Digital Cinema Destinations Corp. - FORM S-1/A

Attached files

file	filename
EX-14.1 - Digital Cinema Destinations Corp.	e609354_ex14-1.htm
EX-23.4 - Digital Cinema Destinations Corp.	e609354_ex23-4.htm
EX-23.2 - Digital Cinema Destinations Corp.	e609354_ex23-2.htm
EX-23.3 - Digital Cinema Destinations Corp.	e609354_ex23-3.htm
EX-23.1 - Digital Cinema Destinations Corp.	e609354_ex23-1.htm
EX-10.15 - Digital Cinema Destinations Corp.	e609354_ex10-15.htm

As filed with the Securities and Exchange Commission on March 6, 2012

Registration No. 333-178648

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Amendment No. 3

FORM S-1

REGISTRATION STATEMENT UNDER

THE SECURITIES ACT OF 1933

DIGITAL CINEMA DESTINATIONS CORP.

(Exact name of registrant as specified in its charter)

Delaware	7830	27-3164577
(State or other jurisdiction of incorporation or organization)	(Primary Standard Industrial Classification Code Number)	(I.R.S. Employer Identification Number)

250 East Broad Street

Westfield, New Jersey 07090

(908) 396-1362

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

____________________

(Name, address, including zip code, and telephone number, including area code, of agent for service)

Copies to:

Joseph L. Cannella	Richard H. Gilden
Eaton & Van Winkle LLP	Kramer Levin Naftalis & Frankel LLP
Three Park Avenue, 16th floor	1177 Avenue of the Americas
New York, New York 10016	New York, New York 10036
(212) 561-3633	(212) 715-9486

Approximate date of commencement of proposed sale to the public: As soon as practicable after the effective date of this registration statement.

If any of the securities being registered on this form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. o

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earliest effective registration statement for the same offering. o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	o	Accelerated filer	o
Non-accelerated filer	o	Smaller reporting company	x

CALCULATION OF REGISTRATION FEE


Title of Each Class of Securities to be	Amount to be	Proposed Maximum Offering Price	Proposed Maximum Aggregate Offering		Amount of Registration
Registered	Registered	Per Share	Price (1)(2)		Fee (3)

Class A Common Stock par value $0.01			$	_________	$	3,294.75

(1) Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457(o) under the Securities Act of 1933 (the “Securities Act”), based on a proposed aggregate offering price of $25.0 million and a $3.75 million over-allotment option.

(2) Includes_______ Class A common stock which may be issuable pursuant to the exercise of a 45-day option granted to the underwriter by the registrant to cover over-allotments, if any.

(3) This amount was previously paid.

________

The Registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act, or until the registration statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to such Section 8(a), may determine.

The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.

Subject To Completion, Dated March 6, 2012

PROSPECTUS

Digital Cinema Destinations Corp.

Class A Common Stock

This is our initial public offering. We are offering shares of Class A common stock.

We expect the public offering price to be between $ and $ per share. Currently, no public market exists for the shares. We have applied to list our Class A common stock on The NASDAQ Capital Market under the symbol “DCIN.”

_________________________________________________

Following this offering, we will have two classes of outstanding common stock, Class A common stock and Class B common stock. The rights of the holders of Class A common stock and Class B common stock will be identical, except with respect to voting and conversion. Each share of Class A common stock will be entitled to one vote per share. Each share of Class B common stock will be entitled to ten votes per share and will be convertible at any time into one share of Class A common stock. Outstanding shares of Class B common stock will represent approximately % of the voting power of our outstanding capital stock following this offering.

_________________________________________________

Investing in our Class A common stock involves a high degree of risk.

See “Risk Factors” beginning on page 9.

_________________________________________________

	Per Share	Total
Public offering price
Underwriting discount (1)
Proceeds to us (before expenses)

(1) See "Underwriting" for a description of compensation payable to the underwriters.

We have granted the underwriters an option to purchase up to an additional shares of Class A common stock, less the underwriting discount, within 45 days from the date of this prospectus to cover overallotments.

We have also agreed to issue one of the underwriters a warrant to purchase up to 1% of the shares of Class A common stock sold in this offering. The warrant will have an exercise price equal to 110% of the offering price of the shares of Class A common stock sold in this offering.

Neither the Securities and Exchange Commission nor any state securities regulators have approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

The underwriters expect to deliver the shares to purchasers on or about , 2012.

_________________________________________________

Joint Book-Running Managers

DOMINICK & DOMINICK LLC

MAXIM GROUP LLC

_________________________________________________

The date of this prospectus is , 2012.

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TABLE OF CONTENTS

Prospectus Summary	1

The Offering	5

Historical Consolidated Financial and Operating Data and Summary Unaudited Pro Forma Combined Data	7

Risk Factors	9

Special Note Regarding Forward-Looking Statements	19

Use of Proceeds	20

Dilution	20

Dividend Policy	21

Capitalization	21

Unaudited Pro Forma Combined Financial Information	23

Management’s Discussion and Analysis of Financial Condition and Results of Operations	31

Business	47

Directors and Executive Officers	62

Director Compensation	65

Executive Compensation	66

Security Ownership of Certain Beneficial Owners and Management	69

Related Party Transactions	71

Description of Capital Stock	71

Shares Eligible For Future Sale	74

Underwriting	75

Legal Matters	78

Experts	78

Where You Can Find More Information	78

Index to Financial Statements	F-1

You should rely only on the information contained in this prospectus. Neither we nor the underwriters have authorized anyone to provide you with information that is different from that contained in this prospectus. This prospectus may only be used where it is legal to offer and sell these securities. The information in this prospectus is only accurate as of the date of this prospectus.

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Market Data and Industry Information

Unless otherwise indicated, information in this prospectus concerning economic conditions, our industry, our markets and our competitive position is based on a variety of sources, including information from independent industry analysts, the National Association of Theatre Owners, the Motion Picture Association of America (the “MPAA”) and publications such as Film Journal International, Box Office Magazine and Variety, as well as our own estimates and research. None of the independent industry publications used in this prospectus were prepared on our behalf, and none of the sources cited in this prospectus have consented to the inclusion of any data from its reports, nor have we sought consent from any of them. Although we believe that the sources are reliable, we have not independently verified market industry data provided by third parties or by industry or general publications. Similarly, while we believe our internal estimates with respect to our industry are reliable, our estimates have not been verified by any independent sources. While we are not aware of any misstatements regarding any industry data presented by this prospectus, our estimates involve risks and uncertainties and are subject to change based on various factors, including those discussed under “Risk Factors” in this prospectus.

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PROSPECTUS SUMMARY

This summary highlights information contained elsewhere in this prospectus and does not contain all of the information that you should consider in making your investment decision. Before investing in our Class A common stock, you should carefully read this entire prospectus, including our financial statements and related notes included in this prospectus and the information set forth under the headings “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” As used in this prospectus, unless the context otherwise requires, the words the “Company,” "Digiplex", “we”, “our”, “us” and “Successor” and words of similar import refer to Digital Cinema Destinations Corp. and its subsidiaries, references to “Cinema Centers” refer to Cinema Supply, Inc., and references to "Lisbon Cinema" refer to Lisbon Theaters Inc. As used in this prospectus, the word “Predecessor” refers to two movie theatres located in Westfield and Cranford, New Jersey which we acquired on December 31, 2010. As used in this prospectus, the term “pro forma” refers to, in the case of pro forma financial information, such information after giving pro forma effect to: (1) our planned acquisition of five Cinema Centers theatres, (2) our planned acquisition of the Lisbon Cinema theatre and (3) this offering and the use of the proceeds therefrom (collectively referred to as the “Transactions”).

Our Company

Digital Cinema Destinations Corp. is a fast-growing motion picture exhibitor dedicated to transforming movie theatres into digital entertainment centers. Pro forma for the Transactions, we will own and operate 85 screens in nine theatres, up from our current 19 screens in three theatres prior to our planned acquisitions. Our goal is to own and operate at least one theatre in each of approximately 100 locations throughout the United States, which, depending on the number of screens in each theatre, may approximate 1,000 screens.

Acquisitions of historically cash flow positive theatres are a key component of our strategy. We intend to create an all-digital national footprint by selectively pursuing multi-screen theatre acquisition opportunities that meet our strategic and financial criteria. We expect to upgrade the theatres to digital platforms if they have not already been upgraded. We believe that an all-digital theatre circuit serves as the backbone for creating a more entertaining movie-going experience, providing us with significantly greater programming flexibility and enabling us to achieve increased operating efficiencies. We believe that through a combination of operating practices, enhanced productivity resulting from the management of the new digital platforms and increased alternative content supplementing the traditional theatrical exhibition schedule, we can produce improved financial results and customer experiences. We can not assure you, however, that we will accomplish these goals. See “Risk Factors”.

We currently operate theatres located in Westfield, New Jersey (the “Rialto”), Cranford, New Jersey (the “Cranford”) and Bloomfield, Connecticut (the “Bloomfield 8”), consisting of three theatres and 19 screens. We acquired the Rialto and Cranford on December 31, 2010 and the Bloomfield 8 on February 17, 2011. All of our theatres are multi-screen theatres and typically contain auditoriums ranging from 90 to 275+ seats. We believe our theatres appeal to a diverse group of patrons because, to the extent the number of screens allow, we offer a wide selection of films and convenient show times, targeted to the demographics of the surrounding population. In addition, most of our theatres feature state-of-the-art amenities such as wall-to-wall and silver 3D screens, digital stereo surround-sound, computerized ticketing systems and comfortable seating with cup holders and infrared security cameras throughout the theatre along with enhanced interiors and exteriors.

In April 2011, we executed an asset purchase agreement for the purchase of certain assets of Cinema Centers, which we refer to as the “Cinema Centers acquisition.” Cinema Centers consists of 54 screens located in central Pennsylvania, with 11 screens in Bloomsburg, 12 screens in Camp Hill, 10 screens in the Fairground Mall, 12 screens in Selinsgrove and 9 screens in Williamsport. The Cinema Centers theatres had approximately 1.4 million attendees for the twelve months ended December 31, 2011. The Cinema Centers theatres have not yet been fully upgraded to digital projection platforms, which we plan to accomplish following the consummation of the acquisition.

In February 2012, we executed an asset purchase agreement for the purchase of certain assets of Lisbon Cinema, which we refer to as the “Lisbon Cinema acquisition.” Lisbon Cinema consists of a single theater with 12 screens in Lisbon, Connecticut. The Lisbon Cinema theatre had approximately 388,000 attendees for the twelve months ended December 31, 2011. The Lisbon Cinema theatre has been fully upgraded to digital projection platforms.

We expect to consummate the Cinema Centers and Lisbon Cinema acquisitions by using a portion of the net proceeds from this offering to fund the purchase price.

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We believe in our slogan, “cinema reinvented.” 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. We have enhanced the operations of the Rialto, Cranford and Bloomfield 8 theatres by fully converting each of the 19 screens to digital projection platforms, with 12 screens equipped with RealD™ 3D systems, installing proven state-of-the-art software and renovating the theatres. During fiscal year ended June 30, 2011, we installed 16 digital platforms, including digital projectors and related equipment in our three theatres. With three systems that were installed prior to our acquisition of the theatres, all 19 of our screens are digital. The average cost that we have incurred with respect to the instillation of the 16 digital projectors and related equipment that we installed to date is approximately $74,000 per digital platform, inclusive of equipment and labor. Our total cost of digital platform installations is $1.2 million. Pro forma for the Transactions, 37 of our screens will be digital, and we expect to convert the 48 remaining screens within four months from consummation of the offering at an approximate aggregate cost of $3.0 million and expect to finance this conversion through capital lease or other secured financing from banks or vendors.

We believe that the historic average capacity utilization of movie theatre seats for the industry has ranged between 10% and 15% and that average utilization falls to below 5% from Monday through Thursday. An all-digital theatre circuit gives us the flexibility to target our programming to match and draw audience demand, which is of particular importance during off-peak times. Properly programmed and advertised, we believe alternative content will increase the utilization of theatres and generate higher theatre level cash flow. We expect that alternative content will vary with customer taste and that the breadth of offerings will increase as alternative content gains traction in the market.

In addition to digital projection platforms, we intend to use alterative content to supplement our traditional theatrical exhibition schedule. Alternative content can be as diverse as the ballet from the Bolshoi, opera from the Metropolitan Opera, rock concerts and sporting events from around the world, which may be taking place in different geographical regions, or even if locally, may be sold out. At a fraction of the ticket price of a major event, our customers are able to see events occurring throughout the world, at times in live 3D. We have presented sporting events such as boxing matches, the World Cup, all-star games, the NCAA basketball finals, and major college football bowl games. Tapping into the potential of alternative content could lead to use of our theatres for auctions and fundraisers as well as a venue for meetings of corporate, religious, trade or professional organizations.

Our three theatres had, on a pro forma basis, approximately 312,000 attendees for the twelve months ended December 31, 2011. For the same twelve-month period, and pro forma for the Transactions, the nine theatres had an aggregate of approximately 2.1 million attendees.

For the Successor period from the inception date (July 29, 2010) to June 30, 2011 we had revenues of $1.6 million and a net loss of $0.8 million. For the six month period (unaudited) ended June 30, 2011, we had revenues of $1.9 million and a net loss of $0.6 million. Pro forma for the Transactions (unaudited), for the twelve month period ended June 30, 2011 and the six month period ended December 31, 2011, the nine theatres had revenues of $22.0 million and $11.0 million, and net income (loss) of $.005 million and ($0.3) million, respectively. Revenues related to alternative content have not been material to date for the Cinema Centers and Lisbon Cinema theatres.

Our Strategy

Our business strategy is to transform movie theatres into digital entertainment center destinations by acquiring cash flow positive theatres in strategic markets, converting them to digital formats and actively programming and marketing alternative content in addition to first run 2D and 3D movies.

Organic Growth

The principal factors that we expect will contribute to our organic growth include:

Digital Implementation. We intend to create an all-digital theatre circuit utilizing our senior management team’s significant experience in digital cinema deployment, alternative content selection and movie selection. We have converted all of our existing theatres and will convert those we acquire to digital formats with an appropriate mix of RealD™ 3D auditoriums in each theatre complex. We expect to finance our purchases of digital projection equipment in the theatres we acquire in part by leveraging “virtual print fees” we receive from motion picture distributors. Motion picture distributors make the payments to motion picture exhibitors to encourage conversion of theatres to digital projection platforms. The “virtual print fee” program will be available to us with respect to installations of new digital platforms until September 30, 2012, at which time the program is scheduled to expire with respect to installations of new digital projection equipment. For additional information regarding “virtual print fees,” see “Business — Digital Cinema Implementation.”

Alternative Content. We expect to offer our customers popular movies and alternative content including sports, music, opera, ballet and video games. With the exception of video games for which we have acquired the necessary software (but have not yet implemented), we offer each of these alternative content presentations at our existing theatres. We advertise and implement these features as an event being presented so that our patrons can fully enjoy the presentation and return frequently to enjoy future presentations. We believe we can increase the utilization rates of our theatres and concession sales by matching content to audience demand during off-peak and some peak periods. Approximately 7% of our box office revenues were attributable to alternative content for the six months ended December 31, 2011.

Operating Efficiencies. We have deployed state of the art integrated software systems for back office accounting and theatre management. This enables us to manage our business efficiently while providing maximum scheduling flexibility and reduced operational costs.

Dynamic Programming. One of the major benefits of the industry’s digital conversion is that it removes our reliance on single reels of film. With digital content, we are able to program multiple screens for playback from a single source file, based on ticket sales and customer demand, rather than being limited to one screen per reel.

Marketing. We intend to actively market the Digiplex brand concept and programs to consumers using primarily new media tools such as social media, website design and regular electronic communications to our targeted audience, which should allow us to grow our attendance. We expect the combination of our marketing strategy with our blend of traditional cinema and alternative content will transform our theatres to entertainment centers.

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Pre-Show and Other Advertising. We expect to increase pre-show and other advertising revenue in our existing theatres and the theatres we acquire using National CineMedia LLC’s services under a multi-year advertising contract that we executed in March 2011 and under which we commenced pre-show advertising in August 2011.

External Growth

The principal factors contributing to our external growth are a disciplined approach to acquisitions and our industry experience and relationships. We believe there is a supply of smaller, family-owned chains and individual theatres currently available in the market in “free zones,” which are areas that permit us to acquire movies from any distributor, compared to an area where film distributors establish geographic licensing zones and allocate each available film to one theatre within that zone.

Smaller theatre owners are facing significant capital investments due to the motion picture and theatre exhibition industry’s ongoing digital conversion. Despite the availability of the virtual print fee program, which provides fees to motion picture exhibitors from movie distributors to encourage and assist in the conversion to digital platforms, we believe many operators are either unable or unwilling to make the necessary capital expenditures despite positive historical cash flows. 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. To remain competitive, we believe alternative content will become increasingly important, and many smaller theatres will lack access to quality content. We intend to selectively pursue acquisitions where the location, overall market and facilities further enhance the quality of our theatre portfolio.

Our acquisition policy is to acquire theatres in free zones, that provide significant opportunities for improved financial performance through our business model. We will typically attempt to acquire cash flow positive theatres in attractive markets, convert them to a digital format where still necessary and actively program and market alternative content in addition to running 2D and 3D movies. By marketing our theatres as all digital entertainment destinations, we expect to realize increased cash flow from 3D films and alternative content programs aimed at targeted audiences, increased attendance, increased concessions and sponsorship and advertising revenues.

Our Industry

Movie-going is a convenient and attractively-priced form of out-of-home entertainment. On an average price-per-patron basis, movie-going continues to compare favorably to other out-of home entertainment alternatives, such as opera, concerts and sporting events. Movie theatres currently garner a relatively small share of consumer entertainment time and spend. We believe that, despite the declining trend in attendance experienced in the U.S. motion picture exhibition industry in recent years, there is significant room for expansion and growth in the U.S. movie exhibition industry. Our industry benefits from available capacity to satisfy additional consumer demand without capital investment. As major studio releases have declined in recent years, we believe that alternative content could fill an important gap that exists in the market today for consumers, movie producers and theatrical exhibitors by providing a broader range of content and access to consumers.

We believe the following market trends will drive the growth and strength of our industry:

Importance of Theatrical Success in Establishing Movie Brands and Subsequent Markets. Theatrical exhibition is the primary distribution channel for new motion picture releases in the domestic and international markets. We believe a successful theatrical release which “brands” a film is one of the major factors in determining its success in “downstream” markets, such as DVDs, network and syndicated television, video-on-demand, pay-per-view television and the Internet. As a result, we believe motion picture studios will continue to work cooperatively with theatrical exhibitors to ensure the continued importance of the theatrical window.

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Convenient and Affordable Form of Out-Of-Home Entertainment. Movie-going continues to be one of the most convenient and affordable forms of out-of-home entertainment, with an estimated average ticket price in the United States of $7.89 in 2010 and $7.96 in 2011 (according to boxofficemojo.com). Average prices in 2010 for other forms of out-of-home entertainment in the United States, including sporting events and theme parks, ranged from approximately $25.00 to $77.00 per ticket according to the MPAA.

Innovation with Digital Technology. Our industry began its conversion to digital projection technology in 2006. This conversion has allowed exhibitors to expand their product offerings. Digital technology allows the presentation of 3D content and alternative content such as live and pre-recorded sports programs, opera, ballet, concert events and special live events. These additional programming alternatives should expand the industry’s customer base and increase patronage for exhibitors.

Risk Associated with Our Business

Our business is subject to numerous risks and uncertainties, including those highlighted in the section titled “Risk Factors” immediately following this prospectus summary. Some of these risks are:

We are a recently-formed enterprise, have incurred net losses to date and we cannot assure you that we can operate profitably in the future.

We will need substantial additional funding to accomplish our business strategy and may be unable to raise capital on terms favorable to us or at all, which could increase our financing costs, dilute your ownership interests, affect our business operations or force us to delay, reduce or abandon our business strategy.

We may not benefit from our business strategy of acquiring and operating multi-screen theatres.

We may face intense competition in our business strategy of acquiring theatres.

We are subject to uncertainties related to digital cinema, including insufficient financing to obtain digital projectors and insufficient supply of digital projectors.

We depend on motion picture production and performance.

Our business is subject to significant competitive pressures.

The interests of A. Dale Mayo, our CEO and Chairman of the Board and controlling stockholder, may conflict with your interests, and the concentration of voting power in Mr. Mayo will limit your ability to influence corporate matters.

Corporate Information

We are a Delaware corporation organized on July 29, 2010. Our principal executive offices are located at 250 East Broad Street, Westfield, New Jersey 07090. Our telephone number at this address is (908) 396-1362. You should direct all inquiries to us at this address and telephone number. Our website address is www.digiplexdest.com. The information contained on our website is not part of this prospectus.

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THE OFFERING

Common Stock		_________shares of Class A common stock(1)

Offering Price		We anticipate that the initial public offering price for our Class A common stock will be between and per share.

Common Stock to be Outstanding After this Offering		shares of Class A common stock(1)(2) shares of Class B common stock

Use of Proceeds		We estimate that the net proceeds to us from this offering will be approximately $ , or approximately $ if the underwriters exercise their over-allotment option in full, based on the assumed offering price of $ per share (the midpoint of the estimated initial public offering price range), and after deducting the estimated underwriting discounts and commissions and offering expenses payable by us related to this offering. We intend to use approximately $14.0 million of the net proceeds from this offering to consummate the Cinema Centers acquisition, approximately $6.0 million to consummate the Lisbon Cinema acquisition and $1.1 million to repay an outstanding obligation owed by us to Barco, Inc. ("Barco") for purchases of digital cinema projectors equipment. We intend to use the balance of the net proceeds from this offering for general corporate purposes, including our working capital needs. If we fail to consummate the Cinema Centers acquisition and/or the Lisbon Cinema acquisition, we plan to use the portion of the net proceeds from this offering not used for the acquisition(s) we do not consummate for future acquisitions and general corporate purposes, including working capital needs. You should read the discussion in this prospectus under the heading “Use of Proceeds” for more information.

Over-Allotment Option		We have granted the underwriters an option for a period of 45 days to purchase, on the same terms and conditions set forth above, up to an additional ______ shares of Class A common stock to cover over-allotments.

Lock Up		Our officers and directors and major shareholders have agreed that, for a period of 180 days from the closing date of this offering, they will be subject to a lock-up agreement prohibiting, without the prior written consent of Dominick & Dominick LLC, any sales, transfers or hedging transactions of our securities owned by them. See “Underwriting” presented below.

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Listing		We have applied to have our common stock listed on the NASDAQ Capital Market; however, we can not assure you that such listing will be approved.

Proposed Symbol		DCIN

Risk Factors		See ‘‘Risk Factors’’ and other information included in this prospectus for a discussion of factors you should carefully consider before deciding to invest in the common stock.

(1)

The number of shares of our common stock outstanding immediately after this offering gives effect to the one-for-two reverse stock split of our Class A and Class B common stock which was approved by our Board of Directors in November 2011. Unless otherwise indicated, all information in this prospectus assumes no exercise by the underwriters of their option to purchase up to shares of our Class A common stock in this offering solely to cover over-allotments.

(2)

Excludes shares of Class A common stock available for issuance in connection with warrants that we will issue to one of the underwriters in connection with this offering and future grants of options and restricted stock.

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HISTORICAL CONSOLIDATED FINANCIAL

AND OPERATING DATA AND SUMMARY UNAUDITED PRO FORMA COMBINED DATA

Summary Consolidated Selected Financial Data

This is only a summary of our financial information and does not contain all of the financial information that may be important to you. Therefore, you should carefully read all of the information in this prospectus, including the financial statements and their explanatory notes and the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” before making a decision to invest in our Class A common stock. The consolidated statement of operations data for the period from inception (July 29, 2010) to June 30, 2011 (Successor) and the combined statement of operations data for the years ended December 31, 2010 and 2009 (Predecessor) are derived from our audited financial statements and related notes thereto included elsewhere in this prospectus. For the Successor, the consolidated balance sheet data as of December 31, 2011, the statement of operations data for the six months then ended and for the Predecessor the statement of operations data for the six months ended December 31, 2010 are derived from our unaudited consolidated financial statements and related notes thereto included elsewhere in this prospectus. Our historical results presented below are not necessarily indicative of results to be expected in future periods.

