2001 and May 31, 2000 (unaudited)                           2

     Consolidated Statements of Operations and Retained Earnings (Deficit) -
          For the Three Months Ended May 31, 2001 and May 31, 2000 (unaudited)                          2

     Consolidated Statements of Cash Flows -
          For the Nine Months Ended May 31, 2001 and May 31, 2000 (unaudited)                           3

     Notes to Consolidated Financial Statements                                                         4

Item 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
         RESULTS OF OPERATIONS                                                                         11

PART II - OTHER INFORMATION

Item 2.  CHANGES IN SECURITIES                                                                         17

Item 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                                           17

Item 6.  EXHIBITS AND REPORTS ON FORM 8-K                                                              18

SIGNATURES                                                                                             20
</TABLE>


                                       2
<PAGE>

                          CHELL GROUP CORPORATION INC.
                     (FORMERLY KNOWN AS NETWORKS NORTH INC.)
                           CONSOLIDATED BALANCE SHEETS
                     AS AT MAY 31, 2001 AND AUGUST 31, 2000
                         (Expressed in Canadian dollars)

<TABLE>
<CAPTION>
===================================================================================================================
                                                                            MAY 31, 2001          August 31, 2000
                                                                            (UNAUDITED)        (restated - Note 14)
                                                                        (RESTATED - NOTE 14)
                                                                                  $                      $
-------------------------------------------------------------------------------------------------------------------
<S>                                                                          <C>                    <C>
ASSETS
CURRENT
Cash and cash equivalents                                                       190,211              1,355,613
Short-term investments                                                           19,518                269,727
Accounts receivable, trade - net of allowance for doubtful
         accounts of $227,000; August - $178,000                              2,494,085              3,098,808
Other receivables                                                               223,717                216,990
Income taxes receivable                                                         155,184                143,227
Inventory                                                                       152,318                206,216
Prepaid expenses                                                                768,887                527,549
-------------------------------------------------------------------------------------------------------------------
TOTAL CURRENT ASSETS                                                          4,003,920              5,818,130
-------------------------------------------------------------------------------------------------------------------
Property and equipment, net                                                   8,930,414              7,689,620
Licenses, net of accumulated amortization                                       236,949                250,248
Goodwill, net of accumulated amortization                                     2,286,227              2,863,146
Notes receivable                                                                461,100                160,000
Deposit on purchase (note 7)                                                  1,689,710                     --
Other assets, net of amortization                                               129,721                202,799
Net assets from discontinued operations                                         104,754                236,268
-------------------------------------------------------------------------------------------------------------------
                                                                             17,842,795             17,220,211
===================================================================================================================

LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT
Accounts payable - trade                                                      2,242,188              1,379,727
Accrued liabilities                                                           1,532,498              1,623,220
Current portion of long-term debt (note 8, 9)                                 3,150,262                397,632
-------------------------------------------------------------------------------------------------------------------
TOTAL CURRENT LIABILITIES                                                     6,924,948              3,400,579
-------------------------------------------------------------------------------------------------------------------
Long-term debt (note 8, 9)                                                    5,069,736              4,377,040
Deferred income taxes payable                                                    59,173                 59,173
-------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES                                                             12053,857              7,836,792
-------------------------------------------------------------------------------------------------------------------
Contingent liabilities (Note 10)
SHAREHOLDERS' EQUITY
Share capital (note 11)
     900,000 preferred shares                                                        --                 10,917
     9,028,239 common shares [August - 2,925,141]                               604,110                191,122
     Capital in excess of par value                                          15,849,970             10,454,669
     Deficit                                                                (10,665,142)            (1,273,289)
-------------------------------------------------------------------------------------------------------------------
TOTAL SHAREHOLDERS' EQUITY                                                    5,788,938              9,383,419
-------------------------------------------------------------------------------------------------------------------
                                                                             17,842,795             17,220,211
===================================================================================================================
</TABLE>

         The accompanying notes are an integral part of these statements


                                       1
<PAGE>

                          CHELL GROUP CORPORATION INC.
                     (FORMERLY KNOWN AS NETWORKS NORTH INC.)
                    CONSOLIDATED STATEMENTS OF OPERATIONS AND
                           RETAINED EARNINGS (DEFICIT)
                   (Expressed in Canadian dollars - unaudited)

<TABLE>
<CAPTION>
==========================================================================================================================
                                                      For Three Months Ended                    For Nine Months Ended
                                                  MAY 31, 2001      May 31, 2000            MAY 31, 2001      May 31, 2000
                                                  (restated -       (restated -             (restated -       (restated -
                                                    Note 14)          Note 14)                Note 14)          Note 14)
                                                       $                 $                       $                 $
--------------------------------------------------------------------------------------------------------------------------
<S>                                              <C>                  <C>                  <C>                  <C>
REVENUE
Network services                                    1,565,610         1,561,663               4,915,072         4,884,821
Pay-TV                                              1,750,918         1,613,800               5,047,393         4,859,700
Event programming                                     139,012           212,917                 336,711           422,068
Ad sponsorship                                         60,578            94,691                 132,869           383,989
Video/software sales                                1,137,261           973,052               2,967,029         3,394,517
Digital encoding                                      139,598           154,719                 677,350           397,828
--------------------------------------------------------------------------------------------------------------------------
                                                    4,792,977         4,610,842              14,076,424        14,342,923
--------------------------------------------------------------------------------------------------------------------------

COST OF SALES
Network services                                      584,501           563,984               1,790,031         1,740,647
Pay-TV                                                867,426           735,400               2,182,480         1,923,300
Ad sponsorship                                             --             4,592                      --            15,872
Video/software sales                                  266,318           509,254                 895,049         1,477,925
Digital encoding                                        3,534            32,769                  17,590            78,957
--------------------------------------------------------------------------------------------------------------------------
                                                    1,721,779         1,845,999               4,885,150         5,236,701
--------------------------------------------------------------------------------------------------------------------------

EXPENSES
Selling, general and administrative                 3,403,040         2,584,925              13,575,462         7,472,134
expenses
Bad debt                                               21,276             3,194                  88,305           118,706
Interest and bank charges                             445,019            56,974                 999,137           196,286
Write off of leasehold improvements                        --                --                 355,560                --
Depreciation and amortization                         543,886           561,970               2,142,417         1,636,312
--------------------------------------------------------------------------------------------------------------------------
Loss before undernoted                             (1,342,023)         (442,220)             (7,969,607)         (317,216)
Provision for (recovery of) income taxes                   --          (113,000)                     --           110,000
Minority interest                                      14,483            (6,752)                 49,989           (9,683)
--------------------------------------------------------------------------------------------------------------------------
LOSS FROM CONTINUING OPERATIONS                    (1,356,506)         (322,468)             (8,019,596)         (417,533)
Loss from discontinued operations (net of
income tax)                                        (1,086,036)         (286,388)             (1,372,257)         (867,254)
--------------------------------------------------------------------------------------------------------------------------
LOSS AND COMPREHENSIVE LOSS FOR THE PERIOD         (2,442,542)         (608,856)             (9,391,853)       (1,284,787)

