SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

x QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended: September 30, ~~2009~~2010

o TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT

For the transition period from --- to ---

~~Commission~~C ommission File Number: 001-31810

(Exact Name of Registrant as Specified in its Charter)

55 Madison Avenue, Suite 300, Morristown New Jersey 07960

(Address of Principal Executive Offices, Zip Code)

(Registrant’s Telephone Number, Including Area Code)

~~Access Integrated Technologies, Inc.~~Indicate by check mark w hether the registrant (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 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 o

Indicate by check mark whether the registrant has submitted electronically and ~~former fiscal year,~~posted on its corporate Web site, if ~~changed since last report)~~any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S - -T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).Yes o No o

Non-accelerated filer o (Do not check if a smaller reporting company)

Indicate by c heck mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x

CINEDIGM DIGITAL CINEMA CORP.

CONTENTS TO FORM 10-Q

~~Submission of Matters to a Vote of Security Holders~~42

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)

CINEDIGM DIGITAL CINEMA CORP.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except for share data)

March 31,
2009

September 30,
2009

ASSETS (Unaudited)

Current assets

Cash and cash equivalents $ 26,329 $ 19,732
Restricted short-term investment securities — 5,594
Accounts receivable, net 13,884 11,527
Deferred costs, current portion 3,936 2,999
Unbilled revenue, current portion 3,082 3,522
Prepaid and other current assets 1,798 3,159
Note receivable, current portion 616 170
Total current assets 49,645 46,703

Restricted long-term investment securities
— 4,974
Restricted cash 255 7,161
Security deposits 424 427
Property and equipment, net 243,124 235,853
Intangible assets, net 10,707 9,192
Capitalized software costs, net 3,653 3,738
Goodwill 8,024 8,024
Deferred costs, net of current portion 3,967 7,735
Unbilled revenue, net of current portion 1,253 1,062
Note receivable, net of current portion 959 878
Accounts receivable, net of current portion 386 386
Total assets $ 322,397 $ 326,133

See accompanying notes to Unaudited Condensed Consolidated Financial Statements

CINEDIGM DIGITAL CINEMA CORP.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except for share data)

Preferred stock, 15,000,000 shares authorized;

Series A 10% - $0.001 par value per share; 20 shares authorized; 8 shares issued and outstanding at March 31, 2009 and September 30, 2009, respectively. Liquidation preference $4,050

See accompanying notes to Unaudited Condensed Consolidated Financial Statements

CINEDIGM DIGITAL CINEMA CORP.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except for share and per share data)

Preferred stock dividends

Net loss per Class A and Class B common share - basic and diluted

Direct operating (exclusive of depreciation and

amortization shown below)

See accompanying notes to Unaudited Condensed Consolidated Financial Statements

CINEDIGM DIGITAL CINEMA CORP.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands) (Unaudited)

Cash flows from investing activities

See accompanying notes to Unaudited Condensed Consolidated Financial Statements

CINEDIGM DIGITAL CINEMA CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

($ in thousands, except for per share data)


1.	NATURE OF OPERATIONS

Cinedigm Digital Cinema Corp. was incorporated in Delaware on March 31, 2000 (“Cinedigm”, and collectively with its ~~subsidiaries,~~subsidiar ies, the “Company”). ~~On September 30, 2009,~~

The Company is a digital cinema services and a content marketing and distribution company driving the ~~Company’s stockholders approved a change in~~conversion of the ~~Company’s name~~exhibition industry from ~~Access Integrated Technologies, Inc.,~~film to ~~Cinedigm Digital Cinema Corp. and such change was effected October 5, 2009.~~digital technology. The Company provides a digital cinema platform that combines technology solutions, provides financial advice and guidance, software services and ~~advice, software services,~~ electronic delivery ~~and content distribution~~ services to content owners and distributors ~~of digital content~~and to movie ~~theatres~~exhibitors. Cinedigm leverages this digital cinema platform with a series of business applications that utilize the platform to capitalize on the new business opportunities created by the transformation of movie theaters into networked entertainment centers. The three main applications currently provided by Cinedigm include (i) its digi tal entertainment origination, marketing and ~~other venues. Beginning September 1, 2009,~~distribution business focused on alternative content and independent film; (ii) its operational and analytical software applications; and (iii) its pre-show advertising and theatrical marketing business. Historically, the conversion of an industry from analog to digital has created new revenue and growth opportunities as well as an opening for new players to emerge for capitalizing on this technological shift at the expense of incumbents.

During the quarter ended June 30, 2010, the Company ~~made changes~~modified how its decision makers review and allocate resources to ~~its organizational structure~~operating segments, which ~~impacted its~~resulted in revised reportable segments, but did not impact ~~its~~our consolidated financial position, results of operations or cash flows. ~~The Company realigned its~~We realigne d our focus to ~~five~~four primary businesses as follows: the first digital cinema deployment (“Phase I Deployment”), the second digital cinema deployment (“Phase II Deployment”), digital cinema services (“Services”), and media content and entertainment (“Content & Entertainment”~~) and other (“Other”~~). The Company’s Phase I Deployment and Phase II Deployment segments are the non-recourse, financing vehicles and administrators for the Company’s digital cinema equipment (the “Systems”) installed in movie theatres nationwide. The Company’s Services segment provides services and support to the Phase I Deployment and Phase II Deployment segments as well as to other third party customers. Included in these services are asset management services for a specified fee via service agreements with Phase I Deployment and Phase II Deployment; software license, maintenance and consulting services; and electronic content delivery services via satellite and hard drive to the motion picture industry. These services primarily facilitate the conversion from analog (film) to digital cinema and have positioned the Company at what it believes to be the forefront of a rapidly developing industry relating to the delivery and management of digital cinema and other content to theatres and other remote venues worldwide. The Company’s Content & Entertainment segment provides content marketing and distribution services to alternative and theatrical content owners and to theatrical exhibitors and in-theatre advertising. ~~The Company’s Other segment provides~~

Since June 2010, the Company has classified certain businesses as discontinued operations, including the motion picture exhibition to the general public ~~information~~(“Pavilion Theatre”) , i nformation technology consulting services and managed network monitoring services (“Managed Services”), and hosting services and network access for other web hosting services (“Access Digital Server Assets”)., which are all separate reporting units previously included in our former "Other" segment. The Company is pursuing a sale of the Pavilion Theatre. In August 2010, the Company sold both Managed Services and the Access Digital Server Assets. Additional information on the discontinued operations can be found in Note 3. Overall, the Company’s goal is to aid in the transformation of movie theatres to entertainment centers by providing a platform of hardware, software and content choices. Additional information related to the Company’s ~~reporting~~reportable segments can be found in Note 9.


2.	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION, USE OF ESTIMATES AND CONSOLIDATION

The Company has incurred net losses historically and has an accumulated deficit of ~~$146,474~~$186,117 as of September 30, ~~2009.~~2010. The Company also has significant contractual obligations related to its recourse and non-recourse debt for the remaining part of fiscal year ~~2010~~2011 and beyond. Management expects that the Company will continue to generate net losses for the foreseeable future. Based on the Company’s cash position at September 30, ~~2009,~~2010, and expected cash flows from operations, management believes that the Company has the ability to meet its obligations through September 30 2010. In August 2009, the Company entered into a private placement of a senior secured note and extinguished its existing senior notes, which provided net proceeds after repayment of existing debt, funding of an interest reserve and transactions fees and expenses of approximately $11,300 of working capital funding., 2011. The Company has signed commitment letters for additional non-recourse debt capital, primarily to meet equipment requirements related to the Company’s Phase II Deployment, ~~(see Note 11). Although the Company recently entered into certain agreements related to the Phase II Deployment (see Note 7),~~and there is no assurance that financing for the Phase II Deployment will be completed as contemplated or under terms acceptable to the Company or its existing stockholders. Failure to generate additional revenues,

raise additional capital or manage discretionary spending could have a material adverse effect on the Company’s ability to continue as a going concern. The accompanying unaudited condensed consolidated financial statements do not reflect any adjustments which may result from the Company’s inability to continue as a going concern.

The condensed consolidated balance sheet as of March 31, ~~2009,~~2010, which has been derived from audited financial statements, and the unaudited interim condensed consolidated financial statements were prepared following the interim reporting requirements of the ~~Securities~~Securiti es and Exchange Commission (“SEC”). They do not include all disclosures normally

The Company’s condensed consolidated financial statements include the accounts of Cinedigm, Access Digital Media, Inc. (“AccessDM”), Hollywood Software, Inc. d/b/a ~~AccessIT~~Cinedigm Software (“Software”), Core Technology Services, Inc. (“Managed Services”), FiberSat Global Services, Inc. d/b/a ~~AccessIT~~Cinedigm Satellite and Support Services (“Satellite”), ADM Cinema Corporation (“ADM Cinema”) d/b/a the Pavilion Theatre (the “Pavilion Theatre”), Christie/AIX, Inc. d/b/a ~~AccessIT~~Cinedigm Digital Cinema (“Phase 1 DC”), PLX Acquisition Corp., UniqueScreen Media, Inc. (“USM”), Vistachiara Productions, Inc. f/k/a The Bigger Picture, currently d/b/a Cinedigm Content and Entertainment Group &n bsp;(“CEG”), Access Digital Cinema Phase 2 Corp. (“Phase 2 DC”) ~~and~~, Access Digital Cinema Phase 2 B/AIX Corp. (“Phase 2 B/AIX”) and Cinedigm Digital Funding I, LLC (“CDF I”). AccessDM and Satellite are together referred to as the Digital Media Services Division (“DMS”). All intercompany transactions and balances have been eliminated.

The preparation of the condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. ~~On an on-going basis, the Company evaluates its estimates, including~~Actual results may differ from those related to the carrying values of its long-lived assets, intangible assets and goodwill, the valuation of deferred tax assets, the valuation of assets acquired and liabilities assumed in purchase business combinations, stock-based compensation expense, revenue recognition and capitalization of software development costs. estimates.

The Company bases its estimates on historical experience and on other assumptions that the Company believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities ~~that are not readily apparent from other sources. Because~~ of the ~~uncertainty inherent in such estimates, actual results could differ materially from these estimates under different assumptions or conditions.~~

Pavilion Theatre, Managed Services and the Access Digital Server Assets have been reported as assets held for sale and discontinued operations for all periods presented. The March 31, ~~2009~~2010 consolidated balance ~~sheets~~sheet and the unaudited interim condensed consolidated statement of operations for the three and six months ended September 30, 2009 were reclassified ~~to break out the recourse and non-recourse notes payable~~ to conform to the current period presentation.

Phase I Deployment and Phase II Deployment

Virtual print fees (“VPFs”) are earned pursuant to contracts with movie studios and distributors, ~~whereby~~where by amounts are payable to Phase 1 DC, CDF I and to Phase 2 DC, when movies distributed by the studio are displayed on screens utilizing the Company’s ~~digital cinema equipment (the “Systems”)~~Systems installed in movie theatres. VPFs are earned and payable to Phase 1 DC and CDF I based on a defined fee schedule with a reduced VPF rate year over year until the sixth year (calendar 2011) at which point the VPF rate remains unchanged through the tenth year. One VPF is payable for every movie title displayed per System. The amount of VPF revenue is ~~therefore~~ dependent on the number of movie titles released and displayed onusing the Systems in any given accounting period. VPF revenue is recognized in the period in which the movie first opens for general audience viewing in ~~that~~a digitally-equipped movie theatre, as Phase 1 DC’s, CDF I’s and Phase 2 DC’s performance obligations have been substantially met at that time.

Phase 2 DC’s agreements with distributors require the payment of VPFs, according to a defined fee schedule, for 10ten years from the date each system is installed; however, Phase 2 DC may no longer collect VPFs once “cost recoupment,” as defined in the agreements, is achieved. Cost recoupment will occur once the cumulative VPFs and other cash receipts collected by Phase 2 DC have equaled the total of all cash outflows, including the purchase price of all Systems, all financing costs, all “overhead and ongoing costs”, as defined, and including the Company’s service fees, subject to maximum agreed upon amounts during the three-year rollout period and thereafter, plus a compounded return on any billed but unpaid overhead and ongoing costs, of 15% per year. Further, if cost recoupment occurs before the end of the eighth contract year, a one-time ~~“cost~~“ cost recoupment bonus” is payable by the studios to ~~Cinedigm.~~the Company. Any other cash flows, net of expenses, received by Phase 2 DC following the achievement of cost recoupment are required to be returned to the distributors on a pro-rata basis. At this time, the Company cannot estimate the timing or probability of the achievement of cost recoupment.

Alternative content fees (“ACFs”) are earned pursuant to contracts with movie exhibitors, whereby ~~amounts~~a mounts are payable to Phase 1 DC, CDF I and to Phase 2 DC, generally as a percentage of the applicable box office revenue derived from the exhibitor’s showing of content other than feature films, such as concerts and sporting events (typically referred to as “alternative content”). ACF revenue is recognized in the period in which the alternative content first opens for audience viewing.

For software multi-element licensing arrangements that do not require significant production, modification or ~~customization~~cu stomization of the licensed software, revenue is recognized for the various elements as follows: revenue for the licensed software element is recognized upon delivery and acceptance of the licensed software product, as that represents the culmination of the earnings process and the Company has no further obligations to the customer, relative to the software license. Revenue earned from consulting services is recognized upon the performance and completion of these services. Revenue earned from annual software maintenance is recognized ratably over the maintenance term (typically one year).

Revenue is deferred in cases where: (1) a portion or the entire contract amount cannot be recognized as revenue, due to non-delivery or pre-acceptance of licensed software or custom ~~programming,~~programmin g, (2) uncompleted implementation of application service provider arrangements (“ASP Service”), or (3) unexpired pro-rata periods of maintenance, minimum ASP Service fees or website subscription fees. As license fees, maintenance fees, minimum ASP Service fees and website subscription fees are often paid in advance, a portion of this revenue is deferred until the contract ends. Such amounts are classified as deferred revenue and are recognized as earned revenue in accordance with the Company’s revenue recognition policies described above.

Revenues from the delivery of data via satellite and hard drive are recognized upon delivery, as DMS’ performance obligations have been substantially met at that time.

Exhibitors who will purchase and own Systems using their own financing will pay an upfront activation fee of $2 thousand per screen to the Company (the “Exhibitor-Buyer Structure”). These upfront activation fees are recognized in the period in which these exhibitor owned Systems are ready for content, as the Company has no further obligations to the customer. The Company will then manage the billing and collection of VPFs and will remit all VPFs collected to the exhibitors, less an administrative fee that will approximate 10% of the VPFs collected. This administrative fee is recognized in the period in which the billing of VPFs occurs, as performance obligations have been substantially met at that time. The Company does not recognize VPF revenue within Services.

Content & Entertainment

USM has contracts with exhibitors to display pre-show advertisements on their screens, in exchange for certain fees paid to the exhibitors. USM then contracts with businesses of various types to place their advertisements in select theatre locations, designs the advertisement, and places it on-screen for specific periods of time, generally ranging from three to twelve months. Cinema advertising service revenue, and the associated direct selling, production and support cost, is recognized on a straight-line basis over the period the related in-theatre advertising is displayed, pursuant to the specific terms of each advertising contract. USM has the right to receive or bill the entire amount of the advertising contract upon execution, and therefore such amount is recorded as a receivable at the time of execution, and all related advertising revenue and all direct costs actually incurred are deferred until such time as the an in-theatre advertising is displayed.

The right to sell and display such advertising, or other in-theatre programs, products and services, is based upon advertising contracts with exhibitors which stipulate payment terms to such exhibitors for this right. Payment terms generally consist of fixed annual payments or annual minimum guarantee payments, plus a revenue share of the excess of a ~~percentage~~percenta ge of advertising revenue over the minimum guarantee, if any. The Company recognizes the cost of fixed and minimum guarantee payments on a straight-line basis over each advertising contract year, and the revenue share cost, if any, in accordance with the terms of the advertising contract.

Barter advertising revenue is recognized for the fair value of the advertising time surrendered in exchange for alternative content. The Company includes the value of such exchanges in both Content & Entertainment’s net revenues and direct operating ~~expenses.~~costs. There may be a timing difference between the screening of alternative content and the screening of the underlying advertising used to acquire the content. The ~~acquisition~~acqu isition cost is being recorded and recognized as a direct operating ~~expense~~cost by CEG when the alternative content is screened, and the underlying advertising is being deferred and recognized as revenue ratably over the period such advertising is screened by USM. ~~The~~For the three months ended September 30, 2010 and 2009, the Company ~~has not~~ recorded ~~any~~ net revenues orand direct operating ~~expenses~~costs related to barter advertising ~~during~~of $0 and $541, respectively. For the ~~three and~~ six months ended September 30, ~~2008~~2010 and ~~2009.~~2009, the Company recorded net revenues and direct operating costs related

to barter advertising of $356 and $541, respectively.

CEG has contracts for the theatrical distribution of third party feature films and alternative content. CEG’s distribution fee revenue is recognized at the time a feature film and alternative content is viewed, based on CEG’s participation in box office receipts. CEG has the right to receive or bill a portion of the theatrical distribution fee in advance of the exhibition date, ~~and~~an d therefore such amount is recorded as a receivable at the time of execution, and

RESTRICTED ~~INVESTMENT SECURITIES~~AVAILABLE-FOR-SALE INVESTMENTS

In connection with the $75,000 Senior Secured Note issued in August 2009 (see Note 5), the Company was required to segregate ~~$11,265~~a portion of the proceeds into marketable securities which will be used to ~~repay~~pay interest over the next two years. The Company classifies the marketable ~~securities~~sec urities as restricted available-for-sale ~~securities~~investments and accordingly, these investments are recorded at fair value. ~~The maturity dates of these investments coincide~~

In connection with the $172,500 term loans issued in May 2010 (see Note 5), the Company segregated $3,873 of the proceeds into an account which will be used to fund the purchase of satellite equipment for DMS.

During the three months ended September 30, 2010 and 2009, the Company made scheduled quarterly interest ~~payment dates through~~ payments of $715 and $1,408, respectively, and $2,788 and $715, for the six months ended September ~~2011.~~ 30, 2010 and 2009, respectively. Investment securities with a maturity of twelve months or less are classified as short-term and investment securities with a maturity greater than twelve months are classified as long-term. As of September 30, 2010, there were no long-term restricted available-for-sale investments.

The changes in the value of these ~~securities~~investments are recorded in other comprehensive loss in the condensed consolidated financial statements. Realized gains and losses are recorded in earnings when securities mature or are redeemed. ~~There~~During the six months ended September 30, 2010 and 2009, there were realized losses of ~~$2 recorded during the three months ended September 30, 2009.~~$44 and $2, respectively.

The Company held no available-for-sale securities at March 31, 2009. During the three months ended September 30, 2009, the Company made the first scheduled quarterly interest payment in the amount of $715. Investment securities with a maturity of twelve months or less are classified as short-term; those that mature in greater than twelve months are classified as long-term. The carrying value and fair value of ~~investment securities~~restricted available-for-sale investments at September 30, ~~2009~~2010 were as follows:

government agencies and

FDIC guaranteed bank

Other interest bearing

The carrying value and fair value of restricted available-for-sale investments at March 31, 2010 were as follows:

government agencies and

FDIC guaranteed bank debt

Other interest bearing

Restricted cash was comprised of the following:

Deferred costs primarily consist of the unamortized debt issuance costs related to the credit facility with General Electric Capital Corporation (“GECC”), the $55,000 of 10% Senior Notes issued in August 2007 up to August 2009 (see Note 5) and the $75,000 Senior Secured Note issued in August 2009 (see Note 5),cos ts which are amortized on a straight-line basis over the term of the respective ~~debt (see Note 5 for extinguishment of debt).~~debt. The straight-line basis is not materially different from the effective interest method. ~~Also included in~~Other deferred costs isare advertising production, post production and technical support costs related to developing and displaying ~~advertising in the amount of $778, which are capitalized and amortized on a straight-line basis over the same period as the related cinema advertising revenues of $4,704 are recognized.~~advertising.

DIRECT OPERATING COSTS

Direct operating costs consist of facility operating costs such as rent, utilities, real estate taxes, repairs and maintenance, insurance and other related expenses, direct personnel costs, ~~film rent expense, amortization~~amortiza tion of capitalized software development costs, exhibitors payments for displaying cinema advertising and other deferred expenses, such as advertising production, post production and technical support related to developing and displaying advertising.

STOCK-BASED COMPENSATION

For the three months ended September 30, ~~2008~~2010 and 2009, the Company recorded stock-based compensation expense of ~~$200~~$674 and ~~$441,~~$438, respectively, and ~~$358~~$1,364 and ~~$766,~~$760, for the six months ended September 30, ~~2008~~2010 and 2009, respectively. ~~The Company estimates that~~During the three months ended June 30, 2010, certain stock-based awards were accelerated upon the retirement of the CEO, which resulted in recognition of $266 of additional stock-based compensation ~~expense related to current outstanding stock options, using a Black-Scholes option valuation model, and current outstanding restricted stock awards will be approximately $1,432 in fiscal 2010.~~expense.

The weighted-average grant-date fair value of options granted during the three months ended September 30, ~~2008~~2010 and 2009 was $0.00 and $0.57, respectively, and $0.91 and $0.57, for the six months ended September 30, ~~2009 was $0.55~~2010 and ~~$0.57, respectively, and $0.58 and $0.57, for the six months ended September 30, 2008 and~~ 2009, respectively. There were no stock options exercised during the three and six months ended September 30, ~~2008~~2010 and ~~2009.~~2009.