	Successor			Predecessor			Predecessor
(in thousands)	Inception date (July 29, 2010) to June 30, 2011			Year Ended December 31, 2010			Year Ended December 31, 2009
Statement of operations data:


Revenue		$1,572			$2,156			$2,536
Total costs and expenses		2,445			2,380			2,424
Income (loss) before income taxes		(776	)		(229	)		109
Net (loss) income		(790	)		(229	)		109

Other operating data:

Theatre level cash flow (1)		$192			$358			$641
Adjusted EBITDA (2)		$(373	)		$(83	)		$229

	Successor			Predecessor
	Six Months Ended December 31, 2011			Six Months Ended December 31, 2010

Revenue		$1,899			$1,114
Total costs and expenses		2,466			1,217
Loss before income taxes		(567	)		(105	)
Net loss		(587	)		(105	)

Other operating data:

Theatre level cash flow (1)		$368			$189
Adjusted EBITDA (2)		$(263	)		$(33	)

______________

(1)

Theatre Level Cash Flow (“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 financial measure should be read in conjunction with the financial statements included in this prospectus. For additional information on TLCF, see pages 41-42.

(2)

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 41-42.

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Summary Unaudited Proforma Combined Data

This is only a summary of our unaudited pro forma financial information and does not contain all of the financial information that may be important to you. The following summary of our unaudited proforma combined financial information data is to be read in conjunction with the detailed Unaudited Pro Forma Combined Financial Information, and notes thereto, beginning at page 23, in accordance with Article 11 of SEC Regulation S-X.

(dollars in thousands except per share data)	(1) Pro forma-19 screens 12 months ended June 30, 2011			(2) Pro forma-85 screens 12 months ended June 30, 2011			(2) Pro forma-85 screens 6 months ended December 31, 2011
Statement of operations data:
Revenues		$3,291			$22,020			$10,970

Film rent expense		1,345			8,468			4,160
Cost of concessions		156			1,018			520
Salaries and wages		411			2,327			1,178
Facility lease expense		399			2,298			1,214
Utilities and other		558			3,598			1,847
General and administrative		1,150			1,530			831
Depreciation and amortization		330			2,859			1,526
Total costs and expenses		4,349			22,098			11,276

Operating loss		(1,058	)		(78	)		(306	)

Net income (loss) attributable to Class A and Class B common shareholders		(975	)		5			(326	)

Weighted average shares of Class A and Class B common stock
Loss per share

Other operating data:
Theatre level cash flow (3)		422			4,311			2,051
Adjusted EBITDA (4)		$(393	)		$3,116			$1,262

(dollars in thousands)	Actual-19 screens As of December 31, 2011		Pro forma-85 screens As of December 31, 2011
Balance Sheet Data:
Cash and cash equivalents		$650		$3,150
Property and equipment, net		2,328		20,828
Total assets		4,841		27,341
Total liabilities		2,167		2,167
Total stockholders’ equity		$2,674		$25,174

Other Data:
Screens		19		85
Locations		3		9
Attendance (12 months ended December 31, 2011)		312,000		2,067,000

(1)

Represents the actual results of our three theatres from the dates of acquisition (the Rialto and the Cranford) on December 31, 2010 and (the Bloomfield 8) on February 17, 2011 through June 30, 2011, plus the pre-acquisition results of these theatres from July 1, 2010 to the respective dates of acquisition.

(2)

Represents the pro forma results of our three theatres (the Rialto, the Cranford and the Bloomfield 8) as described in note (1) above, plus the pro forma results of the Cinema Centers acquisition and the Lisbon Cinema acquisition for the 12 and 6 month periods indicated.

(3)

TLCF is a non-GAAP financial measure. For additional information on TLCF, see page 30 and pages 41-42.

(4)

Adjusted EBITDA is a non-GAAP financial measure. For additional information on Adjusted EBITDA, see page 30 and pages 41-42.

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RISK FACTORS

An investment in our Class A common stock involves significant risks. You should consider carefully all of the information in this prospectus, including the risks and uncertainties described below and the financial statements and related notes included in this prospectus, before making an investment in our Class A common stock. Any of the following risks could have a material adverse effect on our business, financial condition, results of operations, prospects or liquidity. In any such case, the market price of our Class A common stock could decline, and you may lose all or part of your investment.

Risks Related to Our Business

Our business strategy is to create an all-digital national footprint by selectively pursuing multi-screen theatre acquisition opportunities that meet our strategic and financial criteria, with upgrades to digital platforms as necessary. To successfully implement this strategy, we will need to raise substantial additional funds. Our ability to fund potential theatre acquisitions and capital expenditures for theatre digitalization, expansion or renovation will require a significant amount of cash, the availability of which depends on many factors beyond our control, including:

general economic and capital market conditions;

the availability of credit from banks or other lenders;

investor confidence in us; and

the continued performance of our theatres.

We cannot predict when, if ever, our operations will generate sufficient cash flows to fund our capital investment requirements. Until they do, we will be required to finance our cash needs through public or private equity offerings, bank loans or other debt financing, or otherwise. There can be no assurance that financing for future theatre acquisitions and capital expenditures for theatre digitalization, expansion or renovation will be available on terms favorable to us or at all, which could force us to delay, reduce or abandon our growth strategy, increase our financing costs, or both.

We may incur debt, if such financing is available to us, in order to expand our business. Additional funding from debt financings may make it more difficult for us to operate our business because we would need to make principal and interest payments on the indebtedness and may be obligated to abide by restrictive covenants contained in the debt financing agreements, which may, among other things, limit our ability to make business and operational decisions and pay dividends. Furthermore, raising capital through public or private sales of equity to finance acquisitions or expansion could cause earnings or ownership dilution to your shareholding interests in our company.

We cannot assure you that our business will generate sufficient cash flow from operations, that currently anticipated revenue growth will be realized or that future capital will be available for us to fund our capital expenditure needs.

We may not benefit from our business strategy of acquiring and operating multi-screen theatres.

Our business strategy is to acquire and operate multi-screen theatres. In any acquisition, we expect to benefit from cost savings through, for example, the reduction of overhead and theatre level costs, and from revenue enhancements resulting from the acquisition. There can be no assurance, however, that we will be able to realize any anticipated benefits or that our profitability will be improved by any one or more acquisitions. Any acquisition may involve operating risks, such as:

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the difficulty of assimilating the acquired operations and personnel and integrating them into our current business;

the potential disruption of our ongoing business;

the diversion of management’s attention and other resources;

the possible inability of management to maintain uniform standards, controls, procedures and policies;

the risks of entering markets in which we have little or no experience;

the potential impairment of relationships with employees;

the possibility that any liabilities we may incur or assume may prove to be more burdensome than anticipated; and

the possibility that any acquired theatres or theatre circuit operators do not perform as expected.

We have incurred net losses since inception, and we cannot assure you that we will be profitable in the future.

We incurred a net loss of $0.8 million for the Successor period from the inception date (July 29, 2010) to June 30, 2011. We incurred a net loss of $0.6 million for the six months ended December 31, 2011 (unaudited) and had an accumulated deficit of $1.4 million as of December 31, 2011 (unaudited). Following this offering, we expect to consummate the Cinema Centers and Lisbon Cinema acquisitions. For additional information regarding these acquisitions, see “Business — Acquisitions.” We cannot assure you, however, that, following our consummation of the Cinema Centers and Lisbon Cinema acquisitions, we will become profitable for fiscal year ending June 30, 2012 or in any other future period. Further, we cannot be certain that we will be able to execute our business strategy of acquiring and operating multi-screen theatres on a profitable basis. As a result, we cannot assure you that we will be able to attain or increase profitability on a quarterly or annual basis. If we are unable to effectively acquire theatres and manage the risks and difficulties facing our business as we encounter them, our business, financial condition and results of operations may suffer.

We have a limited operating history which provides limited reference for you to evaluate our ability to achieve our business objectives.

Since we have a limited operating history, we are subject to the risks and uncertainties associated with early stage companies and have historically operated at a loss. Accordingly, you will have a limited basis on which to evaluate our ability to achieve our business objectives. We were formed in July 2010 without any operating business. We have acquired a total of three theatres and have entered into acquisition agreements to acquire six more. We plan to continue carrying out our acquisition strategy of acquiring theatres. Our financial condition, results of operations and our future success will, to a significant extent, depend on our ability to continue to acquire theatres throughout the United States and to achieve economies of scale. We cannot assure you that more acquisitions can be consummated on terms favorable to us or at all, or that if we achieve those acquisitions we will be able to operate our expanded business profitably. If we fail to achieve our business objectives, then we may not be able to realize our expected revenue growth, maintain our existing revenue levels or operate at a profit. Even if we do realize our business objectives, our business may not be profitable in the future.

We expect to incur long-term lease and debt obligations, which may restrict our ability to fund current and future operations and that may restrict our ability to enter into certain transactions.

In order to effect our business plan, we expect to incur long-term debt service obligations and long-term lease obligations. We expect to assume outstanding or execute new operating leases for theatres in connection with any acquisition that we may consummate. In addition, we may finance future theatre acquisitions through debt financing, provided that such financing is available to us on acceptable terms. Any lease or debt obligations we incur will pose risk to you by:

making it more difficult for us to satisfy our obligations;

requiring us to dedicate a substantial portion of our cash flows to payments on our lease and debt obligations, thereby reducing the availability of our cash flows from operations to fund working capital, capital expenditures, acquisitions and other corporate requirements and to pay dividends;

impeding our ability to obtain additional financing in the future for working capital, capital expenditures, acquisitions and general corporate purposes;

subjecting us to the risk of increased sensitivity to interest rate increases on any variable rate debt we incur; and

making us more vulnerable to a downturn in our business and competitive pressures and limiting our flexibility to plan for, or react to, changes in our industry or the economy.

Our ability to make scheduled payments of principal and interest with respect to any indebtedness we incur will depend on our ability to generate positive cash flows and on our future financial results. Our ability to generate positive cash flows is subject to general economic, financial, competitive, regulatory and other factors that are beyond our control. We cannot assure you that we will generate cash flows at levels sufficient to enable us to pay any indebtedness we incur. If our cash flows and capital resources are insufficient to fund future lease and debt service obligations, we may be forced to reduce or delay capital expenditures, sell assets or operations, seek additional capital or restructure or refinance indebtedness. We may not be able to take any of these actions, and these actions may not be successful or permit us to meet any scheduled debt service obligations and these actions may be restricted under the terms of any future debt agreements.

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If we fail to make any required payment under the agreements governing our leases and indebtedness or fail to comply with the financial and operating covenants contained in them, we would be in default, and as a result, our debt holders would likely have the ability to require that we immediately repay our outstanding indebtedness and the lenders under any secured credit facility that we execute could terminate their commitments to lend us money and foreclose against the assets securing our borrowings. We could be forced into bankruptcy or liquidation, which could result in the loss of your investment. The acceleration of our indebtedness under one agreement may permit acceleration of indebtedness under other agreements that contain cross-default and cross-acceleration provisions. If our indebtedness is accelerated, we may not be able to repay any future indebtedness or borrow sufficient funds to refinance it. Even if we are able to obtain new financing, it may not be on commercially reasonable terms or on terms that are acceptable to us. If our debt holders require immediate payment, we may not have sufficient assets to satisfy our obligations under our indebtedness.

We may face intense competition in our business strategy of acquiring theatres.

We may have difficulty identifying suitable acquisition candidates. Even if we do identify appropriate candidates, we anticipate significant competition from other motion picture exhibitors and other buyers when trying to acquire these candidates, and we cannot assure you that we will be able to acquire identified candidates at reasonable prices or on favorable terms. Many of our competitors are well established and have significant experience in identifying and effecting acquisitions. Many of these competitors possess greater technical, human and other resources than we do and our financial resources will be relatively limited when contrasted with those of many of these competitors. This inherent competitive limitation gives others an advantage in pursuing the acquisition of certain target theatres. Because of this competition, we cannot assure you that we will be able to successfully compete for attractive theatre acquisitions. In addition, while we believe that there are numerous potential target theatres that we can acquire, our ability to compete in acquiring certain sizable target theatres will be limited by our available financial resources. As a result of competition, we may not succeed in acquiring suitable candidates or may have to pay more than we would prefer to make an acquisition. If we cannot identify or successfully acquire suitable acquisition candidates, we may not be able to successfully expand our operations and the market price of our securities could be adversely affected particularly since acquisitions are an important part of our strategy.

Resources could be wasted in researching acquisitions that are not consummated.

It is anticipated that the investigation of each specific target theatre and the negotiation, drafting, and execution of relevant agreements, disclosure documents, and other instruments will require substantial time and attention and substantial costs for accountants, attorneys and others. In addition, we may opt to make down payments or pay exclusivity or similar fees in connection with structuring and negotiating an acquisition. If a decision is made not to complete a specific acquisition, the costs incurred up to that point in connection with the abandoned transaction, potentially including down payments or exclusivity or similar fees, would not be recoverable. Furthermore, even if an agreement is reached relating to a specific target business, we may fail to consummate the transaction for any number of reasons, including those beyond our control. Any such event will result in a loss to us of the related costs incurred, which could adversely affect subsequent attempts to locate and acquire other theatres.

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We are subject to uncertainties related to digital cinema, including insufficient financing to obtain digital projectors and insufficient supply of digital projectors.

Some of our competitors began a roll-out of digital projection equipment for exhibiting feature films during 2006 and most exhibitors plan to continue domestic roll-out of digital cinema until it is completed. However, significant obstacles may exist that impact such a roll-out plan and our ability to convert the theatres we acquire to digital projection platforms including the availability of financing, the cost of digital projectors and the supply of projectors by manufacturers. We cannot assure you that we will be able to obtain sufficient additional financing to be able to purchase and/or lease the number of digital projectors we will require or that the manufacturers will be able to supply the volume of projectors needed for the worldwide roll-out that is now ongoing in our industry. As a result, our ability to deploy digital equipment in the theatres we acquire could be delayed. Accordingly, the availability of financing, the cost of digital projection systems and manufacturer limitations may delay our deployment of digital platforms.

We may not be able to obtain sufficient or compelling alternative content.

Our ability to present alternative content depends on the availability, diversity and appeal of alternative content and customer taste. This varies from geographic region to region. Poor performance of, or any disruption in the production or supply of alternative content could hurt our business and results of operations. In addition, the type of alternative content offered to us may not be accepted by the demographic base of movie-goers in our theatres.

The “virtual print fee” program is expected to expire on September 30, 2012, after which we will no longer be able to use such fees to finance our purchases of digital projection equipment.

Following the consummation of the Cinema Centers and Lisbon Cinema acquisitions, and with respect to any future acquisitions that we may consummate, we expect to finance our purchases of digital projection equipment through capital lease financing or secured loans provided by banks or vendors. We expect to repay our obligations under these financing arrangements using “virtual print fees” that we recover from motion picture distributors, and we may also secure such financing arrangements with the virtual print fees.

Virtual print fees are provided to motion picture exhibitors from movie distributors, to encourage and assist exhibitors in the conversion to digital projection platforms, by effectively lowering the film rent expense that exhibitors pay to the movie distributors. The virtual print fee program provides that all distributors pay virtual print fees on a quarterly basis to motion picture exhibitors based on films scheduled by the exhibitors on approved digital projection platforms until the earlier of ten years from date the digital systems in a particular theatre are installed or the date the exhibitor has recovered its out-of-pockets costs, including any financing charges, for the digital conversion. The virtual print fee program is expected to expire for new installations of digital projection systems made after September 30, 2012. We will continue receiving virtual print fees for approved digital projection systems installed prior to September 30, 2012.

Following expiration of the virtual print fee program, we will need to finance installations of digital projection platforms from other sources. The pending expiration of the virtual print fee program may provide theatre owners who are otherwise inclined to sell their theatres an incentive to sell their theatres at a higher price. We may seek to reduce our proposed purchase price or offer a lower purchase price with respect to any theatre that we seek to acquire which has not been previously converted to a digital projection system prior to the discontinuance of the virtual print fee program. We cannot assure you, however, that we will be able to secure the financing that we may require or that we will be able to obtain the proposed purchase price reductions.

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Disruption of our relationships with various vendors could substantially harm our business.

We rely on our relationships with several vendors in the operations of our business. These relationships include:

the film department of Clearview Cinema Group (“Clearview”), which handles our negotiations with film distributors;

Cinedigm Digital Cinema Corp. (“Cinedigm”), from which we license the Exhibit Management System (“EMS”) back office management system and which, through a subsidiary, acts as our agent to collect “virtual print fees” from motion picture distributors (for a discussion of “virtual print fees,” see “Business-Digital Cinema Implementation”);

National CineMedia, LLC (“NCM”) provides us with in-theatre advertising and alternative context;

Barco, Inc. (“Barco”), which provides us with digital equipment;

Continental Concession Supply, Inc. (“Continental Concession”), which provides us with most of our concessions; and

RealD™, Inc. (“RealD™”), which provides us with our 3D cinema systems.

Although our senior management has long-standing relationships with each of these vendors, we could experience deterioration or loss of any of our vendor relationships, which would significantly disrupt our operations until an alternative source is secured.

Deterioration in our relationships with any of the major film distributors could adversely affect our access to commercially successful films and could adversely affect our business and results of operations.

Our business depends to a significant degree on maintaining good relationships with the major film distributors that license films to our theatres. Clearview’s film department handles negotiations with motion picture distributors on our behalf. Deterioration in our relationships with any of the major film distributors could adversely affect our access to commercially successful films and adversely affect our business and results of operations. Since the distribution of motion pictures is in large part regulated by federal and state antitrust laws and has been the subject of numerous antitrust cases, we cannot ensure a supply of motion pictures by entering into long-term arrangements with major distributors. Rather, we must compete for licenses on a film-by-film and theatre-by-theatre basis and are required to negotiate licenses for each film and for each theatre individually.

We rely on software we license from Cinedigm to operate our accounting systems and a failure of this system could harm our business.

We depend on Cinedigm’s EMS back office management software system to operate the accounting functions of our business. A substantial system failure could temporarily restrict and limit our internal accounting functions. In addition, we rely on EMS to track theatre invoices and to generate operating reports to analyze film performance and theatre profitability. The EMS system is also an intricate part of our financial reporting process and provides us with information that, together with our other financial software program, allows us to prepare our periodic financial reports. Disruption in, changes to, or a system failure of the EMS system could result in the loss of important data, and increase our expenses.

We rely on “point-of-sale” software that we license from Ready Theatre Systems (“RTS”) to operate our back office management systems and a failure of this system could harm our business.

We depend on RTS’s point-of-sale software to operate our point-of-sale transactions including issuing tickets to patrons at our theatres and selling concessions. A substantial system failure could restrict and limit our ability to issue tickets timely to our patrons, sell concessions and could reduce the attractiveness of our services and cause our patrons to visit other theatres. In addition, we rely on RTS to transmit data to our EMS software to coordinate payroll, track theatre invoices, generate operating reports to analyze film performance and theatre profitability, and generate information to quickly detect theft. Disruption in, changes to, or a system failure of the RTS system could result in the loss of important data, and increase our expenses.

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We depend on our senior management.

Our success depends upon the retention of our senior management, including A. Dale Mayo, our chairman and chief executive officer, Brett Marks, our senior vice president of business development, Jeff Butkovsky, our chief technology officer, and Brian D. Pflug, our chief financial officer. In particular, we rely on the relationships in the motion picture exhibition industry that Mr. Mayo has fostered in his 24 year career in the industry. We cannot assure you that we would be able to find qualified replacements for the individuals who make up our senior management if their services were no longer available. The loss of services of one or more members of our senior management team could have a material adverse effect on our business, financial condition and results of operations. The loss of any member of senior management could adversely affect our ability to effectively pursue our business strategy.

Compensation may be paid to our senior management regardless of our profitability which may affect our operating results.

We have entered into employment agreements with each member of our senior management team. Mr. Mayo, our chairman and chief executive officer, is entitled to periodic salary increases as well as bonuses based on our consolidated gross revenues and regardless of whether we operate at a profit or loss. Each of our other executive officers is entitled to bonuses, as determined by our board of directors. Increases in compensation paid to our senior management will increase our expenses, effect our results of operations and may make it more difficult for us to achieve profitable operations. For information relating to our employment agreements with our senior management, see "Executive Compensation - Employment Agreement".

If we do not comply with the Americans with Disabilities Act of 1990, we could be subject to litigation.

Movie theatres must comply with Title III of the Americans with Disabilities Act of 1990 (the “ADA”) and analogous state and local laws. Compliance with the ADA requires among other things that public facilities “reasonably accommodate” individuals with disabilities and that new construction or alterations made to “commercial facilities” conform to accessibility guidelines unless “structurally impracticable” for new construction or technically infeasible for alterations. If we fail to comply with the ADA, remedies could include imposition of injunctive relief, fines, awards for damages to private litigants and additional capital expenditures to remedy non-compliance. Imposition of significant fines, damage awards or capital expenditures to cure non-compliance could adversely affect our business and operating results.

Risk Related to Our Industry

We depend on motion picture production and performance.

As a motion picture exhibitor, our ability to operate successfully depends upon the availability, diversity and appeal of motion pictures, our ability to license motion pictures and the performance of such motion pictures in our theatres. We license first-run motion pictures, the success of which has increasingly depended on the marketing efforts of the major motion picture studios. Poor performance of, or any disruption in the production of these motion pictures (including by reason of a strike or lack of adequate financing), or a reduction in the marketing efforts of the major motion picture studios, could hurt our business and results of operations. In addition, a change in the type and breadth of movies offered by motion picture studios may not be accepted by the demographic base of moviegoers.

The motion picture exhibition industry has experienced a declining trend in attendance during recent years.

The U.S. motion picture exhibition industry has been subject to periodic short-term increases and decreases in attendance and, box office revenues. In recent years, the U.S. motion exhibition industry has experienced a declining trend in attendance, and according to boxoffice.com, attendance during 2011 was 1.28 billion. According to the MPAA, attendance during 2010 was 1.34 billion. For additional information regarding attendance levels and industry trends, see “Business — Industry Overview and Trends.” We expect the cyclical nature of the U.S. motion picture exhibition industry to continue for the foreseeable future, and if the declining trend in attendance continues, our results of operations could be adversely affected. To offset any decrease in attendance, we plan to offer products unique to the motion picture exhibition industry, such as 3D films and specially selected alternative content. We cannot assure you, however, that our offering of such content will offset any decrease in attendance that the industry may experience.

Our business is subject to significant competitive pressures.

We face varying degrees of competition from other motion picture exhibitors with respect to licensing films and attracting patrons. In those areas where real estate is readily available, there are few barriers preventing competing companies from opening theatres near one of our existing or future theatres. Many of our competitors have substantially more resources than we do and may therefore have a competitive advantage over us.

An increase in the use of alternative film delivery methods, which may be enhanced if traditional release windows are shortened, may drive down movie theatre attendance and reduce ticket prices.

We compete with other movie delivery vehicles, including cable television, downloads and streaming video via the Internet, in-home video and DVD, satellite and pay-per-view services. When motion picture distributors license their products to the domestic exhibition industry, they refrain from licensing their motion pictures to these other delivery vehicles during the theatrical release window. The theatrical release window has shortened over the last decade. In addition, proposals have been made from time to time, particularly in the last several years, which would further shorten the window substantially and allow for premium video on demand and other alternatives that would be available during theatrical releases. These initiatives have not been instituted due, in part, to the adverse reaction of motion picture exhibitors. We cannot assure you that these initiatives will not be instituted in the future. We believe that a material contraction of the current theatrical release window could significantly dilute the consumer appeal of in-theatre motion picture offerings, which could have a material adverse effect on our business and results of operations.

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Our revenues vary significantly depending upon the timing of the motion picture releases by distributors.