Retained earnings (deficit), beginning of          (8,222,600)          374,401              (1,273,289)        1,050,332
period
--------------------------------------------------------------------------------------------------------------------------
DEFICIT, END OF PERIOD                            (10,665,142)         (234,455)            (10,665,142)         (234,455)
==========================================================================================================================

EARNINGS (LOSS) PER SHARE (NOTE 4):
Basic and diluted from continuing                       (0.16)            (0.11)                  (0.94)            (0.15)
operations
Basic and diluted from discontinued                     (0.13)            (0.10)                  (0.16)            (0.30)
operations
--------------------------------------------------------------------------------------------------------------------------
Net loss per share                                      (0.29)            (0.21)                  (1.10)            (0.45)
==========================================================================================================================
</TABLE>

         The accompanying notes are an integral part of these statements


                                       2
<PAGE>

                          CHELL GROUP CORPORATION INC.
                     (FORMERLY KNOWN AS NETWORKS NORTH INC.)
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
             FOR THE NINE MONTHS ENDED MAY 31, 2001 AND MAY 31, 2000
                   (Expressed in Canadian dollars - unaudited)

<TABLE>
<CAPTION>
===================================================================================================================
                                                                             MAY 31, 2001         May 31, 2000
                                                                         (restated - Note 14)  (restated - Note 14)
                                                                                  $                    $
-------------------------------------------------------------------------------------------------------------------
<S>                                                                              <C>                 <C>
OPERATING ACTIVITIES
Net loss and comprehensive loss for the period                                   (9,391,853)         (1,284,787)
Adjustments to reconcile net income to net cash
     used in operating activities:
     Compensation costs related to the change in the conversion rate of
       preferred shares                                                                  --             337,779
     Depreciation and amortization                                                2,142,417           1,636,312
     Accretion of interest on non-interest bearing promissory notes                 137,617             129,807
     Amortization of discount                                                       435,365                  --
     Write-off of leasehold improvements                                            355,560                  --
     Services rendered for shares                                                   659,359                  --
     Warrants issued                                                                174,084                  --
     Write-off of prepaids arising from Chell asset purchase                        367,235                  --
     Write-off assets arising from discontinued operations                          636,268                  --
Changes in assets and liabilities:
     Decrease (increase) in short-term investments                                  250,209              (9,718)
     Decrease (increase) in accounts receivable, trade                              604,723          (1,488,312)
     Decrease (increase) in income taxes receivable                                 (11,957)            167,957
     Decrease (increase) in inventory                                                53,898            (130,043)
     Increase in prepaid expenses                                                   (72,998)            (38,588)
     Increase in other accounts receivable                                           (5,323)                 --
     Decrease in other assets                                                        16,352                  --
     Decrease in assets from discontinued operations                                131,514             183,903
     Increase in accounts payable and accrued liabilities                           634,123             540,021
-------------------------------------------------------------------------------------------------------------------
CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES                                  (2,883,407)             44,331
-------------------------------------------------------------------------------------------------------------------

INVESTING ACTIVITIES
Purchase of property and equipment                                               (1,279,651)         (1,081,664)
Increase in deposit on purchase                                                  (1,689,710)                 --
Increase in notes receivable                                                       (301,100)                 --
-------------------------------------------------------------------------------------------------------------------
CASH USED IN INVESTING ACTIVITIES                                                (3,270,461)         (1,081,664)
-------------------------------------------------------------------------------------------------------------------

FINANCING ACTIVITIES
Increase in notes and loans payable                                               5,011,537                  --
Repayment of notes and loans payable                                                (23,071)            (23,453)
Proceeds from exercise of options                                                        --             156,236
-------------------------------------------------------------------------------------------------------------------
CASH PROVIDED BY FINANCING ACTIVITIES                                             4,988,466             132,783
-------------------------------------------------------------------------------------------------------------------

NET DECREASE IN CASH AND CASH EQUIVALENTS DURING THE PERIOD                      (1,165,402)           (904,550)
Cash and cash equivalents, beginning of period                                    1,355,613           2,018,122
-------------------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS, END OF PERIOD                                            190,211           1,113,572
===================================================================================================================

-------------------------------------------------------------------------------------------------------------------
Income Taxes Paid                                                                    98,491               2,500
Interest Paid                                                                        92,793              91,076
</TABLE>

      Non cash items arose from the purchase of Chell.com assets during the 2001
First Three  Fiscal  Quarters.  They are  $1,936,272  of  property &  equipment,
$107,589 of goodwill,  $45,044 of prepaids,  $1,404 in other accounts receivable
and in addition shares were issued (Note 5). Other assets of $217,362 arose from
the issue of warrants,  shares were issued for  consulting  fees and salaries in
the amount of $668,388  and shares were issued for a debt  payment on the GalaVu
purchase in the amount of $115,165.

         The accompanying notes are an integral part of these statements


                                       3
<PAGE>

                          CHELL GROUP CORPORATION INC.
                     (FORMERLY KNOWN AS NETWORKS NORTH INC.)
                                AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
       FOR THE NINE MONTHS ENDED MAY 31, 2001 AND MAY 31, 2000 (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 Networks  North Inc. (the  "Company")  (Commission
No.:0-18066),  filed with the Securities and Exchange Commission on December 14,
2000.  The results of operations  for the nine months ended May 31, 2001 are not
necessarily indicative of the results for the full fiscal year ending August 31,
2001.

Note 2. GENERAL

      The  financial  statements  of the  Company  for the three and nine months
ended May 31, 2001 (the "2001 Third Fiscal Quarter" and "2001 First Three Fiscal
Quarters"),  include the operations of the Company's  wholly-owned  subsidiaries
Chell  Merchant  Capital  Group  Inc.   ("CMCG"),   Chell.com  (USA)  Inc.,  NTN
Interactive  Network Inc. ("NTNIN"),  3484751 Canada Inc., GalaVu  Entertainment
Network Inc.  ("GalaVu")  and NTNIN's  wholly-owned  subsidiaries  Magic Lantern
Communications Ltd. ("Magic") and Interlynx Multimedia Inc. ("Interlynx").

      The  financial  statements  of the  Company  for the three and nine months
ended May 31, 2000 (the "2000 Third Fiscal Quarter" and "2000 First Three Fiscal
Quarters"),  include the operations of the Company's  wholly-owned  subsidiaries
NTNIN, 3484751 Canada Inc., GalaVu and NTNIN's  wholly-owned  subsidiaries Magic
and Interlynx.

      Magic  conducts  its  operations  directly  and through  its wholly  owned
subsidiaries,  745695 Ontario Ltd.  ("Custom Video"),  B.C. Learning  Connection
Inc.  ("BCLC"),  and  1113659  Ontario  Ltd.  ("Viewer  Services")  and  its 75%
ownership of the outstanding shares of Sonoptic Technologies Inc.  ("Sonoptic").
Effective  September 1, 2000 the operations of BCLC and Custom Video were merged
with  Magic and the BCLC and Custom  Video  corporations  were  wound up.  Also,
effective  September 1, 2000 Magic's  wholly owned  subsidiary  TutorBuddy  Inc.
commenced operations.