The Company estimated the fair value of stock options at the date of each grant using a Black-Scholes option valuation model with the following assumptions:

The risk-free interest rate used in the Black-Scholes option ~~valuation~~pricing model for options granted under the Company’s stock option plan awards is the historical yield on U.S. Treasury securities with equivalent remaining lives. The Company does not currently anticipate paying any cash dividends on common stock in the foreseeable future. Consequently, an expected dividend yield of zero is used in the Black-Scholes ~~option valuation~~opti on pricing model. The Company estimates the expected life of options granted under the Company’s stock option plans using both exercise behavior and post-vesting termination behavior, as well as consideration of outstanding options. The Company estimates expected volatility for options granted under the Company’s

stock option plans based on a measure of historical volatility in the trading market for the Company’s common stock.

~~CAPITALIZED SOFTWARE COSTS~~

~~Internal Use Software~~

~~The Company accounts for internal use software development costs based on three distinct stages~~Employee stock-based compensation expense related to the ~~software development process for internal use software. The first stage, the preliminary project stage, includes the conceptual~~

formulation, design and testing of alternatives. The second stage, or the program instruction phase, includes the development of the detailed functional specifications, coding and testing. The final stage, the implementation stage, includes the activities associated with placing a software project into service. All activities included within the preliminary project stage are considered research and development and expensedCompany’s stock-based awards was as incurred. During the program instruction phase, all costs incurred until the software is substantially complete and ready for use, including all necessary testing, are capitalized, Capitalized costs are amortized on a straight-line basis over estimated lives ranging from three to five years, beginning when the software is ready for its intended use.

~~Software to be Sold, Licensed or Otherwise Marketed~~

GOODWILL AND INTANGIBLE ASSETS

Goodwill is the excess of the purchase price paid over the fair value of the net assets of the acquired business. Goodwill and intangible assets with indefinite lives are not amortized; rather, they are tested for impairment on at least an annual basis. Intangible assets with finite lives, primarily customer relationships, non-compete agreements, patents and software technology, are amortized over their useful lives.

In order to test goodwill and intangible assets with indefinite lives, a determination of the fair value of our reporting units and intangible assets with indefinite lives is required and is based, among other things, on estimates of future operating performance of the reporting unit and/or the component of the entity being valued. The Company ~~assesses its~~is required to complete an impairment test for goodwill ~~for~~and intangible assets with indefinite lives and record any resulting impairment losses at least ~~annually and~~on an annual basis or more often if warranted by events or changes in ~~interim periods if certain triggering events occur~~circumstances indicating that the carrying value may exceed fair value (“impairment indicators”). This impairment test includes the projection and discounting of ~~goodwill may be impaired. The Company also reviews possible impairment~~cash flows, analysis of ~~finite lived~~our market factors impacting the businesses the Compan y operates and estimating the fair values of tangible and intangible assets ~~annually. During the six months ended~~ and liabilities. Estimating future cash flows and determining their present values are based upon, among other things, certain assumptions about expected future operating performance and appropriate discount rates determined by management.

As of September 30, ~~2008 and 2009, no impairment charge was recorded.~~

Information related to the ~~six months ended September 30, 2008 and 2009, no impairment charge was recorded.~~goodwill allocated to the Company’s continuing operations is detailed below:

See Note 3 for information related to the goodwill allocated to the Company’s discontinued operations.

PROPERTY AND EQUIPMENT

Property and equipment are stated at cost, less accumulated depreciation and amortization. Depreciation expense is recorded using the straight-line method over the estimated useful lives of the respective assets. Leasehold improvements are being amortized over the shorter of the lease term or the estimated useful life of the improvement. Maintenance and repair costs are charged to expense as incurred. Major renewals, improvements and additions are capitalized. Upon the sale or other disposition of any property and equipment, the cost and related accumulated depreciation and amortization are removed from the accounts and the gain or loss is included in the condensed consolidated ~~statement~~state ment of operations.

IMPAIRMENT OF ~~LONG~~-~~LIVED~~LONG-LIVED ASSETS

The Company reviews the recoverability of its long-lived assets when events or conditions exist that indicate a possible impairment exists. The ~~assessment~~asse ssment for recoverability is based primarily on the Company’s ability to recover the carrying value of its long-lived assets from expected future undiscounted net cash flows. If the total of expected future undiscounted net cash flows is less than the total carrying value of the assets the asset is deemed not to be recoverable and possibly impaired. The Company then estimates the fair value of the asset to determine whether an impairment loss should be recognized. An impairment loss will be recognized if ~~for~~ the difference between the fair value ~~(computed based upon)~~ and the carrying value of the asset exceeds its fair value. Fair value is ~~estimated~~determined by computing the expected future discounted cash flows. During the three and six months ended ~~September~~Septe mber 30, ~~2008~~2010 and 2009, no impairment charge for long-lived assets was recorded.

Basic and diluted net loss per common share has been calculated as follows:

Shares issued and any shares that are reacquired during the period are weighted for the portion of the period that they are outstanding.

The Company ~~incurred~~incu rred net losses for each of the three and six months ended September 30, ~~2008~~2010 and 2009 and, therefore, the impact of dilutive potential common shares from outstanding stock options, warrants, restricted stock, and restricted stock units, totaling ~~4,360,882~~20,949,329 shares and 23,451,352 shares as of September 30, ~~2008~~2010 and 2009, respectively, were excluded from the computation as it would be anti-dilutive.

ACCOUNTING FOR DERIVATIVE ACTIVITIES

Derivative financial instruments are recorded as either assets or liabilities at fair valu e. In ~~April 2008,~~May 2010, the Company settled the interest rate swap in place with the GE Credit Facility. In June 2010, the Company executed anthree separate interest rate swap ~~agreement~~agreements (the “Interest Rate ~~Swap”~~Swaps”) ~~(see Note 5)~~ to limit the Company’s exposure to changes in interest ~~rates.~~rates related to the 2010 Term Loans. Changes in fair value of derivative financial instruments are either recognized in accumulated other comprehensive ~~income~~loss (a component of stockholders' equity) or in the condensed consolidated statement of operations depending on whether the derivative is being used to hedge changes in cash flows or fair value. The Company has ~~determined that this is~~ not ~~a hedging transaction~~sought hedge accounting and therefore, changes in the value of its Interest Rate ~~Swap~~Swaps were recorded in the condensed consolidated statements of operations (see Note 5).

~~Fair Value of Financial Instruments~~FAIR VALUE OF FINANCIAL INSTRUMENTS

The fair value measurement disclosures are grouped into three levels based on valuation factors:

·
•	Level 1 – ~~quoted~~quot ed prices in active markets for identical investments

·
•	Level 2 – other significant observable inputs (including quoted prices for similar investments, market corroborated inputs, etc.)

·
•	Level 3 – significant unobservable inputs (including the Company’s own assumptions in determining the fair value of investments)

Assets and liabilities measured at fair value on a recurring basis use the market approach, where prices and other relevant information isare generated by market transactions involving identical or comparable assets or liabilities.

The following ~~table summarizes~~tables summarize the levels of fair value measurements of the Company’s financial assets:

Financial Assets at Fair Value
as of September 30, 2009

Level 1 Level 2 Level 3
Cash and cash equivalents $ 19,732 $ — $ —
Investment securities, available-for-sale $ 885 $ 9,683 $ —
Interest rate swap $ — $ (3,306 ) $ —

The Pavilion Theatre generates movie theatre admission and concession revenues. Movie theatre admission revenues are recognized on the date of sale, as the related movie is viewed on that date and the Company's performance obligation is met at that time. Concession revenues consist of food and beverage sales and are also recognized on the date of sale. The Pavilion Theatre, while once a digital cinema test site and showcase for digital cinema technology, is no longer needed in that capacity due to widespread adoption of the technology. Management decided to pursue its sale during the fourth quarter of the year ended March 31, 2010. The Company had preliminary offers from interested buyers and expects a sale to be concluded within a year. Accordingly, the Company classified the Pavilion Theatre as assets held for sale in the quarter ended March 31, 2010 and reported the results of Pavilion Theatre as discontinued operation for the year ended March 31, 2010 and all prior periods.

During the quarter ended September 30, 2010, the Company experienced a reduction in its estimated sales price of the Pavilion Theater as well as decline in its operating performance. Accordingly, the Company recorded an impairment charge of $1,763 and the estimate used to measure the impairment loss is a Level 3 fair value estimate. As of September 30, 2010, there is no goodwill associated with the Pavilion Theatre.

The Company's other segment consists of Managed Services and Access Digital Server Assets. In August 2010, the Company sold the stock of Managed Services and the Access Digital Server Assets in exchange for $268 in cash and $1,150 in service credits under a 46-month service agreement (the "Managed Services Agreement"). The service credits will serve to pay the balance of the purchase price pursuant to the Managed Services Agreement under which the buyer will continue to perform certain information technology related services for the Company. The Access Digital Server Assets currently host the Company's websites, and provide networking and other information technology services to the Company. If there is an event of default by the buyer or if the Managed Services Agreement is terminated pursuant to its terms, the buyer would be required to pay all of the then outstanding (unused) service credits in cash, with immediate acceleration. The operations and cash flows of the other segment has been eliminated from the ongoing operation as a result of the sale, and the Company will have no significant continuing involvement in the operations of these businesses after they are sold. The results of the other segment has been reported in disconti nued operation for the quarter ended September 30, 2010, and all prior period presentation has been reclassified accordingly.

The assets and liabilities of held for sale assets were comprised of the following:

At September 30, 2010, the assets and liabilities of held for sale assets are comprised entirely of the assets and liabilities of the Pavilion Theatre.

The results of the Pavilion Theatre, Managed Services and the Access Digital Server Assets have been reported as discontinued operations for all periods presented. The loss from discontinued operations was as follows:

In June 2009, the ~~FASB~~Financial Accounting Standards Board (“FASB”) issued SFAS No. 167 ~~“Amendments~~Amendments to FASB Interpretation No. 46(R)” (“SFAS 167”) (which will be codified in ASC 810-10). Revisions to ASC 810-10 improves financial reporting by enterprises involved with variable interest ~~entities~~ent ities and to address (1) the effects on certain provisions of FASB Interpretation No. 46 (revised December 2003), “Consolidation of Variable Interest Entities”, as a result of the elimination of the qualifying special-purpose entity concept in SFAS 166 and (2) constituent concerns about the application of certain key provisions of Interpretation 46(R), including those in which the accounting and disclosures under the Interpretation do not always provide timely and useful information about an enterprise’s involvement in a variable interest entity. ~~Revisions to~~On April 1, 2010, the Company adopted ASC 810-10 and its adoption did not have a material impact on the Company’s condensed consolidated financial statements.

In October 2009, the FASB issued ASU 2009-13, Multiple-Deliverable Revenue Arrangements (“ASU 2009-13”), which requires an entity to allocate consideration at the inception of an arrangement to all of its deliverables based on their relative selling prices. This consensus eliminates the use of the residual method of allocation and requires allocation using the relative-selling-price method in all circumstances in which an entity recognizes revenue for an arrangement with multiple deliverables. ASU 2009-13 is effective ~~as of the~~for fiscal years beginning ~~of each reporting entity’s first annual reporting period that begins~~on or after ~~November~~June 15, ~~2009, for interim periods within that first annual reporting period, and for interim and annual reporting periods thereafter.~~2010. The Company ~~is currently evaluating~~will adopt ASU 2009-13 on April 1, 2011 and apply it prospectively. The Company does not expect the ~~impact~~adoption of ~~adoption and application of revisions~~ASU 2009-13 to ~~ASC 810-10 will~~ have a material impact on the Company’s consolidated financial statements.

4.	~~NOTES RECEIVABLE~~

~~Notes receivable consisted~~In October 2009, the FASB issued ASU No. 2009-14, “Software (Topic 985): Certain Revenue Arrangements That Include Software Elements (a consensus of the ~~following:~~FASB Emerging Issues Task Force)” (“ASU 2009-14”). ASU 2009-14 amends ASC 985-605, “Software: Revenue Recognition,” such that tangible products, containing both software and non-software components that function together to deliver the tangible product’s essential functionality, are no longer within the scope of ASC 985-605. It also amends the determination of how arrangement consideration should be allocated to deliverables in a multiple-deliverable revenue arrangement. ASU 2009-14 will become effective for the Company for revenue arrangements entered into or materially modified on or after April 1, 2011. Earlier application is permitte d with required transition disclosures based on the period of adoption. The Company does not expect the adoption of ASU 2009-14 will have a material impact on the Company’s consolidated financial statements.

As of March 31, 2009 As of September 30, 2009
Note Receivable (as defined below) Current Portion Long Term Portion Current Portion Long Term Portion
Exhibitor Note $ 54 $ 37 $ 56 $ 8
Exhibitor Install Notes 118 908 89 863
FiberMedia Note 431 — — —
Other 13 14 25 7
$ 616 $ 959 $ 170 $ 878

In ~~March 2006, in connection with Phase 1 DC’s deployment,~~January 2010, the ~~Company~~FASB issued ~~to a certain motion picture exhibitor a 7.5% note receivable~~ASU No. 2010-06, “Improving Disclosures about Fair Value Measurements” (“ASU 2010-06”). ASU 2010-06 requires some new disclosures and clarifies some existing disclosure requirements about fair value measurements codified within ASC 820, “Fair Value Measurements and Disclosures.” ASU 2010-06 is effective for ~~$231 (the “Exhibitor Note”), in return for the Company’s payment for certain financed digital projectors. The Exhibitor Note requires monthly principal~~interim and ~~interest payments through September 2010. As of September 30, 2009, the outstanding balance of the Exhibitor Note was $64.~~

In March 2010, the FASB issued ASU No. 2010-11, Derivatives and Hedging (Topic 815) - Scope Exception Related to ~~any~~Embedded Credit Derivatives (“ASU 2010-11” ). ASU 2010-11 clarifies the scope exception for embedded credit derivative features related to the transfer of ~~their~~credit risk in the form of subordination of one financial instrument to another. The amendments address how to determine which embedded credit derivative features, including those in collateralized debt obligations and synthetic collateralized debt obligations, are considered to be embedded derivatives that should not be analyzed for potential bifurcation and separate accounting. The amendments in ~~connection with any~~this pronouncement are effective for each reporting entity at the beginning of its first fiscal quarter beginning after June 15, 2010. This is effective for the Company as of April 1, 2011. The Company does not expect the adoption of ASU 2010-11 will have a material impact on the Company’s consolidated financial statements.

In April 2010, the FASB issued ASU No. 2010-12, Income Taxes (Topic 740) – Accounting for Certain Tax Effects of the ~~above notes.~~2010 Health Care Reform Acts (“ASU 2010-12”). ASU 2010-12 establishes criteria for measuring the impact on deferred tax assets and liabilities based on provisions of enacted law, the impact of both Acts, the Health Care and Education Reconciliation Act of 2010 and the Patient Protection and Affordable Care Act, should be considered. ASU 2010-12 requires that income tax deductions for the cost of providing prescription drug coverage will be reduced by the amount of any subsidy received. The Company has evaluated ASU 2010-12 and its adoption did not have a significant impact on the Company’s condensed consolidated financial statements.

In April 2010, the FASB issued ASU No. 2010-17, Revenue Recognition — Milestone Method (“ASU 2010-17”). ASU 2010-17

establishes criteria for a milestone to be considered substantive and allows revenue recognition wh en the milestone is achieved in research or development arrangements. In addition, it requires disclosure of certain information with respect to arrangements that contain milestones. ASU 2010-17 is effective on a prospective basis for milestones achieved in fiscal years, and interim periods within those years, beginning on or after June 15, 2010. ASU 2010-17 is effective for the Company prospectively beginning April 1, 2011. The Company has evaluated ASU 2010-17 and does not expect its adoption to have a material impact on the Company’s consolidated financial statements.

In July 2010, the FASB issued ASU No. 2010-20, Receivables (Topic 310) - Disclosures about the Credit Quality of Financing Receivables and the Allowance for Credit Losses (“ASU 2010-20”). ASU 2010-20 enhances disclosures about the credit quality of financing receivables and the allowance for credit losses. The Company is currently evaluating the impact of ASU 2010-20 on its consolidated financial statements.

Notes payable consisted of the following:

Non-recourse debt is generally defined as debt whereby the lenders’ sole recourse with respect to defaults by the Company is limited to the value of the asset, ~~collateralized by~~which is collateral for the debt. The Vendor Note and the GE Credit Facility are not guaranteed by the Company or its other subsidiaries, other than Phase 1 DC. The KBC ~~Related~~ Facility, the P2 Vendor Note and the P2 Exhibitor Notes are not guaranteed by the Company or its other subsidiaries, other than Phase 2 DC.

In August 2009, the Company entered into a securities purchase agreement (the “Purchase Agreement”) with an affiliate of Sageview Capital LP ~~(the “Purchaser”~~(“Sageview” or the “Purchaser&rdq uo;) pursuant to which the Company agreed to issue a Senior Secured Note (the “2009 Note”) in the aggregate principal amount of $75,000 and warrants (the “Sageview Warrants”) to purchase 16,000,000 shares of its Class A Common Stock (the “2009 Private Placement”). The ~~remaining proceeds~~2009 Note was later amended and restated on May 6, 2010 (as so amended and restated, the “2010 Note”). The balance of the ~~2009 Private Placement after the repayment of existing indebtedness~~2010 Note, net of the Company and one of its subsidiaries, the funding of a cash reserve to pay the cash interest amount required under the 2009 Note for the first two years, the payment of fees and expenses incurred in connectiondiscount associated with the 2009 Private Placement and related transactions, and other general corporate purposes was approximately $11,300. The 2009 Note has a term of five years, which may be extended for up to one 12 month period at the discretionissuance of the ~~Company if certain conditions are satisfied. Subject to certain adjustments set forth in~~Sageview Warrants and the ~~2009 Note,~~ interest of 8% per annum on the ~~2009~~2010 Note ~~is 8% per annum~~ to be accrued as an increase in the aggregate principal amount of the ~~2009~~2010 Note (“PIK Interest”) and 7% per annum paid in cash. The Company may prepay the 2009 Note (i) during the initial 18 months of their term, in an amount up to 20% of the original principal amount of the 2009 Note plus accrued and unpaid interest without penalty and (ii) following the second anniversary of issuance of the 2009 Note, subject to a prepayment penalty equal to 7.5% of the principal amount prepaid if the 2009 Note is prepaid prior to the three year anniversary of its issuance, a prepayment penalty of 3.75% of the principal amount prepaid if the 2009 Note is prepaid after such third anniversary but prior to the fourth anniversary of its issuance and without penalty if the 2009 Note is prepaid thereafter, plus cash in an amount equal to the accrued and unpaid interest amount with respect to the principal amount through and including the prepayment date. The Company is obligated to offer to redeem all or a portion of the 2009 Note upon the occurrence of certain triggering events described in the 2009 Note. Subject to limited exceptions, the Purchaser may not assign the 2009 Note until the earliest of (a) August 11, 2011, (b) the consummation of a change in control as defined in the 2009 Note or (c) an event of default as defined under the Notes. The Purchase Agreement also requires the 2009 Note to be guaranteed by each of the Company’s existing and future subsidiaries, other than AccessDM, Phase 1 DC and its subsidiaries and Phase 2 DC and its subsidiaries and subsidiaries formed after August 11, 2009 which are primarily engaged in the financing or deployment of digital cinema equipment (the "Guarantors"), and that the Company and each Guarantor pledge substantially all of their assets to secure payment on the 2009 Note, except that AccessDM and Phase 1 DC are not required to become Guarantors until such time as certain indebtedness is repaid. Accordingly, the Company and each of the Guarantors entered into a guarantee and collateral agreement (the “Guarantee and Collateral Agreement”) pursuant to which each Guarantor guaranteed the obligations of the Company under the 2009 Note and the Company and each Guarantor pledged substantially all of their assets to secure such obligations. ~~The Company agreed to register the resale of the shares of Class A Common Stock underlying the Sageview Warrants~~ ~~(the “Registration Rights Agreement”)~~. The Purchase Agreement, Note Purchase Agreement, 2009 Note, Warrants, Registration Rights Agreement and Guarantee and Collateral Agreement contain representations, warranties, covenants and events of default as are customary for transactions of this type and nature.

In August 2007, Phase 1 DC obtained $9,600 of vendor financing (the “Vendor Note”) for equipment used in Phase 1 DC’s ~~deployment.~~Phase I Deployment. The Vendor Note bears interest at 11% and may be prepaid without penalty. Interest is due semi-annually commencing February ~~2008.~~2008 a nd is paid by Cinedigm. The balance of the Vendor Note, together with all unpaid interest is due on the maturity date of August 1, 2016. ~~As of September 30, 2009, the outstanding balance of~~In May 2010, the Vendor Note was ~~$9,600.~~repaid in full from the proceeds of the 2010 Term Loans, as discussed below.