Our business is seasonal, with a disproportionate amount of our revenues generated during the summer months and year-end holiday season. While motion picture distributors have begun to release major motion pictures more evenly throughout the year, the most marketable motion pictures are usually released during the summer months and the year-end holiday season, and we expect to generate more revenue and cash flows during those periods than in other periods during the year. As a result, the timing of motion picture releases affects our results of operations, which may vary significantly from quarter to quarter and year to year. If we do not adequately manage our theatre costs of operations, it could significantly affect our cash flow and potential for future growth. Due to the dependency on the success of films released from one period to the next, results of operations for one period may not be indicative of the results for the following period or the same period in the following year.

There can be no assurance of a supply of motion pictures.

The distribution of motion pictures is in large part regulated by federal and state antitrust laws and has been the subject of numerous antitrust cases. Consent decrees resulting from those cases effectively require major motion picture distributors to offer and license films to motion picture exhibitors, including us, on a film-by-film and theatre-by-theatre basis. Consequently, we cannot assure ourselves of a supply of motion pictures by entering into long-term arrangements with major distributors, but must compete for our licenses on a film-by-film and theatre-by-theatre basis.

Risks Related to Our Class A Common Stock and this Offering

Our Class A common stock has no prior trading market. We cannot assure you that our stock price will not decline or not be subject to significant volatility after this offering.

Before this offering, there has not been a public market for our Class A common stock, and an active public market for our Class A common stock may not develop or be sustained after this offering. The market price of our Class A common stock could be subject to significant fluctuations after this offering. The price of our stock may change in response to variations in our operating results and also may change in response to other factors, including factors specific to companies in our industry many of which are beyond our control. After the offering, our shares may be less liquid than the shares of other newly public companies and there may be imbalances between supply and demand for our shares. As a result, our share price may experience significant volatility and may not necessarily reflect the value of our expected performance. In particular, we cannot assure you that you will be able to resell your shares of our Class A common stock at or above the initial public offering price. The initial public offering price will be determined by negotiations between the underwriters and us.

The interests of Mr. Mayo, our controlling stockholder, may conflict with your interests, and the concentration of voting power with Mr. Mayo will limit your ability to influence corporate matters.

Our Class A common stock has one vote per share on all matters to be voted on by stockholders, while our Class B common stock has ten votes per share. Mr. Mayo owns all of our outstanding Class B common stock. As a result, as of March 6, 2012, Mr. Mayo controlled approximately 94.1% of the voting power of all of our outstanding capital stock with voting rights (calculated prior to conversion of our Series A preferred stock to shares of Class A common stock upon consummation of this offering). Upon completion of this offering, we anticipate that Mr. Mayo will control approximately % of the voting power of all of our outstanding capital stock with voting rights. Therefore, Mr. Mayo will have significant influence for the foreseeable future over management and affairs and over all matters requiring stockholder approval, including the election of directors and significant corporate transactions, such as mergers or other business combinations, the acquisition or disposition of assets, the incurrence of indebtedness, the issuance of any additional shares of common stock or other equity securities and the payment of dividends on our common stock. Mr. Mayo will also have the power to prevent or cause a change in control, and could take other actions that might be desirable to him but not to other stockholders. Because of this dual class structure, Mr. Mayo will continue to be able to control all matters submitted to our stockholders for approval even if he owns less than 50% of the outstanding shares of our capital stock. This concentrated control will limit your ability to influence corporate matters and, as a result, we may take actions that our stockholders do not view as beneficial. As a result, the market price of our Class A common stock could be adversely affected. We intend to amend our certificate of incorporation to provide that on transfer for any reason, the Class B common stock will automatically convert to Class A common stock on a one-for-one basis.

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Our stockholders do not have the same protections generally available to stockholders of other NASDAQ-listed companies because we are currently a “controlled company” within the meaning of the NASDAQ Marketplace Rules.

Upon completion of this offering, we anticipate that Mr. Mayo will control approximately % of the voting power of all of our outstanding capital stock with voting rights. Because of Mr. Mayo’s ownership interest and control of our voting power, we will be considered a “controlled company” within the meaning of NASDAQ Marketplace Rules. As a controlled company, within the meaning of NASDAQ Marketplace Rules, we are not subject to the corporate governance requirements of the Rule 5600 series of the NASDAQ Marketplace Rules that would otherwise require us to have:

a majority of independent directors on our board of directors;

compensation of our executive officers determined, or recommended to the board of directors for determination, either by a majority of the independent directors or a compensation committee comprised solely of independent directors; or

director nominees selected, or recommended for the board of directors’ selection, either by a majority of the independent directors or a nominating committee comprised solely of independent directors.

Accordingly, our stockholders will not be afforded the same protections generally as stockholders of other NASDAQ-listed companies for so long as Mr. Mayo controls more than 50% of our voting power and we rely upon such exemptions. See “—Risks Related to Our Class A common stock and this Offering — The interests of Mr. Mayo, our controlling stockholder, may conflict with your interests, and the concentration of voting power with Mr. Mayo will limit your ability to influence corporate matters,” for more information on the risks we face in connection with Mr. Mayo’s ownership interest and control of our voting power.

Potential future sales of our Class A common stock could cause the market price for our Class A common stock to decline.

We cannot predict the effect, if any, that market sales of shares of our Class A common stock or the availability of shares of our Class A common stock for sale will have on the market price of our Class A common stock prevailing from time to time. Sales of substantial amounts of shares of our Class A common stock in the public market, or the perception that those sales will occur, could cause the market price of our Class A common stock to decline.

Based on the total number of shares of our capital stock outstanding as of December 31, 2011, upon completion of this offering, we will have ___ shares of Class A common stock and 900,000 shares of Class B common stock outstanding. All of the outstanding shares of Class B common stock are held by Mr. Mayo, who may convert his shares of Class B common stock into shares of Class A common stock on a one-for-one basis.

All of the shares of Class A common stock sold in this offering will be freely tradable without restrictions or further registration under the Securities Act of 1933, as amended (the “Securities Act”), except for any shares held by our affiliates as defined in Rule 144 under the Securities Act. Substantially all of the remaining shares of Class A common stock and 900,000 shares of Class B common stock outstanding after this offering, based on shares outstanding as of December 31, 2011, will be restricted as a result of securities laws, lock-up agreements or other contractual restrictions that restrict transfers for at least 180 days after the date of this prospectus (or such earlier date or dates as agreed between us and Dominick & Dominick LLC), subject to certain extensions. Dominick & Dominick LLC may, in its sole discretion, release all or some portion of the shares subject to lock-up agreements prior to expiration of the lock-up period.

Our issuance of preferred stock could adversely affect the market value of our common stock, dilute the voting power of common stockholders and delay or prevent a change of control.

Our board of directors has the authority to cause us to issue, without any further vote or action by the stockholders, up to 8,027,500 shares of preferred stock, par value $0.01 per share, in one or more series, to designate the number of shares constituting any series, and to fix the rights, preferences, privileges and restrictions thereof, including dividend rights, voting rights, rights and terms of redemption, redemption price or prices and liquidation preferences of such series.

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The issuance of shares of preferred stock with dividend or conversion rights, liquidation preferences or other economic terms favorable to the holders of preferred stock could adversely affect the market price for our common stock by making an investment in the common stock less attractive. For example, investors in the common stock may not wish to purchase common stock at a price above the conversion price of a series of convertible preferred stock because the holders of the preferred stock would effectively be entitled to purchase common stock at the lower conversion price causing economic dilution to the holders of common stock.

Further, the issuance of shares of preferred stock with voting rights may adversely affect the voting power of the holders of our other classes of voting stock either by diluting the voting power of our other classes of voting stock if they vote together as a single class, or by giving the holders of any such preferred stock the right to block an action on which they have a separate class vote even if the action were approved by the holders of our other classes of voting stock. The issuance of shares of preferred stock may also have the effect of delaying, deferring or preventing a change in control of our company without further action by the stockholders, even where stockholders are offered a premium for their shares.

We do not intend to pay dividends on our Class A or Class B common stock for the foreseeable future.

We intend to retain all of our earnings for the foreseeable future to finance our operations and acquisitions of theatres and digital upgrades associated with any acquisitions. As a result, we do not anticipate paying cash dividends on our Class A common stock or Class B common stock, and consequently, you can expect to receive a return on your investment in our Class A common stock only if the market price of the stock increases.

Because our existing investors paid substantially less than the initial public offering price when they purchased their shares, new investors will incur immediate and substantial dilution in their investment.

Investors purchasing shares of Class A common stock in this offering will incur immediate and substantial dilution in net tangible book value per share because the price that new investors pay will be substantially greater than the net tangible book value per share of the shares acquired. This dilution is due in large part to the fact that our existing investors paid substantially less than the initial public offering price when they purchased their shares of Class A common stock. The initial public offering price for the shares sold in this offering was determined by negotiations between us and the underwriters and may not be indicative of prices that will prevail in the trading market. See “Underwriting” for a discussion of the determination of the initial public offering price.

Provisions in our charter documents and under Delaware law could discourage a takeover that stockholders may consider favorable.

Provisions in our certificate of incorporation and by-laws may have the effect of delaying or preventing a change of control or changes in our management. These provisions include the following:

Our certificate of incorporation provides for a dual class common stock structure. As a result of this structure, Mr. Mayo will have the ability to control all matters requiring stockholder approval, including the election of directors, amendments to our charter documents and significant corporate transactions, such as a merger or other sale of our company or its assets. This concentrated control could discourage others from initiating any potential merger, takeover or other change of control transaction that other stockholders may view as beneficial. We intend to amend our certificate of incorporation to provide that on transfer for any reason, the Class B common stock will automatically convert to Class A common stock on a one-for-one basis.

Our board of directors has the right to determine the authorized number of directors and to elect directors to fill a vacancy created by the expansion of the board of directors or the resignation, death or removal of a director, which prevents stockholders from being able to control the size of or fill vacancies on our board of directors.

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Our board of directors may issue, without stockholder approval, shares of undesignated preferred stock. The ability to authorize undesignated preferred stock makes it possible for our board of directors to issue preferred stock with voting or other rights or preferences that could impede the success of any attempt to acquire us.

In addition, we are governed by the provisions of Section 203 of the Delaware General Corporation Law, which generally prohibits a Delaware corporation from engaging in a broad range of business combinations with any “interested” stockholder for a period of three years following the date on which the stockholder becomes an “interested” stockholder. For a description of our capital stock, see “Description of Capital Stock.”

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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

We make ‘‘forward-looking statements’’ in the “Prospectus Summary,” “Risk factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Industry,” “Regulation” and “Business” sections and elsewhere throughout this prospectus. Whenever you read a statement that is not simply a statement of historical fact (such as when we describe what we “believe,” “expect,” “anticipate,” “project,” “predict”’ or “forecast” will occur, and other similar statements), you must remember that our expectations may not be correct, even though we believe that they are reasonable. These forward-looking statements relate to:

future revenues, expenses and profitability;

our ability to acquire and integrate theatres in our business;

attendance at movies generally or in any of the markets in which we operate;

the number and diversity of popular movies released and our ability to successfully license and exhibit popular films;

national growth in our industry;

competition in our markets; and

competition with other forms of entertainment.

We do not guarantee that the transactions and events described in this prospectus will happen as described or that they will happen at all. You should read this prospectus completely and with the understanding that actual future results may be materially different from what we expect. The forward-looking statements made in this prospectus relate only to events as of the date on which the statements are made. We undertake no obligation, beyond that required by law, to update any forward-looking statement to reflect events or circumstances after the date on which the statement is made, even though our situation will change in the future.

Whether actual results will conform to our expectations and predictions is subject to a number of risks and uncertainties, many of which are beyond our control, and reflect future business decisions that are subject to change. Some of the assumptions, future results and levels of performance expressed or implied in the forward-looking statements we make inevitably will not materialize, and unanticipated events may occur which will affect our results. The ‘‘Risk Factors’’ section of this prospectus describes the principal contingencies and uncertainties to which we believe we are subject.

This prospectus contains data related to the motion picture exhibition industry. This market data includes projections that are based on a number of assumptions. The motion picture exhibition industry may not grow at the rates projected by the market data, or at all. The failure of the markets to grow at the projected rates may materially and adversely affect our business and the market price of our Class A common stock. In addition, the rapidly changing nature of our industry subjects any projections or estimates relating to the growth prospects or future condition of our market to significant uncertainties. If any one or more of the assumptions underlying the market data proves to be incorrect, actual results may differ from the projections based on these assumptions. You should not place undue reliance on these forward-looking statements.

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USE OF PROCEEDS

We estimate that we will receive net proceeds from this offering of approximately $ million, after deducting underwriting discounts and commissions and other estimated offering expenses payable by us related to this offering. For the purposes of estimating net proceeds, we are assuming an initial public offering price of $ per share, the midpoint of the estimated range of the initial public offering price. A $1.00 increase (decrease) in the assumed public offering price of $ per share would increase (decrease) the net proceeds to us from this offering by $ million. We intend to use approximately $14.0 million of the net proceeds from this offering to consummate the Cinema Centers acquisition, approximately $6.0 million to consummate the Lisbon Cinema acquisition and $1.1 million of the net proceeds to repay an outstanding obligation owed by us to Barco for purchases of digital cinema projector equipment, which obligation is not interest bearing and has no specific maturity date. We intend to use the balance of the net proceeds from this offering for general corporate purposes, including our working capital needs. If we fail to consummate the Cinema Centers acquisition and/or the Lisbon Cinema acquisition, we plan to use the portion of the net proceeds from this offering not used for the acquisition(s) we do not consummate for future acquisitions and general corporate purposes, including working capital needs.

The foregoing represents our intentions as to the use and allocation of the net proceeds of this offering based upon our present plans, contractual obligations and business conditions. The amount and timing of any expenditure will vary depending on the amount of cash generated by our operations and the rate of growth, if any, of our business. Accordingly, our management will have significant discretion in the allocation of the net proceeds we will receive from this offering. Depending on future events and other changes in the business climate, we may determine at a later time to use the net proceeds for different purposes. Pending their use, we intend to invest the proceeds in a variety of capital preservation instruments, including short-term, investment-grade, and interest-bearing instruments.

DILUTION

If you invest in our Class A common stock, your investment will be diluted immediately to the extent of the difference between the public offering price per share of our Class A common stock and the pro forma net tangible book value per share of our Class A and Class B common stock after this offering. The following discussion and tables treat our Class A and Class B common stock as a single class and gives effect to the one-for-two reverse stock split of our Class A and Class B common stock which was approved by our board of directors in November 2011.

Dilution represents the difference between the amount per share of Class A common stock paid by investors in this offering and the pro forma net tangible book value per share of our Class A and Class B common stock immediately after this offering. Net tangible book value per share as of December 31, 2011 represented the amount of our total tangible assets less the amount of our total liabilities, divided by the number of shares of common stock outstanding at December 31, 2011.

After giving effect to our sale of the shares of Class A common stock offered by us in this offering at a price of $ per share, the midpoint of the range set forth on the cover page of this prospectus, and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us and the application of the net proceeds from this offering to us as described under the “Use of Proceeds,” our pro forma as adjusted net tangible book value (deficit) as of December 31, 2011 would have been $ million, or $ per share. This represents an immediate increase in net tangible book value to our existing stockholders of $ per share and an immediate dilution to new investors in this offering of $ per share. The following table illustrates this per share dilution in net tangible book value to new investors.

Assumed initial public offering price per share		$
Pro forma as adjusted net tangible book value (deficit) per share as of December 31, 2011	$
Increase per share attributable to new investors

Pro forma further adjusted net tangible book value per share after this offering


Dilution per share to new investors		$

A $1.00 increase (or decrease) in the assumed initial public offering price of $ per share, the mid-point of the price range set forth on the cover page of this prospectus, would increase (or decrease) net tangible book value by $ million, or $ per share, and would increase (or decrease) the dilution per share to new investors by $ , based on the assumptions set forth above.

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If the underwriters exercise in full their option to purchase additional shares, the adjusted net tangible book value per share after the offering would be $ per share, the increase in net tangible book value per share to existing stockholders would be $ per share and the dilution to new investors would be $ per share.

The following table summarizes as of December 31, 2011, on an as adjusted basis, the number of shares of common stock purchased, the total consideration paid and the average price per share paid by the existing stockholders and by new investors, based upon an assumed initial public offering price of $ per share (the mid-point of the initial public offering price range) and before deducting estimated underwriting discounts and commissions and offering expenses:

Shares Purchased

Total Consideration

Number

Percent

Amount

Percent

Average Price Per Share

Existing stockholders

New investors

Total

100

DIVIDEND POLICY

We currently intend to retain all available funds and any future earnings to fund the development and growth of our business and to repay indebtedness. Therefore, we do not anticipate paying any cash dividends in the foreseeable future. Any future determination to pay dividends will be at the discretion of our board of directors, and will depend upon our results of operations, financial condition, capital requirements and other factors including contractual obligations that our board of directors deems relevant.

CAPITALIZATION

The following table sets forth our capitalization as of December 31, 2011:

on an actual basis; and

on an as adjusted basis for conversion of 1,972,500 shares of Series A preferred stock to 986,250 shares of Class A common stock, the issuance and sale of shares of our Class A common stock in this offering, assuming an initial public offering price of $ per share, the midpoint of the estimated range of the initial public offering price, after deducting underwriting discounts and commissions and estimated offering expenses payable by us and assuming no exercise of the underwriters' over-allotment option and no other change to the number of shares of our Class A common stock sold by us as set forth on the cover page of this prospectus.

You should read this table together with our financial statements and the related notes included elsewhere in this prospectus and the information under ‘‘Management’s Discussion and Analysis of Financial Condition and Results of Operations.’’

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	As of December 31, 2011
	(unaudited)
(in thousands)	Actual			As Adjusted

Cash and cash equivalents		$650			$

Stockholders' equity:

Series A preferred stock, $.01 par value, 10,000,000 shares authorized and 1,972,500 shares issued and outstanding		20

Class A common stock, $.01 par value, 20,000,000 shares authorized and 569,166 shares issued and outstanding		6

Class B common stock, $.01 par value, 5,000,000 shares authorized and 900,000 shares issued and outstanding		9

Additional paid-in capital		4,001
Accumulated deficit		(1,362	)

Total stockholders' equity		2,674

Total capitalization		$2,674			$

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UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION

The following unaudited pro forma combined balance sheet presents our financial position as of December 31, 2011, assuming that the acquisition of certain assets and assumption of operating leases of Cinema Centers and Lisbon Cinema had been completed as of December 31, 2011.

The unaudited pro forma combined statements of operations includes the results of operations of the Successor from inception date (July 29, 2010) to June 30, 2011, the twelve month results of operations (July 1, 2010 to June 30, 2011) of the Predecessor (the Rialto and Cranford) (acquired as of December 31, 2010) and Bloomfield 8 (acquired as of February 17, 2011), and the twelve month results of operations (August 1, 2010 to July 31, 2011) of Cinema Centers and Lisbon Cinema as if the acquisitions had been consummated on July 1, 2010. Also presented is the interim unaudited pro forma combined statement of operations, which includes our results of operations for six months ended December 31, 2011 and results of operations for Cinema Centers for the six months ended January 31, 2012 and Lisbon Cinema for the six months ended December 31, 2011, as if the acquisitions had been consummated on July 1, 2011.

These unaudited pro forma results are not necessarily indicative of the actual results of operations that would have been achieved, nor are they necessarily indicative of future results of operations.

The historical financial information has been adjusted to give effect to pro forma events that are directly attributable to the acquisition and factually supportable. Our unaudited pro forma combined financial information and explanatory notes present how our combined financial statements may have appeared had the businesses actually been combined as of the dates noted above. The unaudited pro forma combined financial information shows the impact on the combined balance sheets and the combined income statements under acquisition accounting with Digiplex treated as the acquirer. Under this method of accounting, the assets purchased and liabilities assumed of the acquirees are recorded by Digiplex at their estimated fair values as of the acquisition date.

It is anticipated that the acquisition of certain assets and assumption of operating leases of Cinema Centers and Lisbon Cinema will provide financial benefits such as, among other factors, possible expense efficiencies; however, we cannot assure you that such benefits will actually be achieved. These benefits have not been reflected in the unaudited pro forma financial information. As required, the unaudited pro forma combined financial information includes adjustments for events that are directly attributable to the transaction, expected to have a continuing impact and are factually supportable; as such, any planned adjustments affecting the balance sheet, statement of operations, or shares of Class A or Class B common stock outstanding subsequent to the assumed acquisition completion dates are not included. The unaudited pro forma combined financial information is presented for illustrative purposes only and does not indicate the financial results of the combined businesses had they actually been combined on the dates noted above. However, management believes that the assumptions used provide a reasonable basis for presenting the combined pro forma information, that the pro forma adjustments give appropriate effect to the assumptions and are properly applied in the unaudited pro forma combined financial information.

As explained in more detail in the accompanying notes to the unaudited pro forma combined financial information, the allocation of the purchase price for the Cinema Centers and Lisbon Cinema acquisitions that is reflected in our pro forma combined financial information is subject to adjustment. The actual purchase price allocation will be recorded based upon final estimated fair values of the assets acquired and operating leases assumed, which are likely to vary from the purchase price allocations adopted in the pro forma combined financial statements. In addition, there may be further refinements of the purchase price allocation for the Cinema Centers and Lisbon Cinema acquisitions as additional information becomes available. The unaudited pro forma combined financial information is derived from and should be read in conjunction with the financial statements and related notes included in this prospectus.

