UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON D.C. 20549

                                   FORM 10-KSB
                                   (Mark One)
                |X| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
                     OF THE SECURITIES EXCHANGE ACT OF 1934
                    For the fiscal year ended: March 31, 2005

              |_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)
                     OF THE SECURITIES EXCHANGE ACT OF 1934
                        For the transition period from to

                        Commission File Number: 001-31810
                      ACCESS INTEGRATED TECHNOLOGIES, INC.
                 (Name of Small Business Issuer in its Charter)

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

           55 MADISON AVENUE, SUITE 300, MORRISTOWN, NEW JERSEY 07960
                    (Address of principal executive offices)

                                 (973) 290-0080
                          (ISSUER'S TELEPHONE NUMBER,
                              INCLUDING AREA CODE)
           SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
                                      NONE
           SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
                 CLASS A COMMON STOCK, PAR VALUE $.001 PER SHARE

Check whether the Issuer:  (1) filed all reports required to be filed by Section
13 or 15(d) of the  Exchange  Act during the past 12 months (or for such shorter
period  that the Issuer was  required  to file such  reports),  and (2) has been
subject to such filing requirements for the past 90 days. [X] Yes [ ] No

Check if there is no disclosure of delinquent  filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure  will be contained,  to
the best of the  Company  's  knowledge,  in  definitive  proxy  or  information
statements  incorporated  by  reference  in Part III of this Form  10-KSB or any
amendment to this Form 10-KSB [ ].

Issuer's revenues for the fiscal year ended March 31, 2005 were $10,651,431.

The aggregate  market value of the voting and  non-voting  common equity held by
non-affiliates of the issuer based on a price of $8.99 per share, as of June 28,
2005,  the closing price of such common equity on the American  Stock  Exchange,
was approximately  $50,135,774.  For purposes of the foregoing calculation,  all
directors,  officers and  shareholders who beneficially own 10% of the shares of
such common equity have been deemed to be affiliates,  but the Company disclaims
that any of such persons are affiliates.

As of June 28, 2005,  9,433,328 shares of Class A Common Stock, $.001 par value,
and 965,811 shares of Class B Common Stock, $.001 par value, were outstanding.

                       DOCUMENTS INCORPORATED BY REFERENCE
Certain  information  required  by Items 9, 10, 11, 12, and 13 of Form 10-KSB is
incorporated  by  reference  into Part III hereof  from the  registrant's  Proxy
Statement for the Annual Meeting of Stockholders to be held September 15, 2005.

TRANSITIONAL SMALL BUSINESS DISCLOSURE FORMAT (CHECK ONE): YES    NO X. 
------------------------------------------------------------------------



                                TABLE OF CONTENTS

                                                                            PAGE

FORWARD-LOOKING STATEMENTS..................................................   2

                                     PART I

ITEM 1.       Business......................................................   3

ITEM 2.       Property......................................................  19

ITEM 3.       Legal Proceedings.............................................  20

ITEM 4.       Submission of Matters to a Vote of Security Holders...........  20

                                     PART II

ITEM 5.       Market for Common Equity and Related Stockholder Matters......  20

ITEM 6.       Management's Discussion and Analysis of Financial Condition
              and Results of Operations.....................................  23

ITEM 7.       Consolidated Financial Statements.............................  35

ITEM 8.       Changes  in  and   Disagreements   with  Accountants  on
              Accounting  and Financial Disclosure..........................  69

ITEM 8A.      Controls and Procedures.......................................  69

ITEM 8B.      Other Information.............................................  70

                                    PART III

ITEM 9.       Directors, Executive Officers and Control Persons; Compliance with
              Section 16(a) of the Exchange Act.............................  70

ITEM 10.      Executive Compensation........................................  70

ITEM 11.      Security Ownership of Certain Beneficial Owners and Management and
              Related Stockholder Matters...................................  70

ITEM 12.      Certain Relationships and Related Transactions................  70

ITEM 13.      Exhibits......................................................  71

ITEM 14.      Principal Accountant Fees and Services........................  75

SIGNATURES..................................................................  76

                                       1


                           FORWARD-LOOKING STATEMENTS

This  report  contains  forward-looking  statements  within  the  meaning of the
federal  securities  laws.  These  include  statements  about our  expectations,
beliefs,  intentions or strategies for the future,  which are indicated by words
or phrases such as "believes,"  "anticipates,"  "expects,"  "intends,"  "plans,"
"will,"  "estimates,  "and similar words. These  forward-looking  statements are
based  on  our  current   expectations   and  are  subject  to  certain   risks,
uncertainties and assumptions, including those set forth in the discussion under
Item 1,  "Description  of Business"  and Item 6,  "Management's  Discussion  and
Analysis of Financial  Condition and Results of Operations."  Our actual results
may  differ  materially  from  results  anticipated  in  these   forward-looking
statements.  These forward-looking statements are based on information currently
available to us, and we assume no obligation to update them, except as otherwise
required by law.

In this report, "AccessIT," "we," "us," "our" and the "Company" refers to Access
Integrated Technologies,  Inc. and its subsidiaries unless the context otherwise
requires.


                                       2


                                     PART I

ITEM 1. BUSINESS

AccessIT was organized on March 31, 2000 and we are in the business of providing
software services and technology  solutions to the motion picture industry,  and
operating  Internet  data  centers.  We are  actively  expanding  into  new  and
interrelated  business  areas relating to the delivery and management of digital
cinema content to entertainment venues worldwide. These businesses, supported by
our Internet data center business, have become our primary strategic focus.

Our  business  focus is to create a secure,  managed  and  complete  system that
consists of software to book, track and perform accounting functions for digital
content in theatres,  deliver digital content to multiple  locations and provide
the content management  software for in-theatre  playback system for the digital
cinema marketplace. The system is intended to use all of our businesses:

MEDIA SERVICES

     o    DIGITAL MEDIA  DELIVERY - digital media  managed  electronic  delivery
          services and in-theatre  management  software for use in theatres from
          Access Digital Media, Inc.  ("AccessDM"),  our wholly owned subsidiary
          and satellite  delivery services from FiberSat Global Services,  Inc.,
          our wholly owned  subsidiary.  The Pavilion Theatre (as defined below)
          is utilizing the digital media managed  electronic  delivery  services
          and in-theatre management software products;

     o    MOVIE DISTRIBUTION AND EXHIBITOR SOFTWARE - Hollywood  Software,  Inc.
          ("Hollywood SW"), our wholly owned  subsidiary,  develops and licenses
          distribution and exhibitor software products and services;

DATA CENTER SERVICES

     o    DATA  CENTERS -  AccessIT's  Internet  data  centers  ("IDCs" or "data
          centers"), including redundant sites in Los Angeles and New York City;
          and

     o    MANAGED  SERVICE  OFFERINGS-  managed  storage and network and systems
          management  services  by  Core  Technology  Services,  Inc.  ("Managed
          Services"), our wholly owned subsidiary, and AccessIT.

Our system provides a digital content owner with the secure delivery of multiple
files to multiple locations with proactive notification and security management.
Our system also provides the digital  content  exhibitor  with access to digital
content,  freedom  to  choose  what to play and  when to play it with  proactive
notifications and management software.  We have created a system whereby digital
content is  delivered  where it is supposed to go, is played when it is supposed
to be played along with the ability to act upon and report back  management  and
financial information.

We have two reportable segments: Media Services, which represents the operations
of AccessDM  (including  Boeing Digital (as defined below)),  Pavilion  Theatre,
FiberSat (as defined  below) and Hollywood SW; and Data Center  Services,  which
are comprised of our IDC operations and Managed Service Offerings.

In  February  2003,  we  organized  AccessDM,  which  in  May  2004  became  our
wholly-owned  subsidiary.  AccessDM has developed proprietary software,  Digital
Express  e-Courier,  capable of worldwide  delivery of digital data -- including
movies,  advertisements and alternative  content such as concerts,  seminars and
sporting events -- to movie theaters and other venues having digital  projection
equipment.  Also,  in April 2005 we  completed  the  development  of  in-theatre
management  software for use by digitally - equipped movie theaters,  called the
Theatre Command Center.

In November  2003,  we  acquired  all of the capital  stock of  Hollywood  SW, a
leading  provider of proprietary  transactional  support software and consulting
services for distributors  and exhibitors of filmed  entertainment in the United
States and Canada  (the  "Hollywood  SW  Acquisition").  Its  licensed  software
records and manages information  relating to the planning,  scheduling,  revenue
sharing, cash flow and reporting associated with the distribution and exhibition
of theatrical films. In addition,  Hollywood SW's software  complements,  and is
integrated  with,  AccessDM's  digital  content  delivery  software  by enabling
Hollywood  SW's  customers to seamlessly  plan and schedule  delivery of digital
content  to  entertainment  venue  operators  as well as to manage  the  related
financial transactions.

In an effort to increase the  competitive  advantage of the IDCs,  on January 9,
2004, we acquired  Managed  Services,  a managed service provider of information
technologies.  As an information  technology outsourcing  organization,  Managed
Services manages  clients'  networks and systems in over 35 countries in Europe,
Asia,  North and South  America  and more than 20 states in the  United  States.
Managed Services operates a 24x7 Global Network Command Center ("GNCC"), capable
of running the

                                       3

networks and systems of large corporate  clients.  The four largest customers of
Managed Services  accounted for approximately  77% of its revenues.  The managed
services capabilities of Managed Services have been integrated with our IDCs and
now operate under the name of AccessIT Managed Services.

In March 2004, we acquired  certain  assets of Boeing  Digital  Cinema  ("Boeing
Digital"),  a division  of The Boeing  Company  ("Boeing").  These  assets  were
purchased to further our strategy of becoming a leader in the delivery of movies
and other digital  content to movie  theaters.  The acquired  assets  consist of
digital projectors, satellite dishes and other equipment installed at 28 screens
within 21 theaters in the United States and equipment stored at other locations,
and satellite transmission equipment located in Los Angeles,  California.  Since
the acquisition,  we have used the stored equipment (and added new equipment) in
an additional 3 screens within 2 theaters in the United States.

Also in March 2004, we refinanced  approximately $4.2 aggregate principal amount
(plus  accrued  and unpaid  interest)  of our  promissory  notes  pursuant to an
exchange  offer.  In exchange  for these  promissory  notes,  we issued  707,477
unregistered  shares of our  Class A common  stock  and $1.7  million  aggregate
principal  amount  of new  convertible  notes  which as of March  31,  2005 were
convertible into a maximum of 312,425 shares of our Class A common stock.

In May 2004, we entered into an agreement  with the holder of 750,000  shares of
AccessDM's  common  stock,  to exchange all of the  holders's  shares for 31,300
unregistered  shares  of  AccessIT's  Class A common  stock.  As a result of the
transaction,  which was consummated on May 26, 2004,  AccessIT now holds 100% of
AccessDM's common stock.

In June 2004,  we  consummated a $4.87  million  private  placement of 1,217,500
unregistered  shares of our Class A common  stock with  institutional  and other
accredited investors.  Pursuant to the private placement,  we also issued to the
investors and the placement  agent warrants to purchase up to 243,500 and 60,875
shares of our Class A common stock, respectively,  at an exercise price of $4.80
per share,  exercisable  upon receipt.  We  registered  the resale of all of the
1,217,500   shares  and  the  304,375  shares   underlying  the  warrants  on  a
registration  statement  on Form  SB-2 with the SEC on July 2,  2004,  which was
declared effective by the SEC on July 20, 2004.

In November  2004, we  consummated a $1.1 million  private  placement of 282,776
unregistered  shares of our Class A common stock at $3.89 per share with certain
accredited investors. The net proceeds of approximately $1.023 million from such
private  placement  were  used  for the  FiberSat  Acquisition  and for  working
capital.  These shares carry piggyback and demand  registration  rights,  at the
sole  expense  of  the  investors.   The  investors  exercised  their  piggyback
registration rights and we registered the resale of all of the 282,776 shares on
a regisration  statement on Form S-3, which was declared effective by the SEC on
March 21, 2005.

Also in November 2004, we acquired  substantially  all of the assets of FiberSat
Global Services,  LLC (the "FiberSat")  through FiberSat Global Services,  Inc.,
our  wholly   owned   subsidiary   (the   "FiberSat   Acquisition").   FiberSat,
headquartered in Chatsworth,  California,  provides services utilizing satellite
ground  facilities and  fiber-optic  connectivity  to receive,  process,  store,
encrypt and transmit television and data signals globally. FiberSat's Chatsworth
facility  currently houses the  infrastructure  operations of our digital cinema
satellite delivery services. By completing the FiberSat  Acquisition,  we gained
extensive  satellite  distribution  and  networking   capabilities  provided  by
FiberSat's  fully  operational  data storage and uplink facility  located in Los
Angeles,  California.  FiberSat has the ability to provide broadband video, data
and Internet  transmission  and encryption  services for the broadcast and cable
television and communications industries.

In February  2005, we  consummated a private  placement of $7.6 million,  4-year
convertible   debentures  (the   "Convertible   Debentures").   The  Convertible
Debentures  bear  interest at the rate of 7% per year and are  convertible  into
shares of our Class A common  stock at the price of $4.07 per share,  subject to
possible  adjustments  from time to time.  In  connection  with the  Convertible
Debenture offering, we issued the participating institutional investors warrants
(the "Convertible  Debentures Warrants") exercisable for up to 560,197 shares of
Class A common stock at an initial exercise price of $4.44 per share, subject to
adjustments  from  time to time.  The  Convertible  Debentures  Warrants  may be
exercised  beginning  on  September  9, 2005  until five  years  thereafter.  We
registered the resale of all of the shares underlying the Convertible Debentures
and the Convertible  Debentures  Warrants with the SEC on March 11, 2005,  which
was declared effective by the SEC on March 21, 2005.

Also in  February  2005,  through  ADM  Cinema  Corporation,  our  wholly  owned
subsidiary ("ADM Cinema"),  we consummated the acquisition of substantially  all
of the assets of the Pavilion  Movie  Theatre  located in Park Slope  section of
Brooklyn,  New York ("Pavilion  Theatre")from  Pritchard Square Cinema, LLC. The
Pavilion Theatre is an eight-screen movie theatre and cafe and is a component of
the  Media  Services  segment.  Continuing  to  operate  as a  fully  functional
multiplex,  the Pavilion  Theatre will also become our showplace to  demonstrate
our integrated digital cinema solutions to the movie entertainment industry.

We offer  interrelated  services  that use each of our  business  units  for the
planning,  purchasing,  delivery and  management  of digital  content -- such as
movies,  advertising,  trailers and  alternative  content,  including  concerts,
seminars and sporting events -- to

                                       4


movie theater and other venue operators.  We believe that our ability to offer a
wide range of fully managed  services will  differentiate  us from other service
providers, including distributors of other types of digital media.

During the fiscal year ended March 31, 2005, we received 62% of our revenue from
the Data Center Services  segment and 38% of our revenue from the Media Services
segment.  During the fiscal year ended March 31,  2004,  we received  81% of our
revenue  from the Data Center  Services  segment and 19% of our revenue from the
Media Services  segment.  For the fiscal year ended March 31, 2005, KMC Telecom,
an IDC customer,  comprised  approximately  18.2% of our revenues.  Our contract
with KMC Telecom expires on December 15, 2005 and we have received an indication
from KMC Telecom  that they will not renew the contract for at least some of the
current  sites that they are  licensing  under such  contract.  No other  single
customer accounted for greater than 10% of revenues during the fiscal year ended
March 31, 2005. From our inception through November 3, 2003, all of our revenues
have been  derived  from  monthly  license  fees and fees from  other  ancillary
services provided by us at our IDCs.

Our principal executive offices are at 55 Madison Avenue, Suite 300, Morristown,
NJ 07960, and our telephone number at such offices is (973) 290-0080. Our e-mail
address is investor@accessitx.com and our web site address is www.accessitx.com.
Information  accessed on or through our web site does not  constitute  a part of
this report.

MEDIA SERVICES

The Media Services  segment of our business  consists of two units:  the Digital
Media  Delivery  Services and the Hollywood SW business.  Digital Media Delivery
Services comprises AccessDM, FiberSat, and the Pavilion Theatre.

DIGITAL MEDIA DELIVERY SERVICES

AccessDM, our wholly-owned  subsidiary,  provides software and systems worldwide
that enable the delivery of digital  content to movie  theaters and other venues
having  digital  projection  equipment.  We believe the demand for systems  that
deliver   digital   content  will  increase  as  the  movie,   advertising   and
entertainment  industries  continue  to convert to a digital  format in order to
achieve cost savings,  greater  flexibility  and/or  improved image quality.  We
intend to use our IDCs and  managed  data  storage  services  together  with our
digital content delivery software to deliver digital content using satellite and
land-based  transmission providers. As a result of the acquisition of the assets
of Boeing  Digital,  we currently have an installed base of twenty eight digital
projection  systems  located in certain  movie  theaters  throughout  the United
States that are  available  to receive  digital  content  delivered by AccessDM.
Based on customer  needs and  preferences,  we may adapt or tailor the developed
software and related services to such customer needs or industry demands.

FiberSat,  headquartered  in  Chatsworth,  California,  was acquired by FiberSat
Global  Services,  Inc.,  our  wholly-owned  subsidiary,  on November  17, 2004.
FiberSat provides services utilizing satellite ground facilities and fiber-optic
connectivity to receive,  process,  store,  encrypt and transmit  television and
data signals  globally.  FiberSat's  Chatsworth  facility  currently  houses the
infrastructure  operations  of  AccessDM's  digital  cinema  satellite  delivery
services. By completing the FiberSat Acquisition,  we gained extensive satellite
distribution   and  networking   capabilities   provided  by  FiberSat's   fully
operational  data  storage  and  uplink  facilities   located  in  Los  Angeles,
California.  FiberSat  has the  ability to  provide  broadband  video,  data and
Internet  transmission  and  encryption  services  for the  broadcast  and cable
television and communications industries.

ADM Cinema,  our wholly owned  subsidiary,  purchased  the  Pavilion  Theatre on
February 11, 2005.  The Pavilion  Theatre is an  eight-screen  movie theatre and
cafe and is a component of the Media Services segment.  Continuing to operate as
a fully functional  multiplex,  the Pavilion Theatre has also become a showplace
for the Company to demonstrate  its integrated  digital cinema  solutions to the
movie entertainment industry.

MARKET OPPORTUNITY

We believe that digital content  delivery  eventually will replace,  or at least
become more prevalent than, the current method used for film delivery.  Existing
film delivery  generally  involves the  time-consuming,  somewhat  expensive and
cumbersome  process of receiving  bulk printed  film,  rebuilding  the film into
shipping  reels,   packaging  the  film  reels  into  canisters  and  physically
delivering the reels (by traditional  ground modes of  transportation)  to movie
theaters.  We  believe  that  the  expanding  use of  digital  movie  projection
equipment will lead to an increasing need for digital content delivery services.

The movie exhibition industry now has the capability to present  advertisements,
trailers and alternative entertainment in a digital format and in a commercially
viable manner. We believe the presentation of alternative entertainment at movie
theaters may both expand their hours of operation and increase  their  occupancy
rates.  Movie theater owners may also be able to profit from the presentation of
new and/or additional advertising in their theaters.

                                       5


Digital Cinema Initiatives,  LLC, a consortium of seven major Hollywood studios,
was created to develop  and set  universal  standards  and to develop a business
model  designed to allow the movie  industry to effect a general  transition  to
digital  presentations.  Toward the end of 2004 the studio members  declared the
work of the  group to be  substantially  complete  and  worked to  finalize  the
remaining  open items.  Investment  banks are working  with studios to develop a
business model for digital cinema.

We believe the market  opportunity  for our digital media  delivery  services is
directly  related to the number of movie releases each year, the number of movie
screens those movies are shown upon and the transition to digital  presentations
in those  movie  theatres.  According  to the  Motion  Picture  Association,  on
average,  there are  approximately  200 major movie releases and 250 independent
movie  releases per year.  The average major movie is released to  approximately
4,000  screens in the United States and 8,000  screens  worldwide.  According to
National Association of Theatre Owners ("NATO"), there are approximately 105,000
screens  worldwide that play major movie  releases,  with  approximately  36,000
screens located in the United States. According to ReelSource, Inc., the average
film print costs $1,300 per print.  We believe that the cost to deliver  digital
movies to movie  theatres  will be much less than the cost to print and  deliver
analog movie  prints,  and such lesser cost will  provide the economic  model to
drive the conversion from analog to digital cinema.

PRODUCTS AND SERVICES

AccessDM's  products and services are able to provide and securely deliver,  via
electronic  transmission  (through  copper  wire,  fiber  optics or  satellite),
digital  content,  including  movies,  advertisements,  alternative  content and
educational products.

Our principal  digital media  delivery  service  offering,  which we refer to as
"Digital  Express  e-Courier  Services," is the  distribution of digital content
through our IDC platform.  Our Digital Express e-Courier Services requires us to
obtain a digital master of an audio and/or visual  presentation from the content
owner, store and deliver the digital content and track and confirm its delivery.
We expect to offer our delivery service to the owners of digital content through
a broad choice of bandwidth  providers within each platform (i.e.,  copper wire,
fiber optics or  satellite).  We intend to use our existing IDCs to  accommodate
the services we will provide.

We expect to charge our customers:

     o    a  one-time  set-up  fee based on the size of the  customer's  content
          file;

     o    a  distribution  or delivery fee based on the size of its content file
          and the  number  of  destinations  to which the  content  file will be
          delivered;

     o    a customization fee, if required; and

     o    a fee for changes to the content file or the  destination(s)  to which
          the content file is to be delivered.

INTELLECTUAL PROPERTY

AccessDM  has  applied  for service  mark  registrations  in respect of the name
AccessDM,  Access  Digital  Media and the  phrases  "Digital  Express  e-Courier
Services,"  "Theatre  Command  Center" and "The  courier  for the digital  era."
AccessDM  has  not  yet  received   U.S.   servicemark   registration   for  any
servicemarks.

TARGET CUSTOMERS

We intend to provide our digital media delivery services to major movie studios,
particularly  through  relationships  that we have developed or may develop with
these studios.  We also intend to focus on independent studios and distributors,
alternative  content  providers  and  advertising  agencies,  which may not have
high-quality delivery services currently available.  We believe that major movie
studios will begin to expand  beyond  their  traditional  distribution  methods,
involving the physical delivery of digital files, to include  electronic digital
content delivery for the reasons discussed above.

COMPETITION

Companies that have developed forms of digital content delivery to entertainment
venues include:

     o    Regal Entertainment Group, which has developed a system for delivering
          certain  digital  content to its own  theaters,  including  non-motion
          picture content and advertising;

                                       6


     o    National   Cinema   Network,   a  wholly  owned   subsidiary   of  AMC
          Entertainment,  that has  developed a system known as Digital  Theatre
          Distribution System for delivering advertising to movie theaters; and

     o    Technicolor Digital Cinema, an affiliate of the Thomson Company, which
          has  concentrated  on an in-theater  system to manage content  file(s)
          that are delivered physically, and not electronically, to theatres.

The  competitors   referenced  above  have   significantly   greater  financial,
technical, marketing and managerial resources than we do. These competitors also
generate greater revenue and are better known than we are.  However,  we believe
that AccessDM, through its technology and management experience, its development
of software capable of delivering digital data worldwide, its development of its
Theatre Command Center software for the management of digital  content,  and the
complement of Hollywood SW's software,  may differentiate  itself from the above
companies  by  providing  a  competitive  alternative  to their forms of digital
content delivery.

MARKETING AND BUSINESS DEVELOPMENT

We intend to market  our  digital  media  delivery  services  primarily  through
networking and relationship-building  activities,  supported by presentations at
industry  trade  shows and similar  events.  We believe  that the  entertainment
business is largely based on and driven by personal and business  relationships.
We have,  therefore,  selected  three  individuals  -- A. Dale Mayo,  Russell J.
Wintner  and  David  Gajda  -- each  of  whom  has  significant  experience  and
relationships  in the  movie  and  emerging  entertainment  markets  -- to  lead
AccessDM's marketing efforts.

A. Dale Mayo,  AccessDM's  Chief  Executive  Officer,  is a  co-founder  and the
Chairman,  President and Chief  Executive  Officer of AccessIT,  and  previously
co-founded and developed  Clearview Cinema Group,  Inc.  ("Clearview"),  a large
theater  circuit  in the New York  metropolitan  area  which was  later  sold to
Cablevision  Cinemas,  LLC.  In his  tenure as the Chief  Executive  Officer  of
Clearview,  Mr. Mayo developed close working  relationships with many of the top
theater  operators in the United  States,  as well as heads of  distribution  in
Hollywood  and New York.  Mr. Mayo is on the  advisory  board of the Will Rogers
Motion Picture Pioneers Foundation.

Russell J. Wintner,  AccessDM's  President  and Chief  Operating  Officer,  is a
member of the Society of Motion Picture and Television Engineers,  and serves on
the Digital Cinema Group standards committee,  and is a board member of NATO and
a member of its Technical Committee that is working directly with Digital Cinema
Initiatives,  a consortium of seven major  Hollywood  studios created to develop
standards and a business model for the digital cinema industry.  Mr. Wintner was
a  founder  of, as well as  President  of,  WinterTek,  Inc.,  a  digital  media
consultant to various clients. He also served as Principal, Exhibitor Relations,
Alternative  Programming  and Marketing for  Technicolor  Digital  Cinema,  LLC.
Previous to such  provisions,  Mr.  Wintner  was a founder of  CineComm  Digital
Cinema,  LLC and also served as its  President  of  Exhibition  and  Alternative
Programming and Chief Operating Officer. Mr. Wintner frequently sits on industry
panels at seminars and conventions.

David  Gajda,  Hollywood  SW's  President  and Chief  Operating  Officer,  was a
co-founder  of  Hollywood  SW. Mr.  Gajda was the Chief  Executive  Officer  for
Hollywood SW from its inception  until our November 2003  acquisition.  Prior to
co-founding  Hollywood  SW, Mr.  Gajda owned and managed a strategic  consulting
company,  DWG International  Inc. ("DWG").  At DWG, he helped many entertainment
companies  develop their  three-to-five-year  strategic  systems plans. In April
2005, we promoted Mr. Gajda to Senior Vice President of International Marketing,
in order to focus on marketing  our product and services,  principally  those of
Hollywood SW. We also promoted Jim Miller, the former Chief Financial Officer of
Hollywood SW to the role of President and Chief  Operating  Officer of Hollywood
SW.

We expect to co-market  our digital media  delivery  services to the current and
prospective  customers of Hollywood  SW, using  marketing  and sales efforts and
resources  of  both  companies.  Although  the  services  of  each  may be  used
independently,  using our digital media delivery service in conjunction with the
services  of  Hollywood  SW would  enable  owners of digital  content to deliver
securely such content to their  customers and,  thereafter,  to manage and track
data regarding the  presentation  of the digital  content,  including  different
forms of audio and/or  visual  entertainment.  As the digital  content  industry
continues  to  develop,  we may  engage  in  other  marketing  methods,  such as
advertising and service bundling, and may hire additional sales personnel.

HOLLYWOOD SOFTWARE

Hollywood SW's principal objective is to provide its transactional  software and
film distribution  services to film industry  customers and, through  AccessDM's
digital  content  delivery  software,  to the  expanding  digital  entertainment
industry.

                                       7


Hollywood  SW's  software  products  enable its  customers  to record and manage
information  relating to the planning,  booking,  scheduling and  performance of
movies in movie theaters,  and to track the related financial  operating results
and commitments.

MARKET OPPORTUNITY

The customers  for Hollywood  SW's  existing  software and  consulting  services
consist  principally of worldwide  feature film  distributors and North American
movie theater chains. We are currently developing a new application with similar
functionality  for  distributing  films  internationally  that is expected to be
completed by the end of 2005.

Our goal is to make  Hollywood  SW's  products the industry  standard  method by
which film distributors and exhibitors plan,  manage and monitor  operations and
data regarding the presentation of theatrical  entertainment.  Currently,  based
upon our calculations and certain industry figures, distributors using Hollywood
SW's distribution  software system,  called TDS,  cumulatively  managed, for the
period 1999 through 2002, approximately 36% of U.S. theater box office revenues.
In addition to providing its system currently to analog film industry customers,
Hollywood  SW has also  adapted  this  system  to serve  the  expanding  digital
entertainment  industry.  We believe that  Hollywood  SW's products and services
will be accepted as an important  component in the digital content  delivery and
management business.

We believe  that the  continued  transition  to digital  content  delivery  will
require a high degree of  coordination  among content  providers,  customers and
intermediary service providers.  Producing,  buying and delivering media content
through worldwide  distribution  channels is a highly fragmented and inefficient
process  that we  expect  to  become  increasingly  streamlined,  automated  and
enhanced  through  technologies  created  by  Hollywood  SW and  the  continuing
development of and general transition to digital forms of media.

PRODUCTS AND SERVICES

Hollywood SW provides proprietary software  applications and services to support
customers of varying sizes,  through software licenses,  its Application Service
Provider  ("ASP")  service in which the Company hosts the  application  within a
secure AIT colo-center and provides client access via the internet and through a
fully outsourced  distribution option, called, Indie Direct. Current proprietary
software products of Hollywood SW consist of the:

     o    TDS -- Theatrical  Distribution  System, which manages key operational
          and financial elements of film distribution for film distributors;

     o    TDSi - Theatrical Distribution System  (International),  which manages
          key  operational  and  financial  elements  of film  distribution  for
          international film distributors;

     o    EMS -- Exhibition Management System, which manages key operational and
          financial elements of film exhibition for theater circuits;

     o    MPPS -- Motion  Picture  Planning  System,  which  uses  various  film
          criteria and  historical  performance  data to plan and initiate  film
          release strategies;

     o    Media Manager System -- which facilitates the planning and tracking of
          newspaper advertising campaigns; and

     o    Digi-Central -- online marketplace for digital content in which buyers
          can search for available  digital content,  initiate  transactions and
          coordinate delivery via Access DM.

Hollywood SW generates revenues from its software products through various fees:
software license fees, ASP service fees,  software  maintenance  fees,  software
development fees,  consulting service fees and outsourced  distribution  service
fees.  Under  its  software  license  arrangements,  up-front  fees are paid and
periodic payments are generally made upon the occurrence of certain events:  for
example,  execution  of the  license  agreement,  delivery of the  software  and
acceptance on use of the software by the customer. Software maintenance fees are
paid under separate annual support agreements, under which Hollywood SW provides
maintenance  services and technical  support.  Under Hollywood SW's ASP service,
periodic  payments  are made for the  right to  access  and use  Hollywood  SW's
software  through  the  Internet,  based on the  occurrence  of certain  events.
Maintenance  services are included as part of the annual  service  agreement for
Hollywood SW's ASP service.  Customers that license Hollywood SW's products also
may pay for product feature enhancements,  which include software  developments;
Hollywood SW has generated a significant portion of its revenues from consulting
fees that it charges (on an hourly basis) for  implementation  of the applicable
product and training of the personnel of the licensed or ASP service customers.

                                       8


INTELLECTUAL PROPERTY

Hollywood SW currently has intellectual property consisting of:

    o   licensable  software  products,  including TDS, TDSi,  EMS, MPPS and the
        Media Manager System;

    o   domain names, including EPayTV.com,  EpayTV.net,  HollywoodSoftware.com,
        HollywoodSoftware.net, Indie-Coop.com, Indie-Coop.net, Indiedirect.com,
        IPayTV.com; PersonalEDI.com, RightsMart.com, RightsMart.net,
        TheatricalDistribution.com and Vistapos.com;

    o   unregistered  trademarks and service marks,  including Coop  Advertising
        V1.04, EMS, EMS ASP, Exhibitor  Management  System,  Hollywood SW, Inc.,
        HollywoodSoftware.com,  Indie  Co-op,  Media  Manager,  On-Line  Release
        Schedule, RightsMart, TDS and TheatricalDistribution.com.; and

    o   logos, including those in respect of Hollywood SW, TDS and EMS.

DISTRIBUTED SOFTWARE

In addition to Hollywood SW's proprietary  software  products,  the Company also
distributes   theatre  ticketing  software  developed  by  Vista   Entertainment
Solutions ("Vista").  Vista is a leading provider of theatre ticketing solutions
based  in  New  Zealand  and  Hollywood  SW is  currently  the  only  U.S.-based
distributor of their products to the U.S. theatre market. Under our distribution
agreement  with  Vista,  Hollywood  SW  earns  a  percentage  of  license  fees,
maintenance fees and consulting fees generated from each sale of Vista products.

CUSTOMERS

Hollywood SW's customers include 20th Century Fox, Paramount Pictures, Universal
Studios, MGM, Lions Gate Films, Newmarket Films, Magnolia Pictures,  Gold Circle
Films, IFC Films,  First  Look/Overseas  Film Group,  Regent Releasing,  Brenden
Theatres, and Flagship Theatres, among others.

DOMESTIC THEATRICAL DISTRIBUTION

Hollywood  SW's TDS product  enables U.S. film  distributors  to plan,  book and
account for theatrical film releases. It also allows distributors to collect and
analyze related financial  operations data. TDS is currently licensed to several
distributors,  including 20th Century Fox, MGM ,Universal  Studios and Paramount
Pictures;  these distributors  comprised  approximately  34.9%, 16.3%, 10.4% and
9.6%,  respectively,  of Hollywood SW's revenues for the fiscal year ended March
31, 2005. Also, several  distributors access Hollywood SW's products through its
ASP service,  including IFC Films,  Newmarket  Films,  Magnolia  Pictures,  Gold
Circle  Films,  MAC  Releasing  and IFS. In  addition,  Hollywood SW licenses to
customers  other  distribution-related  software,  including MPPS and MMS, which
further  automate and manage  related  aspects of film  distribution,  including
advertising, strategic theater selection and competitive release planning.

