<PAGE>   1
                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549

                                   FORM 10-QSB

(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, 1999

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

             For the Transition Period from __________ to __________

                         Commission File Number 0-25252

                        CINEMASTAR LUXURY THEATERS, INC.
             (Exact Name of Registrant as specified in its charter)

                DELAWARE                                  33-0451054
    (State or other jurisdiction of            (IRS Employer Identification No.)
     incorporation or organization)

     12230 EL CAMINO REAL, SUITE 320, SAN DIEGO, CA         92130
       (Address of principal executive offices)           (Zip Code)

                                 (619) 509-2777
              (Registrant's telephone number, including area code)



Check whether the issuer (1) has 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 registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.

                                 YES [X] NO [ ]

Common stock, $0.01 par value: 3,864,986 shares outstanding as of July 15, 1999.

Transitional Small Business Disclosure Format. (check one):

                                 YES [ ] NO [X]

<PAGE>   2

                        CINEMASTAR LUXURY THEATERS, INC.

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                    PAGE NO.
                                                                                    --------
<S>          <C>                                                                    <C>
                          PART I. FINANCIAL INFORMATION

 Item 1.     Financial Statements

             Condensed Consolidated Balance Sheet as of June 30, 1999 (Unaudited)      3

             Condensed Consolidated Statements of Operations for the three
              months ended June 30, 1999 and 1998 (Unaudited)                          4

             Condensed Consolidated Statements of Cash Flows for the
             three months ended June 30, 1999 and 1998 (Unaudited)                     5

             Notes to Condensed Consolidated Financial Statements (Unaudited)          6

 Item 2.     Management's Discussion and Analysis of Financial Condition
             and Results of Operations                                                 7

                           PART II. OTHER INFORMATION

 Item 1.     Legal Proceedings                                                        11

 Item 2.     Changes in Securities                                                    12

 Item 3.     Defaults in Senior Securities                                            12

 Item 4.     Submission of Matters to a Vote of Securities Holders                    12

 Item 5.     Other Information                                                        12

 Item 6.     Exhibits and Reports on Form 8-K                                         12

             Signatures                                                               13
</TABLE>

<PAGE>   3

                          PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

                CINEMASTAR LUXURY THEATERS, INC. AND SUBSIDIARIES
                      CONDENSED CONSOLIDATED BALANCE SHEET
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                              June 30,
                                                               1999
                                                           ------------
<S>                                                        <C>
ASSETS

CURRENT ASSETS:
Cash and cash equivalents                                  $  2,641,194
Prepaid expenses                                                251,060
Other current assets                                            375,921
                                                           ------------

TOTAL CURRENT ASSETS                                          3,268,175

Property and equipment, net                                  11,947,576
Deposits and other assets                                       851,961
                                                           ============

TOTAL ASSETS                                               $ 16,067,712
                                                           ============

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
Current portion of long-term debt and capital lease
  obligations                                              $    208,242
Accounts payable                                              1,493,296
Accrued liabilities                                             597,822
Deferred revenue                                                427,952
                                                           ------------

TOTAL CURRENT LIABILITIES                                     2,727,312

Long-term debt and capital lease obligations,
  net of current portion                                      2,706,184
Deferred rent liability                                       4,058,080
                                                           ------------

TOTAL LIABILITIES                                             9,491,576
                                                           ------------

STOCKHOLDERS' EQUITY:
Common stock, $0.01 par value;
  authorized shares 60,000,000;
  issued and outstanding shares 3,864,986                        38,650
Additional paid-in capital                                   26,216,172
Accumulated deficit                                         (19,678,686)
                                                           ------------

TOTAL STOCKHOLDERS' EQUITY                                    6,576,136
                                                           ============

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                 $ 16,067,712
                                                           ============
</TABLE>


SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.