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Unaudited Pro Forma Combined Balance Sheets

December 31, 2011

	Successor
(Dollars in thousands)	Digiplex December 31, 2011			Lisbon Theaters, Inc. December 31, 2011			Cinema Supply January 31, 2012		Pro Forma Adjustment			Pro Forma Footnotes		Pro Forma Combined

Assets:
Cash and cash equivalents	$	650		$	232		$	78	$	22,500			(1)	$	3,150
										(20,000)			(2)
										(310)			(2)

Accounts receivable		149			60			10		(70)			(2)		149
Inventories		19			6			50		-					75
Deferred tax assets		-			-			319		(319)			(2)		-
Prepaid expenses and other		293			-			93		(93)			(2)		293
Total current assets		1,111			298			550		1,708					3,667
Property and equipment-net		2,328			5,413			13,200		(113)			(2)		20,828
Intangible assets-net		503			-			-		975			(2)		1,478
Goodwill		896			-			-		469			(2)		1,365
Other assets		3			28			25		(53)			(2)		3
Total assets		4,841			5,739			13,775		2,986					27,341
Liabilities:
Accounts payable and accrued expenses		640			1,082			2,327		(3,409)			(2)		640
Payable to vendor for digital systems		1,066			-			-		-					1,066
Earnout from theatre acquisition		124			-			-		-					124
Dividends payable		265			-			-		-					265
Notes payable, current portion		-			427			1,402		(1,829)			(2)		-
Capital lease obligations, current portion		-			121			58		(179)			(2)		-

Total current liabilities		2,095			1,630			3,787		(5,417)					2,095
Notes payable, net of current portion		-			3,819			5,459		(9,278)			(2)		-
Deferred taxes		32			-			903		(903)			(2)		32
Deferred rent expense		40			303			953		(1,256)			(2)		40
Capital lease obligations, net of current portion		-			334			125		(459)			(2)		-
Total liabilities		2,167			6,086			11,227		(17,313)					2,167
Stockholders’ equity:
Series A preferred stock		20			-			-		(20	)		(5)		-
Class A common stock		6			-			-		10			(5)
										36			(1)		52

Class B common stock		9			-			-		-					9
Common stock		-			5			4		(9)			(2)		-
Additional paid-in capital		4,001			-			108		24,964			(1)
										(2,500	)		(1)		26,475
										(108)			(2)
										10			(5)

Retained (deficit) earnings		(1,362	)		(352)			2,436		(2,084)			(2)		(1,362)
Total stockholders’ equity		2,674			(347	)		2,548		40,299					25,174
Total liabilities and stockholders’ equity	$	4,841		$	5,739		$	13,775	$	2,986				$	27,341

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Unaudited Pro Forma Combined Statements of Operations

Period from Inception (July 29, 2010 to June 30, 2011)

	Successor			Predecessor
(Dollars in thousands except per share data)	Digiplex from inception date (July 29, 2010) to June 30, 2011			Rialto/ Cranford (from July 1, 2010 to December 31, 2010)			Bloomfield (from July 1, 2010 to February 17, 2011)		Lisbon Theaters, Inc.(from July 1, 2010 to June 30, 2011)		Cinema Supply (from August 1, 2010 to July 31, 2011)		Adjustment			Footnotes	Pro forma Combined

Revenues	$	1,572		$	1,150		$	569	$	4,355	$	14,602	(228)			(7)	$	22,020
Costs and expenses:
Film rent expense		598			506			241		1,418		5,753	(48)			(7)		8,468
Cost of concessions		66			51			39		235		633	(6)			(7)		1,018
Salaries and wages		235			137			39		464		1,613	(161)			(7)		2,327
Facility lease expense		223			119			57		573		1,420	(94)			(7)		2,298
Utilities and other		258			216			84		625		2,415	-					3,598
General and administrative		900			170			80		168		779		380		(8)		1,530
														(947)		(7)

Depreciation and amortization		165			70			2		534		1,479		609		(3)		2,859
Total costs and expenses		2,445			1,269			542		4,017		14,092		(267	)			22,098
Operating income (loss)		(873	)		(119	)		27		338		510		39				(78	)
Other income (expense):
Bargain purchase gain from theatre acquisition		98			-			-		-		-		-				98
Interest expense		-			11			-		369		501		(11)		(4)		-
														(870)		(7)

Other income (expense)		(1	)		-			-		-		16		(16)		(7)		(1	)
Income (loss) before income taxes		(776	)		(130	)		27		(31)		25		904				19
Income tax expense (benefit)		14			-			-		-		12		(12	)	(6)		14
Net income (loss)		(790	)		(130	)		27		(31)		13		916				5
Preferred stock dividends		(112	)		-			-		-		-		112		(5)		-
Net income (loss) attributable to common stockholders	$	(902	)	$	(130	)	$	27	$	(31)	$	13	$	1,028			$	5
Net income (loss) per Class A and Class B common share – basic and diluted	$	(0.84	)														$	-
Weighted average number of Class A and Class B common shares outstanding: basic and diluted		1,073,207												3,600,000 1,282,209		(1) (5)		5,955,416

Other Operating Data:

Theatre level cash flow (9)	$	192			121			109		1,040		2,768		81			$	4,311
Adjusted EBITDA (10)	$	(373	)		(49	)		29		872		1,989		648			$	3,116

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Interim Unaudited Pro Forma Combined Statements of Operations

Six Months Ended December 31, 2011

	Successor
(Dollars in thousands except per share data)	Digiplex (for the six months ended December 31, 2011)			Lisbon Cinema (for the six months ended December 31, 2011)		Cinema Supply (for the six months ended January 31, 2012)			Pro Forma Adjustment			Pro Forma Footnotes		Pro Forma Combined
Revenues	$	1,899		$	2,395	$	6,742		$	(66	)		(7)	$	10,970
Costs and Expenses:
Film rent expense		598			960		2,605			(3	)		(7)		4,160
Cost of concessions		68			180		294			(22	)		(7)		520
Salaries and wages		288			208		685			(3	)		(7)		1,178
Facility lease expense		248			222		746			(2	)		(7)		1,214
Utilities and other		329			300		1,231			(13	)		(7)		1,847
General and administrative		673			71		474			158			(8)		831
										(545	)		(7)

Depreciation and amortization		262			281		652			331			(3)		1,526
Total costs and expenses		2,466			2,222		6,687			(99	)				11,276
Operating income (loss)		(567	)		173		55			33					(306	)
Other Income (expense)
Interest expense		-			171		227			(398	)		(7)		-
Other expense		-			-		69			(69	)		(7)		-
Income (loss) before income taxes		(567	)		2		(241	)		500					(306	)
Income tax expense (benefit)		20			-		(172	)		(172	)		(6)		20
Net income (loss)		(587	)		2		(69	)		328					(326	)
Preferred stock dividends		(153	)		-		-			153			(5)		-
Net income (loss) attributable to common stockholders	$	(740	)	$	2	$	(69	)	$	481				$	(326	)
Net loss per Class A and Class B Common Share – Basic and Diluted	$	(0.50	)		-		-			-				$	(0.05	)
Weighted average number of Class A and Class B common shares outstanding: Basic and Diluted		1,469,166			-		-			3,600,000			(1)		6,055,416
		1,469,166			-		-			986,250			(5)		6,055,416

Other operating data:

Theatre level cash flow (9)	$	368		$	525	$	1,181		$	(23	)			$	2,051
Adjusted EBITDA (10)	$	(263	)	$	454	$	707		$	364				$	1,262

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Notes to Pro Forma Combined Financial Statements

(1)	To record $25 million of gross proceeds from this offering, less estimated underwriting commissions and costs of the offering totaling $2.5 million, and the issuance of 3,600,000 shares of Class A common stock.

(2)

To record the Lisbon Cinema and Cinema Centers assets acquired for a purchase price of $6 million and $14 million, respectively ($20 million total), based on estimated fair value. The operating leases of Cinema Centers and Lisbon Cinema for their theatre facilities are expected to be assumed at market rates in the acquisitions. No other liabilities, debt or capital lease obligations would be assumed under the asset purchase agreements nor is it anticipated that any significant liabilities would be created upon the acquisitions. Estimated fair value allocation of the purchase price (which is subject to change), and adjustment to reflect the removal of assets and liabilities not being acquired, is as follows:

	Lisbon Cinema				Cinema Centers				Total
(Dollars in thousands): Assets:	(1) Historical Basis	(2) Adjustment for Components not being acquired	(3) Purchase Accounting Adjustment	(1)-(2)-(3) (4) Estimated Fair Value	(5) Historical Basis	(6) Adjustment for Components not being acquired	(7) Purchase Accounting Adjustment	(5)-(6)-(7) (8) Estimated Fair Value	(2)+(3) + (7)+(8) Adjustments (to page 24)
Cash and cash equivalents	$232	$(232)	-	$ -	$78	$(78)	$-	-	$(310)
Accounts receivable	60	(60)	-	-	10	(10)	-	-	(70)
Inventories	6	-	-	6	50	-	-	50	-
Deferred tax assets	-	-	-	-	319	(319)	-	-	(319)
Prepaid expenses and other	-	-	-	-	93	(93)	-	-	(93)
Total current assets	298			6	550			50
Property and equipment-net	5,413	-	87	5,500	13,200	-	(200)	13,000	(113)
Intangible assets-net (a)	-	-	275	275	-	-	700	700	975
Goodwill	-	-	219	219	-	-	250	250	469
Other assets	28	(28)	-	-	25	(25)	-	-	(53)
Total assets	5,739			6,000	13,775			14,000
Liabilities:
Accounts payable and accrued expenses	1,082	(1,082)	-	-	2,327	(2,327)	-	-	(3,409)
Notes payable, current portion	427	(427)	-	-	1,402	(1,402)	-	-	(1,829)
Capital lease obligations, current portion	121	(121)	-	-	58	(58)	-	-	(179)
Total current liabilities	1,630	(1,630)		-	3,787	(3,787)
Notes payable, net of current portion	3,819	(3,819)	-	-	5,459	(5,459)	-	-	(9,278)
Deferred taxes	-	-	-	-	903	(903)	-	-	(903)
Deferred rent expense	303	(303)	-	-	953	(953)	-	-	(1,256)
Capital lease obligations, net of current portion	334	(334)	-	-	125	(125)	-	-	(459)
Total liabilities	6,086			-	11,227				(17,313)
Stockholders’ equity:
Common Stock	5	(5)	-	-	4	(4)	-	-	(9)
Additional paid-in capital	-	-	-	-	108	(108)	-	-	(108)
Retained (deficit) earnings	(352)	352	-	-	2,436	(2,436)	-	-	(2,084)
Total stockholders’ equity	(347)			-	2,548			-
Total liabilities and stockholder’s equity	$5,739			$ -	$13,775			$-

(a) Intangible assets consist of trade name and covenants not to compete.

(3) To record estimated depreciation and amortization on the acquired assets, as follows (dollars in thousands):

Inception date (July 29, 2010) to June 30, 2011	Historical Amount	Adjustments		Pro Forma as Adjusted
Digiplex (Successor)	$165	$165	(a)	$330
Rialto/Cranford (Predecessor)	70	(70)	(b)	-
Bloomfield	2	(2)	(b)	-
Lisbon Cinema	534	(29)	(c)	505
Cinema Centers	1,479	545	(c)	2,024
Total	$2,250	$609		$2,859

Six Months Ended December 31, 2011	Historical Amount	Adjustments		Pro Forma as Adjusted
Digiplex (Successor)	$262	-		$262
Lisbon Cinema	281	(29)	(c)	252
Cinema Centers	652	360	(c)	1,012
Total	$1,195	$331		$1,526

(a) To adjust depreciation and amortization on Digiplex-owned assets as if they had been in operation since July 1, 2010.

(b) To remove prior depreciation on these theaters, as they are already owned by Digiplex and included in the Digiplex adjustment in (a).

Inception date (July 29, 2010) to June 30, 2011	Lisbon Cinema			Cinema Centers
	Estimated Fair Value	Estimated Useful Life (years)	Depreciation	Estimated Fair Value	Estimated Useful Life (years)	Depreciation
Trade Name	$200	5	$40	$500	5	$100
Covenants not to compete	75	3	25	200	3	67
Property and equipment	5,500	5-23	440	13,000	5-8	1,857
Total	$5,775		$505	$13,700		$2,024
Historical Amounts			534			1,479
Adjustment			$(29)			$545

Six Months Ended December 31, 2011	Lisbon Cinema			Cinema Centers
	Estimated Fair Value	Estimated Useful Life (years)	Depreciation	Estimated Fair Value	Estimated Useful Life (years)	Depreciation
Trade Name	$200	5	$20	$500	5	$50
Covenants not to compete	75	3	12	200	3	33
Property and equipment	5,500	5-23	220	13,000	5-8	929
Total	$5,775		$252	$13,700		1,012
Historical Amounts			281			652
Adjustment			$(29)			$360

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(4)

To remove historical interest expense of acquired theatres, as there was no assumption of debt on the acquisition dates.

(5)

To reflect the conversion of all Series A preferred stock into Class A common stock and adjust the outstanding number of shares of Class A common stock as though such shares had been outstanding for the entire period.

(6)

To reflect income tax expense, although there were pretax losses, mainly because of the existence of a full deferred tax asset valuation allowance. This circumstance generally results in a zero net tax provision since the income tax expense or benefit that would otherwise be recognized is offset by the change to the valuation allowance.

(7)

To remove the components of Lisbon Cinema and Cinema Centers operations that will not be acquired by us, as follows: (Dollars in thousands)

	Lisbon Cinema (July1, 2010 to June 30, 2011)							Cinema Centers (August 1, 2010 to July 31, 2011)							Total
	(1) Historical		(2) Components to be acquired		(3) (1)–(2) Adjustment			(4) Historical		(5) Components to be acquired		(6) (4)-(5) Adjustment			(3) + (6) Adjustment
Revenues	$	4,355	$	4,355	$	-		$	14,602	$	14,374	$	(228	)	$	(228	)
Costs and Expenses:
Film rent expense		1,418		1,418		-			5,753		5,705		(48	)		(48	)
Cost of concession		235		235		-			633		627		(6	)		(6	)
Salaries and wages		464		464		-			1,613		1,452		(161	)		(161	)
Facility lease expense		573		573		-			1,420		1,326		(94	)		(94	)
General and administrative		168		-		(168	)		779		-		(779	)		(947	)
Interest expense		369		-		(369	)		501		-		(501	)		(870	)
Other		-		-		-			16		-		(16	)		(16	)

	Lisbon Cinema (six months ended December 31, 2011)							Cinema Centers (six months ended January 31, 2012)							Total
	(1) Historical		(2) Components to be acquired		(3) (1)–(2) Adjustment			(4) Historical		(5) Components to be acquired		(6) (4-(5) Adjustment			(3) + (6) Adjustment
Revenues	$	2,395	$	2,395		-		$	6,742	$	6,676	$	(66	)	$	(66	)
Costs and Expenses:
Film rent expense		960		960		-			2,605		2,602		(3	)		(3	)
Cost of concession		180		180		-			294		272		(22	)		(22	)
Salaries and wages		208		208		-			685		682		(3	)		(3	)
Facility lease expense		222		222		-			746		744		(2	)		(2	)
General and administrative		71		-		(71	)		474		-		(474	)		(545	)
Interest expense		171		-		(171	)		227		-		(227	)		(398	)
Other		-		-		-			69		-		(69	)		(69	)

(8)

Represents bonuses payable to Mr. Mayo under his employment agreement, upon the attainment of the pro forma revenues contained herein. See page 66 for a discussion of Mr. Mayo's employment agreement.

(9)

TLCF is a non-GAAP financial measure. For additional information on TLCF, see page 30 and pages 41-42.

(10)

Adjusted EBITDA is a non-GAAP financial measure. For additional information on Adjusted EBITDA, see below and pages 41-42.

A reconciliation of pro forma TLCF and Adjusted EBITDA to our pro forma net loss is calculated as follows (in thousands):

Adjusted EBITDA reconciliation (Dollars in thousands):

(unaudited)	Pro forma (19 screens)			Pro forma (85 screens)			Pro forma (85 screens) Six Months Ended
	Fiscal 2011 Period			Fiscal 2011 period			December 31, 2011
Net income (loss)	$	(975	)	$	5		$	(326	)
Add back:
Depreciation and amortization		330			2,859			1,526
Income tax expense		14			14			20
EBITDA		(631	)		2,878			1,220
Add back:
Stock-based compensation and expenses (1)		186			186			33
Other expense		1			1			-
Non-recurring organizational and M&A–related professional fees (2)		149			149			9
Deduct:
Bargain purchase gain from theatre acquisition (3)		(98	)		(98	)		-
Adjusted EBITDA	$	(393	)	$	3,116		$	1,262

TLCF reconciliation:	Pro forma (19 screens)			Pro forma (85 screens)			Pro forma (85 screens) Six months Ended
(unaudited)	Fiscal 2011 Period			Fiscal 2011 period			December 31, 2011
Net income (loss)	$	(975	)	$	5		$	(326	)
Add back:
General and administrative (4)		1,150			1,530			831
Depreciation and amortization		330			2,859			1,526
Income tax expense		14			14			20
Other expense		1			1			-
Deduct:
Bargain purchase gain from theatre acquisition (3)		(98	)		(98	)		-
TLCF	$	422		$	4,311		$	2,051

(1)

Represents the fair value of shares of Class A common stock issued to employees and non-employees for services rendered. As these are non-cash charges, we believe that it is appropriate to show Adjusted EBITDA excluding this item.

(2)

Primarily represents legal fees incurred in connection with start-up activities, and the creation of acquisition template documents that will be used by us for future transactions. While we intend to acquire additional theatres, we have laid the groundwork for our acquisition program and we expect to incur reduced legal fees in connection with future acquisitions. We therefore believe that it is appropriate to exclude these items from Adjusted EBITDA.

(3)

Represents the excess of the fair value of identified tangible and intangible assets from our purchase price of the Bloomfield 8. As a non-recurring item and unrelated to the operation of the theatre, we believe that it is appropriate to show TLCF and Adjusted EBITDA excluding this item.

(4)

TLCF is intended to be a measure of theatre profitability. Therefore, our corporate general and administrative expenses have been excluded.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS

You should read the following discussion together with the historical consolidated financial statements and related notes included elsewhere in this prospectus. The statements in this discussion regarding industry outlook, our expectations regarding our future performance, liquidity and capital resources and other non-historical statements in this discussion are forward-looking statements. These forward-looking statements are subject to numerous risks and uncertainties, including, but not limited to, the risks and uncertainties described in “Risk Factors” and “Forward-Looking Statements.” Our actual results may differ materially from those contained in or implied by any 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.

Overview

We operate three theatres located in Westfield, New Jersey (the Rialto), Cranford, New Jersey (the Cranford) and Bloomfield, Connecticut (the Bloomfield 8), consisting of 19 screens. Our three theatres had over 148,000 attendees for fiscal year 2011, over 297,000 attendees for the twelve months ended June 30, 2011 on a pro forma basis as though all three theatres were owned by Digiplex as of July 1, 2010, and over 163,000 attendees for the six months ended December 31, 2011. We acquired the Rialto and the Cranford on December 31, 2010 and the Bloomfield 8 on February 17, 2011.

In April 2011, we entered into an asset purchase agreement for our contemplated purchase of certain assets and assumption of theatre operating leases of Cinema Supply, consisting of a chain of five theatres with 54 screens located throughout central Pennsylvania. Cinema Centers consists of:

an 11 screen theatre known as Cinema Center of Bloomsburg, located in Bloomsburg, Pennsylvania;

a 12 screen theatre known as Cinema Center of Camp Hill, located in Camp Hill, Pennsylvania;

a 10 screen theatre known as Cinema Center of Fairground Mall, located in Reading, Pennsylvania;

a 12 screen theatre known as Cinema Center of Selinsgrove, located in Selinsgrove, Pennsylvania; and

a 9 screen theatre known as Cinema Center of Williamsport, located in Williamsport, Pennsylvania.

Cinema Centers had approximately 1.4 million attendees for the year ended December 31, 201l. 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 after consummation of this offering at an approximate aggregate cost of $3.0 million and expect to finance this conversion through capital leases or other secured financing from banks or vendors. We intend to use approximately $14.0 million of the net proceeds from this offering to consummate the Cinema Centers acquisition.

In February 2012, we entered into an asset purchase agreement for our purchase of certain assets of Lisbon Cinema, which we refer to as the “Lisbon Cinema acquisition”. Lisbon Cinema consists of a single theater with 12 screens in Lisbon, Connecticut. Lisbon Cinema had approximately 388,000 attendees for the year ended December 31, 2011. All of the Lisbon Cinema theatre screens have been previously converted to digital formats. We intend to use approximately $6.0 million of the net proceeds from this offering to consummate the Lisbon Cinema acquisition.

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 have converted all of our existing theatres and will convert those we acquire to digital projection platforms 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.

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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 this offering, 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.

Components of Operating Results

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 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, Screenvision, and others as they offer their programs to us. Our existing three theatres, and the five theatres we intend to acquire from Cinema Centers, and the theatre we intend to acquire from Lisbon Cinema 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 that we earn from motion picture distributors.

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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.

For a summary of other industry trends as well as other risks and uncertainties relevant to us, see “Business — Industry Overview and Trends” and “Risk Factors.”

Significant Events and Fiscal 2012 Outlook

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. For additional information regarding the earn-out, see “Business — Acquisitions.” Total goodwill resulting from the acquisition of the Rialto and Cranford 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.

Digital Projector Installation. During fiscal year 2011, we installed 16 digital projectors and related equipment in our three theatres. 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 December 31, 2011 was $1.2 million. With the three systems that had been previously installed, all 19 screens were digitally equipped as of 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 December 31, 2011. We plan to repay the cost of this digital equipment with a portion of the net proceeds from this offering at an approximate aggregate cost of $3.0 million and expect to finance this conversion through capital lease or other secured financing from banks or vendors.

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 during the six months ended December 31, 2011, and we expect revenues from this agreement to be accretive to our theatres’ revenues.

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 19 digital systems (12 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.

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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 TLCF for theatres we acquire. TLCF is calculated as revenues minus theatre operating expenses (excluding depreciation and amortization). See pages 41-42 for additional information regarding TLCF. For example, the Cinema Centers and Lisbon Cinema theatres had historical TLCF for their respective 2011 fiscal years of approximately $2.9 million and $1.0 million respectively, yielding multiples of 4.8 times and 6.0 times TLCF for Cinema Centers and Lisbon Cinema based on our agreed upon purchase prices of $14.0 million and $6.0 million.The higher multiple being paid for Lisbon Cinema is because the asset base being acquired includes 12 recently installed digital projection systems.

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

	Successor						Predecessor						Predecessor
	Fiscal Year Ended June 30, 2011						Fiscal Year Ended December 31, 2010						Fiscal Year Ended December 31, 2009
	$			% of Revenue			$			% of Revenue			$		% of Revenue
Revenues
Admissions	$	1,158			74		$	1,529			71		$	1,876		74
Concessions		382			24			627			29			660		26
Other		32			2			-			-			-		-
Total revenues		1,572			100			2,156			100			2,536		100
Cost of operations:
Film rent expense (1)		598			51			841			55			1,032		55
Cost of concessions (2)		66			17			94			15			143		22
Salaries and wages (3)		235			15			273			13			234		9
Facility lease expense (3)		223			14			238			11			111		4
Utilities and other (3)		258			16			352			16			375		15
General and administrative expenses (including share-based compensation and expenses of $186, $0 and $0, respectively) (3)		900			57			441			20			412		16
Depreciation and amortization (3)		165			10			141			7			117		5
Total costs and expenses(3)		2,445			155			2,380			110			2,424		96

Operating income (loss)(3)		(873	)		(55	)		(224	)		(10	)		112		4
Bargain purchase gain from theatre acquisition (3)		(98	)		(6	)		-			-			-		-
Interest		-			-			5			-			3		-
Other		1			-						-			-		-
Income (loss) before income taxes (3)		(776	)		(49	)		(229	)		(10	)		109		4
Income taxes (4)		14			(2	)		-			-			-		-
Net income (loss) (3)	$	(790	)		(50	)	$	(229	)		(10	)	$	109		4
Other operating data:
Theatre Level Cash Flow (7)	$	192			12		$	358			17		$	641		25
Adjusted EBITDA (8)	$	(373	)		(24	)	$	(83	)		(4	)	$	229		9
Attendance		148			*			206			*			258		*
Average ticket price (5)	$	7.82			*		$	7.42			*		$	7.27		*
Average concession per patron(6)	$	2.58			*		$	3.04			*		$	2.56		*

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__________________

*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 43-44.

(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 43-44.

Fiscal Year 2011 (Successor) and Fiscal Years 2010 and 2009 (Predecessor)

Our fiscal year 2011 results include the Rialto and Cranford theatres for the six month period from the acquisition date of December 31, 2010 to June 30, 2011, and the Bloomfield 8 Theatre for the approximately four and a half month period from the acquisition date of February 17, 2011 to June 30, 2011. The fiscal year 2010 and 2009 results of the Predecessor include those of the Rialto and Cranford theatres for the respective 12 month periods, and do not include the results of the Bloomfield 8.

Admissions and Concessions. Our fiscal year 2011 revenues include our Rialto and Cranford theatres for the six month period from the acquisition date of December 31, 2010 to June 30, 2011, and the Bloomfield 8 theatre for the approximately four and a half month period from the acquisition date of February 17, 2011 to June 30, 2011. During that time, we adjusted admission and concession prices and our concession offerings, based on our review of the local market conditions. The decline in revenues from 2009 to 2010 was primarily due to a stronger product mix in 2009 that included such blockbuster titles as Avatar. We believe the year-over-year revenue decline was consistent with the industry average.

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. During fiscal year 2011, approximately 148,000 patrons attended a movie or other event at our theatres. 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.

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Other Revenues. Other revenues in fiscal year 2011 consist of theatre rentals for parties, camps and other activities. Additionally, although we had no revenues from advertising during fiscal year 2011, we entered into an advertising agreement with NCM to receive ad revenues which commenced during the three months ended September 30, 2011. We expect advertising revenues to be a component of our operating results in future periods. The Predecessor had no other revenues in fiscal years 2010 and 2009.

Film Rent Expense. Beginning in 2011, we utilize Clearview’s film department as an external “booking” service to purchase (or “rent”) films at each location from the movie studios (excluding alternative content). We expect that as we grow we will be able to obtain content at levels comparable to our competitors, although we will be subject to the same pricing trends that all exhibitors will experience. 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. During the fiscal year 2011, we recorded virtual print fees of $35 thousand which reduced our film rent expense.

Cost of Concessions. Beginning in 2011, we purchase concession items from two main national vendors, along with smaller vendors for specialty items. We have been able to negotiate favorable concessions pricing for many items typically only enjoyed by national theatre circuits, due to the reputation of our senior management team and our growth expectations. 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. 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.