Hollywood SW also  provides  outsourced  film  distribution  services  through a
division known as Indie Direct. The Indie Direct staff uses the TDS distribution
software to provide back office film booking and receivables management services
to independent film distributors and producers. Current customers include Arenas
Entertainment and Regent Releasing,

INTERNATIONAL THEATRICAL DISTRIBUTION

In  2004,  Hollywood  SW  began  developing  an  international  version  of  its
successful TDS application to support worldwide theatrical film distribution. In
December  2004,   Hollywood  SW  signed  an  agreement  with  the  international
distribution  subsidiary  of 20th  Century  Fox,  to license and  implement  the
software  in 14  overseas  territories,  encompassing  18 foreign  offices  over
approximately 18 months. As with its North American TDS solution, this worldwide
application   will  interface  with  Access  DM's  digital   delivery   service,
significantly enhancing Access DM's international market opportunities.

                                       9


FILM EXHIBITION

Hollywood SW also has developed EMSa web-enabled theater management  application
designed to manage all key  aspects of film  planning,  scheduling,  booking and
distributor  payment  for  theatrical  exhibitors.  This  head  office  solution
consolidates  daily  transactional data from each theatre's box office ticketing
and concession system,  supports  negotiations with film distributors and passes
necessary revenue,  cash and payment  information on to the client's  accounting
system.  EMS also receives and reports digital film delivery status  information
from Access DM systems at each theatre.

COMPETITION

Within the major movie studios and exhibition circuits, Hollywood SW's principal
competitors for its products are in-house development teams, which generally are
assisted by outside contractors and other third-parties.  Most distributors that
do not use the TDS software use their own systems. Internationally, Hollywood SW
is aware of one vendor  based in the  Netherlands  providing  similar  software,
although  on a smaller  scale.  Hollywood  SW's film  exhibition  product,  EMS,
competes principally with customized solutions developed by the large exhibition
circuits  and at least  one other  competitor  that has been  targeting  mid- to
small-sized exhibitors. We believe that Hollywood SW, through its technology and
management  experience,  may  differentiate  itself  from  such  competitors  by
providing a competitive  alternative to their forms of digital content  delivery
and management business.

MARKETING AND BUSINESS DEVELOPMENT

Hollywood SW's senior management team manages its sales and business development
efforts.  Hollywood SW intends to co-market  its products and services  with the
services of AccessDM,  although  each will be able to market their  products and
services  independently.  Although new customers are generated  usually  through
referrals and the  cross-promotion  of Hollywood SW and Vista products Hollywood
SW also  selectively  advertises  in  trade  journals  and  its  representatives
regularly attend trade shows, such as ShowEast and ShowWest.

DATA CENTER SERVICES

The Data Center Services segment of our business consists of two units: our Data
Centers and Managed Services.

MARKET OPPORTUNITY/INDUSTRY BACKGROUND

We believe that the overall  market for IDC services has been largely  driven by
the rapid  growth in Internet  usage and a  significant  shift by  companies  to
outsourcing  or engaging third parties to provide,  their data center  services.
These services are not the principal focus of these companies,  divert them from
their core businesses and require significant investment.

Growth in data use is driving complex data management services.  We believe that
the demand for  services  that store data will  continue  to grow as a result of
increasing  amounts of stored data,  increasing storage  complexity,  increasing
value of certain  information and a potential  shortage of in-house  information
technology  personnel.  In  February  2003,  Gartner  Dataquest  estimated  that
aggregate  revenues  generated by providers of  outsourced  managed data storage
services in North  America  could  approach  $17 billion by 2006,  up from $12.2
billion in 2001, representing a 7% compounded annual growth rate.

OUR DATA CENTERS

Our IDCs provide  fail-safe  environments for our customers'  equipment by using
back-up power  generators as well as back-up  battery power and  specialized air
conditioning  systems. Our IDC customers include major and mid-level network and
Internet service providers,  such as KMC Telecom, AT&T, OnFiber  Communications,
and Zone  Telecom,  as well as various  users of network  services,  traditional
voice and data  transmission  providers,  long distance  carriers and commercial
businesses.  Our contract  with KMC Telecom  expires on December 15, 2005 and we
have  received  an  indication  from KMC  Telecom  that  they will not renew the
contract for at least some of the current  sites that they are  licensing  under
such  contract.  Our IDC services are enhanced by the network  managed  services
available as a result of the acquisition of Managed Services.  We have installed
our computer equipment for our digital media delivery software and services unit
in our AccessColocenters.

We operate nine IDCs in the following eight states: Arkansas, Kansas, Maine, New
Hampshire, New Jersey, New York, Texas and Virginia. In addition, we maintain an
Internet data center in Los Angeles, California that is dedicated to delivery of
motion pictures and other digital content to movie theatres worldwide.  Internet
data  centers  are  facilities  leased by us through  which we, for  monthly and
variable fees, provide our customers with:

     o    secure   and   fail-   safe   locations   for   their   computer   and
          telecommunications equipment by using back-up power generators as well
          as back-up battery power and specialized air conditioning systems;

                                       10


     o    access  to  voice  and data  transmission  services  from a choice  of
          network providers; and

     o    services to monitor their computer and  telecommunications  equipment;
          and services,  to store,  back-up and protect their programs and data,
          including our AccessStorage-On-Demand  managed storage services, which
          store and copy data.

We provide our customers with flexible space in our IDCs to house data and voice
transmission equipment,  as well as their computer equipment.  Our customers may
choose from a variety of space offerings,  including a single-locking cabinet, a
private cage (under 500 square feet) or a private  suite (over 500 square feet).
IDC services  require an initial  installation fee and a monthly charge based on
the size of the space offering selected by the customer.

Our overall IDC utilization rate as of March 31, 2005 was approximately 25%. The
purchase  prices that we paid for our acquired IDCs reflected  their  respective
utilization rates and,  therefore,  we believe present us with an opportunity to
increase  significantly our results of operations,  largely because the variable
costs in adding new customers are relatively low.

We also offer additional services for which our customers pay additional monthly
service charges. These services include:  additional power availability;  access
to our IDC staff for a  variety  of tasks  such as  equipment  rebooting,  power
cycling,  card swapping and performing  emergency  equipment  replacements;  the
ability to connect  cables  (both  fiber and  copper)  directly  to another  IDC
customer  for voice and data  transmission  services  and the ability to use our
risers,  which are pipes used to connect  cables  (both  fiber optic and copper)
from our customers'  computer  equipment to other companies'  computer equipment
located outside of our IDCs but within the building that our IDC is located.

We provide IDC services under  agreements  generally having terms of from one to
ten  years.  As of  March  31,  2005,  we had 75  contracts,  with  62  separate
customers,  each  requiring  payment of monthly  fees,  with a weighted  average
remaining term of 12 months.

In an effort to increase the  competitive  advantage of the IDCs,  on January 9,
2004, we acquired  Managed  Services,  a managed service provider of information
technologies.  As an information  technology outsourcing  organization,  Managed
Services manages  clients'  networks and systems in over 35 countries in Europe,
Asia and North and South  America and more than 20 states in the United  States.
Managed  Services  operates a 24x7 GNCC,  capable of running  the  networks  and
systems of large corporate  clients.  The  capabilities of Managed Services have
been integrated with our IDCs and now operate under the name of AccessIT Managed
Services.

MANAGED SERVICES OFFERINGS

We believe  that the breadth of  services in the IDCs is a critical  competitive
advantage. We have developed two distinct Managed Services offerings:

     o    Network and Systems Management; and

     o    Managed Storage Services.

NETWORK AND SYSTEMS MANAGEMENT

We offer our  customers  the  economies  of scale of the GNCC and  access to our
advanced   engineering   staff.  We  believe  this  low-cost  and   customizable
alternative to designing,  implementing,  and  maintaining a large scale network
infrastructure enables our customers to focus on information technology business
development,  rather  than the  underlying  communications  infrastructure.  Our
service  features include network  architecture and design,  systems and network
monitoring  and  management,  data and voice  integration,  project  management,
auditing and assessment and managed carrier services.

                                       11


MANAGED STORAGE SERVICES

We offer  managed  storage  services  that use hardware  and software  from such
industry  leaders as EMC,  Brocade,  StorageTek  and Veritas.  We presently have
three customers for such services.  Our managed storage services Xiotech,  known
as  AccessStorage-on-Demand,  are  generally  priced on a per  gigabyte of usage
basis and provide customers with reliable primary data storage that is connected
to their  computers.  We may also provide  customers  that have their  computers
located  within one of our IDCs with a tape  back-up copy of their data that may
then be sent to the customer's  computer if the customer's data is lost, damaged
or inaccessible.

All managed storage services are available separately or may be bundled together
with other  services.  Monthly  pricing is based on the type of storage (tape or
disk), the capacity used and the level of the access required.

OUR DATA CENTER SERVICES CUSTOMERS

Our  AccessColocenters  provide  services to a variety of  customers,  including
traditional  voice and data transmission  providers,  long distance carriers and
commercial businesses.

Our  principal  data  services  customers  include KMC  Telecom and AT&T,  which
comprised  approximately  18.2%  and  8.3%,  respectively,  of our  consolidated
revenues for the fiscal year ended March 31, 2005. Our contract with KMC Telecom
expires on December 15, 2005 and we have received an indication from KMC Telecom
that they will not renew the  contract  for at least some of the  current  sites
that they are licensing under such contract.

SALES AND BUSINESS DEVELOPMENT

We market our services  through a program using a variety of media and channels,
including a small direct sales force, sales channels and referral programs.

Our IDC direct sales force  presently  consists of our  President  and six other
employees. This team is supported by both our operations and legal personnel.

INTELLECTUAL PROPERTY

AccessIT  has applied  for U.S.  service  mark  registration  for the  following
service marks:  AccessManaged Storage;  Access Digital Media; AccessDM;  Digital
Express  E-Courier  Services;  The Courier for the Digital Era; Vortex Solutions
Engine;  ADM Capstore:  Digi-Central;  Theater Command Center and  Digi-Central.
AccessIT has received U.S. service mark  registration for the following  service
marks: Access Integrated Technologies,  AccessSecure;  AccessSafe; AccessBackup;
AccessBusiness  Continuance;   AccessVault;   AccessContent;   AccessColocenter;
AccessDataVault; AccessColo; and AccessStore.

COMPETITORS

Our data center services compete with neutral colocation  providers,  as well as
traditional colocation providers, including local phone companies, long distance
phone  companies,  Internet  service  providers and web hosting  facilities  and
carrier-owned data centers.  There are also many data centers owned and operated
by smaller data center companies,  landlords and  communications  carriers.  The
larger operators of data centers include Switch and Data, Inc.,  Equinix,  Inc.,
Globix  Corporation and AboveNet,  Inc. Many data center operators offer managed
services to clients who co-locate servers in the operator owned data center. Our
focus is to deliver  managed  services  inside the data center as a lead product
for primary data center  services,  but to also offer those  services to clients
who have servers outside our data centers allowing us to offer remote server and
network  monitoring,   server  and  network  management  and  disaster  recovery
services.

A number of the competitors  mentioned above have greater financial,  technical,
marketing and managerial  resources than we do. These  competitors also generate
greater revenue and are better known than we are.  However,  we believe that our
data center services,  by offering IDCs along with related data center services,
may  differentiate  us from the  above  companies  by  providing  a  competitive
alternative to their forms of digital content delivery.

EMPLOYEES

As of March 31, 2005, we have 93 employees, 34 of whom are part-time,  primarily
at the  Pavilion  Theatre.  Of our  full-time  employees,  10 are in  sales  and
marketing, 32 are in research and development and technical services, and 17 are
in finance and administration.  The Pavilion Theatre has a collective bargaining
agreement with one union which covers five employees, one of whom is a full-time
employee.

                                       12


RISK FACTORS

An  investment  in our Class A common  stock  involves a high degree of risk and
uncertainty.  You should  carefully  consider the risks  described  below before
deciding to invest in our Class A common stock.  The risks  described  below are
not the only ones facing our company. Additional risks not presently known to us
or that we presently consider  immaterial may also adversely affect our company.
If any of the following risks occur, our business,  financial condition, results
of operations  and prospects  could be materially  adversely  affected.  In that
case, the trading price of our Class A common stock could decline, and you could
lose all or part or your  investment.  In assessing these risks, you should also
refer to the other  information  included or  incorporated  by reference in this
report, including the consolidated financial statements and notes thereto of our
company included elsewhere in this report.

WE HAVE INCURRED LOSSES SINCE OUR INCEPTION.

We have incurred  losses since our inception in March 2000 and have financed our
operations  principally  through equity investments and borrowings.  We incurred
net losses of $4.8  million and $6.8 million in the fiscal years ended March 31,
2004 and 2005,  respectively.  As of March 31, 2005,  we had working  capital of
$1.7  million  and  cash  and  cash  equivalents  of  $4.8  million;  we  had an
accumulated deficit of $21.5 million;  and, from inception through such date, we
had used $8.5  million  in cash for  operating  activities.  Our net  losses are
likely to continue for the foreseeable future.

Our profitability is dependent upon us achieving a sufficient volume of business
from our customers.  If we cannot  achieve a high enough volume,  we likely will
incur  additional  net and  operating  losses.  We may be unable to continue our
business  as  presently   conducted  unless  we  obtain  funds  from  additional
financings.

Our net losses and negative cash flows may increase as and to the extent that we
increase the size of our business  operations,  increase our sales and marketing
activities,  enlarge our customer support and professional  services and acquire
additional  businesses.  These  efforts may prove to be more  expensive  than we
currently   anticipate  which  could  further  increase  our  losses.   We  must
significantly  increase  our revenues in order to become  profitable.  We cannot
reliably  predict  when,  or if, we will become  profitable.  Even if we achieve
profitability, we may not be able to sustain it. If we cannot generate operating
income  or  positive  cash  flows in the  future,  we will be unable to meet our
working capital requirements.

WE HAVE LIMITED  EXPERIENCE  IN OUR BUSINESS  OPERATIONS,  WHICH MAY  NEGATIVELY
AFFECT OUR ABILITY TO GENERATE SUFFICIENT REVENUES TO ACHIEVE PROFITABILITY.

We were  incorporated  on March 31, 2000.  Our first IDC became  operational  in
December 2000. In addition to our data center operations,  we have expanded into
the  following  new business  areas:  (a)  providing  back office  transactional
software for  distributors  and  exhibitors of filmed and digital  entertainment
through our wholly owned  subsidiary,  Hollywood SW; (b) providing  software and
systems for the  delivery  of digital  entertainment,  such as movies,  to movie
theaters and other venues  through our wholly owned  subsidiary,  AccessDM;  (c)
providing    information    technologies,    secure    system    monitoring   of
telecommunications  and  data  network  outsourcing  through  our  wholly  owned
subsidiary,  Managed  Services,  and (d) providing  satellite  delivery services
through our wholly  owned  subsidiary  FiberSat;  and (e)  operation  of a movie
theatre,  through  our wholly  owned  subsidiary  ADM  Cinema.  Although we have
retained the senior management of Hollywood SW, Managed Services,  and FiberSat,
we have little  experience  in these new areas of business and cannot assure you
that we will be able to develop and market the services provided  thereby.  None
of these new businesses is directly related to our data center operations and we
cannot assure you that any of them will  complement our data center  operations,
or vice versa.  We also cannot  assure you that we will be able to  successfully
operate  these  businesses.  Our efforts to expand into these five new business
areas may prove costly and time-consuming  and may divert a considerable  amount
of resources from our data center operations.

Our lack of operating  experience in the digital  cinema  industry and providing
transactional software for movie distributors could result in:

     o    increased operating and capital costs;

     o    an inability to effect a viable growth strategy;

     o    service interruptions for our customers; and

     o    an inability to attract and retain customers.

                                       13


We may not be able to  generate  sufficient  revenues  to achieve  profitability
through the operation of our data centers,  our digital  cinema  business or our
movie  distribution  software  business.  We cannot  assure  you that we will be
successful in marketing and operating  these new  businesses  or, even if we are
successful in doing so, that we will not experience additional losses.

OUR RECENT  ACQUISITIONS  INVOLVE  RISKS,  INCLUDING  OUR INABILITY TO INTEGRATE
SUCCESSFULLY THE NEW BUSINESSES AND OUR ASSUMPTION OF CERTAIN LIABILITIES.

We have recently made meaningful acquisitions to expand into new business areas.
However,   we  may  experience  costs  and  hardships  in  integrating  the  new
acquisitions  into our current  business  structure.  On  November  3, 2003,  we
acquired  Hollywood SW and on January 9, 2004, we acquired Managed Services.  On
March 29, 2004, we acquired assets used in the operations of Boeing  Digital,  a
business unit of Boeing,  which we integrated into the business of AccessDM.  On
November 17, 2004, we acquired  assets of FiberSat.  Most recently,  on February
11, 2005, we acquired the Pavilion Theatre through ADM Cinema,  our wholly owned
subsidiary. We may not be able to integrate successfully the acquired businesses
and assets into our existing business. We cannot assure you that we will be able
to effectively  market the services provided by Hollywood SW, AccessDM,  Managed
Services,  FiberSat  and the  Pavilion  Theatre  along  with our  data  centers.
Further,  these new businesses and assets may involve a significant diversion of
our  management  time and  resources  and be costly.  Our  acquisition  of these
businesses  and assets also  involves the risks that the  businesses  and assets
acquired  may prove to be less  valuable  than we  expected  and/or  that we may
assume unknown or unexpected  liabilities,  costs and problems.  In addition, we
assumed certain  liabilities in connection with these acquisitions and we cannot
assure you that we will be able to adequately pay off such assumed  liabilities.
Other  companies that offer similar  products and services may be able to market
and sell their products and services more cost-effectively than we can.

BECAUSE THE USE OF ACCESSDM'S  SERVICES  LARGELY  DEPENDS ON THE EXPANDED USE OF
DIGITAL  PRESENTATIONS  REQUIRING ELECTRONIC DELIVERY, IF SUCH EXPANDED USE DOES
NOT OCCUR, NO VIABLE MARKET FOR ACCESSDM'S SERVICES MAY DEVELOP.

Even if we are among the first to develop  software and systems for the delivery
of digital content to movie theaters and other venues,  the demand for them will
largely depend on a concurrent  expansion of digital  presentations at theaters,
which may not occur for several years. There can be no assurance,  however, that
major movie studios that currently rely on traditional  distribution networks to
provide  physical  delivery  of digital  files will  adopt a  different  method,
particularly  electronic  delivery,  of  distributing  digital  content to movie
theaters.  If the  development of digital  presentations  and changes in the way
digital  files are delivered  does not occur,  there may be no viable market for
AccessDM's delivery systems and software.

IF WE DO NOT MANAGE OUR GROWTH, OUR BUSINESS WILL BE HARMED.

We may not be successful in managing our rapid growth.  Since  February 2003, we
acquired five  businesses and in connection with those  acquisitions,  we formed
three more subsidiaries.  These subsidiaries operate in business areas different
from our data center operations business.  The number of our employees has grown
from 11 in March 2003 to 34 in March 2004 and to 93 in March  2005.  Past growth
has placed, and future growth will continue to place, a significant challenge to
our management and resources, related to the successful integration of the newly
acquired  businesses.  To manage the expected growth of our operations,  we will
need to improve  our  existing  and  implement  new  operational  and  financial
systems,  procedures  and  controls.  We may also  need to expand  our  finance,
administrative,  client  services and operations  staff and train and manage our
growing employee base effectively.  Our current and planned personnel,  systems,
procedures  and controls  may not be adequate to support our future  operations.
Our business,  results of operations and financial position will suffer if we do
not effectively manage our growth.

WE MAY NOT BE ABLE TO  GENERATE  THE  AMOUNT OF CASH  NEEDED TO FUND OUR  FUTURE
OPERATIONS.

Our ability either to make payments on or to refinance our  indebtedness,  or to
fund planned  capital  expenditures  and research and development  efforts,  may
depend on our  ability to generate  cash in the future.  Our ability to generate
cash is in part subject to general economic, financial, competitive,  regulatory
and other factors that are beyond our control.


                                       14


Based on our  current  level of  operations,  we  believe  our  cash  flow  from
operations and available cash financed  through the issuance of common stock and
promissory  notes will be  adequate  to meet our future  liquidity  needs for at
least  one  year  from  the  date of this  prospectus.  Significant  assumptions
underlie  this  belief,  including,  among other  things,  that there will be no
material   adverse   developments   in  our   business,   liquidity  or  capital
requirements. If we are unable to service our indebtedness, we will be forced to
adopt an alternative strategy that may include actions such as:

     o    reducing capital expenditures;

     o    reducing research and development efforts;

     o    selling assets;

     o    restructuring or refinancing our remaining indebtedness; and

     o    seeking additional funding.

We cannot assure you, however,  that our business will generate  sufficient cash
flow  from  operations,  or that we will be able to make  future  borrowings  in
amounts sufficient to enable us to pay the principal and interest on our current
indebtedness or to fund our other liquidity  needs. We may need to refinance all
or a portion of our  indebtedness  on or before  maturity.  We cannot assure you
that  we  will be able to  refinance  any of our  indebtedness  on  commercially
reasonable terms or at all.

WE MAY CONTINUE TO HAVE CUSTOMER  CONCENTRATION IN OUR BUSINESS, AND THE LOSS OF
ONE OR MORE OF OUR LARGEST CUSTOMERS COULD HAVE A MATERIAL ADVERSE EFFECT ON US.

We expect that we will rely, at least in the near future,  upon a limited number
of customers  for a  substantial  percentage of our revenues and may continue to
have customer concentration company-wide.  For fiscal years ended 2004 and 2005,
our  four  largest  customers  accounted  for  approximately  54% and 40% of our
revenues,  respectively  (our  largest  customer,  KMC  Telecom,  accounted  for
approximately 27% and 18%,  respectively of our revenues for such fiscal years).
Our contract with KMC Telecom  expires on December 15, 2005 and we have received
an  indication  from KMC Telecom  that they will not renew the  contract  for at
least some of the current sites that they are licensing under such contract. The
revenues  generated from our IDC business  constituted  approximately 62% of our
total revenue for the fiscal year ended March 31, 2005.

To date,  AccessDM has generated  revenues of $260,000 for the fiscal year ended
March  31,  2005,  and  we  anticipate  that   AccessDM's   revenues  will  grow
significantly  although  there can be no assurances of this. For the fiscal year
ended March 31, 2005,  the five largest  customers of Hollywood SW accounted for
approximately  78% of its  revenues  (its  largest  customer,  20th Century Fox,
accounted for approximately 35% of its revenues for such period). For the fiscal
year ended March 31, 2005,  the four largest  customers of Managed  Services and
FiberSat accounted for approximately 54% and 73% of their respective revenues. A
loss of or decrease in business  from one or more of our largest  customers  for
any reason  could  have a material  adverse  effect on our  business,  financial
position and results of operations.

OUR  SUBSTANTIAL  DEBT  AND  LEASE   OBLIGATIONS   COULD  IMPAIR  OUR  FINANCIAL
FLEXIBILITY AND OUR COMPETITIVE POSITION.

We now  have,  and will  continue  to have,  significant  debt  obligations.  We
currently have notes payable to third parties with principal amounts aggregating
$14.1 million as of March 31, 2005. We also have capital lease  obligations with
principal amounts aggregating $6.5 million as of March 31, 2005.

These obligations could have important consequences for us, including:

     o    limiting our ability to obtain  necessary  financing in the future and
          make  it  more  difficult  for  us  to  satisfy  our  lease  and  debt
          obligations;

     o    requiring  us to  dedicate a  substantial  portion of our cash flow to
          payments  on our  lease and debt  obligations,  thereby  reducing  the
          availability  of our  cash  flow  to  fund  working  capital,  capital
          expenditures and other corporate requirements;

     o    making us more  vulnerable to a downturn in our business and limit our
          flexibility to plan for, or react to, changes in our business; and

     o    placing us at a competitive  disadvantage compared to competitors that
          might have stronger balance sheets or better access to capital by, for
          example, limiting our ability to enter into new markets.


                                       15


     o    If we are unable to meet our lease and debt  obligations,  we could be
          forced to restructure or refinance our obligations, to seek additional
          equity financing or to sell assets,  which we may not be able to do on
          satisfactory  terms or at all. As a result,  we could default on those
          obligations.

AN INABILITY TO OBTAIN NECESSARY FINANCING MAY HAVE A MATERIAL ADVERSE EFFECT ON
OUR FINANCIAL POSITION,  OPERATIONS AND PROSPECTS IF UNANTICIPATED CAPITAL NEEDS
ARISE.

Our capital  requirements may vary  significantly from what we currently project
and be affected by unforeseen delays and expenses.  We may experience  problems,
delays,  expenses and difficulties  frequently encountered by similarly-situated
companies,  as  well  as  difficulties  as a  result  of  changes  in  economic,
regulatory or competitive  conditions.  If we encounter any of these problems or
difficulties   or  have   underestimated   our   operating   losses  or  capital
requirements,  we may require  significantly  more  financing  than we currently
anticipate.  We cannot  assure you that we will be able to obtain  any  required
additional financing on terms acceptable to us, if at all. We will be restricted
on the type and amount of additional  indebtedness that we may incur as a result
of our  acquisition  of Hollywood  SW. In  connection  with the  acquisition  of
Hollywood  SW, we issued  secured  promissory  notes to the sellers that will be
senior to all  indebtedness  during the term of those  notes other than any debt
provided  by a bank or  institutional  lender,  which is less than $1 million in
aggregate  principal amount,  unsecured or secured by the assets of Hollywood SW
and its  subsidiaries.  We will  also be  restricted  on the type of  additional
indebtedness  that we may incur as a result of our  Convertible  Debentures.  An
inability to obtain necessary  financing could have a material adverse effect on
our financial position, operations and prospects.

OUR  PLAN  TO  ACQUIRE  ADDITIONAL  BUSINESSES  INVOLVES  RISKS,  INCLUDING  OUR
INABILITY   SUCCESSFULLY   TO  COMPLETE  AN   ACQUISITION,   OUR  ASSUMPTION  OF
LIABILITIES, DILUTION OF YOUR INVESTMENT AND SIGNIFICANT COSTS.

We intend to make further acquisitions of similar or complementary businesses or
assets,  although there are no acquisitions identified by us as probable at this
time. Even if we identify appropriate acquisition  candidates,  we may be unable
to negotiate successfully the terms of the acquisitions, finance them, integrate
the acquired  business into our then existing business and/or attract and retain
customers.  Completing an  acquisition  and  integrating  an acquired  business,
including our recently acquired businesses,  may require a significant diversion
of  management  time and resources and involves  assuming new  liabilities.  Any
acquisition  also  involves  the risks that the assets  acquired  may prove less
valuable  than  expected  and/or  that  we  may  assume  unknown  or  unexpected
liabilities, costs and problems. If we make one or more significant acquisitions
in which the  consideration  consists of our capital stock, your equity interest
in our company could be diluted,  perhaps  significantly.  If we were to proceed
with one or more significant  acquisitions in which the  consideration  included
cash, we could be required to use a substantial  portion of our available  cash,
or obtain additional financing to consummate them.

WE EXPECT COMPETITION TO BE INTENSE:  IF WE ARE UNABLE TO COMPETE  SUCCESSFULLY,
OUR BUSINESS AND RESULTS OF OPERATIONS WILL BE SERIOUSLY HARMED.

The market for the IDC facilities  and managed  services  business,  the digital
cinema  business  and  the  movie  distribution   software  business,   although
relatively new, are competitive, evolving and subject to rapid technological and
other changes.  We expect the intensity of competition in each of these areas to
increase in the future.  Companies  willing to expend the  necessary  capital to
create facilities and/or software similar to ours may compete with our business.
Increased  competition may result in reduced revenues and/or margins and loss of
market  share,  any of which  could  seriously  harm our  business.  In order to
compete  effectively in each of these fields,  we must  differentiate  ourselves
from competitors.

Many of our current and potential  competitors have longer  operating  histories
and greater financial,  technical,  marketing and other resources than us, which
may permit them to adopt aggressive pricing policies. As a result, we may suffer
from  pricing  pressures  that could  adversely  affect our  ability to generate
revenues  and our  results  of  operations.  Many of our  competitors  also have
significantly greater name and brand recognition and a larger customer base than
us. We may not be able to compete  successfully with our competitors.  If we are
unable to compete  successfully,  our business and results of operations will be
seriously harmed.

WE FACE THE RISKS OF AN EARLY-STAGE COMPANY IN A NEW AND RAPIDLY EVOLVING MARKET
AND MAY NOT BE ABLE SUCCESSFULLY TO ADDRESS SUCH RISKS AND EVER BE SUCCESSFUL OR
PROFITABLE.

We have encountered and will continue to encounter the challenges, uncertainties
and  difficulties  frequently  experienced by  early-stage  companies in new and
rapidly evolving markets, including:

     o    lack of operating experience;


                                       16


     o    net losses;

     o    lack of sufficient customers;

     o    insufficient revenues and cash flow to be self-sustaining;

     o    necessary capital expenditures;

     o    an unproven business model;

     o    a changing business focus; and

     o    difficulties in managing potentially rapid growth.

This is particularly the case with respect to our newly acquired businesses.  We
cannot assure you that we will ever be successful or profitable.

MANY OF OUR CORPORATE  ACTIONS MAY BE CONTROLLED BY OUR OFFICERS,  DIRECTORS AND
PRINCIPAL  STOCKHOLDERS;  THESE ACTIONS MAY BENEFIT THESE PRINCIPAL STOCKHOLDERS
MORE THAN OUR OTHER STOCKHOLDERS.

As  of  March  31,  2005,  our  directors,   executive  officers  and  principal
stockholders  beneficially  own,  directly  or  indirectly,  in  the  aggregate,
approximately 41% of our outstanding common stock. In particular,  A. Dale Mayo,
our President and Chief Executive Officer,  beneficially holds 965,811 shares of
Class B common stock,  9,601 shares of Class A common stock, and notes which are
convertible  into  45,810  shares of Class A common  stock,  which  collectively
represent  approximately  10% of our  outstanding  common stock,  but due to the
supervoting  Class B common  stock,  represent  approximately  51% of the voting
power. These stockholders, and Mr. Mayo himself, will have significant influence
over our  business  affairs,  with the  ability  to  control  matters  requiring
approval by our security holders, including elections of directors and approvals
of mergers or other business combinations. Our Class B common stock entitles the
holder to ten votes per share.  The shares of Class A common stock have one vote
per share.  Also,  certain  corporate  actions  directed by our officers may not
necessarily  inure to the  proportional  benefit  of other  stockholders  of our
company;  under his employment  agreement,  for example, Mr. Mayo is entitled to
receive cash bonuses based on our revenues, regardless of our earnings, if any.

OUR  SUCCESS  WILL  SIGNIFICANTLY  DEPEND ON OUR  ABILITY TO HIRE AND RETAIN KEY
PERSONNEL.

Our success will depend in significant  part upon the continued  services of our
key technical,  sales and senior management personnel. If we lose one or more of
our key employees,  we may not be able to find a suitable replacement(s) and our
business and results of operations could be adversely  affected.  In particular,
our  performance  depends  significantly  upon the continued  service of A. Dale
Mayo,  our  President  and  Chief  Executive   Officer,   whose  experience  and
relationships  in the movie  theater  industry  are  integral  to our  business,
particularly  in the business  areas of Hollywood SW and  AccessDM.  Although we
have obtained two $5 million  key-man life insurance  policies in respect of Mr.
Mayo,  the loss of his services  would have a material and adverse effect on our
business,  operations and  prospects.  Each policy carries a death benefit of $5
million,  and  while we are the  beneficiary  of each  policy,  under one of the
policies the proceeds will be used to  repurchase,  after  reimbursement  of all
premiums paid by us some, or all, of the shares of our capital stock held by Mr.
Mayo's  estate at the  then-determined  fair market  value.  We also rely on the
experience and expertise of Russell J. Wintner,  AccessDM's  President and Chief
Operating  Officer,  the two co-founders of Hollywood SW, David Gajda and Robert
Jackovich,  and Ravi Patel, FiberSat's President and Chief Operating Officer. In
addition,  our future  success  will  depend  upon our  ability to hire,  train,
integrate and retain qualified new employees.

IF WE ARE NOT SUCCESSFUL IN PROTECTING OUR INTELLECTUAL  PROPERTY,  OUR BUSINESS
WILL SUFFER.

We depend heavily on technology to operate our business.  Our success depends on
protecting our intellectual property, which is one of our most important assets.
Although  we do  not  currently  hold  any  copyrights,  patents  or  registered
trademarks, we do have intellectual property consisting of:

     o    licensable software products;

     o    rights to certain domain names;

                                       17


     o    registered service marks on certain names and phrases;

     o    various unregistered trademarks and service marks;

     o    know-how; and

     o    rights to certain logos.

