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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C., 20549

FORM 6-K

REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO RULE 13a-16 OR 15D-16
UNDER THE SECURITIES EXCHANGE ACT OF 1934

For the month of July, 2002

PEACE ARCH ENTERTAINMENT GROUP INC.
(Translation of Registrant's name into English)

 
 
 
#500, 56 East 2nd Avenue, Vancouver, B.C., Canada, V5T 1B1
(Address of principal executive office)

[Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.

Form 20-F             ý                        Form 40-F              o

[Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to rule 12g3-2(b) under the Securities Exchange Act of 1934.

Yes             o                        No              ý

(If "Yes" is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b):
82-___________________


FOR IMMEDIATE RELEASE
 
July 29, 2002


PEACE ARCH ENTERTAINMENT GROUP INC. ANNOUNCES
THIRD QUARTER RESULTS

[PEACE ARCH LOGO]

Vancouver, British Columbia—Peace Arch Entertainment Group Inc. (AMEX: "PAE"; TSE: "PAE.A", "PAE.B") today announced its results for the three months ended May 31, 2002. In the third quarter, the Company's revenue totaled $566,000, compared with $7.8 million in the third quarter of FY2001. During the quarter, the Company was in production of one television series and one documentary special, which are scheduled for delivery during the fourth quarter of FY2002.

The Company reported a net loss of ($1.7 million), or ($0.45) per diluted share, for the three months ended May 31, 2002, compared with a net loss of ($2.3 million), or ($0.60) per diluted share, in the third quarter of FY2001. Diluted earnings per share was calculated on 3,887,844 weighted average shares outstanding in the most recent quarter, versus 3,841,237 weighted average shares in the same quarter of the prior year.

Selling, general and administrative (SG&A) expenses decreased by 44% to $736,000 in the most recent quarter, compared with $1.3 million in the prior-year period, reflecting the Company's initiative to reduce overhead costs. SG&A expenses were approximately 47% lower than in the fourth quarter ended August 31, 2001, 15% lower than in the first quarter of FY2002, and 2% lower than in the second quarter of FY2002.

Earnings before interest, taxes, depreciation and amortization (EBITDA) for the three months ended May 31, 2002 totaled ($1.4 million), compared with ($1.2 million) in the comparable quarter of last year.

For the nine months ended May 31, 2002, the Company's revenue declined to $5.8 million, compared with $48.8 million in the first nine months of FY2001. Gross margin improved to 18.8% in the most recent nine-month period, versus 7.3% in the corresponding period of the previous year. The Company reported a net loss of ($2.8 million), or ($0.71) per diluted share, for the nine months ended May 31, 2002, compared with a net loss of ($2.0 million), or ($0.53) per diluted share, in the prior year period. Diluted earnings per share were calculated on 3,887,844 weighted average shares outstanding in the first nine months of FY2002, versus 4,288,849 weighted average shares in the same period of the prior year.

The Notes to the Company's financial statements for the nine months ended May 31, 2002 were amended to reflect the Company's requirement for additional capital to enable it to continue operations. Although the Company has taken steps to improve its financial position, including the reduction of operating costs and efforts to raise additional capital, there is no assurance that the Company will be successful.

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p. 2

The Company has continued its aggressive policy of repaying subordinated debt in recent months and, to date, such debt has been reduced by $7.0 million. These repayments have lowered the amount of subordinated debt outstanding by 89%, to $874,000, compared with $7.9 million at the end of Fiscal 2001. The Company previously indicated its objective to repay high-cost bridge financing prior to its due date, and has almost fully realized this goal.

During the first nine months of fiscal 2002, the Company adjusted its product mix to meet market demands, resulting in a decrease in revenue over the prior comparable period. Along with this change in product mix, a reduced level of program deliveries caused revenue to decline in the third quarter and first nine months of fiscal 2002. For the fourth quarter, the Company anticipates an increase in revenue over the preceding quarter due to an increase in program deliveries. Although the Company anticipates program deliveries for the fourth quarter will increase compared to program deliveries for the same quarter of the prior year, revenues will decrease due to the change in product mix.