<PAGE>   4

                CINEMASTAR LUXURY THEATERS, INC. AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                  Three Months ended June 30,
                                                 ----------------------------
                                                    1999             1998
                                                 -----------      -----------
<S>                                              <C>              <C>
REVENUES:

Admissions                                       $ 5,055,021      $ 4,865,395
Concessions                                        2,093,434        2,065,181
Other operating revenues                             156,917          159,401
                                                 -----------      -----------

TOTAL REVENUES                                     7,305,372        7,089,977
                                                 -----------      -----------

COSTS AND EXPENSES:

Film rental and booking costs                      2,902,221        2,645,292
Cost of concession supplies                          375,812          632,593
Theater operating expenses                         3,046,044        2,964,385
Selling, general and administrative expenses         732,784          735,221
Depreciation and amortization                        597,127          532,208
                                                 -----------      -----------

TOTAL COSTS AND EXPENSES                           7,653,988        7,509,699
                                                 -----------      -----------

OPERATING LOSS                                      (348,616)        (419,722)

OTHER INCOME (EXPENSE):

Interest expense                                     (93,016)         (76,834)
Interest income                                       12,602           39,420
                                                 -----------      -----------

TOTAL OTHER EXPENSE                                  (80,414)         (37,414)
                                                 -----------      -----------

LOSS BEFORE PROVISION FOR INCOME TAXES              (429,030)        (457,136)

PROVISION FOR INCOME TAXES                                --           (1,600)
                                                 -----------      -----------

NET LOSS                                         $  (429,030)     $  (458,736)
                                                 ===========      ===========


BASIC AND DILUTED NET LOSS PER SHARE             $     (0.11)     $     (0.12)
                                                 ===========      ===========

WEIGHTED AVERAGE SHARES                            3,864,986        3,671,949
                                                 ===========      ===========
</TABLE>


SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.

<PAGE>   5

                CINEMASTAR LUXURY THEATERS, INC. AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                          Three Months ended June 30,
                                                         ----------------------------
                                                            1999             1998
                                                         -----------      -----------
<S>                                                      <C>              <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss                                                 $  (429,030)     $  (458,736)
Adjustments to reconcile net loss to net cash
  provided by operating activities:
Depreciation and amortization                                597,127          532,208
Deferred rent expense                                        159,589          212,855
Changes in operating assets and liabilities:
Prepaid expenses and other current assets                    (89,261)         129,613
Deposits and other assets                                      4,427           (5,938)
Accounts payable                                             522,317         (334,848)
Accrued and other liabilities                               (272,424)         341,014
                                                         -----------      -----------

NET CASH PROVIDED BY OPERATING ACTIVITIES                    492,745          416,168
                                                         -----------      -----------

CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment                       (1,019,987)        (281,638)
                                                         -----------      -----------

NET CASH USED IN INVESTING ACTIVITIES                     (1,019,987)        (281,638)
                                                         -----------      -----------

CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of long-term debt                   1,000,000               --
Principal payments on long-term debt and capital
  lease obligations                                          (51,960)        (227,960)
                                                         -----------      -----------

NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES          948,040         (227,960)
                                                         -----------      -----------

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS         420,798          (93,430)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD             2,220,396        3,481,978
                                                         -----------      -----------

CASH AND CASH EQUIVALENTS, END OF PERIOD                 $ 2,641,194      $ 3,388,548
                                                         ===========      ===========



SUPPLEMENTAL CASH FLOW INFORMATION:

Cash paid during the period for:

Interest                                                 $    93,016      $    76,834
                                                         ===========      ===========

Income taxes                                             $        --      $     1,600
                                                         ===========      ===========
</TABLE>

SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.

<PAGE>   6

                        CINEMASTAR LUXURY THEATERS, INC.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  JUNE 30, 1999
                                   (UNAUDITED)

NOTE 1

The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and the instructions to Form 10-QSB. Accordingly, they do
not include all of the information and footnotes required by generally accepted
accounting principles for complete financial statements. In the opinion of
management, all adjustments (consisting of normal recurring adjustments)
considered necessary for a fair presentation have been included. For further
information, refer to the audited consolidated financial statements for the
fiscal year ended March 31, 1999 and footnotes thereto, included in the
Company's Annual Report on Form 10-KSB which was filed with the Securities and
Exchange Commission. Operating results for the three month period ended June 30,
1999 are not necessarily indicative of the results of operations that may be
expected for the year ending March 31, 2000.