If we do  not  adequately  protect  our  intellectual  property,  our  business,
financial  position  and  results of  operations  would be harmed.  Our means of
protecting our intellectual  property may not be adequate.  Unauthorized parties
may attempt to copy  aspects of our  intellectual  property or to obtain and use
information that we regard as proprietary. In addition,  competitors may be able
to devise  methods of competing  with our  business  that are not covered by our
intellectual   property.  Our  competitors  may  independently  develop  similar
technology,  duplicate our technology or design around any intellectual property
that we may obtain.

The success of some of our business operations depends on the proprietary nature
of certain software.  We do not, however,  have any patents with respect to such
software.  Because  there is no patent  protection  in respect of our  software,
other  companies  are  not  prevented  from  developing  and  marketing  similar
software.  We  cannot  assure  you,  therefore,  that  we  will  not  face  more
competitors  or that we can  compete  effectively  against  any  companies  that
develop  similar  software.  We also  cannot  assure  you  that  we can  compete
effectively or not suffer from pricing pressure with respect to our existing and
developing  products  that  could  adversely  affect  our  ability  to  generate
revenues.

Although we hold rights to various web domain  names,  regulatory  bodies in the
United States and abroad could establish additional  top-level domains,  appoint
additional  domain name registrars or modify the requirements for holding domain
names.  The  relationship  between  regulations  governing domain names and laws
protecting  trademarks  and similar  proprietary  rights is  unclear.  We may be
unable to prevent third parties from acquiring  domain names that are similar to
or diminish the value of our proprietary rights.

SERVICE AND OTHER  INTERRUPTIONS  COULD POTENTIALLY REDUCE OUR REVENUES AND HARM
OUR REPUTATION AND FINANCIAL RESULTS.

Our facilities and our customers'  equipment are vulnerable to damage from human
error,  physical or electronic  security  breaches,  power loss,  other facility
failures,  fire,  earthquake,  water  damage,  sabotage,  vandalism  and similar
events. In addition, our customers would be adversely affected by the failure of
carriers to provide network access to our facilities as a result of any of these
events. Any of these events or other unanticipated  problems could interrupt our
customers'  ability to provide  services from our facilities.  This could damage
our reputation,  make it difficult to attract new and retain customers and cause
our customers to terminate their  contracts with us and to seek damages.  Any of
these events could have a material  adverse  effect on our  business,  financial
position and prospects.

WE DEPEND ON  RELATIONSHIPS  WITH THIRD PARTIES,  WHICH, IF NOT MAINTAINED,  MAY
ADVERSELY AFFECT OUR ABILITY TO PROVIDE SERVICES TO OUR CUSTOMERS.

We are not a communications  carrier and,  therefore,  we rely  substantially on
third parties to provide our customers  with access to voice,  data and Internet
networks.  We must maintain  relationships with third-party network providers in
order to offer our data center  customers  access to a choice of networks.  Many
carriers have their own data center  facilities  and may be reluctant to provide
network services at our data centers.  As a result, some carriers may choose not
to connect their  services to our data centers.  We do not own any real property
and depend on our ability to negotiate  favorable lease terms with the owners of
our data center facilities. The use of our IDCs is limited to the extent that we
do not  extend  or  renew  our  leases,  in which  case we might  not be able to
accommodate our customers,  particularly if we were unable to relocate timely to
a comparable facility.

The   availability   of  an  adequate   supply  of  electrical   power  and  the
infrastructure  to deliver  that power is critical to our ability to attract and
retain customers and achieve profitability.  We rely on third parties to provide
electrical  power to our data centers,  and cannot be certain that these parties
will  provide  adequate  electrical  power or that we will  have  the  necessary
infrastructure  to deliver such power to our customers.  If the electrical power
delivered to our facilities is inadequate to support our customers' requirements
or if delivery is not timely,  our results of operations and financial  position
may be materially and adversely affected.

WE MAY HAVE DIFFICULTY  COLLECTING PAYMENTS FROM SOME OF OUR CUSTOMERS AND INCUR
COSTS AS A RESULT.

A number of our customers are early stage  companies.  In addition,  many of our
customers  are  telecommunications   companies,   and  many   telecommunications
companies have been experiencing significant financial difficulties.  There is a
risk that these

                                       18


companies will experience difficulty paying amounts owed to us, and we might not
be able to  collect  on a timely  basis all  monies  owed to us by some of them.
Although we intend to remove customers that do not pay us in a timely manner, we
may  experience  difficulties  and costs in  collecting  from or removing  these
customers.

IF WE DO NOT RESPOND TO FUTURE  ADVANCES IN  TECHNOLOGY  AND CHANGES IN CUSTOMER
DEMANDS,  OUR FINANCIAL  POSITION,  PROSPECTS  AND RESULTS OF OPERATIONS  MAY BE
ADVERSELY AFFECTED.

The demand for our digital cinema business, movie distribution software and data
centers will be affected,  in large part, by future  advances in technology  and
changes in  customer  demands.  Our  success  will also depend on our ability to
address the  increasingly  sophisticated  and varied  needs of our  existing and
prospective customers.

We cannot assure you that there will be a demand for the digital cinema software
and delivery services  provided by AccessDM.  AccessDM's  profitability  depends
largely upon the general expansion of digital  presentations at theaters,  which
may not occur for  several  years.  There can be no  assurance  that major movie
studios  relying  on  traditional  distribution  networks  to  provide  physical
delivery of digital files will adopt a different method, particularly electronic
delivery,  of distributing digital content to movie theaters. If the development
of digital presentations and changes in the way digital files are delivered does
not occur, there may be no viable market for AccessDM's software and systems.

WE MAY BE SUBJECT TO  ENVIRONMENTAL  RISKS  RELATING TO THE  ON-SITE  STORAGE OF
DIESEL FUEL AND BATTERIES.

Our data centers contain tanks for the storage of diesel fuel for our generators
and significant  quantities of lead acid batteries used to provide back-up power
generation for uninterrupted  operation of our customers'  equipment.  We cannot
assure you that our  systems  will be free from leaks or that use of our systems
will not result in spills.  Any leak or spill,  depending on such factors as the
nature and quantity of the  materials  involved and the  environmental  setting,
could  result  in   interruptions  to  our  operations  and  the  incurrence  of
significant  costs;   particularly  to  the  extent  we  incur  liability  under
applicable  environmental laws. This could have a material adverse effect on our
business, financial position and results of operations.

ITEM 2. PROPERTY

Our  executive  offices are  located in  Morristown,  New  Jersey.  Our nine IDC
facilities  are located in Jersey City,  New Jersey;  the Manhattan and Brooklyn
Boroughs of New York City; Portland, Maine; Manchester, New Hampshire;  Roanoke,
Virginia;  Wichita,  Kansas; Little Rock, Arkansas; and Waco, Texas.  FiberSat's
two facilities in Los Angeles,  California  also contains a data center which we
use as a dedicated  digital content delivery site. Our executive offices and all
of our IDC facilities are leased. We do not own any real property.

In  connection  with our  acquisition  of  Hollywood  SW,  we have  assumed  the
obligations of Hollywood SW under a Commercial  Property Lease, dated January 1,
2000,  between  Hollywood  SW and  Hollywood  Media  Center,  LLC  ("HMC"),  the
landlord.  The lease is for the executive offices of Hollywood SW, has a monthly
rent of $2,335 and covers 2,115 square feet.  The lease  expired on December 31,
2003 and is currently a month to month  tenancy with the same monthly  rent.  On
May 1, 2004, an additional 933 square feet was rented on a month-to-month  basis
for additional  monthly rental  payments of $1,000.  HMC is a limited  liability
company 95% owned by David Gajda, a security holder of HMC and a key employee of
AccessIT.

In connection  with our  acquisition of the assets of FiberSat,  we have assumed
the obligations of FiberSat under a Standard Industrial/Commercial Single-Tenant
Lease,  dated December 2, 1996,  between  FiberSat and David L. McNamara  Family
Trust,  the landlord.  The lease is for the  administrative  offices,  technical
operations center,  and warehouse of FiberSat,  has a monthly rent of $9,845 and
covers  13,455  square  feet.  The  lease  expires  on March 31,  2007.  We have
additionally assumed the obligations of FiberSat under a Lease for Communication
Equipment Space, dated July 1, 2004, between FiberSat and Time Warner Cable, the
landlord.  The lease is for space to house  certain  communication  equipment of
FiberSat and has a monthly rent of $1,722. The lease expires on June 30, 2009.

In connection with our acquisition of the Pavilion Theatre,  we have assumed the
obligations of Pritchard Square Cinema LLC under a commercial lease dated August
9, 2002,  between Pritchard Square Cinema LLC and OLP Brooklyn Pavilion LLC, the
landlord,  as amended. The lease is for a movie theatre, and cafe, has a monthly
initial rent of $94,000 and covers  approximately  31,120 square feet. The lease
expires  July 31,  2022 and has two  options  to renew for  additional  ten-year
terms.  This lease also contains a provision for the payment of additional  rent
if box office revenues exceed certain levels.

We are a party to  separate  leases for each of our nine IDC  facilities.  These
leases cover an aggregate square footage of 67,200, under which we are paying an
aggregate monthly rent of $192,000. The rental periods remaining on these leases
range from month-to month (under our Roanoke,  Virginia facility lease, the term
of which we intend  to  extend  if our  customer  at that  facility

                                       19


renews its agreement  with us) to 12 years and, with the exception of our leases
for the Jersey City, New Jersey and Brooklyn, New York facilities,  which expire
in 2009 and 2016, respectively,  the leases include options to renew the leases.
The lease of our  executive  offices  expires on May 31,  2009,  has a four-year
renewal option,  covers 5,237 square feet and has a monthly rent of $10,910.  We
believe  that  we  have  sufficient  space  to  conduct  our  business  for  the
foreseeable  future.  All of our leased  properties  are,  in the opinion of our
management, in satisfactory condition and adequately covered by insurance.

ITEM 3. LEGAL PROCEEDINGS

On July 2, 2004,  we received  notice that certain  creditors of one of our data
center  customers named  NorVergence  filed an involuntary  bankruptcy  petition
against  NorVergence.  On July 14, 2004,  NorVergence  agreed to the entry of an
order granting relief under Chapter 11 of the United States  Bankruptcy Code and
then converted the Chapter 11 reorganization  to Chapter 7 liquidation.  We also
have a first security interest in NorVergence accounts receivable.

On November 1, 2004,  Diversified  Aerospace Services,  LLC ("DAS") commenced an
adversary proceeding (Adv. Pro. No. 04-2862)(the "Adversary Proceeding") against
the  chapter 7 trustee  for the  NorVergence  case and us.  DAS and  NorVergence
entered into a number of leases (the "DAS Leases")  whereby  NorVergence  leased
certain  equipment to DAS and DAS was obligated to make lease payments.  Through
the Adversary  Proceeding,  DAS is seeking to, among other things,  void the DAS
Leases and obtain an order  enjoining any party from  collecting any amounts due
under  the  DAS  Leases.  Because  we  had a  first  priority  lien  on  all  of
NorVergence's accounts receivable, including, but not limited to, some or all of
the payments due under the DAS Leases,  we may not be able to recover on account
of its lien any proceeds from DAS.

On January 26, 2005 the bankruptcy court in the matter of NorVergence approved a
motion for the trustee to pay us $121,000 for past due accounts receivable,  and
on  February  25,  2005 we were paid  this  amount.  Additionally,  we have been
granted  the right to  pursue  collection  of  NorVergence's  customer  accounts
receivable.  Any amounts  collected  will be retained by us in settlement of its
claim against NorVergence.

On March 11, 2005, we filed an answer to the Adversary Proceeding.

On June 9, 2005,  Soriano,  Henkel,  Biehl & Mtthews  ("SHB")  filed a complaint
(case no.  04-32079/RG) (the "Complaint")  against the chapter 7 trustee for the
NorVergence case and us. SHB and NorVergence  entered into a number of equipment
leases (the "SHB Leases") whereby  NorVergence  leased certain  equipment to SHB
and SHB was  obligated to make lease  payments.  Through the  Compalint,  SHB is
seeking  to,  among  other  things,  void the SHB  Leases  and  obtain  an order
enjoining  any party from  collecting  any amounts due under the SHB Leases.  As
with the Adversary  Proceeeding,  because we had a first priority lien on all of
the NorVergence's  accounts receivable,  including,  but not limited to, some or
all of the payments  due under the SHB Leases,  we may not be able to recover on
account of its lien any proceeds from SHB.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.

                                     PART II

ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDERS MATTERS

PRICE RANGE OF COMMON STOCK

Our Class A common stock trades  publicly on the American  Stock  Exchange under
the  trading  symbol  "AIX." The  following  table  shows the high and low sales
prices per share of our Class A common stock as reported by the  American  Stock
Exchange for the periods indicated:


FISCAL YEAR ENDED MARCH 31, 2004                   HIGH        LOW
                                                   ----        ---
    Third Quarter (from November 10, 2003).......$ 6.95      $ 5.00
    Fourth Quarter...............................$ 5.30      $ 4.09

FISCAL YEAR ENDED MARCH 31, 2005
    First Quarter (through June 30, 2004)........$ 5.20      $ 4.10
    Second Quarter ..............................$ 5.15      $ 3.20
    Third Quarter ...............................$ 4.17      $ 3.75
    Fourth Quarter (through June 24, 2005).......$ 8.11      $ 3.25

The last reported  sale price of our Class A common stock on the American  Stock
Exchange on June 28, 2005 was $8.99 per share.  As of June 28, 2005,  there were
approximately 168 holders of record of our Class A common stock.

DIVIDEND POLICY

                                       20


We have never paid any cash dividends on our common stock or preferred stock and
do not anticipate paying any on our common stock in the foreseeable  future. Any
future  payment of dividends on our common stock will be in the sole  discretion
of our board of directors.

EQUITY COMPENSATION PLANS

The  following  table  sets forth  certain  information,  as of March 31,  2005,
regarding the shares of AccessIT's  Class A common stock and  AccessDM's  common
stock authorized for issuance under their respective equity compensation plans.

                                                                Number of shares
                      Number of shares of                        of common stock
                      common stock issuable   Weighted average       remaining
                       upon exercise of     of exercise price      available FOR
                                                                             ---
                      OUTSTANDING OPTIONS     of OUTSTANDING     FUTURE ISSUANCE
                      --------------------    --------------     ---------------
PLAN                             (#)               OPTIONS ($)            (#)
----                             ---               -----------            ---
AccessIT Amended and
Restated 2000 Stock
Option Plan approved by
stockholders............      762,897(1)              $5.50            87,103(1)
AccessIT compensation
plans not approved by
stockholders............          N/A                   N/A                N/A
AccessDM compensation plan
approved by stockholders    1,005,000(2)             $0.21            995,000(2)
AccessDM compensation
plans not approved by
stockholders............          N/A                   N/A                N/A

(1) Shares of AccessIT Class A common stock
(2) Shares of AccessDM common stock

ACCESSIT STOCK OPTION PLAN

Our board of directors adopted our 2000 Stock Option Plan (the "Plan"),  on June
1, 2000  and,  in July  2000,  our  stockholders  approved  the Plan by  written
consent.  Under the Plan,  which was  amended and  restated in January  2003 and
further  amended in September 2003 and October 2004, we grant both incentive and
non-statutory  stock  options  to  our  employees,  non-employee  directors  and
consultants.  The primary purpose of the Plan is to enable us to attract, retain
and motivate our employees, non-employee directors and consultants. The Plan, as
amended,  authorizes  up to  850,000  shares  of our  Class A common  stock  for
issuance  upon the exercise of options  granted  under the Plan. As of March 31,
2005,  there were options to purchase  87,103 shares of our Class A common stock
available for grant under the Plan.

Under the Plan,  stock  options  covering  no more than  100,000  shares  may be
granted to any participant in any single calendar year and no participant may be
granted  incentive  stock options with an aggregate fair market value, as of the
date on  which  such  options  were  granted,  of more  than  $100,000  becoming
exercisable for the first time in any given calendar year. Options granted under
the Plan expire 10 years  following the date of grant (or such shorter period of
time as may be provided in a stock option agreement or five years in the case of
incentive stock options granted to stockholders  who own greater than 10% of the
total combined  voting power of our company) and are subject to  restrictions on
transfer. Options granted under the Plan vest generally over periods up to three
years. The Plan is administered by our board of directors.

The Plan  provides  for the granting of incentive  stock  options with  exercise
prices of not less than 100% of the fair market value of our common stock on the
date of grant.  Incentive  stock options  granted to holders of more than 10% of
the total combined  voting power of our company must have exercise prices of not
less  than  110% of the fair  market  value of our  common  stock on the date of
grant.  Incentive and  non-statutory  stock  options  granted under the Plan are
subject to vesting provisions, and exercise is subject to the continuous service
of  the  optionee.  The  exercise  prices  and  vesting  periods  (if  any)  for
non-statutory options are set in the discretion of our board of directors.  Upon
a change of control of our company,  all options  (incentive and  non-statutory)
that have not previously vested will become  immediately and fully  exercisable.
In connection with the grants of options under the Plan, we and the participants
have executed stock option agreements setting forth the terms of the grant.

                                       21


ACCESSDM STOCK OPTION PLAN

AccessDM's board of directors  adopted its stock option plan on May 13, 2003 and
its  stockholders  approved the plan on May 13, 2003.  Under the plan,  AccessDM
grants stock options to its employees,  non-employee  directors and consultants.
The plan authorizes up to 2,000,000 shares of AccessDM common stock for issuance
upon the  exercise  of options  granted  under the plan.  As of March 31,  2005,
AccessDM has issued  options to purchase  1,005,000 of its shares to  employees,
and there were  options to  purchase  995,000  shares of AccessDM  common  stock
available for grant under the plan.

Under the plan,  stock  options  covering  no more than  500,000  shares  may be
granted to any participant in any single calendar year and no participant may be
granted  incentive  stock options with an aggregate fair market value, as of the
date on  which  such  options  were  granted,  of more  than  $100,000  becoming
exercisable for the first time in any given calendar year. Options granted under
the plan expire 10 years  following the date of grant (or such shorter period of
time as may be provided in a stock option agreement or five years in the case of
incentive stock options granted to stockholders  who own greater than 10% of the
total  combined  voting power of AccessDM)  and are subject to  restrictions  on
transfer. Options granted under the plan vest generally over periods up to three
years. The plan is administered by AccessDM's board of directors.

The plan  provides  for the granting of incentive  stock  options with  exercise
prices of not less than 100% of the fair market value of AccessDM's common stock
on the date of grant.  Incentive  stock options  granted to holders of more than
10% of the total combined  voting power of AccessDM must have exercise prices of
not less than 110% of the fair market value of AccessDM common stock on the date
of grant.  Incentive and non-statutory  stock options granted under the plan are
subject to vesting provisions, and exercise is subject to the continuous service
of  the  optionee.  The  exercise  prices  and  vesting  periods  (if  any)  for
non-statutory  options  are  set  in  the  discretion  of  AccessDM's  board  of
directors.  Upon a change of control of  AccessDM,  all options  (incentive  and
non-statutory) that have not previously vested will become immediately and fully
exercisable.  In connection with the grants of options under the plan,  AccessDM
and the  participants  have executed stock option  agreements  setting forth the
terms of the grant.

SALES OF UNREGISTERED SECURITIES IN FISCAL YEAR ENDED MARCH 31, 2005

All of our equity  securities  sold by us during the fiscal year ended March 31,
2005,  that were not  registered  under the  Securities  Act of 1933, as amended
(the" Securities Act"),  have been previously  reported in our quarterly reports
on Form 10-QSB and current reports on Form 8-K.

PURCHASE OF EQUITY SECURITIES

The following table summarizes  information regarding purchases of shares of our
Class A common  stock made by us or on our behalf  during the three months ended
March 31, 2005.

                                                   Total number
                                                    of shares -
                                                   purchased as   Maximum number
                                                      part of     of shares that
                                                     publicly       may yet be
                                                     announced       purchased
                   Total number    Average price     plans or    under the plans
     PERIOD          of SHARES    paid PER SHARE    PROGRAMS(A)     PROGRAMS(A)
     ------             ------         ---------    -----------    ------------

1/1/2005 -            42,300           $3.35           42,300         48,560
1/31/2005

2/1/2005 - 
2/28/2005                -               -               -               -

3/1/2005 -
3/31/2005                -               -               -               -
                      ------           -----          ------          ------
  Total               42,300           $3.35          42,300          48,560
                      ======           =====          ======          ======

(A) In August 2004,  our Board of Directors  authorized  the repurchase of up to
100,000  shares  of  Class A common  stock.  The  shares  will be  purchased  at
prevailing  prices  from  time-to-time  in the open market  depending  on market
conditions  and other  factors.  Through  March 2005 the Company  has  purchased
51,440  shares for a total  purchase  price of $172,000  at an average  purchase
price of $3.34 per share.  As of March 31, 2005, an additional  48,560 shares of
Class A common stock may be repurchased.

                                       22


ITEM 6. MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

THE FOLLOWING  DISCUSSION  SHOULD BE READ IN CONJUNCTION  WITH THE  CONSOLIDATED
FINANCIAL  STATEMENTS,  INCLUDING THE NOTES THERETO,  INCLUDED ELSEWHERE IN THIS
REPORT. THIS DISCUSSION CONTAINS FORWARD-LOOKING  STATEMENTS. THAT INVOLVE RISKS
AND  UNCERTAINTIES.  FORWARD-LOOKING  STATEMENTS IN THIS REPORT ARE INDICATED BY
WORDS  SUCH  AS  "ANTICIPATES,"   "EXPECTS,"   "BELIEVES,"  "INTENDS,"  "PLANS,"
"ESTIMATES," "PROJECTS" AND SIMILAR EXPRESSIONS.  THESE STATEMENTS REPRESENT OUR
EXPECTATIONS  BASED ON  CURRENT  INFORMATION  AND  ASSUMPTIONS.  FORWARD-LOOKING
STATEMENTS ARE INHERENTLY SUBJECT TO RISKS AND UNCERTAINTIES. OUR ACTUAL RESULTS
COULD  DIFFER  MATERIALLY  FROM THOSE WHICH ARE  ANTICIPATED  OR  PROJECTED AS A
RESULT OF  CERTAIN  RISKS AND  UNCERTAINTIES,  INCLUDING,  BUT NOT  LIMITED TO A
NUMBER  OF  FACTORS,  SUCH  AS OUR  INCURRENCE  OF  LOSSES  TO  DATE;  ACHIEVING
SUFFICIENT  VOLUME OF BUSINESS FROM OUR CUSTOMERS;  OUR SUBSIDIARIES  CONDUCTING
BUSINESS  IN AREAS  IN WHICH WE HAVE  LITTLE  EXPERIENCE;  ECONOMIC  AND  MARKET
CONDITIONS;  THE  PERFORMANCE OF THE DATA CENTER  SERVICES AND SOFTWARE  RELATED
BUSINESSES;  CHANGES IN BUSINESS  RELATIONSHIPS  WITH OUR MAJOR CUSTOMERS AND IN
THE  TIMING,  SIZE AND  CONTINUATION  OF OUR  CUSTOMERS'  PROGRAMS;  COMPETITIVE
PRODUCT AND  PRICING  PRESSURES;  INCREASES  IN COSTS THAT CANNOT BE RECOUPED IN
PRODUCT PRICING; SUCCESSFUL INTEGRATION OF ACQUIRED BUSINESSES; AS WELL AS OTHER
RISKS  AND  UNCERTAINTIES,  SUCH  AS  THOSE  DESCRIBED  UNDER  QUANTITATIVE  AND
QUALITATIVE  DISCLOSURES  ABOUT MARKET RISK AND THOSE  DETAILED  HEREIN AND FROM
TIME TO TIME IN OUR FILINGS WITH THE SEC. THOSE  FORWARD-LOOKING  STATEMENTS ARE
MADE ONLY AS OF THE DATE HEREOF,  AND WE UNDERTAKE  NO  OBLIGATION  TO UPDATE OR
REVISE THE FORWARD-LOOKING  STATEMENTS,  WHETHER AS A RESULT OF NEW INFORMATION,
FUTURE EVENTS OR OTHERWISE.

OVERVIEW

AccessIT was organized on March 31, 2000 and we are in the business of providing
software services and technology  solutions to the motion picture industry,  and
operating IDC's.  Recently,  we have actively expanded into new and interrelated
business areas relating to the delivery and management of digital cinema content
to entertainment venues worldwide.  These businesses,  supported by our internet
data center business, have become our primary strategic focus.

We have two reportable segments: Media Services, which represents the operations
of Hollywood SW, AccessDM  (including Boeing Digital),  the Pavilion Theatre and
FiberSat,  and the Data Center  Services,  which  comprise the operations of our
nine IDCs and the  operations  of Managed  Services.  For the fiscal  year ended
March 31, 2005, we received 38% and 62%,  respectively,  of our revenue from the
Media Services and Data Center Services segments.

From our  inception  through  November 3, 2003,  all of our  revenues  have been
derived  from  monthly  license  fees and fees  from  other  ancillary  services
provided  by us at our IDCs,  including  fees from  various  services  under the
collocation space contract with KMC Telecom,  which contract expires on December
15, 2005 and we have received an indication  from KMC Telecom that they will not
renew  the  contract  for at  least  some of the  current  sites  that  they are
licensing  under such  contract.  Hollywood SW generates  revenues from software
license fees, ASP fees,  enhancements,  consulting and maintenance fees. Managed
Services generates  revenues  primarily from managed network services.  AccessDM
generates  revenues  from the  delivery of movies and other  content  into movie
theaters.  We incurred net losses of $4.8 million and $6.8 million in the fiscal
years ended March 31, 2004 and 2005,  respectively,  and we have an  accumulated
deficit of $21.5  million as of March 31, 2005.  We  anticipate  that,  with our
recent  acquisitions,  as well as the  operation  of  AccessDM,  our  results of
operations  will improve.  As we grow, we expect our operating costs and general
and administrative  expenses will also increase for the foreseeable  future, but
as a lower  percentage  of revenue.  In order to achieve and sustain  profitable
operations,  we will need to generate  more revenues than we have in prior years
and we may need to obtain additional financing.

CRITICAL ACCOUNTING POLICIES AND USE OF ESTIMATES

Our discussion and analysis of our financial condition and results of operations
are based upon our Consolidated  Financial Statements,  which have been prepared
in accordance with accounting principles generally accepted in the United States
of America.  The preparation of Consolidated  Financial Statements in conformity
with accounting  principles  generally  accepted in the United States of America
requires  our  management  to make  estimates  and  assumptions  that affect the
reported  amounts of assets and  liabilities  and the  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.  Our
most significant  estimates relate to software revenue recognition,  capitalized
software  costs,  depreciation  of fixed assets and  amortization  of intangible
assets,  recoverability of goodwill and long-lived assets and intangible assets,
the valuation of deferred tax liabilities,  and the valuation of assets acquired
and liabilities assumed in purchase business combinations.  Actual results could
differ from these  estimates.  On an on-going  basis, we evaluate our estimates,
including  those  related  to the  carrying  values  of  our  fixed  assets  and
intangible assets. We base our estimates on historical experience and on various
other assumptions that we believe to be reasonable under the circumstances made,
the  results  of which form the basis for making  judgments  about the  carrying
values of assets  and  liabilities

                                       23


that are not readily  apparent from other  sources.  Actual results could differ
from these estimates under different assumptions or conditions.

We believe that the following critical  accounting policies and estimates affect
our more  significant  estimates and judgments  used in the  preparation  of our
Consolidated Financial Statements.

REVENUE RECOGNITION

Media Services

Revenues are accounted for in accordance  with  Statement of Position 97-2 ("SOP
97-2") and Staff Accounting  Bulletin ("SAB") No. 104. Our software revenues are
generated from the following primary sources:

     o    software licensing, including customer licenses and ASP agreements;

     o    software maintenance contracts; and

     o    professional    consulting    services,    which   includes    systems
          implementation,  training,  custom software  development  services and
          other professional services.

Software licensing revenue is recognized when the following criteria are met:

     o    persuasive evidence of an arrangement exists;

     o    delivery has occurred and no significant obligations remain;

     o    the fee is fixed or determinable; and

     o    collection is determined to be probable.

Significant  upfront  fees are  received in addition  to periodic  amounts  upon
achievement  of contractual  events for licensing of our products.  Such amounts
are  deferred  until the  revenue  recognition  criteria  have  been met,  which
typically occurs after delivery and acceptance.

For  arrangements  with  multiple  elements  (e.g.,  delivered  and  undelivered
products,  maintenance and other services),  the Company  separately  negotiates
each element of the  arrangement  based on the fair value of the  elements.  The
fair  values for ongoing  maintenance  and  support  obligations  are based upon
vendor  specific  objective  evidence.  The fair  values for  services,  such as
training or  consulting,  are based upon hourly  billing rates of these services
when sold separately to other customers. In instances where the Company develops
customized  software  application  the  percentage-of-completion  accounting  is
followed to recognize revenue.

Customers not wishing to license and operate our software themselves may use the
software  through  an ASP  arrangement,  in which we host  the  application  and
provide  customer  access via the internet.  Annual minimum ASP service fees are
recognized  ratably over the contract term. Overage revenues for usage in excess
of stated minimums are recognized monthly.

Maintenance  services and website  subscription fees are recognized ratably over
the  contract  term.  Professional  consulting  services,  sales of third  party
products and resale  hardware  revenues are recognized as services are provided.
Software  development  revenues are recognized when delivery has occurred and no
significant obligations remain.

Deferred revenue is recorded in cases of:

     o    a portion  or the  entire  contract  amount  cannot be  recognized  as
          revenue due to  non-delivery  or  acceptance  of licensed  software or
          custom programming;

     o    incomplete implementation of ASP service arrangements; or

     o    unexpired pro-rata periods of maintenance, minimum ASP service fees or
          website subscription fees.

                                       24


As  license  fees,  maintenance  fees,  minimum  ASP  service  fees and  website
subscription  fees are often  paid in  advance,  this  revenue is  deferred  and
amortized over the contract term, or in the case of license fees,  recognized in
accordance with SOP 97-2 once the Company's  commitments to provide the software
and other  related  services to the  customer  are  satisfied.  Such amounts are
classified  as  deferred  revenue  in the  Consolidated  Balance  Sheet  and are
recognized  as revenue in  accordance  with the  Company's  revenue  recognition
policies described above.

FiberSat revenues consist of satellite network  monitoring and maintenance fees.
These fees consist of monthly  recurring  billings  pursuant to  contracts  with
terms  ranging  from  month to  month,  and a  maximum  of six  years  including
renewals,  which are  recognized  as  revenues  in the month  earned,  and other
billings  which are  recognized on a time and  materials  basis in the period in
which the services were provided.

Revenues  consist  of  (1)  satellite  delivery  revenues,  (2)  encryption  and
preparation  fee revenues,  (3) landing fees for delivery to each movie theatre.
These revenues are recognized upon completion of the related services.

Data Center Services

Within our Data Center Services  segment,  IDC revenues  consist of license fees
for colocation space, riser access charges, electric and cross-connect fees, and
non-recurring  equipment installation fees. Revenues from our IDCs, riser access
charges,  electric and cross-connect  fees are billed monthly and, in accordance
with SAB 104, are recognized  ratably over the terms of the contracts,  which is
generally  one to  nine  years.  Certain  customer  contracts  contain  periodic
increases  in the  amount of  license  fees to be paid,  and those  amounts  are
recognized as license fee revenues on a straight-line basis over the term of the
contracts. Installation fees are recognized on a time and materials basis in the
period in which the services were provided and represent the  culmination of the
earnings process as no significant  obligations remain.  Amounts such as prepaid
license fees and other  amounts,  which are collected  prior to  satisfying  the
above revenue recognition criteria, are classified as deferred revenues. Amounts
satisfying  revenue  recognition  criteria  prior to billing are  classified  as
unbilled revenues. In addition, within our Data Center Services segment, Managed
Services revenues consist of network monitoring and maintenance fees. These fees
consist  of  monthly  recurring  billings  pursuant  to  contracts,   which  are
recognized  as  revenues  in the  month  earned,  and other  billings  which are
recognized  on a time and  materials  basis in the period in which the  services
were provided.

CAPITALIZED SOFTWARE COSTS

We account for software costs under Statement of Financial  Accounting Standards
("SFAS")  No. 86,  "Accounting  for the Costs of  Computer  Software to Be Sold,
Leased,  or Otherwise  Marketed".  Software  development costs that are incurred
subsequent to establishing  technological  feasibility are capitalized until the
product is  available  for  general  release.  Amounts  capitalized  as software
development  costs are  amortized  periodically  using the  greater of  revenues
during the period compared to the total estimated  revenues to be earned or on a
straight-line  basis over five years. We review  capitalized  software costs for
impairment on an annual basis.  To the extent that the carrying  amount  exceeds
the  estimated  net  realizable  value  of the  capitalized  software  cost,  an
impairment  charge is recorded.  No impairment was recorded for the fiscal years
ended March 31, 2004 and 2005.  Amortization of capitalized software development
costs, included in costs of revenues,  for fiscal years ended March 31, 2004 and
2005 amounted to $118,000 and $369,000, respectively.