      Prior period's  figures have been  reclassified  to be consistent with any
reclassifications in the current period.


                                       4
<PAGE>

Note 3.  BUSINESS  SEGMENT DATA FOR THE THREE AND NINE MONTHS ENDED MAY 31, 2001
         AND MAY 31, 2000

<TABLE>
<CAPTION>
=================================================================================================
                                     For Three Months Ended              For Nine Months Ended
                                MAY 31, 2001       May 31, 2000     MAY 31, 2001     May 31, 2000
                                 (restated -                        (restated -
                                   Note 14)                           Note 14)
                                      $                 $                 $                $
=================================================================================================
<S>                              <C>                 <C>             <C>               <C>
EXTERNAL REVENUE
  Entertainment                   3,496,975         3,477,758        10,392,084        10,540,017
  Education                       1,295,908         1,127,772         3,667,758         3,792,345
  ASP Services                           --                --                --                --
  Corporate                              94             5,312            16,582            10,561
-------------------------------------------------------------------------------------------------
                                  4,792,977         4,610,842        14,076,424        14,342,923
-------------------------------------------------------------------------------------------------
INTER-SEGMENT REVENUE
  Entertainment                          --            14,211                --            42,686
  Education                          48,261           388,643           147,002           388,643
  Corporate                              --            31,969                --            96,269
-------------------------------------------------------------------------------------------------
                                     48,261           434,823           147,002           527,598
-------------------------------------------------------------------------------------------------
OPERATING PROFIT (LOSS)
  Entertainment                     113,124            27,604          (110,013)          332,229
  Education                        (228,629)           42,739          (620,530)         (118,768)
  ASP Services                     (662,054)               --        (5,490,359)               --
  Corporate                        (564,464)         (512,563)       (1,748,705)         (530,677)
-------------------------------------------------------------------------------------------------
                                 (1,342,023)         (442,220)       (7,969,607)         (317,216)
-------------------------------------------------------------------------------------------------
NET INCOME (LOSS)
  Entertainment                     113,124           140,604          (110,013)          222,229
  Education                        (243,112)           49,491          (670,519)         (109,085)
  ASP Services                     (662,054)               --        (5,490,359)               --
  Corporate                        (564,464)         (512,563)       (1,748,705)         (530,677)
  Discontinued operations        (1,086,036)         (286,388)       (1,372,257)         (867,254)
-------------------------------------------------------------------------------------------------
                                 (2,442,542)         (608,856)       (9,391,853)       (1,284,787)
-------------------------------------------------------------------------------------------------

<CAPTION>
=================================================================================================
                                                                               As at
                                                                    MAY 31, 2001     May 31, 2000
                                                                          $               $
-------------------------------------------------------------------------------------------------
<S>                                                                  <C>               <C>
TOTAL ASSETS
  Entertainment                                                       9,791,918        12,753,181
  Education                                                           3,228,830         3,934,847
  ASP Services                                                        2,033,921                --
  Corporate                                                           2,683,372         1,078,042
  Discontinued operations                                               104,754           313,324
-------------------------------------------------------------------------------------------------
                                                                     17,842,795        18,079,394
-------------------------------------------------------------------------------------------------
</TABLE>


                                       5
<PAGE>

Note 4. 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 and
nine months ended May 31, 2001 and May 31, 2000:

<TABLE>
<CAPTION>
=========================================================================================================
                                               For Three Months Ended              For Nine Months Ended
                                          MAY 31, 2001       May 31, 2000     MAY 31, 2001   May 31, 2000
                                           (restated -                        (restated -
                                             Note 14)                           Note 14)
                                                 $                $                $               $
---------------------------------------------------------------------------------------------------------
<S>                                         <C>              <C>              <C>              <C>
NUMERATOR:
Net loss (numerator for basic and
diluted loss per share) from
continuing operations                       (1,356,506)        (322,468)      (8,019,596)        (417,533)
Net loss (numerator for basic and
diluted loss per share) from
discontinued operations                     (1,086,036)        (286,388)      (1,372,257)        (867,254)
---------------------------------------------------------------------------------------------------------
Net loss (numerator for basic and
diluted loss per share)                     (2,442,542)        (608,856)      (9,391,853)      (1,284,787)
=========================================================================================================

DENOMINATOR FOR BASIC AND DILUTED LOSS
PER SHARE - adjusted weighted average
number of shares and assumed
conversions                                  8,490,576        2,860,464        8,490,576        2,860,464
=========================================================================================================

Basic and diluted loss per share from
continuing operations                       $    (0.16)      $    (0.11)      $    (0.94)      $    (0.15)
Basic and diluted loss per share from
discontinued operations                     $    (0.13)      $    (0.10)      $    (0.16)      $    (0.30)
---------------------------------------------------------------------------------------------------------
Net loss per share                          $    (0.29)      $    (0.21)      $    (1.10)      $    (0.45)
=========================================================================================================
</TABLE>

Note 5. PURCHASE OF ASSETS AND SHARES FROM CHEL.COM LTD. AND CAMERON CHELL

      On September 19, 2000, pursuant to an Agreement of Purchase and Sale dated
as of August 4, 2000,  the Company and its  subsidiary  Chell  Merchant  Capital
Group acquired,  certain shares and assets from Cameron Chell and Chell.com Ltd.
("Chell.com"), a Company owned 100% by Cameron Chell. Pursuant to the Agreement,
the Company acquired: (a) 480,000 common shares of cDemo Inc. (23%); (b) 875,000
common shares of Engyro,  Inc. (34%);  and (c) 60,000 common shares of Chell.com
USA (100%).  In addition,  Chell Merchant  Capital Group acquired 962,500 common
shares  of  eSupplies  (Alberta)  Ltd.  (27%)  as well as  certain  assets  from
Chell.com.

      This  acquisition  was not reflected in the financial  statements  for the
year  ended  August  31,  2000 since  shareholder  approval  to ratify the above
purchase transaction was not voted on and approved until September 8, 2000.

      In consideration for this acquisition, the Company issued 4,974,904 shares
of its common stock and Chell Merchant  Capital Group issued  1,928,267  special
convertible  shares,  inclusive of 1,476,398  shares  issued in exchange for the
shares of eSupplies (Alberta) Ltd., to Cameron Chell,  Chell.com and others. The
shares of the Company  that were issued in exchange  for the shares of eSupplies
(Alberta)  Inc. were placed in escrow and the investment in this company was not
to be recorded until such time as certain contingent conditions were


                                       6
<PAGE>

met. Each share issued by Chell Merchant  Capital Group is convertible  into one
share of common  stock of the Company.  Pursuant to a Voting and Exchange  Trust
Agreement  entered  into with a trustee,  whereby  voting  privileges  have been
granted,  such shares issued by Chell Merchant Capital Group can be voted by the
trustee  immediately.  The amount of shares issued was determined  based upon an
appraisal  valuation of the investments and assets acquired which  aggregated US
$28,652,086.

      The shares of the Company that were originally  issued in exchange for the
shares of cMeRun Corp.  were placed in escrow and the investment in this company
was not recorded. The conditions of the escrow were not met for cMeRun Corp. and
subsequently these shares were cancelled.