NOTE 2

Statement of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities" ("SFAS No. 133") issued by the FASB
establishes accounting and reporting standards for derivative instruments
embedded in other contracts, (collectively referred to as derivatives) and for
hedging activities. It requires that an entity recognize all derivatives as
either assets or liabilities in the statement of financial position and measure
those instruments at fair value. The Company currently expects to adopt the
provisions of SFAS No. 133 on April 1, 2001.

NOTE 3

Certain reclassifications have been made to the June 30, 1998 financial
statements to conform to the June 30, 1999 presentation.

NOTE 4

Basic and diluted net loss per share are computed by dividing net loss by the
weighted average number of common shares outstanding during the years.
Potentially dilutive securities consist of outstanding stock options and
warrants, and are not included in the computation as their inclusion would be
anti-dilutive. All per share information and references to the number of shares
outstanding included herein have been adjusted to reflect the one-for-seven
reverse stock split of the Company's common stock, effected on December 2, 1998.

NOTE 5

On September 23, 1997, the Company entered into a definitive agreement (the "CAP
Agreement") with CinemaStar Acquisition Partners, L.L.C. ("CAP") and Reel
Partners L.L.P. ("Reel") whereby Reel provided $3,000,000 of interim debt
financing (the "Bridge Loan") and CAP provided $15,000,000 of equity financing
(the "Equity Financing").

Pursuant to the terms of the CAP Agreement, the Company was and continues to be
obligated to issue additional shares of Common Stock (the "Adjustment Shares")
to CAP. The number of Adjustment Shares to be issued is based upon (i) the
recognition of any liabilities not disclosed as of August 31, 1997, (ii) certain
expenses incurred and paid by the Company in connection with the contemplated
transactions, (iii) any negative cash flow incurred by the Company during the
period commencing August 31, 1997 and ending December 15, 1997, and (iv)
operating losses experienced by, or costs of closing, the Company's Plaza
Americana 10 facility in Tijuana (now in full operation and achieving operating
profits) and San Bernardino Facility (still in development). The measurement of
the operating losses and/or closing costs for the two facilities is cumulative,
calculated in the aggregate and will take place on the earlier to occur of the
closing of each such facility or December 15, 2000. The Company issued


<PAGE>   7

193,037 Adjustment Shares to CAP pursuant to the terms of the CAP Agreement, in
September 1998. To the extent there are (a) operating losses at the Company's
Tijuana and San Bernardino facilities, calculated in the aggregate, for the
three-year period ended December 15, 2000, and (b) expenditures in connection
with the discovery of liabilities, or defense and/or settlement of claims, in
either case relating to periods prior to August 31, 1997, the Company will be
obligated to issue additional Adjustment Shares.

NOTE 6

On October 19, 1998, the Company signed a $15 million Seven-Year Revolving
Credit Agreement with a senior, secured lender. The terms of the agreement were
modified in March 1999. This facility will be used primarily to finance the
Company's future developments in accordance with the terms and conditions of the
Revolving Credit Facility. The Company has borrowed $1,000,000 against this
facility as of June 30, 1999 and has used the facility to secure two standby
letters of credit, with initial terms of one year, totaling $2,275,000, issued
in accordance with the terms of its lease (as amended) on the San Bernardino
20-screen facility, currently under construction. Commitment and other fees
associated with the Revolving Credit Agreement and the standby letters of
credit, totaling approximately $380,000, are included in Other Assets are being
amortized over their respective terms.

NOTE 7

The Company purchased on November 23, 1998 the remaining 25% minority interest
in the Company's Mexican subsidiary, CinemaStar Luxury Theaters, S.A. de C.V.,
for approximately $340,000. This amount is included in Other Assets and is being
amortized over a seven-year period.

ITEM 2.