BUSINESS COMBINATIONS AND INTANGIBLE ASSETS

We have  adopted  SFAS No.  141,  "Business  Combinations"  and  SFAS  No.  142,
"Goodwill  and other  Intangible  Assets".  SFAS No. 141  requires  all business
combinations  to be accounted for using the purchase  method of  accounting  and
that  certain  intangible  assets  acquired  in a business  combination  must be
recognized  as  assets  separate  from  goodwill.  SFAS No.  142  addresses  the
recognition and measurement of goodwill and other intangible  assets  subsequent
to their  acquisition.  SFAS No. 142 also addresses the initial  recognition and
measurement of intangible  assets  acquired  outside of a business  combination,
whether  acquired  individually or with a group of other assets.  This statement
provides that intangible  assets with indefinite  lives and goodwill will not be
amortized but will be tested at least annually for impairment.  If an impairment
is indicated,  then the asset will be written down to its fair value,  typically
based upon its future expected  discounted cash flows. As of March 31, 2005, our
finite-lived  intangible assets consisted of customer agreements,  covenants not
to  compete,   Federal   Communications   Commission   licenses  for   satellite
transmission  services,  trade names and trademarks,  and a liquor license which
are  estimated to have useful lives of ranging from 2 to 10 years.  In addition,
we have recorded  goodwill in connection with the  acquisitions of Hollywood SW,
Managed Services, FiberSat, and the Pavilion Theatre.

PROPERTY AND EQUIPMENT

Property  and  equipment  are  stated at cost,  less  accumulated  depreciation.
Depreciation  is recorded  using the  straight-line  method  over the  estimated
useful lives of the respective assets.  Leasehold  improvements and assets under
capital  lease are being

                                       25


amortized over the shorter of the lease term or the estimated useful life of the
improvement.  Maintenance  and repair  costs are charged to expense as incurred.
Major renewals, improvements and additions are capitalized.

IMPAIRMENT OF LONG-LIVED ASSETS

We review the  recoverability  of our  long-lived  assets on a periodic basis in
order to identify business conditions, which may indicate a possible impairment.
The  assessment  for potential  impairment is based  primarily on our ability to
recover  the  carrying  value of our  long-lived  assets  from  expected  future
undiscounted cash flows. If the total of expected future undiscounted cash flows
is less than the total  carrying  value of the assets,  a loss is recognized for
the difference  between the fair value  (computed based upon the expected future
discounted  cash flows) and the carrying value of the assets.  No impairment was
recorded for the fiscal years ended March 31, 2004 and 2005.

DESCRIPTION OF LINE ITEMS

The  following is a  description  of certain line items from our  statements  of
operations:

     o    Media Services revenues include charges for software license fees, ASP
          service fees,  consulting,  development and maintenance fees,  digital
          movie delivery fees and satellite  delivery  services.  Media Services
          revenue are those  generated by Hollywood SW,  AccessDM,  FiberSat and
          the  Pavilion  Theatre.  Our Data  Center  Services  revenues  include
          charges for monthly license fees for IDC space,  electric fees,  riser
          access charges and installation  fees, and managed network  monitoring
          fees.

     o    Cost of revenues  consists of facility  operating  costs such as rent,
          utilities,  real estate taxes, repairs and maintenance,  insurance and
          other related  expenses,  direct  personnel costs and  amortization of
          capitalized software development costs.

     o    Selling,  general and  administrative  expenses  consist  primarily of
          salaries  and  related   personnel  costs  for  management  and  other
          headquarters  office  employees,  professional  fees,  advertising and
          marketing costs and our corporate and divisional headquarters facility
          costs.

     o    Provision for doubtful accounts represents amounts deemed not probable
          of collection from customers.

     o    Non-cash,  stock-based  compensation  represents the value of employee
          and non-employee stock options and restricted stock grants,  amortized
          over the vesting periods (if any).

     o    Non-cash  interest  expense  represents  the accretion of the value of
          warrants attached to our five-year  promissory notes, and the imputing
          of interest on a non-interest bearing note payable.

PRIVATE PLACEMENTS

On June 4, 2004, we concluded a private placement with several investors whereby
we issued  1,217,500  unregistered  shares of our Class A common stock at a sale
price of $4.00  per  share  ("June  2004  Private  Placement").  The  total  net
proceeds,   including  fees  and  expenses  to  register  the  securities   were
approximately  $4.0  million,  which is being used for capital  investments  and
working  capital.  We also issued to investors and to the investment firm in the
June 2004 Private  Placement  warrants to purchase a total of 304,375  shares of
our Class A common stock at an exercise  price of $4.80 per share,  which became
exercisable  upon receipt.  We agreed to file a  registration  statement for the
resale of these shares and the shares  underlying  the warrants  with the SEC by
filing a Form SB-2 on or before July 5, 2004.  We filed the Form SB-2 on July 2,
2004, and the Form SB-2 was declared effective on July 20, 2004.

On October 26, 2004, we entered into a private  placement with certain investors
whereby we issued  282,776  unregistered  shares of our Class A common  stock at
$3.89  per  share  to  certain  accredited   investors  for  gross  proceeds  of
$1.1million.  ("October 2004 Private  Placement").  These shares carry piggyback
and  demand  registration  rights,  at the sole  expense  of the  investors.  We
realized net proceeds of approximately  $1.023 million,  which were used for the
FiberSat  Acquisition  and for working  capital.  The investors  exercised their
piggyback registration rights and we registered the resale of all of the 282,776
shares of Class A common stock on a Form S-3 which was declared effective by the
SEC on March 21, 2005.

On February 10, 2005, we completed a private  placement of $7.6 million,  of the
Convertible Debentures.  The Convertible Debentures bear interest at the rate of
7% per year and are  convertible  into shares of our Class A common stock at the
price of $4.07 per share,  subject to possible adjustments from time to time. In
connection with the Convertible  Debenture offering, we

                                       26

issued the  participating  institutional  investors the  Convertible  Debentures
Warrants,  exercisable  for up to 560,197  shares of Class A common  stock at an
initial  exercise price of $4.44 per share,  subject to adjustments from time to
time.  The  Convertible  Debentures  Warrants  may  be  exercised  beginning  on
September 9, 2005 until five years thereafter.  We agreed to file a registration
statement for the resale of the shares underlying the Convertible Debentures and
the Convertible Debentures Warrants with the SEC on or before March 14, 2005. We
filed  such a  registration  statement  on March  11,  2005 and it was  declared
effective by the SEC on March 21, 2005.

ACQUISITIONS

On July 17, 2003, we signed a stock purchase agreement with Hollywood SW and its
two selling  stockholders.  On November 3, 2003, we acquired Hollywood SW, after
amending  the  agreement to complete the  acquisition  on that date,  by issuing
secured promissory notes (the "Initial Notes"),  each in the principal amount of
$3.6  million,  to the two  selling  stockholders.  On  November  10,  2003,  we
completed  our initial  public  offering  of shares of our Class A common  stock
("IPO") and (1) the Initial Notes were exchanged for the consideration described
in clauses (2) and (3) below and cancelled and returned to us by Hollywood  SW's
selling  stockholders,  (2) the lead underwriter in the IPO transmitted,  in the
aggregate,  $2.45 million to the selling  stockholders and (3) we issued to such
selling  stockholders $3 million in 8% promissory notes and 400,000 unregistered
shares of our Class A common stock.

We may pay an additional purchase price in each of the three years following the
closing of the Hollywood SW acquisition if certain annual  earnings  targets are
achieved.  In the first such year,  the earnings  targets were not achieved.  We
also have agreed to issue additional  unregistered  shares of our Class A common
stock if,  during the 90 days  following  the  applicable  lock-up  period,  the
average value of our Class A common stock during such 90 days declines  below an
average of $3.60 per share.

On December 22, 2003, we signed an agreement to purchase all of the  outstanding
common stock of Managed  Services,  and on January 9, 2004,  the  acquisition of
Managed  Services was completed.  Managed  Services is a provider of information
technologies; its primary product is managed network services through its global
network command center. We believe that the acquisition of Managed Services will
expand the existing  capabilities and services of our IDCs. The initial purchase
price consisted of $250,000 in cash and 100,000 unregistered shares of our Class
A common  stock.  In addition,  we may be required to pay a contingent  purchase
price for any of the three years following the closing in which certain earnings
targets  are  achieved;  any  additional  payment  is to be  made  in  the  same
proportionate  combination of cash and unregistered shares of our Class A common
stock as the  purchase  price  payable at closing.  In the first such year,  the
earnings  targets were not achieved.  We have also agreed to a one time issuance
of additional  unregistered  shares of our Class A common stock to the seller up
to a maximum of 20,000 shares if, in accordance with an agreed upon formula, the
market value of our Class A common stock is less than an average of $4.00 during
the final 90 days of the lock up period.

On March 29, 2004, we  consummated  an  acquisition  of certain assets of Boeing
Digital,  a division of Boeing,  pursuant to an asset purchase agreement of same
date. The acquired assets consist of digital  projectors,  satellite  dishes and
other equipment  installed at 28 screens within 21 theatres in the United States
and equipment stored at other locations,  and satellite  transmission  equipment
which we  installed  in Los  Angeles,  California.  The initial  purchase  price
consisted of: $250,000 in cash; 53,534 unregistered shares of our Class A common
stock;  and a  non-interest  bearing  promissory  note  payable for $1.8 million
payable  in equal  installments  over 4 years.  In  addition,  we agreed to make
payments  totaling a maximum  of $1 million  over 4 years,  which  payments  are
comprised of 20% of the gross receipts  generated by the acquired  assets during
the 4 year period after the closing. For the fiscal year ended March 31, 2005, a
payment of approximately $52,000 was due to Boeing based on such gross receipts.
Additionally,  at any time during the 90 day period  immediately  following  the
first 12 months  after the  closing,  Boeing  may sell its  53,534  unregistered
shares of our Class A common stock to AccessIT in exchange for $250,000 in cash.
Boeing has also agreed to purchase from  AccessIT a minimum of $450,000  managed
storage services per year for four years from the date of the agreement.

On October 19, 2004, we entered into an agreement to purchase  substantially all
of the assets and assume certain  specified  liabilities of FiberSat Seller.  On
November  17,  2004,  the  FiberSat   Acquisition   was   completed.   FiberSat,
headquartered in Chatsworth,  California,  provides services utilizing satellite
ground  facilities and  fiber-optic  connectivity  to receive,  process,  store,
encrypt and transmit television and data signals globally. FiberSat's Chatsworth
facility currently houses the infrastructure operations of the Company's digital
cinema  satellite  delivery  services.  The initial  purchase price for FiberSat
consisted of 500,000  unregistered  shares of our Class A common  stock,  and we
agreed to repay certain  liabilities of FiberSat on or before the closing of the
acquisition,  with up to $500,000 in cash and 100,000 unregistered shares of our
Class A common stock. We had the option to exchange up to 50,000 of such 100,000
unregistered  shares of Class A common stock to increase  the cash,  and thereby
decrease the Class A common stock portion of such  repayment  based on the ratio
of one Class A common stock for each $5.00 of  additional  cash. We repaid these
liabilities  by paying  approximately  $381,000 and issuing 40,000 shares of our
Class A common  stock.  In  addition,  we may be  required  to pay a  contingent
purchase  price for any of the three years  following the

                                       27


acquisition in which certain earnings targets are achieved.  We have also agreed
to a one-time  issuance  of  additional  unregistered  shares to the  sellers in
accordance  with a formula  if,  during  the 90 days  following  the  applicable
lock-up  period,  the average  value of our Class A common  stock during such 90
days declines below an average of $3.17 per share.

In February  2005,  we,  through  ADM Cinema,  consummated  the  acquisition  of
substantially all of the assets of the Pavilion Theatre. The Pavilion Theatre is
an eight-screen  movie theatre and cafe and is a component of the Media Services
segment.  Continuing to operate as a fully  functional  multiplex,  the Pavilion
Theatre has also become our  showplace to  demonstrate  our  integrated  digital
cinema  solutions  to the  movie  entertainment  industry.  The  purchase  price
included a cash payment of $3.3 million (less  $500,000  held in escrow  pending
completion of certain  construction) and a five-year 8% promissory note for $1.7
million.  In  addition,  we assumed the lease  covering  the land,  building and
improvements which is classified as a capital lease on the consolidated  balance
sheet. Also, we issued 40,000 shares of unregistered Class A common stock to the
landlord of the Pavilion Theatre.

RECENT ACCOUNTING PRONOUNCEMENTS

The  Financial  Accounting  Standards  Board (the  "FASB")  issued  Statement of
Financial  Accounting  Standards  ("SFAS")  No.  150,  "Accounting  for  Certain
Financial Instruments with Characteristics of Both Liabilities and Equity" (SFAS
150), which became effective July 1, 2003, which  establishes  standards for the
classification   and   measurement  of  certain   financial   instruments   with
characteristics  of both liabilities and equity.  There was no impact on AccesIT
financial statements due to the adoption of this standard.

In December  2004,  the FASB issued SFAS No. 123  (revised  2004),  "Share-Based
Payment." This statement revises the original guidance contained in SFAS No. 123
and supersedes  Accounting  Principles Board ("APB") Opinion No. 25, "Accounting
for Stock Issued to Employees,  and its related implementation  guidance.  Under
SFAS No. 123 (revised  2004), a publicly  traded entity such as AccessIT will be
required to measure the cost of employee  services  received in exchange  for an
award of equity  instruments  based on the  grant-date  fair  value of the award
(with limited  exceptions)  and recognize such cost over the period during which
an employee is required to provide  service in exchange for the reward  (usually
the vesting period). For stock options and similar instruments,  grant-date fair
value  will  be  estimated  using  option-pricing  models  adjusted  for  unique
characteristics of instruments  (unless observable market prices for the same or
similar  instruments  are  available).  For small  business  issuers,  including
AccessIT,  this is effective as of the  beginning of the first interim or annual
reporting  period that begins after December 15, 2005,  which is our fiscal year
beginning April 1, 2006.

Upon  adoption of this  standard,  the actual costs of our  stock-based  payment
plans will be based on grant-date fair value, which has not yet been determined.

RESULTS OF OPERATIONS

FOR THE FISCAL  YEAR ENDED  MARCH 31,  2004 AND THE FISCAL  YEAR ENDED MARCH 31,
2005

REVENUES.  Our total revenues were $7.2 million and $10.6 million for the fiscal
years  ended  March 31, 2004 and 2005,  respectively,  an  increase of 47%.  The
increase was primarily attributable to incremental revenues from the fiscal 2004
acquisitions of Hollywood SW and Managed Services,  and revenues from AccessDM ,
in the aggregate  amount of $2.2 million,  and $1.1 million  resulting  from the
2005   acquisitions   of  FiberSat   and  the   Pavilion   Theatre   (the  "2005
Acquisitions").  Our Internet data center business  experienced a slight revenue
increase,  primarily  due to various  new  customers,  offset by the loss of one
large data center customer.

COST OF REVENUES. Our cost of revenues was $3.7 million and $5.8 million for the
fiscal  years ended March 31, 2004 and 2005,  respectively,  an increase of 57%.
This increase was primarily  attributable  to costs  associated  with  increased
revenues  from  our  fiscal  2004  activity   referenced  above,  and  the  2005
Acquisitions,  which  resulted  in added  costs of $1.3  million  and  $800,000,
respectively, and slightly increased utility costs at our IDC's.

GROSS  PROFIT.  Gross  profit was $3.5  million and $4.8  million for the fiscal
years ended  March,  31, 2004 and 2005,  respectively,  an increase of 37%.  Our
fiscal 2004 transactions  provided an additional $927,000 in gross profit, while
the 2005 Acquisitions contributed $350,000 while the IDC's were comparable to in
line with the prior year gross profit results.

SELLING,   GENERAL  AND  ADMINISTRATIVE   EXPENSES.  Our  selling,  general  and
administrative  expenses were $3.2 million and $5.6 million for the fiscal years
ended March 31, 2004 and 2005, respectively, an increase of 75%. The increase is
primarily due to higher  personnel costs  associated  with additional  headcount
compared to the prior year, and increased  advertising expenses and professional
fees. As of March 31, 2004 and 2005,  we had 34 and 93 employees,  respectively,
and one and 34 of whom were part-time employees, respectively.

                                       28


PROVISION FOR DOUBTFUL ACCOUNTS. Our provision for doubtful accounts was $73,000
and $640,000  for the fiscal years ended March 31, 2004 and 2005,  respectively.
The  increase is  primarily  due to the  recording  of a  provision  of $499,000
related to the bankruptcy of a data center  customer in July 2004. The remainder
of the increase is due to the increase in overall business activity.

RESEARCH AND DEVELOPMENT.  We recorded  expenses of $55,000 and $666,000 for the
fiscal  years  ended  March 31,  2004 and 2005,  respectively.  The  increase is
attributable  to research and development  efforts at Media Services  related to
the development of TDS International  software  application and various products
including TDS, ITDS and EMS.

NON-CASH,   STOCK-BASED   COMPENSATION.   We  recorded   non-cash,   stock-based
compensation of $15,000 and $4,000 for the fiscal years ended March 31, 2004 and
2005,  respectively.  These  amounts  represent  the fair value of stock options
granted to non-employees in exchange for goods and services,  amortized over the
vesting period, which ranges from immediate vesting to three years. The types of
services  performed  by  non-employees  in exchange for stock  options  included
advisory  services on real estate matters,  and  advertising and marketing.  The
fair value of these stock options was determined using the Black-Scholes  option
pricing  model.  The  decrease  was  due  to  lower  amortization  expense  from
non-employee options, due to the vesting of certain grants made in prior years.

DEPRECIATION  AND  AMORTIZATION.  Depreciation and amortization was $2.7 million
and  $3.6  million  for  the  fiscal  years  ended  March  31,  2004  and  2005,
respectively,  an increase of 33%. Fiscal 2004 acquisitions  resulted  increased
depreciation  and  amortization  of $1.2  million,  while the 2005  Acquisitions
resulted in  increased  deprecation  and  amortization  of  $370,000.  Partially
offsetting  these  increases  was  certain  data center and  corporate  computer
equipment  which became fully depreciated during the year ended March 31, 2005.

INTEREST  EXPENSE.  Interest  expense was $542,000 and $605,000,  for the fiscal
years ended March 31, 2004 and 2005,  respectively.  The increase was  primarily
due to the March 2004 exchange of $2.5 million for aggregate principal amount of
our 5-Year 8% subordinated  promissory  notes (the "5-Year Notes") for shares of
our Class A common  stock and $1.7  million  aggregate  principal  amount of the
5-Year  Notes  for  our  6%  subordinated   convertible  promissory  notes  (the
"Convertible  Notes"). In addition, in November 2003, we repaid a 1-year 9% note
payable  for  $1.0  million  incurred  in  connection  with  the  November  2002
acquisition of six IDC's.

LOSS ON EARLY  EXTINGUISHMENT OF DEBT. The loss on early  extinguishment of debt
was  $126,000  and $0 for the  fiscal  years  ended  March  31,  2004 and  2005,
respectively.  This  loss on early  extinguishment  of debt was due to the March
2004  exchange  of the  5-Year  Notes  for our  Class  A  common  stock  and the
Convertible Notes.

NON-CASH  INTEREST  EXPENSE.  Non-cash  interest  expense  was $1.8  million and
$832,000  for the fiscal  years  ended  March 31,  2004 and 2005,  respectively.
Non-cash  interest  expense  results  from the  imputing of interest on the $1.8
million  note  payable  to  Boeing,  incurred  in the March  2004,  and from the
accretion  of the value of  warrants  to  purchase  shares of our Class A common
stock (the  "5-Year  Notes  Warrants")  attached to the 5-Year Notes (which bear
interest at 8% per year). The decrease is primarily due to one-time accretion of
$1.4 million recorded in connection with the March 2004 exchange of 5-Year Notes
described above.

INCOME TAX BENEFIT.  Income tax benefit was $212,000 and $311,000 for the fiscal
years ended March 31, 2004 and 2005,  respectively.  The current  year amount is
related  to  the  amortization  of a  deferred  tax  liability  related  to  our
acquisition of Hollywood SW and Managed Services.

NET LOSS.  As a result of the  foregoing,  we had net losses of $4.8 million and
$6.8 million for the fiscal years ended March 31, 2004 and 2005, respectively.

LIQUIDITY AND CAPITAL RESOURCES

We  have  incurred  operating  losses  in  each  year  since  we  commenced  our
operations.  Since our inception, we have financed our operations  substantially
through the private  placement of shares of our common and preferred  stock, the
issuance of promissory  notes,  our IPO, and notes payable and common stock used
to  fund  various  acquisitions.  We  have  no  borrowings  or  line  of  credit
arrangements with banks or other financial institutions.

On February 10, 2005, we issued the  Convertible  Debentures and the Convertible
Debentures Warrants to a group of institutional investors for aggregate proceeds
of $7.6 million.  The  Convertible  Debentures  have a four year term,  with one
third of the  unconverted  principal  balance  repayable in twelve equal monthly
installments  beginning three years after the closing. The remaining unconverted
principal balance is repayable at maturity.  We may pay the interest in cash or,
if certain conditions are

                                       29


met, by issuing shares of our Class A common stock.  If we are eligible to issue
Class A common stock to repay  interest,  the number of shares issuable is based
on 93% of the 5-day average  closing price  preceding the interest due date. The
Convertible  Debentures are initially  convertible  into 1,867,322 shares of our
Class A common stock,  based upon a conversion  price of $4.07 per share subject
to adjustments from time to time. We may redeem the Convertible Debentures,  and
if we do, we must issue additional warrants  exercisable for shares of our Class
A common  stock.  Additionally,  we  issued  to the  investors  the  Convertible
Debentures  Warrants  to  purchase  up to  560,197  shares of our Class A common
stock, at an initial  exercise price of $4.44 per share,  subject to adjustments
from time to time. The Convertible Debentures Warrants are exercisable beginning
on September 9, 2005 until 5 years  thereafter.  The offering of the Convertible
Debentures  and  the  Convertible   Debentures  Warrants  was  exempt  from  the
registration  requirements  of the  Securities  Act,  under  Section 4(2) of the
Securities Act and Rule 506 promulgated thereunder.

We agreed to register,  among other things,  the resale of shares of the Class A
common stock  underlying the Convertible  Debentures and Convertible  Debentures
Warrants within 30 days from the closing. We filed such a registration statement
on March 11, 2005 and it was declared effective by the SEC on March 21, 2005.

On December 23, 2004, ADM Cinema  entered into an asset purchase  agreement with
Pritchard  Square  Cinema,  LLC,  a New  York  limited  liability  company  (the
"Seller"),   and  Norman  Adie,  the  Seller's   managing  member,  to  purchase
substantially  all of the assets and assume certain  liabilities of the Seller's
Pavilion Theatre.  On February 11, 2005, the acquisition of the Pavilion Theatre
was completed. The total purchase price is approximately $5.2 million, including
transaction  fees.  The purchase  price  included a cash payment of $3.3 million
(less $500,000 held in escrow  pending the  completion of certain  construction)
and a five-year 8%  promissory  note for $1.7 million,  among other things.  The
Pavilion  Theatre  is an  eight-screen  movie  theatre  and  cafe  and will be a
component  of the Media  Services  segment.  Continuing  to  operate  as a fully
functional multiplex, the Pavilion Theatre has also become a showplace for us to
demonstrate our integrated  digital cinema solutions to the movie  entertainment
industry.  In addition,  we issued 40,000  unregistered shares of Class A common
stock to the landlord of the Pavilion Theatre.

On November 17, 2004,  we acquired  substantially  all of the assets and assumed
certain  specified  liabilities  of  FiberSat.  The initial  purchase  price for
FiberSat consisted of 500,000  unregistered  shares of our Class A common stock,
and we agreed to repay certain  liabilities of FiberSat on or before the closing
of the acquisition,  with up to $500,000 in cash and 100,000 unregistered shares
of our Class A common stock.  We had the option to exchange up to 50,000 of such
100,000  shares  of Class A common  stock to  increase  the  cash,  and  thereby
decrease the Class A common stock portion of such  repayment  based on the ratio
of one Class A common stock for each $5.00 of  additional  cash. We repaid these
liabilities  by paying  approximately  $381,000 and issuing 40,000 shares of our
Class A common  stock.  In  addition,  we may be  required  to pay a  contingent
purchase  price for any of the three years  following the  acquisition  in which
certain  earnings  targets  are  achieved.  We have also  agreed  to a  one-time
issuance of additional  unregistered  shares to the sellers in accordance with a
formula if, during the 90 days  following the  applicable  lock-up  period,  the
average value of our Class A common stock during such 90 days declines  below an
average of $3.17 per share.

On October 26, 2004, we entered into the October 2004 Private  Placement with an
investor whereby we issued 282,776  unregistered  shares of Class A common stock
at $3.89 per share to the investors  for gross  proceeds of  $1.1million.  These
shares carry piggyback and demand registration  rights. We realized net proceeds
of approximately  $1.023 million,  which were used for the FiberSat  Acquisition
and for working capital.  The investors  exercised their piggyback  registration
rights  and we  registered  the resale of all of the  282,776  shares of Class A
common stock on a Form S-3 which was declared  effective by the SEC on March 21,
2005.

On July 2, 2004,  we received  notice that certain  creditors of one of our data
center  customers named  NorVergence  filed an involuntary  bankruptcy  petition
against  NorVergence.  On July 14, 2004,  NorVergence  agreed to the entry of an
order granting relief under Chapter 11 of the United States  Bankruptcy Code and
then converted the Chapter 11 reorganization  to Chapter 7 liquidation.  We also
have a first security interest in NorVergence  accounts  receivable.  On January
26,  2005 the  bankruptcy  court  approved  a motion  for the  trustee to pay us
$121,000 for past due accounts receivable,  and on February 25, 2005 we received
the payment.  We are attempting to collect  certain  accounts  receivable of the
bankruptcy customer in partial settlement of our claim.

On June 4, 2004,  we  concluded  the June 2004  Private  Placement  with several
investors whereby we issued 1,217,500  unregistered shares of our Class A common
stock at a sale price of $4.00 per share. The total net proceeds, including fees
and expenses to register the securities  were $4.0 million,  which is being used
for capital  investments and working capital. We also issued to investors and to
the investment  firm in the June 2005 Private  Placement  warrants to purchase a
total of  304,375  shares of our Class A common  stock at an  exercise  price of
$4.80 per share,  which became  exercisable  upon  receipt.  We agreed to file a
registration  statement for the resale of these shares and the shares underlying
the  warrants  with the SEC by filing a Form SB-2 on or before July 5, 2004.  We
filed the Form SB-2 on July 2, 2004, and the Form SB-2 was declared effective by
the SEC on July 20, 2004.

                                       30


On March 24, 2004, we refinanced $4.2 million  aggregate  principal amount (plus
accrued and unpaid  interest) of 5-Year Notes pursuant to an exchange offer (the
"Exchange Offer").  In exchange for those notes, we issued 707,477  unregistered
shares of our Class A common stock and $1.7 million  aggregate  principal amount
of  Convertible  Notes which,  as of March 31,  2005,  were  convertible  into a
maximum of 312,425 shares of our Class A common stock.

On March 29, 2004, we acquired  certain assets from Boeing for use in AccessDM's
digital cinema business.  In connection with this acquisition we issued a 4-year
non-interest bearing note for $1.8 million with equal repayments of $450,000 due
each year  beginning in April  2005.In  addition,  at any time during the 90 day
period beginning March 29, 2005, Boeing can sell its 53,534  unregistered shares
of our Class A common stock to us for $250,000 in cash.

On  November  14,  2003 our IPO was  finalized,  resulting  in the  issuance  of
1,380,000  shares of Class A common stock. The net proceeds of our IPO were $4.8
million, of which $1.1 million was used for general business purposes. We agreed
upon the  completion of the IPO in November 2003 to pay the lead  underwriter an
advisory  fee of $4,167 per month for the  12-month  period  beginning  upon the
completion of the IPO. In November 2004 the lead underwriter  received the final
payment for its advisory service fees.

On  November  3, 2003,  we  acquired  all of the  outstanding  capital  stock of
Hollywood  SW. In  connection  with this  acquisition,  we issued  $3.0  million
aggregate  principal  amount of 8% promissory notes to the sellers ("HS Notes"),
which are secured and  senior,  with  certain  exceptions,  to all  indebtedness
during their five year term.  Our  obligations  to repay the HS Notes and to pay
any  additional  purchase  price is secured by a pledge of all of Hollywood SW's
capital stock and any  distributions and proceeds there from, except that we are
permitted to receive  cash  distributions  from  Hollywood SW to the extent that
such distributions do not exceed Hollywood SW's cash flow from operations. As of
March 31, 2005, the principal balance of the HS Notes is $2.36 million.

As of March 31, 2004 and 2005, we had cash and cash  equivalents of $2.3 million
and $4.8 million,  respectively.  Our working capital at March 31, 2004 and 2005
was $212,000 and $1.7 million, respectively.

For the fiscal  year ended  March 31,  2004,  we raised  gross  proceeds of $6.9
million  and $1.2  million  through  sales of our common  stock from our IPO and
promissory  notes,  respectively,  and we repaid  capital lease  obligations  of
$363,000  and an  acquisition  note  payable of $1 million.  For the fiscal year
ended March 31, 2005, we raised gross proceeds of $13.6 million through sales of
our common stock, warrants and convertible debentures.  We used the net proceeds
for acquisitions, capital investments and to provide working capital for general
corporate purposes.

Our operating  activities resulted in net cash inflow (outflows) of $321,000 and
($3.3) million for the fiscal years ended March 31, 2004 and 2005, respectively.
The increase in cash  outflow was  primarily  due to an increased  net loss from
operations.

Investing  activities  used net cash of $3.6  million  and $5.9  million for the
fiscal  years ended  March 31, 2004 and 2005,  respectively.  The  increase  was
primarily  due to the  acquisition  of the  Pavilion  Theatre and due to various
purchases  of computer  and other  equipment,  primarily  to support our digital
cinema and managed data storage businesses. Also, we made additions to Hollywood
SW's  capitalized  software  costs.  We  anticipate  that we will  experience an
increase in our capital  expenditures  consistent with the anticipated growth in
our operations, infrastructure and personnel.

Net cash  provided by financing  activities  of $4.6 million for the fiscal year
ended March 31, 2004 was  primarily  due to proceeds  from issuance of shares of
our Class A common stock of $4.8 million and the issuance of $1.2 million of our
5-Year  Notes,  less $1.4 million  repayments of notes payable and capital lease
obligations.  Net cash provided by financing activities of $11.6 million for the
fiscal  year ended  March 31, 2005 was  primarily  due to the June 2004  Private
Placement,  October  2004  Private  Placement,  and the  February  2005  Private
Placement, less repayments of notes payable and capital lease obligations.

We  have  acquired   property  and  equipment  under  long-term   capital  lease
obligations that expire at various dates through July 2022. As of March 31, 2004
and  2005,  we  had  an  outstanding  balance  of  $150,000  and  $6.4  million,
respectively  in capital  lease  obligations.  The  increase  in  capital  lease
obligations of $6.1 million and $368,000 is primarily due to the  acquisition of
the  Pavilion  Theatre in  February  2005 and the  acquisition  of  FiberSat  in
November 2004,  respectively.  All our capital lease  obligations are secured by
equipment at the following  locations and in the following principal amounts: at
the Pavilion  Theatre,  building,  land and  improvements  for $6.1 million;  at
FiberSat,  certain  computer  and  Satellite  equipment  for  $368,000;  at  our
executive  offices,  telephone  equipment in the remaining  principal  amount of
$17,000,  and computer  equipment  for use in Managed  Service's  operations  of
$11,000.  As of March 31, 2005, minimum future capital lease payments (including
interest) for the fiscal year ending March 31, 2006 was $1.6  million,  at March
31, 2007 through  March 31, 2010 was $1.1 million for each  respective  year and
$8.0 million thereafter (in total). During the fiscal years ended March 31, 2004
and 2005, we

                                       31


made early  repayments of $159,000 and $70,000 on capital leases,  respectively,
in order to achieve interest savings and aid future cash flow.

Following the completion of the Exchange Offer in March 2004, the holders of the
$3.0 million of Hollywood SW acquisition notes, and $220,000 aggregate principal
amount of 5-Year Notes, elected not to participate in the Exchange Offer.

Other  significant  commitments  consist  of  obligations  under  non-cancelable
operating  leases  totaled $15.2 million as of March 31, 2005 and are payable in
varying monthly  installments through 2015. As of March 31, 2005, minimum future
operating lease payments for the fiscal years ending March 31, 2006, 2007, 2008,
2009,  2010 and  thereafter  (in total) were $2.4 million,  $2.3  million,  $2.2
million, $2.2 million, $1.8 million and $4.3 million, respectively.

In May 2004, we entered into an agreement  with the holder of 750,000  shares of
AccessDM's  common stock, to exchange all of its shares for 31,300  unregistered
Class  A  Shares.  As a  result  of the  transaction,  AccessIT  holds  100%  of
AccessDM's common stock.

In July 2004, we made early  repayments  totaling $58,000 for two of the 5 -Year
Notes  that did not  participate  in the  March  2004  Exchange  Offer,  and the
remaining  value of the  underlying  5 - Year Notes  Warrants  was  amortized to
non-cash interest expense, totaling $19,000.

In August  2004,  our Board of  Directors  authorized  the  repurchase  of up to
100,000  shares  of  Class A common  stock.  The  shares  will be  purchased  at
prevailing  prices  from  time-to-time  in the open market  depending  on market
conditions  and other  factors.  Through  March 2005 the Company  has  purchased
51,440  shares for a total  purchase  price of $172,000  at an average  purchase
price of $3.34 per share.  As of March 31, 2005, an additional  48,560 shares of
Class A common stock may be repurchased.

