This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, including statements regarding our future results of operations and financial position, business strategy and plans and our objectives for future operations. The words "may," "will," "should," "could," "expect," "anticipate," "believe," "estimate," "intend," "continue" and other similar expressions are intended to identify forward-looking statements. We have based these forward looking statements largely on current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy, short term and long-term business operations and objectives, and financial needs. These forward-looking statements involve risks and uncertainties that could cause our actual results to differ materially from those expressed or implied in our forward-looking statements. Such risks and uncertainties include, among others, those discussed in our consolidated financial statements, related notes, and the other financial information appearing elsewhere in this report and our other filings with the Securities and Exchange Commission, or the SEC, particularly those contained in the Section entitled "Risk Factors" in our Registration Statement filed on Form S- 1 (File No. 333-178648). Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. We do not intend, and undertake no obligation, to update any of our forward-looking statements after the date of this report to reflect actual results or future events or circumstances. Given these risks and uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements.

Our fiscal year ends on June 30 each year. References to "fiscal year 2011" are for the inception period (July 29, 2010) to June 30, 2011.

As of March 31, 2012 we operated three theatres located in Westfield, New Jersey (the Rialto), Cranford, New Jersey (Cranford) and Bloomfield, Connecticut (the Bloomfield 8), consisting of 19 screens. Our three theatres had over 148,000 attendees for fiscal year 2011 (for the portion of the year we operated them), and over 78,000 and 231,000 attendees for the three and nine months ended March 31, 2012, respectively. We acquired the Rialto and Cranford theatres on December 31, 2010 and the Bloomfield 8 on February 17, 2011.

On April 20, 2012 we acquired certain assets and assumed theatre operating leases of Cinema Supply, consisting of a chain of five theatres with 54 screens located throughout central Pennsylvania ("Cinema Centers"). Cinema Centers consists of:

• an 11 screen theatre located in Bloomsburg, Pennsylvania;

• a 12 screen theatre located in Camp Hill, Pennsylvania;

• a 10 screen theatre located in Reading, Pennsylvania;

• a 12 screen theatre located in Selinsgrove, Pennsylvania; and

• a 9 screen theatre located in Williamsport, Pennsylvania.

Cinema Centers had approximately 1.5 million attendees for the twelve months ended March 31, 2012. Six of the 54 screens constituting Cinema Centers have been converted to digital cinema platforms. We intend to convert the remaining 48 screens to digital platforms within approximately four months of completing the acquisition, at an estimated aggregate cost of $3.1 million and expect to finance this conversion through capital leases or other secured financing from banks or vendors. As described under "Subsequent Events", we completed the acquisition on April 20, 2012 and used $11.0 million of the net proceeds of our initial public offering consummated on the same day to pay the cash portion of the Cinema Centers purchase price of approximately $14.0 million. The remainder of the Cinema Centers purchase price consists of a note for $1.0 million due on October 31, 2012 and of 335,000 shares of our Class A common stock with a fair value of $2.0 million.

Our plan to expand our business is based on our business strategy, centered on our slogan "cinema reinvented," and includes:

• Acquisitions of existing historically cash flow positive theatres in free zones. We intend to selectively pursue multi-screen theatre acquisition opportunities that meet our strategic and financial criteria. Our philosophy is to "buy and improve" existing facilities rather than "find and build" new theatres. We believe this approach provides more predictability, speed of execution and lower risk.

• Creation of an all-digital theatre circuit utilizing our senior management team's extensive experience in digital cinema and related technologies, alternative content selection and movie selection. We will convert the theatres we acquire to digital projection platforms (if not already converted) with an appropriate mix of RealD™ 3D auditoriums in each theatre complex.

• Offering our customers a program of popular movies and alternative content such as sports, concerts, opera, ballet and video games to increase seat utilization and concession sales during off peak and some peak periods.

• Deployment of state of the art integrated software systems for back office accounting and remote camera surveillance systems for theatre management which enable us to manage our business efficiently and to provide maximum scheduling flexibility while reducing operational costs.

• Active marketing of the Digiplex brand and our programs to consumers using primarily new media tools such as social media, website design and regular electronic communications to our targeted audience.