           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                            AND RESULTS OF OPERATIONS

GENERAL

RESULTS OF OPERATIONS

The following discussion and analysis should be read in conjunction with the
Company's Condensed Consolidated Financial Statements and notes thereto included
elsewhere in this Form 10-QSB. Except for the historical information contained
herein, the discussion in this Form 10-QSB contains certain forward looking
statements that involve risks and uncertainties, such as statements of the
Company's plans, objectives, expectations and intentions. The cautionary
statements made in this Form 10-QSB should be read as being applicable to all
related forward-looking statements wherever they appear in this Form 10-QSB.
Where possible, the Company uses words like "believes", "anticipates",
"expects", "plans" and similar expressions to identify such forward looking
statements. The Company's actual results could differ materially from those
discussed here. Factors, risks and uncertainties that could cause or contribute
to such differences include the availability of marketable motion pictures, the
increase of revenues to meet long-term lease obligations and rent increases,
risks inherent in the construction of new theaters, the ability to secure new
locations on favorable terms, intense competition in the industry, dependence on
concession sales and suppliers, earthquakes and other natural disasters and
costs associated with potential changes in management and disputes related
thereto.

At April 1, 1999 and at June 30, 1999 the Company had eight theater locations
with a total of 79 screens. The Company operates one business segment. Such
segment has operations in two geographic regions, California and Northern
Mexico. For the three months ended June 30, 1999 total revenues were $6,104,236
in California and $1,201,136 in Northern Mexico, compared to $5,946,986 and
$1,142,990 for California and Northern Mexico respectively in the three months
ended June 30, 1998. Total assets for the California and Northern Mexico regions
as at June 30, 1999 were $15,627,845 and $439,867, respectively.

The Company has had significant net losses in each fiscal year of its
operations, including net losses of $1,586,372 and $7,932,011 and in the fiscal
years ended March 31, 1999 and 1998, respectively. There can be no assurance as
to whether or when the Company will achieve profitability. While the Company
believes it could attain profitability


<PAGE>   8

with its current operations, such profitability is contingent on many factors
such as the availability of marketable motion pictures and the continued success
of management's on-going cost reduction efforts. Any substantial profitability
will depend, among other things, on the Company's ability to continue to grow
its operations through the addition of new screens.

The Company has entered into agreements pertaining to the development of a
20-screen theater complex and a four-screen expansion to an existing theater
complex in San Bernardino, California and Riverside, California, respectively.
Additionally, the Company has entered into negotiations regarding the
development of other theater complexes in the United States and the Republic of
Mexico. The building of these and other new theater complexes is subject to many
contingencies, many of which are beyond the Company's control, including
consummation of site purchases or leases, receipt of necessary government
approvals, negotiation of acceptable construction agreements, the availability
of financing and timely completion of construction. No assurances can be given
that the Company will be able to successfully build, finance or operate any of
the new theaters presently contemplated or otherwise.

THREE MONTHS ENDED JUNE 30, 1999 COMPARED TO THREE MONTHS ENDED JUNE 30, 1998.

Total revenues for the three months ended June 30, 1999 increased 3.0% to
$7,305,372 compared to $7,089,977 for the prior comparable period. Admission
revenues increased by $189,626, or 3.9%, and concession sales and other
operating revenues increased by $25,769, or 1.2%. The increase in admissions
revenues is attributable to an increase in average ticket price, partially
offset by a modest decline in paid attendance. Domestic average ticket price for
the fiscal three months ended June 30, 1999 increased by 2.6% to $4.99 compared
to the prior comparable period. International average ticket price for the three
months ended June 30, 1999 increased 17.3% to $2.90 compared to the prior
comparable period. Domestic per capita concession revenues for the fiscal three
months ended June 30, 1999 decreased 1.1% to $1.91 compared to the prior
comparable period. International per capita concession revenue for the three
months ended June 30, 1999 increased 22.9% to $1.64 compared to the three months
ended June 30, 1998.

Film rental and booking costs for the three months ended June 30, 1999 increased
9.7% to $2,902,221 compared to $2,645,292 for the previous fiscal year's first
quarter. As a percentage of admission revenues, film rental and booking costs
increased to 57.4% for the three months ended June 30, 1999 from 54.4% for the
prior comparable period, due to the timing and terms of new releases in this
year's first quarter compared to the prior year.

Cost of concession supplies for the three months ended June 30, 1999 decreased
40.6% to $375,812 from $632,593 for the previous year. As a percentage of
concession revenues, cost of concession supplies decreased to 18.0% from 30.6%
in the three months ended June 30, 1999 compared to the previous year, due to
the termination of concession lease agreements with PCI, the Company's former
primary concession vendor. As of June 15, 1998, the Company ceased the purchase
of concession supplies and services from PCI and began purchasing concessions
supplies on a competitive basis.