During the fiscal year ended March 31, 2004 and 2005, we have incurred losses of
$4.8 million and $6.8 million,  respectively,  and cash inflows  (outflows) from
operating activities of $321,000 and $(3.3) million,  respectively. In addition,
we  have  an  accumulated  deficit  of  $21.5  million  as of  March  31,  2005.
Furthermore,  we have total debt service requirements  totaling $2.3 million for
the twelve months beginning in March 2005.

Management  expects that we will continue to generate  operating  losses for the
foreseeable   future  due  to  depreciation  and   amortization,   research  and
development,  the continued efforts related to the identification of acquisition
targets,   marketing  and   promotional   activities  and  the   development  of
relationships with other businesses.  Certain of these costs could be reduced if
working  capital  decreased.  We may attempt to raise  additional  capital  from
various sources for future acquisitions or for working capital as necessary, but
there is no assurance that such financing will be completed as  contemplated  or
under terms acceptable to us, or our existing shareholders.  Failure to generate
additional revenues,  raise additional capital or manage discretionary  spending
could have a material  adverse  effect on our  ability  to  continue  as a going
concern and to achieve our intended business objectives.

Our  management  believes  that  the net  proceeds  generated  by our  financing
transaction  in February  2005  combined with our cash on hand and cash receipts
from  existing  and the  acquired  operations  of the  Pavilion  Theatre will be
sufficient  to permit us to continue our  operations  for at least twelve months
from the date of this report.

OFF-BALANCE SHEET ARRANGEMENTS

We are not a party to any off-balance sheet arrangements.

SUBSEQUENT EVENTS

On June 15, 2005,  we entered into a digital  cinema  framework  agreement  (the
"Framework  Agreement")  with Christie  Digital  Systems USA, Inc.  ("Christie")
through our newly formed wholly-owned subsidiary, Christie/AIX, Inc., a Delaware
corporation ("Christie/AIX"),  whereby, among other things (1) Christie/AIX will
seek to raise financing to purchase 200 of Christie's  digital cinema projection
systems (the "Systems") at agreed-upon  prices; (2) Christie/AIX would then seek
to raise additional debt and/or equity financing to purchase an additional 2,300
Systems at agreed-upon  prices. The Framework  Agreement allows  Christie/AIX to
terminate the agreement for several reasons,  including  failure to: (1) execute
definitive  agreements with certain film  distributors by August 31, 2005 to pay
virtual print fees to  Christie/AIX  for deliveries of digital films made to the
Systems,  (2) execute  agreements with certain  exhibitors by August 31, 2005 to
license the Systems,  to house them in the exhibitor  locations,  and (3) obtain
Christie/AIX's  final  commitment  to  purchase at least 100 Systems by July 31,
2005.

                                       32


In connection with the execution of the Framework  Agreement,  we have engaged a
third party to assist in raising funds to purchase the equipment associated with
the  Framework  Agreement,  and  for  general  corporate  purposes.  We  have no
assurance of the nature and amount of the securities to be issued,  and that the
transaction will be completed on acceptable terms.

On June 9, 2005,  our Board of  Directors  approved  the  expansion of our stock
option pool to 1,100,000 options from the prior amount of 850,000 options.  This
approval is subject to the  approval  of  stockholders  at our 2005  stockholder
meeting, which is scheduled to take place in September 2005. Subsequent to March
31, 2005, we issued 140,000 stock options to an employee and four directors.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Our business is currently  principally  in the United States.  As a result,  our
financial  results  are not  affected  by  factors  such as  changes  in foreign
currency  exchange rates or economic  conditions in foreign  markets.  We do not
engage in hedging  transactions  to reduce our  exposure  to changes in currency
exchange rates,  although if the geographical scope of our business broadens, we
may do so in the future.

Our exposure to market risk for changes in interest  rates relates  primarily to
the  increase or  decrease in the amount of interest  income that we may earn on
our invested  cash.  Because we  currently  do not have any variable  rate debt,
there is no risk associated with fluctuating interest expense. We do not plan to
use any derivative financial instruments.  We plan to help ensure the safety and
preservation of invested principal funds by limiting default risks,  market risk
and investment risk. We plan to mitigate our default risk by investing generally
in low-risk securities.

ITEM 7. CONSOLIDATED FINANCIAL STATEMENTS

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders
Access Integrated Technologies, Inc.


We have audited the accompanying consolidated balance sheet of Access Integrated
Technologies, Inc. and subsidiaries (the "Company") as of March 31, 2005 and the
related  consolidated  statements of  operations,  cash flows and  stockholders'
equity  for  the  year  then  ended.   These   financial   statements   are  the
responsibility of the Company's management.  Our responsibility is to express an
opinion on these financial statements based on our audit.

We conducted  our audit 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.  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  audit  provides  a
reasonable basis for our opinion.

In our opinion, the financial statements enumerated above present fairly, in all
material  respects,  the consolidated  financial  position of Access  Integrated
Technologies,  Inc. and  subsidiaries as of March 31, 2005, and the consolidated
results of their operations and their  consolidated cash flows for the year then
ended in conformity with accounting  principles generally accepted in the United
States of America.




/s/ Eisner LLP
Florham Park, New Jersey
June 10, 2005

                                       33


REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


To the Board of Directors and
Stockholders of Access Integrated Technologies, Inc:

In our opinion,  the  accompanying  consolidated  balance  sheet and the related
consolidated  statement  of  operations,  stockholders'  equity  and cash  flows
present  fairly,  in all material  respects,  the  financial  position of Access
Integrated  Technologies,  Inc. and its  subsidiaries at March 31, 2004, and the
results of their  operations  and their cash flows for the year ended  March 31,
2004 in conformity with accounting  principles  generally accepted in the United
States of America.  These  financial  statements are the  responsibility  of the
Company's  management.  Our  responsibility  is to  express  an opinion on these
financial  statements  based  on our  audit.  We  conducted  our  audit of these
statements 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.  An audit includes examining, on a
test basis,  evidence  supporting  the amounts and  disclosures in the financial
statements,  assessing the accounting  principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.


/s/ PricewaterhouseCoopers LLP
Florham Park, New Jersey
June 9, 2004




                                       34


                      ACCESS INTEGRATED TECHNOLOGIES, INC.
                           CONSOLIDATED BALANCE SHEETS
                      (In thousands, except for share data)
                                                                  MARCH 31,
                                                            2004            2005
                                                            ----            ----
                       ASSETS
     CURRENT ASSETS
       Cash and cash equivalents..................        $2,330          $4,779
       Accounts receivable, net...................           509             947
       Prepaid and other current assets...........           296             762
       Unbilled revenue...........................             8             550
                                                             ---             ---
     Total current assets.........................         3,143           7,038
                                                           -----           -----

       Property and equipment, net................         5,865          14,261
       Intangible assets, net.....................         4,200           3,337
       Capitalized software costs, net............         1,430           1,622
       Goodwill...................................         5,378          10,363
       Deferred costs.............................            91             726
       Unbilled revenue, net of current portion...           596              69
       Security deposits..........................           472             361
                                                             ---             ---
     Total assets.................................       $21,175         $37,777
                                                         =======         =======

     LIABILITIES, REDEEMABLE STOCK AND STOCKHOLDERS' EQUITY

     CURRENT LIABILITIES
       Accounts payable and accrued expenses......        $1,371          $2,415
       Current portion of notes payable...........           650           1,415
       Current portion of customer security deposits          38             116
       Current portion of capital leases..........           115             432
       Current portion of deferred revenue........           755             884
       Current portion of deferred rent expense...             2              42
                                                               -              --
     Total current liabilities....................         2,931           5,304
                                                           -----           -----

       Notes payable, net of current portion......         5,589          12,682
       Customer security deposits, net of current portion    117             161
       Deferred revenue, net of current portion...           271              95
       Capital leases, net of current portion.....            35           6,058
       Deferred rent expense......................           884             970
       Minority interest in subsidiary............            10              --
       Deferred tax liability.....................         1,520           1,210
                                                         -------           -----
       Total liabilities..........................        11,357          26,480

     COMMITMENTS AND CONTINGENCIES (See Note 7)

      Redeemable Class A common stock, issued
        and outstanding, 2004 and 2005- 53,534
        shares, respectively                                 238             250

     Stockholders' Equity:
      Class A common stock, $0.001 par value per
      share; 40,000,000  shares  authorized;  shares
      issued and  outstanding, 2004 - 7,281,730 and
      2005 shares  issued  9,433,328  and  shares
      outstanding 9,381,888, respectively                      7               9

     Class B common stock, $0.001 par value per share;
        15,000,000 shares authorized; shares issued
        and outstanding, 2004 and 2005
        1,005,811 and 965,811 shares                           1               1

     Additional paid-in capital...................        24,271          32,696
     Treasury stock, at cost 51,440 shares........            --           (172)
     Accumulated deficit..........................      (14,699)        (21,487)
                                                        --------        --------
     Total stockholders' equity...................         9,580          11,047
                                                           -----          ------
     Total Liabilities, Redeemable Stock and
     Stockholders' Equity.........................       $21,175         $37,777
                                                         =======         =======

     See accompanying Notes to Consolidated Financial Statements.

                                       35


                      ACCESS INTEGRATED TECHNOLOGIES, INC.
                      CONSOLIDATED STATEMENTS OF OPERATIONS
               (In thousands, except for share and per share data)

                                                      FOR THE FISCAL YEARS ENDED
                                                               MARCH 31,
                                                        2004                2005
                                                        ----                ----
Revenues:
 Media services...................................    $1,356              $4,043
 Data center services.............................     5,845               6,608
                                                       -----               -----
Total revenues....................................     7,201              10,651

Costs of revenues  (exclusive of depreciation
and amortization of $2,692 in 2004 and $3,623
in 2005 shown below):
 Media services...................................       152               1,696
 Data center services.............................     3,515               4,115
                                                       -----              ------
Total costs of revenues...........................     3,667               5,811

Gross profit (exclusive of depreciation and
amortization of $2,692 in 2004 and $3,623
in 2005)..........................................     3,534               4,840
Operating expenses:
Selling, general and administrative (excludes
non-cash stock-based compensation of $15 in 2004
and $4 in 2005)...................................     3,204               5,607
Provision for doubtful accounts...................        73                 640
Research and development..........................        55                 666
Non-cash stock-based compensation.................        15                   4
Depreciation and amortization.....................     2,692               3,623
                                                       -----               -----

Total operating expenses..........................     6,039              10,540
                                                      ------              ------

Loss before other income/ expense.................    (2,505)            (5,700)

Interest income...................................         6                   5
Interest expense..................................      (542)              (605)
Loss on early extinguishment of debt..............      (126)                 --
Non-cash interest expense.........................    (1,823)              (832)
Other expense, net................................       (52)                 23
                                                         ---              ------

Loss before income tax benefit and minority interest. (5,042)            (7,109)

Income tax benefit................................       212                 311
                                                         ---                 ---

Net loss before minority interest in subsidiary...    (4,830)            (6,798)
Minority interest in loss of subsidiary...........        25                  10
                                                          --                  --

Net loss..........................................    (4,805)            (6,788)

Accretion related to redeemable convertible
preferred stock...................................    (1,588)                 --
Accretion of preferred dividends..................      (220)                 --
                                                        -----                 --

Net loss available to common stockholders.........    (6,613)           $(6,788)
                                                     ========           ========

Net loss available to common stockholders per
common share:
Basic and diluted.................................    $(1.37)            $(0.70)
                                                      =======            =======

Weighted average number of common shares outstanding:
Basic and diluted.................................  4,826,776          9,668,876
                                                    =========          =========

See accompanying Notes to Consolidated Financial Statements.

                                       36


                      ACCESS INTEGRATED TECHNOLOGIES, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (In thousands)

                                                      FOR THE FISCAL YEARS ENDED
                                                               MARCH 31,
                                                            2004            2005
                                                            ----            ----
Cash flows from operating activities:
Net loss...............................................   $(4,805)      $(6,788)
Adjustments to reconcile net loss to net
 cash provided by (used in) operating
 activities:
Depreciation and amortization..........................      2,692         3,623
Amortization of software development costs.............        118           369
Amortization of deferred tax liability.................       (85)         (311)
Provision for doubtful accounts........................         29           550
Non-cash stock-based compensation......................         15             4
Non-cash interest expense..............................      1,823           832
Minority interest......................................       (25)          (10)
Decrease in fair value of common stock warrants........         --          (91)
Loss on early extinguishment of debt...................        126            --
Changes in operating assets and liabilities:
Accounts receivable....................................       (312)        (455)
Prepaid and other current assets.......................           4        (422)
Other assets...........................................        (24)      (1,034)
Accounts payable and accrued expenses..................         292          387
Deferred revenue.......................................         237         (52)
Other liabilities......................................         236          140
                                                                ---          ---

Net cash provided by (used in) operating activities....         321      (3,258)
                                                                ---      -------

Cash flows from investing activities:
Purchases of property and equipment....................       (279)      (1,932)
Purchase of intangible assets..........................        (50)         (38)
Additions to capitalized software costs................       (198)        (561)
Acquisition of Hollywood Software, net of cash acquired     (2,387)           --
Acquisition of Core Technology Services................       (275)           --
Acquisition of Boeing Digital Cinema assets............       (405)           --
Acquisition of Pavilion Theatre, net of cash acquired..         --       (2,886)
Acquisition of FiberSat, net of cash acquired .........         --         (508)
                                                                --         -----

Net cash used in investing activities..................     (3,594)      (5,925)
                                                            -------      -------

Cash flows from financing activities:
Net proceeds from issuance of notes payable and warrants      1,230        7,600
Repayment of notes payable.............................     (1,000)        (579)
Principal payments on capital leases...................       (363)        (284)
Repurchase of common stock.............................          --        (172)
Proceeds from issuance of common stock.................       4,780        5,067
                                                              -----        -----

Net cash provided by financing activities..............       4,647       11,632
                                                              -----       ------

Net increase in cash and cash equivalents..............       1,374        2,449

Cash and cash equivalents at beginning of year.........         956        2,330
                                                                ---        -----

Cash and cash equivalents at end of year...............      $2,330       $4,779
                                                             ======       ======

See accompanying Notes to Consolidated Financial Statements.

                                       37



                      ACCESS INTEGRATED TECHNOLOGIES, INC.
                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                      (In thousands, except for share data)


                                                                                      
                                                     Class A                Class B
                                                   Common Stock           Common Stock         Treasury Stock
                                                   ------------           ------------         --------------

                                                  SHARES     AMOUNT     SHARES     AMOUNT     SHARES   AMOUNT
                                                  ------     ------     ------     ------     ------   ------

Balances as of March 31, 2003..................  2,015,770      $2      1,005,811      $1        --       $--

Issuance of common stock, net..................  1,380,000       1             --      --        --        --
Issuance of warrant to purchase common stock            --      --             --      --        --        --
Issuance of common stock in exchange for
preferred stock and contingent warrants          2,207,976       2             --      --        --        --
Issuance of warrants to purchase common stock
(attached to notes payable)....................         --      --             --      --        --        --
Issuance of common stock for the purchase
of Hollywood Software, Inc.....................    400,000      --             --      --        --        --
Issuance of common stock for the purchase
of Core Technology Services, Inc...............    100,000      --             --      --        --        --
Issuance of common stock upon completion
of notes exchange                                  707,477       1             --      --        --        --
Issuance of common stock for goods and services.     9,700      --             --      --        --        --
Exercise of warrants to purchase common stock
(attached to notes payable)....................    460,807       1             --      --        --        --
Amortization of stock-based compensation.......         --      --             --      --        --
Accretion of preferred stock to redemption
amount.........................................         --      --             --      --        --        --
Gain on sale of stock by subsidiary............         --      --             --      --        --        --
Net loss.......................................         --      --             --      --        --        --
                                                        --      --             --      --        --        --

Balances as of March 31, 2004..................  7,281,730      $7      1,005,811       $1       --       $--
                                                 =========      ==      =========       ==       ==       ===

Issuance of common stock, net..................  1,500,298       2             --       --       --        --
Repurchase of common stock.....................   (51,440)     (1)             --       --   51,440     (172)
Issuance of common stock in exchange for
AccessDM common stock..........................     31,300      --             --       --       --        --
Issuance of common stock for the purchase
of FiberSat                                        540,000       1             --       --       --        --
Issuance of common stock for goods and services         --      --             --       --       --        --
Issuance of warrants attached to convertible
notes payable..................................         --      --             --       --       --        --
Beneficial conversion feature on convertible
notes payable..................................         --      --             --       --       --        --
Conversion of Class B shares to Class A........     40,000      --       (40,000)       --       --        --
Issuance of common stock in connection
with the Pavilion acquisition..................     40,000      --             --       --       --        --
Net loss.......................................         --      --             --       --       --        --
                                                        --      --             --       --       --        --

Balances as of March 31, 2005..................  9,381,888      $9        965,811       $1   51,440    $(172)
                                                 =========      ==        =======       ==   ======    ======


See accompanying Notes to Consolidated Financial Statements.


                                       38


                      ACCESS INTEGRATED TECHNOLOGIES, INC.
          CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY - (CONTINUED)
                      (In thousands, except for share data)



                                                                                   
                                                   Additional    Deferred Stock-                  Total
                                                    Paid-In           Based       Accumulated  Stockholders'
                                                    CAPITAL       COMPENSATION      DEFICIT       EQUITY
                                                    -------       ------------      -------       ------

Balances as of March 31, 2003.................      $11,530            $(11)        $(9,894)      $1,628

Issuance of common stock, net.................        4,372               --              --       4,373
Issuance of warrant to purchase common stock..          385               --              --         385
Issuance of common stock in exchange for
preferred stock and contingent warrants.......        4,498               --              --       4,500
Issuance of warrants to purchase common
stock (attached to notes payable).............          615               --              --         615
Issuance of common stock for the purchase
of Hollywood Software, Inc....................        1,380               --              --       1,380
Issuance of common stock for the purchase
of Core Technology Services, Inc..............          345               --              --         345
Issuance of common stock upon completion of
notes exchange................................        2,566               --              --       2,567
Issuance of common stock for goods and
services......................................            7              (4)              --           3
Exercise of warrants to purchase common
stock (attached to notes payable).............           22               --              --          23
Amortization of stock-based compensation......           --               15              --          15
Accretion of preferred stock to redemption
amount........................................       (1,588)              --              --     (1,588)
Gain on sale of stock by subsidiary...........           139              --              --         139
Net loss......................................            --              --         (4,805)     (4,805)
                                                          --              --         -------     -------

Balances as of March 31, 2004.................       $24,271             $--       $(14,699)      $9,580
                                                     =======             ===       =========      ======

Issuance of common stock , net................         4,951              --              --       4,953
Repurchase of common stock....................            --              --              --       (173)
Issuance of common stock in exchange for
AccessDM common stock.........................            --              --              --          --
Issuance of common stock for the purchase
of FiberSat...................................         1,624              --              --       1,625
Issuance of common stock for goods and
services......................................             4              --              --           4
Issuance of warrants attached to
convertible notes payable.....................         1,109              --              --       1,109
Beneficial conversion feature on
convertible notes payable.....................           605              --              --         605
Conversion of Class B shares to Class A.......            --              --              --          --
Issuance of common stock in connection
with  the Pavilion acquisition................           132              --              --         132
Net loss......................................            --              --         (6,788)     (6,788)
                                                          --              --         -------     -------

Balances as of March 31, 2005.................       $32,696             $--       $(21,487)     $11,047
                                                     =======             ===       =========     =======


See accompanying Notes to Consolidated Financial Statements.


                                       39


                      ACCESS INTEGRATED TECHNOLOGIES, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
               (In thousands, except for share and per share data)


NOTE 1. NATURE OF OPERATIONS

Access Integrated  Technologies,  Inc. ("AccessIT") was incorporated in Delaware
in  March  2000.  Access  Digital  Media,  Inc.  ("AccessDM"),  a  wholly  owned
subsidiary of AccessIT, was incorporated in Delaware in February 2003. Hollywood
Software,  Inc. ("Hollywood SW") was incorporated in California in October 1997,
and was acquired by AccessIT on November 3, 2003. Core Technology Services, Inc.
("Managed  Services")  was  incorporated  in New York in November  1995, and was
acquired  by  AccessIT  on January  9, 2004.  FiberSat  Global  Services,  Inc.,
("FiberSat") a wholly-owned  subsidiary of AccessIT was incorporated in Delaware
in October 2004, and acquired  certain assets and liabilities of FiberSat Global
Services LLC on November 17,  2004.  ADM Cinema  Coporation  ("ADM  Cinema"),  a
wholly owned subsidiary of AccessIT, was incorporated in Delaware on December21,
2004,  and on February  11, 2005  acquired  substantially  all the assets of the
Pavilion  Theatre in  Brooklyn,  New York.  AccessIT,  AccessDM,  Hollywood  SW,
Managed Services, FiberSat and ADM Cinema are referred to herein collectively as
the  ("Company").  AccessIT  operates a  national  platform  of  carrier-diverse
Internet Data Centers ("IDCs") in which the Company's  customers have access to:
secure,  flexible space for installing  network and server  equipment;  multiple
fiber  providers for connecting to the internet  and/or other carrier  networks;
and a broad range of value-added  data center  services  including the Company's
AccessStorage-on-Demand  managed storage service solutions.  The Company's IDCs,
called  AccessColocenters,  are  designed  to  serve  a  variety  of  customers,
including  traditional  voice/data  competitive local exchange  carriers,  other
integrated  communication  providers,  Internet Service  Providers,  Application
Service Providers  ("ASPs"),  Streaming and Content Delivery Service  Providers,
storage  outsourcers,  and small  and  medium  sized  enterprises.  The  Company
currently operates nine IDCs located in eight states:  Arkansas,  Kansas, Maine,
New  Hampshire,  New  Jersey,  New York,  Texas and  Virginia,  plus a dedicated
digital delivery site in Los Angeles, California. AccessDM is in the business of
storing and  distributing  digital  content to movie  theaters  and other remote
venues.  Hollywood  SW is a provider  of  proprietary  enterprise  software  and
consulting  services for distributors and exhibitors of filmed  entertainment in
the United  States and  Canada.  Its  software  manages the  planning,  booking,
scheduling,  revenue  sharing,  cash  flow  and  reporting  associated  with the
distribution and exhibition of theatrical films.  Managed Services is a provider
of  information  technology  consulting  services;  its  primary  offering is to
provide managed network  monitoring  services through its global network command
center.  FiberSat  provides  satellite-based  broadband video, data and Internet
transmission and encryption services for multiple customers in the broadcast and
cable television and communications  industries, and also operates an outsourced
network   operations   center.   ADM  Cinema   operates   the   Pavilion   Movie
Thaeatre/Entertainment Complex,an eight-screen movie theatre and cafe located in
Brooklyn, New York (the "Pavilion Theatre").

BASIS OF PRESENTATION

For the fiscal  years ended March 31, 2004 and 2005,  the Company  incurred  net
losses of $4,805 and $6,788  respectively,  and positive and negative cash flows
from operating activities of $321 and ($3,258),  respectively.  In addition, the
Company has an accumulated  deficit of $21,487 as of March 31, 2005. The Company
also has debt service requirements (including interest) of $2,307 for the twelve
months  beginning  in March  2005.  Management  expects  that the  Company  will
continue  to  generate  operating  losses  for  the  foreseeable  future  due to
depreciation and amortization,  research and development,  the continued efforts
related to the identification of acquisition targets,  marketing and promotional
activities and the development of relationships  with other businesses.  Certain
of these  costs  could be  reduced if working  capital  decreased.  Based on the
Company's  cash  position  at March 31,  2005,  and  expected  cash  flows  from
operations;  management  believes  that the  Company has the ability to meet its
obligations  through March 31, 2006. The Company may attempt to raise additional
capital from various  sources for future  acquisitions or for working capital as
necessary.  There is no  assurance  that such  financing  will be  completed  as
contemplated  or  under  terms   acceptable  to  the  Company  or  its  existing
shareholders.  Failure to generate additional revenues, raise additional capital
or manage  discretionary  spending  could have a material  adverse effect on the
Company's  ability to  continue as a going  concern and to achieve its  intended
business objectives.  The accompanying  Consolidated Financial Statements do not
reflect any adjustments which may result from the outcome of such uncertainties.

Certain  reclassifications of prior period data have been made to conform to the
current presentation.

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION

                                       40


The  Consolidated   Financial  Statements  include  the  accounts  of  AccessIT,
AccessDM,   Hollywood  SW,  Managed  Services,  FiberSat  and  ADM  Cinema.  All
intercompany transactions and balances have been eliminated.

CASH AND CASH EQUIVALENTS

The Company  considers  all highly liquid  instruments  with a maturity from the
date  of  purchase  of  three  months  or  less  to be  cash  equivalents.  Cash
equivalents consist of money market mutual funds.

FINANCIAL INSTRUMENTS AND CONCENTRATION OF CREDIT RISK

Financial  instruments,  which potentially subject the Company to concentrations
of credit risk,  consist of cash and cash equivalents to the extent these exceed
federal insurance limits and accounts receivable. Risks associated with cash and
cash equivalents are mitigated by the Company's  investment policy, which limits
the Company's investing of excess cash and cash equivalents to only money market
mutual funds.

The Company  places its cash with high credit  quality  financial  institutions.
These balances, as reflected in the financial institution's records, are insured
in the U.S. by the Federal Deposit  Insurance  Corporation for up to $100. As of
March 31, 2005,  uninsured cash balances in the U.S.  aggregated $4,399 with two
financial institutions.

The Company's customer base is primarily  composed of businesses  throughout the
United  States.  For the  fiscal  year ended  March 31,  2004,  three  customers
accounted for 27%, 12%, and 10% of revenues,  respectively,  and as of March 31,
2004 four customers accounted for 17%, 15%, 12% and 12% of accounts  receivable,
respectively.  For the fiscal year ended March 31, 2005, one customer  accounted
for 18% of revenues, and as of March 31, 2005 three customers accounted for 13%,
12%,  and 10% of  accounts  receivable,  respectively.  As of March 31, 2004 and
2005,  the Company had  established  an  allowance  for  uncollectable  accounts
against accounts receivable of $64 and $131, respectively. The Company records a
general  allowance for uncollectible  accounts monthly,  based on review of aged
accounts receivable.

PROPERTY AND EQUIPMENT

Property and equipment  are stated at original  cost.  Depreciation  is computed
using the straight-line method over the estimated useful lives of the respective
assets as follows:

Computer equipment                              3-5 years
Machinery and equipment                         3-6 years
Furniture and fixtures                          3-6 years


Leasehold  improvements and assets under capital leases are being amortized over
the shorter of the lease term or the  estimated  useful  life of the  underlying
assets.  Maintenance and repair costs are charged to expense as incurred.  Major
renewals,  betterments and additions are  capitalized.  Included in property and
equipment  as of March 31, 2004 and 2005 was $100 of  construction  services for
which the Company issued Common Stock (as defined below) as  consideration  (See
note 12).

FAIR VALUE OF FINANCIAL INSTRUMENTS

The carrying amounts of the Company's financial instruments,  which include cash
and cash equivalents,  accounts receivable,  accounts payable,  accrued expenses
and other  obligations,  approximate  their  fair  value  due to the  short-term
maturities  of the  related  instruments.  Based on  borrowing  rates  currently
available to the Company for loans with  similar  terms,  the carrying  value of
notes payable and capital lease obligations approximates fair value.


                                       41


IMPAIRMENT OF LONG-LIVED ASSETS AND LONG-LIVED ASSETS TO BE DISPOSED OF

The Company has adopted Statement of Financial Accounting Standards ("SFAS") No.
144,  "Accounting  for the  Impairment or Disposal of  Long-Lived  Assets" as of
April 1,  2002.  SFAS No.  144  supersedes  SFAS No.  121,  "Accounting  for the
Impairment of Long-Lived Assets and of Long-Lived Assets to be Disposed Of", and
portions of Accounting  Principles Board Opinion No. 30,  "Reporting the Results
of Operations - Reporting the Effects of Disposal of a Segment of Business,  and
Extraordinary,  Unusual and Infrequently Occurring Events and Transactions," and
amends Accounting Research Bulletin No. 51, "Consolidated Financial Statements".
SFAS No. 144 generally conforms,  among other things,  impairment accounting for
assets to be  disposed  of,  including  those in  discontinued  operations.  The
Company reviews the recoverability of its long- lived assets on a periodic basis
in  order to  identify  business  conditions,  which  may  indicate  a  possible
impairment.  The assessment for potential  impairment is based  primarily on the
Company's  ability to recover the carrying value of its  long-lived  assets from
expected  future   undiscounted   cash  flows.  If  the  total  expected  future
undiscounted  cash flows is less than the carrying amount of the assets,  a loss
is recognized for the difference between the fair value (computed based upon the
expected future discounted cash flows) and the carrying value of the assets.

INTANGIBLE ASSETS

The Company has adopted SFAS No. 141, "Business  Combinations" and SFAS No. 142,
"Goodwill  and other  Intangible  Assets."  SFAS No. 141  requires  all business
combinations  to be accounted for using the purchase  method of  accounting  and
that  certain  intangible  assets  acquired  in a business  combination  must be
recognized  as  assets  separate  from  goodwill.  SFAS No.  142  addressed  the
recognition and measurement of goodwill and other intangible  assets  subsequent
to their  acquisition.  SFAS No. 142 also addresses the initial  recognition and
measurement  of intangible  assets  acquired  outside of a business  combination
whether  acquired  individually or with a group of other assets.  This statement
provides that intangible  assets with indefinite  lives and goodwill will not be
amortized but will be tested at least annually for impairment.  If an impairment
is  indicated  then the asset will be written  down to its fair value  typically
based upon its future expected  discounted cash flows.  Intangible assets of the
Company  as of March 31,  2004  consist  of  customer  contracts,  trade  names,
trademarks  and  covenants  not  to  compete.   These  were   determined  to  be
finite-lived  intangibles assets and are being amortized over their useful lives
ranging from 2 to 10 years. In addition,  during the fiscal year ended March 31,
2005, the Company acquired  intangible assets related to customer  contracts,  a
corporate trade name, FCC broadcast licenses,  and a liquor license.  These were
determined to be  finite-lived  intangibles  assets and are being amortized over
their useful lives of 5 years each. In addition the Company recorded goodwill in
connection  with the  acquisitions  of  Hollywood  SW,  Core,  FiberSat  and the
Pavilion Theatre.

REVENUE RECOGNITION

Media  Services  revenues  generated by Hollywood SW,  FiberSat and the Pavilion
Theatre are revenues  generated from the following sources and are in accordance
as follows:  Software are accounted for in accordance with Statement of Position
97-2, "Software Revenue Recognition" ("SOP 97-2"), and Staff Accounting Bulletin
No. 104 "Revenue  Recognition  in Financial  Statements"  ("SAB No.  104").  The
Company's  software  revenues are generated from the following  primary sources:
(1) software  licensing,  including  customer  licenses and ASP agreements,  (2)
software maintenance contracts,  and (3) professional consulting services, which
includes systems implementation,  training, custom software development services
and other professional services.  FiberSat revenues consist of satellite network
monitoring  and  maintenance  fees.  These  fees  revenues  consist  of  monthly
recurring billings pursuant


                                       42


to contracts,  which are  recognized as revenues in the month earned,  and other
billings  which are  recognized on a time and  materials  basis in the period in
which the  services  were  provided.  Fibersat  revenues  are  accounted  for in
accordance with SAB 104. Additionally, the Pavilion Theatre consists of the sale
of movie theatre  admissions and concession food and beverages,  which are made,
either  in cash or via  customer  credit  cards at the time of the  transaction.
Revenues are recognized at the time the transaction is complete, as the earnings
process has been culminated, in accordance with SAB No. 104.


Software  licensing  revenue is recognized when the following  criteria are met:
(a) persuasive  evidence of an arrangement exists, (b) delivery has occurred and
no significant  obligations remain, (c) the fee is fixed or determinable and (d)
collection is determined to be probable.  Significant  upfront fees are received
in addition to periodic  amounts  upon  achievement  of  contractual  events for
licensing of the Company's products. Such amounts are deferred until the revenue
recognition  criteria have been met, which  typically  occurs after delivery and
acceptance.

For  arrangements  with  multiple  elements  (e.g.,  delivered  and  undelivered
products,  maintenance and other services),  the Company  separately  negotiates
each element of the  arrangement  based on the fair value of the  elements.  The
fair  values for ongoing  maintenance  and  support  obligations  are based upon
vendor  specific  objective  evidence.  The fair  values for  services,  such as
training or  consulting,  are based upon hourly  billing rates of these services
when sold separately to other customers. In instances where the Company develops
customized  software  appliaation  the  percentage-of-completion  accounting  is
followed to recognize revenue.

Customers not wishing to license and operate the software themselves may use the
software through an ASP arrangement,  in which the Company hosts the application
and provides  customer access via the internet.  Annual minimum ASP service fees
are  recognized  ratably over the contract term.  Overage  revenues for usage in
excess of stated minimums are recognized monthly.

Maintenance  services and website  subscription fees are recognized ratably over
the  contract  term.  Professional  consulting  services,  sales of third  party
products and resale  hardware  revenues are recognized as services are provided.
Software  development  revenues are recognized when delivery has occurred and no
significant obligations remain.