• Enhancing our alternative content programs with themed costuming for our theatre personnel, food packages, scripted introductions by theatre managers, and the use of selected staff members called "ambassadors" to employ various social media tools before, during and after each event to promote the event and the Digiplex brand.

Other than the funds resulting from our capital raised to date, there can be no assurance, however, that we will be able to secure financing necessary to implement our business strategy, including to acquire additional theatres or to renovate and digitalize the theatres we do acquire.

We manage our business under one reportable segment: theatre exhibition operations.

Revenues

We generate revenues primarily from admissions and concession sales with additional revenues from screen advertising sales and other revenue streams, such as theatre rentals, private parties and vendor marketing promotions. Our advertising agreement with National CineMedia, LLC ("NCM") has assisted us in expanding our offerings to domestic advertisers and will be broadening ancillary revenue sources, such as digital video monitor advertising and third party branding. Our alternative content agreements with NCM and others has assisted us in expanding our alternative content offerings, such as live and pre-recorded concert events, opera, ballet, sports programs, and other cultural events. In addition to NCM, we select, market and exhibit alternative content from a variety of other sources, including Emerging Pictures, Cinedigm Digital Cinema Corp., Screenvision, and others as they offer their programs to us. Our existing eight theatres are located in "free zones," or areas that permit us to acquire movies from any distributor. As such, we display all of the leading movies and can tailor our offerings to each of our markets.

Our revenues are affected by changes in attendance and concession revenues per patron. Attendance is primarily affected by the quality and quantity of films released by motion picture studios. Our revenues are seasonal, coinciding with the timing of releases of motion pictures by the major distributors. Generally, motion picture studios release the most marketable motion pictures during the summer and holiday seasons. The unexpected emergence or continuance of a "hit" film during other periods can alter the traditional pattern. The timing of movie releases can have a significant effect on our results of operations, and the results of one fiscal quarter are not necessarily indicative of the results for the next or any other fiscal quarter. The seasonality of motion picture exhibition, however, has become less pronounced as motion picture studios are releasing motion pictures somewhat more evenly throughout the year. Our operations may be impacted by the effects of rising costs of our concession items, wages, energy and other operating costs. We would generally expect to offset those increased costs with higher costs for admission and concessions.

Expenses

Film rent expenses are variable in nature and fluctuate with our admissions revenues. Film rent expense as a percentage of revenues is generally higher for periods in which more blockbuster films are released. Film rent expense can also vary based on the length of a film's run and are generally negotiated on a film-by-film and theatre-by-theatre basis. Film rent expense is higher for mainstream movies produced by the Hollywood studios, and lower for art and independent product. Film rent expense is reduced by virtual print fees ("VPFs") that we record from motion picture distributors under an exhibitor-buyer agreement that entitles us to payments for the display of digital movies.

Cost of concessions is variable in nature and fluctuates with our concession revenues. We purchase concession supplies to replace units sold. We negotiate prices for concession supplies directly with concession vendors and manufacturers to obtain volume rates. Because we purchase certain concession items, such as fountain drinks and popcorn, in bulk and not pre-packaged for individual servings, we are able to improve our margins by negotiating volume discounts.

Salaries and wages include a fixed cost component (i.e., the minimum staffing costs to operate a theatre facility during non-peak periods) and a variable component in relation to revenues as theatre staffing is adjusted to respond to changes in attendance.

Facility lease expense is primarily a fixed cost at the theatre level as most of our facility operating leases require a fixed monthly minimum rent payment. Our leases are also subject to percentage rent in addition to their fixed monthly rent if a target annual revenue level is achieved.

Utilities and other expenses include certain costs that have both fixed and variable components such as utilities, property taxes, janitorial costs, repairs and maintenance and security services.

