<PAGE>   1


                                 FORM 10-Q
                    SECURITIES AND EXCHANGE COMMISSION

                          Washington, D.C. 20549

                Quarterly Report Under Section 13 or 15(d)
                 of the Securities Exchange Act of 1934


     For Quarter Ended: June 30, 1999

     Commission file number:  0-11363


                          CHAD THERAPEUTICS, INC.
          (Exact name of registrant as specified in its charter)

                California                       95-3792700
        (State or other jurisdiction of       (I.R.S. Employer
        incorporation or organization)       Identification No.)

             21622 Plummer Street, Chatsworth, CA       91311
     (Address of principal executive offices)         (Zip Code)

                              (818) 882-0883
           (Registrant's telephone number, including area code)


                ------------------------------------------------
                                (Former Address)


     (Former name, former address and former fiscal year, if changed since last
     report.)

     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  [X]   No  [ ]

                   APPLICABLE ONLY TO CORPORATE ISSUERS:

     Indicate the number of shares outstanding of each of the issuer's classes
     of common stock, as of the latest practicable date:

                    Common Shares          10,015,201




<PAGE>   2

                         CHAD THERAPEUTICS, INC.
                              Balance Sheets
                   June 30, 1999 and March 31, 1999


                                  ASSETS


<TABLE>
<CAPTION>

                                                   June 30,       March 31,
                                                    1999             1999
                                                 -----------     -----------
                                                 (Unaudited)
<S>                                              <C>             <C>
Current assets:
   Cash                                          $ 1,039,000     $   137,000
   Accounts receivable, less allowance for
     doubtful accounts of $93,000 at
     June 30, 1999 and $88,000 at March 31,
     1999                                          2,145,000       2,165,000
   Inventories (Note 2)                            6,938,000       7,642,000
   Income taxes refundable                           787,000         687,000
   Prepaid expenses                                  243,000         294,000
   Deferred income taxes                             445,000         445,000
                                                  ----------      ----------
     Total current assets                         11,597,000      11,370,000

Property and equipment, at cost                    5,388,000       5,366,000
   Less accumulated depreciation                   2,285,000       2,086,000
                                                  ----------      ----------
     Net property and equipment                    3,103,000       3,280,000
                                                  ----------      ----------

Note receivable from related party                    65,000          68,000
Other assets, net                                  1,141,000       1,181,000
                                                  ----------      ----------

     Total assets                                $15,906,000     $15,899,000
                                                  ==========      ==========

                   LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:
   Accounts payable                              $   385,000     $   227,000
   Accrued expenses                                  976,000         979,000
                                                  ----------      ----------

     Total current liabilities                     1,361,000       1,206,000
                                                  ----------      ----------
Shareholders' equity:
 Common shares, $.01 par value, authorized
  40,000,000 shares; 10,015,000 and 10,012,000
  shares issued and outstanding                   13,058,000      13,052,000
 Retained earnings                                 1,487,000       1,641,000
                                                  ----------      ----------
     Total shareholders' equity                   14,545,000      14,693,000
                                                  ----------      ----------

     Total liabilities and shareholders' equity  $15,906,000     $15,899,000
                                                  ==========      ==========

See accompanying notes to financial statements.

</TABLE>




<PAGE>   3

                          CHAD THERAPEUTICS, INC.
                         Statements of Operations
                For the three months ended June 30, 1999 and 1998
                                (Unaudited)


<TABLE>
<CAPTION>
                                                        Three Months Ended
                                                    -------------------------
                                                       1999           1998
                                                    ----------    -----------
<S>                                                <C>            <C>
Net sales                                          $ 3,638,000    $ 4,197,000
Cost of sales                                        2,317,000      2,257,000
                                                    ----------    -----------

          Gross profit                               1,321,000      1,940,000

   Costs and expenses:
      Selling, general and administrative            1,419,000      1,571,000
      Research and development                         155,000        208,000
                                                    ----------     ----------

          Total costs and expenses                   1,574,000      1,779,000
                                                    ----------     ----------

          Operating income (loss)                     (253,000)       161,000

      Other income - interest income (expense), net     (1,000)        17,000
                                                    ----------     ----------

          Earnings (loss) before income taxes         (254,000)       178,000

   Income tax expense (benefit)                       (100,000)        71,000
                                                    ----------    -----------

          Net earnings (loss)                      $  (154,000)   $   107,000
                                                    ==========     ==========

          Basic earnings (loss) per share          $      (.02)   $       .01
                                                    ==========     ==========
          Diluted earnings (loss) per share        $      (.02)   $       .01
                                                    ==========     ==========

          Weighted shares outstanding:
             Basic                                  10,015,000     10,010,000
             Diluted                                10,015,000     10,126,000
                                                    ==========     ==========
</TABLE>


See accompanying notes to financial statements.