In ~~September 2009, Phase 2 DC obtained $898~~May 2010, CDF I, an indirectly wholly-owned, special purpose, non-recourse subsidiary of vendor financing (the “P2 Vendor Note”) for equipment used in Company’s Phase II Deployment. The P2 Vendor Note bears interest at 7% and requires quarterly interest-only payments through January 2010. Quarterly installments commencingthe Company, formed in April 2010, entered into a definitive credit agreement (the “2010 Credit Agreement”) with Société Générale, New York Branch (“SocGen”), as co-administrative agent and paying agent for the lenders party thereto and certain other secured parties, and General Electric Capital Corporation (“GECC”), as co-administrative agent and collateral agent (the &l dquo;Collateral Agent”). Pursuant to the 2010 Credit Agreement, CDF I borrowed term loans (the “2010 Term Loans”) in the principal amount of $172,500. These 2010 Term Loans are non-recourse to ~~be repaid with 92.5%~~the Company. The proceeds of the ~~VPFs~~2010 Term Loans were used by CDF I to pay all costs, fees and ~~ACFs received~~expenses relating to the transaction and to pay $157,456 to Phase 1 DC, as part of the consideration for the acquisition by CDF I of all of the assets and liabilities of Phase 1 DC pursuant to a Sale and Contribution Agreement between CDF I and Phase 1 DC. Phase 1 DC acquired all of the outstanding membership interests in CDF I pursuant to this Sale and Contribution Agreement. Phase 1 DC, in turn, extinguished all of its outstanding obligations with respect to the GE Credit Facility and the Vendor Note, and its intercompany obligations owed to the Company. Under the 2010 Credit Agreement, each of the 2010 Term Loans will bear interest, a t the option of CDF I and subject to certain conditions, based on ~~this equipment with~~ the ~~payments being applied~~base rate (generally, the bank prime rate) plus a margin of 2.50% or the Eurodollar rate (subject to ~~accrued~~a floor of 1.75%), plus a margin of 3.50%. All collections and ~~unpaid~~revenues of CDF I are deposited into a special blocked account, classified as cash and cash equivalents, from which amounts are paid out on a monthly basis to pay certain operating expenses, principal, interest, ~~first~~fees, costs and ~~any remaining~~expenses relating to the 2010 Credit Agreement according to certain designated priorities. On a quarterly basis, if funds remain after the payment of all such amounts, they will be applied to prepay the ~~principal.~~2010 Term Loans. After certain conditions are met, CDF I may use up to 50% of the remaining funds to pay dividends or distributions to Phase 1 DC. The Company also set up a debt service fund under the 2010 Credit Agreement for future principal and interest payments, classified as restricted cash of $5,756 as of September 30, 2010.

The 2010 Term Loans mature and must be paid in full by April 29, 2016. In addition, CDF I may prepay the 2010 Term Loans, without premium or penalty, in whole or in part, subject to paying certain breakage costs, if applicable. The 2010 Credit Agreement also requires each of CDF I’s existing and future direct and indirect domestic subsidiaries (the "Guarantors") to guarantee, under a Guaranty and Security Agreement dated as of May 6, 2010 by and among CDF I, the Guarantors and the Collateral Agent (the “Guaranty and Security Agreement”), the obligations under the 2010 Credit Agreement, and all such obligations to be secured by a first priority perfected security interest in all of the collective assets of CDF I and the Guarantors, including real estate owned or leased, and all capital stock or other equity interests in Phase 1 DC, CDF I and CDF I’s subsidiaries. In connection with the 2010 Credit Agreement, AccessDM, the direct parent of Phase 1 DC, entered into a pledge agreement dated as of May 6, 2010 in favor of the Collateral Agent (the “ADM Pledge Agreement”) pursuant to which AccessDM pledged to the Collateral Agent all of the outstanding shares of common stock of Phase 1 DC, and Phase 1 DC entered into a pledge agreement dated as of May 6, 2010 in favor of the Collateral Agent (the “Phase 1 DC Pledge Agreement”) pursuant to which Phase 1 DC pledged to the Collateral Agent all o f the outstanding membership interests of CDF I. The 2010 Credit Agreement contains customary representations, warranties, affirmative covenants, negative covenants and events of default, as well as conditions to borrowings. The balance of the ~~P2 Vendor Note, together~~2010 Term Loans, net of the original issue discount, was as follows:

In June 2010, CDF I executed the three separate Interest Rate Swaps with ~~all accrued~~counterparties for a total notional amount of approximately 66.67% of the amounts to be outstanding at June 15, 2011 under the 2010 Term Loans or an initial amount of $100,000. Under the Interest Rate Swaps, CDF I will effectively pay a fixed rate of 2.16%, to guard against CDF I’s exposure to increases in the variable interest rate under the 2010 Term Loans. SocGen arranged the transaction, which took effect commencing June 15, 2011 as required by the 2010 Term Loans and ~~unpaid interest is due on~~will remain in effect until at least June 15, 2013. As principal repayments of the ~~maturity date~~2010 Term Loans occur, the notional amount will decrease by a pro rata amount, such that

approximately $80,000 of ~~December 31, 2018. The P2 Vendor Note may~~the remaining principal amount will be ~~prepaid~~covered by the Interest Rate Swaps at any ~~time without penalty~~time. The Company has not sought hedge accounting and is not guaranteed by the Company or its other subsidiaries, other than Phase 2 DC. During the three months ended September 30, 2009, the Phase 2 DC repaid principal of $108 on the P2 Vendor Note. As of September 30, 2009, the outstanding balance of the Vendor Note was $790.

In August 2006, Phase 1 DC entered into an agreement with GECC pursuant to which GECC and certain other lenders agreed to provide to Phase 1 DC a $217,000 Senior Secured Multi Draw Term Loan (the “GE Credit Facility”). Proceeds from the GE Credit Facility were used for the purchase and installation of up to 70% of the aggregate purchase price, including all costs, fees or other expenses associated with the purchase acquisition, receipt, delivery, construction and installation of Systems in connection with Phase 1 DC’s ~~deployment~~Phase I Deployment and to pay transaction fees and expenses related to the GE Credit Facility, and for certain other specified purposes. The remaining cost of the Systems was funded from other sources of capital including contributed equity. Each of the borrowings by Phase 1 DC bears interest, at the option of Phase 1 DC and subject to certain conditions, based on the bank prime loan rate in the United States or the Eurodollar rate, plus a margin ranging from 2.75% to 4.50%, depending on, among other things, the type of rate chosen, the amount of equity contributed into Phase 1 DC and the total debt of Phase 1 DC. Under the GE Credit Facility Phase 1 DC must pay interest only through July 31, 2008. Beginning August 31, 2008, in addition to the interest payments, Phase 1 DC must repay approximately 71.5% of the principal amount of the borrowings over a five-year period with a balloon payment for the balance of the principal amount, together with all unpaid interest on such borrowings and any fees incurred by Phase 1 DC pursuant to the GE Credit Facility on the maturity date of August 1, 2013. In addition, Phase 1 DC may prepay borrowings under the GE Credit Facility in whole or in part, after July 31, 2007 and before August 1, 2010, subject to paying certain prepayment penalties ranging from 3% to 1%, depending on when the prepayment is made. The GE Credit Facility is required to be guaranteed by each of Phase 1 DC’s existing and future direct and indirect domestic subsidiaries (the “Guarantors”) and secured by a first priority perfected security interest on all of the collective assets of Phase 1 DC and the Guarantors, including real estate owned or leased, and all capital stock or

In April 2008, Phase 1 DC executed the Interest Rate Swap, otherwise known as an “arranged hedge transaction” or "synthetic fixed rate financing" with a counterparty for a notional amount of approximately 90% of the amounts outstanding under the GE Credit Facility or an initial amount of $180,000. Under the Interest Rate Swap, Phase 1 DC will effectively pay a fixed rate of 7.3%, to guard against Phase 1 DC’s exposure to increases in the variable interest rate under the GE Credit Facility. GE Corporate Financial Services arranged the transaction, which took effect commencing August 1, 2008 as required by the GE Credit Facility and will remain in effect until August 2010.& nbsp; As principal repayments of the GE Credit Facility occur, the notional amount will decrease by a pro rata amount, such that approximately 90% of the remaining principal amount will be covered by the Interest Rate Swap at any time.

In May 2008, AccessDM entered into a credit facility with NEC Financial Services, LLC (the “NEC Facility”) to fund the purchase and installation of equipment to enable the exhibition of 3-D live events in movie theatres as part of the Company’s CineLiveSM product offering. The NEC Facility provides for maximum borrowings of up to approximately $2,000, repayments over a 47 month period, and interest at annual rates ranging from 8.25-8.44%. As of September 30, 2009, AccessDM has borrowed $569 and the equipment purchased therewith is included in property and equipment. During the six months ended September 30, 2008 and 2009, the Company repaid principal of $0 and $82, respectively, on the NEC Credit Facility. As of September 30, 2009, the outstanding principal balance of the NEC Credit Facility was $419.

In February 2010, Phase 2 B/AIX entered into an additional credit facility with KBC Bank NV (the “KBC Facility #2”) to fund the purchase of Systems from Barco, to be installed in movie theatres as part of the Company’s Phase II Deployment. The KBC Facility #2 provides for borrowings of up to a maximum of $2,890 through December 31, 2010 (the “Draw Down Period”) and requires interest-only payments based on the three month London Interbank Offered Rate ("LIBOR") plus 3.75% per annum during the Draw Down Period. For any funds drawn, the principal is to be repaid in twenty-eight equal quarterly installments commencing in March 2011 and ending December 2017 (the “Repayment Period”) at an interest rate based on the three month LIBOR plus 3.75% per annum during the Repayment Period. The KBC Facility #2 may be prepaid at any time without penalty and is not guaranteed by the Company or its other subsidiaries, other than Phase 2 DC. As of September 30, 2010, $1,512 has been drawn down on the KBC ~~Related~~ Facility #2.

In May 2010, Phase 2 B/AIX entered into an additional credit facility with KBC Bank NV (the “KBC Facility #3”) to fund the purchase of Systems from Barco, to be installed in movie theatres as part of the Company’s Phase II Deployment. The KBC Facility #3 provides for borrowings of up to a maximum of $13,312 through December 31, 2010 (the “Draw Down Period”) and requires interest-only payments based on the three ~~months ended~~ month LIBOR plus 3.75% per annum during the Draw Down Period. For any funds drawn, the principal is to be repaid in twenty-eight equal quarterly installments commencing in December 2011 and ending September 2018 (the “Repayment Period”) at an interest rate based on the three month LIBOR plus 3.75% per annum during the Repayment Period. The KBC Facility #3 may be prepaid at any time without penalty and is not guaranteed by the Company or its other subsidiaries, other than Phase 2 DC. As of September 30, ~~2008~~2010, $2,443 has been drawn down on the KBC Facility #3.

In May 2010, Phase 2 B/AIX entered into an additional credit facility with KBC Bank NV (the “KBC Facility #4”) to fund the purchase of Systems from Barco, to be installed in movie theatres as part of the Company’s Phase II Deployment. The KBC Facility #4 provides for borrowings of up to a maximum of $22,336 through December 31, 2010 (the “Draw Down Period”) and ~~2009 amounted~~requires interest-only payments based on the three month LIBOR plus 3.75% per annum during the Draw Down

Period. For any funds drawn, the principal is to $0be repaid in twenty-eight equal quarterly installments commencing in December 2011 and ~~$152, respectively~~ending September 2018 (the “Repayment Period”) at an interest rate based on the three month LIBOR plus 3.75% per annum during the Repayment Period. The KBC Facility #4 may be prepaid at any time without penalty and ~~$0 and $218 for~~is not guaranteed by the ~~six months ended~~ Company or its other subsidiaries, other than Phase 2 DC. As of September 30, ~~2008 and 2009, respectively. As of~~ 2010, $1,070 has been drawn down on the KBC Facility #4.

At September 30, ~~2009, the outstanding principal balance of the KBC Related Facility was $8,885.~~


6.	STOCKHOLDERS’ EQUITY

CAPITAL STOCK

~~STOCKHOLDERS’ RIGHTS~~

~~On August 10, 2009,~~In April 2010, Imperial Capital, LLC exercised all their warrants under the cashless exercise feature and the Company entered into a tax benefit preservation plan (the "Tax Preservation Plan"), dated August 10, 2009, between the Company and American Stock Transfer & Trust Company, LLC, as rights agent. The Company’s board of directors (the "Board") adopted the Tax Preservation Plan in an effort to protect stockholder value by attempting to protect against a possible limitation on its ability to use net operating loss carryforwards (the "NOLs") to reduce potential future federal income tax obligations.

On August 10, 2009, the Board declared a dividend of one preferred share purchase right (the "Rights") for each outstanding share of the Company’s Class A Common Stock and each outstanding share of the Company’s Class B Common Stock, (the "Class B Common Stock," and together with the Class A Common Stock, the "Common Stock") under the terms of the Tax Preservation Plan. The dividend is payable to the stockholders of record as of the close of business on August 10, 2009. Each Right entitles the registered holder to purchase from the Company one one-thousandth of a share of the Company’s Series B Junior Participating Preferred Stock, par value $0.001 per share, (the "Preferred B Stock") at a price of $6.00, subject to adjustment. The Rights are not exercisable, and would only become exercisable when any person or group has acquired, subject to certain conditions, beneficial ownership of 4.99% or more of the Company’s outstandingissued 348,633 shares of Class A Common Stock. As

In June 2010, a holder of ~~September 30, 2009,~~Preferred Warrants exercised their warrants for $441 and the Company ~~did not record the dividends as a 4.99% or more change in the beneficial ownership of the Company’s outstanding~~issued 700,000 shares of Class A Common ~~Stock had not occurred.~~Stock.

~~CAPITAL STOCK~~

In ~~August 2004,~~ the Board authorized the repurchase of up to 100,000 shares of Class A Common Stock, which may be purchased at prevailing prices from time-to-time in the open market depending on market conditions and other factors. Under the terms of the 2007 Senior Notes (see Note 5)six months ended September 30, 2010, the Company was previously precluded from purchasing shares of its Class A Common Stock. In a prior year, the Company repurchased 51,440 shares of Class A Common Stock for an aggregate purchase price of $172, including fees, which have been recorded as treasury stock.

~~Pursuant to the 2007 Senior Notes, in August 2007 the Company~~ issued 715,000 shares of Class A Common Stock (the “Advance Additional Interest Shares”) covering the first 12 months of Additional Interest (see Note 5). The Company registered the resale of these shares of Class A Common Stock and also registered an additional 1,249,875 shares of Class A Common Stock for future Interest Shares and Additional Interest. The Company filed a registration statement on Form S-3 on September 26, 2007, which was declared effective by the SEC on November 2, 2007. The Company is recording the value of the Advance Additional Interest Shares of $4,676 to interest expense over the 36 month term of the 2007 Senior Notes. For the three months ended September 30, 2008 and 2009, the Company recorded $401 and $134, respectively, and $802 and $534 for the six months ended September 30, 2008 and 2009, respectively, to interest expense in connection with the Advance Additional Interest Shares. See Note 5 on extinguishment of debt.

Commencing with the quarter ended December 31, 2008 and through the maturity of the 2007 Senior Notes in the quarter ended September 30, 2010, the Company was obligated to issue a minimum of 132,000 shares or a maximum of 220,000 shares of Class A Common Stock per quarter as Additional Interest (the “Additional Interest Shares”). The Company estimated the initial value of the Additional Interest Shares to be $5,244 and is amortizing that amount over the 36 month term of the 2007 Senior Notes. For the three months ended September 30, 2008 and 2009, the Company recorded $437 and $0, respectively, and $874 and $0 for the six months ended September 30, 2008 and 2009, respectively, to interest expense in connection with the Additional Interest Shares. In March 2009 and June 2009, the Company issued 220,000 shares of Class A Common Stock, each period, as Additional Interest Shares with a value of $136 and $220, respectively. No Additional Interest Shares were issued in September 2009, as the 2007 Senior Notes were cancelled in August 2009.

In March 2008 and June 2008, the Company issued 548,572 and 635,847 shares of Class A Common Stock, respectively, as Interest Shares pursuant to the 2007 Senior Notes (see Note 5), which were part of the 1,249,875 shares previously registered on the registration statement on Form S-3 filed on September 26, 2007, which was declared effective by the SEC on November 2, 2007 and the additional 500,000 shares registered on the registration statement on Form S-3 filed on May 6, 2008, which was declared effective by the SEC on June 30, 2008. For the three months ended September 30, 2008 and 2009, the Company did not record any non-cash interest expense in connection with the Interest Shares. For the six months ended September 30, 2008 and 2009, the Company recorded $1,342 and $186 as non-cash interest expense in connection with the Interest Shares. No Interest Shares were issued and no interest was paid in cash in September 2009, as the 2007 Senior Notes were cancelled in August 2009.

In connection with the acquisition of CEG in January 2007, CEG entered into a services agreement (the “SD Services Agreement”) with SD Entertainment, Inc. (“SDE”) to provide certain services, such as the provision of shared office space and certain shared administrative personnel. The SD Services Agreement is on a month-to-month term and requires the Company to pay approximately $18 per month, of which 70% may be paid periodically in the form of Cinedigm Class A Common Stock, at the Company’s option. In September 2008 and January 2009, the Company issued 22,010 and 70,432 shares of unregistered Class A Common Stock, respectively, with a value of $33 and $49, respectively, to SDE as partial payment for such services and resources.

In August 2009, in connection with the 2009 Private Placement (see Note 5), the Purchaser agreed with the Company that, subject to limited exceptions, the Purchaser and its affiliates would not, without the Company’s consent, acquire, offer to acquire or join or participate in any group, as defined in Rule 13d-3 of the Securities Exchange Act of 1934, as amended, that would result in Purchaser and its affiliates beneficially owning more than 42.5% of the Class A Common Stock and the Company’s Class B Common Stock outstanding. This agreement will terminate upon the earliest of August 11, 2011, a change of control, an event of default (each as defined in the 2009 Note) and the date when the Purchaser and its affiliates own less than 10% of the outstanding Class A Common Stock and the Company’s Class B Common Stock.

In August 2009, in connection with the 2009 Private Placement (see Note 5), the Company entered into an agreement (the “Aquifer Agreement”) with Aquifer Capital Group, LLC (“Aquifer Capital”) pursuant to which Aquifer Capital provided financial advisory services to the Company in connection with the purchase of the 2007 Senior Notes in exchange for the issuance of 200,000 shares of unregistered Class A Common Stock to designees of Aquifer Capital. In August 2009, 200,000 shares were issued to designees of Aquifer Capital, with a value of $198 as payment for such services and were recorded as a debt issuance cost associated with the 2009 Note.

~~In September 2009, the Company issued 12,815~~399,899 shares of Class A Common Stock for restricted stock awards that ~~vested.~~vested, of which 114,260 were restricted stock awards whose vesting was accelerated upon the retirement of the Company’s CEO, which resulted in approximately $80 of additional stock-based compensation expense included in the unaudited interim condensed consolidated statement of operations.

~~PREFERRED STOCK~~

In ~~February 2009,~~September 2010, the Company issued ~~eight~~347,223 shares of Class A Common Stock in connection with a stock purchase agreement wi th Grassmere Partners, LLC (“Grassmere”) for an aggregate purchase price of $500, priced at the trailing 20 day average share price of $1.44 per share.

In September 2010, the Company issued 267,068 shares of Class A Common Stock to certain members of the Board of Directors as payment for their services as non-employee directors for the fiscal year ended March 31, 2010, the value of such shares are included in stock-based compensation in the unaudited interim condensed consolidated statement of operations.

In September 2010, the Company issued 476,776 shares of Class A Common Stock as payment for the cumulative dividends in arrears, up through September 30, 2010, on the Series A 10% Non-Voting Cumulative Preferred Stock (“Preferred Stock”) ~~to two investors.~~ .

PREFERRED STOCK

There iswere no ~~public trading market for the Preferred Stock. The Preferred Stock has the designations, preferences and rights set forth~~cumulative dividends in ~~the certificate of designations filed with the Secretary of State for the State of Delaware~~arrears on February 3, 2009 (the “Certificate of Designations”). Pursuant to the Certificate of Designations, holders of Preferred Stock shall have the following rights among others: (1) the holders are entitled to receive dividends at the rate of 10% of the Preferred Stock ~~original issue price per annum on each outstanding share~~at September 30, 2010.

CINEDIGM’S EQUITY INCENTIVE PLAN

The Company’s equity incentive plan (“the Plan”) provides for the issuance of ~~Preferred Stock (as adjusted for any stock dividends, combinations, splits, recapitalizations and the like with respect~~up to such shares). Such dividends shall begin to accrue commencing upon the first date such share is issued and becomes outstanding and shall be payable in cash or, at the Company’s option, by converting the cash amount

5,000,000 shares of ~~such dividends into~~ Class A Common Stock to employees, outside directors and ~~will not be paid until~~ consultants. The Company obtained stockholder approval to expand the size of the Plan to 7,000,000 shares of Class A Common Stock at the Company’s 2010 Annual Meeting of Stockholders held on September 14, 2010.

Stock Options

During the six months ended September 30, 2010 as, under the Plan, the Company ~~was not permitted~~granted stock options to ~~do so under~~purchase 213,964 shares of its Class A Common Stock to its emp loyees at a weighted average exercise price of $1.42 per share. As of September 30, 2010, the ~~terms~~weighted average exercise price for outstanding stock options is $4.04 and the weighted average remaining contractual life is 6.6 years.

