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UNITED STATES
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, 2002

OR



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

Commission File Number: 000-26125

RUBIOS RESTAURANTS, INC.
(Exact Name of Registrant as Specified in Its Charter)

|                                                                        |  |                                                   
|----------------------------------------------------------------------- |  | --------------------------------------------------
|DELAWARE
(State or Other Jurisdiction of
Incorporation or Organization) |  | 33-0100303
(I.R.S. Employer Identification Number)

1902 WRIGHT PLACE, SUITE 300, CARLSBAD, CALIFORNIA 92008
(Address of Principal Executive Offices)

(760) 929-8226
(Registrants Telephone Number, Including Area Code)

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.

(1) Yes   [X]     No   [   ]
(2) Yes   [X]     No   [   ]


As of August 1, 2002 there were 9,052,258 shares of the Registrants common
stock, par value $0.001 per share, outstanding.



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TABLE OF CONTENTS



|                                |                                                                                               |                                                        |  |  |  |  |  | 
|------------------------------- | --------------------------------------------------------------------------------------------- | ------------------------------------------------------ |  |  |  |  |  | 
|PART I   FINANCIAL INFORMATION
|                                | ITEM 1. FINANCIAL STATEMENTS                                                                 
|                                |                                                                                               | CONSOLIDATED BALANCE SHEETS                           
|                                |                                                                                               | CONSOLIDATED STATEMENTS OF OPERATIONS  UNAUDITED     
|                                |                                                                                               | CONSOLIDATED STATEMENTS OF CASH FLOWS  UNAUDITED     
|                                |                                                                                               | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  UNAUDITED
|                                | Item 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|                                | Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                           
|PART II  OTHER INFORMATION    
|                                | Item 1. LEGAL PROCEEDINGS                                                                    
|                                | Item 2. CHANGES IN SECURITIES AND USE OF PROCEEDS                                            
|                                | Item 3. DEFAULTS UPON SENIOR SECURITIES                                                      
|                                | Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                                  
|                                | Item 5. OTHER INFORMATION                                                                    
|                                | Item 6. EXHIBITS AND REPORTS ON FORM 8-K                                                     
|SIGNATURES                     
|EXHIBIT 10.1                   
|EXHIBIT 10.2                   
|EXHIBIT 10.3                   
|EXHIBIT 99.1                   



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RUBIOS RESTAURANTS, INC.

TABLE OF CONTENTS

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|PART I   |  | FINANCIAL INFORMATION                                                                 |  |                                                                                                                                                                             |    |     
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|Item 1.  |  | Financial Statements                                                                  |  |                                                                                                                                                                             |    |     
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|         |  |                                                                                       |  | Consolidated Balance Sheets at June 30, 2002 (unaudited)
and December 30, 2001                                                                                              |    |      | 3  | 
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|         |  |                                                                                       |  | Consolidated Statements of Operations (unaudited) for the
thirteen weeks ended June 30, 2002 and July 1, 2001 and
the twenty-six weeks ended June 30, 2002 and July 1, 2001 |    |      | 4  | 
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|         |  |                                                                                       |  | Consolidated Statements of Cash Flows (unaudited) for the
twenty-six weeks ended June 30, 2002 and July 1, 2001                                                             |    |      | 5  | 
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|         |  |                                                                                       |  | Notes to Consolidated Financial Statements (unaudited)                                                                                                                      |    |      | 6  | 
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|Item 2.  |  | Managements Discussion and Analysis of Financial Condition and
Results of Operations |  |                                                                                                                                                                             | 11 |     
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|Item 3.  |  | Quantitative and Qualitative Disclosures About Market Risk                            |  |                                                                                                                                                                             | 26 |     
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|PART II. |  | OTHER INFORMATION                                                                     |  |                                                                                                                                                                             |    |     
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|Item 1.  |  | Legal Proceedings                                                                     |  |                                                                                                                                                                             | 27 |     
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|Item 2.  |  | Changes in Securities and Use of Proceeds                                             |  |                                                                                                                                                                             | 27 |     
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|Item 3.  |  | Defaults Upon Senior Securities                                                       |  |                                                                                                                                                                             | 27 |     
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|Item 4.  |  | Submission of Matters to a Vote of Security Holders                                   |  |                                                                                                                                                                             | 27 |     
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|Item 5.  |  | Other Information                                                                     |  |                                                                                                                                                                             | 28 |     
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|Item 6.  |  | Exhibits and Reports on Form 8-K                                                      |  |                                                                                                                                                                             | 28 |     
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|         |  |                                                                                       |  | Signatures                                                                                                                                                                  |    |      | 29 | 

