Peace Arch Entertainment Group Inc.
AMEX : PAE
TSX : PAE.LV

Peace Arch Entertainment Group Inc.

January 13, 2006 17:32 ET

Peace Arch Entertainment Group Reports Fiscal 2006 First Quarter Results

TORONTO, ONTARIO--(CCNMatthews - Jan. 13, 2006) - Peace Arch Entertainment Group Inc. (TSX:PAE.LV)(AMEX:PAE) (www.peacearch.com) today announced results for its fiscal first quarter, the three-month period ended November 30, 2005.

The Company's revenue totalled $0.9 million for the quarter, compared with $3.1 million for the fiscal first quarter of the prior year. Peace Arch reported a net loss of $0.7 million, or $0.04 per diluted share for the three months ended November 30, 2005, compared to a net loss of $0.6 million, or $0.03 per diluted share for the comparable fiscal '05 period.

The decrease in revenues compared to the same period of the prior year reflects the timing of the recognition of presale revenues only recognized upon completion and delivery of a motion picture. As an emerging entertainment company in the film and television industries, Peace Arch's quarterly results tend to be 'clumpy,' which is dependent upon the number and timing of projects completed and delivered during a given period.

Peace Arch has announced new films, television series renewals and pilots as well as appointments of experienced industry executives in recent months. Management expects the positive impact of these developments to be reflected in its operating results during fiscal '06.

Recent news:

- Peace Arch received favorable news from the American Stock Exchange (Amex) that the Company was in compliance with the Exchange's continued listing standards. This was in response to a letter that Peace Arch had received from the Amex on February 10, 2004.

- Peace Arch's Series I Preferred Shareholders exercised 1,435,897 Preferred Share Purchase Warrants to purchase 1,435,897 Series II Preference Shares at a price of U.S. $0.50 per share, resulting in $717,948 in proceeds to the Company.

Fiscal Q1 highlights:

- The Company has worldwide distribution rights to "Delirious," a romantic comedy starring Steve Buscemi, Michael Pitt, Alison Lohman and Gina Gershon, which has now completed filming in New York City.

- Peace Arch acquired worldwide distribution rights to, "Guantanamero" starring Rupert Evans, Sir Derek Jacobi and Natalie Verbeke, which has now completed filming.

- Peace Arch formed a new genre division, Archetype Films, to package, finance and distribute action, horror, thriller and science fiction films. The division has packaged and financed four pictures which it will distribute worldwide: - "Heartstopper" starring Robert Englund, "Warriors of Terra" starring Edward Furlong, "The Last Sect" with David Carradine and "5ive Girls" with Ron Perlman of which principal photography was completed on "Heartstopper" and "Warriors of Terra."

- The Company was in production on two television series - a pilot for a new series for Food Network Canada, and "Homemade Inc.," a documentary series exploring food entrepreneurs and food product innovation. Each is scheduled for delivery during the 2006 calendar year.

- Peace Arch factual television subsidiary The Eyes Project Development Corp. (www.theeyes.ca) delivered "Fantasy Lands Asia," a documentary examining the latest trends in theme park design, engineering and construction in the Asia Pacific region. The film illustrates similarities as well as differences that define theme parks and attractions as culturally and ethnically appropriate to their geographic locale.

For full Financial Statements, Note Disclosure and MD&A, please refer to the Company's filings, which are available at: www.sedar.com and www.sec.gov/edgar.

Peace Arch Entertainment Group Inc. (www.peacearch.com) develops, produces and acquires feature films and television programming that it licenses to theatrical, home video and television distributors throughout the world.

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, availability of capital 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.



Peace Arch Entertainment Group Inc.
Consolidated Balance Sheets
---------------------------------------------------------------------

(expressed in thousands of Canadian dollars)

November 30 August 31
2005 2005
$ $
(unaudited) (audited)
Assets
Cash and cash equivalents 519 1,428
Accounts and other receivables 10,545 13,022
Investment in film and
television programming 19,524 15,559
Prepaid expenses and deposits 132 163
Property and equipment 411 399
Restricted term deposits 19,669 20,597
-----------------------------
50,800 51,168
-----------------------------
-----------------------------

Liabilities
Production loans 17,963 16,038
Accounts payable and
accrued liabilities 3,773 4,519
Deferred revenue 606 523
Obligation to issue shares 142 142
Revenue guarantee obligation 19,669 20,597
-----------------------------
42,153 41,819
-----------------------------

Shareholders' Equity
Capital stock 9,889 9,889
Contributed surplus 2,398 2,342
Warrants 693 693
Other paid-in capital 680 680
Deficit (5,013) (4,255)
-----------------------------
8,647 9,349
-----------------------------
50,800 51,168
-----------------------------
-----------------------------



Peace Arch Entertainment Group Inc.
Consolidated Statements of Operations
(unaudited)
---------------------------------------------------------------------

(expressed in thousands of Canadian dollars,
except per share amounts)

Three Months Three Months
Ended Ended
November November
30, 2005 30, 2004
$ $

Revenue 909 3,098
-----------------------------

Expenses
Amortization of investment in
film and television programming
and other production costs 832 2,933
Selling, general and administrative 1,020 839
-----------------------------
1,852 3,772
-----------------------------

Loss from operations before
the undernoted (943) (674)

Interest income 252 259
Interest expense (430) (338)
Other amortization (20) (4)
Foreign exchange gain 409 55
Gain on sale of asset 33 -
Recovery of selling, general
and administration expenses - 119
-----------------------------

Loss before income taxes (699) (583)

Income tax recovery - -
-----------------------------

Net loss for the period (699) (583)
-----------------------------
-----------------------------

Net loss per common share

Basic (0.04) (0.03)
-----------------------------
-----------------------------

Diluted (0.04) (0.03)
-----------------------------
-----------------------------



Peace Arch Entertainment Group Inc.
Consolidated Statements of Deficit
(unaudited)
---------------------------------------------------------------------

(expressed in thousands of Canadian dollars)

Three Months Three Months
Ended Ended
November November
30, 2005 30, 2004
$ $

Deficit - Beginning of period
As previously reported (4,255) (35,442)

Preferred stock dividend (59) -
Net loss for the period (699) (583)
-----------------------------

Deficit - End of period (5,013) (36,025)
-----------------------------
-----------------------------



Peace Arch Entertainment Group Inc.
Consolidated Cash Flow Statements
(unaudited)
---------------------------------------------------------------------

(expressed in thousands of Canadian dollars)


Three Months Three Months
Ended Ended
November November
30, 2005 30, 2004
$ $

Cash flows from operating activities
Net loss for the period (699) (583)
Items not affecting cash
Amortization of film and
television programming 539 2,836
Other amortization 20 4
Gain on sale of asset (33) -
Stock based compensation 56 -
Investment in film and
television programming (4,503) (410)
Changes in non-cash operating
working capital 1,877 (4,193)
-----------------------------
(2,743) (2,346)
-----------------------------

Cash flows from investing activities
Property and equipment purchases (32) (22)
-----------------------------
(32) (22)
-----------------------------

Cash flows from financing activities
Payment of preferred stock dividends (59) -
Issuance of production loans 6,438 3,623
Repayment of production loans (4,513) (1,868)
-----------------------------
1,866 1,755
-----------------------------

Decrease in cash and cash equivalents (909) (613)

Cash and cash equivalents -
Beginning of period 1,428 1,484
-----------------------------

Cash and cash equivalents -
End of period 519 871
-----------------------------
-----------------------------

Supplemental cash flow information
Interest paid 577 244



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