<PAGE>

                          SECURITIES AND EXCHANGE COMMISSION
                               WASHINGTON, D.C.  20549
                                      FORM 10-Q

(Mark One)

[x]  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
     SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended   June 30, 1997      
                              ---------------------

                                          OR

[ ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
     SECURITIES EXCHANGE ACT OF 1934

For the transition from ___________________ to _______________________

                           COMMISSION FILE NUMBER 33-55400



                                ACT III THEATRES, INC.
   ----------------------------------------------------------------------------
                (Exact name of Registrant as specified in its charter)


            Delaware                                      95-4211629
--------------------------------               --------------------------------
(State or other jurisdiction of                      (I.R.S. Employer
incorporation or organization)                       Identification No.)



               919 SW Taylor Street, Suite 900, Portland, Oregon  97205
-------------------------------------------------------------------------------
            (Address of principal executive offices)            (Zip Code)


(Registrant's telephone number, including area code)   (503) 221-02l3   
                                                     ------------------

         Indicate by check mark whether the Registrant (1) has filed all 
reports required to be filed by Section 13 or 15(d) of the Securities 
Exchange Act of 1934 during the preceding 12 months (or for such shorter 
period that the Registrant was required to file such reports), and (2) has 
been subject to such filing requirements for the past 90 days.  Yes xx  No 
                                                                    --     --

         At July 31, 1997, there were 100 shares of the registrant's common 
stock outstanding.

<PAGE>

                                ACT III THEATRES, INC.

                                        INDEX


                                                                          PAGE
                                                                         NUMBER
                                                                         ------

PART I.   Financial Information (Unaudited)            

     Item l.  Financial Statements . . . . . . . . . . . . . . . . . . .      3

        Consolidated Statement of Operations -
          Three Months Ended June 30, 1997 and 1996. . . . . . . . . . .      3

        Consolidated Statement of Operations -
          Six Months Ended June 30, 1997 and 1996. . . . . . . . . . . .      4

        Consolidated Balance Sheet -
          At June 30, 1997 and December 31, 1996 . . . . . . . . . . . .      5

        Consolidated Statement of Changes in Common
        Shareholder's Equity (Deficit) for the six months
        ended June 30, 1997. . . . . . . . . . . . . . . . . . . . . . .      6

        Consolidated Condensed Statement of Cash Flows -
          Six Months Ended June 30, 1997 and 1996. . . . . . . . . . . .      7

        Notes to Consolidated Financial Statements . . . . . . . . . . .      8

     Item 2.  Management's Discussion and Analysis
              of Results of Operation and Financial Condition. . . . . .      8

PART II.  Other Information. . . . . . . . . . . . . . . . . . . . . . .      13

     Item 6.  Exhibits and Reports on Form 8-K . . . . . . . . . . . . .      13


                                          2
<PAGE>


                             ITEM 1: FINANCIAL STATEMENTS

                                ACT III THEATRES, INC.
                        CONSOLIDATED STATEMENTS OF OPERATIONS
                  FOR THE THREE MONTHS ENDED JUNE 30, 1997 AND 1996
                                    (IN THOUSANDS)
                                     (UNAUDITED)

                                                      1997            1996    
                                                  ------------    ------------
REVENUES:
  Admissions                                      $    39,415     $    36,616
  Concessions                                          17,952          16,705
  Other                                                   481             462
                                                  ------------    ------------

                                                       57,848          53,783
                                                  ------------    ------------
EXPENSES
  Costs of operations                                        
    Film Rental                                        21,581          20,342
    Cost of concessions                                 3,187           2,664
    Other theatre operating expenses                   18,974          16,391
                                                  ------------    ------------
           Total                                       43,742          39,397

  General and administrative expenses                   2,264           1,625
  Depreciation and amortization                         6,265           4,820
                                                  ------------    ------------

                                                       52,271          45,842
                                                  ------------    ------------
           Income from operations                       5,577           7,941