The following table summarizes the activity of the ~~2007 Senior Notes~~Plan related to stock option awards:


	Shares Under Option		Weighted Average Exercise Price Per Share
Balance at March 31, 2010	3,910,372		$	4.11
Granted	213,964		1.42
Exercised	—		—
Cancelled	(1,099,949	)	1.66
Balance at September 30, 2010	3,024,387		$	4.08

Restricted Stock Awards

The Plan also provides for the issuance of restricted stock and ~~is not so permitted under~~restricted stock unit awards. During the ~~2009 Note, (2)~~six months ended September 30, 2010, the ~~holders~~Company granted 153,843 restricted stock unit awards which will ~~not have the right to vote on matters brought before the stockholders of the Corporation, (3)~~vest equally over a three year period. The Company may pay such restricted stock unit awards upon any liquidation, dissolution, or winding up of the Corporation, whether voluntary or involuntary, before any distribution or payment shall be made to the holders of any Junior Stock (as defined in the Certificate of Designations), subject to the rights of any series of preferred stock that may from time-to-time come into existence and which is expressly senior to the rights of the Preferred Stock, the holders of Preferred Stock shall be entitled to be paidvesting in cash out of the assets of the Company an amount per share of Preferred Stock equal to 100% of the Preferred Stock original issue price (as adjusted for any stock dividends, combinations, splits, recapitalizations and the like with respect to such shares), plus accrued but unpaid dividends (the “Liquidation Preference”), for each share of Preferred Stock held by each such holder, (4) the holders will have no rights with respect to the conversion of the Preferred Stock intoor shares of Class A Common Stock or any other security of the Company and (5) the Preferred Stock may be redeemed by the Company at any time after the second anniversary of the original issue date upon 30 days advance written notice to the holder for a ~~price equal to 110% of the Liquidation Preference, payable in cash or,~~combination thereof at the Company’s ~~option, so long as~~discretion.

The following table summarizes the ~~closing price~~activity of the ~~Class A Common Stock is $2.18 or higher (as shall be adjusted for~~Plan related to restricted stock ~~splits) for at least 90 consecutive trading days ending on the trading day into Class A Common Stock~~and restricted stock unit awards:


	Restricted Stock Awards				Weighted Average Market Price Per Share
Balance at March 31, 2010	1,065,674				$	1.44
Granted	153,843			(1)	1.4
Vested	(399,899	)	;		0.96
Forfeitures	(61,951	)			1.43
Balance at S eptember 30, 2010	757,667				$	1.40

(1) Represents restricted stock units awarded in June 2010 which were subject to stockholder approval. Stockholder approval was obtained at the ~~market price, as measured~~Company’s 2010 Annual Meeting of Stockholders, held on September 14, 2010.

WARRANTS

Warrants outstanding consisted of the ~~original issue date for the initial issuance of shares of Series A Preferred Stock.~~following:


	As of September 30, 2010	As of March 31, 2010
July 2005 Private Placement Warrants	467,275	467,275
August 2005 Warrants	—	760,196
Preferred Warrants	700,000	1,400,000
Sageview Warrants	16,000,000	16,000,000
Imperial Warrants	—	750,000
	17,167,275	19,377,471

In February 2009, in connection with the issuance of Preferred Stock, the Company issued warrants to purchase 700,000 shares of Class A Common Stock, to each holder of Preferred Stock, at an exercise price of $0.63 per share (the “Preferred Warrants”). The Preferred Warrants are exercisable beginning on March 12, 2009 for a period of five years thereafter. The Preferred Warrants are callable by the Company, provided that the closing price of the Company’s Class A Common Stock is $1.26 per share, 200% of the applicable exercise price, for twenty consecutive trading ~~days. The Company allocated $537 of the proceeds from the Preferred Stock issuance to the estimated fair value of the Preferred Warrants.~~

~~STOCK OPTION PLAN~~

The Company’s equity incentive plan (“the Plan”) provides for the issuance of up to 5,000,000 shares of Class A Common Stock to employees, outside directors and consultants. The Company obtained stockholder approval to expand the size of the Plan to 5,000,000, from the previously authorized 3,700,000, shares of Class A Common Stock at the Company’s 2009 Annual Meeting of Stockholders held on September 30, 2009.

~~Stock Options~~

During the six months ended September 30, 2009, under the Plan, the Company granted stock options to purchase 621,000 shares of its Class A Common Stock to its employees at an exercise price of $1.37 per share, of which 171,000 were issued in exchange for the termination of the AccessDM options. As of September 30, 2009, the weighted average exercise price for outstanding stock options is $5.09days and the ~~weighted~~ average ~~remaining contractual life is 5.3 years.~~

~~The following table summarizes the activity~~daily volume exceeds 50,000 shares. In June 2010, a holder of ~~the Plan related to stock option awards:~~

Shares Under Option Weighted Average Exercise Price Per Share
Balance at March 31, 2009 2,313,622 $ 6.11
Granted 621,000 1.37
Exercised — —
Cancelled/Forfeited (14,750 ) 9.02
Balance at September 30, 2009 2,919,872 $ 5.09

~~Restricted Stock Awards~~

~~The Plan also provides~~Preferred Warrants exercised their warrants for the issuance of restricted stock and restricted stock unit awards. During the six months ended September 30, 2009, the Company granted 504,090 restricted stock units, of which 274,750 will vest equally

~~over a three year period and 229,340 will vest at the end of the third year or sooner depending on the Company’s stock price.~~

~~The following table summarizes the activity of the Plan related to restricted stock and restricted stock unit awards:~~

Restricted Stock Awards Weighted Average Market Price Per Share
Balance at March 31, 2009 773,168 $ 1.83
Granted 504,090 1.06
Vested (120,000 ) 2.06
Cancelled/Forfeited (3,249 ) 2.30
Balance at September 30, 2009 1,154,009 $ 1.47

There were 1,101,356 restricted stock units granted which have not vested as of September 30, 2009. The Company may pay such restricted stock units upon vesting in cash or shares of Class A Common Stock or a combination thereof at the Company’s discretion.

~~ACCESSDM STOCK OPTION PLAN~~

In August 2009, in connection with the 2009 Private Placement (see Note 5), AccessDM terminated its stock option plan and all stock options outstanding thereunder. In exchange for the termination of the AccessDM stock options, the Company issued 171,000 stock options to the holders of AccessDM stock options, pursuant to the Plan.

~~WARRANTS~~

~~Warrants outstanding consist of the following:~~

Outstanding Warrant (as defined below)
March 31,
2009

September 30,
2009

July 2005 Private Placement Warrants 467,275 467,275
August 2005 Warrants 760,196 760,196
Preferred Warrants 1,400,000 1,400,000
Sageview Warrants — 16,000,000
Imperial Warrants — 750,000
2,627,471 19,377,471

In July 2005, in connection with the July 2005 Private Placement, the Company issued warrants to purchase 477,275 shares of Class A Common Stock at an exercise price of $11.00 per share (the “July 2005 Private Placement Warrants”). The July 2005 Private Placement Warrants were exercisable beginning on February 18, 2006 for a period of five years thereafter. The July 2005 Private Placement Warrants are conditionally callable by the Company. The underlying shares of these warrants are registered for resale. As of September 30, 2009, 467,275 July 2005 Private Placements Warrants remained outstanding.

~~In August 2005, certain then outstanding warrants were exercised for $2,487~~$441 and the Company issued to the investors 560,196 shares of Class A Common Stock and warrants to purchase 760,196 shares of Class A Common Stock at an exercise price of $11.39 per share (the “August 2005 Warrants”). The underlying shares of these warrants are registered for resale. As of September 30, 2009, all 760,196 of the August 2005 Warrants remained outstanding.

~~In February 2009, in connection with the issuance of Preferred Stock, the Company issued warrants to purchase~~ 700,000 shares of Class A Common Stock, to each holder of Preferred Stock, at an exercise price of $0.63 per share (the “Preferred Warrants”). The Preferred Warrants are exercisable beginning on March 12, 2009 for a period of five years thereafter. The Preferred Warrants are conditionally callable by the Company. The Company allocated $537 of the proceeds from the Preferred Stock issuance to the estimated fair value of the Preferred Warrants. As of September 30, 2009, all 1,400,000 of the Preferred Warrants remained outstanding.Stock.

In August 2009, in connection with the 2009 Private Placement (see Note 5), the Company issued warrants to purchase 16,000,000 shares of Class A Common Stock at an exercise price of $1.37 per share (the “Sageview Warrants”). The Sageview Warrants are exercisable beginning on September 30, 2009 and contain customary cashless exercise provision

and anti-dilution adjustments, and expire on August 11, 2016 (subject to extension in limited circumstances). The Company also entered into a Registration Rights Agreement with ~~the Purchaser~~Sageview pursuant to which the Company agreed to register the resale of the Sageview Warrants an d the underlying shares of the Sageview Warrants from time to time in accordance with the terms of such Registration Rights Agreement. Based on the terms of the warrant and the Registration Rights ~~Agreement. The~~Agreement, the Company determined that the fair value of the Sageview ~~Warrants at the date of issuance was $10,732, using a Black-Scholes option valuation model and was recorded as~~Warrant represents a liability until such time when the underlying common shares are registered. The shares underlying the Sageview Warrant were registered with the SEC for resale in September 2010 and the ~~condensed consolidated financial statements. The change in fair value of a $3,576 loss was recognized in~~Company reclassified the ~~condensed consolidated statement of operations and resulted in a~~ warrant liability ~~fair value~~ of ~~$14,308 at September 30, 2009. All 16,000,000 of the Sageview Warrants remained outstanding and the underlying shares have not yet been registered.~~$16,054 to equity.

In ~~August 2009, in~~ connection with the 2009 Private Placement (see Note 5), the Company engaged Imperial Capital, LLC (“Imperial”) to provide financial advisory services. As partial consideration for such services, the Company issued warrants to ~~Imperial~~Imperia l to purchase 750,000 shares of Class A Common Stock (the “Imperial Warrants”). The Imperial Warrants have a customary cashless exercise feature and a strike price of $1.37 per share, become exercisable on February 11, 2010 and expire on August 11, 2014. In ~~connection with~~April 2010, Imperial exercised all their warrants under the ~~issuance of the Imperial Warrants,~~cashless exercise feature and the Company ~~and Imperial entered into a registration rights agreement (the “Imperial Registration Rights Agreement”) pursuant to which the Company agreed to register the~~issued 348,633 shares of Class A Common Stock underlying the Imperial Warrants from time to time if other registrations are filed, as defined in the terms of the Imperial Registration Rights Agreement. The fair value of the Imperial Warrants at the date of issuance was $427, using a Black-Scholes option valuation model and was recorded in debt issuance costs and stockholders’ equity in the condensed consolidated financial statements at September 30, 2009. As of September 30, 2009, all 750,000 of the Imperial Warrants remained outstanding.Stock.


7.	COMMITMENTS AND CONTINGENCIES

As of September 30, ~~2009,~~2010, in connection with the Phase II Deployment, Phase 2 DC has entered into digital cinema deployment agreements with ~~six~~eight motion picture studios for the distribution of digital movie releases to motion picture exhibitors equipped with Systems, and providing for payment of VPFs to Phase 2 DC. As of September 30, ~~2009,~~2010, Phase 2 DC ~~also~~a lso entered into master license agreements with ~~four~~35 exhibitors covering a total of ~~503~~2,223 screens, whereby the exhibitors agreed to the placement of Systems as part of the Phase II Deployment. Included in the 2,223 contracted screens are contracts covering 1,437 screens with 28 exhibitors under the Exhibitor-Buyer Structure. As of September 30, ~~2009~~2010, the Company has 1,050 Phase 2 Systems installed, ~~160 Systems. Installation~~including 521 screens under the Exhibitor-Buyer Structure. For Phase 2 Systems that the Company will own and finance, installation of additional Systems in the Phase II Deployment is ~~still~~ contingent upon the completion of ~~appropriate vendor supply agreements and~~ financing for the purchase of Systems.

In September 2009, in connection with the Company’s Phase II Deployment, Phase 2 DC entered into master license agreements with two additional exhibitors covering a total of 457 screens, bringing the number of screens licensed by Phase 2 DC to 960. Both exhibitors will purchase its own equipment through their own financing and pay an upfront activation fee to the Company. The Company will manage the billing and collection of VPFs and the remittance of a percentage of the VPFs collected, less a servicing fee, to the exhibitors for a ten-year term.

In November 2008, in connection with the Phase II Deployment, Phase 2 DC entered into a supply agreement with Christie, for the purchase of up to 10,000 Systems at agreed upon pricing, as part of the Phase II Deployment. As of September 30, ~~2009,~~2010, the Company has purchased 12 Systems under this agreement for ~~$898.~~$898 and has no purchase obligations for additional Systems.

In November 2008, in connection with the Phase II ~~Deployment,~~Deploymen t, Phase 2 DC entered into a supply agreement with Barco, for the purchase of up to 5,000 Systems at agreed upon pricing, as part of the Phase II Deployment. As of September 30, ~~2009,~~2010, the Company has purchased ~~138~~ Systems under this agreement for ~~$10,096.~~an accumulated total of $13,910 and has additional purchase obligations for approximately $34,800.

~~LITIGATION~~

~~The Company’s subsidiary, ADM Cinema, was named~~In March 2009, in connection with the Phase II Deployment, Phase 2 DC entered into a supply agreement with NEC Corporation of America (&ldqu o;NEC”), for the purchase of up to 5,000 Systems at agreed upon pricing, as ~~a defendant in an action filed on May 19, 2008 in the Supreme Court~~part of the ~~State~~Phase II Deployment. As of ~~New York, County of Kings by Pavilion on~~September 30, 2010, the ~~Park, LLC (“Landlord”). Landlord is~~Company has not purchased any Systems under this agreement.

In June 2010, in connection with the ~~owner~~retirement of the ~~premises located at 188 Prospect Park West, Brooklyn, New York, known as~~Company’s CEO, the ~~Pavilion Theatre. Pursuant~~Company agreed to pay and accrued a $450 bonus and $450 of severance, to be paid over the ~~relevant lease, ADM Cinema leases~~subsequent 9 months. As of September 30, 2010, the ~~Pavilion Theatre from Landlord~~Company has $300 bonus and ~~operates it as a movie theatre.~~$300 of severan ce remaining to be paid.

~~In the complaint, Landlord alleges that ADM Cinema violated its obligations under Article 12 of the lease in that~~

ADM Cinema failed to comply with an Order of the Fire Department of the City of New York issued on September 24, 2007 calling for the installation of a sprinkler system in the Pavilion Theatre and that such violation constitutes an event of default under the lease. Landlord seeks to terminate the lease and evict ADM Cinema from the premises and to recover its attorneys’ fees and damages for ADM Cinema’s alleged “holding over” by remaining on the premises. In July 2009, the Company entered into an agreement with Landlord to settle this matter whereby the Company would be responsible for 25% of the cost and expenses related to the installation of a sprinkler system. The Company’s share of the cost to install a sprinkler system is estimated to be $100. As an additional condition of this agreement, any option to renew or extend this lease has been eliminated. This lease ends on July 31, 2022.


8.	SUPPLEMENTAL CASH FLOW ~~DISCLOSURE~~DISC LOSURE


	For the Six Months Ended September 30,				&n bsp;	For the Six Months Ended September 30,
	2008		2009			2010			2009
Interest paid	$	9,413	$	14,907		$	12,513	&nb sp;	$	14,907
Equipment purchased from Christie included in accounts payable and accrued expenses at end of period	$	1,414	$	—
Issuance of Class A Common Stock as additional purchase price for Access Digital Server Assets	$	129	$	—
Issuance of Class A Common Stock as additional purchase price for Managed Services	$	82	$	—
Issuance of Class A Common Stock to SDE as payment for services and resources	$	93	$	—
Assets acquired under capital leases	$	92	$	901		$	27		$	901
Accretion of preferred stock discount	$	—	$	54		$	54		$	54
Accrued dividends on preferred stock	$	—	$	200		$	205		$	200
Issuance of Class A Common Stock to Board of Directors for services						$	655		$	—
Issuance of Class A Common Stock to Aquifer Capital for financial advisory services in connection with the purchase of the 2007 Senior Notes	$	—	$	198		$	—		$	198
Issuance of Class A Common Stock to Imperial to provide financial advisory services	$	—	$	437		$	—		$	427


9.	SEGMENT INFORMATION

~~During the quarter ended September 30, 2009, the Company modified how its decision makers review and allocate resources to operating segments, which resulted in revised reportable segments.~~ The Company is now comprised of ~~five~~four reportable segments: Phase I Deployment, Phase II Deployment, Services and Content & ~~Entertainment~~Entertainment. Our former Other segment has been reclassified as discontinued operations (see Notes 1 and ~~Other.~~3). The segments were determined based on the products and services provided by each segment and how management reviews and makes decisions regarding segment operations. Performance of the segments is evaluated on the segment’s income (loss) from continuing operations before interest, taxes, depreciation and amortization. As a result of the change in the Company’s reportable segments during the three months ended June 30, 2010, the Company has restated the segment information for the prior periods. ~~Future~~All segment information has been restated to reflect the changes ~~to this organization structure may result in changes to the reportable segments disclosed.~~described above for all periods presented.

The Phase I Deployment and Phase II Deployment segments consist of the following:


Operations of:		Products and services provided:
Phase 1 DC		Financing vehicles and administrators for the Company’s 3,724 Systems installed nationwide in Phase 1 DC’s deployment to theatrical exhibitors. The Company retains ownership of the Systems and the residual cash flows ~~and~~related to the Systems after the repayment of all non-recourse debt and the Company retains at the expiration of exhibitor master license agreements.
Phase 2 DC		Financing vehicles and administrators for the Company’s second digital cinema deployment, through Phase 2 ~~DC (the “Phase II Deployment”).~~DC. The Company retains no ownership of the residual cash flows and digital cinema equipment after the completion of cost recoupment and at the expiration of the exhibitor master license agreements.

The Services segment consists of the following:


Operations of:		Products and services provided:
~~Digital Cinema~~ Services		Provides monitoring, billing, collection, verification and other management services to the Company’s Phase I Deployment, Phase II Deployment as well as to exhibitors who purchase their own equipment. Collects and disburses VPFs from motion picture studios and distributors and ACFs from alternative content providers, movie exhibitors and theatrical exhibitors.
Software		Develops and licenses software to the theatrical distribution and exhibition industries, provides ASP Service, and provides software enhancements and consulting services.
DMS		Distributes digital content to movie theatres and other venues having digital ~~projection~~cinema equipment and provides satellite-based broadband video, data and Internet transmission, encryption management services, video network origination and management services and a virtual booking center to outsource the booking and scheduling of satellite and fiber networks and provides forensic watermark detection services for motion picture studios and forensic recovery services for content owners.

The Content & Entertainment segment consists of the ~~following:~~foll owing:


Operations of:		Products and services provided:
USM		Provides cinema advertising services and entertainment.
CEG		Acquires, distributes and provides the marketing for programs of alternative content and feature films to movie exhibitors.

~~The Other segment consists of the following:~~

~~Operations of:~~	~~Products and services provided:~~
~~Pavilion Theatre~~	~~A nine-screen digital movie theatre and showcase to demonstrate the Company’s integrated digital cinema solutions.~~
~~Managed Services~~	~~Provides information technology consulting services and managed network monitoring services through its global network command center.~~
~~Access Digital Server Assets~~	~~Provides hosting services and provides network access for other web hosting services.~~

~~Since May 1, 2007, the Company’s IDCs have been operated by FiberMedia, consisting of unrelated third parties,~~

pursuant to a master collocation agreement. Although the Company is still the lessee of the IDCs, substantially all of the revenues and expenses were being realized by FiberMedia and not the Company and since May 1, 2008, 100% of the revenues and expenses are being realized by FiberMedia.