<PAGE>   4

                              CHAD THERAPEUTICS, INC.
                         Statement of Shareholders' Equity
                     For the three months ended June 30, 1999
                                   (Unaudited)

<TABLE>
<CAPTION>

                                                 Common Shares        Retained
                                              Shares      Amount      Earnings
                                            ----------  ----------   ----------
<S>                                         <C>         <C>          <C>

Balance at
 March 31, 1999                             10,012,000  $13,052,000  $ 1,641,000

Common Shares issued in
 lieu of cash for directors
 fees                                            3,000        6,000        -

Net loss                                         -            -         (154,000)
                                            ----------  -----------  -----------
Balance at
 June 30, 1999                              10,015,000  $13,058,000  $ 1,487,000
                                            ==========  ===========  ===========


</TABLE>



See accompanying notes to financial statements.



<PAGE>   5



                          CHAD THERAPEUTICS, INC.
                          Statements of Cash Flows
               For the three months ended June 30, 1999 and 1998
                                (Unaudited)


<TABLE>
<CAPTION>

                                                        Three Months Ended
                                                     -------------------------

                                                        1999          1998
                                                        ----          ----
<S>                                                  <C>          <C>

Cash flows from operating activities:
   Net earnings (loss)                                $(154,000)   $  107,000
   Adjustments to reconcile net earnings (loss)
     to net cash provided by (used in)
     operating activities:
       Depreciation and amortization                    199,000       201,000
       Compensation expense related to stock issued       6,000         -
       Changes in assets and liabilities:
         Decrease (increase) in accounts receivable      20,000      (330,000)
         Decrease (increase) in inventories             704,000    (1,364,000)
         Decrease (increase) in income taxes
           refundable                                  (100,000)       71,000
         Decrease (increase) in prepaid expenses         51,000        32,000
         Decrease (increase) in note receivable
           from related party                             3,000         1,000
         Decrease (increase) in other assets             40,000        16,000
         Increase (decrease) in accounts payable        158,000       401,000
         Increase (decrease) in accrued expenses         (3,000)      225,000
                                                      ---------     ---------
               Net cash provided by (used in)
               operating activities                     924,000      (640,000)
                                                      ---------    ----------

Cash flows from investing activities:
   Capital expenditures                                 (22,000)      (50,000)
                                                     ----------    ----------

               Net cash used in investing
               activities                               (22,000)      (50,000)
                                                     ----------    ----------

Cash flows from financing activities:
   Exercise of stock options                              -            24,000
   Common Shares issued                                   -            67,000
                                                     ----------    ----------

               Net cash provided by
               financing activities                       -            91,000
                                                     ----------    ----------

Net increase (decrease) in cash                         902,000      (599,000)
Cash beginning of period                                137,000     1,579,000
                                                     ----------    ----------

Cash end of period                                   $1,039,000    $  980,000
                                                     ==========    ==========

</TABLE>


See accompanying notes to financial statements.




<PAGE>   6

                             CHAD THERAPEUTICS, INC.
                                 June 30, 1999
                                  (Unaudited)

     1.  Interim Reporting

         Chad Therapeutics, Inc. (the Company) is in the business of developing,
         producing and marketing respiratory care devices designed to improve
         the efficiency of oxygen delivery systems for home health care and
         hospital treatment of patients suffering from pulmonary diseases.

         In the opinion of management, all adjustments necessary, which are of a
         normal and recurring nature, to a fair statement of the results for the
         interim periods presented have been made. The interim statements are
         condensed and do not include some of the information necessary for a
         more complete understanding of the financial data. Accordingly, your
         attention is directed to the footnote disclosures found on pages 10,
         11, 12 and 13 of the March 31, 1999, Annual Report and particularly to
         Note 1 which includes a summary of significant accounting policies.