OTEHR EXPENSES:
Interest Expense, net                                   6,321           5,793
Loss on sale of assets                                    174               0
                                                  ------------    ------------
                                                        6,495           5,793

Loss Income before income taxes                          (918)          2,148


BENEFIT (PROVISION) FOR INCOME TAXES                      228            (877)
                                                  ------------    ------------
Net (Loss) Income                                        (690)          1,271

ACCRETION OF MANDATORILY REEDEEMABLE
  SECURITIES                                                4               6

PREFERRED DIVIDENDS                                       475             413
                                                  ------------    ------------

Net (Loss) income applicable to common stock      $    (1,169)    $       852 
                                                  ------------    ------------
                                                  ------------    ------------


The accompanying notes are an integral part of this consolidated financial
statement.


                                          3
<PAGE>


                                ACT III THEATRES, INC.
                         CONSOLIDATED STATEMENT OF OPERATIONS
                   FOR THE SIX MONTHS ENDED JUNE 30, 1997 AND 1996
                                    (IN THOUSANDS)
                                     (UNAUDITED)
                                                      1997            1996  
                                                  ------------    ------------
REVENUES:
  Admissions                                      $    82,168     $    71,650
  Concessions                                          37,117          32,390
  Other                                                 1,104             952
                                                  ------------    ------------

                                                      120,389         104,992
                                                  ------------    ------------
EXPENSES:
  Costs of operations
    Film Rental                                        43,416          37,448
    Cost of concessions                                 6,440           5,147
    Other theatre operating expenses                   37,717          31,487
                                                  ------------    ------------
           Total                                       87,573          74,082

  General and administrative expenses                   4,255           3,309
  Depreciation and amortization                        12,342          10,468
                                                  ------------    ------------
                                                      104,170          87,859
                                                  ------------    ------------
           Income from operations                      16,219          17,133

OTHER EXPENSES:
  Interest expense, net                                11,972          11,477
  Loss on sale of assets                                  289               0
                                                  ------------    ------------
                                                       12,261          11,477
                                                  ------------    ------------


           Income before income taxes                   3,958           5,656

PROVISION FOR INCOME TAXES                              1,659           2,221
                                                  ------------    ------------

           Net Income                                   2,299           3,435
ACCRETION OF MANDATORILY REDEEMABLE
  SECURITIES                                                8              11

PREFERRED DIVIDENDS                                       950             826
                                                  ------------    ------------

           Net income applicable to common
           stock.                                 $     1,341     $     2,598
                                                  ------------    ------------
                                                  ------------    ------------

The accompanying notes are part of this consolidated financial statement.


                                          4
<PAGE>

                                ACT III THEATRES, INC.
                             CONSOLIDATED BALANCE SHEET
                                (DOLLARS IN THOUSANDS)
                                        ASSETS
                                                    June 30,     December 31,
                                                      1997           1996    
                                                  ------------    ------------
                                                  (unaudited)

CURRENT ASSETS:
  Cash and cash equivalents                       $    21,325     $     8,720 
  Accounts receivable                                   1,245           1,324
  Prepaid expenses and other receivables                  689             641
  Inventories                                           2,322           2,122
                                                  ------------    ------------
      Total current assets                             25,581          12,807
                                                                             
    
CONTRACTS RECEIVABLE                                    2,282           2,007
PROPERTY AND EQUIPMENT, net                           265,244         231,621
INTANGIBLES, net                                       30,350          31,753
OTHER ASSETS, net                                       4,270           3,239
                                                  ------------    ------------
      Total assets                                $   327,727     $   281,427 
                                                  ------------    ------------
                                                  ------------    ------------



                    LIABILITIES, MANDATORILY REDEEMABLE SECURITIES
                      AND COMMON SHAREHOLDER'S EQUITY (DEFICIT)