Information related to the segments of the Company and its subsidiaries is detailed below:

As of March 31, 2009
Phase I Phase II Services Content & Entertainment Other Corporate Consolidated
Total intangible assets, net $ 527 $ — $ 156 $ 10,010 $ 14 $ — $ 10,707
Total goodwill $ — $ — $ 4,306 $ 1,568 $ 2,150 $ — $ 8,024
Total assets $ 250,030 $ 5,330 $ 19,911 $ 21,391 $ 9,476 $ 16,259 $ 322,397

Notes payable, non-recourse $ 195,448 $ — $ — $ — $ — $ — $ 195,448
Notes payable — — 501 35 — 55,221 55,757
Capital leases — — — 68 5,939 — 6,007
Total debt $ 195,448 $ — $ 501 $ 103 $ 5,939 $ 55,221 $ 257,212

As of September 30, 2009
Phase I Phase II Services Content & Entertainment Other Corporate Consolidated
Total intangible assets, net $ 504 $ — $ 76 $ 8,599 $ 13 $ — $ 9,192
Total goodwill $ — $ — $ 4,306 $ 1,568 $ 2,150 $ — $ 8,024
Total assets $ 235,261 $ 12,947 $ 20,111 $ 19,759 $ 8,602 $ 29,453 $ 326,133

Notes payable, non-recourse $ 176,580 $ 10,290 $ — $ — $ — $ — $ 186,870
Notes payable — — 419 — — 65,385 65,804
Capital leases — 31 524 54 5,869 — 6,478
Total debt $ 176,580 $ 10,321 $ 943 $ 54 $ 5,869 $ 65,385 $ 259,152

Capital Expenditures Phase I Phase II Services Content & Entertainment Other Corporate Consolidated
For the six months ended September 30, 2008 $ 14,353 $ — $ 1,320 $ 191 $ 123 $ 21 $ 16,008
For the six months ended September 30, 2009 $ 66 $ 11,768 $ 635 $ 13 $ 44 $ 47 $ 12,573


	As of September 30, 2010
	(Unaudited)
	Phase I		Phase II			Services			Content & Entertainment			Corporate			Consolidated
Total intangible assets, net	$	458	$	—		$	47		$	5,777		$	—		$	6,282
Total goodwill	$	—	$	—		$	4,306		$	1,568		$	—		$	5,874
Assets from continuing operations	$	208,275	$	19,702		$	20,424		$	16,276		$	17,739		$	282,416
Assets held for sale															5,422
Total assets															$	287,838
Notes payable, non-recourse	$	162,845	$	14,248		$	—		$	—		$	—		$	177,093
Notes payable	—		—			258			—			73,781			74,039
Capital leases	—		20		22			51			—			93
Total debt	$	162,845	$	14,268		$	280		$	51		$	73,781		$	251,225

For the Three Months Ended September 30, 2008
Phase I Phase II Services Content & Entertainment Other Corporate Consolidated
Revenues from external customers $ 12,713 $ — $ 2,269 $ 4,368 $ 2,499 $ — $ 21,849
Intersegment revenues 1 — 128 6 96 — 231
Total segment revenues 12,714 — 2,397 4,374 2,595 — 22,080
Less :Intersegment revenues (1 ) — (128 ) (6 ) (96 ) — (231 )
Total consolidated revenues $ 12,713 $ — $ 2,269 $ 4,368 $ 2,499 $ — $ 21,849
Direct operating (exclusive of depreciation and amortization shown below) 241 — 1,512 2,874 2,105 — 6,732
Selling, general and administrative 313 — 376 1,641 201 1,656 4,187
Plus: Allocation of Corporate overhead — — 745 207 99 (1,051 ) —
Provision for doubtful accounts — — — 115 30 — 145
Research and development — — 93 — — — 93
Stock-based compensation — — 40 23 2 135 200
Depreciation and amortization of property and equipment 7,137 — 447 267 265 17 8,133
Amortization of intangible assets — — 150 728 22 1 901
Total operating expenses 7,691 — 3,363 5,855 2,724 758 20,391
Income (loss) from operations $ 5,022 $ — $ (1,094 ) $ (1,487 ) $ (225 ) $ (758 ) $ 1,458

For the Three Months Ended September 30, 2009
Phase I Phase II Services Content & Entertainment Other Corporate Consolidated
Revenues from external customers $ 11,406 $ 450 $ 1,735 $ 3,947 $ 2,343 $ — $ 19,881
Intersegment revenues — — 69 6 117 — 192
Total segment revenues 11,406 450 1,804 3,953 2,460 — 20,073
Less :Intersegment revenues — — (69 ) (6 ) (117 ) — (192 )
Total consolidated revenues $ 11,406 $ 450 $ 1,735 $ 3,947 $ 2,343 $ — $ 19,881
Direct operating (exclusive of depreciation and amortization shown below) 262 61 1,349 2,553 1,841 — 6,066
Selling, general and administrative 117 244 463 1,228 223 1,798 4,073
Plus: Allocation of Corporate overhead — — 1,267 122 58 (1,447 ) —
Provision for doubtful accounts — — — 136 — — 136
Research and development — — 64 — — — 64
Stock-based compensation — — 84 28 3 326 441
Depreciation and amortization of property and equipment 7,139 290 470 217 198 9 8,323
Amortization of intangible assets 11 — 32 706 1 — 750
Total operating expenses 7,529 595 3,729 4,990 2,324 686 19,853
Income (loss) from operations $ 3,877 $ (145 ) $ (1,994 ) $ (1,043 ) $ 19 $ (686 ) $ 28


		As of March 31, 2010
		Phase I		Phase II		Services		Content & Entertainment		Corporate		Consolidated
Total intangible assets, net		$	481	$	—	$	49	$	7,189	$	—	$	7,719
Total goodwill		$	—	$	—	$	4,306	$	1,568	$	—	$	5,874
Assets from continuing operations		$	217,974	$	12,146	$	20,961	$	18,133	$	19,702	$	288,916
Assets held for sale												8,231
Total assets												$	297,147
Notes payable, non-recourse		$	163,329	$	9,972	$	—	$	—	$	—	$	173,301
Notes payable	& nbsp;	—		—		333		—		69,521		69,854
Capital leases		—		25		99		40		—		164
Total debt		$	163,329	$	9,997	$	432	$	40	$	69,521	$	243,319

For the Six Months Ended September 30, 2008
Phase I Phase II Services Content & Entertainment Other Corporate Consolidated
Revenues from external customers $ 24,614 $ — $ 4,215 $ 8,463 $ 5,127 $ — $ 42,419
Intersegment revenues 1 — 289 21 172 — 483
Total segment revenues 24,615 — 4,504 8,484 5,299 — 42,902
Less :Intersegment revenues (1 ) — (289 ) (21 ) (172 ) — (483 )
Total consolidated revenues $ 24,614 $ — $ 4,215 $ 8,463 $ 5,127 $ — $ 42,419
Direct operating (exclusive of depreciation and amortization shown below) 421 — 2,563 5,401 4,144 — 12,529
Selling, general and administrative 710 — 1,020 3,536 425 3,329 9,020
Plus: Allocation of Corporate overhead — — 1,498 416 200 (2,114 ) —
Provision for doubtful accounts (150 ) — 40 223 60 — 173
Research and development — — 100 — — — 100
Stock-based compensation — — 99 43 (30 ) 246 358
Depreciation and amortization of property and equipment 14,255 — 889 559 532 33 16,268
Amortization of intangible assets — — 301 1,503 43 1 1,848
Total operating expenses 15,236 — 6,510 11,681 5,374 1,495 40,296
Income (loss) from operations $ 9,378 $ — $ (2,295 ) $ (3,218 ) $ (247 ) $ (1,495 ) $ 2,123


	Capital Expenditures
	For the Six Months Ended September 30,
	Phase I		Phase II		Services		Content & Entertainment		Corporate		Consolidated
2010	$	—	$	5,292	$	391	$	63	$	—	$	5,746
2009	$	66	$	11,768	$	635	$	13	$	47	$	12,529


	Statements of Operations
	For the Three Months Ended September 30, 2010
	(Unaudited)
	Phase I			Phase II		Services			Content & Entertainment			Corporate			Consolidated
Revenues from external customers	$	10,988		$	1,111	$	2,868		$	3,932		$	—		$	18,899
Intersegment revenues (1)	1			—		1,355			1			—			1,357
Total segment revenues	10,989			1,111		4,223			3,933			—			20,256
Less: Intersegment revenues	(1		)	—		(1,355		)	(1		)	—			(1,357		)
Total consolidated revenues	$	10,988		$	1,111	$	2,868		$	3,932		$	—		$	18,899
Direct operating (exclusive of depreciation and amortization shown below) (2)	122			31		1,875			2,275			—			4,303
Selling, general and administrative (3)	5			15		938			1,648			2,395			5,001
Plus: Allocation of Corporate overhead	—			—		1,767			237			(2,004		)	—
Provision for doubtful accounts	97			11		5			115			—			228
Research and development	—		;	—		97			—			—			97
Depreciation and amortization of property and equipment	7,139			457		507			179			11			8,293
Amortization of intangible assets	11			—		5			706			—			722
Total operating expenses	7,374			514		5,194			5,160			402			18,644
Income (loss) from operations	$	3,614		$	597	$	(2,326	)	$	(1,228	)	$	(402	)	$	255

(1) Included in intersegment revenues of the Services segment is $1,270 for service fees earned from the Phase I and Phase II Deployments.

(2) Included in direct operating of the Services segment is $197 for the amortization of capitalized software development costs.

(3) Included in selling, general and administra tive of the Corporate segment is $229 of one-time transition costs related to the retirement of our CEO.

The following employee stock-based compensation expense related to the Company’s stock-based awards is included in the above amounts as follows:


	Phase I		Phase II		Services		Content & Entertainment		Corporate		Consolidated
Direct operating	$	—	$	—	$	13	$	4	$	—	$	17
Selling, general and administrative	—		—		72		11		559		642
Research and development	—		—		15		—		—		15
Total stock-based compensation	$	—	$	—	$	100	$	15	$	559	$	674


	Statements of Operations
	For the Three Months Ended September 30, 2009
	(Unaudited)
	Phase I		Phase II			Services				Content & Entertainment			Corporate			Consolidated
Revenues from external customers	$	11,405	$	451		$	1,735			$	3,947		$	—		$	17,538
Intersegment revenues	—		—			69				6			—			75
Total segment revenues	11,405		451			1,804			&nb sp;	3,953			—			17,613
Less: Intersegment revenues	—		—			(69		)		(6		)	—			(75		)
Total consolidated revenues	$	11,405	$	451		$	1,735			$	3,947		$	—		$	17,538
Direct operating (exclusive of depreciation and amortization shown below) (1)	265		62			1,358				2,556			—			4,241
Selling, general and administrative	153		245			488				1,253			2,123			4,262		&nb sp;
Plus: Allocation of Corporate overhead	—		—			1,267				122			(1,389		)	—
Provision for doub tful accounts	—		—			(1		)		137			—			136
Research and development	—		—			73				—			—			73
Depreciation and amortization of property and equipment	7,139		290			470				218			9			8,126
Amortization of intangible assets	11		—			32				706			—			749
Total operating expenses	7,568		597			3,687				4,992			743			17,587
Income (loss) from operations	$	3,837	$	(146	)	$	(1,952	)		$	(1,045	)	$	(743	)	$	(49	)

For the Six Months Ended September 30, 2009
Phase I Phase II Services Content & Entertainment Other Corporate Consolidated
Revenues from external customers $ 22,027 $ 694 $ 3,815 $ 7,210 $ 4,801 $ — $ 38,547
Intersegment revenues — — 133 7 226 — 366
Total segment revenues 22,721 694 3,948 7,217 5,027 — 38,913
Less :Intersegment revenues — — (133 ) (7 ) (226 ) — (366 )
Total consolidated revenues $ 22,027 $ 694 $ 3,815 $ 7,210 $ 4,801 $ — $ 38,547
Direct operating (exclusive of depreciation and amortization shown below) 443 85 2,523 4,709 3,768 — 11,528
Selling, general and administrative 237 495 914 2,747 430 3,119 7,942
Plus: Allocation of Corporate overhead — — 2,199 212 101 (2,512 ) —
Provision for doubtful accounts — — 39 225 — — 264
Research and development — — 104 — — — 104
Stock-based compensation — — 161 55 6 544 766
Depreciation and amortization of property and equipment 14,280 443 887 436 412 18 16,476
Amortization of intangible assets 23 — 79 1,411 2 — 1,515
Total operating expenses 14,983 1,023 6,906 9,795 4,719 1,169 38,595
Income (loss) from operations $ 7,044 $ (329 ) $ (3,091 ) $ (2,585 ) $ 82 $ (1,169 ) $ (48 )

~~10. RELATED PARTY TRANSACTIONS~~

~~In August 2009, the Company hired Adam M. Mizel to be its Chief Financial Officer and Chief Strategy Officer. Mr. Mizel has been a member~~(1) Included in direct operating of the Services segment is $162 for the amortization of capitalized software development costs.

The following employee stock-based compensation expense related to the Company’s ~~Board of Directors since March 2009 and~~stock-based awards is ~~currently~~included in the above amounts as follows:


	Phase I		Phase II		Services			Content & Entertainment			Corporate			Consolidated
Direct operating	$	4	$	—	$	9		$	2		$	—		$	15
Selling, general and administrative	37		—		25		25			327			414
Research and development	—		—		9			—			—			9
Total stock-based compensation	$	41	$	—	$	43		$	27		$	327		$	43 8


	Statements of Operations
	For the Six Months Ended September 30, 2010
	(Unaudited)
	Phase I			Phase II		Services			Content & Entertainment				Corporate			Consolidated
Revenues from external customers	$	22,501		$	1,712	$	5,745		$	8,291			$	—		$	38,249
Intersegment revenues (1)	1			&mdas h;		2,640			3				—			2,644
Total segment revenues	22,502			1,712		8,385			8,294				& mdash;			40,893
Less: Intersegment revenues	(1		)	—		(2,640		)	(3		)		—			(2,644		)
Total consolidated revenues	$	22,501		$	1,712	$	5,745		$	8,291			$	—		$	38,249
Direct operating (exclusive of depreciation and amortization shown below) (2)	160			46		4,097			4,939				—			9,242
Selling, general and administrative (3)	23			23		1,824			3,213				5,394			10,477
Plus: Allocation of Corporate overhead	—			—		2,951			396				(3,347		)	—
Provision for doubtful accounts	97			11		5			219			;	—			332
Research and development	—			—		162			—				—			162
Depreciation and amortization of property and equipment	14,278			783		1,002			370				21			16,454
Amortization of intangible assets	23			—		9			1,411				—			1,443
Total operating expenses	14,581			863		10,050			10,548				2,068			38,110
Income (loss) from operations	$	7,920		$	849	$	(4,305	)	$	(2,257	)		$	(2,068	)	$	139

(1) Included in intersegment revenues of the Services segment is $2,292 for service fees earned from the Phase I and Phase II Deployments.

(2) Included in direct operating of the Services segment is $372 for the amortization of capitalized software development costs.

(3) Included in selling, general and administrative of the Corporate segment is $1,141 of one-time transition costs related to the retirement of our CEO.

The following employee stock-based compensation expense related to the Company’s stock-based awards is included in the above amounts as follows:


	Phase I		Phase II		Services		Content & Entertainment		Corporate		Consolidated
Direct operating	$	—	$	—	$	26	$	8	$	—	$	34
Selling, general and administrative	—		—		133		28		1,142		1,303
Research and development	—		—		27		—		—		27
Total stock-based compensation	$	—	$	—	$	186	$	36	$	1,142	$	1,364

~~Managing Principal of Aquifer Capital Group, LLC and the General Partner~~


		Statements of Operations
		For the Six Months Ended September 30, 2009
		(Unaudited)
		Phase I		Phase II			Services			Content & Entertainment			Corporate			Consolidated
Revenues from external customers		$	22,027	$	694		$	3,815		$	7,210		$	—		$	33,746
Intersegment revenues	&n bsp;	—		—			133			6			—			139
Total segment revenues		22,027		694			3,948			7,216			—			33,885
Less: Intersegment revenues		—		—			(133		)	(6		)	—			(139		)
Total consolidated revenues		$	22,027	$	694		$	3,815		$	7,210		$	—		$	33,746
Direct operating (exclusive of depreciation and amortization shown below) (1)		449		85			2,544			4,715			—			7,793
Selling, general and administrative		304		495			961			2,797			3,663			8,220		&nbs p;
Plus: Allocation of Corporate overhead		—		—			2,199			212			(2,411		)	—
Provision for doubt ful accounts		—		—			39			225			—			264
Research and development		—		—			123			—			—			123
Depreciation and amortization of property and equipment		14,279		443			887			436			19			16,064
Amortization of intangible assets		23		—			79			1,411			—			1,513
Total operating expenses		15,055		1,023			6,832			9,796			1,271			33,977
Income (loss) from operations		$	6,972	$	(329	)	$	(3,017	)	$	(2,586	)	$	(1,271	)	$	(231	)

(1) Included in direct operating of the ~~Aquifer Opportunity Fund, L.P., currently~~Servi ces segment is $323 for the amortization of capitalized software development costs.

The following employee stock-based compensation expense related to the Company’s ~~largest shareholder.~~stock-based awards is included in the above amounts as follows:

~~11. SUBSEQUENT EVENTS~~


	Phase I		Phase II		Services		Content & Entertainment		Corporate		Consolidated
Direct operating	$	7	$	—	$	21	$	5	$	—	$	33
Selling, general and administrative	67		—		47		50		544		708
Research and development	—		—		19		—		—		19
Total stock-based compensation	$	74	$	—	$	87	$	55	$	544	$	760


10.	SUBSEQUENT EVENTS

The Company has evaluated events and transactions ~~that occurred between September 30, 2009 and November 13, 2009, which is the date the financial statements were issued,~~ for possible disclosure or recognition in the financial statements. The Company has determined that there were no such events or transactions that warrant disclosure or recognition in the financial statements except as noted below.

In ~~October 2009, in connection with~~November 2010, the ~~Company’s Phase II Deployment,~~Company, through its non-recourse Phase 2 ~~DC has~~subsidiary, received commitment letters from ~~GECC’s Media, Communications & Entertainment business (“GE Capital”) and~~ Société Générale ~~Corporate & Investment Banking~~and Natixis for a senior credit facility totaling $75 million with flexibility to expand up to $86 million through syndication, and from Macquarie Equi pment Finance, LLC (“~~Soc Gen”~~Macquarie”) for ~~senior credit facilities totaling~~ up to ~~$100 million. The Company anticipates~~$23 million of junior capital. Closing is targeted for the ~~closing~~end of the third quarter with deployments commencing in this ~~new loan~~year's fiscal fourth quarter. This Phase 2 facility together with support from digital cinema equipment vendors Christie and Barco by December 31, 2009 with installations targeted to commence in early 2010. GE Capital’s commitment covers the financing ofwill deploy up to ~~about 1,600~~1,800 - 2,100 Systems, with projectors being provided exclusively by Barco and ~~Soc Gen’s~~NEC Display Solutions of America ("NEC Display"). These new commitment ~~covers the~~letters address both senior and junior capital requirements of a non-

recourse borrowing facility which Cinedigm can offer to exhibitors to provide a complete financing ~~of up to an additional 533 Systems.~~solution.

In October 2009, in connection with the Company’s Phase II Deployment, Phase 2 DC entered into digital cinema deployment agreements with two additional motion picture studios for the distribution of digital movie releases to motion picture exhibitors equipped with Systems, and providing for payment of VPFs to Phase 2 DC. Phase 2 DC now has digital cinema deployment agreements with eight motion picture studios.

In October 2009, the Company’s name change from Access Integrated Technologies, Inc., to Cinedigm Digital Cinema Corp. and the increase in the number of shares Class A Common Stock authorized for issuance from 65,0000,000 to 75,000,000 shares became effective.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following is a discussion of the historical results of operations and financial condition of Cinedigm Digital Cinema Corp. (the “Company”) and factors affecting the Company’s financial resources. This discussion should be read in conjunction with the condensed consolidated financial statements, including the notes thereto, set forth herein under Item 1 “Financial Statements” and ~~the~~th e Form 10-K for the year ended March 31, ~~2009.~~2010.

This report contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that involve risks and uncertainties, many of which are beyond our control. Our actual results could differ materially and adversely from those anticipated in such forward-looking statements as a result of certain factors, including those set forth in our Annual Report on Form 10-K for the year ended March 31, ~~2009.~~2010. These include statements about our expectations, beliefs, intentions or strategies for the future, which are indicated by words or phrases such as “believes,” “anticipates,” “expects,” “intends,” “plans,” “will,” “estimates,“ and similar words. Forward-looking statements represent, as of the date of this report, our judgment relating to, among other things, future results of operations, growth plans, sales, capital requirements and general industry and business conditions applicable to us. These forward-looking statements are not guarantees of future performance and are subject to risks, uncertainties, assumptions and other factors, some of which are beyond the Company’s control that could cause actual results to differ materially from those expressed or implied by such forward-looking statements. Additional information regarding risks to the Company can be found below (see Part III I Item 1A under Risk Factors).

In this report, “Cinedigm,” “we,” “us,” “our” refers to Cinedigm Digital Cinema Corp. f/k/a Access Integrated Technologies, Inc. and the “Company” refers to Cinedigm and its subsidiaries unless the context otherwise requires.

OVERVIEW

Cinedigm Digital Cinema Corp. was incorporated in Delaware on March 31, 2000 (“Cinedigm”, and collectively with its subsidiaries, the “Company”). ~~On September 30, 2009~~

The Company is a digital cinema services and a content marketing and distribution company driving the ~~Company’s stockholders approved a change in~~conversion of the ~~Company’s name~~exhibition industry from ~~Access Integrated Technologies, Inc.,~~film to ~~Cinedigm Digital Cinema Corp. and such change was effected October 5, 2009.~~digital technology. The Company provides a digital cinema platform that combines technology solutions, provides financial advice and guidance, software services and ~~advice, software services,~~ electronic delivery ~~and content distribution~~ services to content owners and distributors ~~of digital content~~and to movie ~~theatres~~exhibitors. Cinedigm leverages this digital cinema platform with a series of business applications that utilize the platform to capitalize on the new bus iness opportunities created by the transformation of movie theaters into networked entertainment centers. The three main applications currently provided by Cinedigm include (i) its digital entertainment origination, marketing and ~~other venues.~~ distribution business focused on alternative content and independent film; (ii) its operational and analytical software applications; and (iii) its pre-show advertising and theatrical marketing business. Historically, the conversion of an industry from analog to digital has created new revenue and growth opportunities as well as an opening for new players to emerge for capitalizing on this technological shift at the expense of incumbents.