During the quarter, the Company delivered its documentary special Rites of Passage, and was in production of its 13-episode, character-based documentary series, Whistler Stories, slated for delivery in our fourth quarter. Production commenced on its documentary special Fantasy Lands set to air on Discovery in the US and its documentary special Raven in the Sun set to air on SRC (CBC French), APTV, ARTV and CHUM's The New VI. The Company reports that it has seen a growing interest in, and demand for, documentary and reality-based television series as networks seek to reduce costs in response to lower advertising revenue. Although such series do not generate the large initial revenue streams characteristic of dramatic programming, the Company can retain worldwide control over exploitation, adding significant long-term value to its proprietary programming library.

In the dramatic programming arena, we continue to believe Peace Arch is well-positioned to benefit from a desire among producers, distributors and broadcasters to access original content in a cost-effective manner.

Peace Arch Entertainment Group Inc., one of Canada's foremost entertainment companies, creates, develops, produces and distributes proprietary television programming for worldwide markets. Peace Arch is headquartered in Vancouver, British Columbia.

A conference call to discuss the Company's operating results is scheduled for 4:15 P.M. Eastern Time on Monday, July 29, 2002. The dial in number for the conference call is 800-388-8975 (international callers 973-694-2225). An audio playback of this call will be posted on Peace Arch's website (www.peacearch.com). A replay of the call will also be available from 6:15 P.M. ET July 29, 2002 through 11:59 P.M. ET, August 5, 2002, by dialing 800-428-6051 (or 973-709-2089 for international callers) and entering Access Code 254104.

The call will be hosted by Peace Arch Entertainment Group Inc.'s, President and CEO, Juliet Jones.

(Note: The financial statistics included in this release are represented in Canadian dollars and are reported in accordance with Generally Accepted Accounting Principles in Canada. On July 26, 2002, the Bank of Canada noon spot rate was US $0.63 for each $1.00 Canadian.)

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p. 3

This press release includes statements that may constitute forward-looking statements, usually containing the words "believe", "estimate","project", "expect", or similar expressions. These statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements inherently involve risks and uncertainties that could cause actual results to differ materially from the forward-looking statements. Factors that would cause or contribute to such differences include, but are not limited to, continued acceptance of the Company's products and services in the marketplace, competitive factors, dependence upon third-party vendors, and other risks detailed in the Company's periodic report filings with the Securities and Exchange Commission. By making these forward-looking statements, the Company undertakes no obligation to update these statements for revisions or changes after the date of this release.

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For additional information on Peace Arch Entertainment Group,
please visit our new web site at
www.peacearch.com

For additional information, please contact:

Garth Albright, CFO
Carole Appleby, Media Relations
Peace Arch Entertainment Group Inc.
Tel: (604) 681-9308

(Financial Highlights to Follow)

[PEACE ARCH LOGO]

American Stock Exchange—Symbol PAE
Toronto Stock Exchange—Symbol PAE.A, PAE.B


THIRD QUARTER REPORT

For the Three and Nine Months Ended
May 31, 2001 and 2002
(unaudited)

PEACE ARCH ENTERTAINMENT GROUP INC.

CONSOLIDATED BALANCE SHEETS
As at May 31, 2001 and 2002 and August 31, 2001

(Expressed in thousands of Canadian dollars)
  May 31,
2001
   August 31,
2001
   May 31,
2002
  
 
   (unaudited)
(restated)

   (audited)
(restated)

   (unaudited)


  
ASSETS                    

Cash and cash equivalents
 
$
4,950
 
$
3,977
 
$
2,309
 
Accounts receivable     7,430     4,474     2,537  
Tax credits receivable     19,928     23,729     6,358  
Productions in progress     6,096     3,039     615  
Prepaid expenses and deposits     553     459     133  
Investment in television programming     10,778     3,667     4,067  
Property and equipment     7,251     7,277     893  
Deferred costs     835     410     564  
Goodwill and trademarks     2,687     238     220  
   
 
 
 
    $ 60,508   $ 47,270   $ 17,696  
   
 
 
 

LIABILITIES AND SHAREHOLDERS' EQUITY
 
 
 
 
 
 
 
 
 
 

Bank indebtedness
 
$
15,327
 
$
18,447
 
$
5,449
 
Accounts payable and accrued liabilities     10,880     12,876     2,449  
Deferred revenue     9,215     3,191     734  
Deferred gain     58     —     —  
Debt     11,239     11,215     10,161  
   
 
 
 
      46,719     45,729     18,793  
   
 
 