CURRENT LIABILITIES:                                         
  Current portion of long-term debt and capital
    lease obligations                             $     2,112     $     1,978 
  Accounts payable                                     12,194          10,042
  Accrued film rentals                                 10,155          10,063
  Taxes other than income taxes                         2,656           2,839
  Other current liabilities                            15,202          13,349
                                                  ------------    ------------
     Total current liabilities                         42,319          38,271
                                                                             
    
DEFERRED INCOME TAXES                                   9,830           9,173
LONG-TERM DEBT AND CAPITAL
  LEASE OBLIGATIONS                                   293,426         254,130
                                                  ------------    ------------
                                                      345,575         301,574
                                                  ------------    ------------
MANDATORILY REDEEMABLE SECURITIES OF                         
  ACT III CINEMAS, INC.                                14,090          13,132
                                                  ------------    ------------
                                                                             
    
COMMON SHAREHOLDER'S EQUITY (DEFICIT)                        
  Common stock, $.01 par value, 1,000 shares
    authorized, 100 shares issued and outstanding           1               1
  Additional paid-in capital                            4,979           4,979
  Accumulated deficit                                 (36,918)        (38,259)
                                                  ------------    ------------
                                                      (31,938)        (33,279)
                                                  ------------    ------------
       Total Liabilities and Shareholder's
        Equity (Deficit)                          $   327,727     $   281,427 
                                                  ------------    ------------
                                                  ------------    ------------

The accompanying notes are an integral part of this consolidated financial
statement.


                                          5
<PAGE>

                                ACT III THEATRES, INC.
                    CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS
                   FOR THE SIX MONTHS ENDED JUNE 30, 1997 AND 1996
                                (DOLLARS IN THOUSANDS)
                                     (UNAUDITED)             



                                                      1997            1996    
                                                  ------------    ------------

CASH FLOWS FROM OPERATING ACTIVITIES:
  Net income                                      $     2,299     $     3,435 
  Adjustments to reconcile net income to net                 
    cash provided by operating activities-                   
  Depreciation and amortization                        12,342          10,468
  Loss on sale of assets                                  289               0
  Amortization of debt discount                           412             469
  Deferred income taxes                                   657             548
  Change in certain working capital items               3,745             352
                                                  ------------    ------------
           Net cash provided by operating 
             activities                                19,744          15,272
                                                  ------------    ------------

CASH FLOWS FROM INVESTING ACTIVITIES:
  Additions to property and equipment                 (44,457)        (25,354)
  Net change in contracts receiviable                    (275)            329
  Proceeds from sale of assets                            150               0
                                                  ------------    ------------
           Net cash used for investing 
           activities                                 (44,582)        (25,025)
                                                  ------------    ------------

CASH FLOWS FROM FINANCING ACTIVITIES:                        
  Payments made on long-term debt                        (957)           (674)
  Borrowings on long-term debt                         39,975               0
  Deferred financing costs                             (1,575)              0
                                                  ------------    ------------
           Net cash provided by (used for) 
             financing activities                      37,443            (674)
                                                  ------------    ------------
 
INCREASE (DECREASE) IN CASH AND CASH                         
   EQUIVALENTS                                         12,605         (10,427)

CASH AND CASH EQUIVALENTS AT BEGINNING                       
  OF PERIOD                                             8,720          19,002
                                                  ------------    ------------

CASH AND CASH EQUIVALENTS AT END
  OF PERIOD                                       $    21,325     $     8,575 
                                                  ------------    ------------
                                                  ------------    ------------



The accompanying notes are an integral part of this consolidated financial
statement.



                                          6
<PAGE>


                                ACT III THEATRES, INC.
 