      The shares of Chell Merchant Capital Group that were originally  issued in
exchange for the shares of eSupplies were placed in escrow and the investment in
this company was not  recorded.  The  conditions  of the escrow were not met for
eSupplies and subsequently these shares were cancelled.

      As  a  result  of  the  above,   Cameron   Chell  and  Chell.com  now  own
approximately 65% of the Company's outstanding common stock, that is the Company
has in effect been acquired in a reverse acquisition.

      This  acquisition  of the Company by Cameron  Chell and  Chell.com and the
acquisition  by the Company of the equity  interests,  as described in the first
paragraph,  are reflected at historical cost in the Company's separate financial
statements.

      The Company will reflect the minority equity  investments using the equity
method of accounting.

Note 6. PURCHASE OF RICHARD WOLFF ENTERPRISES, INC. ASSETS

      Pursuant to an asset purchase  agreement  dated  September 1, 2000,  Magic
acquired the assets and business  operations of Richard Wolff Enterprises,  Inc.
("RWE"),  a  company  based  in  Illinois,  for a  purchase  price  of  $289,590
calculated on a discounted basis. As a result, Magic has expanded its library of
educational  titles  and  now  has  access  to  the  international  distribution
infrastructure formerly held by RWE. The acquisition was accounted for using the
purchase  method of  accounting  and  accordingly,  the purchase  price has been
allocated  to property  and  equipment.  The  purchase  price was  satisfied  by
$154,825 in cash and the issuance of four promissory  notes with maturity values
aggregating $147,350.  These promissory notes mature over a period of two years.
The fair values of these promissory notes approximate their carrying value.

      The asset purchase  agreement  also contains a purchase  price  adjustment
clause  whereby the price may be adjusted  upwards to a maximum of an additional
US$100,000  if certain  revenue  levels  are  achieved.  Specifically,  if gross
revenues for the acquired  business  exceed  US$500,000  for the 12 month period
ending August 31, 2001,  Magic will pay to RWE US$50,000,  and if gross revenues
exceed  US$600,000 for the second 12 month period ending August 31, 2002,  Magic
will pay to RWE an additional US$50,000.


                                       7
<PAGE>

      The  operating  results  related to the  acquisition  are  included in the
Company's  consolidated  statements of operations and retained earnings from the
date of acquisition.  Pro-forma  information has not been provided for the prior
year because it is not material.

Note 7. DEPOSIT ON PURCHASE OF APPLICATIONSTATION.COM, INC. SHARES

      On November 22, 2000, the Company entered into an agreement with Chell.com
Ltd.  to  participate  in  the  purchase  of a 51%  interest  in the  shares  of
ApplicationStation.com, Inc. The Company has provided a deposit of $1,689,710 to
Chell.com  Ltd.  for  its  25%  share  of the  51%  interest  in the  shares  of
ApplicationStation.com,  Inc. The Company's  investment  will be reflected using
the equity method of accounting.

Note 8. NOTE PAYABLE

      On January 15, 2001,  the Company  received  US$1,500,000  in return for a
promissory  note.  The note bears interest at 2% per month and the principal and
accrued interest is due and payable on July 15th, 2001.

Note 9. CONVERTIBLE DEBENTURE - RELATED PARTY TRANSACTION

      On  October  3,  2000,  the  Company  closed  the  sale of a  US$3,000,000
Convertible 10% Debenture to the VC Advantage Limited Partnership ("VCALP").  As
at May 31, 2001,  US$1,700,000  has been advanced.  EITF-00-27  "Application  of
Issue No. 98-5 to Certain Convertible  Instruments"  requires that a discount be
recorded for any beneficial  conversion  features  associated  with  convertible
debt.  The Company has recorded a discount of $1,959,144 in October 2000 and has
amortized  $429,077 to interest expense for the nine months ending May 31, 2001.
This  unsecured  convertible  debenture  is due  three  years  from  issue.  The
Convertible  Debenture bears interest at 10% per annum, payable upon conversion,
redemption or maturity.  The unpaid  principal of the debenture  bears  interest
from the date that it is actually  advanced  until paid.  Interest is payable in
cash or stock at the Company's option. The Convertible  Debenture is convertible
into common stock of the Company,  at US$3.00 per share, in amounts specified by
the  VCALP.  The  maximum  number of common  shares  VCALP  will  receive is one
million.  On the close date, the Company also issued 50,000 warrants to purchase
50,000 common shares at US$3.00 per share to VCALP.  The warrants have a term of
four years. On November 30, 2000 the convertible debenture was assigned by VCALP
to CALP II Limited Partnership.

Note 10. CONTINGENT LIABILITIES

      On June 18, 1992,  Interactive  Network  Inc.,  a third party,  instituted
proceedings  against  NTN  Communications  Inc.,  one  of  the  Company's  major
suppliers,  NTN Interactive Network Inc. and the Company in the Federal Court of
Canada and in the California Supreme Court claiming patent  infringement.  It is
the opinion of the Company's management that this patent infringement claim will
be successfully defended.


                                       8
<PAGE>

      Canada  Customs and Revenue  Agency is currently in  discussions  with the
Company  regarding a potential  liability  with  respect to  withholding  tax on
certain amounts paid to NTN Communications,  Inc. No assessment has been made to
date by Canada Customs and Revenue Agency. However,  Management believes that it
has valid defenses with respect to these matters and, accordingly, no amount has
been recorded in these consolidated  financial  statements.  The withholding tax
assessment could be between $0 and $460,000.  In the event that such matters are
settled in favour of Canada  Customs and Revenue  Agency,  the amounts  could be
material and would be recorded in the period in which they become  determinable.
NTN Communications Inc. would be responsible for paying such taxes.

Note 11. CHANGES IN SHARE CAPITAL

      During the nine months  ended May 31,  2001,  the  following  transactions
resulted in the  issuance of  6,103,098  common  shares of the Company and Chell
Merchant  Capital Group Inc. The  acquisition of certain assets of Chell.com and
Cameron  Chell was  satisfied by the issuance of 5,426,772  common shares of the
Company.  In addition  145,000 shares were issued as payment for consulting fees
rendered,  131,974  shares  issued in lieu of salary and  36,602  shares for the
settlement of debt. In addition, the preferred shares were converted for 300,000
common shares.  Also during the nine months ended May 31, 2001, options totaling
62,750 were  exercised  resulting in the issuance of  additional  62,750  common
shares of the Company.  Effective February 28, 2001, common shares authorized to
be issued was increased to 50,000,000.

Note 12. RECENT PRONOUNCEMENTS

      In March 2000,  the  Financial  Accounting  Standards  Board (FASB) issued
Interpretation No. 44 (FIN 44), "Accounting for Certain  Transactions  involving
Stock  Compensation,  an Interpretation of APB Opinion No. 25." FIN 44 clarifies
the application of APB No. 25 for certain issues, including the definition of an
employee,  the treatment of the acceleration of stock options and the accounting
treatment for options assumed in business combinations.  FIN 44 became effective
on July 1, 2000,  but is  applicable  for  certain  transactions  dating back to
December  1998.  The  adoption  of FIN 44 did not have a material  impact on the
Company's financial position or results of operations.