Deferred  revenue is recorded  in cases of (1) a portion or the entire  contract
amount  cannot be  recognized  as revenue due to  non-delivery  or acceptance of
licensed software or custom  programming,  (2) incomplete  implementation of ASP
service arrangements, or (3) unexpired pro-rata periods of maintenance,  minimum
ASP service fees or website  subscription  fees.  As license  fees,  maintenance
fees,  minimum ASP service fees and website  subscription fees are often paid in
advance,  a portion of this revenue is deferred  until the contract  ends.  Such
amounts are classified as deferred revenue in the Consolidated Balance Sheet and
are recognized as revenue in accordance with the Company's  revenue  recognition
policies described above.


                                       43



Revenues in the Media  Services  segment also include  digital  cinema - related
revenues generated by AccessDM. These revenues consist of (1) satellite delivery
revenues,  (2) data encryption and preparation fee revenues and (3) landing fees
for  delivery  to  each  movie  theatre.  These  revenues  are  recognized  upon
completion of the related services.

In addition,  revenues in the Media Services  segment  include  FiberSat,  which
consist of satellite  transmission and network  monitoring and maintenance fees.
These fees consist of monthly recurring  billings  pursuant to contracts,  which
are  recognized as revenues in the month earned,  and other  billings  which are
recognized  on a time and  materials  basis in the period in which the  services
were provided, in accordance with SAB No. 104.

Revenues in the Data Center Services  segment consist  primarily of license fees
for  colocation,  riser access  charges,  electric and cross connect  fees,  and
non-recurring installation and consulting fees. Revenues from colocation,  riser
access  charges,  electric  and cross  connect  fees are billed  monthly and, in
accordance  with  SAB No.  104,  are  recognized  ratably  over  the term of the
contract,  generally  one to nine  years.  Certain  customer  contracts  contain
periodic  increases in the amount of license fees to be paid,  and those amounts
are recognized as license fee revenues on a straight-line basis over the term of
the contracts. Installation fees are recognized on a time and materials basis in
the period in which the services were provided and represent the  culmination of
the earnings process as no significant  obligations  remain.  Amounts  collected
prior to satisfying  the above revenue  recognition  criteria are  classified as
deferred  revenue.  Amounts  satisfying  revenue  recognition  criteria prior to
billing are classified as unbilled revenue.

In addition,  within our Data Center Services segment, Managed Services revenues
consist  of network  monitoring  and  maintenance  fees.  These fees  consist of
monthly  recurring  billings  pursuant to  contracts,  which are  recognized  as
revenues in the month earned,  and other billings which are recognized on a time
and materials basis in the period in which the services were provided.

CAPITALIZED SOFTWARE COSTS

The Company accounts for software development costs under Statement of Financial
Accounting  Standards  ("SFAS")  No. 86,  "Accounting  for the Costs of Computer
Software to Be Sold, Leased, or Otherwise Marketed".  Software development costs
that are incurred  subsequent  to  establishing  technological  feasibility  are
capitalized  until  the  product  is  available  for  general  release.  Amounts
capitalized as software  development costs are amortized  periodically using the
greater of revenues during the period  compared to the total estimated  revenues
to be earned or on a  straight-line  basis over five years.  The Company reviews
capitalized  software  costs for impairment on a periodic  basis.  To the extent
that the carrying  amount  exceeds the  estimated  net  realizable  value of the
capitalized  software cost, an impairment charge is recorded.  No impairment was
recorded  for the fiscal  years  ended  March 31,  2004 and 2005,  respectively.
Amortization of capitalized  software  development  costs,  included in costs of
revenues,  for the fiscal  years ended March 31, 2004 and 2005  amounted to $118
and $369,  respectively.  Revenues relating to customized  software  development
under a contract is recognized on a percentage of completion method. As of March
31, 2005, unbilled receivables under such contracts aggregated $517.


                                       44


INCOME TAXES

The Company  accounts  for income  taxes under the asset and  liability  method.
Under the asset and liability  method,  deferred tax assets and  liabilities are
recognized  based upon the differences  arising from the carrying amounts of the
Company's assets and liabilities for tax and financial  reporting purposes using
enacted tax rates in effect for the year in which the  differences  are expected
to reverse. The effect on deferred tax assets and liabilities of a change in tax
rates is  recognized  in income in the  period  when the  change in tax rates is
enacted.  A valuation  allowance is established when it is determined that it is
more likely than not that some  portion of the  deferred  tax assets will not be
realized.

The Company has a tax net operating loss ("NOL"). A full valuation allowance has
been applied against this NOL and its other deferred tax assets.

NET LOSS PER SHARE AVAILABLE TO COMMON STOCKHOLDERS

Computations  of basic and diluted net loss per share of the  Company's  Class A
common stock  ("Class A Common  Stock") and Class B Common Stock  (collectively,
"Common  Stock") have been made in accordance  with SFAS No. 128,  "Earnings Per
Share".  Basic net loss per share is computed by dividing net loss  available to
common  stockholders (the numerator) by the weighted average number of shares of
Common Stock  outstanding  (the  denominator)  during the period.  Shares issued
during the  period  are  weighted  for the  portion of the period  that they are
outstanding.  The  computation  of diluted  net loss per share is similar to the
computation of basic net loss per share except that the denominator is increased
to include the number of additional  shares of Common Stock that would have been
outstanding if the dilutive potential shares of Common Stock had been issued and
were  outstanding.  The numerator is adjusted for the impact of interest expense
associated  with  potentially   dilutive  shares  issuable  upon  conversion  of
convertible  notes.  The Company has  incurred  net losses for the fiscal  years
ended  March 31,  2004 and 2005;  therefore,  the impact of  dilutive  potential
shares of Common Stock has been  excluded  from the  computation  as it would be
anti-dilutive.

The following  outstanding stock options,  warrants (prior to the application of
the  treasury  stock  method),  convertible  notes  and  redeemable  convertible
preferred stock (on an as-converted basis) were excluded from the computation of
diluted net loss per share:
                                                     MARCH 31,
                                                 2004        2005
                                                 ----        ----

Stock options................................  520,564     762,897
Underwriter warrants.........................  120,000     120,000
Shares issuable related to convertible notes.  308,225   2,175,193
Private Placement Warrants...................      --      304,375
Convertible notes warrants...................      --      560,196

ISSUANCE OF STOCK BY SUBSIDIARIES

Sales of stock by a  subsidiary  are  accounted  for in  accordance  with  Staff
Accounting  Bulletin  No.  51,  topic  5H,  "Accounting  for Sales of Stock of a
Subsidiary." At the time a subsidiary sells its stock to unrelated  parties at a
price different from the Company's book value per share,  the Company's share of
the subsidiary's  net equity changes.  If, at that time, the subsidiary is not a
newly-formed,  non-operating entity, nor a research and development, start-up or
development stage company,  nor is there question as to the subsidiary's ability
to continue  in  existence,  the Company  records the change in its share of the
subsidiary's  net  equity  as a gain or loss in its  Consolidated  Statement  of
Operations.  Otherwise,  the  increase is  reflected  in  "subsidiaries'  equity
transactions" in the Company's Consolidated Statements of Shareholders' Equity.


                                       45


STOCK-BASED COMPENSATION

The Company has stock based  employee  compensation  plans,  which are described
more  fully  in Note 8.  The  Company  accounts  for its  stock  based  employee
compensation  plans in accordance  with the provisions of Accounting  Principles
Board ("APB") Opinion No. 25,  "Accounting  for Stock Issued to Employees",  and
related interpretations.  As such, compensation is recorded on the date of grant
only if the current  fair value of the  underlying  stock  exceeds the  exercise
price.  The  Company  has  adopted  the  disclosure  standards  of SFAS No.  148
"Accounting for Stock-Based  Compensation - Transaction and Disclosures",  which
amends SFAS No. 123, "Accounting for Stock-Based  Compensation",  which requires
the Company to provide pro forma net loss and earnings per share disclosures for
stock  option  grants made in 1995 and future  years as if the  fair-value-based
method of  accounting  for stock  options  as  defined  in SFAS No. 123 had been
applied.  The following table  illustrates the effect on net loss if

the Company had applied  the fair value  recognition  provisions  to stock based
compensation for the fiscal years ended March 31, 2004 and 2005:

                                                              MARCH 31,
                                                              ---------
                                                          2004              2005
                                                          ----              ----

Net loss as reported................................   $(4,805)         $(6,788)
Add: Stock-based compensation expense included
in net loss.........................................         15                4
Less: Stock-based compensation expense determined
under fair value based method.......................      (489)            (647)
                                                          -----            -----
Pro forma net loss..................................   $(5,279)         $(7,431)
                                                        =======         ========

Basic and diluted net loss available to common stockholders
per share:
As reported.........................................    $(1.37)          $(0.70)
Pro forma...........................................    $(1.47)          $(0.77)

The fair value of each stock option granted during
the year is estimated on the date of grant using the
Black-Scholes  option  pricing model with the following
assumptions:
                                                             2004       2005
                                                             ----       ----

Expected life (years).....................................      10        10
Expected volatility.......................................    110%      110%
Expected dividend yield...................................      0%        0%
Weighted average risk-free interest rate..................   4.32%     4.24%
Weighted average fair value per share of employee options
granted during the year...................................   $3.93     $7.94

RESEARCH AND DEVELOPMENT

AccessIT  recorded  research  and  development  expenses,  comprised  mainly  of
personnel costs and outside  services,  of $55 and $666,  respectively,  for the
fiscal  years ended March 31, 2004 and 2005.  The  increase is  attributable  to
research and  development  efforts at Hollywood SW related to the development of
TDS International  software application and various products including TDS, ITDS
and EMS.

ADVERTISING COSTS

The Company has incurred advertising costs of $19 and $28, respectively,  during
the fiscal years ended March 31, 2004 and 2005.  Advertising  costs are expensed
as incurred.


                                       46


USE OF ESTIMATES

The  preparation  of  Consolidated   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 contingent  liabilities at the date of the
Consolidated  Financial  Statements  and the  reported  amounts of revenues  and
expenses during the reporting period.  The Company's most significant  estimates
related to software revenue recognition,  capitalization of software development
costs, amortization and impairment testing of intangible assets and depreciation
of fixed assets. Actual results could differ from those estimates.

RISK AND UNCERTAINTIES

The  Company is subject to all of the risks  inherent  in  business  in software
development,  colocation,  and managed storage. These risks include, but are not
limited to, limited  operating  history,  limited senior  management  resources,
rapidly changing technology business environments, the need for substantial cash
investments to fund its operations,  reliance on third parties,  the competitive
nature of the industry,  development  and  maintenance of efficient  information
technologies,   and   uncertainty   regarding  the   protection  of  proprietary
intellectual properties.

NOTE 3. ACQUISITIONS

HOLLYWOOD SOFTWARE

On November 3, 2003, the Company completed the acquisition of all of the capital
stock of Hollywood SW, after  amending the agreement it had entered into on July
17, 2003 (the  "Hollywood  SW  Acquisition").  To complete  the  acquisition  of
Hollywood  SW, the Company  issued  collateralized  promissory  notes to the two
holders of all of the  capital  stock of  Hollywood  SW,  each in the  principal
amount of $3,625 (the "Notes"). The amount of the Notes represented the original
purchase  price  of  $7,300  (based  on the IPO  price  less  the  underwriter's
discount),  less $50 that had already been paid by the  Company.  The Notes were
due no  later  than  five  business  days  after  the date  that  the  Company's
registration  statement was declared  effective by the  Securities  and Exchange
Commission.

On November 14, 2003,  four business days after the  registration  statement was
declared effective, the Notes were exchanged for $2,500 in cash of which $50 had
already been paid,  promissory notes in the aggregate principal amount of $3,000
and 400,000 unregistered shares of Class A Common Stock. For purchase accounting
purposes, the purchase price is $7,102,  consisting of $2,722 of cash (including
$222 of  expenses);  $1,380 of Class A Common Stock  (400,000  shares  valued at
$3.45 per share,  as determined by a valuation from an  independent  appraiser);
and $3,000 of promissory  notes.  In addition,  a contingent  purchase  price is
payable each year for the three years following the closing if certain  earnings
targets are  achieved.  The  Company  has also agreed to a one-time  issuance of
additional  unregistered  shares to the sellers in accordance with a formula if,
during the 90 days following the applicable lock-up period, the average value of
Class A Common Stock during such 90 days declines  below an average of $3.60 per
share.  The results of  operations  of  Hollywood  SW have been  included in the
Company's consolidated financial statements since the acquisition date.

The  total  purchase  price  of  $7,102,  including  fees  and  expenses  of the
acquisition,  has been allocated to the net assets acquired,  including tangible
and  intangible  assets and  liabilities  assumed,  based upon the results of an
independent  appraisal  of fair  value,  with the excess  purchase  price  being
allocated  to  goodwill.  The  goodwill  recorded  on  the  acquisition  is  not
deductible  for  income  tax  purposes.  The  fair  value  of the  tangible  and
intangible  assets  acquired and  liabilities  assumed has been reflected in the
Consolidated Balance Sheet as follows:


                                       47


Tangible and intangible assets acquired:
Current assets............................................  $535
Property and equipment....................................    25
Capitalized software cost................................. 1,350
Intangible assets......................................... 2,170
Goodwill.................................................. 5,184
                                                           -----

Total tangible and intangible assets acquired............. 9,264
Less liabilities assumed:
Current liabilities.......................................   733
Deferred tax liability...................................  1,429
                                                           -----

Total liabilities assumed................................. 2,162
                                                           -----
Total purchase price......................................$7,102
                                                          ======

The intangible  assets consist of customer  contracts,  covenants not to compete
agreements  and corporate  trade names.  These assets are being  amortized  over
their estimated useful lives of 5, 5 and 10 years, respectively.

Amortization of these assets in future years is expected to be as follows:
Fiscal Year ended March 31,

2006...................................................... 422
2007...................................................... 422
2008...................................................... 422
2009...................................................... 252
2010......................................................  12
Thereafter................................................  43

MANAGED SERVICES

   On December 22, 2003,  the Company signed an agreement to purchase all of the
outstanding   common  stock  of  Managed   Services   (the   "Managed   Services
Acquisition"),  and on January 9, 2004, the acquisition of Managed  Services was
completed.  Managed  Services  is a  managed  service  provider  of  information
technologies;  its primary  product is managed  network  services  through their
global network  command  center.  The Company  believes that the  acquisition of
Managed Services will expand the existing capabilities and services of its IDCs.
The purchase price consisted of $250 in cash and 100,000  unregistered shares of
Class A  Common  Stock.  In  addition,  the  Company  may be  required  to pay a
contingent  purchase  price for any of the three years  following the closing in
which certain  earnings  targets are achieved;  any additional  payment is to be
made in the same  proportionate  combination of cash and unregistered  shares of
Class A Common Stock as the purchase  price payable at closing.  The Company has
also agreed to a one-time issuance of additional  unregistered shares of Class A
Common  Stock to the seller up to a maximum of 20,000  shares if, in  accordance
with an agreed upon formula,  the trading value of the Company's  Class A Common
Stock is less than  $4.00  during  the 90 day  period at the end of the  lock-up
period. Based on a valuation from an independent appraiser, the restricted stock
issued in the Managed Services Acquisition was estimated to have a fair value of
$3.45 per share.

The  total  purchase  price of $620,  including  $25 of fees and  expenses,  was
allocated to the net assets acquired,  including tangible and intangible assets,
based upon the  results of an  independent  appraisal  of Fair  value,  with the
excess purchase price being allocated to goodwill. The gooodwill recorded on the
acquisition  is not  deductible  for income tax purposes.  The fair value of the
tangible and intangible  assets acquired has been reflected in the  Consolidated
Balance Sheet as follows:

Tangible and intangible assets acquired:
Property and equipment........................        $152
Intangible assets.............................         450
Goodwill......................................         194
                                                       ---
Total tangible and intangible assets acquired.         796

Deferred tax liability........................         176
                                                      ----
Total purchase price..........................        $620
                                                      ====

The intangible  assets consist of customer  contracts,  covenants not to compete
agreements  and corporate  trade names.  These assets are being  amortized  over
their estimated useful lives of 5, 5 and 10 years, respectively.


                                       48


Amortization  of these  assets in future  years is  expected  to be as  follows:
Fiscal Year ended March 31,

2006......................................................  87
2007......................................................  87
2008......................................................  87
2009......................................................  66
2010......................................................   3
Thereafter................................................  11

BOEING DIGITAL

On March 29, 2004 the  Company  acquired  certain  assets of Boeing  Digital,  a
division  of Boeing  (the  "Boeing  Digital  Acquisition").  These  assets  were
purchased to further the Company's strategy of becoming a leader in the delivery
of movies and other  digital  content to movie  theaters.  The  acquired  assets
consist of digital projectors, satellite dishes and other equipment installed at
28 screens within 21 theaters in the United States and at one theater in London,
England,   and  satellite   transmission   equipment  located  in  Los  Angeles,
California.  The initial  purchase  price  consisted  of:  $250 in cash;  53,534
unregistered  shares of Class A Common Stock;  and a  non-interest  bearing note
payable for $1,800 payable in equal installments over 4 years. In addition,  the
Company has agreed to make  payments  totaling a maximum of $1,000 over 4 years,
representing  20% of the gross  receipts  generated by the acquired  assets (the
"Future  Revenue  Share").  Additionally,  at any time  during the 90 day period
immediately following the first 12 months after the closing, Boeing can sell its
53,534  unregistered  shares of Class A Common  Stock to the Company in exchange
for $250 in cash (the "Boeing Put Option").

Based on a valuation  from an  independent  appraiser,  for purchase  accounting
purposes the total purchase price is $2,010,  including estimated fees and setup
costs of $155. The unregistered  stock issued in the Boeing Digital  Acquisition
was  estimated to have a fair value of $238.  Due to the Boeing Put Option,  the
Class A Common  Stock issued to Boeing has been  reflected  on the  consolidated
balance sheet as redeemable  shares of Class A Common Stock,  until such time as
the  Boeing Put Option  expires  or is  exercised.  The fair value of the assets
acquired has been reflected in the consolidated balance sheet as follows:

Property & equipment............................................          $1,645
Intangible assets...............................................             365
                                                                        --------
Total                                                                     $2,010
                                                                          ======

The intangible assets consist of customer contracts and covenants not to compete
agreements.  These assets are being amortized over their estimated  useful lives
of 4 and 2 years, respectively.

Amortization of these assets in future years is expected to be as follows:
Fiscal Year ended March 31,

2006............................................      116
2007............................................       76
2008............................................       76
2009............................................        4


                                       49


FIBERSAT

On October 19,  2004,  the Company and its  wholly-owned  subsidiary,  FiberSat,
entered  into an  agreement  to  purchase  substantially  all of the  assets and
certain  specified  liabilities  of FiberSat  Global  Services,  LLC  ("FiberSat
Seller")  (the  "FiberSat  Acquisition").  On November  17,  2004,  the FiberSat
Acquisition was completed.  FiberSat,  headquartered in Chatsworth,  California,
provides  services   utilizing   satellite  ground  facilities  and  fiber-optic
connectivity to receive,  process,  store,  encrypt and transmit  television and
data signals  globally.  FiberSat's  Chatsworth  facility  currently  houses the
infrastructure  operations of the Company's  digital cinema  satellite  delivery
services.

The initial  purchase  price for the FiberSat  Acquisition  consisted of 500,000
unregistered  shares of Class A Common  Stock,  and the Company  agreed to repay
certain  liabilities of FiberSat Seller on or before the closing of the FiberSat
Acquisition,  with up to $500 in cash and 100,000 unregistered shares of Class A
Common  Stock.  The  Company  had the  option to  exchange  up to 50,000 of such
100,000  shares  of Class A Common  Stock to  increase  the  cash,  and  thereby
decrease the Class A Common Stock portion

of such repayment  based on the ratio of one Class A Common Stock for each $5.00
of additional cash. The Company repaid these liabilities by paying approximately
$381 and issuing 40,000 shares of Class A Common Stock. In addition, the Company
may be required to pay a  contingent  purchase  price for any of the three years
following the acquisition in which certain  earnings  targets are achieved.  The
Company has also agreed to a one-time issuance of additional unregistered shares
to the sellers in accordance with a formula if, during the 90 days following the
applicable  lock-up  period,  the average value of the Company's  Class A Common
Stock during such 90 days declines below an average of $3.17 per share.

Based on a valuation  from an  independent  appraiser,  for purchase  accounting
purposes the total purchase  price is $2,177,  including  estimated  transaction
costs of $ 169. The  goodwill  recorded on the  acquisition  is  deductible  for
income tax purpose,  to the extent the Company has any taxable  income in future
periods.

The fair values of assets and  liabilities  acquired have been  reflected in the
Consolidated Balance Sheet as follows:

Current assets...........................................................   $214
                     Property and equipment...... .......................  2,164
Intangible assets .......................................................    550
Goodwill ................................................................     24
Noncurrent assets .......................................................     16
                                                                              --

Total tangible and intangible assets acquired............................  2,968
Less: liabilities assumed:

Current liabilities......................................................    711
Long-term liabilities....................................................     80
                                                                              --
Total Liabilities........................................................    791
                                                                             ---
Total Purchase Price....................................................  $2,177
                                                                          ======

The intangible  assets consist of FCC broadcast  licenses,  corporate trade name
and customer  contracts.  These assets are being  amortized over their estimated
useful lives of 5 years each.

Amortization of these assets in future years is expected to be as follows:
Fiscal Year ended March 31,

2006............................................      110
2007............................................      110
2008............................................      110
2009............................................      110
2010............................................      107


                                       50


PAVILION THEATRE

On December 23, 2004, ADM Cinema  entered into an asset purchase  agreement with
Pritchard  Square  Cinema,  LLC,  a New  York  limited  liability  company  (the
"Seller"),   and  Norman  Adie,  the  Seller's   managing  member,  to  purchase
substantially all of the assets and certain liabilities of the Seller's Pavilion
Theatre (the "Pavilion  Acquisition").  On February 11, 2005 the  acquisition of
the Pavilion was completed. The purchase price included a cash payment of $3,300
(less $500 held in escrow pending the completion of certain  construction) and a
five-year 8% promissory  note for $1,700.  In addition,  ADM Cinema  assumed the
lease  covering the land,  building and  improvements  which is  classified as a
capital lease on the  consolidated  balance  sheet.  Also,  in  connection  with
renegotiating the lease, the Company issued 40,000  unregistered shares of Class
A Common Stock to the landlord of the Pavilion  Theatre,  which was valued by an
independent appraiser at $132.

The  Pavilion  Theatre  is an  eight-screen  movie  theatre  and  cafe  and is a
component  of the Media  Services  segment.  Continuing  to  operate  as a fully
functional  multiplex,  the Pavilion Theatre has also become a showplace for the
Company to  demonstrate  its integrated  digital  cinema  solutions to the movie
entertainment industry.

Based on a preliminary  valuation  from an independent  appraiser,  for purchase
accounting  purposes the total  purchase  price is $5,248,  including  estimated
transaction costs of $ 106. The preliminary  allocation of purchase price may be
subject to further  adjustment.  The  goodwill  recorded on the  acquisition  is
deductible  for income tax  purposes,  to the extent the Company has any taxable
income in future periods.

The fair values of assets and  liabilities  acquired have been  reflected in the
Consolidated Balance Sheet as follows:

Current assets..........................................................     $10

Property and equipment, net.............................................   6,402
Intangible assets ......................................................      50
Goodwill ...............................................................   4,886
                                                                           -----

Total tangible and intangible assets acquired...........................  11,348
Less: liabilities assumed:

Current liabilities.....................................................      52
Long-term liabilities...................................................   6,048
                                                                           -----
Total Liabilities.......................................................   6,100

Total Purchase Price....................................................  $5,248
                                                                          ======

The intangible asset consists of a liquor license and is being amortized over an
estimated useful life of 5 years.

Amortization of this asset in future years is expected to be as follows:
Fiscal year ended March 31,

2006............................................       10
2007............................................       10
2008............................................       10
2009............................................       10
2010............................................        9


                                       51


The following  pro-forma  information  shows the results of  operations  for the
years ended March 31, 2005 and 2004, as though the  acquisitions of FiberSat and
the Pavilion had occurred at the  beginning of each  respective  fiscal year. In
addition,  the fiscal 2004 pro forma financial  information reflects the results
of operations of Hollywood SW as if that  acquisition  occurred at the beginning
of that fiscal year.  The pro forma  information  reflects  adjustments  for (i)
depreciation  and amortization of acquired  tangible and intangible  assets from
the  acquisitions  of Hollywood  SW,  FiberSat and the  Pavilion  (ii)  interest
expense for the 8% notes  payable in the amount of $3 million  issued to the two
sellers of Hollywood SW in November 2003, the 7% convertible  notes and warrants
in the amount of $7.6 million  issued in February  2005,  and the February  2005
issuance of the 8% note for $1.7  million  issued to the seller in the  Pavilion
acquisition,  (iii) the full year impact of the  issuance of 400,000  shares for
Hollywood  SW in fiscal 2004 and 540,000 and 40,000 for  FiberSat  and  Pavilion
acquisitions  in fiscal 2004 and 2005,  and (iv)  additional  non-cash  interest
associated with the beneficial  conversion feature and warrant accretion related
to the 7% convertible  notes issued in February 2005. The pro forma  adjustments
related to the  acquisition of the Pavilion are based on a preliminary  purchase
price allocation.  Differences  between the preliminary and final purchase price
allocations  could  have  an  impact  on the  pro  forma  financial  information
presented.   The  pro  forma  financial   information  below  is  presented  for
illustrative  purposes only and is not  necessarily  indicative of the operating
results that would have been achieved had the  acquisition  been completed as of
the dates indicated above or the results that may be obtained in the future.


                                                    MARCH 31,
                                                    ---------
                                                 2004      2005
                                                   (unaudited)
Revenues.....................................     16,286  17,645
Net loss.....................................      8,620   8,463
Basic and  diluted loss per share............     ($1.85) ($0.84)


NOTE 4. CONSOLIDATED BALANCE SHEET COMPONENTS

CASH AND CASH EQUIVALENTS

Cash and cash  equivalents  consisted of the  following as of March 31, 2004 and
2005:

                                                     2004    2005

Bank balances.....................................  $1,248  $4,779



                                       52


Money market fund.................................   1,082      --
                                                     -----      --
Total cash and cash equivalents...................  $2,330  $4,779
                                                    ======  ======

As of March 31, 2004 and 2005, cost  approximated  market value of cash and cash
equivalents.

PREPAID EXPENSES AND OTHER CURRENT ASSETS

Prepaid  expenses and other current  assets consist of the following as of March
31, 2004 and 2005:

                                                   2004    2005
                                                   ----    ----
Insurance.........................................  $81    $215
Deposits..........................................   11      10
Deferred costs, current...........................   97     321
Concession - inventory............................   --       5
Other.............................................  107     211
                                                    ---     ---
                                                   $296    $762
                                                   ====    ====

PROPERTY AND EQUIPMENT, NET

Property and equipment,  net was comprised of the following as of March 31, 2004
and 2005:

                                                    2004    2005
                                                    ----    ----
Land..............................................   $--  $1,500
Building and improvements.........................    --   4,600
Leasehold improvements............................ 3,911   4,158
Computer equipment and software................... 2,945   2,642
Machinery and equipment........................... 2,591   5,254
Furniture and fixtures............................   306     474
                                                   -----   -----

                                                   9,753  18,628
Less - Accumulated depreciation...................(3,888) (4,367)
                                                  ------- -------

Total property and equipment, net.................$5,865  $14,261
                                                   =====  =======



                                       53



Land and building and improvements  represent the Company's capital lease of the
Pavilion Theater.  Leasehold improvements consist primarily of costs incurred in
the construction of the Company's Jersey City, New Jersey and Brooklyn, New York
IDCs, and from the other IDC acquisitions. Included in leasehold improvements as
of March  31,  2004 and 2005 was $100 of  construction  services  for  which the
Company issued Common Stock as  consideration.  Computer  equipment and software
consists  primarily of costs incurred for equipment and related software used in
the  Company's  Managed  Storage  Services  business and from the  Hollywood SW,
Managed  Services and Boeing Digital  acquisitions  (See Note 3).  Machinery and
Equipment  consists primarily of costs incurred for equipment used at the IDC's,
and from the Boeing Digital and FiberSat acquisitions. For the years ended March
31,  2004 and 2005,  depreciation  expense  amounted  to $1.6 and $2.1  million,
respectively.

INTANGIBLE ASSETS, NET

Intangible  assets,  net was comprised of the following as of March 31, 2004 and
2005:

                                                   2004      2005

Trademarks......................................   $45        $68
Corporate trade names...........................   150        180
Customer contracts.............................. 3,691      4,236
Covenants not to compete........................ 1,852      1,909
                                                 -----      -----

                                                  5,738     6,393
Less - accumulated amortization.................(1,538)   (3,056)
                                                -------   -------

Total intangible assets, net.................... $4,200    $3,337
                                                 ======    ======

For the years  ended March 31, 2004 and 2005  amortization  expense  amounted to
$1.1 and $1.5 million, respectively.

CAPITALIZED SOFTWARE COST, NET

Capitalized  software costs,  net was comprised of the following as of March 31,
2004 and 2005:

                                                    2004      2005

Capitalized software............................  $1,548    $2,109
Less - accumulated amortization.................   (118)     (487)
                                                   -----     -----
Total capitalized software costs, net...........  $1,430    $1,622
                                                  ======    ======

For the years  ended  March 31, 2004 and 2005,  amortization  of software  costs
amounted to $118 and $369, respectively.

ACCOUNTS PAYABLE AND ACCRUED EXPENSES

Accounts payable and accrued expenses consisted of the following as of March 31,
2004 and 2005:

                                                   2004      2005

Accounts payable.................................. $541    $1,118
Accrued compensation and benefits.................  178       392
Accrued taxes payable.............................  162         9
Interest payable..................................   97       134
Other.............................................  393       762
                                                    ---       ---

Total accounts payable and accrued expenses.......$1,371   $2,415
                                                  ======   ======




                                       54


NOTE 5. RECENT ACCOUNTING PRONOUNCEMENTS

The  Financial  Accounting  Standards  Board (the  "FASB")  issued  Statement of
Financial  Accounting  Standards  ("SFAS")  No.  150,  "Accounting  for  Certain
Financial  Instruments with Characteristics of Both Liabilities and Equity" SFAS
150, which became  effective July 1, 2003, which  establishes  standards for the
classification   and   measurement  of  certain   financial   instruments   with
characteristics  of both liabilities and equity.  There was no impact on AccesIT
financial statements due to the adoption of this standard.

In December  2004,  the FASB issued SFAS No. 123  (revised  2004),  "Share-Based
Payment." This statement revises the original guidance contained in SFAS No. 123
and supersedes  Accounting  Principles Board ("APB") Opinion No. 25, "Accounting
for Stock Issued to Employees,  and its related implementation  guidance.  Under
SFAS No. 123 (revised 2004), a publicly entity such as AccessIT will be required
to measure the cost of employee  services  received in exchange  for an award of
equity instruments based on the grant-date fair value of the award (with limited
exceptions)  and recognize such cost over the period during which an employee is
required to provide  service in  exchange  for the reward  (usually  the vesting
period). For stock options and similar  instruments,  grant-date fair value will
be estimated using option-pricing models adjusted for unique  characteristics of
instruments (unless observable market prices for the same or similar instruments
are available).  For small business issuers on a calendar reporting year this is
effective as of the  beginning of the first interim or annual  reporting  period
that begins after  December 15, 2005.  The effective  date for AccessIT to adopt
this  standard due to its fiscal  reporting  first  interim or annual  reporting
period is April 1, 2006.

Upon  adoption of this  standard,  the actual costs of our  stock-based  payment
plans will be based on grant-date fair value, which has not yet been determined.

NOTE 6. NOTES PAYABLE

In February  2002, the Company  commenced an offering of 5-year 8%  subordinated
promissory  notes (the  "5-Year  Notes")  with  detachable  warrants to purchase
shares of Class A Common Stock (the "5-Year Notes Warrants").  Through March 31,
2004 the Company had raised a total of $4,405 from the  issuance of 5-Year Notes
and no  additional  5-Year Notes were issued  during the fiscal year ended March
31, 2005. As of March 31, 2004, 5-Year Notes Warrants to purchase 440,500 shares
of Class A Common Stock were issued.

In November 2003, the Company issued two 8% notes payable totaling $3,000 to the
founders of Hollywood SW as part of the purchase price for Hollywood SW (the "HS
Notes").  During the fiscal  year  ended  March 31,  2005,  the  Company  repaid
principal of $512 on the HS Notes.

In February  2004,  the Company sent a notice to the holders of the 5-Year Notes
and the HS Notes offering to exchange (the  "Exchange  Offer") the principal and
accrued  interest of the outstanding  5-Year Notes and the HS Notes for, at each
note holder's election,  either (1) unregistered  shares of Class A Common Stock
at an exchange rate of $3.57 per share (the "Share Option") or (2)  Subordinated
Convertible  Promissory Notes ("Convertible  Notes"), which are convertible into
shares of Class A Common  Stock at a  conversion  rate of $5.64  per share  (the
"Convertible Note Option"). On March 24, 2004, the Exchange Offer was completed.
Pursuant  to the  Share  Option,  the  Company  exchanged  5-Year  Notes  in the
aggregate principal amount of $2,480 plus accrued and unpaid interest of $46 for
707,477 unregistered shares of Class A Common Stock. Pursuant to the Convertible
Note Option,  in exchange for 5-Year Notes in the aggregate  principal amount of
$1,705 plus accrued and unpaid  interest of $31, the Company issued  Convertible
Notes which are,  as of March 31,  2005,  convertible  into a maximum of 307,871
shares of its Class A Common  Stock (1) at any time up to the  maturity  date at
each holder's option or (2)  automatically  on the date when the average closing
price  on the  American  Stock  Exchange  of the  Class A  Common  Stock  for 30
consecutive  trading days has been equal to or greater than $12.00.  The holders
of all the HS Notes and  holders  of 5-Year  Notes  totaling  $220 of  principal
elected not to participate in the Exchange Offer.



