CinemaStar Luxury Theaters Reports Strong First Quarter Revenue Growth.

SAN DIEGO--(BUSINESS WIRE)--Aug. 15, 1997--CinemaStar Luxury Theaters Inc. (Nasdaq:LUXY) Friday reported revenues of $5.8 million for its first fiscal quarter ended June 30, 1997, up 35 percent from $4.3 million a year ago.

The increase reflects significant growth in theater attendance from a greater number of screens in operation, including the company's newly expanded 13-screen Ultraplex theater in Oceanside, Calif.,and two new Ultraplex entertainment centers in Riverside, Calif.

However, the company reported a first quarter net loss of $878,897, compared with a net loss of $993,685 for the corresponding quarter last year. On a per-share basis, calculated on 25 percent more shares outstanding, the company's net loss for the quarter was $0.11 per share, compared with $0.16 per share a year ago.

For the first quarter, admissions revenue increased 32 percent to $3,915,058, compared with $2,963,529. Concessions revenue rose 43 percent to $1,719,006, vs. $1,202,922 a year ago.

John Ellison Jr., president and chief executive officer, noted that the number of new screens in operation for the first quarter has increased to 64 from 44 at the end of the fiscal year 1996, reflecting a year of expansion in underserved markets. Five additional screens were added two days after the end of the quarter, bringing the total to 69 screens. Ellison added that cash flow from operating activities was a positive $170,000.

"Our goal continues to be the development of luxury theater complexes in those areas where there is a need to fulfill the viewing public's demand for a quality filmgoing experience," Ellison said. Separately, the company announced that it is continuing active discussions with a group of investors led by Rust Capital Ltd., an Austin, Texas venture capital firm, to complete an agreement allowing Rust to purchase newly issued shares of CinemaStar's common stock for $15 million. A previous letter of intent with Rust has expired, but the parties are negotiating an agreement. No assurance can be given that an agreement will be reached.

CinemaStar Luxury Theaters, founded in 1989, operates seven first-run movie theaters, with a total of 69 screens in Southern California. CinemaStar theaters feature high quality projection and sound capabilities, including LucasFilm THX sound environment systems in most auditoriums, along with luxury amenities such as high-back reclining seats and extra wide aisles between seat rows. -0-

The information contained in this news release contains certain forward-looking statements that involve risk and uncertainties, such as the statements of the company's plan, objectives, expectations and intentions. The company's actual results could differ materially from those indicated by such statements as a result of various factors, including those discussed in the company's Form 10-KSB and Form 10-QSB/A on file with the Securities and Exchange Commission. -0-

                       CINEMASTAR LUXURY THEATERS
                            Statement of Income


                         Three Months Ended             Year Ended
                              June 30,                   March 31,
                            (unaudited)                  (audited)
                         1997          1996            1997     1996

Total revenues      $5,752,733     $4,260,403    $19,631,621 $11,524,740

Total costs and
 expenses            6,451,314      4,128,503     21,201,275  11,863,275

Operating loss        (698,581)       131,900     (1,569,654)   (338,535)


Other income (expense):

Non-cash interest
 expense related
 to convertible
 debentures                 --       (977,568)    (2,048,997)         --
Interest expense            --             --       (678,041)   (400,966)
Other expense         (186,869)      (150,661)       (43,018)         --
Interest income          6,553          2,644         36,940     102,516

Total other expense   (180,316)    (1,125,585)    (2,733,116)   (298,450)

Loss before provision
 for income taxes     (878,897)      (993,685)    (4,302,770)   (636,985)
Provision for income
 taxes                      --             --         (1,600)     (1,600)

Net loss            $ (878,897)    $ (993,685)  $ (4,304,370) $ (638,585)


Net loss per common
 share              $     (.11)    $     (.16)  $       (.61) $     (.10)

Weighted average number of
 common shares and share
 equivalents
 outstanding         7,790,747      6,254,000      7,099,000   6,200,000

CONTACT: CinemaStar Luxury Theaters Inc., San Diego

John Ellison Jr. or Alan Grossberg, 619/630-2011

or

Pondel Parsons & Wilkinson

Craig Parsons/Michael Pollock, 310/207-9300