     2.  Inventories

         Inventories at June 30, 1999, are summarized as follows:

                        Finished goods                $1,600,000
                        Work-in-process                1,205,000
                        Raw materials                  4,133,000
                                                      ----------
                                                      $6,938,000
                                                      ==========

     3.  Earnings Per Common Share

         Following is a reconciliation of the numerators and denominators used
         in the calculation of basic and diluted earnings per common shares:

<TABLE>
<CAPTION>
                                                         Three Months Ended
                                                               June 30
                                                         1999           1998
                                                         ----           ----
<S>                                                   <C>            <C>
         Basic earnings per share:

         Numerator-net earnings (loss)                $  (154,000)   $   107,000
         Denominator-common shares
           outstanding                                 10,015,000     10,010,000
                                                      -----------    -----------

         Basic earnings (loss) per share              $      (.02)   $       .01
                                                      ===========    ===========

         Diluted earnings per share:

         Numerator-net earnings (loss)                $  (154,000)   $   107,000
         Denominator:
           Common shares outstanding                   10,015,000     10,010,000
           Common stock options                               --         116,000
                                                       10,015,000     10,126,000

         Diluted earnings (loss) per share           $      (.02)    $       .01
                                                     ===========     ===========
</TABLE>


<PAGE>   7


                             CHAD THERAPEUTICS, INC.
                                  June 30, 1999
                                   (Unaudited)

     3.  Earnings Per Common Share (cont'd)

         Options to purchase 1,041,000 shares of common stock at prices ranging
         from $1.50 to $13.47 per share were not included in the computation of
         diluted earnings per share because their effect would have been
         anti-dilutive.

     4.  Income Taxes

         Income taxes have been provided for at an effective combined Federal
         and California rate of approximately 39% and 40% for the periods ended
         June 30, 1999 and 1998, respectively. The income tax benefit for the
         period ended June 30, 1999, relates primarily to Federal income tax
         carrybacks.

     5.  Geographic Information

         The Company has one reportable operating segment. Geographic
         information regarding the Company's sales is as follows:

<TABLE>
<CAPTION>
                                                          Three Months Ended
                                                               June 30
                                                         1999           1998
                                                         ----           ----
<S>                                                   <C>              <C>
         United States                                $3,230,000       3,610,000
         Germany                                          36,000         299,000
         All other countries                             372,000         288,000
                                                      ----------      ----------

                                                      $3,638,000       4,197,000
                                                      ==========      ==========
</TABLE>

         All long-lived assets are located in the United States.

         Sales of OXYMATIC7 conservers and OXYLITE7 systems accounted for 52%
         and 70% of the Company's sales for the three month periods ended June
         30, 1999 and 1998, respectively.


<PAGE>   8



                             CHAD THERAPEUTICS, INC.
                     Management's Discussion and Analysis of
                  Financial Condition and Results of Operations

                                  June 30, 1999

Results of Operations

Sales for the three months ended June 30, 1999, decreased $559,000 (13.3%) from
the prior year's period. While there have been price reductions in 1999 and
1998, the decrease in sales relates primarily to decreases in domestic unit
sales of OXYMATIC conservers and OXYLITE complete portable oxygen systems which
are being affected by the current marketing environment for home oxygen therapy
discussed below.

Sales to foreign distributors represented 11% and 14% of total sales for the
periods ended June 30, 1999 and 1998, respectively. Currently, management
expects a decrease in sales to foreign distributors during the upcoming fiscal
year and quarter to quarter sales will fluctuate depending on the timing of
shipments. In addition, all foreign sales are transacted in US dollars, thus
annual unit sales could be affected by foreign currency fluctuations.

The current procedure for reimbursement by Medicare for home oxygen services
provides a prospective flat fee monthly payment based solely on the patient's
prescribed oxygen requirement. Under this system, inexpensive concentrators have
grown in popularity because of low cost and less frequent servicing
requirements. At the same time, interest heightened in oxygen conserving
devices, such as the Company's products, which can extend the life of oxygen
supplies and reduce service calls by dealers, thereby providing improved
mobility for the patient and cost savings for dealers.

In addition, other changes in the health care delivery system - including the
increase in the acceptance and utilization of managed care - have stimulated a
significant consolidation among home oxygen dealers. As major national and
regional home medical equipment chains attempt to secure managed care contracts
and improve their market position, they have expanded their distribution
networks through the acquisition of independent dealers in strategic areas.
Three major national chains accounted for approximately 22% of the Company's
domestic sales for the periods ended both June 30, 1999 and 1998. Margins on
these sales may be somewhat lower due to quantity pricing. In some instances
consolidation has resulted in reduced purchases as the former independent
provider complies with the chain's purchasing policies. The Company's products,
which allow homecare dealers to provide cost efficient home oxygen therapy, are
ideally suited for use in a managed care environment and as a tool for dealers
to increase


<PAGE>   9



                             CHAD THERAPEUTICS, INC.
                     Management's Discussion and Analysis of
                  Financial Condition and Results of Operations

                                  June 30, 1999

Results of Operations (cont'd)

revenues and profits. To ensure continued awareness of the benefits of the
Company's products by chain headquarters personnel, a proactive marketing and
communication program is in effect with all of the major national chains.