Salaries and Wages. 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. The change from 2009 to 2010 was due to higher average wages paid to theatre personnel. Salaries and wages were higher as a percentage of revenue due to reduced revenue in 2010 following a record year at the box office in 2009.

Facility Lease Expense. Each of our facilities is operated under operating leases that contain renewal options upon expiration. The leases contain provisions that increase rents in certain amounts and at certain times during the initial term, and the leases for our three theatres require additional rent to be paid upon the achievement of certain revenue targets. For fiscal year 2011, there was no additional rent expense recorded because the revenue targets had not been exceeded. Upon acquisition of each of our theatres, we entered into new leases with the landlords, with different lease rates and terms than had existed under prior ownership. The change from 2009 to 2010 was due to a revision in the Predecessor’s lease arrangement with the owner of the theatres.

Utilities and Other. Utilities and other expenses consist of utility charges, real estate taxes incurred pursuant to the operating leases for our theatres, and various other costs of operating the theatres. 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. General and administrative expenses consisted primarily of salaries and wages for our corporate staff, legal, accounting and professional fees associated with our startup and acquisition of theatres, marketing, and information technology related expenses. We expect these costs to decrease as a percentage of revenue as many of the activities in fiscal year 2011, our first fiscal year, were related to laying the groundwork for anticipated growth. Included in general and administrative expenses is stock compensation expense of $0.2 million related to issuance of Class A common stock to employees, non-employees and non-employee directors for services rendered during fiscal year 2011. 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 June 30, 2011, we had 9 employees on our corporate staff, including our chief executive officer and other executive officers and staff to support our business development, technology, accounting, and marketing activities. The Successor's general and administrative expenses are at higher levels than the Predecessor's due to the Successor's planned acquisitions of theatres at the Successor, and expanded content offerings following the conversion to digital presentation.

Depreciation and Amortization. We utilize straight line depreciation and amortization for property and equipment and intangible assets over the estimated useful life of each asset class. Our largest fixed asset is our digital projection equipment, which has a gross cost of $1.2 million and is being depreciated over a 10-year expected useful life. We expect digital projection equipment to be a large component of our asset base going forward following any acquisitions that we may consummate, along with other theatre equipment and leasehold improvements. The change from 2009 to 2010 was due to renovations to the Rialto theatre in 2009 and a resulting increased asset base. Fiscal year 2011 amounts are based on the fair values assigned to the assets acquired on the respective theatre acquisition dates.

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Operating Loss. Our operating loss was primarily attributable to various startup costs, depreciation and amortization, general and administrative costs which will form the basis for future growth, and the lack of a full year of operation from our theatres.

Bargain Purchase Gain. We recorded a bargain purchase gain of $0.1 million in fiscal year 2011 resulting from difference between the cash paid for the Bloomfield 8 theatre and the fair value of the acquired assets.

Income Taxes. We recorded income tax expense in fiscal year 2011, although there were pretax losses, mainly because of the existence of a full deferred tax asset valuation allowance. This circumstance generally results in a zero net tax provision since the income tax expense or benefit that would otherwise be recognized is offset by the change to the valuation allowance. However, we recorded an accrual of non-cash tax expense due to additional valuation allowance in connection with the tax amortization of our indefinite-lived intangible assets that was not available to offset existing deferred tax assets. The Predecessor had no income tax expense as it was a Subchapter S Corporation for tax purposes.

Successor

Predecessor

Six Months Ended

Inception Period

Six Months Ended

(Amounts in thousands,

except per patron data)

December 31, 2011

(unaudited)

(July 29, 2010) to

December 31, 2010 (7)

December 31, 2010

(unaudited)

% of Revenue

Revenues

Admissions

1,392

820

Concessions

401

294

Other

106

Total revenues

1,899

100

1,114

100

Cost of operations:

(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

9. RELATED PARTY TRANSACTIONS

The Successor’s landlord for the Rialto and the Cranford also owns 250,000 shares of the Successor’s Series A preferred stock, which he obtained as partial consideration for the sale of those theatres. At December 31, 2011, accrued dividends of $40 was payable to the seller. The total rent expense under these operating leases with this landlord was $127 for the six months ended December 31, 2011. There was no rent expense for the 2010 periods.

10. NET LOSS PER SHARE

Basic net loss per share is computed using the weighted average number of common shares outstanding during the period. Diluted net loss per share is computed using the weighted average number of common shares and, if dilutive, common stock equivalents outstanding during the period.

The rights, including the liquidation and dividend rights, of the holders of the Successor’s Class A and Class B common stock are identical, except with respect to voting. Each share of Class B common stock is convertible into one share of Class A common stock at any time, at the option of the holder of the Class B common stock.

The following table sets forth the computation of basic net loss per share of Class A and Class B common stock of the Successor (in millions, except share and per share data):

	Six Months Ended December 31, 2011			Inception Period (July 29, 2010) to December 31, 2010
Basic net loss per share:
Numerator:
Net loss	$	(587	)	$	(178	)
Preferred dividends		(153	)		-
Net loss attributable to common shareholders		(740	)		(178	)
Denominator
Weighted average common shares outstanding (1)		1,469,166			647,806

Basic and diluted net loss per share	$	(0.50	)	$	(0.27	)

______________________

(1)

The Successor has incurred net losses and, therefore, the impact of dilutive potential common stock equivalents totaling 1,019,585 shares for the six months ended December 31, 2011 are anti-dilutive and are not included in the weighted shares. The weighted average number of shares includes the effect of the one-for-two reverse stock split (see Note 11).

11. LINE OF CREDIT

The Predecessor has a $100 credit line with a third party financial institution, at an interest rate of 3.25%. Interest expense on the line of credit for the six months ended December 31, 2010 was approximately $2.

12. SUPPLEMENTAL CASH FLOW DISCLOSURE

	Successor Company				Predecessor Company
	Six months ended December 31, 2011		From inception date (July 29, 2010) to December 31, 2010		Six months ended December 31, 2010

Accrued dividends on Series A preferred stock	$	153	$	-	$	-
Issuance of Series A preferred stock to seller of Rialto/Cranford theatres as part of acquisition	$	500	$	-	$	-

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DIGITAL CINEMA DESTINATIONS CORP. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

13. SUBSEQUENT EVENTS

In November 2011, the Successor’s Board of Directors approved a one-for-two reverse stock split of the Class A and Class B common stock. All share amounts and per share amounts for all periods presented have been adjusted retroactively to reflect the one-for - two stock split.

On December 19, 2011, the Successor filed a Form S-1 with the United States Securities and Exchange Commission, related to an underwritten public offering of the Successor’s Class A Common Stock.

In February 2012, a wholly-owned subsidiary of the Company executed an asset purchase agreement for the purchase of certain assets of Lisbon Theaters, Inc. doing business as the Lisbon Cinema. Lisbon Cinema consists of a single theater with 12 screens in Lisbon, Connecticut. The purchase price for Lisbon Cinema is $6.0 million in cash, and a contingent purchase price payable in future periods upon the achievement of certain profitability measures. The acquisition is contingent upon the Company obtaining sufficient financing to fund the purchase price. The Company will purchase the assets of Lisbon Cinema and assume an operating leave. All other liabilities and note obligations will not be assumed. The Lisbon Cinema theatre has been fully upgraded to digital projection platforms.

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Report of Independent Registered Public Accounting Firm

The Stockholders of Cinema Supply, Inc.

We have audited the accompanying balance sheets of Cinema Supply, Inc. (the “Company) as of October 31, 2011 and 2010 and the related statements of operations, stockholders’ equity and cash flows for each of the years in the two-year period ended October 31, 2011. The financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Cinema Supply, Inc. as of October 31, 2011 and 2010, and the results of its operations and its cash flows for each of the years in the two-year period ended October 31, 2011, in conformity with accounting principles generally accepted in the United States of America

/s/ EISNERAMPER LLP

Edison, New Jersey

December 19, 2011

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CINEMA SUPPLY, INC.

BALANCE SHEETS

October 31, 2011 and 2010

(in thousands, except share and per share data)

	October 31,		October 31,
	2011		2010
ASSETS
CURRENT ASSETS
Cash	$	67	$	50
Accounts receivable		11		12
Inventory		61		60
Income tax refund receivable		-		194
Deferred tax assets		151		118
Prepaid expenses and other		53		86
Total current assets		343		520

Property and equipment, net		13,509		14,920
Deferred financing costs, net		27		35

TOTAL ASSETS	$	13,879	$	15,475

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
Accounts payable	$	843	$	819
Accrued expenses		1,008		522
Notes payable, current portion		1,782		2,521
Capital lease obligations, current portion		56		46

Total current liabilities		3,689		3,908

Accrued interest - officers		334		254
Notes payable, net of current portion		3,601		4,765
Note payable - officers		1,760		1,760
Deferred rent expense		957		967
Deferred taxes		1,005		1,130
Capital lease obligations, net of current portion		141		198
Total liabilities		11,487		12,982
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Common stock, $100 par value: 100 shares authorized , 40 shares issued and outstanding		4		4
Additional paid-in-capital		108		108
Retained earnings		2,280		2,381

Total stockholders' equity		2,392		2,493

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	13,879	$	15,475

See accompanying notes to the financial statements.

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CINEMA SUPPLY, INC.

STATEMENTS OF OPERATIONS

For the years ended October 31, 2011 and 2010

(In thousands)

	2011		2010
REVENUES
Admissions	$	10,329	$	10,569
Concessions		3,990		3,892
Other		351		416
Total revenues		14,670		14,877
COSTS AND EXPENSES
Cost of operations:
Film rent expense		5,750		5,920
Cost of concessions		642		673
Salaries and wages		1,501		1,645
Facility lease expense		1,459		1,451
Utilities and other		2,423		2,383
Total cost of operations		11,775		12,072
General and administrative expenses		898		796
Depreciation and amortization		1,364		1,297
Total costs and expenses		14,037		14,165
OPERATING INCOME		633		712
OTHER EXPENSE (INCOME)
Loss on disposition of property and equipment		83		42
Interest expense		483		422
Interest income and other		-		(2	)
Income before income taxes		67		250
Income tax expense		32		102
NET INCOME	$	35	$	148

See accompanying notes to the financial statements.

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CINEMA SUPPLY, INC.

STATEMENTS OF STOCKHOLDERS' EQUITY

October 31, 2011 and 2010

(In thousands except share data)

	Common Stock				Additional paid-in		Retained			Total stockholders'
	Shares		Amount		capital		earnings			equity
Balance, October 31, 2009		40	$	4	$	108	$	2,075		$	2,187
Net income								148			148
Contributions from owner								158			158
Balance, October 31, 2010		40		4		108		2,381			2,493
Net income								35			35
Distribution to owner								(136	)		(136	)
Balance, October 31, 2011		40	$	4	$	108	$	2,280		$	2,392

See accompanying notes to the financial statements.

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CINEMA SUPPLY, INC.

STATEMENTS OF CASH FLOWS

For the years ended October 31, 2011 and 2010

(in thousands)

	2011			2010
Cash flows from operating activities
Net income	$	35		$	148
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		1,364			1,297
Loss from disposition of property and equipment		83			42
Deferred taxes		(157	)		210
Changes in operating assets and liabilities:
Income tax refund receivable		194			(2	)
Inventory		(1	)		3
Prepaid expenses and other assets		40			21
Accounts payable and accrued expenses		338			376
Deferred rent		(9	)		13
Net cash provided by operating activities		1,887			2,108
Cash flows from investing activities
Purchases of property and equipment		(35	)		(2,422	)
Proceeds from disposition of property and equipment		-			4
Net cash used in investing activities		(35	)		(2,418	)
Cash flows from financing activities
Accrued interest - officers		80			80
Distribution to owner		(136	)		-
Contribution from owner		-			158
Change in bank overdraft		172			(69	)
Payments under capital lease obligations		(46	)		(46	)
Borrowings of notes payable		30			2,041
Payments of notes payable		(1,935	)		(1,899	)
Net cash provided by (used in) financing activities		(1,835	)		265
Net change in cash and cash equivalents		17			(45	)
Cash and cash equivalents at beginning of year		50			95
Cash and cash equivalents at end of year	$	67		$	50

See accompanying notes to the financial statements

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CINEMA SUPPLY, INC.

NOTES TO FINANCIAL STATEMENTS

For the years ended October 31, 2011 and 2010

(in thousands except share data)

1. THE COMPANY AND BASIS OF PRESENTATION

Cinema Supply, Inc. (the “Company”) was incorporated in 1975 under the laws of the Commonwealth of Pennsylvania. The Company primarily operates movie theatres in six locations in central Pennsylvania and sells theatre concession supplies principally in Pennsylvania.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Significant estimates include, but are not limited to, those related to film rent expense settlements, depreciation and amortization, impairments and income taxes. Actual results could differ from those estimates.

Revenue Recognition

Revenues are generated principally through admissions and concessions sales for feature films with proceeds received in cash or credit card at the Company’s point of sale terminals at the Theatres. Revenue is recognized at the point of sale. Credit card sales are normally settled in cash within approximately three business days from the point of sale, and any credit card chargebacks have been insignificant. Other operating revenues consist of amounts earned from advertising, vending commissions and theatre rentals for parties and other activities, which are recognized as services are performed or earned under contractual terms. The Company also sells theatre admissions in advance of the applicable event, and sells gift cards for patrons’ future use. The Company defers the revenue from gift cards until considered redeemed. The Company estimates the gift card breakage rate based on historical redemption patterns. Unredeemed gift cards are recognized as revenue only after such a period of time indicates, based on historical experience, the likelihood of redemption is remote, and based on applicable laws and regulations, in evaluating the likelihood of redemption, the period outstanding, the level and frequency of activity, and the period of inactivity is evaluated.

Cash Equivalents

The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. At October 31, 2011 and 2010, the Company held substantially all of its cash in demand deposit accounts and overnight investments, and cash held at the theatres in the normal course of business.

Accounts receivable

Accounts receivable are recorded at the invoiced amount for theatre concession supplies and do not bear interest. The Company reports accounts receivable net of any allowance for doubtful accounts to represent the Company’s estimate of the amount that ultimately will be realized in cash. The Company will review collectability of accounts receivable based on the aging of the accounts and historical collection trends. When the Company ultimately concludes a receivable is uncollectible, it is written off.

Inventories

Inventories consist of concession products and related supplies. The Company states inventories on the basis of first-in, first-out method, stated at the lower of cost or market.

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CINEMA SUPPLY, INC.

NOTES TO FINANCIAL STATEMENTS

For the years ended October 31, 2011 and 2010

(in thousands except share data)

Property and Equipment

The Company states property and equipment at cost. Major renewals and improvements are capitalized, while maintenance and repairs that do not improve or extend the lives of the respective assets are expensed currently.

The Company records depreciation and amortization using the straight-line method over the following estimated lives:

Leasehold improvements	lesser of lease term or estimated useful life of asset

Machinery and Equipment	3-10 years

Furniture and fixtures	3 – 10 years

Vehicles	5 years

Buildings	10-40 years

Impairment of Long-Lived Assets

The Company reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amounts of the assets may not be fully recoverable. The Company generally evaluates assets for impairment on an individual theatre basis, which management believes is the lowest level for which there are identifiable cash flows. If the sum of the expected future cash flows, undiscounted and without interest charges is less than the carrying amount of the assets, the Company recognizes an impairment charge in the amount by which the carrying value of the assets exceeds their fair market value.

The Company considers actual theatre level cash flows, future years budgeted theatre level cash flows, theatre property and equipment carrying values, the age of a recently built theatre, competitive theatres in the marketplace, the impact of recent ticket price changes, available lease renewal options and other factors considered relevant in its assessment of impairment of individual theatre assets. The fair value of assets is determined using the present value of the estimated future cash flows or the expected selling price less selling costs for assets of which the Company expects to dispose. Significant judgment is involved in estimating cash flows and fair value.

There were no impairment charges recorded for the years ended October 31, 2011 and 2010.

Concentration of Credit Risk

Financial instruments that could potentially subject the Company to concentration of credit risk, if held, would be included in accounts receivable. Collateral is not required on trade receivables. It is anticipated that in the event of default, normal collection procedures would be followed.

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CINEMA SUPPLY, INC.

NOTES TO FINANCIAL STATEMENTS

For the years ended October 31, 2011 and 2010

(in thousands except share data)

Leases

All of the Company’s theatre operations are conducted in premises occupied under non-cancelable lease agreements. The Company, at its option, can renew the leases at defined rates for various periods. Certain leases for Company theatres provide for contingent rentals based on the revenue results of the underlying theatre and require the payment of taxes, insurance, and other costs applicable to the property. Also, certain leases contain escalating minimum rental provisions. There are no conditions imposed upon the Company by its lease agreements or by parties other than the lessor that legally obligate the Company to incur costs to retire assets as a result of a decision to vacate its leased properties. None of the leases require the Company to return the leased property to the lessor in its original condition (allowing for normal wear and tear) or to remove leasehold improvements. The Company accounts for all of its facility leases as operating leases. The Company accounts for its leases under the provisions of ASC Topic 840, Leases and other authoritative accounting literature. The Company does not believe that exercise of the renewal options in its leases are reasonably assured at the inception date of the lease agreements because the leases: (i) provide for either (a) renewal rents based on market rates or (b) renewal rents that equal or exceed the initial rents, and (ii) do not impose economic penalties upon our determination whether or not to exercise the renewal option. As a result, there are not sufficient economic incentives at the inception of the leases, to consider that lease renewal options are reasonably assured of being exercised and therefore, the Company generally consider the initial base lease term under ASC Subtopic 840-10.

The Company leases certain equipment for use in its theatres, under agreements that expire through December 2014. The Company accounts for these leases as capital leases.

Fair Value of Financial Instruments

The carrying amounts of cash, cash equivalents, accounts receivable and accounts payable, approximate their fair values, due to their short term nature.

Income Taxes

Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. The Company records a valuation allowance if it is deemed more likely than not that its deferred income tax assets will not be realized. The Company reassesses its need for the valuation allowance for its deferred income taxes on an ongoing basis.

Additionally, income tax rules and regulations are subject to interpretation, require judgment by the Company and may be challenged by the taxation authorities. In accordance with ASC Subtopic 740-10, the Company recognizes a tax benefit only for tax positions that are determined to be more likely than not sustainable based on the technical merits of the tax position. With respect to such tax positions for which recognition of a benefit is appropriate, the benefit is measured at the largest amount of benefit that is greater than 50 percent likely of being realized upon ultimate settlement. Tax positions are evaluated on an ongoing basis as part of the Company’s process for determining the provision for income taxes. Any interest and penalties determined to result from uncertain tax position will be classified as interest expense and other expense.

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CINEMA SUPPLY, INC.

NOTES TO FINANCIAL STATEMENTS

For the years ended October 31, 2011 and 2010

(in thousands except share data)

Deferred Rent Expense

The Company recognizes rent expense on a straight-line basis, after considering the effect of rent escalation provisions resulting in a level monthly rent expense for each lease over its term.

Deferred Financing Costs

Deferred financing costs consist of unamortized debt issuance costs amortized on a straight-line basis over the term of the respective debt and are included in interest expense. The straight-line basis is not materially different from the effective interest method. The amount included in interest expense was $8 for each of the years ended October 31, 2011 and 2010, respectively.

Film Rent Expense

The Company estimates film rent expense settlements and related film rent payable based on management’s best estimate of the ultimate settlement of the film costs with the film distributors. Generally, less than one-quarter of film rent expense is estimated at period-end, with the majority being agreed to under firm terms. The length of time until these costs are known with certainty depends on the ultimate duration of the film’s theatrical run, but is typically “settled” within one to two months of a particular film’s opening release. Upon settlement with the film distributors, film rent expense and the related film rent payable are adjusted to the final film settlement.

Advertising Costs

The Company expenses advertising costs as incurred. Advertising costs incurred for the years ended October 31, 2011 and 2010 was $133 and $157, respectively.

Segments

As of October 31, 2011 and 2010, the Company managed its business under one reportable segment: theatre exhibition operations. All of the Company’s operations are located in the United States.

Recent Accounting Pronouncements

In May 2011, the FASB issued ASU 2011-4, “Amendments to Achieve Common Fair Value Measurements and Disclosure Requirements in US GAAP and IFRS”, to substantially converge the fair value measurement and disclosure guidance in US GAAP and IFRS. The most significant change in disclosures is an expansion of the information required for Level 3 measurements based on unobservable inputs. The standard is effective for fiscal years beginning after December 15, 2011. The Company will adopt this standard November 1, 2012 and does not expect the adoption of this standard to have a material impact on the financial statements and disclosures.

In June 2011, the FASB issued ASU 2011-5, “Presentation of Comprehensive Income”, which eliminates the current option to report other comprehensive income and its components in the statement of stockholders’ equity. Instead, an entity will be required to present items of net income and other comprehensive income in one continuous statement or in two separate, but consecutive, statements. The standard is effective for fiscal years beginning after December 15, 2011. The Company will adopt this standard as of November 1, 2012 and does not expect it to have a material impact on the financial statements and disclosures.

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CINEMA SUPPLY, INC.

NOTES TO FINANCIAL STATEMENTS

For the years ended October 31, 2011 and 2010

(in thousands except share data)

3.	BALANCE SHEET COMPONENTS

PREPAID EXPENSES AND OTHER CURRENT ASSETS

Prepaid expenses and other current assets consisted of the following:

	October 31, 2011		October 31, 2010
Rent	$	14	$	25
Insurance		26		28
Real estate taxes		2		9
Common area maintenance		3		16
Other		8		8
Total	$	53	$	86

PROPERTY AND EQUIPMENT

Property and equipment, net was comprised of the following:

	October 31, 2011			October 31, 2010
Leasehold improvements	$	15,787		$	15,890
Machinery and equipment		3,574			3,592
Furniture and fixtures		3,409			3,439
Vehicles		150			150
Buildings and improvements		69			92
Land		32			32
	$	23,021		$	23,195
Less: accumulated depreciation and amortization		(9,512	)		(8,275	)
Property and equipment, net	$	13,509		$	14,920

ACCRUED EXPENSES

Accrued expenses consisted of the following:

	October 31, 2011		October 31, 2010
Cash deficit	$	263	$	91
Deferred revenue – gift cards		372		291
Accrued interest		9		16
Accrued payroll		69		55
Accrued taxes payable		159		31
Other accrued expenses		136		38
Total	$	1,008	$	522

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CINEMA SUPPLY, INC.

NOTES TO FINANCIAL STATEMENTS

For the years ended October 31, 2011 and 2010

(in thousands except share data)

5. LEASES

OPERATING LEASES

The Company leases five theatre facilities under operating leases for initial terms of 15-20 years. Each lease provides for monthly payments subject to rent escalations at each renewal date. Each lease offers options to renew for periods ranging from 4 to 5 years. The Company is also required to pay real property taxes and common maintenance expenses. In addition, rent includes an amount equal to a percentage of revenue generated in excess of a base amount of total sales. The Company leases the corporate office, warehouse, and a drive-in theatre from a related party for rent expense of $11 for each of the years ended October 31, 2011 and 2010, respectively. There is no set lease maturity. The Company also leases theatre equipment and office equipment under operating leases expiring at various dates through September 2013. Lease rent expense amounted to $1,459 and $1,451 for the years ended October 31, 2011 and 2010, respectively. Included in lease rent expense is percentage rent totaling $52 and $ 6 for the years ended October 31, 2011 and 2010, respectively.

At year-end, future minimum lease payments approximated:

Year	Amount
2012	$	1,489
2013		1,338
2014		1,382
2015		1,382
2016		1,316
Thereafter		7,580
	$	14,487

CAPITAL LEASES

The Company leases certain equipment under capital leases that expire through December 2014. The assets are being amortized over the shorter of their lease terms or their estimated useful lives. The applicable amortization is included in depreciation and amortization expense in the accompanying financial statements. Amortization of assets under capital leases charged to expense during the years ended October 31, 2011 and 2010 was $62 and $52, respectively.