During the quarter ended ~~September~~June 30, ~~2009,~~2010, the Company modified how its

decision makers review and allocate resources to operating segments, which resulted in revised reportable segments, but did not impact our consolidated financial position, results of operations or cash flows. We realigned our focus to ~~five~~four primary ~~businesses:~~businesses as follows: the first digital cinema deployment (“Phase I Deployment”), the second digital cinema deployment (“Phase II Deployment”), services (“Services”), and media content and entertainment (“Content & Entertainment”~~) and other (“Other”~~). The Company’s Phase I Deployment and Phase II Deployment segments are the non-recourse, financing vehicles and administrators for the Company’s digital cinema equipment (the “Systems”) installed in movie theatres nationwide. The Company’s Services segment provides ~~technology solutions,~~the digital cinema platform that

services and supports the Phase I Deploy ment and Phase II Deployment segments as well as is being offered to other third party customers. Included in these services are asset management services for a specified fee via service agreements with Phase I Deployment and Phase II Deployment; software ~~services,~~license, maintenance and consulting services; and electronic content delivery services via satellite and hard drive to the motion picture ~~industry,~~industry. These services primarily to facilitate the conversion from analog (film) to digital cinema and ~~has~~have positioned the Company at what it believes to be the forefront of a rapidly developing industry relating to the delivery and management of digital cinema and other content to theatres and other remote venues worldwide. The Company’s Content & Entertainment segment provides content marketing and distribution services to alternative and theatrical content owners and to theatrical exhibitors and in-theatre advertising. ~~The Company’s Other segment provides~~In June 2010, the Company decided to discontinue the motion picture exhibition to the general public, information technology consulting services and managed network monitoring services, and hosting services and network access for other web hosting services, ~~(“Access Digital Server Assets”).~~which are all separate reporting units previously included in our former Other segment. Overall, the Company’s goal is to aid in the

transformation of movie theatres to entertainment centers by providing a platform of hardware, software and content choices.

The Phase I Deployment segment of our business is comprised of Christie/AIX, Inc. (“Phase 1 DC”). The Phase II Deployment segment is comprised of Access Digital Cinema Phase 2 Corp. (“Phase 2 DC”). The Services segment of our business is comprised of FiberSat Global Services, Inc. d/b/a AccessIT Satellite and Support Services, (“Satellite”), Access Digital Media, Inc. (“AccessDM” and, together with Satellite, “DMS”), Hollywood Software, Inc. d/b/a AccessIT Software (“Software”), and PLX Acquisition Corp. The Content & Entertainment segment of our business is comprised of UniqueScreen Media, Inc. (“USM”) and Vistachiara Productions, Inc. f/k/a The Bigger Picture, currently d/b/a Cinedigm Content and Entertainment Group (“CEG”). Our Other segment consists of the operations of Core Technology Services, Inc. (“Managed Services”), ADM Cinema Corporation (“ADM Cinema”) d/b/a the Pavilion Theatre (the “Pavilion Theatre”) and our Access Digital Server Assets. In the past our Other segment included the operations of our internet data centers (“IDCs”). However, since May 2007, our three IDCs have been operated by FiberMedia, consisting of unrelated third parties, and substantially all of the revenues and expenses were being realized by FiberMedia and not the Company and since May 1, 2008, 100% of the revenues and expenses are being realized by FiberMedia. In June 2009, one of the IDC leases expired, leaving two IDC leases with the Company as lessee.

The following organizational chart provides a graphic representation of our ~~business and our five reporting segments:~~four primary businesses:

We have incurred consolidated net losses, including the results of ~~$6.3~~our non-recourse deployment subsidiaries, of $10.8 million and ~~$1.1~~$1.1 million in the three months ended September 30, ~~2008~~2010 and 2009, respectively, and ~~$10.6~~$17.9 million and ~~$8.2~~$8.2 million in the six months ended September 30, ~~2008~~2010 and 2009

, respectively, and we have an accumulated deficit of ~~$146.5~~$186.1 million as of September 30, ~~2009.~~2010. We also have significant contractual obligations related to our ~~recourse~~non-recourse and ~~non-recourse~~recourse debt for the ~~remainder of~~next fiscal year ~~2010~~2011 and beyond. We expect to continue generating consolidated net losses, including our non-recourse deployment subsidiaries, for the foreseeable future. Based on our cash position at September 30, ~~2009,~~2010, and expected cash flows from operations, we believe that we have the ability to meet our obligations through September 30 ~~2010.~~, 2011. In May 2010, we entered into a definitive credit agreement on non-recourse debt in the principal amount of $172.5 million and extinguished an existing credit facility and vendor note. We ~~are seeking to raise~~have signed commitment letters for additional non-recourse debt capital, ~~to refinance certain outstanding debt,~~primarily to meet equipment requirements related to ~~the Phase 2 DC second digital cinema deployment (the “Phase II Deployment”) and for working capital as necessary. Although we recently entered into certain agreements related to the~~our Phase II Deployment, however there is no assurance that ~~financing of additional Systems~~financi ng for the Phase II Deployment will be completed as contemplated or under terms acceptable to us or our existing stockholders. ~~We expect any Phase II debt will be non-recourse to the parent company, as is the case with our existing debt at Phase 1 DC.~~ Failure to generate additional revenues, raise additional capital or manage discretionary spending could have a material adverse effect on our ability to continue as a going concern. The accompanying condensed consolidated financial statements do not reflect any adjustments which may result from our inability to continue as a going concern.

Results of Operations for the Three Months Ended September 30, ~~2008~~2010 and 2009

Revenues

For the Three Months Ended September 30,
($ in thousands) 2008 2009 Change
Phase I Deployment $ 12,713 $ 11,406 (10 )%
Phase II Deployment — 450 —
Services 2,269 1,735 (24 )%
Content & Entertainment 4,368 3,947 (10 )%
Other 2,499 2,343 (6 )%
$ 21,849 $ 19,881 (9 )%


	For the Three Months Ended September 30,
($ in thousands)	2010		2009		Change
Phase I Deployment	$	10,988	$	11,405	(4	)%
Phase II Deployment	1,111		451		146	%
Services	2,868		1,735		65	%
Content & Entertainment	3,932		3,947		(0	)%
	$	18,899	$	17,538	8	%

Revenues ~~decreased $2.0~~increased $1.4 million or 9%8%. The decrease in revenues in the Phase I Deployment segment was due, as discussed in our previous quarter, to the shifting of a ~~10%~~large movie release into Q1 from Q2 and a resulting decrease in ~~Phase 1 DC’s VPF revenues, attributable to a contractual 16% reduction in VPF rates starting in November 2008, offset by an increase in quarterly screen turnover.~~ fewer VPFs during the quarter. The increase in revenues in the Phase II Deployment segment was due to ~~Phase 2 DC VPF revenues which were not generated during~~ the ~~three months ended September 30, 2008, as no~~increased number of Phase 2 DC’s financed Systems ~~were~~ installed and ready for content ~~until December 2008.~~to 529 at September 30, 2010 from 160 at September 30, 2009. The ~~decrease~~65% increase in revenues in the Services segment was primarily due to (i) a ~~26% decrease~~39% increase in DMS revenues, ~~attributable to flat revenues from digital feature and trailer deliveries~~ as DMS maintained its movie studio feature delivery customers ~~but~~and experienced ~~limited~~ growth in the number of digital delivery sites as industry digital deployments have increased and also benefited from a ~~52% decrease~~5% increase in non-theatrical satellite services ~~revenues due to general economic factors;~~revenues; (ii) Phase 2 DC service fees for additional Phase 2 DC Systems deployed through the Exhibitor-Buyer Structure as well as Cinedigm provided non-recourse financing; (iii) Phase 1 DC service fees earned; and ~~(ii)~~(iv) a ~~22% decrease~~54% increase in Software revenues ~~due~~related to ~~delayed~~increased Phase 2 ~~deployments, limiting expected~~deployment license and maintenance fees offset by a modest decrease in other software license and development fees.

As of September 30, 2010 Cinedigm services,through its Phase 2 deployment subsidiary and 3^rd party exhibitor-buyer customers, a total of 1,050 Phase 2 DC screens in comparison to 160 at September 30, 2009 and 619 at June 30, 2010. During the quart er ended September 30, 2010, we experienced a delay in the installation of approximately 75 Phase 2 DC System deployments due to vendor equipment supply constraints with such installations expected to occur in the fiscal third and fourth quarters. We expect ~~Phase 2 DC~~digital cinema related service fees, DMS revenues and software license fees to increase as the delayed Phase 2 DC Systems are installed in the fiscal third quarter, as well as expected additional Systems are deployed under ~~both the recent $100 million~~various non-recourse credit facility ~~committed to by GECC’s Media, Communications & Entertainment business (“GE Capital”)~~commitments and ~~Société Générale Corporate & Investment Banking (“Soc Gen”) as well as~~ through the ~~exhibitor-buyer model launched in late September 2009 initially~~Exhibitor-Buyer Structure with ~~two exhibitors.~~28 exhibitors as of Sept ember 30, 2010.

In the Content & Entertainment segment, ~~revenues decreased 10% due to a 24% decline in~~USM’s in-theatre advertising revenues ~~attributable to the elimination of various under-performing customer contracts, as well as the current weak economic environment, offset by a 4% increase in~~increased 19% and national advertising revenues generated by the partnership with Screenvision increased 4% offset by reduced inter-company barter revenues. Both of these increases reflect improved overall advertising conditions and ~~non-cash barter revenues of $0.5 million, which represents the fair value of advertising provided to alternative~~operating improvements undertaken within USM’s sales force. CEG’s content ~~providers of CEG. CEG’s~~ distribution revenues relating to digitally-equipped locations decreased 51% for alternative content and content sponsorship revenues as CEG planned a limited number of events and independent films during the three months ended September 30, 2009. The CEG distribution slate is expected to be more significant in the second half of our 2010 fiscal year commencing in October 2009increased 136% with the release of ~~Opa! and~~ the ~~December 11, 2009 release of Dave Matthews Band in 3-D.~~2010 FIFA World Cup™ live 3D sporting event, as well as the ongoing KidToons series. The primary driver of CEG revenues is the number of programs CEG is distributing, together with the nationwide (and anticipated w orldwide) conversion of theatres to digital capabilities, a trend the Company expects to continue. In addition to the distribution of independent motion pictures, the Company also expects that with its implementation of the CineLiveSM product into movie theatres, CEG’s revenues will increase from the distribution of live 2D and 3D content such as concerts and sporting events.

Direct Operating Expenses


	For the Three Months Ended September 30,
($ in thousands)	2010		2009			Change
Phase I Deployment	$	122	$	265	;	(54	)%
Phase II Deployment	31		62			(50	)%
Services	1,875		1,358			38	%
Content & Entertainment	2,275		2,556			(11	)%
	$	4,303	$	4,241		1	%

Direct operating expenses increased 1%. The decrease in direct operating costs in the Phase I Deployment segment was

primarily due to the forma tion of the Services Company in August 2009 which includes the costs that were previously within the Phase I Deployment segment through August 2009. The increase in the Services segment was primarily related to increased DMS feature and trailer hard drive delivery volumes, additional software development costs and the allocation of certain costs to our Services Company, which were shown within the Phase I Deployment segment in the prior year. The decrease in the Content & Entertainment segment was primarily related to a 15% increase in minimum guaranteed obligations under theatre advertising agreements with exhibitors for displaying cinema advertising, which corresponded to a 15% increase in advertising revenues, offset by reduced non-cash content acquisition expenses of $0.5 million for CEG related to the fair value of barter advertising provided by USM. We expect direct operating expenses to remain consistent at the current level with any future increases tied to additional revenue growth.

Selling, General and Administrative Expenses


	For the Three Months Ended September 30,
($ in thousands)	2010		2009		Change
Phase I Deployment	$	5	$	153	(97	)%
Phase II Deployment	15		245		(94	)%
Services	938		488		92	%
Content & Entertainment	1,648		1,253		32	%
Corporate	2,395		2,123		13	%
	$	5,001	$	4,262	17	%

Selling, general and administrative expenses increased $0.7 million or 17%. The decrease in selling, general and administrative expenses in the Phase I and Phase 2 Deployment segments was primarily due to prior year costs now being allocated to our Servicer Co. The increase in the Services segment was mainly due to costs now being allocated from the Phase 1 and Phase 2 Deployment segments. The increase in the Content & Entertainment segment was related to a planned increased staffing levels within the sales force at USM. The increase within Corporate was due to additional transition costs not previously accrued related to the retirement of our CEO of $0.2 million, increased travel costs and a timing recognition shift related to accrued accounting and tax professional fees for fiscal 2011 offset by reduced investor relations rela ted expenses. During the quarter, the Company took actions to reduce corporate overhead including the elimination of several corporate positions and a reduction in other discretionary spending. The annualized net savings from these actions total approximately $0.5 million and will impact our results beginning with first quarter in fiscal 2012. As of September 30, 2010 and 2009 and excluding employees in our discontinued operations, we had 177 employees, of which 3 and 4 were part-time employees and 55 and 48 were salespersons, respectively. Excluding any additional transition costs, we expect selling, general and administrative expenses to remain relatively consistent at the current level.

Depreciation and Amortization Expense on Property and Equipment


	For the Three Months Ended September 30,
($ in thousands)	2010		2009		Change
Phase I Deployment	$	7,139	$	7,139	—	%
Phase II Deployment	457		290		58	%
Services	507		470		8	%
Content & Entertainment	179		218		(18	)%
Corporate	11		9		22	%
	$	8,293	$	8,126	2	%

Depreciation and amortization expense increased $0.2 million or 2%. The increase in the Phase II Deployment segment represents depreciation on the increased number of Phase 2 DC Syst ems which were not in service during the three months ended September 30, 2009. The increase in the Services segment represents depreciation on the increased number of satellite systems installed for DMS which were not in service during the three months ended September 30, 2009. The decrease in the Content & Entertainment segment reflects reduced depreciation expense on assets which are fully depreciated or amortized at September 30, 2010. We expect the depreciation and amortization expense in the Ph ase II Deployment and the Services segment to generally increase as new Phase 2 DC Systems and additional satellite systems are installed.

Interest expense


	For the Three Months Ended September 30,
($ in thousands)	2010		2009			Change
Phase I Deployment	$	2,527	$	5,456		(54	)%
Phase II Deployment	273		226			21	%
Services	5		25			(80	)%
Content & Entertainment	2		3		(33	)%
Corporate	3,840		2,821			36	%
	$	6,647	$	8,531		(22	)%

Interest expense decreased $1.9 million or (22)%. Total interest expense included $6.0 million and $7.5 million of interest paid and accrued for the three months ended September 30, 2010 and 2009, respectively. The decrease in interest paid and accrued within the non-recourse Phase I Deployment segment relates to the refinancing of the GE Credit Facility into a new, non-recourse facility rated Ba1 by Moody’s completed in May 2010 (the “2010 Term Loans”). We expect Phase I Deployment interest expense to decrease significantly as we reduced the interest on Phase 1 debt to 3 Month LIBOR plus 375 basis points above a 1.75% LIBOR floor from 650 basis points above a 2.00% LIBOR floor. Interest increased within the Phase II Deployment segment related to the non-recourse credit facilities with KBC Bank NV (the “KBC Facilities”) to fun d the purchase of Systems from Barco. Phase 2 DC’s non-recourse interest expense is expected to increase with the growth in deployments in fiscal 2011. The increase in interest paid and accrued within Corporate related to the amended and restated note with an affiliate of Sageview Capital LP (the "2010 Note"). Interest on the 2010 Note is 8% PIK Interest and 7% per annum paid in cash. The Company has an interest reserve set aside to cover cash interest payments on this note through September 30, 2011. This increase is offset by the elimination of interest payments on the 2007 Senior Notes which ceased as the 2007 Senior Notes were cancelled in August 2009.

Non-cash interest expense was $0.6 million and $1.0 million for the three months ended September 30, 2010 and 2009, respectively. The decrease in the non-cash interest related to the cessation of interest payments on the 2007 Senior Notes upon their cancellation in August 2009 offset by accretion of $0.5 million on the note payable discou nt associated with the 2010 Note will continue over the term of the 2010 Note.

Change in fair value of interest rate swap

The change in fair value of the interest rate swap was a loss of $1.0 million and a gain of $0.5 million for the three months end ed September 30, 2010 and 2009, respectively. The gain in 2009 for the swap agreement related to the GE Credit Facility, which was terminated on May 6, 2010 upon the completion of the Phase I Deployment refinancing. It has been replaced by new swap agreements related to the 2010 Term Loans entered into on June 7, 2010 which will become effective on June 15, 2011 and resulted in a loss of $1.0 million.

Change in fair value of warrants

The change in fair value of warrants issued to a designee of Sageview Capital LP (“Sageview”), related to the 2010 Note, were losses of $1.9 million and $3.6 million for the three months ended September 30, 2010 and 2009, respectively. The shares underlying these warrants were registered with the SEC for resale in September 2010 and the Company reclassified the warrant liability of $16.1 million to equity.

Adjusted EBITDA

The Company measures its financial success based upon growth in revenues and earnings before interest, depreciation, amortization, other income (expense), net, stock-based compensation and non-recurring items ("Adjusted EBITDA"). Further, the Company analyzes this measurement excluding the results of its Phase 1 DC and Phase 2 DC subsidiaries, and includes in this measurement intercompany service fees earned by its digital cinema servicing group from the Phase I and Phase II Deployments, which are eliminated in consolidation (see Note 9. Segment Information for further details). During the quarter, the Company achieved an important milestone as its Adjusted EBITDA loss (excluding its Phase 1 DC and Phase 2 DC subsidiaries) declined to $(178,000) for the three months ended September 30, 2010 from $(1.8) million for the three months ended September 30, 2009 and from $(489,000) for the three months ended June 30, 2010 and most importantly, the Company

achieved its first Adjusted EBITDA positive month of $537,000 in September 2010 (excluding its Phase 1 DC and Phase 2 DC subsidiaries). Based on the expected Phase 2 DC Systems planned for deployment during the remainder of the fiscal year, the Company expects Adjusted EBITDA perfor mance to continue to improve for the remainder of the fiscal year, due to the intercompany service fees, software license and maintenance fees and other revenues derived from a growing number of Phase 2 DC System installations nationwide, including content delivery fees.

Adjusted EBITDA is not a measurement of financial performance under U.S. generally accepted accounting principles (“GAAP”) and may not be comparable to other similarly titled measures of other companies. The Company uses Adjusted EBITDA as a financial metric to measure the financial performance of the business because management believes it provides additional information with respect to the performance of its fundamental business activities. For this reason, the Company believes Adjusted EBITD A will also be useful to others, including its stockholders, as valuable financial metrics.

Management presents Adjusted EBITDA because it believes that Adjusted EBITDA is a useful supplement to net loss from continuing operations as an indicator of operating performance. Management also believes that Adjusted EBITDA is an industry-wide financial measure that is useful both to management and investors when evaluating the Company's performance and comparing our performance with the performance of our competitors. Management also uses Adjusted EBITDA for planning purposes, as well as to evaluate the Company's performance because it believes that Adjusted EBITDA more accurately reflects the Company's results, as it excludes certain items, such as stock-based compensation cha rges, that management believes are not indicative of the Company's operating performance.

The Company believes that Adjusted EBITDA is a performance measure and not a liquidity measure, and a reconciliation between net loss from continuing operations and Adjusted EBITDA is provided in the financial results. Adjusted EBITDA should not be considered as an alternative to income (loss) from operations or net loss from continuing operations as an indicator of performance or as an alternative to cash flows from operating activities as an indicator of cash flows, in each case as determined in accordance with GAAP, or as a measure of liquidity. In addition, Adjusted EBITDA does not take into account changes in certain assets and liabilities as well as interest and income taxes that can affect cash flows. Manage ment does not intend the presentation of these non-GAAP measures to be considered in isolation or as a substitute for results prepared in accordance with GAAP. These non-GAAP measures should be read only in conjunction with the Company's condensed consolidated financial statements prepared in accordance with GAAP.

Following is the reconciliation of the Company's consolidated Adjusted EBITDA to consolidated GAAP net loss from continuing operations:


	For the Three Months Ended September 30,
	2010			2009
Net loss from continuing operations	$	(9,396	)	$	(935	)
Add Back:
Amortization of software development	197			162
Depreciation and amortization of property and equipment	8,293			8,126
Amortization of intangible assets	722			749
Interest income	(39		)	(95		)
Interest expense	6,647			8,531
Extinguishment of note payable	—			(10,744		)
Other expense, net	165			158
Change in fair value of interest rate swap	987			(540		)
Change in fair value of warrants	1,891			3,576
Stock-based expenses	—			(37		)
Stock-based compensation	674			438
Non-recurring expenses	229			—
Adjusted EBITDA	$	10,370		$	9,389

Results of Operations for the Six Months Ended September 30, 2010 and 2009

Revenues


	For the Six Months Ended September 30,
($ in thousands)	2010		2009		Change
Phase I Deployment	$	22,501	$	22,027	2	%
Phase II Deployment	1,712		694		147	%
Services	5,745		3,815		51	%
Content & Entertainment	8,291		7,210		15	%
	$	38,249	$	33,746	13	%

Revenues increased $4.5 million or 13%. The increase in revenues in the Phase I Deployment segment was due to an increased number of VPFs despite a decreased number of titles as release patterns continue to widen. The increase in revenues in the Phase II Deployment segment was due to the increased number of Phase 2 DC’s financed Systems installed and ready for content to 529 at September 30, 2010 from 160 at September 30, 2009. The 51% increase in revenues in the Services segment was primarily due to (i) a 49% increase in DMS revenues, as DMS maintained its movie studio feature delivery customers and experienced growth in the number of digital delivery sites offset by a 23% decrease in non-theatrical satellite services revenues; (ii) Phase 2 DC service fees for additional Phase 2 DC Systems deployed through the Exhibitor-Buyer Structure as well as Cinedigm provided non-recourse financing; (iii) Phase 1 DC service fees earned; and (iv) a 10% increase in Software revenues related to increased Phase II Deployment license and maintenance fees offset by a m odest decrease in other software license and development fees.