The Company believes that its revenues during the past two years have been
adversely affected by several factors. During the periods ended June 30, 1999
and 1998, sales to national chain accounts as well as independent dealers have
been impacted by increased competitive factors and uncertainties regarding the
size of cuts in Medicare home oxygen reimbursement which were enacted as part of
the Federal budget process during the year ended March 31, 1998. This process
was finalized and a 25% cut in home oxygen reimbursement went into effect
January, 1998, with an additional 5% cut effective January 1, 1999. The effects
of managed care and concerns over the severity of reimbursement cuts has, in
many cases, resulted in the provision of systems to patients that do not provide
truly ambulatory oxygen. Management believes these factors, including
uncertainties as to how home care providers are responding to the 25% and 5%
cuts, may continue to adversely affect the Company's revenues from sales of
oxygen conserving devices for the foreseeable future.

Management also believes future revenues may be positively affected by sales of
a new product, the TOTAL O2TM Delivery System. The TOTAL O2 system provides
stationary oxygen for patients at home, portable oxygen including an oxygen
conserving device for ambulation and a safe and efficient mechanism for filling
portable oxygen cylinders. This should provide home care dealers with means to
deal with the reimbursement cuts discussed above by reducing their monthly cost
of servicing patients while at the same time providing a higher quality of
service by maximizing ambulatory capability. The Company received clearance in
November, 1997, to sell the new product from the Food and Drug Administration.
The Company began shipping TOTAL O2 systems in January, 1998, and realized
approximately $600,000 and $218,000 in sales during the periods ended June 30,
1999 and 1998, respectively. Initial sales of the TOTAL O2 system have been
adversely affected by several factors, including the overall home oxygen market
climate as well as start-up manufacturing and related supplier quality issues.
The Company has taken a number of steps to resolve the manufacturing and
supplier issues. The sales potential for the new system is significant as the
average selling price is approximately four times that of the OXYMATIC and
OXYLITE systems. No estimate can currently be


<PAGE>   10



                             CHAD THERAPEUTICS, INC.
                     Management's Discussion and Analysis of
                  Financial Condition and Results of Operations

                                  June 30, 1999

Results of Operations (cont'd)

made regarding the level of success the Company may achieve with the TOTAL O2
system. For information which may affect the outcome of forward looking
statements made in this paragraph see Outlook: Issues and Risks - New Product.

Cost of sales as a percent of net sales increased from 53.8% to 63.7% for the
period ended June 30, 1999, as compared to the prior year's period. Both periods
have been affected by decreased sales volume and start-up costs associated with
the manufacture of the TOTAL O2 system. Management believes the gross margins
should improve in the future periods if sales increase.

Selling, general and administrative expenditures decreased from $1,571,000 to
$1,419,000 for the periods ended June 30, 1999 and 1998, respectively. The
Company anticipates that recent cost reduction efforts should align staffing and
operating expenses more closely with current sales expectations, but will be
offset to some extent by commissions to be paid to the Company's new field sales
force of manufacturer's representatives. This field sales force has recently
been hired and trained, and now provides full coverage in the United States.
Historically, the Company has relied entirely on its internal sales personnel
and extensive marketing efforts to generate sales. The shift to a field sales
force will cause selling, general and administrative expenses to fluctuate more
closely with sales volume. Research and development expenses decreased by
$53,000 for the period ended June 30, 1999, as compared to the prior year's
period. Currently, management expects research and development expenditures to
total approximately $525,000 in the fiscal year ended March 31, 2000, on
projects to enhance and expand the Company's product line. Interest income
declined $18,000 for the period ended June 30, 1999, as compared to the prior
year's period due to the reduction in the Company's cash balances.