 
Shareholders' equity:                    
  Share capital     31,854     31,870     31,870  
  Authorized:                    
    100,000,000 Class A Multiple Voting Shares                    
      Issued—1,091,875 (May 31, 2001—1,111,245)                    
    100,000,000 Class B Subordinate Voting Shares                    
      Issued—2,795,969 (May 31, 2001—2,776,599)                    
    25,000,000 Preference Shares, issuable in series                    
      Issued—nil                    
 
Other paid-up capital
 
 
467
 
 
467
 
 
606
 
  Deficit     (18,532 )   (30,796 )   (33,573 )
   
 
 
 
      13,789     1,541     (1,097 )
   
 
 
 
    $ 60,508   $ 47,270   $ 17,696  
   
 
 
 

The accompanying notes are an integral part of the consolidated financial statements.

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PEACE ARCH ENTERTAINMENT GROUP INC.

CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three and Nine Months Ended May 31, 2001 and 2002

 
   3 months ended
   9 months ended
  
(Expressed in thousands of Canadian dollars
except per share information)

   2001
   2002
   2001
   2002
  
 
   (unaudited)
(restated)

   (unaudited)


   (unaudited)
(restated)

   (unaudited)


  
Revenue   $ 7,825   $ 566   $ 48,799   $ 5,772  

Expenses:
 
 
 
 
 
 
 
 
 
 
 
 
 
  Amortization of television programming and
Production costs		     7,546     1,099     43,776     4,318  
  Other costs of production and sales     214     158     1,480     369  
  Other amortization     247     161     738     485  
  Selling, general and administrative     1,325     736     3,142     2,354  
  Interest     507     601     1,452     1,895  
   
 
 
 
 
      9,839     2,755     50,588     9,421  
   
 
 
 
 
Loss from operations before undernoted     (2,014 )   (2,189 )   (1,789 )   (3,649 )

Gain on sale of assets
 
 
58
 
 
72
 
 
174
 
 
484
 
   
 
 
 
 
Loss before income taxes     (1,956 )   (2,117 )   (1,615 )   (3,165 )
Income taxes     339     (383 )   401     (388 )
   
 
 
 
 
Net loss for the period   $ (2,295 ) $ (1,734 ) $ (2,016 ) $ (2,777 )
   
 
 
 
 
Basic net loss per common share   $ (0.60 ) $ (0.45 ) $ (0.53 ) $ (0.71 )
   
 
 
 
 
Fully diluted loss per common share   $ (0.60 ) $ (0.45 ) $ (0.53 ) $ (0.71 )
   
 
 
 
 


CONSOLIDATED STATEMENTS OF DEFICIT
For the Three and Nine Months Ended May 31, 2001 and 2002

 
   3 months ended
   9 months ended
  
(Expressed in thousands of Canadian dollars
except per share information)

   2001
   2002
   2001
   2002
  
 
   (unaudited)
(restated)

   (unaudited)


   (unaudited)
(restated)

   (unaudited)


  
Deficit, beginning of period, as previously reported   $ (4,288 ) $ (31,839 ) $ (5,780 ) $ (30,796 )

Adjustment to reflect change in accounting for film costs
 
 
(11,949
)
 
—
 
 
(10,736
)
 
—
 
   
 
 
 
 
Deficit, beginning of period, as restated     (16,237 )   (31,839 )   (16,516 )   (30,796 )

Net loss for the period
 
 
(2,295
)
 
(1,734
)
 
(2,016
)
 
(2,777
)
   
 
 
 
 
Deficit, end of period   $ (18,532 ) $ (33,573 ) $ (18,532 ) $ (33,573 )
   
 
 
 
 

The accompanying notes are an integral part of the consolidated financial statements.

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PEACE ARCH ENTERTAINMENT GROUP INC.


CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Three and Nine Months Ended May 31, 2001 and 2002

 
   3 months ended
   9 months ended
  
(Expressed in thousands of Canadian dollars)

   2001
   2002
   2001
   2002
  
 
   (unaudited)
(restated)

   (unaudited)


   (unaudited)
(restated)

   (unaudited)


  
Operating activities:                          
  Net loss   $ (2,295 ) $ (1,734 ) $ (2,016 ) $ (2,777 )
  Items not involving cash:                          
    Amortization of television programming     7,546     1,099     43,776     1,365  
    Other amortization     247     162     738     485  
    Interest on debt discount     55     46     166     135  
    Gain on sale of assets     (58 )   (72 )   (174 )   (484 )
  Investment in television programming     (10,597 )   (1,126 )   (51,994 )   (1,765 )
  Changes in non-cash working capital     7,897     13,504     617     9,174  
   
 
 
 
 
      2,795     11,879     (8,887 )   6,133  
   
 
 
 
 
Investing activities:                          
  Change in deferred costs     (76 )   (62 )   (66 )   (451 )
  Increase of goodwill and trademarks     (8 )   (1 )   (16 )   (1 )
  Proceeds on sale of assets, net     —     (43 )   —     6,743  
  Property and equipment acquired     (23 )   (31 )   (70 )   (44 )
   
 
 
 
 
      (107 )   (137 )   (152 )   6,247  
   
 
 
 
 
Financing activities:                          
  Issue of common shares, net     170     —     179     —  
  Increase (decrease) in bank indebtedness     501     (10,869 )   9,530     (12,998 )
  Decrease debt     (48 )   (617 )   (179 )   (1,050 )
   
 
 
 
 
      623     (11,486 )   9,530     (14,048 )
   
 
 
 
 
Increase (decrease) in cash and cash equivalents     3,311     256     491     (1,668 )
Cash and cash equivalents, beginning of period     1,639     2,053     4,459     3,977  
   
 
 
 
 
Cash and cash equivalents, end of period   $ 4,950   $ 2,309   $ 4,950   $ 2,309  
   
 
 
 
 
Supplementary information:                          
  Interest paid (net of amounts capitalized)   $ 507   $ 845   $ 1,200   $ 1,686  
  Income taxes paid     —     —     18     —  
Non-cash transaction:                          
  Conversion of an accounts payable to debt     —     —     —     6,626  

The accompanying notes are an integral part of the consolidated financial statements.

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PEACE ARCH ENTERTAINMENT GROUP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Three and Nine Months Ended May 31, 2001 and 2002
(unaudited)

(Dollar amounts in tables expressed in thousands of Canadian dollars)


1.    Operations


2.    Future Operations


3.    Significant Accounting Policies

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4.    Segmented Information

 
   Production
Services
   Proprietary
Programming
   Other
   Total
2001                        
Revenue   $ 2,159   $ 46,560   $ 80   $ 48,799
Gross profits     679     2,784     80     3,543
   
 
 
 
Total assets     7,637     52,762     109     60,508
   
 
 
 
2002                        
Revenue   $ 3,511   $ 2,078   $ 183   $ 5,772
Gross profits     189     713     183     1,085
   
 
 
 
Total assets     741     15,389     1,566     17,696
   
 
 
 

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SUPPLEMENTAL INFORMATION

For the convenience of the reader, operating results for the three and nine months ended May 31, 2001 and 2002 have been translated into US Dollars using the average exchange rate in effect for the periods. Balance sheet information has been translated into US Dollars using the Bank of Canada noon spot rate in effect at the balance sheet dates. These translations are not necessarily representative of the amounts that would have been reported if the Company had historically reported its financial statements in US Dollars. In addition, the rates utilized are not necessarily indicative of rates in effect at any other time.

PEACE ARCH ENTERTAINMENT GROUP INC.

US DOLLARS

Selected Financial and Operating Information
For the Three and Nine Months Ended May 31, 2001 and 2002

(Reported in accordance with generally accepted accounting principles in Canada)
(Expressed in thousands of US Dollars except per share information)

 
   3 months ended
   9 months ended
  
 
   2001
   2002
   2001
   2002
  
 
   (unaudited)
(restated)

   (unaudited)


   (unaudited)
(restated)

   (unaudited)


  
Revenue   $ 5,040   $ 360   $ 31,951   $ 3,652  

Net loss for the period
 
 
(1,478
)
 
(1,103
)
 
(1,320
)
 
(1,757
)

EBITDA
 
 
(774
)
 
(862
)
 
376
 
 
(497
)

Fully diluted loss for the period
 
$
(0.39
)
$
(0.28
)
$
(0.35
)
$
(0.45
)

Selected Balance Sheet Information
As at May 31, 2001 and 2002

(Reported in accordance with generally accepted accounting principles in Canada)
(Expressed in thousands of US Dollars except per share information)

 
   2001
   2002
  
 
   (unaudited)
(restated)

