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 Form 10-K for the year ended March 31, 2011.

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, 2011. 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.

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").

The Company is a digital cinema services, software and content marketing and distribution company driving the conversion of the exhibition industry from film to digital technology. The Company provides a digital cinema platform that combines technology solutions, provides financial advice and guidance, software services and electronic delivery services to content owners and distributors and to movie 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 theatres into networked entertainment centers. The two main applications currently provided by Cinedigm include (i) its digital entertainment origination, marketing and distribution business focused on alternative content and independent film and
(ii) its operational and analytical software applications. Historically, the conversion of an industry from analog to digital has created new revenue and growth opportunities as well as an opening for new companies to emerge to capitalize on this technological shift.

We have four primary 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"). 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 the digital cinema platform that services and supports the Phase I Deployment 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; and software license, maintenance and consulting services. 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 distribution and management of digital cinema and other content in 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. 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 reportable segments can be found in Note 10.

The Company classifies certain of its businesses as discontinued operations, including the motion picture exhibition to the general public ("Pavilion Theatre") , information technology consulting services and managed network monitoring services ("Managed Services"), hosting services and network access for other web hosting services ("Access Digital Server Assets"), which were all separate reporting units previously included in our former "Other" segment, the cinema advertising services business ("USM"), which was previously included in our Content & Entertainment segment, and its DMS digital distribution

and delivery business ("DMS"), the majority of which was sold in November 2011 and was previously included in our Services segment. In August 2010, the Company sold both Managed Services and the Access Digital Server Assets. In May 2011, the Company completed the sale of certain assets and liabilities of the Pavilion Theatre to a third party. In September 2011 the Company completed the sale of USM to a third party, and in November, 2011 completed the sale of the majority of assets of DMS to a third party (See Note 3) .

The following organizational chart provides a graphic representation of our four primary businesses:

[[Image Removed]] We have incurred consolidated net losses, including the results of our non-recourse deployment subsidiaries, of $10.6 million and $4.2 million in the three months ended December 31, 2011 and 2010, respectively, and $17.5 million and $22.3 million in the nine months ended December 31, 2011 and 2010, respectively, and we have an accumulated deficit of $215.2 million as of December 31, 2011. Included in our consolidated net losses were $6.9 million and $1.7 million in the three months ended December 31, 2011 and 2010, respectively of losses attributed to discontinued operations, asset write-offs related to our sale of DMS assets, restructuring charges and non-cash loss through the equity investment in the CDF2 VIE. We also have significant contractual obligations related to our non-recourse and recourse debt for the fiscal year 2012 and beyond. We may continue generating consolidated net losses, including our non-recourse deployment subsidiaries, for the foreseeable future. Based on our cash position at December 31, 2011, and expected cash flows from operations, we believe that we have the ability to meet our obligations through at least December 31, 2012. Failure to generate additional revenues, raise additional capital or manage discretionary spending could have an adverse effect on our financial position, results of operations or liquidity.

Results of Operations for the Three Months Ended December 31, 2011 and 2010

Revenues
                                  For the Three Months Ended December 31,
($ in thousands)                         2011                    2010      Change
Phase I Deployment        $        10,530                      $ 11,575      (9 )%
Phase II Deployment                 2,976                         2,342      27  %
Services                            5,736                         2,038     181  %
Content & Entertainment               551                           132     317  %
                          $        19,793                      $ 16,087      23  %

Revenues increased $3.7 million or 23%. The increase in revenues in the Phase II Deployment segment was due to an increase in the number of Phase 2 DC's financed Systems installed and ready for content to 1,657 at December 31, 2011 from 760 at December 31, 2010. The 181% increase in revenues in the Services segment was primarily due to (i) increased Phase 2 DC service fees as 768 Phase 2 DC and Exhibitor-Buyer systems were installed during the quarter and a total of 5,032 installed systems were generating service fees in the quarter; and (ii) a 164% increase in Software license fee and maintenance revenues due to the previously described increase in Phase 2 systems deployed as well as an increase in license and maintenance fees from other software customers due to the recently announced new business contracts. We expect continued growth in services

from (i) continued strong deployments from our current backlog of in excess of 1,300 screens under MLA as well as from new exhibitor customer signings as we enter the final 9 months of the contractual digital cinema deployment period;
(ii) initial deployments of screens by our international service customers in fiscal year 2013; (iii) additional revenues from recently signed software customers upon installation in the remainder of this fiscal year and next fiscal year; and (iv) new potential software customers based on our active domestic and international pipeline.

As of December 31, 2011 Cinedigm provides its digital cinema services through both its Phase 2 deployment subsidiary and third party exhibitor-buyer customers to a total of 5,032 Phase 2 DC screens in comparison to 1,654 at December 31, 2010 and 2,195 at March 31, 2011. Cinedigm also services an additional 3,724 screens in its Phase 1 deployment subsidiary, identical to the number serviced in the previous year. We will continue to deploy additional Phase 2 DC Systems under various non-recourse credit facility commitments and through the Exhibitor-Buyer Structure.