Financial Condition

At June 30, 1999, the Company had cash totaling $1,039,000 or 7% of total
assets, as compared to $137,000 (1%) at March 31, 1999. Net working capital
increased from $10,164,000 at March 31, 1999 to $10,236,000 at June 30, 1999.
Accounts receivable decreased $20,000 during the period ended June 30, 1999.
Future increases or decreases in accounts receivable will generally coincide
with sales volume fluctuations and the timing of shipments to foreign customers.
During the same period, inventories decreased


<PAGE>   11


                             CHAD THERAPEUTICS, INC.
                     Management's Discussion and Analysis of
                  Financial Condition and Results of Operations

                                  June 30, 1999

Financial Condition (cont'd)

$704,000. This decrease relates primarily to utilization of raw materials
purchased in the prior year for the manufacture of the new TOTAL O2 product
line. The Company attempts to maintain sufficient inventories to meet its
customer needs as orders are received. Thus, future inventory and related
accounts payable levels will be impacted by the ability of the Company to
maintain its safety stock levels. If safety stock levels drop below target
amounts, then inventories in subsequent periods will increase more rapidly as
inventory balances are replenished.

Management believes funds derived from operations and income tax refunds should
be adequate to meet the Company's present cash requirements. The Company expects
capital expenditures during the next twelve months to be approximately $250,000.

On June 30, 1994, the Company announced that the Board of Directors had
authorized stock repurchases of its common shares in privately negotiated
transactions for a minimum of 10,000 shares. While the Company made no stock
repurchases during the period ended June 30, 1999, the Company may make
additional stock repurchases pursuant to the Board of Directors authorization in
the future. In addition, the Board has authorized the Company to purchase shares
of the Company's common stock in open market transactions. No purchases were
made during the periods ended June 30, 1999 and 1998, respectively. The number
of shares which may be purchased under these programs in the future can not be
predicted at this time. The Company has not adopted any programs which provide
for post employment retirement benefits, however, it has on occasion provided
such benefits to individual employees.

Year 2000

Management has initiated an enterprise-wide program to prepare the Company's
computer systems and applications for the year 2000 and to ensure Year 2000
compliance by its customers and suppliers. The Company's products do not contain
embedded chips that are date sensitive and thus they are not at risk for Year
2000 issues. The Company has completed the assessment of its internal computer
hardware and software and plans to have all systems Year 2000 compliant by
September 30, 1999. The Company is in the assessment stage for its third party
relationships and plans to have this phase completed by September 30, 1999. At
that time, any third parties representing a material risk to the Company who do
not appear to be moving towards


<PAGE>   12


                             CHAD THERAPEUTICS, INC.
                     Management's Discussion and Analysis of
                  Financial Condition and Results of Operations

                                  June 30, 1999

Year 2000 (cont'd)

Year 2000 compliance should be identified and the Company will attempt to secure
back up suppliers wherever possible.

The Company expects to incur internal staff costs as well as consulting and
other expenses related to infrastructure and facilities enhancements necessary
to prepare the systems for the year 2000. The cost of testing and conversion of
system applications is not expected to be material. A significant proportion of
these costs are not likely to be incremental costs to the Company, but rather
will represent the redeployment of existing information technology resources.

The Company is in the process of developing a contingency plan in the event of
various problem scenarios. If the Company is unsuccessful or if remediation
efforts with key suppliers or customers are unsuccessful in dealing with Year
2000 problems, there may be a material adverse impact on the Company's results
of operations and financial condition. The Company is unable to quantify any
potential adverse impact at this time.

Outlook:  Issues & Risks

This quarterly report contains forward-looking statements which reflect the
Company's current views with respect to future events and financial performance.
These forward-looking statements are subject to certain risks and uncertainties
which may cause actual operating results to differ materially from currently
anticipated results. Among the factors that could cause actual results to differ
materially are the following:

Dependence Upon a Single Product Line

Although the Company currently markets a number of products, these products
comprise a single product line for patients requiring supplementary oxygen. The
Company's future performance is thus dependent upon developments affecting this
segment of the health care market and the Company's ability to remain
competitive within this market sector.

New Product

The Company's future growth in the near term will depend in significant part
upon the commercial success of the TOTAL O2 Delivery System. The success of this
new product will depend upon the health care community's perception of the
system's capabilities, clinical efficacy and benefit to


<PAGE>   13

                            CHAD THERAPEUTICS, INC.

                     Management's Discussion and Analysis of
                  Financial Condition and Results of Operations

                                  June 30, 1999

New Product (cont'd)

patients, as well as timely resolution of manufacturing and supplier issues. In
addition, prospective sales will be impacted by the degree of acceptance it
achieves among home oxygen dealers and patients requiring supplementary oxygen.
As with the introduction of any new product, the Company's ability to
successfully promote the TOTAL O2 Delivery System cannot be assessed at this
time.