• New Jersey Theatre Acquisitions. On December 31, 2010, we acquired the Rialto and Cranford theatres in Westfield and Cranford, New Jersey having six and five screens, respectively, for a total purchase price of $1.8 million. We paid $1.2 million in cash and issued to the seller 250,000 shares of our Series A preferred stock, valued at $0.5 million, along with an earn-out. The fair value of the earn-out was recorded as additional purchase price, and as a liability with an estimated fair value of $0.1 million to be paid over 2 years. As of March 31, 2012, we reduced the earn-out liability by $.04 million based on the actual revenues of the New Jersey theatres and recorded a payable to the seller for $.02 million for an amount due under the earnout. Total goodwill resulting from the acquisition of the Rialto and Cranford theatres was $0.9 million.

• Connecticut Theatre Acquisition. On February 17, 2011, we acquired the Bloomfield 8, an 8-screen theatre in Bloomfield, Connecticut, for $0.1 million in cash. The fair value of the theatre was determined to be $0.2 million, and we recorded a bargain purchase gain of $0.1 million during fiscal year 2011.

• Completion of Initial Public Offering and Exercise of Overallotment. On April 20, 2012 we completed our initial public offering of 2,200,000 shares of Class A common stock at a price of $6.10 per share, for net proceeds of $11,400 after deducting underwriting commissions and offering expenses. On May 7, 2012, we sold 323,900 shares of Class A common stock upon the exercise of the underwriters' overallotment option, for net proceeds of $1,800 after deducting underwriting discounts and commissions.

• Pennsylvania Theatre Acquisition. On April 20, 2012 we acquired certain assets of Cinema Centers, a chain of five theaters with 54 screens located in central Pennsylvania. Subject to certain adjustments, the purchase price for Cinema Centers was $14.0 million, consisting of $11.0 million in cash paid at closing, a note for $1.0 million due on October 31, 2012 and 335,000 shares of Class A common stock with a fair value of $2.0 million. We also assumed the operating lease of each theatre location. No debt or other liabilities were assumed.

• Digital Projector Installation. During fiscal year 2011, we installed 16 digital projectors and related equipment in the three theatres we operated as of June 30, 2011. The average cost that we incurred with respect to the installation was approximately $74,000, inclusive of equipment and labor. Our total cost of digital platform installations to date is $1.2 million. With the three systems that had been previously installed, all 19 screens we owned in Fiscal 2011 were digitally equipped before June 30, 2011. The remaining balance of the cost of the 16 digital systems was approximately $1.1 million and was included in property and equipment, net and as a current liability as of June 30, 2011 and March 31, 2012. We repaid the cost of this digital equipment with a portion of the net proceeds from our initial public offering (see "Subsequent Events").

• Advertising Agreement. During the fiscal year 2011, we entered into a five year advertising agreement with NCM that entitles us to payments on a per patron basis for advertising displayed by NCM on our screens. We started recording the revenues per patron under this agreement in August 2011.

• Alternative Content Program Launch. Along with the continued display of traditional feature movies, a cornerstone of our business strategy is to exhibit opera, ballet, concerts, sporting events, children's programming and other forms of alternative content in our theatres. Using our 25 digital systems (18 of which are equipped to show 3D events), we can show live and pre-recorded 2D and 3D events at off-peak times to increase the utilization of our theatres. Going forward we expect at least 40% of any new screens to be 3D-enabled.

• Acquisition Strategy. We plan to acquire existing movie theatres in free zones over the next 12 months and beyond. We generally seek to pay a multiple of 4.5 times to 5.5 times Theater Level Cash Flow ("TLCF") for theatres we acquire. TLCF is calculated as revenues minus theatre operating expenses (excluding depreciation and amortization). For example, the Cinema Centers theatres had historical TLCF for 2011 of approximately $2.9 million, yielding a multiple of 4.9 times TLCF based on our purchase price of approximately $14.0 million.