The following is a summary of property held under capital leases included in property and equipment:

	October 31, 2011		October 31, 2010
Equipment	$	312	$	312
Less: accumulated amortization		114		52
Net	$	198	$	260

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CINEMA SUPPLY, INC.

NOTES TO FINANCIAL STATEMENTS

For the years ended October 31, 2011 and 2010

(in thousands except share data)

Future maturities of capital lease payments as of October 31, 2011 for each of the next five years and in the aggregate are:

Year ending
2012	$	76
2013		76
2014		76
2015		6
Total minimum payments		234
Less: amount representing interest		(37	)
Present value of minimum lease payments	$	197
Less: current maturity		(56	)
	$	141

6. NOTES PAYABLE

NOTES AND LEASEHOLD MORTGAGES PAYABLE

Notes and mortgages payable at October 31, 2011 and 2010 consisted of the following:

2011:		Total		Current portion		Non-current portion
A	Leasehold mortgage payable-bank	$	54	$	54	$	-
B	Leasehold mortgage payable-bank		211		211		-
C	Leasehold mortgage payable-bank		2,038		661		1,377
D	Leasehold mortgage payable-bank		800		160		640
E	Leasehold mortgage payable-bank		1,748		175		1,573
F	Note payable – Ford credit		20		9		11
G	Note payable – bank		3		3		-
H	Note payable-officers		1,510		-		1,510
I	Note payable-officers		250		-		250
J	Line of credit		509		509		-
Total		$	7,143	$	1,782	$	5,361

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CINEMA SUPPLY, INC.

NOTES TO FINANCIAL STATEMENTS

For the years ended October 31, 2011 and 2010

(in thousands except share data)

2010:		Total		Current portion		Non-current portion
A	Leasehold mortgage payable-bank	$	581	$	581	$	-
B	Leasehold mortgage payable-bank		674		502		172
C	Leasehold mortgage payable-bank		2,668		632		2,036
D	Leasehold mortgage payable-bank		949		149		800
E	Leasehold mortgage payable-bank		1,900		165		1,735
F	Note payable – Ford credit		27		8		19
G	Note payable – bank		7		4		3
H	Note payable-officers		1,510		-		1,510
I	Note payable-officers		250		-		250
J	Line of credit		478		478		-
K	Note payable – Town and country LLC		2		2		-
Total		$	9,046	$	2,521	$	6,525

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CINEMA SUPPLY, INC.

NOTES TO FINANCIAL STATEMENTS

For the years ended October 31, 2011 and 2010

(in thousands except share data)

Leasehold mortgage payable— bank, carries an interest rate of prime plus 1/2% based on the Wall Street Journal prime lending rate and requires monthly payments sufficient to amortize the loan until maturity. The maturity date of the loan is April 2011. The interest rate at year-end 2011 and 2010 was 4.50%. The note is collateralized by substantially all the assets of the Company and personally guaranteed by the corporate officers and a related partnership of which the corporate officers own 100%. In addition, the personal residence of the corporate officers is pledged as collateral for the notes as well as the assignment of a life insurance policy on one corporate officer totaling $2. The corporate officers may not encumber any personal investments they own without the Bank's permission. The note is collateralized by 100% of the Company stock and an assignment of each theatre lease. The proceeds of the loan were used to build the Selinsgrove theatre,

The Company's loan agreement with the bank contains certain restrictions and covenants. Under these restrictions, the Company must maintain a debt to net worth ratio of no more than 5.75 to 1 and maintain a debt service coverage ratio of a minimum of 1.20 to 1. The Company was in violation of this covenant. The Company has obtained a waiver of the 2011 and 2010 debt service coverage ratio which cures the debt covenant violation whereas the bank will not call the debt due. In addition, the corporate officers may not encumber their personal marketable securities without the bank's consent.

Leasehold mortgage payable — bank, carries an interest rate of prime based on the commercial prime rate of Susquehanna Bank and requires monthly payments sufficient to amortize the loan until maturity. The maturity date of the loan is February 2012. The interest rate at year-end 2011 and 2010 was 4.5%. The note is collateralized as noted in A) above. The proceeds of the loan were used to build the Reading theatre.

Leasehold mortgage payable — bank, carries an interest rate of 6.5% for 48 months with a variable rate indexed to the Wall Street Journal prime lending rate thereafter. Current monthly payments total $ 62. The maturity date of the loan is March 2015. The interest rate at year-end 2011 and 2010 was 4.50%. The note is collateralized as described in A) above. The proceeds of the loan were used to build the Camp Hill theatre.

Leasehold mortgage payable — bank, carries an interest rate of 6.85% for 60 months with an adjustment to the prime rate of interest as published in the money rates column of the Wall Street Journal thereafter. Interest payments only commence for the first twelve months, followed by monthly payments of principal and interest totaling $ 2. After 54 months, the monthly installments will be increased or decreased in an amount necessary to amortize the principal of this loan until maturity in March 2016 at the then-prevailing rate of the index. The note is collateralized as described in A) above. The proceeds of the loan were used to purchase furniture and fixtures and equipment for the Williamsport theatre.

Lease mortgage payable – bank, carries an interest rate of 7.00% for six monthly payments of interest only, 54 monthly payments of $23 at an interest of 7.00%, 59 monthly payments of $22 with interest calculated based on the prime rate of interest as published in the money rates section of the Wall Street journal. The loan matures in January 2020. The note is collateralized as described in A) above. The proceeds of the loan were used to renovate the Bloomsburg theatre.

Note payable – Ford credit, payable at $776 monthly, 36 payments until December 31, 2013, including interest at 0.9% and collateralized by the vehicle purchased.

Note payable – bank, payable at $360 monthly, 36 payments until July 2012, including interest at 7.59% and collateralized by the vehicle purchased.

Notes payable — officers, carries an interest rate of 4.61%. Monthly payments of principal totaling $4 plus interest are required. The bank requires that the Company meet all financial covenants before the payment of principal on this loan unless approved by the bank. The loan matures in March 2016. The borrowings were used to finance theatre projects and to provide operating capital. The note is subordinated to the bank loans noted above and is unsecured.

Notes payable — officers, carries an interest rate of 4.35%. Interest payments are required at least annually. The loan matures in October 2016 and is unsecured. The note is subordinated to the bank loans noted above. The proceeds of the loan were used for operating capital.

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CINEMA SUPPLY, INC.

NOTES TO FINANCIAL STATEMENTS

For the years ended October 31, 2011 and 2010

(in thousands except share data)

Line of credit - The Company has an available line-of-credit from a bank for $600. The credit line carries an interest rate at prime based on the Wall Street Journal prime lending rate and is collateralized by the assets noted in A) above. The credit line is renewable annually. The interest rate at October 31, 2011 and 2010 was 4.50%. The Company had outstanding $ 509 and $ 478 at October 31, 2011 and 2010, respectively. The line of credit is guaranteed by officers of the Company.

Note payable – Town and Country LLC, payable at $338 monthly, 36 payments until March 2011, including interest at 6.68% and collateralized by the equipment purchased.

Maturities of notes, mortgages payable and line of credit for each of the next five years based on amounts due at October 31, 2011 are as follows:

Years Ending October 31,
2012	$	1,782
2013		1,050
2014		1,060
2015		406
2016		2,066
Thereafter		779
	$	7,143

7. INCOME TAXES

The components of the income tax provision for the years ended October 31, 2011 and 2010 are as follows:

	2011			2010
Federal:
Current	$	155		$	(91	)
Deferred		(140	)		176
Total Federal		15			85
State:
Current		33			(17	)
Deferred		(16	)		34
Total State		17			17
Total income tax provision	$	32		$	102

F-49

Table of Contents

CINEMA SUPPLY, INC.

NOTES TO FINANCIAL STATEMENTS

For the years ended October 31, 2011 and 2010

(in thousands except share data)

Significant components of the Company’s net deferred tax liabilities consisted of the following as of October 31, 2011 and 2010 :

		2011			2010
Deferred tax assets:
Accrued expenses – current	$	151		$	118
Accrued expenses – long term		140			109
Total deferred tax assets		291			227
Deferred tax liabilities:
Property and equipment		(1,146	)		(1,239	)
Total deferred tax (liabilities)		(1,146	)		(1,239	)

Net deferred tax liabilities	$	(855	)	$	(1,012	)

The differences between the United States statutory federal tax rate and the Company’s effective tax rate are as follows:

	2011		2010
Provision at the U.S. Statutory federal tax rate	34.0	%	34.0	%
State income taxes, net of federal benefit	7.8	%	6.6	%
Non-deductible expenses	5.5	%	.2	%
Income tax provision	47.3	%	40.8	%

F-50

Table of Contents

CINEMA SUPPLY, INC.

NOTES TO FINANCIAL STATEMENTS

For the years ended October 31, 2011 and 2010

(in thousands except share data)

The Company utilizes accounting principles under ASC Subtopic 740-10 to assess the accounting and disclosure for uncertainty in income taxes. The Company recognizes accrued interest and penalties associated with uncertain tax positions, if any, as part of income tax expense. There were no income tax related interest and penalties recorded for the fiscal years ended October 31, 2011 and 2010. Additionally, the Company has not recorded an asset for unrecognized tax benefits or a liability for uncertain tax positions at October 31, 2011 and 2010. The Company files income tax returns in the U.S. federal jurisdiction and Pennsylvania. For federal and state income tax purposes, the Company’s years ended October 31, 2011 through 2008 remains open for examination by the tax authorities.

8. COMMITMENTS AND CONTINGENCIES

Management believes that it is in substantial compliance with all relevant laws and regulations that apply to the Company, and is not aware of any current, pending or threatened litigation that could materially impact the Company.

All of the Company’s current operations are located in Pennsylvania, with the customer base being public attendance. The Company’s main suppliers are the major movie studios, primarily located in the greater Los Angeles area. Any events impacting the region the Company operates in, or impacting the movie studios, who supply movies to the Company, could significantly impact the Company’s financial condition and results of operations.

9. STOCKHOLDER’S EQUITY

Capital Stock

As of October 31, 2011 and 2010, the Company's authorized capital stock consisted of 100 shares of common stock. As of October 31, 2011 and 2010, 40 shares were issued and outstanding. All of the shares were held by one individual.

Dividends

No dividends were declared on the Company’s common stock during the years ended October 30, 2011 and 2010 and the Company does not anticipate doing so.

10. RELATED PARTY TRANSACTIONS

The Company borrowed from its officers under terms of the loan agreements described in Note 6. The Company used the funds for construction and expansion projects and for operating capital. Interest accrued on these loans at October 31, 2011 and 2010 totaled $334 and $254, respectively. Interest expense was $80 for each of the years ended October 31, 2011 and 2010.

The Company leases the corporate office, warehouse, and a drive-in theatre from a related party for rent expense of $11 for each of the years ended October 31, 2011 and 2010, respectively.

F-51

Table of Contents

CINEMA SUPPLY, INC.

NOTES TO FINANCIAL STATEMENTS

For the years ended October 31, 2011 and 2010

(in thousands except share data)

11. RETIREMENT PLAN

The Company makes contributions to a SIMPLE IRA plan for the benefit of each eligible employee. The Company provides a match contribution equal to 3% of the covered employees' compensation. The Company's contribution for years ended October 31, 2011 and 2010 totaled $10 and $ 9, respectively.

12. SUPPLEMENTAL CASH FLOW DISCLOSURE

	October 31, 2011		October 31, 2010
Interest paid	$	383	$	341
Income taxes paid		34		-
Assets acquired under capital leases		-		290

13. SUBSEQUENT EVENTS

In May 2011, Cinema Supply, Inc. executed an asset purchase agreement for the Theatres for sale of Theatre assets and assumption of Theatre operating lease by a subsidiary of Digital Cinema Destinations Corp. (“Digiplex”), an operator of movie theatres headquartered in New Jersey. The acquisition of the Theatres is contingent upon Digiplex obtaining financing sufficient to fund the purchase price. The agreed upon purchase price for the Theatres is $14,000, payable in cash. The asset purchase agreement may be terminated by the Company if the acquisition is not completed by December 31, 2011; however Digiplex may extend this termination option to March 31, 2012, by paying the company $100 by December 31, 2011. The payment of $100 would be treated as a non-refundable deposit against the purchase price. None of the Company’s existing liabilities, notes payable and capital leases would be assumed by Digiplex.

F-52

Table of Contents

CINEMA SUPPLY, INC.

CONDENSED BALANCE SHEETS

(in thousands, except share and per share data)

	January 31,		October 31,
	2012		2011
ASSETS	(unaudited)
CURRENT ASSETS
Cash and cash equivalents	$	78	$	67
Accounts receivable		10		11
Inventory		50		61
Deferred taxes		319		151
Prepaid expenses and other		93		53
Total current assets		550		343
Property and equipment, net		13,200		13,509
Deferred financing costs, net		25		27
TOTAL ASSETS	$	13,775	$	13,879

LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable	$	769	$	843
Accrued expenses		1,558		1,008
Notes payable, current portion		1,402		1,782
Capital lease obligations, current portion		58		56
Total current liabilities		3,787		3,689
Accrued interest - officers		353		334
Notes payable, net of current portion		3,346		3,601
Note payable - officers		1,760		1,760
Deferred rent expense		953		957
Deferred taxes		903		1,005
Capital lease obligations, net of current portion		125		141
TOTAL LIABILITIES		11,227		11,487
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Common stock, $100 par value: 100 shares authorized , 40 shares issued and outstanding		4		4
Additional paid-in-capital		108		108
Retained earnings		2,436		2,280
Total stockholders' equity		2,548		2,392
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	13,775	$	13,879

The accompanying notes are an integral part of the unaudited condensed financial statements

F-53

CINEMA SUPPLY, INC.

CONDENSED STATEMENTS OF OPERATIONS (UNAUDITED)

FOR THE THREE MONTHS ENDED JANUARY 31, 2012 AND 2011

(In thousands)

	2012		2011
REVENUES
Admissions	$	2,574	$	2,687
Concessions		1,175		1,091
Other		131		175
Total revenues		3,880		3,953
COSTS AND EXPENSES
Cost of operations:
Film rent expense		1,525		1,514
Cost of concessions		167		172
Salaries and wages		360		361
Facility lease expense		346		367
Utilities and other		624		645
General and administrative expenses		224		200
Depreciation and amortization		310		341
Total costs and expenses		3,556		3,600
OPERATING INCOME		324		353
Interest expense		99		125
Income before income taxes		225		228
Income tax expense		96		108
NET INCOME	$	129	$	120

The accompanying notes are an integral part of the unaudited condensed financial statements

F-54

CINEMA SUPPLY, INC.

CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)

FOR THE THREE MONTHS ENDED JANUARY 31, 2012 AND 2011

(in thousands)

	2012			2011
Cash flows from operating activities
Net income	$	129		$	120
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		310			341
Deferred taxes		(270	)		(535	)
Changes in operating assets and liabilities:
Accounts receivable		1			(11	)
Income tax refund receivable		-			(10	)
Inventory		11			5
Prepaid expenses and other assets		(38	)		11
Accounts payable and accrued expenses		476			824
Deferred rent		(4	)		(5	)
Net cash provided by operating activities		615			740
Cash flows from financing activities
Accrued interest - officers		19			19
Distribution to owner		-			(150	)
Contribution from owner		26			-
Payments under capital lease obligations		(14	)		(11	)
Payments of notes payable		(635	)		(580	)
Net cash used in financing activities		(604	)		(722	)
Net change in cash and cash equivalents		11			18
Cash and cash equivalents at beginning of period		67			50
Cash and cash equivalents at end of period	$	78		$	68

The accompanying notes are an integral part of the unaudited condensed financial statements

F-55

CINEMA SUPPLY, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)

(in thousands, except share and per share data)

1. THE COMPANY AND BASIS OF PRESENTATION

The accompanying unaudited condensed financial statements of the Company were prepared in accordance with generally accepted accounting principles in the United States of America ("U.S. GAAP") for interim financial information. Certain information and disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted. Accordingly, these condensed financial statements should be read in conjunction with the Company's historical financial statements and accompanying notes for the years ended October 31, 2011 and 2010, included in this Form S-1 Registration Statement. In the opinion of management, all adjustments, consisting of a normal recurring nature, considered necessary for a fair presentation have been included in the unaudited condensed financial statements. The operating results for the three months ended January 31, 2012 are not necessarily indicative of the results expected for the full year ending October 31, 2012.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Use of Estimates

Revenue Recognition

Cash Equivalents

The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. At January 31, 2012 and October 31, 2011, the Company held substantially all of its cash in demand deposit accounts and overnight investments, and cash held at the theatres in the normal course of business.

F-56

CINEMA SUPPLY, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)

(in thousands, except share and per share data)

Accounts receivable

Accounts receivable are recorded at the invoiced amount for theatre concession supplies and do not bear interest. The Company reports accounts receivable, net of any allowance for doubtful accounts, to represent the Company’s estimate of the amount that ultimately will be realized in cash. The Company will review collectability of accounts receivable based on the aging of the accounts and historical collection trends. When the Company ultimately concludes a receivable is uncollectible, it is written off.

Inventories

Inventories consist of concession products and related supplies. The Company states inventories on the basis of first-in, first-out method, stated at the lower of cost or market.

Property and Equipment

The Company records depreciation and amortization using the straight-line method over the following estimated lives:

Leasehold improvements	lesser of lease term or estimated useful life of asset

Machinery and equipment	3-10 years

Furniture and fixtures	3 – 10 years

Vehicles	5 years

Buildings	10-40 years

Concentration of Credit Risk

Fair Value of Financial Instruments

The carrying amounts of cash, cash equivalents, accounts receivable and accounts payable, approximate their fair values, due to their short term nature.

F-57

CINEMA SUPPLY, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)

(in thousands, except share and per share data)

Deferred Rent Expense

The Company recognizes rent expense on a straight-line basis, after considering the effect of rent escalation provisions resulting in a level monthly rent expense for each lease over its term.

Film Rent Expense

Segments

As of January 31, 2012, the Company managed its business under one reportable segment: theatre exhibition operations. All of the Company’s operations are located in the United States.

Recent Accounting Pronouncements

F-58

CINEMA SUPPLY, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)

(in thousands, except share and per share data)

3. PROPERTY AND EQUIPMENT

Property and equipment, net was comprised of the following:

	January 31, 2012		October 31, 2011
Leasehold improvements	$	15,787	$	15,787
Machinery and equipment		3,574		3,574
Furniture and fixtures		3,409		3,409
Vehicles		150		150
Buildings and improvements		69		69
Land		32		32
	$	23,021	$	23,021
Less: accumulated depreciation and amortization		(9,821)		(9,512	)
Property and equipment, net	$	13,200	$	13,509

4. LEASES

OPERATING LEASES

The Company leases five theatre facilities under operating leases for initial terms of 15-20 years. Each lease provides for monthly payments subject to rent escalations at each renewal date. Each lease offers options to renew for periods ranging from 4 to 5 years. The Company is also required to pay real property taxes and common maintenance expenses. In addition, rent includes an amount equal to a percentage of revenue generated in excess of a base amount of total sales. The Company leases the corporate office, warehouse, and a drive-in theatre from a related party for rent expense of less than $1 for each of the three months ended January 31, 2012 and 2011. There is no set lease maturity. The Company also leases theatre equipment and office equipment under operating leases expiring at various dates through September 2013. Lease rent expense amounted to $346 and $367 for the three months ended January 31, 2012 and 2011, respectively. Included in lease rent expense is percentage rent totaling $4 for each of the three months ended January 31, 2012 and 2011.

At January 31, 2012 future minimum lease payments over the next five years, including the remainder of Fiscal 2012 approximated:

Fiscal Year	Amount
2012	$	1,072
2013		1,338
2014		1,382
2015		1,382
2016		1,316
2017		988
Thereafter		6,592
	$	14,070

F-59

CINEMA SUPPLY, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)

(in thousands, except share and per share data)

CAPITAL LEASES

The Company leases certain equipment under capital leases that expire through December 2014. The assets are being amortized over the shorter of their lease terms or their estimated useful lives. The applicable amortization is included in depreciation and amortization expense in the accompanying financial statements. Amortization of assets under capital leases charged to expense during each of the three months ended January 31, 2012 and 2011 was $16.

The following is a summary of equipment held under capital leases included in property and equipment:

	January 31, 2012		October 31, 2011
Equipment	$	312	$	312
Less: accumulated amortization		130		114
Net	$	182	$	198

Future maturities of capital lease obligations as of January 31, 2012 over the next five years, including the remainder of Fiscal 2012 is as follows:

Fiscal Year	Amount
2012	$	72
2013		74
2014		76
2015		6
2016		-
Thereafter		-
Total minimum payments		228
Less: amount representing interest		(45	)
Present value of minimum payments		183
Less: current portion		(58	)
	$	125

5. NOTES PAYABLE AND LEASEHOLD MORTGAGES PAYABLE

Notes payable and leasehold mortgages payable at January 31, 2012 and October 31, 2011 consisted of the following:

January 31, 2012:		Total		Current portion		Non-current portion
B	Leasehold mortgage payable-bank	$	52	$	52	$	-
C	Leasehold mortgage payable-bank		1,875		668		1,207
D	Leasehold mortgage payable-bank		761		163		598
E	Leasehold mortgage payable-bank		1,697		165		1,532
F	Note payable – Ford credit		18		9		9
G	Note payable – bank		2		2		-
H	Note payable-officers		1,510		-		1,510
I	Note payable-officers		250		-		250
J	Line of credit		343		343		-
Total		$	6,508	$	1,402	$	5,106

F-60

CINEMA SUPPLY, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)

(in thousands, except share and per share data)

October 31, 2011:		Total		Current portion		Non-current portion
A	Leasehold mortgage payable-bank	$	54	$	54	$	-
B	Leasehold mortgage payable-bank		211		211		-
C	Leasehold mortgage payable-bank		2,038		661		1,377
D	Leasehold mortgage payable-bank		800		160		640
E	Leasehold mortgage payable-bank		1,748		175		1,573
F	Note payable – Ford credit		20		9		11
G	Note payable – bank		3		3		-
H	Note payable-officers		1,510		-		1,510
I	Note payable-officers		250		-		250
J	Line of credit		509		509		-
Total		$	7,143	$	1,782	$	5,361

The Company's loan agreement with the bank contains certain restrictions and covenants. Under these restrictions, the Company must maintain a debt to net worth ratio of no more than 5.75 to 1 and maintain a debt service coverage ratio of a minimum of 1.20 to 1 annually. The Company was in violation of this covenant as of October 31, 2011. The Company obtained a waiver of the October 31, 2011 debt service coverage ratio which cures the debt covenant violation whereas the bank will not call the debt due. In addition, the corporate officers may not encumber their personal marketable securities without the bank's consent.

Leasehold mortgage payable — bank, carries an interest rate of prime based on the commercial prime rate of Susquehanna Bank and requires monthly payments sufficient to amortize the loan until maturity. The maturity date of the loan is February 2012. The interest rate for the three months ended January 31, 2012 and 2011 was 4.5%. The note is collateralized as noted in A) above. The proceeds of the loan were used to build the Reading theatre.

Leasehold mortgage payable — bank, carries an interest rate of 6.5% for 48 months with a variable rate indexed to the Wall Street Journal prime lending rate thereafter. Current monthly payments total $ 62. The maturity date of the loan is March 2015. The interest rate for the three months ended January 31, 2012 and 2011 was 4.5%. The note is collateralized as described in A) above. The proceeds of the loan were used to build the Camp Hill theatre.

F-61

CINEMA SUPPLY, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)

(in thousands, except share and per share data)

Note payable – Ford credit, payable at $776 monthly, 36 payments until December 31, 2013, including interest at 0.9% and collateralized by the vehicle purchased.

Note payable – bank, payable at $360 monthly, 36 payments until July 2012, including interest at 7.59% and collateralized by the vehicle purchased.

Line of credit - The Company has an available line-of-credit from a bank for $600. The credit line carries an interest rate at prime based on the Wall Street Journal prime lending rate and is collateralized by the assets noted in A) above. The credit line is renewable annually. The interest rate for the three months ended January 31, 2012 and 2011 was 4.5%. The Company had outstanding $343 and $509 at January 31, 2012 and October 31, 2011, respectively. The line of credit is guaranteed by officers of the Company.