As of September 30, 2010 Cinedigm services,through its Phase 2 deployment subsidiary and 3^rd party exhibitor-buyer customers, a total of 1,050 Phase 2 DC screens in comparison to 160 at September 30, 2009 and 619 at June 30, 2010. We expect digital cinema related service fees, DMS revenues and software license fees to increase as the delayed Phase 2 DC Systems are installed in the fiscal third and fourth quarters, as well as expected additional Systems are deployed under various non-recourse credit facility commitments and through the Exhibitor-Buyer Structure with 28 exhibitors as of September 30, 2010.

In the Content & Entertainment segment, USM’s in-theatre advertising revenues increased 11% and national advertising revenues generated by the partnership with Screenvision increased 28% offset by reduced inter-company barter revenues. Both of these increases reflect improved overall advertising conditions and operating improvements undertaken within USM’s sales force. CEG’s content distribution revenues increased 130% with the release of various live 3D events, as well as the ongoing KidToons series. The primary driver of CEG revenues is the number of programs CEG is distributing, t ogether with the nationwide (and anticipated worldwide) conversion of theatres to digital capabilities, a trend the Company expects to continue. In addition to the distribution of independent motion pictures, the Company also expects that with its implementation of the CineLiveSM product into movie theatres, CEG’s revenues will increase from the distribution of live 2D and 3D content such as concerts and sporting events.

We expect consolidated revenues to increase during the remainder of our fiscal year relative to the previous fiscal year due to increased amounts of financing that are generally available to fund digital deployments, and the growing number of 3-D movies to be released by the motion picture studios. In particular, the Company recently signed 457 screens with two exhibitors who are purchasing the equipment directly and have hired the Company to manage the asset base in exchange for an upfront activation fee and on-going share of VPF revenues. In addition, the Company expects to sign definitive documentation for a $100 million non-recourse, senior credit facility with GE Capital and Soc Gen prior to year end and commence deployments under this facility in the fourth quarter of fiscal 2010. As the number of industry wide digital screens increases generally, the Company expects to earn additional delivery fees in its DMS business unit as well as distribution fees in CEG and software fees from our TCC software. We are dependent on the availability of suitable financing for any large scale Phase II Deployment. To date such sources of financing are still being pursued.

Direct Operating Expenses


	For the Three Months Ended September 30,							For the Six Mo nths Ended September 30,
($ in thousands)	2008		2009		Change			2010		2009		Change
Phase I Deployment	$	241	$	262		9	%	$	160	$	449	(64	)%
Phase II Deployment		—		61		—		46		85		(46	)%
Services		1,512		1,349		(11	)%	4,097		2,544		61	%
Content & Entertainment		2,874		2,553		(11	)%	4,939		4,715		5	%
Other		2,105		1,841		(13	)%
	$	6,732	$	6,066		(10	)%	$	9,242	$	7,793	19	%

Direct operating expenses ~~decreased $0.7~~increased $1.4 million or ~~10%~~19%. The ~~increase~~decrease in direct operating costs in the Phase I Deployment segment was primarily due to ~~a 27% increase~~the formation of the Services Company in ~~property taxes on Systems.~~August 2009 which includes the costs that were previously within the Phase I Deployment segment through August 2009. The increase in the Services segment was primarily related to increased DMS volume this fiscal year as well as direct

and the allocation of certain costs to ~~Phase 2 DC costs~~our Services Company, which were ~~not generated during~~shown within the ~~three months ended September 30, 2008.~~Phase I Deployment segment in the prior year. The ~~decrease~~increase in the Content & Entertainment segment was primarily related to a ~~28% decrease~~10% increase in minimum guaranteed obligations under theatre advertising agreements with exhibitors for displaying cinema advertising, ~~reduced operational staffing levels at USM and reduced~~which corresponded to a 14% increase in advertising ~~and marketing costs in CEG related to the fewer number of programs CEG distributed during the quarter~~revenues, offset by reduced non-cash content acquisition ~~expenses of $0.5 million~~exp enses for CEG related to the fair value of barter advertising provided by USM. We expect direct operating expenses to ~~decrease as compared to prior periods and~~ remain ~~constant~~consistent at the current ~~level.~~level with any future increases tied to additional revenue growth.

Selling , general and administrative expenses ~~decreased approximately $0.1~~increased $2.3 million or 3%27%. The decrease ~~was primarily caused by reduced payroll related~~in selling, general and administrative expenses in the Phase I and Phase II Deployment ~~segment~~segments was primarily due to ~~the completion of our Phase I Deployment as those~~prior year costs ~~are~~ now being allocated to our Servicer Co. The increase in the Services segment was mainly due to costs now being allocated from the Phase I and Phase II Deployment ~~segment.~~segments. The ~~decrease was also related to reduced staffing levels~~increase in the Content & Entertainment segment ~~offset by~~was related to a planned increased ~~professional fees~~staffing levels within the sales force at USM. The increase within Corporate was due to one-time ~~investor relations expenses and compensation consulting fees and scheduled quarterly directors’ fees. Following~~transition costs related to the ~~completion~~retirement of our ~~Phase I Deployment, overall headcount reductions have now stabilized. As~~CEO of $1.1 million, increased travel costs, a timing recognition shift related to accrued accounting and tax professional fees for fiscal 2011 and additional stock-based awards granted since September 30, ~~2008 and~~ 2009 ~~we had 252 and 244 employees, of~~ which 40 and 47, were part-time employees and 39 and 43, were salespersons, respectively. We expect selling, general and administrative expenses to decrease as compared to prior periods and remain relatively constant at the current level.

~~Stock-based compensation~~

Depreciation and amortization expense ~~remained consistent with last year. Other than the Phase II Deployment and Services segments, the decreases reflect reduced expense on assets which are fully depreciated~~increased $0.4 million or ~~amortized at September 30, 2009.~~2%. The increase in the Phase II Deployment segment represents depreciation on the increased number of Phase 2 DC Systems which were not in service during the ~~three~~six months ended September 30, ~~2008.~~2009. The increase in the Services segment represents depreciation on the increased number of satellite systems installed for DMS which were not in service during the six months ended September 30, 2009. The decrease in the Content & Entertainment segment reflects reduced depreciation expense on assets which are fully depreciated or amortized at September 30, 2010. We expect the depreciation and amortization expense in the Phase II Deployment and the Services segment to generally increase as new Phase 2 DC Systems and additional satellite systems are installed.

Interest expense ~~increased $1.8~~decreased $2.3 million or ~~26%~~(15)%. Total interest expense included ~~$6.2~~$12.3 million and ~~$7.7~~$13.9 million of interest paid and accrued for the three months ended September 30, ~~2008~~2010 and 2009, respectively. The ~~increase~~decrease in interest paid and accrued within the non-recourse Phase I Deployment segment relates to the ~~increased interest rate on~~refinancing of the GE Credit Facility ~~related~~into the 2010 Term Loans. We expect Phase I Deployment interest expense to decrease significantly as we reduced the ~~fourth amendment and in part~~interest on Phase 1 DC's debt to ~~the~~3 Month LIBOR plus 375 basis points above a 1.75% LIBOR floor from 650 basis points above a 2.00% LIBOR floor. Interest ~~Rate Swap (see change in fair value of interest rate swap discussed below) and~~ increased ~~interest~~ within the Phase II Deployment segment related to the ~~credit facility with~~non-recourse KBC ~~Bank NV (“KBC”)~~Facilities to fund the purchase of Systems ~~(the “KBC Related Facility”)~~ from ~~Barco, Inc. (“Barco”).~~

Non-cash interest expense was $1.2 million and $1.9 million for the six months ended September 30, 2010 and 2009, respectively. The decrease in the non-cash interest related to the cessation of interest payments on the 2007 Senior Notes upon their cancellation in August 2009 offset by accretion of $1.1 million on the note payable discount associated with the ~~2009~~2010 Note will continue over the term of the ~~2009~~2010 Note.

~~Extinguishment of debt~~

The gain on the extinguishment of debt was $10.7 million for the three months ended September 30, 2009, related to the satisfaction of the principal and any accrued and unpaid interest on the 2007 Senior Notes for an aggregate purchase price of $42.5 million which resulted in a gain of $12.5 million of remaining principal along with $0.6 million in unpaid accrued interest offset by unamortized debt issuance costs of $2.4 million.

The change in fair value of the interest rate swap was ~~$0.6~~a loss of $1.4 million and a gain of $1.2 million f or the six months ended September 30, 2010 and 2009, respectively. The gain in 2009 for the ~~three months ended September 30, 2009. This represents Phase 1 DC’s unrealized gain from the change in the fair value of the Interest Rate Swap executed in April 2008~~swap agreement related to the GE Credit ~~Facility.~~Facility, which was terminated on May 6, 2010 upon the completion of the Phase I Deployment refinancing. It has been replaced by new swap agreements related to the 2010 Term Loans entered into on June 7, 2010 which will become effective on June 15, 2011 and resulted in a loss of $1.4 million.

Change in fair value of warrants

The change in fair value of warrants issued to a designee of Sageview, ~~Capital LP (“Sageview”),~~ related to the ~~2009~~2010 Note, was a gain of $3.1 million and a loss of ~~$3.6~~$3.6 million for the ~~three~~six months ended September 30, ~~2009. Until the~~2010 and 2009, respectively. The shares underlying these warrants ~~are~~were registered with the SEC for resale in September 2010 and the Company ~~will continue to adjust~~reclassified the warrant liability ~~each quarter~~of $16.1 million to ~~the then fair value.~~equity.

For the Six Months Ended September 30,
($ in thousands) 2008 2009 Change
Phase I Deployment $ 24,614 $ 22,027 (11 )%
Phase II Deployment — 694 —
Services 4,215 �� 3,815 (10 )%
Content & Entertainment 8,463 7,210 (15 )%
Other 5,127 4,801 (6 )%
$ 42,419 $ 38,547 (9 )%

~~Direct Operating Expenses~~

For the Six Months Ended September 30,
($ in thousands) 2008 2009 Change
Phase I Deployment $ 421 $ 443 5 %
Phase II Deployment — 85 —
Services 2,563 2,523 (2 )%
Content & Entertainment 5,401 4,709 (13 )%
Other 4,144 3,768 (9 )%
$ 12,529 $ 11,528 (8 )%

~~Selling, General and Administrative Expenses~~

For the Six Months Ended September 30,
($ in thousands) 2008 2009 Change
Phase I Deployment $ 710 $ 237 (67 )%
Phase II Deployment — 495 —
Services 1,020 914 (10 )%
Content & Entertainment 3,536 2,747 (22 )%
Other 425 430 1 %
Corporate 3,329 3,119 (6 )%
$ 9,020 $ 7,942 (12 )%

was also related to reduced staffing levels in both the Services segment and the Content & Entertainment segment, and decreased professional fees and travel expenses within Corporate. Following the completionAdjusted EBITDA is not a measurement of our Phase I Deployment, overall headcount reductions have now stabilized. As of September 30, 2008 and 2009, we had 252 and 244 employees, of which 40 and 47, were part-time employees and 39 and 43, were salespersons, respectively. We expect selling, general and administrative expenses to decrease as compared to prior periods and remain relatively constant at the current level.

~~Stock-based compensation~~

~~Depreciation and Amortization Expense on Property and Equipment~~

For the Six Months Ended September 30,
($ in thousands) 2008 2009 Change
Phase I Deployment $ 14,255 $ 14,280 —
Phase II Deployment — 443 —
Services 889 887 —
Content & Entertainment 559 436 (22 )%
Other 532 412 (23 )%
Corporate 33 18 (45 )%
$ 16,268 $ 16,476 1 %

~~Interest expense~~

For the Six Months Ended September 30,
($ in thousands) 2008 2009 Change
Phase I Deployment $ 8,851 $ 10,283 16 %
Phase II Deployment — 294 —
Services 5 40 700 %
Content & Entertainment 7 6 (14 )%
Other 521 520 —
Corporate 4,782 5,198 9 %
$ 14,166 $ 16,341 15 %

~~Extinguishment of debt~~

The gain on the extinguishment of debt was $10.7 million for the six months ended September 30, 2009, which resulted from the satisfaction of the principal and any accrued and unpaid interest on the 2007 Senior Notes for an aggregate purchase price of $42.5 million which resulted in a gain of $12.5 million of remaining principal along with $0.6 million in unpaid accrued interest offset by unamortized debt issuance costs of $2.4 million.

~~Change in fair value of interest rate swap~~

The change in fair value of the interest rate swap was $1.2 million for the six months ended September 30, 2009. This represents Phase 1 DC’s unrealized gain from the change in the fair value of the Interest Rate Swap executed in April 2008 related to the GE Credit Facility.

~~Change in fair value of warrants~~

Management presents Adjusted EBITDA because it believes that Adjusted EBITDA is a useful supplement to net loss from continuing operations as an indicator of operating performance. Management also believes that Adjusted EBITDA is an industry-wide financial measure that is useful both to management and investors when evaluating the Company's performance and comparing our performance with the performance of our competitors. Management also uses Adjusted EBITDA for planning purposes, as well as to evaluate the Company's p erformance because it believes that Adjusted EBITDA more accurately reflects the Company's results, as it excludes certain items, such as stock-based compensation charges, that management believes are not indicative of the Company's operating performance.

The Company believes that Adjusted EBITDA is a performance measure and not a liquidity measure, and a reconciliation between net loss from continuing operations and Adjusted EBITDA is provided in the ~~United States. The historical~~financial results. Adjusted EBITDA should not be considered as an alternative to income (loss) from operations or net loss from continuing operations as an indicator of performance or as an alternative to cash flows from operating activities as an indicator of cash flows, in each case as determined in accordance with GAAP, ~~hierarchy was eliminated~~or as a measure of liquidity. In addition, Adjusted EBITDA does not take into account changes in certain assets and liabilities as well as interest and income taxes that can affect cash flows. Management does not intend the ~~ASC became~~presentation of these non-GAAP measures to be considered in isolation or as a substitute for results prepared in accordance with GAAP. These non-GAAP measures should be read only in conjunction with the only level of authoritative GAAP, other than guidance issued by the SEC. Our accounting policies were not affected by the conversion to ASC. However, references to specific accounting standards in the footnotes to ourCompany's condensed consolidated financial statements ~~have been changed to refer to~~prepared in accordance with GAAP.

Following is the ~~appropriate section of ASC.~~

Recent Accounting Standards Update (ASU) that will amend ASC 605-25. Final consensus is effective for fiscal years beginning on or after June 15, 2010. Entities can elect to apply this Issue (1) prospectively to new or materially modified arrangements after the Issue’s effective date or (2) retrospectively for all periods presented. The Company does not believe that revisions to ASC 605-25 will have a material impact on the Company’s consolidated financial statements.Pronouncements

Interpretation 46(R), including those in which the accounting and disclosures under the Interpretation do not always provide timely and useful information about an enterprise’s involvement in a variable interest entity. ~~Revisions to~~On April 1, 2010, the Company adopted ASC 810-10 and its adoption did not have a material impact on the Company’s condensed consolidated financial statements.

In October 2009, the FASB issued ASU 2009-13, Multiple-Deliverable Revenue Arrangements (“ASU 2009-13”), which requires an entity to allocate consid eration at the inception of an arrangement to all of its deliverables based on their relative selling prices. This consensus eliminates the use of the residual method of allocation and requires allocation using the relative-selling-price method in all circumstances in which an entity recognizes revenue for an arrangement with multiple deliverables. ASU 2009-13 is effective ~~as of the~~for fiscal years beginning ~~of each reporting entity’s first annual reporting period that begins~~on or after ~~November~~June 15, ~~2009, for interim periods within that first annual reporting period, and for interim and annual reporting periods thereafter.~~2010. The Company ~~is currently evaluating~~will adopt ASU 2009-13 on April 1, 2011 and apply it prospectively. The Company does not expect the ~~impact~~adoption of ~~adoption and application of revisions~~ASU 2009-13 to ~~ASC 810-10 will~~ have a material impact on the Company’s consolidated financial statements.

In October 2009, the FASB issued ASU No. 2009-14, “Software (Topic 985): Certain Revenue Arrangements That Include Software Elements (a consensus of the FASB Emerging Issues Task Force)” (“ASU 2009-14”). ASU 2009-14 amends ASC 985-605, “Software: Revenue Recognition,” such that tangible products, containing both software and non-software components that function together to deliver the tangible product’s essential functionality, are no longer within the scope of ASC 985-605. It also amends the determination of how arrangement consideration should be allocated to deliverables in a multiple-deliverable revenue arrangement. ASU 2009-14 will become effective for the Company for revenue arrangements entered into or materially modified on or after April 1, 2011. Earlier application is permitted with required transition disclosures based on the period of adoption. The Company does not expect the adoption of ASU 2009-14 will have a material impact on the Company’s consolidated financial statements.

In January 2010, the FASB issued ASU No. 2010-06, “Improving Disclosures about Fair Value Measurements” (“ASU 2010-06”). ASU 2010-06 requires some new disclosures and clarifies some existing disclosure requirements about fair value measurements codified within ASC 820, “Fair Value Measurements and Disclosures.” ASU 2010-06 is effective for interim and annual reporting periods beginning after December 15, 2009. The Company has adopted the requirements for disclosures about inputs and valuation techniques used to measure fair value. Additionally, these amended standards require presentation of disaggregated activity within the reconciliation for fair value measurements using significant unobservable inputs (Level 3) and is effective for fiscal years beginning after December 15, 2010, which will be effective for the Company as of April 1, 2011. The Company does not expect the additional disclosure requirements will have a material impact on the Company’s consolidated financial statements.

In March 2010, the FASB issued ASU No. 2010-11, Derivatives and Hedging (Topic 815) - Scope Exception Related to Embedded Credit Derivatives (“ASU 2010-11”). ASU 2010-11 clarifies the scope exception for embedded credit derivative features related to the transfer of credit risk in the form of subordination of one financial instrument to another. The amendments address how to determine which embedded credit derivative features, including those in c ollateralized debt obligations and synthetic collateralized debt obligations, are considered to be embedded derivatives that should not be analyzed for potential bifurcation and separate accounting. The amendments in this pronouncement are effective for each reporting entity at the beginning of its first fiscal quarter beginning after June 15, 2010. This is effective for the Company as of April 1, 2011. The Company does not expect the adoption of ASU 2010-11 will have a material impact on the Company’s consolidated financial statements.

In April 2010, the FASB issued ASU No. 2010-12, Income Taxes (Topic 740) – Accounting for Certain Tax Effects of the 2010 Health Care Reform A cts (“ASU 2010-12”). ASU 2010-12 establishes criteria for measuring the impact on deferred tax assets and liabilities based on provisions of enacted law, the impact of both Acts, the Health Care and Education Reconciliation Act of 2010 and the Patient Protection and Affordable Care Act, should be considered. ASU 2010-12 requires that income tax deductions for the cost of providing prescription drug coverage will be reduced by the amount of any subsidy received. The Company has evaluated ASU 2010-12 and its adoption did not have a significant impact on the Company’s condensed consolidated financial statements.

In April 2010, the FASB issued ASU No. 2010-17, Revenue Recognition — Milestone Method (“ASU 2010-17”). ASU 2010-17 establishes criteria for a milestone to be considered substantive and allows revenue recognition when the milestone is achieved in research or development arrangements. In addition, it requires disclosure of certain information with respect to arrangements that contain milestones. ASU 2010-17 is effective on a prospective basis for milestones achieved in fiscal years, and interim periods within those years, beginning on or after June 15, 2010. ASU 2010-17 is effective for the Company prospectively beginning April 1, 2011. The Company has evaluated ASU 2010-17 and does not expect its adoption to have a material impact on the Company’s consolidated financial statements.


Delaware	22-3720962
(State or Other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification No.)