   (unaudited)


  
Cash and cash equivalents   3,203   1,512  
Accounts receivable   4,807   1,661  
Tax credits receivable   12,893   4,162  
Productions in progress   3,944   403  
Investment in television programming   6,974   2,663  
Property and equipment   4,691   585  
Goodwill and trademarks   1,738   144  

Total Assets
 
39,153
 
11,585
 

Bank indebtedness
 
9,916
 
3,567
 
Accounts payable and accrued liabilities   7,039   1,603  
Deferred revenue   5,961   481  
Debt   7,271   6,652  

Share capital
 
20,611
 
20,864
 
Deficit   (11,992 ) (21,979 )
Shareholders' equity (deficit)   8,922   (718 )

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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, thereunto duly authorized.

        PEACE ARCH ENTERTAINMENT GROUP INC.
(Registrant)

 
 
 
 
 
Date July 29, 2002
   By "JULIET JONES"
(Signature)*
Juliet Jones, President and CEO
*Print the name and title under the signature of the signing officer.		      


GENERAL INSTRUCTIONS

A.    Rule as to Use of Form 6-K,

This form shall be used by foreign private issuers which are required to furnish reports pursuant to Rule 13a-16 or 15d-16 under the Securities Exchange Act of 1934.

B.    Information and Document required to be Furnished,

Subject to General Instruction D herein, an issuer furnishing a report on this form shall furnish whatever information, not required to be furnished on Form 40-F or previously furnished, such issuer (i) makes or is required to make public pursuant to the law of the jurisdiction of its domicile or in which it is incorporated or organized, or (ii) files or is required to file with a stock exchange on which its securities are traded and which was made public by that exchange, or (iii) distributes or is required to distribute to its security holders.

The information required to be furnished pursuant to (i), (ii) or (iii) above is that which is material with respect to the issuer and its subsidiaries concerning: changes in business; changes in management or control; acquisitions or dispositions of assets; bankruptcy or receivership; changes in registrant's certifying accountants; the financial condition and results of operations; material legal proceedings; changes in securities or in the security for registered securities; defaults upon senior securities; material increases or decreases in the amount outstanding of securities or indebtedness; the results of the submission of matters to a vote of security holders; transactions with directors, officers or principal security holders; the granting of options or payment of other compensation to directors or officers; and any other information which the registrant deems of material importance to security holders.

This report is required to be furnished promptly after the material contained in the report is made public as described above. The information and documents furnished in this report shall not be deemed to be "filed" for the purpose of Section 18 of the Act or otherwise subject to the liabilities of that section.

If a report furnished on this form incorporates by reference any information not previously filed with the Commission, such information must be attached as an exhibit and furnished with the form.

C.    Preparation and Filing of Report

This report shall consist of a cover page, the document or report furnished by the issuer, and a signature page. Eight complete copies of each report on this form shall be deposited with the Commission. At least one complete copy shall be filed with each United States stock exchange on which any security of the registrant is listed and registered under Section 12(b) of the Act. At least one

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of the copies deposited with the Commission and one filed with each such exchange shall be manually signed. Unsigned copies shall be conformed.

D.    Translations of Papers and Documents into English

Reference is made to Rule 12b-12(d) [17 CFR 240.12b-12(d)]. Information required to be furnished pursuant to General Instruction B in the form of press releases and all communications or materials distributed directly to security holders of each class of securities to which any reporting obligation under Section 13(a) or 15(d) of the Act relates shall be in the English language. English versions or adequate summaries in the English language of such materials may be furnished in lieu of original English translations.

Notwithstanding General Instruction B, no other documents or reports, including prospectuses or offering circulars relating to entirely foreign offerings, need be furnished unless the issuer otherwise has prepared or caused to be prepared English translations, English versions or summaries in English thereof. If no such English translations, versions or summary have been prepared, it will be sufficient to provide a brief description in English of any such documents or reports. In no event are copies of original language documents or reports required to be furnished.

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THIRD QUARTER RESULTS
THIRD QUARTER REPORT
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED STATEMENTS OF OPERATIONS
CONSOLIDATED STATEMENTS OF DEFICIT
CONSOLIDATED STATEMENTS OF CASH FLOWS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SUPPLEMENTAL INFORMATION
SIGNATURES
GENERAL INSTRUCTIONS