                                       55


In March 2004, in connection  with the Boeing Digital  Acquisition,  the Company
issued a  non-interest  bearing note  payable with a face amount of $1,800.  The
estimated  fair value of this note was  determined  to be $1,367 on the  closing
date and interest is being imputed over the 4 year term of the note, to non-cash
interest expense in the Consolidated Statement of Operations. On March 31, 2005,
the value of the note, (including imputed interest) is $1,531 and is included in
notes payable in the Consolidated Balance Sheet. For the fiscal year ended March
31, 2005, non-cash interest expense resulting from this note was $164.

In July 2004,  the Company  made early  repayments  totaling $58 for two 5 -Year
Notes,  and the remaining  value of the  underlying 5 - Year Notes  Warrants was
amortized to non-cash interest expense, totaling $19.

On  February  10,  2005,  the  Company  issued 7%  convertible  debentures  (the
"Convertible  Debentures") and warrants ("the Convertible  Debentures Warrants")
to a group of  institutional  investors for aggregate  proceeds of $7.6 million.
The  Convertible  Debentures  have a four  year  term,  with  one  third  of the
unconverted  principal  balance  repayable in twelve equal monthly  installments
beginning  three years after the closing.  The remaining  unconverted  principal
balance is repayable  at maturity.  The Company may pay the interest in cash or,
if certain conditions are met, by issuing shares of its Class A Common Stock. If
the  Company is  eligible to issue  Class A Common  Stock to pay  interest,  the
number of shares  issuable is based on 93% of the 5-day  average  closing  price
preceding  the interest  due date.  The  Convertible  Debentures  are  initially
convertible into 1,867,322 shares Class A Common Stock,  based upon a conversion
price of $4.07 per share  subject  to  adjustments  from time to time.  Upon the
redemption  of the  Convertible  Debentures,  the Company  may issue  additional
warrants exercisable for Class A Common Stock. Additionally,  the Company issued
to the  investors  Convertible  Debentures  Warrants  to  purchase up to 560,197
shares of Class A Common Stock, at an initial exercise price of $4.44 per share,
subject to adjustments  from time to time. The Convertible  Debentures  Warrants
are  exercisable  beginning on September 9, 2005 until 5 years  thereafter,  and
have been  valued at $1.1  million  which is  accounted  for as a debt  issuance
discount.  As a result, there is a beneficial conversion feature and the company
recognized a $605 charge,  which is included in non-cash interest  expense.  The
offering of the Convertible  Debentures and the Convertible  Debentures Warrants
was exempt from the registration  requirements of the Securities Act of 1933, as
amended (the  "Securities  Act"),  under Section 4(2) of the  Securities Act and
Rule 506 promulgated thereunder.

The Company has agreed to register, among other things, the Class A Common Stock
underlying the Convertible  Debentures and Convertible  Debentures Warrants with
the  SEC  within  30  days  from  the  closing.  If,  among  other  things,  the
registration  statement is not filed within 30 days or is not declared effective
within  90 days  (120  days in the  event of an SEC  review),  then  cash  delay
payments equal to 1% of the offering  proceeds per month will apply. The Company
filed  such a  registration  statement  on March  11,  2005 and it was  declared
effective by the SEC on March 21, 2005.

During  the  fiscal  year ended  March 31,  2005,  the  Company  made  scheduled
principal payments of $12 on the 5-Year Notes.

In connection with the acquisition of the Pavilion Theatre, on February 10, 2005
we issued to the seller a 5-year, 8% note payable for $1,700. Principal payments
are to be made  quarterly  for five  years in the  amount of $42,  with a ballon
repayment of the remainder after five years.

The aggregate principal  repayments on the Company's notes payable are scheduled
to be as follows:


                                       56



Fiscal Year ending March 31,
2006.............................................$1,137
2007............................................. 1,449
2008............................................. 1,795
2009............................................. 9,368
2010............................................. 1,161

NOTE 7. MANDATORILY REDEEMABLE CONVERTIBLE PREFERRED STOCK

PREFERRED STOCK

In  October  2001,  the  Company  issued  3,226,538  shares  of the  Series A 8%
Mandatorily  Redeemable  Convertible  Preferred  Stock (the  "Series A Preferred
Stock") at approximately $0.62 per share,  resulting in gross proceeds of $2,000
before considering expenses of $203. Concurrent with this issuance,  the Company
issued  warrants to purchase up to 430,205 Class A Shares (the "2001  Warrant").
In November 2002, the Company issued  4,976,391 shares of Series B 8% Cumulative
Convertible  Preferred Stock, par value $0.001 (the "Series B Preferred  Stock")
the Series A Preferred Stock holder at approximately $0.50 per share,  resulting
in gross proceeds of $2,500 before considering expenses of $125. Concurrent with
this issuance,  the Company issued three warrants to purchase  381,909,  144,663
and 100,401 Class A Shares  ("Contingent  Warrant A", "Contingent Warrant B" and
"Contingent  Warrant C",  respectively).  The issuance of the Series A Preferred
Stock  resulted  in a  beneficial  conversion  feature of $1,078  calculated  in
accordance   with  Emerging   Issues  Task  Force   ("EITF")  Issue  No.  00-27,
"Application  of  Issue  No.  98-5  to  Certain  Convertible  Instruments".  The
beneficial  conversion  feature was  reflected as an issuance cost and therefore
was reflected as a charge  against the Series A Preferred  Stock and an increase
to additional paid-in capital. As described below, in November 2003, the Company
exchanged all of its Series A Preferred Stock, Series B Preferred Stock, related
warrants and accumulated dividends for 2,207,976 shares of Class A Common Stock.

Total  accretion for the Series A Preferred  Stock to its  estimated  redemption
value was $1,121  during the fiscal  year ended  March 31,  2004,  of which $990
related to the accretion to the estimated  redemption amount. In addition,  $131
related to the accretion of the  beneficial  conversion  feature,  respectively.
Accretion for the Series B Preferred Stock to its redemption  value was $467 for
the fiscal year ended March 31, 2004.

In  September  2003,  the  Company  entered  into an  agreement  (the  "Exchange
Agreement") with the holder of the Series A and Series B Preferred Stock to: (1)
convert all 8,202,929 shares of Series A and Series B Preferred Stock held by it
into  1,640,585  shares of Class A Common Stock;  (2) exchange the 2001 Warrant,
Contingent  Warrant A and  Contingent  Warrant C for  320,000  shares of Class A
Common Stock;  (3) exercise  Contingent  Warrant B to purchase 143,216 shares of
Class A Common Stock on a cashless-exercise  basis; and (4) accept Class A Stock
at a price per share of $5.00  pursuant to the  Company's  November 2003 initial
public  offering  (the  "IPO"),  as  consideration  for  the  conversion  of all
accumulated  dividends on the Series A and Series B Preferred  Stock through the
effective  date of the IPO. On November 14, 2003,  the  Exchange  Agreement  was
finalized, concurrent with the completion of the IPO. The Company issued 104,175
shares  of  Class A Common  Stock as  consideration  for the  conversion  of all
accumulated  dividends  on the Series A and B Preferred  Stock.  As of March 31,
2004 and 2005,  there is no Series A Preferred Stock or Series B Preferred Stock
issued or outstanding.


                                       57



NOTE 8. STOCKHOLDERS' EQUITY

CAPITAL STOCK

In August 2004, the Company's Board of Directors authorized the repurchase of up
to 100,000  shares of Class A Common  Stock.  The shares  will be  purchased  at
prevailing  prices  from  time-to-time  in the open market  depending  on market
conditions  and other factors  During the year ended March 31, 2005, the Company
repurchased 51,440 Class A shares for a total purchase price of $172,  including
fees,  which has been  recorded  as Treasury  Stock.  As of March 31,  2005,  an
additional 48,560 shares of Class A Common Stock may be repurchased.

In November  2004, the Company  issued  540,000  unregistered  shares of Class A
Common Stock in connection with the FiberSat Acquisition.

In February  2005,  the Company  issued  40,000  unregistered  shares of Class A
Common Stock in connection with the Pavilion Acquisition.

In October  2004,  the Company  entered  into a stock  purchase  agreement  with
investors to issue and sell 282,776  unregistered shares of Class A Common Stock
at $3.89 per share to the investors  for gross  proceeds of $1,100 (the "October
2004 Private  Placement").  These shares carry piggyback and demand registration
rights, at the sole expense of the investor.  The net proceeds to the Company of
approximately  $1,023  were used for the  FiberSat  Acquisition  and for working
capital.  The  investors  exercised the  piggyback  registration  rights and the
Company  registered  the resale of all of the  282,776  shares of Class A Common
Stock on a  registration  statement  which  registration  statement was declared
effective by the SEC on March 21, 2005.

In June 2004, the Company issued in a private  placement (the "June 2004 Private
Placement")  1,217,500  unregistered  shares  of Class A Common  Stock at a sale
price of $4.00 per share. The total net proceeds to the Company,  including fees
and expenses to subsequently  register the securities were approximately $4,000.
The Company is using the net  proceeds for capital  investments  and for working
capital.  The Company also issued to investors  and the  investment  firm in the
June 2004 Private  Placement,  warrants to purchase a total of 304,375 shares of
Class A Common Stock at an exercise price of $4.80 per share,  exercisable  upon
receipt  (the "June 2004 Private  Placement  Warrants").  The Company  agreed to
register the Class A Common Stock issued and to be issued upon exercising of the
June 2004 Private  Placement  Warrants  with the SEC by filing a Form SB-2 on or
before July 5, 2004.  The Company  filed the Form SB-2 on July 2, 2004,  and the
Form SB-2 was declared effective on July 20, 2004.

In May 2004,  the Company  entered into an agreement  with the holder of 750,000
shares of AccessDM's  common  stock,  to exchange all of those shares for 31,300
unregistered shares of Class A Common Stock. This transaction was consummated in
May 2004 and as a result, AccessIT holds 100% of AccessDM's common stock.


                                       58


STOCK OPTION PLAN

In June 2000,  the Company  adopted the 2000 Stock Option Plan,  as amended (the
"Plan") under which incentive and  nonstatutory  stock options may be granted to
employees,  outside  directors,  and consultants.  The purpose of the Plan is to
enable  the  Company  to  attract,  retain and  motivate  employees,  directors,
advisors  and  consultants.  The Company  initially  reserved a total of 400,000
shares of Class A Common Stock of the Company for issuance  upon the exercise of
options  granted in accordance  with the Plan. In September  2003, the amount of
stock options  available  for grant under the Plan was increased to 600,000.  At
the annual stockholders' meeting held in October 2004, the stockholders voted to
approve an increase in the number of AccessIT stock options  available for grant
from 600,000  shares of Class A Common Stock to 850,000 shares of Class A Common
Stock  .Options  granted  under the Plan expire 10 years  following  the date of
grant (five years for  stockholders  who own greater than 10% of the outstanding
stock) and are subject to  limitations  on transfer.  Options  granted under the
Plan vest generally over  three-year  periods.  The Plan is  administered by the
Company's Board of Directors.

The Plan  provides for the granting of incentive  stock options at not less than
100% of the fair value of the underlying stock at the grant date.  Option grants
under the Plan are  subject  to  various  vesting  provisions,  all of which are
contingent  upon the  continuous  service of the  optionee.  Options  granted to
stockholders who own greater than 10% of the outstanding stock must be issued at
prices not less than 110% of the trading value of the stock on the date of grant
as  determined  by the  Company's  Board of  Directors.  The exercise  price and
vesting  period of  nonstatutory  options is at the  discretion of the Company's
Board of Directors.  Upon a change of control, all shares granted under the Plan
shall immediately vest.

The following table summarizes the activity of the Plan:
                                  Options Outstanding
                                   -------------------        Weighted-
                                     Shares                    Average
                                    Available                  Exercise
                                      For       Number of     Price Per
                                     GRANT        SHARES        SHARE

Balances, March 31, 2003..........  93,603     306,397          $6.90
Increase in authorized options.... 200,000          --             --
Options granted...................(214,167)    214,167          $5.01
                                  ---------    -------          -----

Balances, March 31, 2004..........  79,436     520,564          $6.12
                                    ------     -------          -----

Increase in authorized options.... 250,000          --             --
Options forfeited.................   9,334      (9,334)         $5.27
Options granted...................(251,667)    251,667          $4.21
                                  ---------    -------          -----

Balances, March 31, 2005..........  87,103     762,897          $5.50
                                    ======     =======          =====



                                       59


The following table summarizes information about stock options outstanding as of
March 31, 2005:

                         OPTIONS OUTSTANDING      OPTIONS EXERCISABLE

                          Weighted-
                           Average     Weighted- Number    Weighted-
                  Number  Remaining     Average    of      Average
                    of    Contractual   Exercise  Shares   Exercise
Exercise Prices   SHARES     LIFE       PRICE   EXERCISABLE PRICE

 $2.50             50,000    7.72        $2.50    33,333    $2.50
 $3.60            139,000    9.79        $3.60        --    $3.60
 $4.81             20,000    9.92        $4.81        --    $4.81
 $5.00            356,897    8.52        $5.00   142,231    $5.00
 $5.05             25,000    8.71        $5.05     8,333    $5.05
 $7.50            117,400    5.63        $7.50   110,400    $7.50
$12.50             54,600    5.58       $12.50    54,600   $12.50
                  -------    ----       ------   -------   ------

                  762,897    5.76        $5.50   348,897    $6.73
                  =======    ====       ======   =======   ======

In May 2003,  AccessDM  adopted the 2003 Stock Option Plan (the "AccessDM Plan")
under  which  incentive  and  nonstatutory  stock  options  may  be  granted  to
employees,  outside directors, and consultants. The purpose of the AccessDM Plan
is to enable  AccessDM to attract,  retain and  motivate  employees,  directors,
advisors  and  consultants.  AccessDM  reserved a total of  2,000,000  shares of
AccessDM's  common  stock for issuance  upon the exercise of options  granted in
accordance  with the AccessDM Plan.  During the fiscal year ended March 31, 2004
and 2005,  AccessDM granted stock options to purchase 1,000,000 shares and 5,000
shares,  respectively,  of its common stock to  employees  of AccessDM.  Options
granted  under the  AccessDM  Plan expire 10 years  following  the date of grant
(five years for stockholders who own greater than 10% of the outstanding  stock)
and are subject to limitations on transfer.  Options  granted under the AccessDM
Plan vest generally over three-year  periods.  The AccessDM Plan is administered
by AccessDM's Board of Directors.

The AccessDM  Plan  provides for the granting of incentive  stock options at not
less  than 100% of the fair  value of the  underlying  stock at the grant  date.
Option grants under the AccessDM Plan are subject to various vesting provisions,
all of which are contingent upon the continuous service of the optionee. Options
granted to stockholders  who own greater than 10% of the outstanding  stock must
be issued at prices not less than 110% of the trading  value of the stock on the
date of grant as determined by the AccessDM's  Board of Directors.  The exercise
price of such  options  range from  $0.20 to $0.25 and have a  weighted  average
remaining contractual life of 8.42 years.

NON-EMPLOYEE STOCK-BASED COMPENSATION

The  Company   uses  the  fair  value  method  to  value   options   granted  to
non-employees.  In connection  with its grant of options to  non-employees,  the
Company has  recorded  deferred  stock-based  compensation  of $4 and $0 for the
fiscal  years  ended  March 31,  2004 and 2005,  respectively.  The  Company has
amortized  $15 and $4 for the  fiscal  years  ended  March  31,  2004 and  2005,
respectively, to stock-based compensation expense on an accelerated basis.

The  Company's   calculations  for  non-employee  grants  were  made  using  the
Black-Scholes   option  pricing  model  with  the  following   weighted  average
assumptions:
                                          FOR THE FISCAL YEARS ENDED
                                                   MARCH 31,
                                                 2004     2005

Dividend yield..................................   0%       0%
Expected volatility............................. 110%     110%
Risk-free interest rate.........................5.91%    5.94%
Expected life (in years)........................   10       10



                                       60


WARRANTS

In  connection  with the  issuance of the 5-Year Notes (see Note 6), the Company
issued  5-Year  Notes  Warrants to the holders of the 5-Year  Notes.  During the
fiscal year ended March 31, 2004,  the Company  issued 5-Year Notes  Warrants to
purchase  123,000  shares of Class A Common  Stock to the  holders of the 5-Year
Notes in the  ratio of  one-half  of a 5-Year  Note  Warrant  for  every  dollar
principal  amount of 5-Year Notes  issued.  In total,  5-Year Notes  Warrants to
purchase 440,500 shares of Class A Common Stock were issued and were ascribed an
estimated  fair value of  $2,202,  which was  recognized  as  issuance  cost and
therefore was charged  against the carrying  value of the related notes payable.
In March 2004, the Company completed the Exchange Offer covering the majority of
the  outstanding  5-Year  Notes  and  related  warrants  (see  Note 6),  and the
remaining  $1,421  aggregate  amount of  underlying  5-Year  Notes  Warrants was
amortized to non-cash interest expense.  During the fiscal years ended March 31,
2004, and 2005 a total of $402 and $17, respectively,  was amortized to non-cash
interest  expense to accrete the value of the notes to their face value over the
expected term of the related notes. In addition,  in July 2004, the Company made
early  repayments  totaling $58 for two 5 -Year Notes,  and the remaining $19 of
the underlying 5-Year Notes Warrants was amortized to non-cash interest expense.

   In connection with the June 2004 Private Placement, the Company issued to the
investors  and to the  investment  firm  in the  June  2004  Private  Placement,
Warrants to purchase 304,375 shares of Class A Common Stock at an exercise price
of $4.80 per share.  The June 2004 Private  Placement  Warrants are  exercisable
from the date of issuance  and for a period of five years  thereafter.  However,
the June 2004 Private  Placement  Warrants may be redeemed by the Company at any
time  after  the date that is one year from the issue  date,  upon  thirty  days
advance  written  notice to the  holder,  for  $0.05  per the June 2004  Private
Placement  Warrant to purchase one Class A Common  Stock,  provided,  that (i) a
registration  statement with the SEC is then in effect as to such Class A Common
Stock and will be in effect as of a date thirty days from the date of giving the
redemption notice and (ii) for a period of twenty (20) trading days prior to the
giving of the redemption  notice the Class A Common Stock have closed at a price
of $9.20 per share or higher.  The Company agreed to register the Class A Common
Stock issued and to be issued upon exercising of the June 2004 Private Placement
Warrants  with the SEC by  filing a Form  SB-2 on or before  July 5,  2004.  The
Company  filed the Form  SB-2 on July 2,  2004,  and the Form SB-2 was  declared
effective July 20, 2004.

In accordance with EITF 00-19,  "Accounting for Derivative Financial Instruments
Indexed To, and Potentially Settled In, a Company's Own Stock," and the terms of
the June  2004  Private  Placement  Warrants,  the fair  value of the June  2004
Private Placement Warrants were initially accounted for as a liability,  with an
offsetting  reduction to the  carrying  value of the common  stock.  The warrant
liability was  reclassified  to equity as of the July 20, 2004 effective date of
the registration statement.

The fair value of the June 2004 Private  Placement  Warrants was estimated to be
$797  on  the  closing  date  of  the  transaction,   using  the   Black-Scholes
option-pricing  model with the following  assumptions:  no dividends:  risk-free
interest rate 3.94%,  the contractual life of 5 years and volatility of 72%. The
fair value of the warrants was  re-measured at June 30, 2004 and estimated to be
$776.  The decrease in the fair value of $21 from the  transaction  date to June
30,  2004 was  recorded  as a credit to other  income,  net in the  Consolidated
Statement of  Operations.  The fair value of the warrants  decreased by $70 from
June 30, 2004 to July 20,  2004 and such  decrease  was  recorded as a credit to
other income, net in the Consolidated Statement of Operations.



                                       61


In February  2005,  the Company  issued the  Convertible  Debenture  Warrants to
purchase  560,197  shares of Class A Common  Stock.  The  Convertible  Debenture
Warrants have an initial  exercise price of $4.44 per share, and are exercisable
beginning on September  9, 2005 until 5 years  thereafter.  Based on a valuation
from an independent appraiser,  the Convertible Debenture Warrants were assigned
an  estimated  fair value of $1,109,  which is  included in  additional  paid-in
capital on the Consolidated Balance Sheet and will be amortized to Notes Payable
over the term of the warrants.

NOTE 9. COMMITMENTS AND CONTINGENCIES

On July 2, 2004,  we received  notice that certain  creditors of one of our data
center  customers named  NorVergence  filed an involuntary  bankruptcy  petition
against  NorVergence.  On July 14, 2004,  NorVergence  agreed to the entry of an
order granting relief under Chapter 11 of the United States  Bankruptcy Code and
then converted the Chapter 11 reorganization  to Chapter 7 liquidation.  We also
have a first security  interest in NorVergence  accounts  receivable.  As of the
bankruptcy  date,  the Company had  accounts  receivable  of $121,  representing
approximately 2 months of service charges,  recorded on the Consolidated Balance
Sheet  related  to this  customer.  On January  26,  2005 the  bankruptcy  court
approved a motion  for the  trustee to pay the  Company  $121,  for the past due
accounts receivable, and on February 25, 2005, the Company was paid this amount.
In addition,  the Company had $499 of unbilled revenue related to this customer.
The Company has  provided an allowance  for $499  against the unbilled  revenue,
which  is shown in the  provision  for  doubtful  accounts  in the  Consolidated
Statements of Operations. Also, the Company has a first security interest in the
customer's accounts receivable. The Company has been granted the right to pursue
collection of the customer  accounts  receivable.  Any amounts collected will be
retained by the Company in settlement of its claim against the customer accounts
receivable.

In March 2004, the Company acquired certain digital cinema - related assets from
the  Boeing  Company.   The  purchase  price  for  the  assets  included  53,534
unregistered shares of Class A Common StockShares. At any time during the 90 day
period beginning March 29, 2005, Boeing can sell its 53,534  unregistered shares
of Class A Common Stock to the Company in exchange for $250 in cash.

LEASES

The Company leases its IDCs and corporate office under  noncancelable  operating
lease agreements  expiring  through 2015. The IDCs lease agreements  provide for
base rental  rates which  increase at defined  intervals  during the term of the
lease.  The Company  accounts for rent  abatements and  increasing  base rentals
using  the  straight-line  method  over the life of the  lease.  The  difference
between the  straight-line  expense and the cash payment is recorded as deferred
rent expense.

The  Company  leases  certain  equipment  for  use in  its  IDCs  and  corporate
headquarters  under  noncancelable  capital lease agreements that expire through
2006.

Minimum  future  operating and capital  lease  payments as of March 31, 2005 are
summarized as follows:

                                                  Capital   Operating   
                                                   LEASES    LEASES
                                                  
Fiscal Year ending March 31,                      
2006.............................................. $1,563    $2,383
2007..............................................  1,137     2,293
2008..............................................  1,128     2,209
2009..............................................  1,128     2,238
2010..............................................  1,128     1,792
Thereafter........................................  7,997     4,320
                                                  -------   -------
Total minimum lease payments......................$14,081   $15,235
                                                  -------   =======
Less amount representing interest.................  7,591
                                                  -------

Present value of net minimum lease payments, including
current maturities of $432........................ $6,490
                                                  =======


                                       62


Total rent  expense  was  approximately  $2,461 and $2,192 for the fiscal  years
ended March 31, 2004 and 2005, respectively.

Assets  recorded under  capitalized  lease  agreements  included in property and
equipment consists of the following:

                                                      MARCH 31,
                                                      ---------
                                                2004           2005
                                                ----           ----

Land..........................................  $ --          $1,500
Building......................................    --           4,600
Computer equipment............................   369              70
Machinery and equioment.......................   413           1,062
                                                ----           -----

                                                 782           7,232
                                                ----          ------
Less: Accumulated amortization................  (459)           (691)
Net assets under capital lease................  $323          $6,541
                                                =====         =======

NOTE 10. SUPPLEMENTAL CASH FLOW DISCLOSURE
                                                            MARCH 31,
                                                            ---------
                                                        2004              2005
                                                        ----              ----

Interest paid................................           $513              $556

Assets acquired under capital leases.........             31            $6,542
Accretion on mandatorily redeemable
convertible preferred stock..................         $1,588               $--
Notes converted/exchange for Class A
common stock.................................         $2,526               $--
Issuance of notes for the following 
acquisitions:
Hollywood Software, Inc......................         $3,000               $--
Boeing Digital ..............................         $1,366               $--
Pavilion Theatre (and working capital).......            $--            $9,300

NOTE 11. SEGMENT INFORMATION

Segment  information  has  been  prepared  in  accordance  with  SFAS  No.  131,
"Disclosures  about  Segments of an  Enterprise  and Related  Information".  The
Company has two reportable  segments:  Data Center  Services and Media Services.
The segments were determined based on the products and services provided by each
segment.  Accounting policies of the segments are the same as those described in
Note 2.  Performance  of the segments is evaluated  on operating  income  before
interest, taxes, depreciation and amortization. The Data Center Services segment
provides  services  through its nine IDC's  including the license of data center
space,  provision  of  power,  data  connections  to other  businesses,  and the
installation  of equipment,  and the operations of Managed  Services.  The Media
Services segment  consists of Hollywood SW, AccessDM and FiberSat.  Hollywood SW
develops and licenses  software to the  theatrical  distribution  and exhibition
industries,  provides services as an ASP, and provides software enhancements and
consulting  services.  AccessDM is in the  business of storing and  distributing
digital content to movie theaters and other venues.  FiberSat is in the business
of providing satellite-based broadband video, data and Internet transmission and
encryption services for multiple customers in the broadcast and cable television
and  communications   industries,  and  also  operates



                                       63


an outsourced networks operations center. Prior to November 3, 2003, the Company
operated only in the Data Center Services segment. All of the Company's revenues
were generated inside the United States.

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

                                                 DATA 
                                        MEDIA    CENTER                TOTAL
                                       SERVICES SERVICES CORPORATE  CONSOLIDATED

FOR THE FISCAL YEAR ENDED MARCH 31,
2004:
   Total income (loss) from
   operations......................      $414     $(124)   $(2,795)     $(2,505)
   Depreciation and                       207     2,394         91        2,692
   Amortization....................
     Operating income (loss) before
   interest, taxes, depreciation and
   amortization.....................       621    2,270     (2,704)         187

FOR THE FISCAL YEAR ENDED MARCH 31,
2005:
   Total (loss) from operations.....  $(1,961)    $(156)   $(3,583)     $(5,700)
   Depreciation and
   Amortization.....................     1,715     1,807       101        3,623
     Operating income (loss) before
   interest, taxes, depreciation and
   amortization.....................     (246)     1,651    (3,482)     (2,077)
AS OF MARCH 31,2005:
   Total Assets.....................   $27,029    $5,302    $5,446      $37,777

AS OF MARCH 31,2004:
   Total Assets.....................   $12,174    $6,777    $2,224      $21,175

NOTE 12. RELATED PARTY TRANSACTIONS

As of March 31, 2004 and 2005,  the Company had principal  amounts of $1,400 and
$3,891, respectively, in notes payable to related parties, including officers of
the Company. During the fiscal year ended March 31, 2004 and 2005, there were $0
and $512, respectively, of principal repayments for these notes payable.

The Company granted to two executives  400,000 shares of Class A Common Stock in
April 2000,  upon  formation of  AccessColo,  Inc. and in connection  with their
employment  and  status as  co-founders.  At the time of their  receipt  of such
shares, we were a subsidiary of Fibertech & Wireless,  Inc. In July 2003, one of
the executives left our employ and also resigned from our Board of Directors.

In connection  with the execution of one of our long-term real property  leases,
two executives posted a letter of credit in the aggregate amount of $525 in June
2000.  This  letter of credit  was  reduced  by  one-third  in each of the three
successive  years and terminated in June 2003. We reimbursed such two executives
for the issuance costs of approximately $10,000 for the letter of credit.



                                       64


Two of our directors, are directors of MidMark, which previously held all of our
outstanding  Series A and  Series  B  preferred  stock  and  related  contingent
warrants. In connection with its purchase of shares of our Series A and Series B
preferred  stock,  we paid  MidMark a $75  investment  banking fee. In September
2003, we entered into an exchange agreement with MidMark,  under which we agreed
to issue  2,207,976  additional  shares of Class A Common  Stock to  MidMark  in
exchange  for all of our  outstanding  shares of Series A and Series B preferred
stock,  including  accrued  dividends  thereon,  and  through the  exercise  and
exchange of certain warrants.  Upon the IPO, MidMark (i) converted all 8,202,929
shares of its Series A and Series B  preferred  stock into  1,640,585  shares of
Class A common stock; (ii) exchanged warrants that were exercisable,  subject to
certain future conditions, for up to 951,041 shares of Class A Common Stock, for
320,000 shares of Class A Common Stock;  (iii)  exercised a warrant  exercisable
for  up to  144,663  shares  of  Class  A  Common  Stock  (143,216  shares  on a
cashless-exercise  basis);  and (iv) accepted  104,175  shares of Class A Common
Stock as payment  of all  accrued  dividends  on shares of Series A and Series B
preferred stock held by such stockholder. The number of shares of Class A Common
Stock  issued as payment of accrued  dividends  was  calculated  at the offering
price of $5.00.  Additionally,  MidMark also purchased  $333 of one-year  notes,
which was repaid in April  2002,  and was  issued  6,902 of the  one-year  notes
warrants.  Each of these  directors have been granted  options to purchase 5,000
shares of our Class A Common Stock.  We paid MidMark a management fee of $50 per
year until November 2003.

On March 24, 2004, pursuant to the Exchange Offer, we exchanged $2.5 million and
$1.7 million aggregate principal amount of five-year promissory notes for shares
of Class A Common Stock and for longer term 6% convertible notes,  respectively.

We issued 707,477 unregistered shares of Class A Common Stock and $1.7 aggregate
principal  amount of  convertible  notes  convertible  into a maximum of 308,225
shares of Class A Common Stock (i) at any time up to the  maturity  date at each
holder's option or (ii) automatically on the date when the average closing price
on the American  Stock  Exchange of the Class A Common Stock for 30  consecutive
trading days has been equal to or greater than $12.00.

Two  executives of the Company  invested $250,  and $125,  respectively,  in our
offering of one-year 8% notes and received  warrants to purchase 4,601 and 2,301
shares,  respectively,  of Class A Common Stock at $0.05 per share.  These notes
were repaid prior to March 31, 2002.  Both  executives  also,  invested $250 and
$125,  respectively,  in our  offering  of  five-year  8%  promissory  notes and
received warrants to purchase 25,000 and 12,500 shares, respectively, of Class A
Common Stock at $0.05 per share.  In September  2003,  all of the warrants  that
were  attached  to our  one-year  and  five-year  promissory  notes held by both
executives  were exercised.  In March 2004, both executives  participated in the
Exchange Offer and exchanged  their 5-year notes and accrued  interest  totaling
$382 for  Convertible  Notes,  convertible  into 67,713 shares of Class A Common
Stock.  As of March 31,  2004 and 2005,  the  principal  due to these  executive
officers included in notes payable was $382.

One of our  former  directors  is a  partner  in the law firm of  Kirkpatrick  &
Lockhart LLP,  which provided  legal  services to us,  including  handling legal
matters  related to the IPO. For the fiscal years ended March 31, 2005 and March
31,  2004,  we  purchased  approximately  $39 and $639,  respectively,  of legal
services  from this firm.  Our former  director was granted  options to purchase
4,000 shares of Class A Common Stock.



                                       65


One of our  directors is the general  partner of CMNY  Capital II,  L.P.,  which
holds 157,927  shares of Class A Common Stock,  and a director of  Sterling/Carl
Marks  Capital,  Inc.,  which holds 51,025 shares of Class A Common Stock.  CMNY
Capital II, L.P. also invested $1 million in our offering of one-year promissory
notes,  which was repaid in March 2002,  and invested $1 million in our offering
of  five-year  promissory  notes.  The  warrants  attached to such  one-year and
five-year  notes were  exercised  in August  2003 and are  included in the share
numbers  above.  The Ddirector has also been granted  options to purchase  9,000
shares of Class A Common Stock.  In March 2004 CMNY Capital II, LP  participated
in the Exchange Offer and exchanged its five-year  promissory  notes and accrued
interest totaling $1.0 million for Convertible  Notes,  convertible into 180,569
shares of Class A Common Stock. As of March 31, 2004 and 2005, the principal due
to CMNY  Capital II, LP included  in notes  payable was $1.0  million in each of
those years, respectively.

A member of our board of  advisors  is the  father  of one of our  founders  and
executive officers, and is a partner in an entity that has performed real estate
services  for us.  The  member of our board of  advisors  also has been  granted
options to purchase 41,025 shares of Class A Common Stock at a weighted  average
exercise price of $6.83 per share.