CEG's distribution fee revenue increased 14% to $6.0 in the quarter due to its release of the Pokemon 3D movie in December and a continued strong Kidtoons release calendar. The primary driver of CEG revenues is the number of programs CEG is distributing, together with the nationwide (and anticipated worldwide) conversion of theatres to digital capabilities, a trend the Company expects to continue. CEG has recently released several events including Life in a Day with YouTube and National Geographic, John Carpenter's The Ward, a Sarah Palin documentary, Pokemon 3D, its first of 4 quarterly Live 3D UFC fights as well as announced several films and events for the remainder of the fiscal year and fiscal year 2013, CEG also recently announced a joint venture with New Video Group to jointly distribute independent films across theatrical and all home entertainment platforms.

Direct Operating Expenses
                                    For the Three Months Ended December 31,
($ in thousands)                            2011                       2010    Change
Phase I Deployment        $             238                           $  78      205 %
Phase II Deployment                     132                              21      529 %
Services                              1,033                             624       66 %
Content & Entertainment                 701                             138      408 %
                          $           2,104                           $ 861      144 %

Direct operating expenses increased 144% tied to our overall revenue increase. The increase in direct operating costs in the Phase II Deployment segment was primarily due to increased property taxes and insurance incurred on deployed Systems. The increase in the Services segment was primarily related to increased personnel costs to support the software development requirements of our current new customers as well as additional new product development efforts. The increase in the Content & Entertainment segment was primarily related to the additional events and film releases in the quarter. We expect direct operating expenses to remain consistent at the current level with any future increases associated with additional revenue growth, particularly in our software group as we continue to expand both current products and our new platform in response to client and market requirements.

Selling, General and Administrative Expenses

                                   For the Three Months Ended December 31,
($ in thousands)                          2011                      2010     Change
Phase I Deployment        $            24                         $     3      700 %
Phase II Deployment                    44                              11      300 %
Services                              830                             603       38 %
Content & Entertainment               381                             371        3 %
Corporate                           3,024                           1,799       68 %
                          $         4,303                         $ 2,787       54 %

Selling, general and administrative expenses increased $1.5 million or 54% in support of the 190% increase in non-deployment revenues. The increase in the Services segment was mainly due to payroll and related employee expenses for increased staffing as we added sales resources to support the expanding digital cinema exhibitor sales efforts as well as additional management, software development and quality assurance staff to support the significant recent software customer additions. The Content &

Entertainment segment was near flat as we carefully managed expenses against our releases scheduled in the quarter. The increase within Corporate was mainly due to (i) the lag between our restructuring plan and actual expense reductions. Based on employee reductions completed at December 31, 2011 and planned reductions for the fourth quarter, we estimate an annualized reduction in SG&A of approximately $1.5 million or approximately $0.4 million per quarter; (ii) increased professional services fees to assist in the transition of our finance organization as well as to support the marketing of our products and services; and (iii) increased travel and sales costs. As of December 31, 2011 and 2010 and excluding employees in our discontinued operations, we had 74 and 46 employees, of which 1 and 2 were part-time employees. We expect a near term decrease in SG&A from current levels upon the completion of our restructuring plan and then an increase in selling, general and administrative expenses tied to additional revenues as we support our recent new software business contracts and expanding sales pipeline and our additional content distribution activities with additional sales and service headcount.

Restructuring and Transition Expenses

During the three months ended December 31, 2011, the Company completed a
strategic assessment of its resource requirements for its ongoing businesses
which resulted in a workforce reduction and a severance and employee related
charge of $0.8 million which is reflected as restructuring and transition
expenses in the Company's condensed consolidated statements of operations for
the three months ended December 31, 2011. A summary of activity for the
restructuring and transition expenses is as follows:
                                                                                               Amounts Accrued
                                Balance at September                                           at December 31,
                                      30, 2011              Total Cost        Amounts Paid          2011
Employee Severance Related     $                   -     $          832     $          (76 )   $         756

The Company expects to incur both additional severance related and occupancy related restructuring expenses estimated at approximately $0.4 to $0.5 million in the fourth quarter ending March 31, 2012 related to the strategic realignment of its ongoing businesses.

Depreciation and Amortization Expense on Property and Equipment

                                   For the Three Months Ended December 31,
($ in thousands)                          2011                     2010     Change
Phase I Deployment        $         7,138                        $ 7,113       -  %
Phase II Deployment                 1,682                            937      80  %
Services                               75                             49      53  %
Content & Entertainment                 2                             18     (89 )%
Corporate                              99                             10     890  %
                          $         8,996                        $ 8,127      11  %

Depreciation and amortization expense increased $0.9 million or 11%. 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 months ended December 31, 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 are installed and additional modest technology investments are made to support our software expansion.