      In December  1999, the  Securities  and Exchange  Commission  (SEC) issued
Staff  Accounting  Bulletin  (SAB) No. 101,  "Revenue  Recognition  in Financial
Statements."  (SAB No. 101). SAB No. 101 expresses the views of the SEC staff in
applying generally accepted accounting principles to certain revenue recognition
issues.  The adoption of the  provisions  of SAB No. 101 in the first quarter of
fiscal 2001 did not have a material impact on the Company's  financial  position
or its results of operations.

      In June 1998,  the FASB issued SFAS No. 133,  "Accounting  for  Derivative
Instruments and Hedging  Activities."(SFAS No. 133). SFAS No. 133, as amended by
SFAS No. 138,  establishes  accounting  and reporting  standards for  derivative
instruments,   including  certain  derivative   instruments  embedded  in  other
contracts  (collectively referred to as derivatives) and for hedging activities.
SFAS No. 133 requires the  recognition  of all  derivatives  as either assets or
liabilities in the statement of financial position and the


                                       9
<PAGE>

measurement  of those  instruments  at fair  value.  The  Company  adopted  this
standard  in the first  quarter  of fiscal  year 2001  pursuant  to SFAS No. 137
(issued in June  1999),  which  delays the  adoption  of SFAS No. 133 until that
time.  The  adoption  of SFAS No.  133 did not  have a  material  impact  on the
Company's financial position or its results of operations.

Note 13. Discontinued Operations/Subsequent Events

      In May  2001,  the  Company  entered  into a plan  regarding  the  sale of
Interlynx.  On June 30th 2001, subsequent to the balance sheet date, the Company
signed an  agreement  to sell  Interlynx,  a  wholly-owned  subsidiary  of its a
wholly-owned  subsidiary NTNIN for $50,000. The sale will be completed effective
July 31st 2001. The Company's financial statements have been restated to reflect
Interlynx as a discontinued operation for all periods presented.

Note 14. Restatement of financial statements

[a]   Discount on Convertible Debt

      On  October  3,  2000,  the  Company  closed  the  sale of a  US$3,000,000
Convertible  10% Debenture of which  US$1,700,000  has been  advanced  (NOTE 9).
EITF-00-27  "Application of Issue No. 98-5 to Certain  Convertible  Instruments"
requires  that a discount be recorded  for any  beneficial  conversion  features
associated with convertible debt. The Company did not record the discount on the
US$1,700,000 debt and therefore had to make an adjustment and restate its Fiscal
2001 financial statements. The Company has now recorded a discount of $1,959,144
in October  2000 and has  amortized  $429,077 to  interest  expense for the nine
months ending May 31, 2001.

      Also as part of the  transaction,  the Company  issued 50,000  warrants to
purchase  50,000 common shares at US$3.00 per share.  These warrants were valued
and the Company  recognized a $252,706 cost associated with these warrants.  The
company had  expensed  $56,275  and had  $196,431  as other  assets.  The entire
transaction  has been  reversed,  because  the  value of the  warrants  has been
included in the calculation of the discount above.

[b]   Change in preferred shares

      On April 4th, 2000, the ratio at which preferred shares could be converted
to common shares was changed from 4.67 to 1 to 3 to 1. The resulting change from
192,857  to  300,000  common  shares  upon  conversion  resulted  in a  one-time
compensation  charge of $337,779.  In order to reflect  this change,  the fiscal
2000 financial statements have been restated.


                                       10
<PAGE>

The following table presents the impact of the restatements.

<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------
                                              As Previously      As Restated     As Previously      As Restated
                                                Reported                           Reported
----------------------------------------------------------------------------------------------------------------
                                                      3 months ended                      9 Months ended
                                                       May 31, 2001                        May 31, 2001
<S>                                             <C>               <C>               <C>               <C>
  Balance sheet:
      Other Assets                                                                     326,152           129,721
Long-term debt                                                                       6,593,515         5,069,736
    Share Capital
      Capital in excess of par value                                                14,143,532        15,849,970
      Deficit                                                                      (10,286,952)      (10,665,142)

  Statement of operations:
    Selling, general and admin                   3,421,623         3,403,040        13,625,449        13,575,462
    Interest and Bank Charges                      284,115           445,019           570,060           999,137
    Net loss                                    (2,300,211)       (2,442,542)       (9,012,763)       (9,391,853)

EPS
    Basic  and  diluted  loss per share
from continuing operations                          $(0.14)           $(0.16)           $(0.90)           $(0.94)
    Net loss per share                              $(0.27)           $(0.29)           $(1.06)           $(1.10)

                                                                                     Year ended August 31, 2000

    Share Capital
      Common Shares                                                       `            183,235           191,122
      Capital in excess of par value                                                10,124,777        10,454,669
      Deficit                                                                         (935,510)       (1,273,289)
----------------------------------------------------------------------------------------------------------------
</TABLE>


                                       11
<PAGE>

Item 2. MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

INTRODUCTION

      The financial  statements of the Company and the information  contained in
this Management's  Discussion and Analysis of Financial Condition and Results of
Operations are expressed in Canadian dollars.

GENERAL

      Chell Group  Corporation is engaged in the business of defining,  building
and   re-engineering   businesses,   interactive   entertainment   services  and
electronic/online  products  and  services  using new  economy  technologies  to
maximize  market value.  The Company's  main business  strategy is to operate or
invest in companies that represent the latest in technological  innovations.  In
that  regard,  the  Company  has two main  categories  of  companies:  operating
subsidiaries  and  investment  companies.  The Company  applies  its  expertise,
industry  contacts,  and market  foresight to these companies in order to create
shareholder  value.  The core businesses of the Company are the merchant capital
services provided through Chell Merchant Capital Group Inc.  (referred to as the
"Merchant Capital Group") and the interactive entertainment services provided by
NTN IN. In addition,  GalaVu is a  technology  based  entertainment  provider of
interactive  in-room  entertainment  systems to hotels across Canada;  the Magic
Lantern Group is involved in the marketing and distribution of educational video
and media resources and the conversion of analog video to digital video formats;
and Interlynx designs and develops web-based  training  software.  Interlynx was
sold subsequent to May 31st, 2001, the balance sheet date.

RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED MAY 31, 2001

      The  Company's  total  revenues  for the 2001 Third  Fiscal  Quarter  were
$4,792,977,  compared  to  $4,610,842  for the 2000  Third  Fiscal  Quarter,  an
increase of $182,135 or 4.0%.

      Revenues  from network  services  for the 2001 Third  Fiscal  Quarter were
$1,565,610,  compared  to  $1,561,663  for the 2000  Third  Fiscal  Quarter,  an
increase of $3,947 or 0.3%. These revenues are relatively constant between years
due to the number of Hospitality sites remaining at approximately the same level
between the 2001 and 2000 Third Fiscal Quarters.