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PART I   FINANCIAL INFORMATION




ITEM 1. FINANCIAL STATEMENTS




RUBIOS RESTAURANTS, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)

|                                       |                                                                                                                                                     |                            |        |        |        |             |        |              |        |  |  | 
|-------------------------------------- | --------------------------------------------------------------------------------------------------------------------------------------------------- | -------------------------- | ------ | ------ | ------ | ----------- | ------ | ------------ | ------ |  |  | 
|                                       |                                                                                                                                                     |                            |        |        |        | June 30,    |        | December 30,
|                                       |                                                                                                                                                     |                            |        |        |        | 2002        |        | 2001        
|                                       |                                                                                                                                                     |                            |        |        |        |             |        |             
|                                       |                                                                                                                                                     |                            |        |        |        | (unaudited) |        | (see Note)  
|ASSETS                                 |                                                                                                                                                     |                            |        |        |        |             |        |             
|CURRENT ASSETS:                        |                                                                                                                                                     |                            |        |        |        |             |        |             
|                                       | Cash and cash equivalents                                                                                                                           |                            | $      | 7,302  |        |             | $      | 4,710        |       
|                                       | Short-term investments                                                                                                                              |                            |        | 1,994  |        |             |        | 1,302        |       
|                                       | Income taxes receivable                                                                                                                             |                            |        |       |        |             |        | 798          |       
|                                       | Other receivables                                                                                                                                   |                            |        | 515    |        |             |        | 673          |       
|                                       | Inventory                                                                                                                                           |                            |        | 1,059  |        |             |        | 1,453        |       
|                                       | Prepaid expenses                                                                                                                                    |                            |        | 1,963  |        |             |        | 736          |       
|                                       |                                                                                                                                                     |                            |        |        |        |             |        |              |       
|                                       |                                                                                                                                                     | Total current assets       |        |        | 12,833 |             |        |              | 9,672  | 
|                                      
|INVESTMENTS                            |                                                                                                                                                     |                            |       |        |        |             | 367    |             
|PROPERTY  NET                         |                                                                                                                                                     |                            | 34,880 |        |        |             | 35,911 |             
|OTHER ASSETS                           |                                                                                                                                                     |                            | 301    |        |        |             | 353    |             
|DEFERRED INCOME TAXES                  |                                                                                                                                                     |                            | 3,447  |        |        |             | 4,346  |             
|                                       |                                                                                                                                                     |                            |        |        |        |             |        |             
|TOTAL                                  |                                                                                                                                                     | $                          | 51,461 |        |        | $           | 50,649 |             
|                                       |                                                                                                                                                     |                            |        |        |        |             |        |             
|LIABILITIES AND STOCKHOLDERS EQUITY   |                                                                                                                                                     |                            |        |        |        |             |        |             
|CURRENT LIABILITIES:                   |                                                                                                                                                     |                            |        |        |        |             |        |             
|                                       | Accounts payable                                                                                                                                    |                            | $      | 1,690  |        |             | $      | 3,005        |       
|                                       | Accrued expenses and other liabilities                                                                                                              |                            |        | 4,215  |        |             |        | 3,634        |       
|                                       | Store closure reserve                                                                                                                               |                            |        | 1,280  |        |             |        | 1,496        |       
|                                       | Line of credit                                                                                                                                      |                            |        | 1,000  |        |             |        | 1,000        |       
|                                       | Income taxes payable                                                                                                                                |                            |        | 267    |        |             |        |             |       
|                                       | Deferred income taxes                                                                                                                               |                            |        | 211    |        |             |        | 214          |       
|                                       |                                                                                                                                                     |                            |        |        |        |             |        |             
|                                       |                                                                                                                                                     | Total current liabilities  |        |        | 8,663  |             |        |              | 9,349  | 
|                                      
|STORE CLOSURE RESERVE                  |                                                                                                                                                     |                            | 2,376  |        |        |             | 2,981  |             
|DEFERRED RENT                          |                                                                                                                                                     |                            | 1,781  |        |        |             | 1,608  |             
|DEFERRED FRANCHISE REVENUE             |                                                                                                                                                     |                            | 59     |        |        |             | 87     |             
|                                       |                                                                                                                                                     |                            |        |        |        |             |        |             
|                                       |                                                                                                                                                     | Total liabilities          |        |        | 12,879 |             |        |              | 14,025 | 
|                                       |                                                                                                                                                     |                            |        |        |        |             |        |             
|COMMITMENTS AND CONTINGENCIES (NOTE 5) |                                                                                                                                                     |                            |        |        |        |             |        |             
|STOCKHOLDERS EQUITY:                  |                                                                                                                                                     |                            |        |        |        |             |        |             
|                                       | Preferred stock, $.001 par value, 5,000,000
shares authorized, no shares issued or
outstanding                                                      |                            |        |       |        |             |        |             |       
|                                       | Common stock, $.001 par value, 75,000,000
shares authorized, 9,023,134 issued and
outstanding in 2002, and 8,922,786 issued
and outstanding in 2001 |                            |        | 9      |        |             |        | 9            |       
|                                       | Paid-in capital                                                                                                                                     |                            |        | 41,659 |        |             |        | 41,441       |       
|                                       | Deferred compensation                                                                                                                               |                            |        | 407    |        |             |        | 217          |       
|                                       | Accumulated other comprehensive income                                                                                                              |                            |        | 1      |        |             |        | 6            |       
|                                       | Accumulated deficit                                                                                                                                 |                            |        | (3,494 | )      |             |        | (5,049       | )     
|                                       |                                                                                                                                                     |                            |        |        |        |             |        |             
|                                       |                                                                                                                                                     | Total stockholders equity |        |        | 38,582 |             |        |              | 36,624 | 
|                                       |                                                                                                                                                     |                            |        |        |        |             |        |             
|TOTAL                                  |                                                                                                                                                     | $                          | 51,461 |        |        | $           | 50,649 |             
|                                       |                                                                                                                                                     |                            |        |        |        |             |        |             