The following table sets forth the percentage of total revenues represented by statement of operations items included in our consolidated statements of operations for the periods indicated (dollars and attendance in thousands, except average ticket prices and average concession per patron):

Results of Operations

                                        Three Months Ended                Three Months Ended
                                          March 31, 2012                    March 31, 2011
Revenues:                               $                 %                $                %
Admissions                         $       695               71      $        481              75
Concessions                                213               22               141              22
Other                                       68                7                19               3
Total revenues                             976              100               641             100

Cost of operations:
Film rent expense (1)                      304               44               254              53
Cost of concessions (2)                     40               19                21              15
Salaries and wages (3)                     109               11               121              19
Facility lease expense (3)                 122               13                96              15
Utilities and other (3)                    203               21                65              10
General and administrative (3)             409               42               219              34
Change in fair value of earnout
(3)                                        (20 )             (2 )               -               -
Depreciation and amortization
(3)                                        125               13                56               9
Total costs and expenses (3)             1,292              132               832             130
Operating loss (3)                        (316 )            (32 )            (191 )           (30 )
Bargain purchase gain from
theatre acquisition (3)                      -                -                98              15
Other income (3)                            (1 )              -                 2               -
Loss before income taxes (3)              (317 )            (32 )             (91 )           (14 )
Income taxes (4)                            (2 )              1                 2              (2 )
Net loss (3)                       $      (315 )            (32 )    $        (93 )           (15 )

Other operating data:
Theatre Level Cash Flow (7)                198               20                84              13
Adjusted EBITDA (8)                       (194 )            (20 )            (109 )           (17 )
Attendance                              78,937                *            59,052               *
Average Ticket Price (5)           $      8.80                *      $       8.15               *
Average concession per patron
(6)                                $      2.69                *      $       2.39               *

* Not meaningful

(1) Percentage of revenues calculated as a percentage of admissions revenues.

(2) Percentage of revenues calculated as a percentage of concessions revenues.

(3) Percentage of revenues calculated as a percentage of total revenues.

(4) Calculated as a percentage of pre-tax loss.

(5) Calculated as admissions revenue/attendance.

(6) Calculated as concessions revenue/attendance.

(7) TLCF is a non-GAAP financial measure. TLCF is a common financial metric in the theatre industry, used to gauge profitability at the theatre level, before the effect of depreciation and amortization, general and administrative expenses, interest, taxes or other income and expense items. While TLCF is not intended to replace any presentation included in our consolidated financial statements under GAAP and should not be considered an alternative to cash flow as a measure of liquidity, we believe that this measure is useful in assessing our cash flow and working capital requirements. This calculation may differ in method of calculation from similarly titled measures used by other companies. This adjusted financial measure should be read in conjunction with the financial statements included in this prospectus. For additional information on TLCF, see pages 25-26.

(8) Adjusted EBITDA is a non-GAAP financial measure. We use adjusted EBITDA as a supplemental liquidity measure because we find it useful to understand and evaluate our results, excluding the impact of non-cash depreciation and amortization charges, stock based compensation expenses, and nonrecurring expenses and outlays, prior to our consideration of the impact of other potential sources and uses of cash, such as working capital items. This calculation may differ in method of calculation from similarly titled measures used by other companies. This adjusted financial measure should be read in conjunction with the financial statements included in this prospectus. For additional information on Adjusted EBITDA, see pages 25-26.

Three Months Ended March 31, 2012 and Three Months Ended March 31, 2011

The three months ended March 31, 2012 included the operations of the three theatres we owned on March 31, 2012 for the entire period. The three months ended March 31, 2011 included the Cranford and Rialto theatres for the entire period, and the Bloomfield 8 from the date of acquisition, February 17, 2011.

Admissions and Concessions. Our admissions and concessions revenues increased by 46% in the March 2012 period, due in part to the theater which was not part of our operations for the entire quarter during the prior year, and attendance increases (along with the industry as a whole) driven by favorable product offerings including Lorax and Hunger Games in the 2012 period. In addition, our emphasis on alternative content programming has resulted in incremental admissions and concessions revenue. Alternative content revenue comprised 11% of our box office revenue during the three months ended March 31, 2012, compared to no such revenue during the 2011 period. During the 2011 period, upon the acquisition of each theatre we also adjusted admission and concession prices and our concession offerings, based on our review of the local market conditions.

We believe the average ticket prices and the average concession purchases at our theatres as shown in the table above are close to the averages among movie theatres in our operating markets. We believe each theatre's revenues are positioned to grow in the next fiscal year and beyond from our product offerings, including the addition of alternative content, such as concerts, sporting events and children's programming, when the theatres are not otherwise operating at peak levels.