      Revenues  from Pay-tv for the 2001 Third Fiscal  Quarter  were  $1,750,918
compared  to  $1,613,800  for the 2000 Third  Fiscal  Quarter,  an  increase  of
$137,118  or 8.5%.  This  increase  can be  attributed  to more  popular  movies
available  in the  2001  Third  Fiscal  Quarter  than in the 2000  Third  Fiscal
Quarter.

      Revenues  from event  programming  for the 2001 Third Fiscal  Quarter were
$139,012,  compared to $212,917 for the 2000 Third Fiscal Quarter, a decrease of
$73,905 or 34.7%. The decrease was due to a decreased number of corporate events
hosted in the 2001 Third Fiscal  Quarter  when  compared to the number of events
hosted in 2000 Third Fiscal Quarter.


                                       12
<PAGE>

      Revenues  from ad  sponsorship  were  $60,578  for the 2001  Third  Fiscal
Quarter,  compared to $94,691 for the 2000 Third Fiscal  Quarter,  a decrease of
34,113 or 36.0%.  The  decrease  was the result of a decrease  in the number and
size of corporate sponsors over the level experienced in the previous period.

      Revenues from video and software  sales for the 2001 Third Fiscal  Quarter
were  $1,137,261,  compared to $973,052  for the 2000 Third Fiscal  Quarter,  an
increase of  $164,209  or 16.9%.  The  increase  is  primarily  the result of an
increase in foreign sales ($229,429),  which is offset by the decrease in analog
video  sales,  as the demand for  digital  video has not  increased  at the same
corresponding levels.

      Revenues  from digital  encoding  were  $139,598 for the 2001 Third Fiscal
Quarter,  compared to $154,719 for the 2000 Third Fiscal Quarter,  a decrease of
$15,121 or 9.8%.  The  decrease  can be  attributed  a decreased  level of sales
compared to the 2000 Third Fiscal Quarter.

      Total  cost of sales for the 2001 Third  Fiscal  Quarter  were  $1,721,779
compared to $1,845,999 for the 2000 Third Fiscal Quarter, a decrease of $124,220
or 6.7%. The decrease is the result of decreased costs  associated with a change
in the focus of event programming, the decreased sales in ad sponsorship and the
decrease in video and software sales. As a percentage of revenues, cost of sales
decreased in the 2001 Third Fiscal Quarter to 35.9% from 40.0% in the 2000 Third
Fiscal Quarter.

      Total  selling,  general and  administrative  expenses  for the 2001 Third
Fiscal Quarter were $3,403,040, compared to $2,584,925 for the 2000 Third Fiscal
Quarter, an increase of $818,115 or 31.6%. The increase was caused mainly by the
addition  of the ASP  Services  segment,  which  accounted  for an  increase  of
$779,861.  The  Company  has also  experienced  increased  investor  and  public
relation  costs  ($320,822)  as a result  of the  addition  of the ASP  Services
segment.  In the 2000  Third  Fiscal  Quarter,  there  was a  one-time  $337,779
compensation  charge  resulting  from a  change  in the  conversion  rate on the
preferred shares.

      Total  selling,  general and  administrative  expenses  for the 2001 Third
Fiscal Quarter for the ASP Services segment comprised the following major items;
professional fees of $526,065 salaries of $126,955,  and communication  costs of
$50,038.

      As a percentage  of the Company's  total  revenues,  selling,  general and
administration  expenses  increased to 71.0% for the 2001 Third  Fiscal  Quarter
from 56.1% for the 2000 Third Fiscal Quarter.

      During the 2001 Second Fiscal Quarter,  Chell Merchant  Capital Group Inc.
decreased  its  staffing  levels  in the ASP  Services  segment.  The  costs  of
restructuring  this  company  are of a one time  nature and will not be incurred
beyond the 2001 Third Fiscal Quarter.

      Interest and bank charges for the 2001 Third Fiscal Quarter were $445,019,
compared to $56,974 for the 2000 Third Fiscal  Quarter,  an increase of $388,045
or  681.1%.  This  increase  results  from an  increase  in debt  related to the
purchase of the RWE assets  (Note 6),


                                       13
<PAGE>

the amortization of the discount on the note payable,  the note payable (Note 8)
and the sale of the  convertible  debenture  (Note  9). As a  percentage  of the
Company's  total revenues,  interest and bank charges  increased to 5.9% for the
2001 Third Fiscal Quarter from 1.2% for the 2000 Third Fiscal Quarter.

      There was no provision for income taxes  recorded in the 2001 Third Fiscal
Quarter  compared with a recovery of income taxes of $113,000 for the 2000 Third
Fiscal  Quarter.  As the tax provision is based upon the  individual  companies'
taxable income, no provision was incurred, as the companies are not in a taxable
position.

      Loss from  discontinued  operations  for the 2001 Third Fiscal Quarter was
$1,086,036,  compared to $286,388 for the 2000 Third Fiscal Quarter, an increase
of  $799,648  or 279.2%.  During  the 2001 Third  Fiscal  Quarter,  prepaids  of
$41,512, software costs of $162,500 and goodwill of $636,268 were written off in
anticipation  of the sale of  Interlynx.  The items are of a one time nature and
will not be incurred beyond the 2001 Third Fiscal Quarter.

      The minority  interest  share in profit for the 2001 Third Fiscal  Quarter
was $14,483.  This is compared to the minority  interest share in losses for the
2000 Third Fiscal Quarter of $6,752,  an overall change of $21,235.  This change
results from profitable operations in Sonoptic Technologies Inc., in which there
is a 25% minority interest.

      As a result of all of the above,  the net loss for the 2001  Third  Fiscal
Quarter was  $2,442,542,  compared  to net loss of  $608,856  for the 2000 Third
Fiscal  Quarter,  a increase of  $1,833,686.  The 2001 Third Fiscal Quarter loss
resulted  primarily from the addition of Chell  Merchant  Capital Group Inc. and
Chell.com (USA) Inc. to the Company and their activities including the provision
of services to developing  ASP  companies in which the Company has invested,  as
well as the loss incurred from discontinuing the operations of Interlynx.

RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED MAY 31, 2001

      The Company's total revenues for the 2001 First Three Fiscal Quarters were
$14,076,424, compared to $14,342,923 for the 2000 First Three Fiscal Quarters, a
decrease of $266,499 or 1.9%.

      Revenues  from network  services for the 2001 First Three Fiscal  Quarters
were  $4,915,072,  compared  to  $4,884,821  for the  2000  First  Three  Fiscal
Quarters, an increase of $30,251 or 0.6%. These revenues are relatively constant
between  the  years  due  to  the  number  of  Hospitality  sites  remaining  at
approximately  the same  level  between  the 2001 and 2000  First  Three  Fiscal
Quarters.

      Revenues  from  Pay-tv  for the 2001  First  Three  Fiscal  Quarters  were
$5,047,393  compared to $4,859,700 for the 2000 First Three Fiscal Quarters,  an
increase of $187,693 or 3.9%.  This  increase can be  attributed to more popular
movies available in 2001 versus 2000.