Note: The balance sheet as of December 30, 2001 is derived from audited
consolidated financial statements and is in accordance with accounting
principles generally accepted in the United States of America. Entire notes
for the audited period are not included in this report.

See notes to consolidated financial statements-unaudited.

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RUBIOS RESTAURANTS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS  UNAUDITED
(In thousands, except per share data)

|                                                 |                                       |                              |        |                |    |                |        |          |    |         |        |        |    |   |        |        |     | 
|------------------------------------------------ | ------------------------------------- | ---------------------------- | ------ | -------------- | -- | -------------- | ------ | -------- | -- | ------- | ------ | ------ | -- | - | ------ | ------ | --- | 
|                                                 |                                       |                              |        | 13 Weeks Ended |    | 26 Weeks Ended
|                                                 |                                       |                              |        |                |    |               
|                                                 |                                       |                              |        | June 30,       |    | July 1,        |        | June 30, |    | July 1,
|                                                 |                                       |                              |        | 2002           |    | 2001           |        | 2002     |    | 2001   
|                                                 |                                       |                              |        |                |    |                |        |          |    |        
|REVENUE:                                         |                                       |                              |        |                |    |                |        |          |    |         |        |        |    |   |        |       
|                                                 | Restaurant sales                      |                              | $      | 30,607         |    |                | $      | 28,849   |    |         | $      | 60,450 |    |   | $      | 55,379 |    
|                                                 | Franchise and licensing
revenue       |                              |        | 94             |    |                |        | 63       |    |         |        | 129    |    |   |        | 111    |    
|                                                 |                                       |                              |        |                |    |                |        |          |    |         |        |        |    |   |        |       
|TOTAL REVENUE                                    |                                       |                              | 30,701 |                |    |                | 28,912 |          |    |         | 60,579 |        |    |   | 55,490 |       
|                                                 |                                       |                              |        |                |    |                |        |          |    |         |        |        |    |   |        |       
|COSTS AND EXPENSES:                              |                                       |                              |        |                |    |                |        |          |    |         |        |        |    |   |        |       
|                                                 | Cost of sales                         |                              |        | 8,248          |    |                |        | 7,878    |    |         |        | 16,579 |    |   |        | 15,356 |    
|                                                 | Restaurant labor, occupancy
and other |                              |        | 16,726         |    |                |        | 15,846   |    |         |        | 33,481 |    |   |        | 31,225 |    
|                                                 | General and administrative
expenses   |                              |        | 2,481          |    |                |        | 2,502    |    |         |        | 5,189  |    |   |        | 5,219  |    
|                                                 | Depreciation and amortization         |                              |        | 1,315          |    |                |        | 1,310    |    |         |        | 2,599  |    |   |        | 2,529  |    
|                                                 | Pre-opening expenses                  |                              |        | 3              |    |                |        | 93       |    |         |        | 93     |    |   |        | 234    |    
|                                                 | Loss on disposal/sale of
property     |                              |        | 40             |    |                |        | 1        |    |         |        | 39     |    |   |        | 1      |    
|                                                 |                                       |                              |        |                |    |                |        |          |    |         |        |        |    |   |        |       
|TOTAL COSTS AND EXPENSES                         |                                       |                              | 28,813 |                |    |                | 27,630 |          |    |         | 57,980 |        |    |   | 54,564 |       
|                                                 |                                       |                              |        |                |    |                |        |          |    |         |        |        |    |   |        |       
|OPERATING INCOME                                 |                                       |                              | 1,888  |                |    |                | 1,282  |          |    |         | 2,599  |        |    |   | 926    |       
|                                                 |                                       |                              |        |                |    |                |        |          |    |         |        |        |    |   |        |       