Other Revenues. Other revenues consist of theatre rentals for parties, camps and other activities, and in the 2012 period, advertising revenue. We had no revenues from advertising during the 2011 period, as we entered into an agreement with NCM to receive ad revenues in August 2011. Advertising revenue was $20 for the 2012 period. The remainder of the increase was due to the addition of the Bloomfield 8 theatre in 2011, and increased rental activity in the months following our acquisition of the theaters.

Film Rent Expense. Included as a reduction of film rent expense in the 2012 period is $56 of virtual print fees (VPFs) that we receive from a third party vendor, associated with digital titles that we play from the studios. We did not have VPFs in the 2011 period, as we had not converted any of our theatres to digital projection until late in the March 2011 quarter. Excluding VPFs, film rent expense would have been 51% of admissions revenues in the 2012 period, compared to 53% in the prior year. The decrease was due to the mix of movies displayed and the specific terms negotiated with the studios. While film rent expense is a variable cost that fluctuates with box office revenues, we generally expect film rent expense to range from 45% to 55% of admissions revenues, with art and independent titles at the lower end of the range and mainstream movie titles at the middle to high end of the range. Our Cranford theatre is largely dedicated to art and independent product while our other two locations are more focused on mainstream movies.

Cost of Concessions. Changes in the cost of concessions percentage from year to year are due to the mix of products being sold and fluctuations in supply pricing. Cost of concessions was 19% and 15% in the 2012 and 2011 periods, respectively, as a percentage of concession revenues. The increase was due to increases in the cost of certain concession items, and the mix of products sold which generate varying profit margins. Cost of concessions is a variable expense that will fluctuate with concession revenues. We expect our cost of concessions to average between 15% to 20% of our concession revenues, with mainstream movies generating margins at the higher end of the range, and art and independent movies at the lower end.

Salaries and Wages. The reduction in this expense from the 2011 period is due to staffing changes made following our acquisition of our theatres. Our theatre employees are mostly part-time hourly employees, supervised by one or more full-time managers at each location. Our payroll expenses contain a fixed component but are also variable and will fluctuate, being generally higher during the peak summer and holiday periods, and also during alternative content events, and lower at other times.

Facility Lease Expense. The increase in this expense in the 2012 period is due to the addition of the Bloomfield 8 theatre in February 2011. Each facility is subject to an operating lease that contains renewal options upon expiration.

Utilities and Other. The increase in these expenses is due to the addition of the Bloomfield 8 theatre in 2011, higher utility and operating costs in general, and maintenance of our digital projection equipment that we did not have in the 2011 period. We expect these costs, which are largely fixed in nature, to remain relatively constant for the theatres, with growth in these expenses as we acquire more theatres.

General and Administrative Expenses. The increase in these expenses is due to additional corporate personnel hired to manage the Company's actual and planned growth, along with professional fees for auditing, legal, marketing and information technology. We expect these costs to decrease as a percentage of revenue as we grow, as our existing infrastructure will be able to handle a larger number of theatres than we currently operate. Included in general and administrative expenses for the 2012 period is stock compensation expense of $16 related to issuance of Class A common stock to employees and non-employees for services rendered. No stock based compensation expenses were incurred in the 2011 period. We expect to issue additional stock-based awards in the future under stock compensation award plans, which may consist of stock options or restricted stock, subject to vesting periods. As of March 31, 2012 and 2011 there were 9 and 5 employees on our corporate staff, respectively including our chief executive officer and other executive officers and staff to support our business development, technology, accounting, and marketing activities.

Change in fair value of earnout. This results from the adjustment to the fair value of the earnout liability based on actual revenues in the first year of the two-year earnout period.

Depreciation and Amortization. The increase from the 2011 period is due to the addition of digital projection equipment near the end of the March 31, 2011 quarter, and other capital improvements made since that time, and the addition of the Bloomfield 8 theater in February 2011. We record depreciation and amortization for property and equipment and intangible assets over the estimated useful life of each asset class on a straight line basis. Our largest fixed . . .