      Revenues from event  programming  for the 2001 First Three Fiscal Quarters
were $336,711  compared to $422,068 for the 2000 First Three Fiscal Quarters,  a
decrease of $85,357


                                       14
<PAGE>

or 20.2%.  The decrease was due to a decreased number of corporate events hosted
in the 2001 First Three Fiscal  Quarters  when  compared to the number of events
hosted in 2000 First Three Fiscal Quarters.

      Revenues from ad sponsorship were $132,869 for the 2001 First Three Fiscal
Quarters,  compared to  $383,989  for the 2000 First Three  Fiscal  Quarters,  a
decrease of $251,120 or 65.4%.  The decrease was the result of a decrease in the
number and size of corporate sponsors over the level experienced in the previous
period.

      Revenues  from video and  software  sales for the 2001 First Three  Fiscal
Quarters were $2,967,029  compared to $3,394,517 for the 2000 First Three Fiscal
Quarters, a decrease of $427,488 or 12.6%. In the First Three Fiscal Quarters of
2000, a one time large sale of $294,600 was recorded that resulted in abnormally
high revenue when compared to 2001's First Three Fiscal Quarters.

      Revenues  from  digital  encoding  were  $677,350 for the 2001 First Three
Fiscal Quarters,  compared to $397,828 for the 2000 First Three Fiscal Quarters,
an increase of $279,522 or 70.3%.  The increase can be  attributed  to increased
demand for digital services and the greater sales effort in this area.

      Total  cost of  sales  for the  2001  First  Three  Fiscal  Quarters  were
$4,885,150,  compared to $5,236,701 for the 2000 First Three Fiscal Quarters,  a
decrease of $351,551.  The decrease is  commensurate  with the  decreased  sales
levels experienced,  offset by increased cable costs in the Pay-tv segment. As a
percentage of revenues,  cost of sales  decreased in the 2001 First Three Fiscal
Quarters to 34.7% from 36.5% in the 2000 First Three Fiscal Quarters.

      Total  selling,  general and  administrative  expenses  for the 2001 First
Three Fiscal  Quarters were  $13,575,462,  compared to  $7,472,134  for the 2000
First Three Fiscal  Quarters,  an increase of $6,103,328 or 81,7%.  The increase
was caused mainly by the addition of the ASP Services  segment,  which accounted
for an increase of $5,377,070.

      Total  selling,  general and  administrative  expenses  for the 2001 First
Three Fiscal Quarters for the ASP Services segment comprised the following major
items; salaries $1,772,780, professional fees of $1,547,487, communication costs
of $157,351,  travel of $791,574,  advertising  and  promotion of $407,559,  and
investor and public relation costs of $487,196.

      As a percentage  of the Company's  total  revenues,  selling,  general and
administrative  expenses  increased  to 96.4% for the 2001  First  Three  Fiscal
Quarters from 52.1% for the 2000 First Three Fiscal Quarters.

      During the 2001 First Three Fiscal Quarters,  Chell Merchant Capital Group
Inc.  vacated certain leased space and as a result the Company wrote off the net
book value of the  related  leasehold  improvements  in the amount of  $355,560.
There were no similar transactions in the 2000 First Three Fiscal Quarters.


                                       15
<PAGE>

      Interest and bank charges for the 2001 First Three  Fiscal  Quarters  were
$999,137,  compared to $196,286  for the 2000 First Three  Fiscal  Quarters,  an
increase of $802,851 or 409.0%.  This increase  results from an increase in debt
related to the purchase of the RWE assets  (Note 6), the note payable  (Note 8),
the  amortization of the discount on the  convertible  debenture and the sale of
the  convertible  debenture  (Note 9). As a percentage  of the  Company's  total
revenues,  interest and bank charges  increased to 7.1% for the 2001 First Three
Fiscal Quarters from 1.4% for the 2000 First Three Fiscal Quarters.

      Total  depreciation  and  amortization  expense  for the 2001 First  Three
Fiscal Quarters was $2,142,417,  compared to $1,636,312 for the 2000 First Three
Fiscal  Quarters,  an increase of $506,105 or 30.9%.  This increase is primarily
the result of  depreciation  on the fixed assets acquired from RWE and Chell.com
Ltd.

      There was no provision  of income  taxes  recorded in the 2001 First Three
Fiscal  Quarters  compared with a provision for income taxes of $110,000 for the
2000  First  Three  Fiscal  Quarters.  As the tax  provision  is based  upon the
individual  companies'  taxable  income,  no  provision  was  incurred,  as  the
companies are not in a taxable position.

      Loss from discontinued operations for the 2001 First Three Fiscal Quarters
was  $1,372,257,  compared to $867,254  for the 2000 Third  Fiscal  Quarter,  an
increase of $505,003 or 58.2%. During the 2001 Third Fiscal Quarter, prepaids of
$41,512,  software  costs of $162,500 and goodwill of $636,268  were written off
coinciding  with the Sale of  Interlynx.  The items are of a one time nature and
will not be incurred beyond the 2001 Third Fiscal Quarter.

      The  minority  interest  share in profit for the 2001 First  Three  Fiscal
Quarters was $49,989.  This is compared to the minority interest share in losses
for the 2000  First  Three  Fiscal  Quarters  of $9,683,  an  overall  change of
$59,672. This change results from profitable operations in Sonoptic Technologies
Inc., in which there is a 25% minority interest.

      As a result of all of the  above,  the net loss for the 2001  First  Three
Fiscal Quarters was $9,391,853,  compared to net loss of $1,284,787 for the 2000
First Three Fiscal  Quarters,  an increase of  $8,107,066.  The 2001 First Three
Fiscal  Quarters loss  resulted  primarily  from the addition of Chell  Merchant
Capital Group Inc. and Chell.com (USA) Inc. to the Company and their  activities
including  the  provision of services to  developing  ASP companies in which the
Company has invested.

LIQUIDITY AND CAPITAL RESOURCES

      At  May  31st,  2001,  the  Company  had  a  working  capital  deficit  of
$2,921,028,  a decrease of  $5,338,579  from working  capital of  $2,417,551  at
August 31, 2000.

      For the 2001 First Three Fiscal  Quarters,  the Company had a net decrease
of cash of  $1,165,402  compared to a net decrease of $904,550 in the 2000 First
Three Fiscal Quarters.

      Cash used in operating activities for the 2001 First Three Fiscal Quarters
was $2,883,407, compared to $44,331 provided by operating activities in the 2000
First Three


                                       16
<PAGE>

Fiscal Quarters. In 2001, the major items that contributed to cash being used in
operating  activities were as follows: the net loss with non-cash expenses added
back of $4,483,948,  the increase in income taxes  receivable of $11,957 and the
increase in prepaid  expenses of $72,998.  The major items that  contributed  to
cash being  provided by operating  activities  were as follows:  the decrease in
accounts  receivable  of  $604,723  a  decrease  in  short-term  investments  of
$250,209,  an increase in accounts  payable and accrued  liabilities of $634,123
and a decrease in net assets from discontinued  operations of $131,514. In 2000,
the major items that contributed to cash being provided by operating  activities
were as  follows:  net income with  non-cash  expenses  added back of  $819,111,
decreases  in income  taxes  receivable  $167,957,  and an  increase in accounts
payable and accrued  liabilities and a decrease in net assets from  discontinued
operations  of $540,021 and $183,903  respectively.  The major uses of operating
funds  included  increases  in  accounts  receivable  and  prepaid  expenses  of
$1,488,312 and $130,043 respectively.