F-62

CINEMA SUPPLY, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)

(in thousands, except share and per share data)

6. INCOME TAXES

The Company’s provision for income tax was approximately $96 and $108 for the three months ended January 31, 2012 and 2011, respectively, or 42.6% and 47.2% of pre-tax income for the three months ended January 31, 2012 and 2011, respectively The effective tax rates for 2012 and 2011 periods reflect provisions for both current and deferred federal and state income taxes.

The Company utilizes accounting principles under ASC Subtopic 740-10 to assess the accounting and disclosure for uncertainty in income taxes. The Company recognizes accrued interest and penalties associated with uncertain tax positions, if any, as part of income tax expense. There were no income tax related interest and penalties recorded for the three months ended January 31, 2012 and 2011. Additionally, the Company has not recorded an asset for unrecognized tax benefits or a liability for uncertain tax positions at January 31, 2012 and 2011. The Company files income tax returns in the U.S. federal jurisdiction and Pennsylvania. For federal and state income tax purposes, our years ended October 31, 2011 through 2008 remain open for examination by the tax authorities.

7. COMMITMENTS AND CONTINGENCIES

8. STOCKHOLDER’S EQUITY

Capital Stock

As of January 31, 2012 and October 31, 2011, the Company's authorized capital stock consisted of 100 shares of common stock. As of January 31, 2012 and October 31, 2011, 40 shares were issued and outstanding. All of the shares were held by one individual.

Dividends

No dividends were declared on the Company’s common stock during the three months ended January 31, 2012 and 2011.The Company does not anticipate declaring dividends in the immediate future.

F-63

CINEMA SUPPLY, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)

(in thousands, except share and per share data)

9. RELATED PARTY TRANSACTIONS

The Company borrowed from its officers under terms of the loan agreements described in Note 5. The Company used the funds for construction and expansion projects and for operating capital. Interest accrued on these loans at January 31, 2012 and October 31, 2011 totaled $353 and $334, respectively. Interest expense was $18 for each of the three months ended January 31, 2012 and 2011.

The Company leases the corporate office, warehouse, and a drive-in theatre from a related party for rent expense of $2 for each of the three months ended January 31, 2012 and 2011.

10. SUPPLEMENTAL CASH FLOW DISCLOSURE

Supplemental cash flow disclosures for the three months ended January 31, 2012 and 2011 were as follows:

	2012		2011
Interest paid	$	79	$	104
Income taxes paid		136		-

11. SUBSEQUENT EVENTS

In May 2011, Cinema Supply, Inc. executed an asset purchase agreement for the Theatres for sale of Theatre assets and assumption of Theatre operating lease by a subsidiary of Digital Cinema Destinations Corp. (“Digiplex”), an operator of movie theatres headquartered in New Jersey. The acquisition of the Theatres is contingent upon Digiplex obtaining financing sufficient to fund the purchase price. The agreed upon purchase price for the Theatres is $14,000, payable in cash. The asset purchase agreement was extended to March 31, 2012. None of the Company’s existing liabilities, notes payable and capital leases would be assumed by Digiplex.

F-64

Report of Independent Registered Public Accounting Firm

The Stockholder of Lisbon Theaters, Inc.

We have audited the accompanying balance sheets of Lisbon Theaters, Inc. (the “Company) as of December 31, 2011 and 2010 and the related statements of operations, stockholder’s deficit and cash flows for each of the years in the two-year period ended December 31, 2011. The financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Lisbon Theaters, Inc. as of December 31, 2011 and 2010, and the results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2011, in conformity with accounting principles generally accepted in the United States of America

/s/ EISNERAMPER LLP

Edison, New Jersey

February 13, 2012

F-65

Table of Contents

LISBON THEATERS, Inc.

BALANCE SHEETS

December 31, 2011 and 2010

(in thousands, except share and per share data)

	December 31,			December 31,
	2011			2010
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	232		$	139
Accounts receivable		60			4
Inventory		6			10
Prepaid expenses and other assets		-			13
Total current assets		298			166

Property and equipment, net		5,413			5,596
Deferred financing costs, net		28			53

TOTAL ASSETS	$	5,739		$	5,815

LIABILITIES AND STOCKHOLDER’S DEFICIT

CURRENT LIABILITIES
Accounts payable	$	154		$	41
Accrued expenses		210			244
Payable to vendor for digital systems		354			-
Gift card liability		151			63
Due to affiliate		213			446
Line of credit		113			137
Notes payable, current portion		314			295
Capital lease obligations, current portion		121			108
Total current liabilities		1,630			1,334

Notes payable, net of current portion		3,819			4,133
Capital lease obligations, net of current portion		334			455
Deferred rent expense		303			288
Total liabilities		6,086			6,210
COMMITMENTS AND CONTINGENCIES
STOCKHOLDER'S EQUITY
Common stock, no par value: 5,000 shares authorized , 5,000 shares issued and outstanding		5			5
Accumulated deficit		(352	)		(400	)

Total stockholder’s deficit		(347	)		(395	)

TOTAL LIABILITIES AND STOCKHOLDER'S DEFICIT	$	5,739		$	5,815

See accompanying notes to the financial statements.

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LISBON THEATERS, Inc.

STATEMENTS OF OPERATIONS

For the years ended December 31, 2011 and 2010

(In thousands)

	2011			2010
REVENUES
Admissions	$	2,830		$	3,145
Concessions		1,381			1,475
Other		50			92
Total revenues		4,261			4,712
COSTS AND EXPENSES
Cost of operations:
Film rent expense		1,496			1,797
Cost of concessions		248			262
Salaries and wages		412			506
Facility lease expense		478			572
Utilities and other		629			663
General and administrative expenses		183			205
Depreciation and amortization		537			474
Total costs and expenses		3,983			4,479
OPERATING INCOME		278			233
OTHER EXPENSE (INCOME)
Impairment of property and equipment		129			-
Interest expense		386			400
NET LOSS	$	(237	)	$	(167	)

See accompanying notes to the financial statements.

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Table of Contents

LISBON THEATERS, Inc.

STATEMENT OF STOCKHOLDER’S DEFICIT

December 31, 2011 and 2010

(In thousands)

	Common Stock				Accumulated			Total stockholder's
	Shares		Amount		deficit			deficit
Balance, December 31, 2009		5,000	$	5	$	(232	)	$	(227	)
Net loss		-		-		(167	)		(167	)
Distribution to shareholder		-		-		(1	)		(1	)
Balance, December 31, 2010		5,000		5		(400	)		(395	)
Net loss		-		-		(237	)		(237	)
Contributions from shareholder		-		-		285			285
Balance, December 31, 2011		5,000	$	5	$	(352	)	$	(347	)

See accompanying notes to the financial statements.

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Table of Contents

LISBON THEATERS, Inc.

STATEMENTS OF CASH FLOWS

For the years ended December 31, 2011 and 2010

	2011			2010
Cash flows from operating activities
Net loss	$	(237	)	$	(167	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization		537			474
Impairment of property and equipment		129			-
Changes in operating assets and liabilities:
Accounts receivable		(56	)		(4	)
Inventory		4			4
Prepaid expenses and other assets		38			40
Accounts payable, accrued expenses, and gift card liability		176			(5	)
Payable to vendor for digital systems		354			-
Deferred rent		15			20
Net cash provided by operating activities		960			362
Cash flows from investing activities
Purchases of property and equipment		(492	)		(52	)
Net cash used in investing activities		(492	)		(52	)
Cash flows from financing activities
Due to affiliate		(233	)		(78	)
Distribution to shareholder		-			(1	)
Contribution from shareholder		285			-
Borrowings under line of credit					10
Payments under line of credit		(24)			-
Payments under capital lease obligations		(108	)		-
Payments of notes payable		(295	)		(271	)
Net cash used in financing activities		(375	)		(340	)
Net change in cash and cash equivalents		93			(30	)
Cash and cash equivalents at beginning of year		139			169
Cash and cash equivalents at end of year	$	232		$	139

See accompanying notes to the financial statements

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Table of Contents

LISBON THEATERS, INC.

NOTES TO FINANCIAL STATEMENTS

For the years ended December 31, 2011 and 2010

(in thousands)

1. THE COMPANY AND BASIS OF PRESENTATION

Lisbon Theaters, Inc. (the “Company”) was incorporated on June 4, 2004 as a Connecticut Corporation, doing business as the Lisbon Cinema. The Company operates a 12-screen movie theatre located in Lisbon, Connecticut (the “Theatre”).

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Use of Estimates

Revenue Recognition

Revenues are generated principally through admissions and concessions sales for feature films with proceeds received in cash or credit card at the Company’s point of sale terminals at the Theatre. Revenue is recognized at the point of sale. Credit card sales are normally settled in cash within approximately three business days from the point of sale, and any credit card chargebacks have been insignificant. Other operating revenues are principally from amounts earned under advertising contracts and games played in the Theatre, and are recognized as performed or earned under contractual terms. The Company also sells theatre admissions in advance of the applicable event, and sells gift cards for patrons’ future use. The Company defers the revenue from gift cards until considered redeemed. The Company estimates the gift card breakage rate based on historical redemption patterns. Unredeemed gift cards are recognized as revenue only after such a period of time indicates, based on historical experience, the likelihood of redemption is remote, and based on applicable laws and regulations, in evaluating the likelihood of redemption, the period outstanding, the level and frequency of activity, and the period of inactivity is evaluated.

Cash Equivalents

The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. At December 31, 2011 and 2010, the Company held substantially all of its cash in demand deposit accounts and cash held at the Theatre in the normal course of business.

Accounts receivable

Accounts receivable represents amounts due under its agreement with third party advertising providers and for virtual print fees (“VPF”) under a master license agreement with a third party vendor. The Company reports accounts receivable net of any allowance for doubtful accounts to represent the Company’s estimate of the amount that ultimately will be realized in cash. The Company will review collectability of accounts, if any, receivable based on the aging of the accounts and historical collection trends. When the Company ultimately concludes a receivable is uncollectible, it is written off.

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LISBON THEATERS, INC.

NOTES TO FINANCIAL STATEMENTS

For the years ended December 31, 2011 and 2010

(in thousands)

Inventories

Inventories consist of food and beverage concession products and related supplies. The Company states inventories on the basis of first-in, first-out method, stated at the lower of cost or market.

Property and Equipment

The Company records depreciation and amortization using the straight-line method over the following estimated lives:

Equipment	3 - 10 years

Furniture and fixtures	7 – 10 years

Buildings and improvements	15 - 40 years

Impairment of Long-Lived Assets

During the year ended December 31, 2011, the Company had an impairment loss of $129 relate to 35 mm equipment that was no longer in use, due to the conversion to digital projection equipment and the Company not deeming 35mm having a market. There was no impairment charge for the year ended December 31, 2010.

Concentration of Credit Risk

Financial instruments that could potentially subject the Company to concentration of credit risk, if held, would be included in accounts receivable. Collateral is not required on accounts receivables. It is anticipated that in the event of default, normal collection procedures would be followed.

F-71

LISBON THEATERS, INC.

NOTES TO FINANCIAL STATEMENTS

For the years ended December 31, 2011 and 2010

(in thousands)

Leases

The Company leases the land on which the Theatre is located, under a non-cancelable lease agreement for an initial 25 year term with three five year renewal options. The Company, at its option, can renew the lease at defined rates for various periods. The lease provides for contingent rentals based on the revenue results of the Theatre and require the payment of taxes, insurance, and other costs applicable to the property. Also, the lease contains escalating minimum rental provisions. There are no conditions imposed upon the Company by its lease agreement or by parties other than the lessor that legally obligate the Company to incur costs to retire assets as a result of a decision to vacate the lease. The lease does not require the Company to return the leased property to the lessor in its original condition. The Company accounts for this lease as an operating lease and accounts for its lease under the provisions of ASC Topic 840, Leases and other authoritative accounting literature. The lease does not transfer title to the land and does not contain a bargain purchase option.

The Company leases certain equipment for use in the Theatre, under agreements that expire through 2017. The Company accounts for these leases as capital leases.

Fair Value of Financial Instruments

The carrying amounts of cash, cash equivalents, accounts receivable and accounts payable, approximate their fair values, due to their short term nature.

Income Taxes

No provision has been made in the financial statements for income taxes because the Company reports its income and expenses as a Subchapter S Corporation whereby all income and losses are taxed at the shareholder level. Income tax rules and regulations are subject to interpretation, require judgment by the Company and may be challenged by the taxation authorities. In accordance with ASC Subtopic 740-10, the Company recognizes a tax benefit only for tax positions that are determined to be more likely than not sustainable based on the technical merits of the tax position. With respect to such tax positions for which recognition of a benefit is appropriate, the benefit is measured at the largest amount of benefit that is greater than 50 percent likely of being realized upon ultimate settlement. Tax positions are evaluated on an ongoing basis as part of the Company's process for determining the provision for income taxes. Any interest and penalties determined to result from uncertain tax position will be classified as interest expense and other expense.

Deferred Rent Expense

The Company recognizes rent expense on a straight-line basis, after considering the effect of rent escalation provisions resulting in a level monthly rent expense the lease term.

F-72

LISBON THEATERS, INC.

NOTES TO FINANCIAL STATEMENTS

For the years ended December 31, 2011 and 2010

(in thousands)

Deferred Financing Costs

Deferred financing costs consist of unamortized debt financing costs amortized on a straight-line basis over the term of the respective debt and are included in interest expense. The straight-line basis is not materially different from the effective interest method. The amount included in interest expense was $24 and $23 for years ended December 31, 2011 and 2010, respectively.

Film Rent Expense

The Company estimates film rent expense and related film rent payable based on management's best estimate of the ultimate settlement of the film costs with the film distributors. Generally, less than one-quarter of film rent expense is estimated at period-end, with the majority being agreed to under firm terms. The length of time until these costs are known with certainty depends on the ultimate duration of the film's theatrical run, but is typically "settled" within one to two months of a particular film's opening release. Upon settlement with the film distributors, film rent expense and the related film rent payable are adjusted to the final film settlement. The film rent expense on the statements of operations for the year ended December 31, 2011, was reduced by $97, related to VPFs under a master license agreement exhibitor-buyer arrangement with a third party vendor. VPFs represent a reduction in film rent paid to film distributors. Pursuant to this master license agreement, the Company purchased and owns digital projection equipment and the third party vendor, through their agreements with film distributors, will collect and remit VPFs to the Company , net of a 10% administrative fee. VPFs are generated based on initial display of titles on the digital projection equipment. There were no VPFs collected in 2010.

Advertising Costs

The Company expenses advertising costs as incurred. Advertising costs incurred for the years ended December 31, 2011 and 2010 was $44 and $73, respectively.

Segments

As of December 31, 2011 and 2010, the Company managed its business under one reportable segment: theatre exhibition operations. All of the Company’s operations are located in the United States.

Recent Accounting Pronouncements

In May 2011, the FASB issued ASU 2011-4, “Amendments to Achieve Common Fair Value Measurements and Disclosure Requirements in US GAAP and IFRS”, to substantially converge the fair value measurement and disclosure guidance in US GAAP and IFRS. The most significant change in disclosures is an expansion of the information required for Level 3 measurements based on unobservable inputs. The standard is effective for fiscal years beginning after December 15, 2011. The Company will adopt this standard January 1, 2012 and does not expect the adoption of this standard to have a material impact on the financial statements and disclosures.

In June 2011, the FASB issued ASU 2011-5, “Presentation of Comprehensive Income”, which eliminates the current option to report other comprehensive income and its components in the statement of stockholders’ equity. Instead, an entity will be required to present items of net income and other comprehensive income in one continuous statement or in two separate, but consecutive, statements. The standard is effective for fiscal years beginning after December 15, 2011. The Company will adopt this standard as of January 1, 2012 and does not expect it to have a material impact on the financial statements and disclosures.

F-73

LISBON THEATERS, INC.

NOTES TO FINANCIAL STATEMENTS

For the years ended December 31, 2011 and 2010

(in thousands)

3.	BALANCE SHEET COMPONENTS

PROPERTY AND EQUIPMENT

Property and equipment, net was comprised of the following:

	December 31, 2011			December 31, 2010
Equipment	$	3,087		$	2,880
Furniture and fixtures		95			95
Buildings and improvements		4,936			4,936
	$	8,118		$	7,911
Less: accumulated depreciation and amortization		(2,705	)		(2,315	)
Property and equipment, net	$	5,413		$	5,596

ACCRUED EXPENSES

Accrued expenses consisted of the following:

	December 31, 2011		December 31, 2010
Accrued payroll	$	94	$	91
Accrued percentage rent		13		74
Other accrued expenses		103		79
Total	$	210	$	244

LEASES

OPERATING LEASE

The Company leases the land on which the Theatre is located under an operating lease with an initial term of 25 years. The lease provides for monthly payments subject to rent escalations during the initial lease term and at each renewal date. The lease offers three options to renew for periods of five years. The Company is reasonably assured the lease renewals will be exercised. The Company is also required to pay real property taxes and common maintenance expenses. In addition, rent includes an amount equal to a percentage of revenue generated in excess of a base amount of total revenues, as defined. Facility lease expense amounted to $478 and $572 for the years ended December 31, 2011 and 2010, respectively. Included in facility lease expense is percentage rent totaling $13 and $74 for the years ended December 31, 2011 and 2010, respectively.

F-74

LISBON THEATERS, INC.

NOTES TO FINANCIAL STATEMENTS

For the years ended December 31, 2011 and 2010

(in thousands)

At year-end, future minimum lease payments were as follows:

Year	Amount
2012	$	300
2013		300
2014	300
2015	314
2016	319
Thereafter	9,879
	$	11,412

CAPITAL LEASES

The Company leases certain theatre equipment under capital leases that expire through 2017. The assets are being amortized over the shorter of their lease terms or their estimated useful lives. The applicable amortization is included in depreciation and amortization expense in the accompanying financial statements. Amortization of assets under capital leases charged to expense during the years ended December 31, 2011 and 2010 was $92 and $41, respectively.

The following is a summary of property held under capital leases included in property and equipment:

	December 31, 2011		December 31, 2010
Equipment	$	697	$	697
Less: accumulated amortization		190		98
Net	$	507	$	599

F-75

LISBON THEATERS, INC.

NOTES TO FINANCIAL STATEMENTS

For the years ended December 31, 2011 and 2010

(in thousands)

Future maturities of capital lease payments as of December 31, 2011 for each of the next five years and in the aggregate are:

Year ending
2012	$	153
2013		151
2014		107
2015		83
2016		24
Thereafter		22
Total minimum payments		540
Less: amount representing interest		(85	)
Present value of minimum payments		455
Less: current portion		(121	)
	$	334

5. NOTES PAYABLE

Notes payable at December 31, 2011 and 2010 consisted of the following:

2011:		Total		Current portion		Non-current portion
	Mortgage loan on building	$	2,915	$	74	$	2,841
	Note payable-bank		574		211		363
	Note payable-SBA		644		29		615
Total		$	4,133	$	314	$	3,819

2010:		Total		Current portion		Non-current portion
	Mortgage loan on building	$	2,984	$	69	$	2,915
	Note payable - bank		773		199		574
	Note payable - SBA		671		27		644
Total		$	4,428	$	295	$	4,133

The mortgage loan on building is for the Company’s Theater building. Interest is 6.25% and 6.0% for the years ended December 31, 2011 and 2010 and is based on the federal rate plus 2.25%. The maturity date of the mortgage loan is March 2019. The mortgage loan is collateralized by the Theatre building and related improvements, assignment of leases and rents, and all business assets of the Company. The mortgage is personally guaranteed by the shareholder and other entities in which the shareholder has ownership or is a trustee. The proceeds of the loan were used to build the Theatre.

F-76

LISBON THEATERS, INC.

NOTES TO FINANCIAL STATEMENTS

For the years ended December 31, 2011 and 2010

(in thousands)

The mortgage loan, note payable - bank, and line of credit contains certain restrictions and covenants. The Company must maintain an annual debt service coverage ratio of at least 1.25 among all the obligations, and the obligation of the shareholder and shareholder's other affiliated entities. The Company was in violation of this covenant as of December 31, 2011. The Company has obtained a waiver of the 2011 debt service coverage ratio which cures the debt covenant violation, whereas the bank will not call the debt due.

Note payable – bank carries an interest rate of 6.25% and 6.0% for the years ended December 31, 2011 and 2010 and requires monthly payments sufficient to amortize the loan until maturity. The maturity date of the loan is July 2014. The note is collateralized by the business assets of the Company, as defined. The proceeds of the loan were used to purchase various items of equipment for the Theatre.

Note payable — SBA, carries an interest rate of 5.62% for the years ended December 31, 2011 and 2010 . Monthly payments are required in amounts that are sufficient to amortize the loan until maturity. The maturity date of the loan is September 2026.

Maturities of mortgages and notes payable each of the next five years based on amounts due at December 31, 2011 are as follows:

Years Ending December 31,
2012	$	314
2013		334
2014		254
2015		123
2016		131
Thereafter		2,977
	$	4,133

The Company has a $150 revolving of credit with a third party financial institution, at an interest rate of 5% for the years ended December 31, 2011 and 2011. The outstanding balance as of December 31, 2011 and 2010 was $113 and $137, respectively and matures in March 2012. Interest expense on the line of credit for the years ending December 31, 2011 and 2010 was approximately $4 and $6, respectively. The line of credit is collateralized by business assets of the company, as defined.

F-77

LISBON THEATERS, INC.

NOTES TO FINANCIAL STATEMENTS

For the years ended December 31, 2011 and 2010

(in thousands)

6. INCOME TAXES

In July 2006, the FASB issued ASC 740-10, which clarifies the accounting for uncertainty in tax positions taken or expected to be taken in a return. ASC 740-10 provides guidance on the measurement, recognition, classification and disclosure of tax positions, along with accounting for the related interest and penalties. ASC 740-10 became effective as of January 1, 2007 and had no impact on the Company’s financial statements. The Company has filed income tax returns in the United States and Connecticut. All tax years prior to 2008 are closed by expiration of the statute of limitations. The years ended December 31, 2008 through and including 2011, are open for examination. If the Company did incur any uncertain tax positions for the years the Company was a Subchapter S Corporation, the liability would be the responsibility of the shareholders of the Company.

7.	COMMITMENTS AND CONTINGENCIES

All of the Company’s current operations are located in Connecticut, with the customer base being public attendance. The Company’s main suppliers are the major movie studios, primarily located in the greater Los Angeles area. Any events impacting the region the Company operates in, or impacting the movie studios, who supply movies to the Company, could significantly impact the Company’s financial condition and results of operations.

The Company has a license agreement with another vendor to license motion activated theatre seats. The license period is 7 years through October 2017 and the Company pays the vendor a portion of the admissions ticket premium price during the license period.

F-78

LISBON THEATERS, INC.

NOTES TO FINANCIAL STATEMENTS

For the years ended December 31, 2011 and 2010

(in thousands)

8.	STOCKHOLDER’S EQUITY

Capital Stock

As of December 31, 2011 and 2010, the Company's authorized capital stock consisted of 5,000 shares of common stock. As of December 31, 2011 and 2010, 5,000 shares were issued and outstanding. All of the shares were held by one individual.

9.	RELATED PARTY TRANSACTIONS

The Company has a payable of $213 and $446 at December 31, 2011 and 2010, respectively, to an entity affiliated with the Company’s shareholder. The affiliated entity is a standalone theatre operation in which the shareholder has a 50% ownership interest. The Company does not have any equity ownership interest in this entity and does not have any ability over this entity’s operations. There are no interest or repayment terms.

The Company has a guarantee and cross default agreement related to obligations for the shareholder and the shareholder’s other affiliated entities. The amount of obligations under guarantee is approximately $3.2 million. The obligations of the shareholder and the shareholder’s affiliated entities have been funded through operations and other sources. The Company does not have any obligation under this guarantee as of December 31, 2011 and 2010.