Theater operating expenses for the three months ended June 30, 1999 increased
2.8% to $3,046,044 compared to $2,964,385 for the previous year. This increase
was due, in part, to increases in federally mandated minimum wages. As a
percentage of total revenues, theater operating expenses decreased 0.1% to 41.7%
for the three months ended June 30, 1999 compared to 41.8% for the prior year.

Selling, general and administrative expenses for the three months ended June 30,
1999 decreased 0.3% to $732,784 compared to $735,222 for the previous year. As a
percentage of total revenues, selling, general and administrative costs
decreased to 10.0% from 10.4%.

Depreciation and amortization for the three months ended June 30, 1999 increased
12.2% to $597,127 compared to $532,208 for the previous year, due, in part, to
amortization of goodwill associated with the purchase of the remaining 25%
equity interest in the Company's Mexican subsidiary in the third quarter of
fiscal year 1999.

Interest expense for the fiscal three months ended June 30, 1999 increased 21.1%
to $93,016 compared to $76,834 for the previous year. This increase is primarily
due to the amortization of fees related to the Company's line of credit.


<PAGE>   9

Interest income for the three months ended June 30, 1999 decreased to $12,602
from $39,420 for the three months ended June 30, 1998. This decrease is
attributable to changes in cash balances.

As a result of the above factors, the net loss for the three months ended June
30, 1999 decreased 6.5% to $429,030 from $458,736 for the three months ended
June 30, 1998.

LIQUIDITY AND CAPITAL RESOURCES

The Company's revenues are collected in cash, principally through box office
admissions and concession sales. Because its revenues are received in cash prior
to the payment of related expenses, the Company has an operating "float" which
partially finances its operations.

The Company's capital requirements arise principally in connection with new
theater openings and acquisitions of existing theaters. In the past, new theater
openings have been financed with internally generated cash flow, long-term debt
financing or leasing arrangements of facilities and equipment, the offering to
the public of equity securities and the private placement of convertible
debentures. During fiscal 1998, however, the Company determined that it lacked
the resources necessary to finance its current capital obligations through
traditional sources and sought additional capital through alternative financing
sources. On September 23, 1997, the Company signed the CAP Agreement for CAP to
acquire a majority equity interest in the Company through a $15 million purchase
of newly issued shares of the Company's Common Stock. Following stockholder
approval, the Equity Financing transaction was completed on December 15, 1997.

Pursuant to the CAP Agreement, CAP purchased 2,526,352 shares of Common Stock
for a purchase price of $5.94 per share. CAP also received, at closing, warrants
to purchase 232,947 shares of Common Stock at an exercise price of $5.94 per
share. Pursuant to the terms of the CAP Agreement, the Company has and continues
to be obligated to issue Adjustment Shares to CAP. The number of Adjustment
Shares to be issued is based upon (i) the recognition of any liabilities not
disclosed as of August 31, 1997, (ii) certain expenses incurred and paid by the
Company in connection with the contemplated transactions, (iii) any negative
cash flow incurred by the Company during the period commencing August 31, 1997
and ending December 15, 1997, and (iv) operating losses experienced by, or costs
of closing, the Company's Plaza Americana 10 facility in Tijuana (now in full
operation and achieving operating profits) and San Bernardino Facility (still in
development). The measurement of the operating losses and/or closing costs for
the two facilities is cumulative, calculated in the aggregate and will take
place on the earlier to occur of the closing of each such facility or December
15, 2000. The Company issued 193,037 Adjustment Shares to CAP pursuant to the
terms of the CAP Agreement, in September 1998. To the extent there are (a)
operating losses at the Company's Tijuana and San Bernardino facilities,
calculated in the aggregate, for the three-year period ended December 15, 2000,
and (b) expenditures in connection with the discovery of liabilities, or defense
and/or settlement of claims, in either case relating to periods prior to August
31, 1997, the Company will be obligated to issue additional Adjustment Shares.