      Cash used in investing  activities in the 2001 First Three Fiscal Quarters
was $3,270,461  compared to the $1,081,664  used in investing  activities in the
2000 First Three Fiscal Quarters,  an increase of $2,188,797.  This increase was
primarily the result of an increase in the note  receivable  from Engyro and the
deposit of $1,689,710 on the purchase of shares in ApplicationStation.com, Inc.

      Cash  provided by  financing  activities  in the 2001 First  Three  Fiscal
Quarters was  $4,988,466,  compared to the  $132,783  provided in the 2000 First
Three  Fiscal  Quarters.  The  increase  is  primarily  due to the  sale  of the
convertible debenture and the bridge financing.

      The Company is in the process of attempting to raise additional capital in
order to realize its ASP  strategy  and to repay its loan  obligations  that are
currently  being  negotiated.   The  Company's  subsidiaries  operating  in  the
entertainment,  education and E-commerce segments create liquidity sufficient to
fund their  operations.  Management  believes that the current  negotiations for
terms and financing will be successful  and that combined with the  reorganizing
of the ASP  segment in the First  Fiscal 2001 Half,  the  Company  will have the
required liquidity for its planned operating activities in the current year.

INFLATION

      The rate of inflation has had little impact on the Company's operations or
financial  position  during the nine months  ended May 31, 2001 and May 31, 2000
and  inflation is not  expected to have a  significant  impact on the  Company's
operations or financial position during the 2001 Fiscal Year.

      The Company  pays a number of its  suppliers,  including  its licensor and
principal  supplier,  NTN  Communications,   Inc.,  in  US  dollars.  Therefore,
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.


                                       17
<PAGE>

                           PART II - OTHER INFORMATION

Item 1.     LEGAL PROCEEDINGS

            None.

Item 2.     CHANGES IN SECURITIES

            None.

Item 3.     DEFAULTS UPON SENIOR SECURITIES

            None.

Item 4.     SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

            None

Item 5.     OTHER INFORMATION

            None.


                                       18
<PAGE>

Item 6.     EXHIBITS AND REPORTS ON FORM 8-K

(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:

EXHIBIT
NUMBER                                 TITLE
------                                 -----

   3.1      Certificate of Incorporation, as amended to date.
   3.2      By-Laws, as amended to date.
   10.1     License Agreement, dated March 23, 1990, between NTN Communications,
            Inc. and NTN Interactive Network Inc.+
   10.2     Stock Purchase  Agreement,  dated as of October 4, 1994, between NTN
            Canada  Inc.  and  NetStar   Enterprises  Inc.   (formerly,   Labatt
            Communications  Inc.).  +
            Option,  dated as of  October  4,  1994,  registered  in the name of
            NetStar Enterprises Inc. (formerly, Labatt Communications Inc).+
   10.4     Designation  Agreement  dated as of October 4, 1994,  among Networks
            North Inc.  (formerly  know as NTN Canada,  Inc.),  NTN  Interactive
            Network  Inc.  and  NetStar   Enterprises   Inc.   (formerly  Labatt
            Communications Inc.). +
   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. +
   10.16    Promissory  Note,  dated  September 10, 1999, by and between 1373224
            Ontario Limited, as Debtor, and the Holder, as Creditor. +
   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. +
   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. +
   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. +
   10.24    Covenant of Networks North Inc.,  dated September 13, 1999, to allot
            and issue and pay to the Bank in writing  100,000  common  shares of
            NETN.
   11.      Computation of Earnings Per Share (see note 4).
   22       List of Subsidiaries


                                       19
<PAGE>

+     Incorporated by reference. See Exhibit Index.

(b)   REPORTS ON FORM 8-K

                                      NONE.

                                   SIGNATURES

            Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this amended report to be signed on its behalf by
the undersigned, thereunto duly authorized.

                                            CHELL GROUP CORPORATION INC.
                                       (FORMERLY KNOWN AS NETWORKS NORTH INC.)


Dated: March 5, 2004                       By: /s/ Stephen McDermott
                                           -------------------------------------
                                           Chairman and Chief Executive Officer
                                           (Duly Authorized Officer)


                                       20
<PAGE>

                          CHELL GROUP CORPORATION INC.
                                FORM 10-Q/A NO. 1
                                  MAY 31, 2001

                                  EXHIBIT INDEX

<TABLE>
<CAPTION>
EXHIBIT
NUMBER      DESCRIPTION OF EXHIBIT                                                              LOCATION
------      ----------------------                                                              --------
<S>         <C>                                                                                 <C>
   3.1      Certificate of Incorporation, as amended to date                                    +1, Exh. 3.1

   3.2      By-Laws, as amended to date                                                         +1, Exh. 3.2

   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 October 1, 1996, among Connolly-Daw  Holdings
            Inc.,  1199846  Ontario  Ltd.,  Douglas  Connolly,   Wendy  Connolly  and  NTN
            Interactive Network Inc., minus Schedules thereto                                   +3, Exh. 10.1

   10.4     Designation  Agreement dated as of October 4, 1994,  among Networks North Inc.
            (formerly known as NTN Canada, Inc.), NTN Interactive Network Inc. and NetStar
            Enterprises Inc. (formerly Labatt Communications Inc.)                              +4, Exh. C

   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. 10.1

   10.16    Promissory  Note,  dated  September 10, 1999, by and between  1373224  Ontario
            Limited, as Debtor, and the Holder, as Creditor.                                    +5, Exh. 10.2

   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. 10.3

   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. 10.4

   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. 10.9
</TABLE>


                                            21
<PAGE>

<TABLE>
<S>         <C>                                                                                 <C>
   10.24    Covenant of Networks North Inc. for valuable  consideration to allot and issue
            and pay to the Bank in writing 100,000 common shares of NETN.                       +5, Exh. 10.10

   11       Computation of earnings per share (see Note 4)

   22       List of Subsidiaries                                                                +1, Exh. 22
</TABLE>

+1    All  exhibits so  indicated  are  incorporated  herein by reference to the
      exhibit  number  listed  above in the  Annual  Report  on Form 10-K of the
      Company,  for its fiscal year ended  August 31,  1996 (File No.  0-18066),
      filed on December 16, 1996.
+2    All  exhibits so  indicated  are  incorporated  herein by reference to the
      exhibit  number  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  number  listed  above in the  Current  Report  on Form 8-K of the
      Company  (Date of Report:  October 2, 1996) (File No.  0-18066),  filed on
      October 17, 1996.
+4    All  exhibits so  indicated  are  incorporated  herein by reference to the
      exhibit  number  listed  above in the  Current  Report  on Form 8-K of the
      Company  (Date of Report:  October 4, 1994) (File No.  0-18066),  filed on
      October 18, 1994.
+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,
      1999) (File No. 0-18066), filed on September 29, 1999.
 +    Filed electronically pursuant to Item 401 of Regulation S-T.