Interest expense
                                For the Three Months Ended December 31,
($ in thousands)                       2011                       2010     Change
Phase I Deployment    $          2,527                          $ 2,385       6 %
Phase II Deployment                680                              514      32 %
Corporate                        4,396                            3,900      13 %
                      $          7,603                          $ 6,799      12 %

Interest expense increased $0.8 million or 12%. The increase in interest paid and accrued within the non-recourse Phase I

Deployment segment relates primarily to higher interest rate swap costs offset by continued repayment of Phase 1 DC's 2010 Term Loans from free cash flow and the resulting reduced debt balance. Interest increased within the Phase II Deployment segment related to the non-recourse credit facilities with KBC Bank NV (the "KBC Facilities") as we added approximately $2.5 million of additional non-recourse Phase 2 debt in the quarter and $14.9 million year to date to fund the purchase of Systems from Barco and will be serviced by the increased VPFs generated by those additional systems. 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 expense increases quarterly with the increased balance of the 2010 Note through its PIK interest accumulation. The Company had an interest reserve set aside to cover cash interest payments on this note through September 30, 2011 and currently pays its cash interest expense through the cash flows from operations.

Non-cash interest expense was $0.6 million for each of the three months ended December 31, 2011 and 2010, respectively, and represents the accretion of $0.5 million on the note payable discount associated with the 2010 Note which will continue over the term of the 2010 Note and the accretion of $0.1 million on the note payable discount associated with the 2010 Term Loans which will continue over the term of the 2010 Term Loans.

Change in fair value of interest rate swaps

The change in fair value of the interest rate swaps was a gain of $0.6 million and $0.3 million for the three months ended December 31, 2011 and 2010, respectively. The swap agreement in the prior year related to the prior 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 became effective on June 15, 2011.

Change in fair value of warrants

The resale of the shares underlying warrants issued to a designee of Sageview Capital LP ("Sageview"), related to the 2010 Note, was registered with the SEC 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, allocated costs attributable to discontinued operations
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 10 Segment Information for further details). This measure isolates the financial and capital structure impact of the Company's non-recourse Phase 1 DC and Phase 2 DC subsidiaries. The Company reported continued improved Adjusted EBITDA (excluding its Phase 1 DC and Phase 2 DC subsidiaries) of $1.4 million for the three months ended December 31, 2011 in comparison to $(0.3) million for the three months ended December 31, 2010. The Company continues to benefit from growth in its installed Systems, growth in software license and maintenance fees and the inherent operating leverage embedded in its business model. Based on the expected Phase 2 DC Systems planned for deployment during the remainder of the fiscal year, as well as recently signed software contracts, the Company expects Adjusted EBITDA performance to continue to improve for the remainder of the fiscal year relative to prior year results, 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.

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 EBITDA will also be useful to others, including its stockholders, as a valuable financial metric.

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 a 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 Adjusted EBITDA excludes certain non-recurring or non-cash items, such as stock-based compensation charges, that management believes are not indicative of the Company's ongoing 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 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. Management 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 GAAP net loss from continuing operations to consolidated Adjusted EBITDA:

                                                   For the Three Months Ended December 31,
($ in thousands)                                        2011                      2010
Net loss from continuing operations            $           (3,751 )       $           (2,399 )
Add Back:
Amortization of software development                          130                         18
Depreciation and amortization of property
and equipment                                               8,996                      8,127
Amortization of intangible assets                              84                         83
Interest income                                               (21 )                      (34 )
Interest expense                                            7,603                      6,799
Other (income) expense, net                                  (175 )                      100
Loss on investment in non-consolidated
entity                                                        343                          -
Change in fair value of interest rate swap                   (597 )                     (318 )
Stock-based expenses                                          142                          -
Stock-based compensation                                      561                        285
Allocated costs attributable to discontinued
operations                                                    119                        174
    Restructuring and transition expenses                     832                          -
Adjusted EBITDA                                $           14,266         $           12,835

Adjustments related to the Phase I and Phase
II Deployments:
Depreciation and amortization of property
and equipment                                              (8,820 )                   (8,076 )
Amortization of intangible assets                             (12 )                      (12 )
    Income from operations                                 (4,275 )                   (5,716 )
Intersegment services fees earned (1)                         245                      1,268
Adjusted EBITDA from non-deployment Phase I
and Phase II businesses                        $            1,404         $              299

(1) Intersegment revenues of the Services segment represent service fees earned from the Phase I and Phase II Deployments.

Results of Operations for the Nine Months Ended December 31, 2011 and 2010

Revenues
                                  For the Nine Months Ended December 31,
. . .