|OTHER (EXPENSE) INCOME:                          |                                       |                              |        |                |    |                |        |          |    |         |        |        |    |   |        |       
|                                                 | Interest and investment income        |                              |        | 24             |    |                |        | 70       |    |         |        | 56     |    |   |        | 188    |    
|                                                 | Interest expense                      |                              |        | (32            | )  |                |        | (22      | )  |         |        | (64    | )  |   |        | (41    | )  
|                                                 |                                       |                              |        |                |    |                |        |          |    |         |        |        |    |   |        |       
|                                                 |                                       | OTHER (EXPENSE) INCOME  NET |        |                | (8 | )              |        |          | 48 |         |        |        | (8 | ) |        |        | 147 | 
|                                                 |                                       |                              |        |                |    |                |        |          |    |         |        |        |    |   |        |       
|INCOME BEFORE INCOME TAXES                       |                                       |                              | 1,880  |                |    |                | 1,330  |          |    |         | 2,591  |        |    |   | 1,073  |       
|INCOME TAX EXPENSE                               |                                       |                              | 752    |                |    |                | 532    |          |    |         | 1,036  |        |    |   | 429    |       
|                                                 |                                       |                              |        |                |    |                |        |          |    |         |        |        |    |   |        |       
|NET INCOME                                       |                                       | $                            | 1,128  |                |    | $              | 798    |          |    | $       | 1,555  |        |    | $ | 644    |       
|                                                 |                                       |                              |        |                |    |                |        |          |    |         |        |        |    |   |        |       
|NET INCOME ATTRIBUTABLE TO COMMON
STOCKHOLDERS:  |                                       |                              |        |                |    |                |        |          |    |         |        |        |    |   |        |       
|                                                 | Basic                                 |                              | $      | 1,128          |    |                | $      | 798      |    |         | $      | 1,555  |    |   | $      | 644    |    
|                                                 |                                       |                              |        |                |    |                |        |          |    |         |        |        |    |   |        |       
|                                                 | Diluted                               |                              | $      | 1,128          |    |                | $      | 798      |    |         | $      | 1,555  |    |   | $      | 644    |    
|                                                 |                                       |                              |        |                |    |                |        |          |    |         |        |        |    |   |        |       
|NET INCOME PER SHARE:                            |                                       |                              |        |                |    |                |        |          |    |         |        |        |    |   |        |       
|                                                 | Basic                                 |                              | $      | 0.13           |    |                | $      | 0.09     |    |         | $      | 0.17   |    |   | $      | 0.07   |    
|                                                 |                                       |                              |        |                |    |                |        |          |    |         |        |        |    |   |        |       
|                                                 | Diluted                               |                              | $      | 0.12           |    |                | $      | 0.09     |    |         | $      | 0.17   |    |   | $      | 0.07   |    
|                                                 |                                       |                              |        |                |    |                |        |          |    |         |        |        |    |   |        |       
|SHARES USED IN CALCULATING NET
INCOME PER SHARE: |                                       |                              |        |                |    |                |        |          |    |         |        |        |    |   |        |       
|                                                 | Basic                                 |                              |        | 8,998          |    |                |        | 8,922    |    |         |        | 8,982  |    |   |        | 8,917  |    
|                                                 |                                       |                              |        |                |    |                |        |          |    |         |        |        |    |   |        |       
|                                                 | Diluted                               |                              |        | 9,185          |    |                |        | 9,002    |    |         |        | 9,126  |    |   |        | 8,998  |    
|                                                 |                                       |                              |        |                |    |                |        |          |    |         |        |        |    |   |        |       

See notes to consolidated financial statements-unaudited.