The Company leases seven theater properties and various equipment under
non-cancelable operating lease agreements which expire through 2021 and require
various minimum annual rentals. At June 30, 1999, the aggregate future minimum
lease payments due under non-cancelable operating leases was approximately
$86,500,000. In addition, the Company has signed a lease agreement for a
20-screen Ultraplex theater in San Bernardino, California and for the expansion
by 4 screens of an existing theater in Riverside, California. The lease for the
San Bernardino Ultraplex will require expected minimum rental payments
aggregating approximately $40,700,000 over the 25-year life of the lease. The
lease for the Riverside expansion will require expected minimum rental payments
aggregating approximately $9,300,000 over the 22-year life of the lease.
Accordingly, existing minimum lease commitments as of March 31, 1999 plus those
expected minimum commitments for the proposed theater location and theater
expansion, would aggregate minimum lease commitments of approximately
$136,500,000. Under the terms of the San Bernardino lease, the Company is
obligated to construct and equip the theater building. Costs to the Company to
complete and equip the San Bernardino Facility are estimated at approximately
$3,800,000. All necessary zoning and similar approvals have been obtained from
the City of San Bernardino, and the landlord has committed under the lease to
make available a tenant allowance of approximately $9,200,000 to reimburse the
Company for a portion of the cost of constructing and equipping the complex.
While the landlord has financing commitments in place to fund its tenant
improvement allowance to the Company, its ability to fund the tenant improvement
allowance is dependant upon its lender adhering to the terms of their financing
commitments. Therefore, there can be no assurance that the Company will be able
to receive adequate funds from the landlord to complete the construction of the
project. The Company has executed a fixed-price construction contract with a
general contractor, for the construction of the theater project. The Company is
obligated to pay the contractor the full amount due under the


<PAGE>   10
contract whether or not the Company receives reimbursement from the landlord.
In addition, the Company's lease obligations with respect to the San Bernardino
Facility are contingent upon the completion and acceptance of the theater. Under
the terms of the Riverside expansion lease amendment, the Company's obligation
with respect to constructing and equipping the theater is estimated at
approximately $1,500,000.

The Company has had significant net losses in each fiscal year of its
operations, including net losses of $1,586,372 and $7,932,011 and in the fiscal
years ended March 31, 1999 and 1998, respectively. There can be no assurance as
to whether or when the Company will achieve profitability. While the Company
believes it could attain profitability with its current operations, any
substantial profitability will depend upon numerous factors including the
Company's ability to continue reducing costs and expand through the addition of
new screens and theaters.

The ability of the Company to expand through the development of new theaters,
the expansion of existing theaters or the acquisition of established theaters is
contingent upon numerous factors including the Company's ability to secure new,
third party financing. In this regard, the Company signed on October 19, 1998, a
$15 million Revolving Credit Agreement (the "Revolving Credit Facility") with a
senior, secured lender. The terms of the facility were amended in March 1999.
This facility will be used primarily to finance the Company's future
developments in accordance with the terms and conditions of the Revolving Credit
Facility. The Company has borrowed $1,000,000 against this facility in June 1999
and has used the facility to secure two standby letters of credit, with initial
terms of one year, totaling $2,275,000, issued in accordance with the terms of
its lease (as amended) on the San Bernardino 20-screen facility, currently under
construction. Commitment and other fees associated with the Revolving Credit
Facility and the standby letters of credit, totaling approximately $380,000, are
being amortized over their respective terms. The Revolving Credit Facility is
subject to various positive and negative covenants. The Company is in compliance
with these covenants as of June 30, 1999.

During the three months ended June 30, 1999, the Company generated cash of
$492,745 from operating activities, as compared to $416,168 for the three months
ended June 30, 1998. Reductions in the cost of concession supplies have been
offset by increases in film rental costs.


During the three months ended June 30, 1999, the Company used cash in investing
activities of $1,019,987 as compared to $281,638 for the three months ended June
30, 1998. The increase is due to construction in progress for the 20-screen
Ultraplex in San Bernardino, California.