A member of our board of advisors is the  President of John O'Hara  Contracting,
Inc.,  which performs  construction and other work at our IDCs. Also, the member
of our board of advisors  has  invested $50 in our  five-year  notes,  and holds
5,000 five-year note attached warrants. This contractor has been paid $10 and $0
for the fiscal  years ended March 31, 2004 and 2005,  respectively.  John O'Hara
Contracting,  Inc.  also,  owns 8,000 shares of Class A Common Stock,  issued as
partial  consideration for work performed during the fiscal year ended March 31,
2001.  In  September  2003,  the  member of our board of advisor  exercised  the
five-year  warrants.  In  addition,  in March  2004,  the member of our board of
advisors  participated  in the Exchange Offer and exchanged his 5 year notes and
accrued interest totaling $51 for 14,264 shares of Class A Common Stock.

One of the  members of our board of  advisors  is a partner in an  architectural
services firm,  Herbst Musciano,  which has performed work at our IDCs. His firm
was paid $1 and $0 for the fiscal  years  ended  March 31,  2004,  and March 31,
2005,  respectively.  In  addition,  the member of our board of  advisors  holds
options to purchase 600 shares of our Class A Common Stock.

In January  2003,  the board of directors  approved the purchase of two separate
ten-year, term life insurance policies on the life of one of its executive. Each
policy carries a death benefit of $5 million, and we are the beneficiary of each
policy.  Under  one of the  policies,  however,  the  proceeds  will  be used to
repurchase,  after  reimbursement of all premiums paid by us some, or all of the
shares of our capital stock held by the estate of A. Dale Mayo,our President and
Chief Executive Officer, at the then-determined fair market value.

In  connection  with the  Hollywood  SW  Acquisition,  we  purchased  all of the
outstanding  capital stock of Hollywood SW from two of its security holders,  on
November 3, 2003. The two security holders have continued as executive  officers
of Hollywood SW under new  employment  agreements and have received an aggregate
of  400,000  unregistered  shares  of our  Class A  Common  Stock,  less  40,444
unregistered  shares  of  Class A Common  Stock  that  were  issued  to  certain
optionees of Hollywood SW.

Hollywood SW and Hollywood Media Center,  LLC, a limited  liability company that
is 95% owned by David Gajda,  Senior Vice President of International  Marketing,
one of the sellers of Hollywood SW,  entered into a Commercial  Property  Lease,
dated January 1, 2000,  for 2,115 square feet of office  space.  We have assumed
Hollywood  SW's  obligations  under  this  lease  pursuant



                                       66


to the  acquisition,  including the monthly rental  payments of $2. The lease is
currently a month-to-month tenancy with the same monthly rent. On May 1, 2004 an
additional  933 square  feet were rented on a  month-to-month  basis for monthly
additional rental payments of $1.

In connection with one of our executive's  employment arrangement with AccessDM,
we paid a  finder's  fee of $25 during the fiscal  year  ended  March  2004,  in
connection with his efforts related to the Hollywood SW Acquisition.

We entered into a consulting  agreement  with a former  employee of the Company,
one  of  our  co-founders  and  directors,  following  the  termination  of  his
employment  with us as of July 5, 2003.  Under the terms of the  agreement,  the
former employee agreed to provide  consulting  services to us in connection with
the IPO and our acquisition of Hollywood SW, for which we paid him $10 per month
(plus  reasonable  out-of-pocket  expenses) for the period  beginning on July 5,
2003  through  September  30,  2003.  We also paid the  former  employee  $20 in
November 2003 in connection  with the completion of the IPO. After September 30,
2003, we may, in our sole  discretion,  retain the former employee  services for
future projects on mutually agreed to terms. The former employee has agreed that
the term of his  confidentiality,  non-solicitation  and non-compete  agreement,
which he entered into as of April 10, 2000,  remained in effect  through July 4,
2004.

In connection  with the Managed  Services  Acquisition,  we purchased all of the
outstanding  capital stock of Managed Services from its sole security holder, on
January 9, 2004. The sole security holder  continued as an executive  officer of
Managed Services under a new employment  agreement and as consideration  for the
sale of Managed Services capital stock,  received $250, and 100,000 unregistered
shares of Class A Common Stock.

In connection with the FiberSat Acquisition,  we purchased  substantially all of
the assets and certain  specified  liabilities of FiberSat Global Services,  LLC
from its members,  on November 17, 2004.  One of the members has continued as an
executive  officer  of  FiberSat  under  a  new  employment   agreement  and  as
consideration  for the  sale of  FiberSat  capital  stock  has  received  35,000
unregistered  shares  of Class A  Common  Stock.  Also,  we  agreed  to pay this
executive  and annual base salary of $175 which shall be increased  five percent
annually,  plus a  bonus,  if and  as  determined  in  the  sole  discretion  of
FiberSat's board of directors.

NOTE 13. INCOME TAXES

The  benefit  from  income  taxes for the years  ended  March 31,  2004 and 2005
consisted of the following:

                                                2004    2005
                                                ----    ----

Current.........................................$127    $  -
Deferred........................................  85     311
                                                 ---     ---

Total...........................................$212    $311
                                                ====    ====



                                       67


Net deferred tax assets / (liabilities) consist of the following as of March 31,
2004 and 2005:

                                                   2004     2005
                                                   ----     ----
Deferred tax assets
Net operating loss carryforwards..................$3,082   $5,689
Depreciation and Amortization..................... 1,100      854
Deferred rent expense.............................   381      435
Stock based compensation..........................   208      201
Revenue deferral..................................   347      115
Other.............................................    71      129
                                                   -----    -----

Total deferred tax assets......................... 5,189    7,423
                                                   -----    -----

Deferred tax liabilities
Intangibles....................................... 1,720    1,497
                                                   -----    -----

Total deferred tax liabilities.................... 1,720    1,497
                                                   -----    -----
Net deferred tax assets before valuation
allowance........................................  3,469     5,926
Valuation allowance.............................  (4,989)   (7,136)
                                                  -------   -------

Net deferred tax assets / (liabilities).........  (1,520)  $(1,210)
                                                  =======  ========

The Company has  provided a  valuation  allowance  for either all or most of its
deferred  tax  assets  since  realization  of future  benefits  from  deductible
temporary  differences and net operating loss carryovers  cannot be sufficiently
assured  at March  31,  2004 or March 31,  2005.  The  change  in the  valuation
allowance in the current year is approximately $2,050.

As of March 31,  2005,  the Company has  federal  and state net  operating  loss
carryforwards  of  approximately  $13,300  available  to reduce  future  taxable
income.  The federal net operating  loss  carryforwards  will begin to expire in
2020.  Under the provisions of the Internal  Revenue Code,  certain  substantial
changes in the  Company's  ownership may result in a limitation on the amount of
net operating loss carryforwards that can be used in future years.  Depending on
a variety of factors  this  limitation,  if  applicable,  could  cause a portion
and/or all of these net operating losses to expire before utilization occurs.

The  differences  between the United States  federal  statutory tax rate and the
Company's  effective  tax rate are as follows as of fiscal  year ended March 31,
2004 and March 31, 2005:

                                                     2004      2005
                                                     ----      ----

Tax benefit at the U.S. Statutory Federal Rate..... (34.0%)   (34.0%)
State tax benefit..................................  (2.9%)    (0.3%)
Change in valuation allowance......................  18.9%     33.0% 
Disallowed interest................................  12.4%      4.5% 
Other..............................................   1.4%      1.1% 
                                                    ------    ------ 
                                                                    
Effective tax rate.................................  (4.2%)    (4.5%)
                                                     ======    ======



                                       68


NOTE 14. SUBSEQUENT EVENTS

On June 15, 2005, the Company entered into a digital cinema framework  agreement
(the "Framework Agreement") with Christie Digital Systems USA, Inc. ("Christie")
through the Company's newly formed wholly-owned subsidiary,  Christie/AIX, Inc.,
a  Delaware  corporation  ("Christie/AIX"),  whereby,  among  other  things  (1)
Christie/AIX will seek to raise financing to purchase 200 of Christie's  digital
cinema   projection   systems  (the  "Systems")  at  agreed-upon   prices;   (2)
Christie/AIX would then seek to raise additional debt and/or equity financing to
purchase an  additional  2,300  Systems at  agreed-upon  prices.  The  Framework
Agreement  allows  Christie/AIX to terminate the agreement for several  reasons,
including  failure to: (1)  execute  definitive  agreements  with  certain  film
distributors  by August 31, 2005 to pay virtual print fees to  Christie/AIX  for
deliveries of digital  films made to the Systems,  (2) execute  agreements  with
certain  exhibitors by August 31, 2005 to license the Systems,  to house them in
the  exhibitor  locations,  and (3) obtain  Christie/AIX's  final  commitment to
purchase at least 100 Systems by July 31, 2005.

In connection  with the execution of the  Framework  Agreement,  the Company has
engaged a third  party to assist in  raising  funds to  purchase  the  equipment
associated with the Framework Agreement,  and for general corporate purposes. We
have no assurance of the nature and amount of the  securities to be issued,  and
that the transaction will be completed on acceptable terms.

On June 9, 2005, the Company's Board of Directors  approved the expansion of the
Company's  stock  option  Plan to  1,100,000  options  from the prior  amount of
850,000 options. This approval is subject to the approval of stockholders at the
Company's  2005  stockholder  meeting,  which  is  scheduled  to take  place  in
September  2005.  Subsequent to March 31, 2005, the Company issued 140,000 stock
options to an employee and four directors.

                           PART II. OTHER INFORMATION

ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
      FINANCIAL DISCLOSURE

None.

ITEM 8A. CONTROLS AND PROCEDURES

As of the end of the period covered by this report,  we conducted an evaluation,
under the  supervision  and with the  participation  of our principal  executive
officer and principal  financial officer, of the effectiveness of our disclosure
controls and  procedures  (as defined in Rules 13a-15 and 15d-15 of the Exchange
Act). Based on this evaluation,  our principal  executive  officer and principal
financial  officer  concluded  that our  disclosure  controls and procedures are
effective to ensure that  information  required to be disclosed by us in reports
that we file or submit under the Exchange Act is recorded, processed, summarized
and reported  within the time periods  specified in the  Securities and Exchange
Commission rules and forms.

There was no change in our internal control over financial  reporting during our
most recently  completed  fiscal  quarter that has  materially  affected,  or is
reasonably  likely to materially  affect,  our internal  controls over financial
reporting.



                                       69


ITEM 8B.  OTHER INFORMATION

None.

                                    PART III

ITEM 9.    DIRECTORS, EXECUTIVE OFFICERS AND CONTROL PERSONS; COMPLIANCE WITH
           SECTION 16(A) OF THE EXCHANGE ACT

Except as set forth below, the information  required by this item will appear in
our  Proxy  Statement  for the  Annual  Meeting  of  Stockholders  to be held on
September 15, 2005,  which will be filed  pursuant to  Regulation  14A under the
Exchange Act (the "Proxy  Statement")  and is  incorporated by reference in this
report  pursuant  to General  Instruction  E(3) of Form  10-KSB  (other than the
portions  thereof  not deemed to be "filed" for the purpose of Section 18 of the
Exchange Act).

CODE OF ETHICS

We have  adopted  a code of  ethics  that  applies  to the  principal  executive
officer,   principal   financial  officer,   principal   accounting  officer  or
controller,  or persons performing similar functions, as contemplated by Section
406 of the  Sarbanes-Oxley.  Such  code of ethics is  included  on our  website,
www.accessitx.com.  We will disclose any amendment to, or waiver of, a provision
of our code of ethics  on a Form 8-K  filed  with the  Securities  and  Exchange
Commission.

ITEM 10. EXECUTIVE COMPENSATION

Information  required  by this item will  appear in the Proxy  Statement  and is
incorporated by reference in this report pursuant to General Instruction E(3) of
Form 10-KSB  (other than the  portions  thereof not deemed to be "filed" for the
purpose of Section 18 of the Exchange Act).

ITEM 11.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
          RELATED STOCKHOLDER MATTERS

Information  required  by this item will  appear in the Proxy  Statement  and is
incorporated by reference in this report pursuant to General Instruction E(3) of
Form 10-KSB  (other than the  portions  thereof not deemed to be "filed" for the
purpose of Section 18 of the Securities Exchange Act of 1934).

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS


Information  required  by this item will  appear in the Proxy  Statement  and is
incorporated by reference in this report pursuant to General Instruction E(3) of
Form 10-KSB  (other than the  portions  thereof not deemed to be "filed" for the
purpose of Section 18 of the Exchange Act).


                                       70



ITEM 13. EXHIBITS

EXHIBIT
NUMBER         DESCRIPTION OF DOCUMENT

1.1    -- Form of Underwriting Agreement between the Company and the underwriter
          to the Company's November 10, 2003 Public Offering. (1)
2.1    -- Stock Purchase Agreement, dated July 17, 2003, between the Company and
          Hollywood Software, Inc. and its stockholders. (2)
2.2    -- Exchange Agreement, dated as of September 17, 2003, between the
          Company and MidMark Equity Partners II, L.P. (3)
2.3    -- Amendment No. 1 to Stock Purchase Agreement, dated as of November 3,
          2003, between and among the Company, Hollywood Software, Inc., the
          selling stockholders and Joseph Gunnar & Co., LLC. (1)
2.4    -- Stock Purchase Agreement, dated as of December 22, 2003, among the
          Company, Concurrent Technologies, Inc. and Erik B. Levitt. (4)
2.5    -- Asset Purchase Agreement, dated as of March 29, 2004, between the
          Company and The Boeing Company. (5)
2.6    -- Form of Exchange Agreement (debt for equity), dated as of March 24,
          2004, between the Company and each Investor taking part in the March
          24, 2004 exchange offering. (6)
2.7    -- Form of Exchange Agreement (debt for debt), dated as of March 24,
          2004, between the Company and each investor taking part in the March
          24, 2004 exchange offering. (6)
2.8    -- Securities Purchase Agreement, dated as of June 2, 2004, among the
          Company and certain investors. (7)
2.9    -- Asset Purchase Agreement, dated as of October 19, 2004, among the
          Company, FiberSat Global Services, Inc., FiberSat Global Services LLC,
          Richard Wolfe, Ravi Patel, McKebben Communications, Globecomm Systems,
          Inc., Timothy Novoselski, Scott Smith and Farina. (11)
2.10   -- Asset Purchase Agreement, dated as of December 23, 2004, among ADM
          Cinema Corporation, Pritchard Square Cinema, LLC and Norman Adie. (13)
2.11   -- Stock Purchase Agreement, dated as of October 26, 2004, among the
          Company and the purchasers identified therein. (13)
2.12   -- Securities Purchase Agreement, dated as of February 9, 2005, among the
          Company and certain investors. (12)
3.1    -- Fourth Amended and Restated Certificate of Incorporation of the
          Company. (4)
3.2    -- Bylaws of the Company. (2)
4.1    -- Form of Warrant Agreement (with Warrant Certificates) between the
          Company and the lead underwriter. (1)
4.2    -- Specimen certificate representing Class A common stock. (1)
4.3    -- Promissory note issued by the Company to ColoSolutions, Inc., dated
          November 27, 2002. (2)
4.4    -- Promissory note issued by the Company to holders of ten-year warrants.
          (2)
4.5    -- Form of note to be issued by the Company to the selling stockholders
          of Hollywood Software, Inc. (2)
4.6    -- Form of Pledge and Security Agreement between the Company, the selling
          stockholders of Hollywood Software, Inc. and the pledge agent. (2)
4.7    -- Promissory note dated November 3, 2003 issued by the Company to David
          Gajda. (1)
4.8    -- Promissory note dated November 3, 2003 issued by the Company to Robert
          Jackovich. (1)
4.9       -- Pledge and Security  Agreement,  dated as of November 3, 2003,
          between the Company and the  selling  stockholders  of  Hollywood
          Software, Inc.
          (1)
4.10   -- Registration Rights Agreement, dated as of January 9, 2004, between
          the Company and Erik B. Levitt. (4)
4.11   -- Promissory note dated March 29, 2004 issued by the Company to The
          Boeing Company. (5)
4.12   -- Registration Rights Agreement, dated as of March 29, 2004, between the
          Company and The Boeing Company. (5)


                                       71


4.13   -- Form of Subordinated Convertible Promissory Note, dated March 24,
          2004, issued by the Company to each investor taking part in the March
          24, 2004 exchange offering. (6)
4.14   -- Form of Registration Rights Agreement, dated as of March 24, 2004,
          between the Company and each investor taking part in the March 24,
          2004 exchange offering. (6)
4.15   -- Form of Warrant, dated June 2004, issued to purchasers pursuant to
          Securities Purchase Agreement, dated as of June 1, 2004, among the
          Company and certain investors. (7)
4.16   -- Form of Warrant, dated June 2004, issued to placement agent in
          connection with Securities Purchase Agreement, dated as of June 1,
          2004, among the Company and certain investors. (7)
4.17   -- Registration Rights Agreement, dated as of June 2004, among the
          Company and certain investors. (7)
4.18   -- Promissory Note, dated November 14, 2003, issued by the Company to
          David Gajda. (8)
4.19   -- Promissory Note, dated November 14, 2003, issued by the Company to
          Robert Jackovich.(8)
4.20   -- Registration Rights Agreement, dated as of November 8, 2004, among the
          Company and certain investors. (13)
4.21   -- Form of Subsidiary Guarantee to be entered  into by certain
          subsidiaries of the Company pursuant to the Securities Purchase
          Agreement, dated as of February 9, 2005 among the Company and the
          several investors party thereto. (12)
4.22   -- Form of Debenture to be issued to the purchasers pursuant to the
          Securities Purchase Agreement, dated as of February 9, 2005 among the
          Company and the several investors party thereto. (12)
4.23   -- Form of Warrant to be issued to the purchasers pursuant to the
          Securities Purchase Agreement, dated as of February 9, 2005 among the
          Company and the several investors party thereto. (12)
4.24   -- Form of Registration Rights Agreement, among the registrant and
          certain investors pursuant to the Securities Purchase Agreement, dated
          as of February 9, 2005 among the Company and the several investors
          party thereto. (12)
10.1   -- Employment Agreement, dated as of July 1, 2000 (as amended), between
          the Company and A. Dale Mayo. (2)
10.2   -- Employment Agreement, dated as of April 10, 2000, between the Company
          and Kevin Farrell. (2)
10.3   -- Form of Employment Agreements between Hollywood Software, Inc. and
          David Gajda/Robert Jackovich. (2) 
10.4   -- First Amended and Restated 2000 Stock Option Plan of the Company. (2)
10.5   -- Amendment to No. 1 to the First Amended and Restated 2000 Stock Option
          Plan of the Company. (3)
10.6   -- Asset Purchase Agreement, dated as of November 16, 2001, between the
          Company and BridgePoint International (USA), Inc. (2)
10.7   -- Asset Purchase Agreement, dated as of October 10, 2002, between the
          Company, R.E. Stafford, Inc. d/b/a ColoSolutions and Cob Solutions
          Global Services, Inc. (2)
10.8   -- Services Distribution Agreement, dated July 17, 2001, between the
          Company and Managed Storage International, Inc. (2)
10.9   -- License Agreement between the Company and AT&T Corp., dated July 31,
          2001. (2)
10.10  -- Master Agreement for Colocation Space between the Company (by
          assignment from Cob Solutions Global Services, Inc.) and KMC Telecom
          VI LLC dated April II, 2002. (2)
10.11  -- License Agreement between the Company (by assignment from Bridgepoint
          International (USA), Inc.) and Zone Telecom, Inc. dated February 27,
          2001. (2)
10.12  -- Lease Agreement, dated as of May 23, 2000, between the Company
          (formerly Fibertech & Wireless, Inc.) and 55 Madison Associates, LLC.
          (2)


                                       72


10.13  -- Agreement of Lease, dated as of July 18, 2000, between the Company and
          1-10 Industry Associates, LLC. (2)
10.14  -- Lease Agreement, dated as of August 28, 2000, between the Company
          (formerly Fibertech & Wireless, Inc.) and RFG Co. Ltd. (2)
10.15  -- Letter Amendment to the Lease Agreement, dated August 28, 2000,
          between the Company (formerly Fibertech & Wireless, Inc.) and RFG Co.
          Ltd. (2)
10.16  -- First Amendment to the Lease, dated August 28, 2000 between the
          Company (formerly Fibertech & Wireless, Inc.) and RFG Co. Ltd. dated
          October 27, 2000. (2)
10.17  -- Agreement of Lease, dated as of January 18, 2000, between the Company
          (by assignment from BridgePoint International (Canada), Inc.) and 75
          Broad, LLC. (2)
10.18  -- Additional Space and Lease Modification to the Agreement of Lease,
          dated as of January 18, 2000, between the Company (by assignment from
          BridgePoint International (Canada), Inc.) and 75 Broad, LLC dated May
          16, 2000. (2)
10.19  -- Second Additional Space and Lease Modification to the Agreement of
          Lease, dated as of January 18, 2000, between the Company (by
          assignment from BridgePoint International (Canada), Inc.) and 75
          Broad, LLC dated August 15, 2000. (2)
10.20  -- Lease Agreement, dated as of January 17, 2001, as amended, between the
          Company (by assignment from R. E. Stafford, Inc. d/b/a ColoSolutions)
          and Union National Plaza I, Inc. (2)
10.21  -- Lease Agreement, dated as of February 6, 2001, between the Company (by
          assignment from R. E. Stafford, Inc. d/b/a ColoSolutions) and Granite
          -- Wall Street Limited Partnership (successor in interest to Duffy
          Wall Street L.L.C.). (2)
10.22  -- Indenture Agreement, dated as of May 22, 2001, between the Company (by
          assignment from R. E. Stafford, Inc. d/b/a ColoSolutions) and Research
          Boulevard Partnership. (2)
10.23  -- Lease Agreement, dated as of January 22, 2001, between the Company (by
          assignment from ColoSolutions L.L.C.) and 340 Associates, L.L.C. (2)
10.24  -- Lease Agreement, dated as of September 29, 2002, between the Company
          (by assignment from R. E. Stafford, Inc. d/b/a ColoSolutions) and
          Jerry J. Howard and Eddy D. Howard. (2)
10.25  -- Office Lease, dated as of February 22, 2001, between the Company (by
          assignment from R. E. Stafford, Inc. d/b/a ColoSolutions) and One
          Liberty Place, L.C. (2)
10.26  -- Commercial Property Lease between Hollywood Software, Inc. and
          Hollywood Media Center, LLC, dated January 1, 2000. (2)
10.27  -- Lease, dated as of February 1, 1999, between Hollywood Software, Inc.
          and Spieker Properties, L. P. (2)
10.28  -- First Amendment to Lease, dated as of February 1, 1999, between
          Hollywood Software, Inc. and Spieker Properties, L.P. dated May 10,
          2000. (2)
10.29  -- Second Amendment to Lease, dated as of February 1, 1999, between
          Hollywood Software, Inc. and Spieker Properties, L.P. dated February
          16, 2001. (2)
10.30  -- Third Amendment to Lease, dated as of February 1, 1999, between
          Hollywood Software, Inc. and EOP-BREA Park Centre, L.P. (successor in
          interest to Spieker Properties, L.P.), dated June 27, 2002. (2)
10.31  -- Consulting Agreement between the Company (formerly Fibertech &
          Wireless, Inc.) and Harvey Marks dated June 2000. (2)
10.32  -- Independent Contractor Agreement, dated July31, 2003, between the
          Company and Kevin Booth. (2)
10.33     -- Universal  Transport  Exchange  License and Option  Agreement,
          dated August 13, 2003,  by and between the Company and  Universal
          Access, Inc.
          (3)
10.34  -- Employment Agreement, dated as of January 9, 2004, between the Company
          and Erik B. Levitt. (4)
10.35  -- Confidentiality, Inventions and Noncompete Agreement, dated as of
          January 9, 2004, between the Company and Erik B. Levitt. (4)
10.36  -- Employment Agreement, dated as of November 21, 2003, between the
          Company and Russell Wintner.  (8)
10.37  -- Fourth Amendment to Lease Agreement, dated as of February 11, 2005,
          between ADM Cinema Corporation and OLP Brooklyn Pavilion LLC.  (16 )


                                       73


10.38  -- Amendment No. 2 to First Amended and Restated 2000 Stock Option Plan
          of the Company. (16)
16.1   -- Letter from PricewaterhouseCoopers LLP, dated September 10, 2004
          regarding
          change in certifying accountants. (13)
21.1   -- List of Subsidiaries.*
23.1   -- Consent of PricewaterhouseCoopers LLP.*
23.2   -- Consent of Eisner LLP.*
24.1   -- Power of Attorney.* (contained on signature page)
31.1   -- Officer's Certificate Pursuant to 15 U.S.C. Section 7241, as Adopted
          Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*
31.2   -- Officer's Certificate Pursuant to 15 U.S.C. Section 7241, as Adopted
          Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*
32.1   -- Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant
          to Section 906 of the Sarbanes-Oxley Act of 2002.*
32.2   -- Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant
          to Section 906 of the Sarbanes-Oxley Act of 2002.*

* Filed herewith.

Documents Incorporated Herein by Reference:

(1) Previously filed with the Securities and Exchange  Commission on November 4,
2003 as an exhibit to the Company's Amendment No. 3 to Registration Statement on
Form SB-2 (File No. 333-107711).

(2) Previously  filed with the  Securities and Exchange  Commission on August 6,
2003 as an exhibit to the  Company's  Registration  Statement on Form SB-2 (File
No. 333-107711).

(3) Previously  filed with the  Securities and Exchange  Commission on September
22,  2003  as an  exhibit  to the  Company's  Amendment  No.  1 to  Registration
Statement on Form SB-2 (File No. 333-107711).

(4) Previously filed with the Securities and Exchange Commission on February 17,
2004 as an exhibit to the Company's  Form 10-QSB for the quarter ended  December
31, 2003 (File No. 001-31810).

(5) Previously  filed with the  Securities  and Exchange  Commission on April 2,
2004 as an exhibit to the Company's Form 8-K (File No. 001-31810).

(6) Previously  filed with the  Securities and Exchange  Commission on April 29,
2004 as an exhibit to the Company's Form 8-K (File No. 001-31810).

(7) Previously filed with the Securities and Exchange Commission on June 2, 2004
as an exhibit to the Company's Form 8-K (File No. 001-31810).

(8) Previously  filed with the  Securities  and Exchange  Commission on June 25,
2004 as an exhibit to the Company's  Form 10-KSB for the fiscal year ended March
31, 2004 (File No. 001-31810).

(9) Previously filed with the Securities  Exchange Commission on July 2, 2004 as
an  exhibit  to the  Company's  Registration  Statement  on Form SB-2  (File No.
333-117115).

(10) Previously filed with the Securities  Exchange  Commission on September 14,
2004 as an exhibit to the Company's Form 8-K (File No. 001-31810).

(11)  Previously  filed with the Securities  Exchange  Commission on November 8,
2004 as an exhibit to the Company's Form 8-K (File No. 001-31810).

(12) Previously  filed with the Securities  Exchange  Commission on February 10,
2005 as an exhibit to the Company's Form 8-K (File No. 001-31810).

(13) Previously  filed with the Securities  Exchange  Commission on February 14,
2005 as an exhibit to the Company's  Form 10-QSB for the quarter ended  December
31, 2004 (File No. 001-31810).

(14) Previously filed with the Securities  Exchange Commission on March 14, 2005
as  an  exhibit  to  the  Post-Effective   Amendment  No.  1  to  the  Company's
Registration Statement on Form SB-2 (File No. 333-117115).

(15) Previously filed with the Securities  Exchange Commission on April 25, 2005
as an  exhibit to the  Company's  Registration  Statement  on Form S-8 (File No.
333-124290)

(16) Previously filed with the Securities Exchanged Commission on April 29, 2005
as an exhibit to the Company's Form 8-K (File No. 001-31810)


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ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

AUDIT AND NON-AUDIT FEES

On September 9, 2004, our audit  committee  dismissed PwC as the our independent
registered  public  accounting  firm and engaged  Eisner as our new  independent
registered public accounting firm.

Our audit committee has also adopted  policies and procedures for  pre-approving
all non-audit  work  performed by PwC, for fiscal year ended March 31, 2004, and
by Eisner for the fiscal year ended March 31, 2005. Specifically,  the committee
has  pre-approved  the use of Eisner for  detailed,  specific  types of services
within the following categories of non-audit services: acquisition due diligence
and audit  services;  tax services;  and reviews and procedures  that we request
Eisner to  undertake  on matters not  required by laws or  regulations.  In each
case, the committee has required management to obtain specific pre-approval from
the committee for any engagements.

The aggregate  fees billed for  professional  services by PwC and Eisner for the
fiscal years ended March 31, 2004 and March 31, 2005 for these various  services
were:

Type of Fees                        2004          2005
                                    ----          ----

Audit Fees                      $190,380      $102,400
Audit-Related Fees                26,308        71,605
Tax Fees                          15,875        66,060
All Other Fees                     1,400         1,500
                                   -----         -----

Total                           $233,963      $241,565
                                ========      ========

In the above table, in accordance with the Securities and Exchange  Commission's
definitions  and rules,  "audit fees" are fees  AccessIT paid PwC and Eisner for
professional  services  for  the  audit  of  AccessIT's  consolidated  financial
statements  included  in Form SB-2 and Form  10-KSB and  review of  consolidated
financial  statements  included in Form SB-2 and Form 10-QSBs,  and for services
that are normally  provided by the  accountant in connection  with statutory and
regulatory  filings or engagements for the fiscal years ended March 31, 2004 and
2005;  "audit-related fees" are fees for assurance and related services that are
reasonably  related  to the  performance  of the audit or  review of  AccessIT's
consolidated financial statements;  "tax fees" are fees for tax compliance,  tax
advice and tax  planning;  and "all other  fees" are fees for any  services  not
included in the first three categories.


                                       75


                                   SIGNATURES

In accordance  with Section 13 or 15(d) of the Exchange Act, the Company  caused
this  report to be  signed on its  behalf  by the  undersigned,  thereunto  duly
authorized.

                      ACCESS INTEGRATED TECHNOLOGIES, INC.

Date: JUNE 29, 2005        BY: /S/ A. DALE MAYO
      -------------        --------------------

                              A. Dale Mayo
                              President and Chief Executive Officer and Director
                              (Principal Executive Officer)

Date: JUNE 29, 2005        BY: /S/ BRIAN D. PFLUG
      -------------        ----------------------

                              Brian D. Pflug
                              Senior Vice President - Accounting & Finance
                              (Principal Financial Officer)

We, the undersigned  directors and officers of Access  Integrated  Technologies,
Inc., do hereby  constitute and appoint,  A. Dale Mayo and Gary S. Loffredo,  or
either of them, our true and lawful attorneys and agents, to do any and all acts
and  things in our name and on our behalf in our  capacities  as  directors  and
officers and to execute any and all  instruments  for us and in our names in the
capacities  indicated below, which said attorneys and agents, or either of them,
may deem  necessary or advisable to enable said  corporation  to comply with the
Securities Act of 1933, as amended, and any rules,  regulations and requirements
of the  Securities  and Exchange  Commission,  in connection  with the aforesaid
annual report on Form 10-KSB,  including  specifically,  but without limitation,
the  power  and  authority  to  sign  for us or any  of us in our  names  in the
capacities indicated below, any and all amendments (including any post-effective
amendment(s)) hereto and we do hereby ratify and confirm all that said attorneys
and agents, or either of them, shall do or cause to be done by virtue hereof. In
accordance with the requirements of the Securities Act of 1933, as amended, this
report was signed by the following  persons in the capacities and on the date(s)
stated:

          SIGNATURE(S)                 TITLE(S)                    DATE
/s/ A.  Dale  Mayo                President, Chief            June 29, 2005
------------------------          Executive Officer
A. Dale Mayo                      and Chairman of the
                                  Board of Directors

/s/ Kevin J. Farrell              Senior Vice President--     June 29, 2005
-------------------------         Data Center Operations
Kevin J. Farrell                  and Director

/s/ Brett E. Marks                Senior Vice President--     June 29, 2005
-------------------------         Business Development
Brett E. Marks                    and Director

/s/ Gary S. Loffredo              Senior Vice President--     June 29, 2005
-------------------------         Business Affairs, General
Gary S. Loffredo                  Counsel, Secretary and
                                  Director

/s/ Brian D. Pflug                Senior Vice President--     June 29, 2005
-------------------------         Accounting and Finance
Brian D. Pflug

/s/ Robert Davidoff               Director                    June 29, 2005
-------------------------
Robert Davidoff

/s/ Wayne L. Clevenger            Director                    June 29, 2005
-------------------------
Wayne L. Clevenger


                                       76


/s/ Matthew W. Finlay             Director                    June 29, 2005
-------------------------
Matthew W. Finlay

/s/ Gerald C. Crotty                Director                  June 29, 2005
-------------------------
Gerald C. Crotty


                                       76


EXHIBIT
NUMBER         DESCRIPTION OF DOCUMENT


21.1 -- List of Subsidiaries.
23.1 -- Consent of PricewaterhouseCoopers LLP.
23.2 -- Consent of Eisner LLP.
24.1 -- Powers of Attorney. (Contained on signature page)
31.1 -- Officer's Certificate Pursuant to 15 U.S.C. Section 7241, as Adopted
        Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2 -- Officer's Certificate Pursuant to 15 U.S.C. Section 7241, as Adopted
        Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1 -- Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to
        Section 906 of the Sarbanes-Oxley Act of 2002.
32.2 -- Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to
        Section 906 of the Sarbanes-Oxley Act of 2002.


                                       77