10.	SUPPLEMENTAL CASH FLOW DISCLOSURE

	December 31, 2011		December 31, 2010
Interest paid	$	357	$	381
Assets acquired under capital leases		-		395

11.	SUBSEQUENT EVENT

In February 2012, the shareholder of the Company and Digital Cinema Destinations Corp. (“Digiplex”), an operator of movie theatres headquartered in New Jersey, signed an asset purchase agreement for Digiplex to acquire the assets of the Theatre. The acquisition of the Company is contingent upon Digiplex obtaining financing sufficient to fund the purchase price. The agreed upon purchase price for the Company is $6,000, payable in cash. There is also an additional purchase price payable in the future, if certain profitability measures are exceeded. Digiplex will purchase the assets of the Company and assume the operating leases. All other liabilities, capital leases and note obligations will not be assumed, including any guarantees or cross default arrangements on any other debt of the Company’s shareholder or the shareholder’s affiliated entities

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Table of Contents

Report of Independent Registered Public Accounting Firm

The Members of K&G Theatres LLC

We have audited the accompanying statements of operations, members’ deficit and cash flows of K&G Theatres LLC (the “Company”) for the years ended December 31, 2010 and 2009. The financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the statements of operations, members’ deficit, and cash flows referred to above present fairly, in all material respects, the results of operations and cash flows of K&G Theatres LLC for the years ended December 31, 2010 and 2009, in conformity with accounting principles generally accepted in the United States of America.

/s/ EISNERAMPER LLP

Edison, New Jersey

December 16, 2011

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Table of Contents

K&G THEATRES LLC

STATEMENTS OF OPERATIONS

For the years ended December 31, 2010 and 2009

(In thousands)

	2010		2009

Revenues	$	861	$	1,057
861
COSTS AND EXPENSES
Cost of operations:
Film rent expense		326		423
Cost of concessions		62		74
Salaries and wages		77		89
Facility lease expense		98		138
Utilities and other		125		157

Total cost of operations		688		881
General and administrative expenses		108		118
Depreciation and amortization		1		4
Total costs and expenses		797		1,003

OPERATING INCOME		64		54
OTHER EXPENSE
Interest		13		14

NET INCOME	$	51	$	40

See accompanying notes to the financial statements.

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K&G THEATRES LLC

STATEMENTS OF MEMBERS’ DEFICIT

(In thousands)


Balance, December 31, 2008	$	(66	)
Net income		40
Member withdrawals		(47	)
Balance, December 31, 2009		(73	)
Net income		51
Member withdrawals		(29	)
Balance, December 31, 2010	$	(51	)

See accompanying notes to the financial statements.

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Table of Contents

K&G THEATRES LLC

STATEMENTS OF CASH FLOWS

For the years ended December 31, 2010 and 2009

(in thousands)

	2010			2009
Cash flows from operating activities
Net income	$	51		$	40
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization		1			4
Changes in operating assets and liabilities:
Prepaid expenses and other current assets		1			14
Accounts payable and accrued expenses		(76	)		51
Deferred rent expense		(4	)		(2	)
Net cash (used in) provided by operating activities		(27	)		107

Cash flows from investing activities		-			-
Net cash used in investing activities		-			-
Cash flows from financing activities
Return of member capital		(29	)		(47	)
Repayments of notes payable		(4	)		(4	)
Net cash used in financing activities		(33	)		(51	)
Net change in cash		(60	)		56
Cash at beginning of year		113			57
Cash at end of year	$	53		$	113

See accompanying notes to the financial statements.

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Table of Contents

K&G THEATRES LLC

NOTES TO FINANCIAL STATEMENTS

For the years ended December 31, 2010 and 2009

(in thousands)

1. THE COMPANY AND BASIS OF PRESENTATION

K&G Theatres LLC (the "Company," or "K&G") was incorporated in the State of Connecticut on December 14, 2007. K&G operates an eight screen movie theatre located in Bloomfield, Connecticut (the “Theatre”).

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Significant estimates include, but are not limited to, those related to film rent expense settlements, depreciation and amortization, asset impairments and income taxes. Actual results could differ from those estimates.

Revenue Recognition

Revenues are generated principally through admissions and concessions sales with proceeds received in cash or via credit card at the point of sale and revenue are recognized at the point of sale. Credit card sales are normally settled in cash within approximately three business days from the point of sale, and any credit card chargebacks have been insignificant. Revenues also include rentals to a group that regularly displays ethnic-oriented movies for a fixed monthly sum. Collections of box office receipts above the fixed sum are remitted to the group, while any shortfall is paid by the group. Such revenue is recognized monthly when earned based on the contract. The Company also sells theatre admissions in advance of the applicable event, and sells gift cards for patrons’ future use. The Company defers the revenue from such sales until considered redeemed, however such sales were insignificant for the years ended December 31, 2010 and 2009.

Cash

At December 31, 2010 and 2009, the Company held substantially all of its cash in checking accounts with a major financial institutions, and had minor amounts on hand in cash at the Theatre, in the normal course of business.

Property and Equipment

The Company records depreciation and amortization using the straight-line method over the following estimated useful lives:

Equipment		5 years
Leasehold Improvements		lesser of lease term or estimated useful life

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K&G THEATRES LLC

NOTES TO FINANCIAL STATEMENTS

For the years ended December 31, 2010 and 2009

(in thousands)

Impairment of Long-Lived Assets

The Company reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amounts of the assets may not be fully recoverable. If the sum of the expected theatre cash flows, undiscounted and without interest charges is less than the carrying amount of the assets, the Company recognizes an impairment charge in the amount by which the carrying value of the assets exceeds their fair value.

The Company considers actual theatre level cash flows, future years budgeted theatre level cash flows, theatre property and equipment carrying values, the age of the theatre, competitive theatres in the marketplace, the impact of recent ticket price changes, available lease renewal options and other factors considered relevant in its assessment of impairment of individual theatre assets.. The fair value of assets is determined using the present value of the estimated future cash flows or the expected selling price less selling costs for assets of which the Company expects to dispose. Significant judgment is involved in estimating cash flows and fair value.

There were no impairment charges recorded for the years ending December 31, 2010 and 2009.

Leases

The Company's operations are conducted in premises occupied under a non-cancelable lease agreement with an initial base term of five years. The Company, at its option, can renew the leases at defined rates for another five years. There are no conditions imposed upon the Company by its lease agreements or by parties other than the lessor that legally obligate the Company to incur costs to retire assets as a result of a decision to vacate its leased properties. The lease does not require the Company to return the leased property to the lessor in its original condition (allowing for normal wear and tear) or to remove leasehold improvements. The Company accounts for its leased property under the provisions of ASC Topic 840, Leases and other authoritative accounting literature.

Income Taxes

No provision has been made in the financial statements for income taxes because the Company reports its income and expenses as a Limited Liability Company whereby all income and losses are taxed at the member level.

Income tax rules and regulations are subject to interpretation, require judgment by the Company and may be challenged by the taxation authorities. In accordance with ASC Subtopic 740-10, the Company recognizes a tax benefit only for tax positions that are determined to be more likely than not sustainable based on the technical merits of the tax position. With respect to such tax positions for which recognition of a benefit is appropriate, the benefit is measured at the largest amount of benefit that is greater than 50 percent likely of being realized upon ultimate settlement. Tax positions are evaluated on an ongoing basis as part of the Company's process for determining the provision for income taxes. Any interest and penalties determined to result from uncertain tax position will be classified as interest expense and other expense.

Deferred Rent

The Company recognizes rent expense on a straight-line basis, after considering the effect of rent escalation provisions resulting in a level monthly rent expense for each lease over its term.

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K&G THEATRES LLC

NOTES TO FINANCIAL STATEMENTS

For the years ended December 31, 2010 and 2009

(in thousands)

Film Rent Expense

Advertising

The Company expenses advertising costs as incurred. Advertising costs incurred for the years ended December 31, 2010 and 2009 were $9 and $27, respectively.

Segments

As of December 31, 2010 and 2009, the Company managed its business under one reportable segment: theatre exhibition operations. All of the Company’s operations are located in the United States.

3. CREDIT FACILITY

In February 2008, K&G entered into a credit facility with the Community Economic Development Fund (“CEDF”), with a maximum borrowing capacity of $150 (the “Loan”). Borrowings under the Loan were evidenced by promissory notes and were used for initial rent and security payments to the property owner, and various theatre improvements. All of the borrowings under the Loan were made in 2008, and aggregated $113. The Loan bears interest at the rate of 10 % per annum, and requires payments of interest only for the six months from April 2008 through September 2008, with monthly payments of principal and interest for 15 years thereafter. The loan is personally guaranteed by the owners of K&G and their spouses, and may be prepaid at any time without penalty. The lease contains no financial covenants; however it imposes restrictions on the use of Loan proceeds, sale or transfer of the business, and dividends or distributions from the business. No events of default occurred under the Loan during the fiscal years ended December 31, 2010 and 2009. Interest expense on the Loan for the years ended December 31, 2010 and 2009 was $13 and $14, respectively.

4. LEASES

The Company accounts for its lease as an operating lease. Minimum rentals payable for the non-cancelable term are summarized for the following fiscal years (in thousands):

2011	$	65
2012		68
2013		76
Thereafter		-
Total	$	209

Rent expense under the lease was $98 and $138 for the years ended December 31, 2010 and 2009, respectively.

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K&G THEATRES LLC

NOTES TO FINANCIAL STATEMENTS

For the years ended December 31, 2010 and 2009

(in thousands)

5. INCOME TAXES

In July 2006, the FASB issued ASC 740-10, which clarifies the accounting for uncertainty in tax positions taken or expected to be taken in a return. ASC 740-10 provides guidance on the measurement, recognition, classification and disclosure of tax positions, along with accounting for the related interest and penalties. ASC 740-10 became effective as of January 1, 2007 and had no impact on the Company’s financial statements. The Company has filed income tax returns in the United States and Connecticut. All tax years prior to 2008 are closed by expiration of the statute of limitations. The years ended December 31, 2008 through and including 2010, are open for examination. If the Company did incur any uncertain tax positions for the years the Company was a disregarded entity, the liability would be the responsibility of the members of the Company.

6. COMMITMENTS AND CONTINGENCIES

The Company’s management believes it is in substantial compliance with all relevant laws and regulations that apply to the Company, and are not aware of any current, pending or threatened litigation that could materially impact the Company.

The Company’s operations are located in Bloomfield Connecticut, with the customer base being public attendance. The Company’s main suppliers are the major movie studios, primarily located in the greater Los Angeles area. Any events impacting the region the Company operates in, or impacting the movie studios, who supply movies to the Company, could significantly impact the Company’s financial condition and results of operations.

7. SUPPLEMENTAL CASH FLOW INFORMATION

Supplemental cash flow information for the years ended December 31, 2010 and 2009 are as follows:

	2010		2009
Interest paid	$	13	$	12
Income taxes paid		-		1

8. SUBSEQUENT EVENTS

On February 17, 2011, certain assets of the Company were acquired by a subsidiary of Digital Cinema Destinations Corp. (“Digiplex”) pursuant to an asset purchase agreement. Digiplex is an operator of movie theatres headquartered in New Jersey. Digiplex paid cash consideration of $113, representing the amount of principal and accrued interest due under the Loan for the acquisition. The Loan was repaid in full on the acquisition date and Digiplex modified the terms of the existing operating lease on the acquisition

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Shares of Class A Common Stock

________________

PROSPECTUS

________________

, 2012

Until , 2012, 25 days after the date of this prospectus, all dealers that buy, sell or trade our common shares, whether or not participating in this offering, may be required to deliver a prospectus. This requirement is in addition to the dealers’ obligation to deliver a prospectus when acting as underwriters and with respect to unsold allotments or subscriptions.

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PART II

Information Not Required In Prospectus

Item 13. Other Expenses of Issuance and Distribution

The following table sets forth the various costs and expenses to be incurred in connection with the issuance and distribution of the securities registered under this Registration Statement, other than underwriting discounts and commissions. All such expenses are estimates, except for the SEC registration fee and the FINRA filing fee. The following expenses will be borne solely by the Company.

SEC Registration Fee	$	2,636
FINRA Filing Fee	$	2,800
Nasdaq Filing Fee	$	50,000
Printing and Engraving Expenses	$	_____
Legal Fees and Expenses	$	_____
Accounting Fees and Expenses	$	_____
Transfer Agent and Registrar Fees	$	_____
Miscellaneous Expenses	$	_____
Total	$	_____

Item 14. Indemnification of Directors and Officers

Section 145 of the Delaware General Corporation Law (“DGCL”) provides that a corporation may indemnify directors and officers as well as other employees and individuals against expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by such person in connection with any threatened, pending or completed actions, suits or proceedings in which such person is made a party by reason of such person being or having been a director, officer, employee or agent to the corporation. The DGCL provides that Section 145 is not exclusive of other rights to which those seeking indemnification may be entitled under any bylaw, agreement, vote of stockholders or disinterested directors or otherwise. Section 6.1 of Article VI of the Company’s bylaws provide for indemnification by the Company of its directors, officers, employees and agents to the fullest extent permitted by the DGCL.

Article Ninth of the Company’s Amended and Restated Certification of Incorporation eliminates the liability of a director to the corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, except to the extent such exemption from liability or limitation thereof is not permitted under Delaware law. Under Section 102(b)(7) of the DGCL, a director shall not be exempt from liability for monetary damages for any liabilities arising (i)from any breach of the director’s duty of loyalty to the corporation or its stockholders, (ii)from acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii)under Section 174 of the DGCL, or (iv)for any transaction from which the director derived an improper personal benefit.

Prior to the completion of this offering, the Company expects to purchase and maintain a director and officer insurance policy on behalf of any person who is or was a director or officer of the Company. Under such insurance policy, the directors and officers of the Company will be insured, within the limits and subject to the limitations of the policy, against certain expenses in connection with the defense of certain claims, actions, suits or proceedings, and certain liabilities which might be imposed as a result of such claims, actions, suits or proceedings, which may be brought against them by reason of being or having been such directors or officers.

Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers or persons controlling the Company pursuant to the foregoing provisions, the Company has been advised that, in the opinion of the Commission, such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable.

Item 15. Recent Sales of Unregistered Securities

The following is information furnished with regard to all securities sold by the Company within the past three years that were not registered under the Securities Act after giving effect to a one-for-two reverse stock split of our Class A and Class B common stock which was approved by the Company’s board of directors in November 2011.

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In connection with its formation in August 2010, the Company issued 200 shares of its common stock to Mr. Mayo and 100 shares of its common stock to IJM Family Limited Partnership in exchange for consideration of $415. On December 10, 2010 these shares were redeemed by the Company in exchange for 900,000 shares of the Company’s Class B common stock and 450,000 shares of our Class A common stock, respectively.

On December 31, 2010, the Company issued 87,500 shares of Class A common stock to non-employees (who subsequently became employees) and a board member, for performance of services rendered during the fiscal year. On June 30, 2011, the Company issued 15,000 shares of Class A common stock to directors and 16,665 shares to various employees. The Company sold the following shares of its Series A preferred stock to the following entities and individuals on the dates set forth below.

Name	Date	Number of Shares	Consideration
Richard P. Casey	12/28/2010	125,000	$250,000
Ullman Family Partnership	12/29/2010	250,000	$500,000
Neil T. Anderson	12/30/2010	200,000	$400,000
Jesse Sayegh	12/31/2010	250,000	$500,000
Dark Bridge	1/3/2011	50,000	$100,000
Roger Burgdorf	1/3/2011	37,500	$75,000
Sandy Marks	1/4/2011	25,000	$50,000
Neil T. Anderson	1/3/2011	50,000	$100,000
Spector Family Trust	1/6/2011	50,000	$100,000
Anthony B. Cimino	1/11/2011	75,000	$150,000
Robert Klein	1/17/2011	17,500	$35,000
Richard P. Casey	1/28/2011	125,000	$250,000
T. James Newton III	2/11/2011	5,000	$10,000
Gary Spindler	2/23/2011	50,000	$100,000
Las Aguillas Holdings LLC	2/25/2011	15,000	$30,000
Jeffrey Gerson	3/15/2011	25,000	$50,000
John Nelson	4/8/2011	50,000	$100,000
J. Richard Suth	5/12/2011	125,000	$250,000
Cyril J. Goddeeris	5/13/2011	125,000	$250,000
Vlad Y Barbalat	5/16/2011	62,500	$125,000
Dr. Steven Struhl	5/31/2011	10,000	$20,000
Arthur J. Papetti	6/3/2011	50,000	$100,000
Exeter Investments (Papetti)	8/16/2011	75,000	$150,000
Ellen Doremus	9/14/2011	50,000	$100,000
Arthur Israel	9/28/2011	75,000	$150,000

The securities issued in the foregoing transactions were exempt from registration under Section 4(2) of the Securities Act and/or Rule 506 promulgated thereunder as transactions by an issuer not involving a public offering. The Company placed legends on the certificates stating that the securities were not registered under the Securities Act and set forth the restrictions on their transferability and sale. No general advertising or solicitation was used in selling the securities. No commissions or underwriting fees were paid to any placement agents in connection with the sale or issuances of the securities.

The Company has agreed to issue to the underwriters warrants to purchase a number of shares of its Class A common stock equal to an aggregate of 1% of the shares of Class A common stock sold in the offering, other than shares of its Class A common stock covered by the over-allotment option, if any are purchased. The warrants will have an exercise price equal to 110% of the offering price of the shares of Class A common stock sold in this offering. For additional information regarding these warrants, see “Underwriting — Underwriting Compensation.”

Item 16. Exhibits and Financial Statement Schedules

(a) Exhibits

1.1**	Form of Underwriting Agreement

2.1*	Asset Purchase Agreement dated of December 31, 2010, by and between Rialto Theatre of Westfield, Inc., Cranford Theatre, Inc., DC Westfield Cinema, LLC, and DC Cranford Cinema, LLC.
2.2*	Asset Purchase Agreement dated of February 17, 2011, by and between DC Bloomfield Cinema, LLC and K&G Theatres, LLC.

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2.3*	Asset Purchase Agreement dated of April 20, 2011, by and between Cinema Supply, Inc., d/b/a Cinema Centers, Martin Troutman, Doris Troutman, DC Cinema Centers, LLC, McNees Wallace & Nurick LLC, as escrow agent, and, solely with respect to Sections 2.6(a), 2.8, 2.9 and 2.10, Gina DiSanto, Trudy Withers, and Van Troutman.
2.4*	Amendment dated as of June 30, 2011 to the Asset Purchase Agreement dated of May 3, 2011, by and between Cinema Supply, Inc., d/b/a Cinema Centers, Martin Troutman, Doris Troutman, DC Cinema Centers, LLC, McNees Wallace & Nurick, LLC, as escrow agent, and, solely with respect to Sections 2.6(a), 2.8, 2.9 and 2.10, Gina DiSanto, Trudy Withers, and Van Troutman.

2.5**	Asset Purchase Agreement dated as of February 13, 2012, by and between Lisbon Theaters, Inc., Daniel C. O'Neil, Timothy M. O'Neil, and DC Lisbon Cinema, LLC.

3.1*	Amended and Restated Certificate of Incorporation dated of December 8, 2010.
3.2*	Certificate of Designation of Series A preferred Stock dated of December 29, 2010.

3.3*	Bylaws

3.4***	Form of Second Amended and Restated Certificate of Incorporation

4.1***	Specimen of Class A Common Stock certificate

4.2**	Form of Warrant

5.1***	Opinion of Eaton & Van Winkle LLP

10.1*	Employment Agreement dated of September 1, 2010, by and between Digital Cinema Destinations, Corp. and A. Dale Mayo.
10.2*	Employment Agreement dated of June 2011, by and between Digital Cinema Destinations, Corp. and Brian Pflug.
10.3*	Employment Agreement dated of December 1, 2011, by and between Digital Cinema Destinations, Corp. and Brett Marks.
10.4*	Employment Agreement dated of September 28, 2011, by and between Digital Cinema Destinations, Corp. and Jeff Butkovsky.

10.5*	Exhibitor Management Services Agreement dated of January 28, 2011, by and between Cinedigm Cinema, Corp. and Digital Cinema Destinations, Corp.

10.6*	RealD™ System Leasing Agreement dated of March 23, 2011, by and between RealD Inc., and Digital Cinema Destinations, Corp.
10.7*	Agreement to Loan Equipment dated of June 2011, by and between Barco, Inc. and Digital Cinema Destinations, Corp.
10.8*	Equipment Warranty and Support Agreement dated of March 29, 2011, by and between Barco, Inc. and Digital Cinema Destinations Corp.
10.9*	Special Events Network Affiliate Agreement of March 14, 2011, by and between National CineMedia, LLC and Digital Cinema Destinations Corp.
10.10*	Network Affiliate Agreement dated of March 14, 2011, by and between National CineMedia, LLC and Digital Cinema Destinations Corp.
10.11*	Lease Agreement dated of December 31, 2010, by and between Cranford Theatre Holding Co, LLC and DC Cranford Cinema, LLC.

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10.12*	Lease Agreement dated of December 31, 2010, by and between Rialto Holding Co, LLC and DC Westfield Cinema, LLC.
10.13*	Lease Agreement dated of February 6, 2008, by and between Wintonbury Mall Associates, LLC and K&G Theatres, LLC.
10.14*	First Amendment dated of February 17, 2011, by and between Wintonbury Mall Associates, LLC, K&G Theatres, LLC and DC Bloomfield Cinema, LLC to the Lease Agreement dated of February 6, 2008, by and between Wintonbury Mall Associates, LLC and K&G Theatres, LLC.
10.15	2012 Stock Option and Incentive Plan.

14.1	Code of Ethics

21.1**	List of Subsidiaries

23.1	Consent of EisnerAmper LLP, Independent Registered Public Accounting Firm.

23.2	Consent of EisnerAmper LLP, Independent Registered Public Accounting Firm.

23.3	Consent of EisnerAmper LLP, Independent Registered Public Accounting Firm.

23.4	Consent of Eisner Amper LLP, Independent Registered Public Accounting Firm.

23.5**	Consent of Eaton & Van Winkle LLP (included in Exhibit 5.1)

24.1*	Power of Attorney (included on signature page).

_______________

* Filed as an exhibit to the Company's registration statement on Form S-1, filed with the Securities and Exchange Commission on December 20, 2011 and incorporated herein by reference.

** Filed as an exhibit to Amendment No. 2 to the Company's registration statement on Form S-1, filed with the Securities and Exchange Commission on February 15, 2012 and incorporated herein by reference.

*** To be filed by amendment.

Item 17. Undertakings

The undersigned registrant hereby undertakes to provide to the underwriters at the closing specified in the underwriting agreement certificates in such denominations and registered in such names as required by the underwriters to permit prompt delivery to each purchaser.

Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers, and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer, or a controlling person of the registrant in the successful defense of any action, suit, or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue.

The undersigned registrant hereby undertakes that:

(1) For purposes of determining any liability under the Securities Act of 1933, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be a part of this registration statement at the time it was declared effective.

(2) For the purpose of determining any liability under the Securities Act of 1933, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

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SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized in the City of Westfield, State of New Jersey, on March 6, 2012.

	DIGITAL CINEMA DESTINATIONS CORP.
	By:	/s/ A. Dale Mayo
		A. Dale Mayo Chief Executive Officer and Chairman

	By:	/s/ Brian Pflug
		Brian Pflug, Chief Financial Officer, Principal Accounting Officer and Director

Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons on March 6, 2012 in the capacities and on the dates indicated:

Signature		Title

/s/ A. Dale Mayo		Chief Executive Officer and Chairman
A. Dale Mayo

/s/ Brian Pflug		Chief Financial Officer, Principal Accounting Officer and Director
Brian Pflug

/s/ Brett Marks		Senior Vice President of Business Development and Director
Brett Marks

*		Director
Neil T. Anderson

*		Director
Richard Casey

*		Director
Martin O’Connor, II

/s/ Charles Goldwater		Director
Charles Goldwater


*By:	/s/ Brian Pflug
	Brian Pflug
	Attorney-in-fact

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Digital Cinema Destinations Corp. - FORM S-1/A - March 6, 2012

Attached files

Digital Cinema Destinations Corp. Reports