During the three months ended June 30, 1999, the Company provided net cash of
$948,040 from financing activities, as compared to using net cash of $227,960
for the three months ended June 30, 1998. The cash provided in the three months
ended June 30, 1999 related to the drawdown of $1,000,000 against the Company's
Revolving Credit Facility, offset in part by principal payments on long-term
debt and capital lease obligations. The cash used in the three months ended June
30, 1998 related to principal repayments on long-term debt and capital lease
obligations.

At June 30, 1999, the Company held cash, cash equivalents and working capital in
the amounts of $2,641,194 and $540,863, respectively. Management believes that
cash and cash equivalents, working capital and the $15 million Revolving Credit
Facility will be adequate to fund the existing operations and capital
requirements of the Company during the next twelve months.

As of March 31, 1999, the Company had net operating loss carryforwards ("NOLs")
of approximately $13,250,000 and $6,500,000 for Federal and California income
tax purposes, respectively. The Federal NOLs are available to offset future
years taxable income, and they expire in 2006 through 2019 if not utilized prior
to that time. The California NOLs are available to offset future years taxable
income, and they expire in 1999 through 2004 if not utilized prior to that time.
The annual utilization of NOLs will be limited in accordance with restrictions
imposed under the Federal and state laws as a result of changes in ownership.
The Company's initial public offering and certain other equity transactions
resulted in an "ownership change" as defined in Section 382 of the Internal
Revenue Code of 1986, as amended (the "Code"). As a result, the Company's use of
its net operating loss carryforwards to offset taxable income in any post-change
period will be subject to certain specified annual limitations.

At March 31, 1999, the Company has total net deferred income tax assets in
excess of $5,900,000. Such potential income tax benefits, a significant portion
of which relates to the NOLs discussed above, have been subjected to a 100%
valuation allowance since realization of such assets is not "more likely than
not" in light of the Company's




<PAGE>   11

recurring losses from operations.

Due to the absence of two market makers for its Redeemable Warrants (LUXYW), the
Company has been notified by NASDAQ that these warrants were delisted effective
December 14, 1998. These warrants may trade on the Over-The-Counter Market, upon
application by a market maker.


SEASONALITY

The Company's revenues have been seasonal, coinciding with the timing of major
releases of motion pictures by the major distributors. Generally, the most
marketable motion pictures are released during the summer and the Thanksgiving
through year-end holiday season. The unexpected emergence of a hit film during
other periods can alter this trend. The timing of such releases can have a
significant effect on the Company's results of operations, and the results of
one quarter are not necessarily indicative of results for subsequent quarters.

YEAR 2000

The Company has performed a review of its computer applications, including
software and hardware, related to their continuing functionality for the year
2000 and beyond. Based on this review, the Company does not believe that it has
material exposure with respect to the year 2000 issue in regards to its computer
applications. The Company has implemented new ticketing systems and concessions
systems at each of its locations (an initiative unrelated to year 2000). These
systems are certified as year 2000 compliant. Management believes that the
Company is not dependent on any other internal computer applications for its day
to day operations. The Company is communicating via questionnaire with third
parties with whom it has a material relationship to assess its risk with respect
to year 2000 issues. This assessment is not complete, in particular because the
Company has not completed its inquiries of its primary film distributors.
However, the Company is not aware at this time of any material year 2000 issues
with respect to its dealings with such third parties.The historical costs to the
Company for its year 2000 preparations have been nominal, future costs are not
yet known due to the Company's ongoing assessments and the Company has not
deferred or delayed any projects or expenditures in anticipation of any year
2000 issues. The Company believes that its worst case scenario for the change to
year 2000 would be a disruption of film distribution to the Company. Such a
disruption could have a material impact on the Company and its results of
operations. The Company is in the process of developing and testing a
contingency plan to address any year 2000 issues such as disruption in film
distribution. Upon completion of the Company's assessment of its year 2000
readiness, in particular the completion of its assessment of third party issues,
the Company will finalize its contingency plan. The Company believes that its
contingency plan will be finalized and tested prior to September 30, 1999.

CURRENCY FLUCTUATIONS

The Company is subject to the risks of fluctuations in the Mexican Peso with
respect to the U.S. dollar. These risks are heightened because revenues in
Mexico are generally collected in Mexican Pesos, but the theater lease payments
are denominated in U.S. dollars. While the Company does not believe it has been
materially adversely effected by currency fluctuations to date, there can be no
assurance it will not be so affected in the future and it has taken no steps to
guard against these risks.