CONSOLIDATED STATEMENT OF CHANGES IN COMMON SHAREHOLDER'S EQUITY (DEFICIT)
                        FOR THE SIX MONTHS ENDED JUNE 30, 1997
                                (DOLLARS IN THOUSANDS)
                                     (UNAUDITED)


<TABLE>
<CAPTION>

                                              Common         Stock        Additional
                                           --------------------------      Paid-In      Accumulated
                                             Shares          Amount        Capital        Deficit         Total   
                                           -----------    -----------    -----------    -----------    -----------
<S>                                        <C>            <C>            <C>            <C>            <C>        
BALANCE, December 31, 1996                         100             $1         $4,979      $(38,259)      $(33,279)
  
Accretion of mandatorily redeemable senior            
  subordinated convertible preferred stock                                                      (8)            (8)
  
Preferred dividends                                                                           (950)          (950)
  
Net income                                                                                   2,299          2,299

                                            -----------------------------------------------------------------------
BALANCE, June 30, 1997                             100             $1         $4,979      $(36,918)      $(31,938)
                                            -----------------------------------------------------------------------
                                            -----------------------------------------------------------------------

</TABLE>


The accompanying notes are an integral part of this consoldiated financial
statement.    
    
    
                                          7


<PAGE>


                                ACT III THEATRES, INC.

                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                    JUNE 30, 1997
                                     (UNAUDITED)

NOTE 1:   BASIS OF PRESENTATION

      The accompanying unaudited consolidated financial statements reflect all 
adjustments (consisting of normal recurring accruals) which are, in the 
opinion of management, necessary for a fair presentation of the results of 
operations for the interim periods.  Certain information and footnote 
disclosure normally included in financial statements prepared in accordance 
with generally accepted accounting principles have been condensed or omitted 
pursuant to the rules and regulations of the Securities and Exchange 
Commission.  The interim financial information and notes thereto should be 
read in conjunction with the Company's 1996 annual report on Form 10-K.

      The results of operations for the six (6) months ended June 30, 1997 and 
the three (3) months ended June 30, 1997, are not necessarily indicative of 
results to be expected for the year ending December 3l, l997.

NOTE 2:   NET INCOME PER SHARE

      Earnings per share information is not presented as Act III Theatres, Inc. 
(the "Company") is a wholly owned subsidiary of Act III Cinemas, Inc.,  
(Cinemas).

NOTE 3:   COMMITMENTS AND CONTINGENCIES

      See Note 9 and 10 of the Notes to Consolidated Financial Statements in 
the Company's Form 10-K for the year ended December 31, 1996 for a 
description of Commitments and Contingencies.

      ITEM 2:   MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS 
                AND FINANCIAL CONDITION


                                          8
<PAGE>

OVERVIEW:

      On a quarter to quarter basis, the Company's financial results vary due 
to seasonal fluctuations which affect all motion picture exhibitors.  These 
fluctuations are the result of distribution practices of the major motion 
picture studios which have historically concentrated the release of films 
during the summer and holiday seasons.    The seasonality of picture 
exhibition, however, has begun to become less prominent as studios have begun 
to release major motion pictures in periods other than the summer and holiday 
seasons in an effort to reduce seasonal fluctuation.

      The Company's revenues are derived principally from box office 
admissions and theatre concessions sales.  Additional sources of revenue 
include auditorium rentals and video games.  The Company's principal costs of 
operations are film rentals, concession costs and other expenses (such as 
payroll, advertising, rents, maintenance, supplies, insurance and utilities). 
 In general, costs of operations are variable and general and administrative 
costs are fixed in relation to changes in revenues.