Consolidation of Home Care Industry

The home health care industry is undergoing significant consolidation. As a
result, the market for the Company's products is increasingly influenced by
major national chains. Three major national chains presently account for 22% of
the Company's domestic sales. Future sales may be increasingly dependent on a
limited number of customers which may have an impact on margins due to quantity
pricing.

Competition

Chad's success over the past several years has drawn new competition to vie for
a share of the home oxygen market. These new competitors include both small and
very large companies. While the Company believes the quality of its products and
its established reputation will continue to be a competitive advantage, some
competitors have successfully introduced lower priced products which do not
provide oxygen conserving capabilities comparable to the Company's products. No
assurance can be given that increased competition in the home oxygen market will
not continue to have an adverse affect on the Company's operations.

Rapid Technological Change

The health care industry is characterized by rapid technological change. The
Company's products may become obsolete as a result of new developments. The
Company's ability to remain competitive will depend to a large extent upon its
ability to anticipate and stay abreast of new technological developments related
to oxygen therapy. The Company has limited internal research and development
capabilities. Historically, the Company has contracted with outside parties to
develop new products. Some of the Company's competitors have substantially
greater funds and facilities to pursue research and development of new products
and technologies for oxygen therapy.


<PAGE>   14


                             CHAD THERAPEUTICS, INC.
                     Management's Discussion and Analysis of
                  Financial Condition and Results of Operations

                                  June 30, 1999

Potential Changes in Administration of Health Care

A number of bills proposing to regulate, control or alter the method of
financing health care costs have been discussed and certain of such bills have
been introduced in Congress and various state legislatures. There are wide
variations among these bills and proposals. Because of the uncertain state of
the health care proposals, it is not meaningful at this time to predict the
effect on the Company if any of these proposals is enacted.

Approximately 80% of home oxygen patients are covered by Medicare and other
government programs. Federal law has altered the payment rates available to
providers of Medicare services in various ways during the last several years.
Congress has passed legislation which has reduced Medicare spending. It cannot
yet be predicted how changes in reimbursement levels will affect the home oxygen
industry and there can be no assurance that such changes will not have an
adverse effect on the Company's business.

Patents and Trademarks

The Company pursues a policy of obtaining patents for appropriate inventions
related to products marketed or manufactured by the Company. The Company
considers the patentability of its products to be significant to the success of
the Company. To the extent that the products to be marketed by the Company do
not receive patent protection, competitors may be able to manufacture and market
substantially similar products. Such competition could have an adverse impact
upon the Company's business.

Products Liability

The nature of the Company's business subjects it to potential legal actions
asserting that the Company is liable for damages for product liability claims.
Although the Company maintains products liability insurance in an amount which
it believes to be customary in the industry, there is no assurance that this
insurance will be sufficient to cover the costs of defense or judgments which
might be entered against the Company. The type and frequency of these claims
could have an adverse impact on the Company's results of operations and
financial position.

Availability of Third Party Component Products

The Company tests and packages its products in its own facility. Some of its
other manufacturing processes are conducted by other firms and the Company
expects to continue using outside firms for certain manufacturing


<PAGE>   15


                             CHAD THERAPEUTICS, INC.
                     Management's Discussion and Analysis of
                  Financial Condition and Results of Operations

                                  June 30, 1999

Availability of Third Party Component Products (cont'd)

processes for the foreseeable future and is thus dependent on the reliability
and quality of parts supplied by these firms. The Company's agreements with its
suppliers are terminable at will or by notice. The Company believes that other
suppliers would be available in the event of termination of these arrangements.
No assurance can be given, however, that the Company will not suffer a material
disruption in the supply of its products.

Accounting Standards

Accounting standards promulgated by the Financial Accounting Standards Board
change periodically. Changes in such standards may have an impact on the
Company's future financial position.

Additional Risk Factors

Additional factors which might affect the Company's performance may be listed
from time to time in the reports filed by the Company with the Securities and
Exchange Commission.


<PAGE>   16


                                SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.


                                              CHAD THERAPEUTICS, INC.
                                              -----------------------
                                                    (Registrant)



     Date    8/10/99                          /S/ Thomas E. Jones
         ----------------                     -----------------------
                                              Thomas E. Jones
                                              Chief Executive Officer


     Date    8/10/99                          /S/ Earl L. Yager
         ----------------                     -----------------------
                                              Earl L. Yager
                                              Executive Vice President,
                                              Chief Financial Officer and
                                              Secretary