                          PART II -- OTHER INFORMATION

ITEM 1 -- LEGAL PROCEEDINGS

On June 17, 1998, The Clark Real Estate Group, Inc. sued the Company in San
Diego Superior Court, alleging that the Company breached a 50-year lease
relating to commercial real property located in the Rancho Del Rey Business
Center consisting of approximately 35,000 square feet. The complaint alleges
that the lease was terminated as a result of the Company's failure to perform
and seeks damages of $1.25 million. The Company intends to vigorously defend
this action. Management believes the Company's termination of the lease in
question was in accordance with its terms, however there is no assurance that
the Company ultimately will prevail in this action. The Company also understands
that the landlord has already leased the property to another tenant which the


<PAGE>   12

Company believes would mitigate all or a portion of the claimed damages.
Therefore, based on the aforementioned assumptions, management believes that the
ultimate outcome of this matter will not have a material adverse impact on the
Company's financial position or results of operations.

In addition, from time to time the Company is involved in routine litigation and
proceedings in the ordinary course of its business. The Company is not currently
involved in any other pending litigation matters, which the Company believes
would have a material adverse effect on the Company.

ITEM 2 -- CHANGES IN SECURITIES

ONE-FOR-SEVEN REVERSE STOCK SPLIT

The Company completed a one-for-seven reverse stock split of its Common Stock,
effective December 2, 1998. The reverse stock split affects the Company's Common
Stock and all options and warrants that are convertible into the Company's
Common Stock. The number of shares of the Company's Common Stock outstanding
prior to the reverse stock split was 27,054,902 and after the reverse stock
split is 3,864,986.

The reverse stock split also amends the terms of the Company's Redeemable
Warrants and Class B Redeemable Warrants. After giving effect to the reverse
stock split, the number of outstanding and issuable Redeemable Warrants for
Common Stock, with a maturity date of February 6, 2000 under the trading symbol
"LUXYW," remains at 4,648,562. The total number of shares of Common Stock for
which such warrants will be exercisable is reduced, however, to approximately
1,568,704 shares from 10,980,833 shares prior to the reverse stock split. The
number of shares of Common Stock exercisable per each warrant is reduced to
0.33746 shares per warrant from 2.36220 shares per warrant prior to the reverse
stock split. The price per share upon exercise of the warrants increases to
$17.78, compared to $2.54 prior to the reverse stock split.

After giving effect to the reverse stock split, the number of outstanding and
issuable Class B Redeemable Warrants for Common Stock, with a maturity date of
September 15, 2001 under the trading symbol "LUXYZ," remain at 226,438
outstanding. The total number of shares of Common Stock for which such warrants
will be exercisable is reduced to approximately 76,183 shares from 533,278
shares prior to the reverse stock split. The number of shares of Common Stock
exercisable per each Class B warrant is reduced to 0.33644 shares per warrant
from 2.35507 shares per warrant prior to the stock split. The price per share
upon exercise of the warrants increases to $19.32, compared to $2.76 prior to
the reverse stock split.

ITEM 3 -- DEFAULTS IN SENIOR SECURITIES

        None

ITEM 4 -- SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS

        None

ITEM 5 -- OTHER INFORMATION

        None

ITEM 6 -- EXHIBITS AND REPORTS ON FORM 8-K

  (a)   EXHIBITS

        Item 27.              Financial Data Schedule

  (b)   REPORTS ON FORM 8-K

        None

<PAGE>   13

SIGNATURES

In accordance with the requirements of the Exchange Act, the Registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.

Dated: July 16, 1999

                                        CinemaStar Luxury Theaters, Inc.


                                        by: /s/  Jack R. Crosby
                                            ------------------------------------
                                            Jack R. Crosby
                                            Chairman and Chief Executive Officer
                                            (principal executive officer)


                                        by: /s/   Norman Dowling
                                            ------------------------------------
                                            Norman Dowling
                                            Vice President and Chief Financial
                                            Officer (principal financial officer
                                            and principal accounting officer)