RESULTS OF OPERATIONS:

      The following table presents a summary of certain income statement items
as a percentage of total revenues and other key ratios:


<TABLE>
<CAPTION>

                                   Results of Operations         Results of Operations  
                                 Three Months Ended June 30      Six Months Ended June 30
                                 --------------------------      ------------------------

                                      1997          1996              1997        1996
                                     -------       -------           -------     -------
<S>                                  <C>           <C>               <C>         <C> 
REVENUES:
  Admissions . . . . . . . . .        68.1%         68.1%            68.3%        68.2%
  Concessions and other. . . .        31.9%         31.9%            31.7%        31.8%
                                     -------       -------          -------      -------
TOTAL REVENUES . . . . . . . .       100.00%       100.00%          100.00%      100.00%

Costs of operations. . . . . .        75.6%         73.3%            72.7%        70.6%
General and adminis-
  trative expenses . . . . . .         3.9%          3.0%             3.5%         3.2%
Depreciation and 
  amortization . . . . . . . .        10.8%          9.0%            10.3%        10.0%
Income from operations . . . .         9.7%         14.8%            13.5%        16.3%
Interest expense (net) . . . .        10.9%         10.8%             9.9%        10.9%

</TABLE>



                                          9
<PAGE>


REVENUES:

      Revenue for the quarter ended June 30, l997, increased 7.6% to $57.8 
million from $53.8 million for the quarter ended June 30, l996.  Revenue for 
the six months ended June 30, 1997 increased 14.7% to $120.4 million from 
$105.0 million for the six months ended June 30, 1996.  The increase for the 
quarter and six months ended June 30, 1997, was primarily the result of an 
increase of 4% in average ticket price and an increase in attendance and 
concession sales resulting from a net addition of 76 screens in operation at 
June 30, 1997 as compared to the number of screens in operation at June 30, 
1996.

COSTS OF OPERATIONS:

      Cost of operations for the quarter ended June 30, 1997 increased 11.0.% 
to $43.7 million from $39.4 million for the quarter ended June 30, l996.  
Costs of operations for the six months ended June 30, 1997 increased 18.2% to 
$87.6 million from $74.1 million for the six months ended June 30, 1996.  The 
 increase for the quarter and the six months ended June 30, 1997 as compared 
to 1996 is attributable to increased attendance and operating costs 
associated with the additional screens operated by the Company as well as 
$565,000 of pre-opening costs relating to three new theatres (one of which 
will open in the third quarter) and one theatre expansion.  Cost of 
operations as a percentage of revenues increased for the three months and six 
months ended June 30, 1997 as compared to the same periods in 1996, due to 
higher concession costs and higher rent expense at the new facilities and 
during the six month period, higher film rental. 

GENERAL AND ADMINISTRATIVE EXPENSES:

      General and administrative expenses increased  for the quarter  ended  
June 30, 1997 to $2.3 million from $1.6 million for the quarter ended June 
30,1996. General and administrative expenses increased for the six months 
ended June 30, 1997 to $4.3 million from $3.3 million for the six months 
ended June 30, 1996. The increase  in the dollar amount is attributable to 
higher salaries, management fee, compensation expenses related to the 
granting of stock options to certain officers of the Company and professional 
fees.

DEPRECIATION AND AMORTIZATION:

      Depreciation and amortization expense, which  includes amortization of 
intangibles and other assets, increased for the quarter ended June 30, 1997 
to $6.3 million 


                                          10
<PAGE>

from $4.8 million for the quarter ended June 30, 1996.  For the six months ended
June 30, 1997 depreciation and amortization increased to $12.3 million from
$10.5 million for the same period in 1996.  The  increase for the quarter and
six months ended June 30, 1997 was primarily the result of the opening of new
theatres and the renovation of existing theatres.                          
                                                    



INTEREST EXPENSE (NET):

      Interest expense increased for both the quarter ended June 30, 1997 and 
the six months ended June 30, 1997 as compared to the same periods in 1996.  
The increase was due to higher average borrowing levels and higher applicable 
rates.

LIQUIDITY AND CAPITAL RESOURCES:

      The Company's revenues are collected in cash, principally through box 
office admissions and theatre concessions revenues.  The Company has an 
operating "float" which partially finances its operations and which permits 
the Company to maintain a small amount of working capital capacity.  The 
"float" exists because admissions are received in cash, while exhibition 
costs (primarily film rentals) are ordinarily paid to distributors within 15 
to 45 days following receipt of admission revenues.