Indicate by check mark whether the registrant (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 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 o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).	~~Yes~~ o No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o	Accelerated filer o
Non-accelerated filer o (Do not check if a smaller reporting company)	Smaller reporting company x

~~Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).~~	~~Yes~~ o No x

~~As of November 12, 2009, 28,032,875 shares of Class A Common Stock, $0.001 par value, and 733,811 shares of Class B Common Stock, $0.001 par value, were outstanding.~~


PART I --	FINANCIAL INFORMATION	Page
Item 1.	Financial Statements (Unaudited)
	Condensed Consolidated Balance Sheets at September 30, 2010 (Unaudited) and March 31, ~~2009 and September 30, 2009 (Unaudited)~~ 2010	1
	Unaudited Condensed Consolidated Statements of Operations for the Three and Six Months ended September 30, ~~2008~~2010 and 2009	3
	Unaudited Condensed Consolidated Statements of Cash Flows for the Six Months ended September 30, ~~2008~~2010 and 2009	4
	Notes to Unaudited Condensed Consolidated Financial Statements	5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	29 28
Item ~~4T.~~4 T.	Controls and Procedures	43 41
PART II --	OTHER INFORMATION
Item 1.	Legal Proceedings	43
~~Item 1A.~~	~~Risk Factors~~42	43
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	45 42
Item 3.	Defaults Upon Senior Securities	45
~~Item 4.~~	~~Submission of Matters to a Vote of Security Holders~~42	45
Item 5.	Other Information	46 42
Item 6.	Exhibits	46 42
Signatures		47 43
Exhibit Index		48 44

	March 31, 2009			September 30, 2009
LIABILITIES AND STOCKHOLDERS’ EQUITY				(Unaudited)
Current liabilities
Accounts payable and accrued expenses	$	14,954		$	8,995
Current portion of notes payable, non-recourse		24,824			24,758
Current portion of notes payable		424			177
Current portion of capital leases		175			700
Current portion of deferred revenue		5,535			5,860
Current portion of customer security deposits		314			314
Total current liabilities		46,226			40,804

Notes payable, non-recourse, net of current portion		170,624			162,112
Notes payable, net of current portion		55,333			65,627
Capital leases, net of current portion		5,832			5,778
Warrant liability		—			14,308
Interest rate swap		4,529			3,306
Deferred revenue, net of current portion		1,057			2,013
Customer security deposits, net of current portion		9			9
Total liabilities		283,610			293,957
Commitments and contingencies (see Note 7)
Stockholders’ Equity
Preferred stock, 15,000,000 shares authorized; Series A 10% - $0.001 par value per share; 20 shares authorized; 8 shares issued and outstanding at March 31, 2009 and September 30, 2009, respectively. Liquidation preference $4,050		3,476			3,529
Class A common stock, $0.001 par value per share; 65,000,000 shares authorized; 27,544,315 and 28,084,315 shares issued and 27,492,875 and 28,032,875 shares outstanding at March 31, 2009 and September 30, 2009, respectively		27			28
Class B common stock, $0.001 par value per share; 15,000,000 shares authorized; 733,811 shares issued and outstanding, at March 31, 2009 and September 30, 2009, respectively		1			1
Additional paid-in capital		173,565			175,281
Treasury stock, at cost; 51,440 Class A shares		(172	)		(172	)
Accumulated deficit		(138,110	)		(146,474	)
Accumulated other comprehensive loss		—			(17	)
Total stockholders’ equity		38,787			32,176
Total liabilities and stockholders’ equity	$	322,397		$	326,133


	September 30, 2010			March 31, 2010
LIABILITIES AND STOCKHOLDERS’ EQUITY	(Unaudited)
Current liabilities
Accounts payable and accrued expenses	$	7,314		$	7,761
Current portion of notes payable, non-recourse	25,715			26,508
Current portion of notes payable	192			185
Current portion of capital leases	57			126
Current portion of deferred revenue	5,705			5,881
Current portion of customer security deposits	60			12
Liabilities as part of held for sale assets	5,835			6,315
Total current liabilities	44,878			46,788
Notes payable, non-recourse, net of current portion	151,378			146,793
Notes payable, net of current portion	73,847			69,669
Capital leases, net of current portion	36			38
Warrant liability	—			19,195
Interest rate swap	2,091			1,535
Deferred revenue, net of current portion	3,457			1,828
Customer security deposits, net of current portion	9			9
Total liabilities	275,696			285,855
Commitments and contingencies (see Note 7)
Stockholders’ Equity
Preferred stock, 15,000,000 shares authorized; Series A 10% - $0.001 par value per share; 20 shares authorized; 8 shares issued and outstanding at September 30, 2010 and March 31, 2010, respectively. Liquidation prefe rence $4,050	3,637			3,583
Class A common stock, $0.001 par value per share; 75,000,000 shares authorized; 30,643,834 and 28,084,315 shares issued and 30,592,394 and 28,032,875 shares outstanding at September 30, 2010 and March 31, 2010, respectively	30			28
Class B common stock, $0.001 par value per share; 15,000,000 shares authorized; 733,811 shares issued and outstanding, at September 30, 2010 and March 31, 2010, respectively	1			1
Additional paid-in capital	194,848			175,937
Treasury stock, at cost; 51,440 Class A shares	(172		)	(172		)
Accumulated deficit	(186,117		)	(168,018		)
Accumulated other comprehensive loss	(85		)	(67		)
Total stockholders’ equity	12,142			11,292
Total liabilities and stockholders’ equity	$	287,838		$	297,147

	March 31, 2009		September 30, 2009
ASSETS			(Unaudited)
Current assets
Cash and cash equivalents	$	26,329	$	19,732
Restricted short-term investment securities		—		5,594
Accounts receivable, net		13,884		11,527
Deferred costs, current portion		3,936		2,999
Unbilled revenue, current portion		3,082		3,522
Prepaid and other current assets		1,798		3,159
Note receivable, current portion		616		170
Total current assets		49,645		46,703
Restricted long-term investment securities		—		4,974
Restricted cash		255		7,161
Security deposits		424		427
Property and equipment, net		243,124		235,853
Intangible assets, net		10,707		9,192
Capitalized software costs, net		3,653		3,738
Goodwill		8,024		8,024
Deferred costs, net of current portion		3,967		7,735
Unbilled revenue, net of current portion		1,253		1,062
Note receivable, net of current portion		959		878
Accounts receivable, net of current portion		386		386
Total assets	$	322,397	$	326,133

	For the Three Months Ended September 30,							For the Six Months Ended September 30,
			2008			2009			2008			2009
Revenues		$	21,849		$	19,881		$	42,419		$	38,547

Costs and Expenses:
Direct operating (exclusive of depreciation and amortization shown below)			6,732			6,066			12,529			11,528
Selling, general and administrative			4,187			4,073			9,020			7,942
Provision for doubtful accounts			145			136			173			264
Research and development			93			64			100			104
Stock-based compensation			200			441			358			766
Depreciation and amortization of property and equipment			8,133			8,323			16,268			16,476
Amortization of intangible assets			901			750			1,848			1,515
Total operating expenses			20,391			19,853			40,296			38,595
Income (loss) from operations			1,458			28			2,123			(48	)
Interest income			99			95			223			135
Interest expense			(6,990	)		(8,791	)		(14,166	)		(16,341	)
Extinguishment of debt			—			10,744			—			10,744
Other expense, net			(176	)		(158	)		(326	)		(301	)
Change in fair value of interest rate swap			(687	)		540			1,565			1,223
Change in fair value of warrants			—			(3,576	)		—			(3,576	)
Net loss		$	(6,296	)	$	(1,118	)	$	(10,581	)	$	(8,164	)
Preferred stock dividends			—			(100	)		—			(200	)
Net loss attributable to common stockholders		$	(6,296	)	$	(1,218	)	$	(10,581	)	$	(8,364	)
Net loss per Class A and Class B common share - basic and diluted		$	(0.23	)	$	(0.04	)	$	(0.39	)	$	(0.29	)

Weighted average number of Class A and Class B common shares outstanding:
Basic and diluted			27,536,371			28,663,959			27,202,593			28,475,217


	For the Six Months Ended September 30,						For the Six Months Ended September 30,
		2008			2009		2010			2009
Cash flows from operating activities
Net loss	$	(10,581	)	$	(8,164	)	$	(17,894	)	$	(8,164	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Loss on disposal of assets		79			4		—			4
Gain from sale of the information technology services operation							(622		)	—
Depreciation and amortization of property and equipment and amortization of intangible assets		18,116			17,991		17,897			17,991
Amortization of capitalized software costs		387			323		372			323
Amortization of debt issuance costs included in interest expense		749			938
Amortization of debt issuance costs includ ed in interest expense							1,020			938
Provision for doubtful accounts		173			264		136			264
Stock-based compensation		358			766		1,361			766
Non-cash interest expense		3,018			1,861		—			1,861
Change in fair value of interest rate swap and warrant		(1,565	)		2,353
Loss on available-for-sale investments		—			2
Note payable included in interest expense		—			817
Gain on extinguishment of debt		—			(10,744	)
Change in fair value of interest rate swap							1,445			(1,223		)
Change in fair value of warrant liability							(3,142		)	3,576
Realized loss on restricted available-for-sale investments							44			2
Interest expense added to note payable							3,187			817
Extinguishment of note payable							4,448			(10,744		)
Accretion of note payable discount included in interest expense		—			300		1,193			300
Changes in operating assets and liabilities:
Accounts receivable		4,012			2,093		(1,321		)	2,093
Unbilled revenue		1,318			(250	)	269			(250		)
Prepaids and other current assets		(1,535	)		(1,308	)	(1,786		)	(1,308		)
Other assets		150			533		2,730			533
Accounts payable and accrued expenses		943			(2,194	)	4			(2,194		)
Deferred revenue		(407	)		1,236		1,461			1,236
Other liabilities		9			—		49			—
Net cash provided by operating activities		15,224			6,821		10,851			6,821
Cash flows from investing activities
Purchases of property and equipment		(16,008	)		(12,573	)	(5,746		)	(12,573		)
Purchases of intangible assets							(6		)	—
Additions to capitalized software costs		(508	)		(408	)	(254		)	(408		)
Maturities of available-for-sale investments		—			671
Purchase of available-for-sale investments		—			(11,265	)
Restricted cash		—			(6,906	)
Sales/maturities of restricted available-for-sale investments							3,110			671
Purchase of restricted available-for-sale investments							(4,276		)	(11,265		)
&nb sp; Restricted cash							1,156			(6,906		)
Net cash used in investing activities		(16,516	)		(30,481	)	(6,016		)	(30,481		)

Cash flows from financing activities
Repayment of notes payable							(19,287		)	(42, 862		)
Proceeds from notes payable		—			76,513		170,775			76,513
Repayment of notes payable		(1,100	)		(42,862	)
Repayment of credit facilities		(3,858	)		(18,950	)	(154,932		)	(18,950		)
Proceeds from credit facilities		200			8,884		5,025			8,884
Payments of debt issuance costs		(368	)		(6,064	)	(4,894		)	(6,064		)
Principal payments on capital leases		(53	)		(432	)	(99		)	(432		)
Costs associated with issuance of preferred stock		—			(8	)	—			(8		)
Net proceeds from issuance of Class A common stock							941			—
Costs associated with issuance of Class A common stock		(37	)		(18	)	(44		)	(18		)
Net cash (used in) provided by financing activities		(5,216	)		17,063		(2,515		)	17,063
Net decrease in cash and cash equivalents		(6,508	)		(6,597	)
Net increase (decrease) in cash and cash equivalents							2,320			(6,597		)
Cash and cash equivalents at beginning of period		29,655			26,329		9,094			26,329
Cash and cash equivalents at end of period	$	23,147		$	19,732		$	11,414		$	19,732

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
U.S. Treasury securities	$	4,517	$	1	$	(8	)	$	4,510
Obligations of U.S. government agencies and FDIC guaranteed bank debt		5,099		2		(11	)		5,090
Corporate debt securities		506		—		—			506
Other interest bearing securities		463		—		(1	)		462
	$	10,585	$	3	$	(20	)	$	10,568


	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Va lue
U.S. Treasury securities	$	1, 395	$	—	$	(26	)	$	1,369
Obligations of U.S. government agencies and FDIC guaranteed bank debt	3,499		—		(55		)	3,444
Corporate debt securities	—		—		—			—
Other interest bearing securities	4,311		—		(4		)	4,307
	$	9,205	$	—	$	(85	)	$	9,120


	September 30, 2010		March 31, 2010
Interest reserve account related to the GE Credit Facility (see Note 5)	$	—	$	6,913
Interest reserve account related to the 2010 Term Loans (see Note 5)	5,756		—
Bank certificate of deposit underlying an outstanding bank standby letter of credit for an office space lease	255		255
	$	6,011	$	7,168


	For the Three Months Ended September 30,			For the Six Months Ended September 30,
Assumptions for Option Grants	2010	2009		2010	2009
Range of risk-free interest rates	—	2.7	%	2.0-2.2%	2.7	%
Dividend yield	—	—		—	—
Expected life (years)	—	5		5	5
Range of expected volatilities	—	77.4	%	78.5-78.8%	77.4	%


Basic and diluted net loss per common share =	Net loss	– preferred dividends
	Weighted average number of ~~Common Stock~~common stock outstanding during the period


	As of September 30, 2010
	Level 1		Level 2			Level 3		Total
Cash and cash equivalents	$	11,414	$	—	&nb sp;	$	—	$	11,414
Restricted available-for-sale investments	299		8,821			—		9,120
Restricted cash	6,011		—			—		6,011
Interest rate swap	—		(2,091		)	—		(2,091		)
	$	17,724	$	6,730		$	—	$	24,454


	For the Three Months EndedSeptember 30,						For the Six Months Ended September 30,
	2010			2009			2010				2009
Revenues	$	1,486		$	2,343		$	3,567			$	4,801
Costs and Expenses:
Direct operating (exclusive of depreciation and amortization shown below)	1,267			1,840			2,971				3,768
Selling, general and administrative	99			224			331			&n bsp;	430
Provision for doubtful accounts	46			—			46
Stock-based compensation	—			3			(3		)		6
Loss on disposal of asset	120			—			120
Impairment of goodwill	1,763			—			1,763				—
Gain from sale of the information technology services operation	(622		)	—			(622		)		—
Depreciation of property and equipment	—			198			48				412
Amortization of intangible assets	—			1			1				2
Total operating expenses	2,673			2,266			4,655				4,618
Income from operations	(1,187		)	77			(1,088		)		183
Interest expense	(252		)	(260		)	(506		)		(521		)
Loss from discontinued operations	$	(1,439	)	$	(183	)	(1,594		)		$	(338	)


4.	RECENT ACCOUNTING PRONOUNCEMENTS


5.	NOTES PAYABLE

	As of March 31, 2009				As of September 30, 2009
Note Receivable (as defined below)	Current Portion		Long Term Portion		Current Portion		Long Term Portion
Exhibitor Note	$	54	$	37	$	56	$	8
Exhibitor Install Notes		118		908		89		863
FiberMedia Note		431		—		—		—
Other		13		14		25		7
	$	616	$	959	$	170	$	878

	As of March 31, 2009				As of September 30, 2009
Note Payable (as defined below)	Current Portion		Long Term Portion		Current Portion		Long Term Portion
First USM Note	$	221	$	—	$	—	$	—
SilverScreen Note		20		—		—		—
2007 Senior Notes		—		55,000		—		—
NEC Facility		168		333		177		242
2009 Note, net of debt discount		—		—		—		65,385
Other		15		—		—		—
Total recourse notes payable	$	424	$	55,333	$	177	$	65,627

Vendor Note	$	—	$	9,600	$	—	$	9,600
GE Credit Facility		24,824		161,024		23,759		143,221
KBC Related Facility		—		—		952		7,933
P2 Vendor Note		—		—		32		758
P2 Exhibitor Notes		—		—		15		600
Total non-recourse notes payable	$	24,824	$	170,624	$	24,758	$	162,112
Total notes payable	$	25,248	$	225,957	$	24,935	$	227,739

	As of March 31, 2009		As of September 30, 2009
2009 Note, at issuance	$	—	$	75,000
Discount on 2009 Note		—		(10,432	)
PIK Interest		—		817
2009 Note, net	$	—	$	65,385
Less current portion		—		—
Total long term portion	$	—	$	65,385


	As of September 30, 2010			As of March 31, 2010
2010 Note, at issuance	$	75,000		$	75,000
Discount on 2010 Note	(8,285		)	(9,359		)
PIK Interest	7,066			3,880
2010 Note, net	$	73,781		$	69,521
Less current portion	—			—
Total long term portion	$	73,781		$	69,521


	As of September 30, 2010
2010 Term Loans, at issuance	$	172,500
Payments to date	(8,050		)
Discount on 2010 Term Loans	(1,605		)
2010 Term Loans, net	162,845
Less current portion	(24,151		)
Total long term portion	$	138,694

	Shares Under Option			Weighted Average Exercise Price Per Share
Balance at March 31, 2009		2,313,622		$	6.11
Granted		621,000			1.37
Exercised		—			—
Cancelled/Forfeited		(14,750	)		9.02
Balance at September 30, 2009		2,919,872		$	5.09

Outstanding Warrant (as defined below)	March 31, 2009		September 30, 2009
July 2005 Private Placement Warrants		467,275		467,275
August 2005 Warrants		760,196		760,196
Preferred Warrants		1,400,000		1,400,000
Sageview Warrants		—		16,000,000
Imperial Warrants		—		750,000
		2,627,471		19,377,471

	Payments Due by Period
Contractual Obligations	Total		2010		2011 & 2012		2013 & 2014		Thereafter
Long-term recourse debt (1)	$	88,294	$	177	$	242	$	87,875	$	—
Long-term non-recourse debt (2)		186,869		24,758		61,995		86,873		13,243
Capital lease obligations		6,478		700		436		479		4,863
Debt-related obligations, principal		281,641		25,635		62,673		175,227		18,106
Interest (3)		86,786		21,610		37,127		21,572		6,477
Total debt-related obligations	$	368,427	$	47,245	$	99,800	$	196,799	$	24,583
Operating lease obligations (4)	$	7,627	$	2,411	$	2,589	$	1,702	$	925
Theatre agreements (5)		19,072		3,809		5,053		4,377		5,833
Obligations to be included in operating expenses		26,699		6,220		7,642		6,079		6,758
Purchase obligations		191		191		—		—		—
Total	$	395,317	$	53,656	$	107,442	$	202,878	$	31,341

Total non-recourse debt including interest	$	235,622	$	39,826	$	85,074	$	95,163	$	15,559


	Payments Due
Contractual Obligations ($ in thousands)	Total		2011		2012 & 2013		2014 & 2015		Thereafter
Long-term recourse debt (1)	$	111,881	$	192	$	66	$	111,623	$	—
Long-term non-recourse debt (2)	178,700		25,715		53,267		59,195		40,523
Capital lease obligations	93		57		36		—		—
Debt-related obligations, principal	290,674		25,964		53,369		170,818		40,523
Interest on recourse debt (3)	25,878		5,935		13,441		6,502		—
Interest on non-recourse debt	31,874		9,071		13,893		7,814		1,096
Interest on capital leases	9		7		2		—		—
Total interest	57,761		15,013		27,336		14,316		1,096
Total debt-related obligations	$	348,435	$	40,977	$	80,705	$	185,134	$	41,619
Operating lease obligations (4)	$	4,895	$	1,260	$	1,983	$	1,439	$	213
Theatre agreements (5)	17,060		3,755		5,162		4,363		3,780
Obligations to be included in operating expenses	21,955		5,015		7,145		5,802		3,993
Purchase obligations (6)	34,970		34,970		—		—		—
Total	$	405,360	$	80,962	$	87,850	$	190,936	$	45,612
Total non-recourse debt including interest	$	210,574	$	34,786	$	67,160	$	67,009	$	41,619


(3)	Includes the ~~first two years of~~remaining interest of approximately ~~$11.3~~$5.1 million on the ~~2009 Notes~~2010 Note to be paid with the funding of a cash reserve established with proceeds from the 2009 Private Placement and excludes the PIK Interest on the ~~2009 Note to be accrued as an increase in the aggregate principal amount of the 2009~~2010 Note.


(5)	Represents ~~minimum~~min imum guaranteed obligations under theatre advertising agreements with exhibitors for displaying cinema advertising.


(6)	Includes $34.8 million for an additional 451 Phase II Systems under purchase orders with Barco. This is expected to be funded through non-recourse KBC Facilities.

	Votes For	Votes Withheld
A. Dale Mayo	21,256,163	584,635
Gary S. Loffredo	21,114,092	726,706
Wayne L. Clevenger	21,031,034	809,764
Gerald C. Crotty	21,268,160	572,638
Robert Davidoff	19,134,977	2,705,821
Matthew W. Finlay	21,112,060	728,738
Edward A. Gilhuly	21,738,324	102,474
Adam M. Mizel	21,264,680	576,118
Robert E. Mulholland	21,268,060	572,738


~~Date:~~	~~November 13, 2009~~	~~By:~~	~~/s/ A. Dale Mayo~~
			~~A. Dale Mayo~~ ~~President and Chief Executive Officer and Director~~ ~~(Principal Executive Officer)~~


Date:	November ~~13, 2009~~ 15, 2010	By:	~~/s/~~/s/ Adam M. Mizel
			Adam M. Mizel Interim Co-Chief Executive Officer, Chief Financial Officer and Chief Strategy Officer and Director (Interim Co-Principal Executive Officer and Principal Financial Officer)


Date:	November ~~13, 2009~~ 15, 2010	By:	~~/s/~~/s/ Gary S. Loffredo
			Gary S. Loffredo Interim Co-Chief Executive Officer, SVP – Business Affairs and General Counsel, Secretary and Director (Interim Co-Principal Executive Officer)


Date:	November 15, 2010	By:	/s/ Brian D. Pflug
			Brian D. Pflug Senior Vice President – Accounting & Finance (Principal Accounting Officer)


Exhibit Number		Description of Document
~~2.1~~31.1	Amendment and Waiver, dated as of November 4, 2009, to Securities Purchase Agreement by and among the Company, the Subsidiary Note Parties party thereto and Sageview Capital Master, L.P., as Collateral Agent.
~~3.1~~	~~Fourth Amended and Restated Certificate of Incorporation, as amended.~~
~~31.1~~	Officer’s Certificate Pursuant to 15 U.S.C. 7241, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2		Officer’s Certificate Pursuant to 15 ~~U.S.C.~~U.S .C. 7241, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.3		Officer’s Certificate Pursuant to 15 U.S.C. 7241, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1		Certification of ~~Chief~~Interim Co-Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2		Certification of Interim Co-Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.3		Certification of Chief Accounting Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.