      The Company's primary capital requirements are for new theatre 
construction, acquisitions, remodeling and expansion of existing theatres.  
The Company prefers to develop theatres on a fee-owned (or ground lease) 
basis rather than on a leasehold basis, notwithstanding that the capital 
requirements associated with developing a theatre on a fee-owned (or ground 
lease) basis are significantly higher than developing a theatre on a 
leasehold basis.  The Company historically has financed primary capital 
requirements with funds generated from its operations and through financing 
activities.

      For the six months ended June 30, 1997, the Company's principal 
investing activities have been for new theatre openings, acquisitions, 
remodeling and expansion, totalling approximately $44.5 million, which was 
funded partially with borrowings under the Revolving Credit Agreement (as 
hereafter defined) and partially with cash on hand.

                                          11
<PAGE>

      Net cash provided by operating activities was insufficient to meet cash 
used for investing and financing activities for the period ended June 30, 
1997. The insufficiency was met by using cash on hand at the beginning of the 
quarter, plus draws on the Revolving Credit Agreement..

      Under the revolving credit agreement (the "Revolving Credit Agreement") 
between General Electric Capital Corporation ("GECC"), CIBC, Inc., Bank of 
America National Trust & Savings Association and Morgan GUA, as lenders, and 
the Company, the Company has credit availability of $250 million.  The amount 
available under the Revolving Credit Agreement will reduce in amounts varying 
from $5 million to 10 million on a quarterly basis commencing December 31, 
1998 and the Revolving Credit Agreement terminates on September 20, 2001.  At 
June 30, 1997 there was $175 million outstanding under the Revolving Credit 
Agreement.  Interest under the Revolving Credit Agreement is payable monthly 
at a rate based on either prime or LIBOR, at the Company's option, and 
determined based upon certain financial ratios of the Company.  At June 30, 
1997, the interest rate on borrowings was 7.1875%.

      Additionally, the Company has $85 million of senior subordinated notes 
outstanding which mature in 2003 and bear interest at 11-7/8%.  The senior 
subordinated notes contain restrictive covenants that, among other things, 
restrict the amount and type of debt that the Company may incur and impose 
limitations on the creation of liens, changes in control , transactions with 
affiliates, mergers and investments.  Similar limitations exist in the 
Revolving Credit Agreement.  The Company does not anticipate that these 
covenants will materially impede the operations of the Company.

      The Company believes its existing cash, cash generated from operations 
and available credit facilities will be sufficient to meet its cash 
requirements for at least the next 12 months.

      The Company's major shareholder has engaged an investment banking firm 
to provide advice regarding various strategic alternatives, which could 
include sale of the Company. 

                                          12
<PAGE>


                                ACT III THEATRES, INC.

                             PART II -- OTHER INFORMATION



ITEM 6:  EXHIBITS AND REPORTS ON FORM 8-K

            (A)    EXHIBITS:

            *3.1   Certificate of Incorporation

            *3.2   Bylaws, as amended and restated on November 24, 1992

           +27.l   Financial Data Schedule     
                 
            (B)    REPORTS ON FORM 8-K

                   None

--------------------------------------------------------------------------------

            *  Incorporated herein by reference from the Company's registration
               statement on Form S-l dated as of January 26, 1993

            +  Filed herewith


                                          13
<PAGE>

                                      SIGNATURES


      Pursuant to the requirements of the Securities Exchange Act of 1934, 
the Registrant has caused this Report to be signed on its behalf by the 
undersigned, thereunder duly authorized.

DATED:  This 14th day of August, 1997



                           ACT III THEATRES, INC.
                                                    (REGISTRANT)

                                               BY   /s/ Wade L. Canning
                                                 ------------------------------
                                                    WADE L. CANNING
                                                    Vice President and
                                                    Chief Financial Officer


                                          14