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RUBIOS RESTAURANTS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS  UNAUDITED
(In thousands)

|                                                   |                                                                                   |                                    |                                        |                                       |       |                |        |         |       |        |        |  
|-------------------------------------------------- | --------------------------------------------------------------------------------- | ---------------------------------- | -------------------------------------- | ------------------------------------- | ----- | -------------- | ------ | ------- | ----- | ------ | ------ | -
|                                                   |                                                                                   |                                    |                                        |                                       |       | 26 Weeks Ended
|                                                   |                                                                                   |                                    |                                        |                                       |       |               
|                                                   |                                                                                   |                                    |                                        |                                       |       | June 30,       |        | July 1,
|                                                   |                                                                                   |                                    |                                        |                                       |       | 2002           |        | 2001   
|                                                   |                                                                                   |                                    |                                        |                                       |       |                |        |        
|OPERATING ACTIVITIES:                              |                                                                                   |                                    |                                        |                                       |       |                |        |        
|                                                   | Net income                                                                        |                                    | $                                      | 1,555                                 |       |                | $      | 644     |      
|                                                   | Adjustments to reconcile net income to net cash
provided by operating activities: |                                    |                                        |                                       |       |                |        |         |      
|                                                   |                                                                                   | Depreciation and amortization      |                                        |                                       | 2,599 |                |        |         | 2,529 |       
|                                                   |                                                                                   | Deferred compensation              |                                        |                                       | 190   |                |        |         | 25    |       
|                                                   |                                                                                   | Loss on disposal/sale of property  |                                        |                                       | 39    |                |        |         | 1     |       
|                                                   |                                                                                   | Changes in assets and liabilities: |                                        |                                       |       |                |        |         |       |       
|                                                   |                                                                                   |                                    | Income taxes receivable/payable        |                                       |       | 1,065          |        |         |       | 428    |       
|                                                   |                                                                                   |                                    | Other receivables                      |                                       |       | 158            |        |         |       | 64     |       
|                                                   |                                                                                   |                                    | Inventory                              |                                       |       | 394            |        |         |       | 453    |       
|                                                   |                                                                                   |                                    | Prepaid expenses                       |                                       |       | (1,227         | )      |         |       | (265   | )     
|                                                   |                                                                                   |                                    | Other assets                           |                                       |       | 52             |        |         |       | 26     |       
|                                                   |                                                                                   |                                    | Deferred income taxes                  |                                       |       | 896            |        |         |       | 4      |       
|                                                   |                                                                                   |                                    | Accounts payable                       |                                       |       | (1,315         | )      |         |       | (1,196 | )     
|                                                   |                                                                                   |                                    | Accrued expenses and other liabilities |                                       |       | 581            |        |         |       | 158    |       
|                                                   |                                                                                   |                                    | Store closure reserve                  |                                       |       | (821           | )      |         |       |       |       
|                                                   |                                                                                   |                                    | Deferred rent                          |                                       |       | 173            |        |         |       | 145    |       
|                                                   |                                                                                   |                                    | Deferred franchise revenue             |                                       |       | (28            | )      |         |       | (34    | )     
|                                                   |                                                                                   |                                    |                                        |                                       |       |                |        |        
|                                                   |                                                                                   |                                    |                                        | Cash provided by operating activities |       |                | 4,311  |         |       |        | 2,982  |  
|                                                   |                                                                                   |                                    |                                        |                                       |       |                |        |        
|INVESTING ACTIVITIES:                              |                                                                                   |                                    |                                        |                                       |       |                |        |        
|                                                   | Purchases of property                                                             |                                    |                                        | (1,918                                | )     |                |        | (5,326  | )    
|                                                   | Proceeds from sales of property                                                   |                                    |                                        | 311                                   |       |                |        | 562     |      
|                                                   | Purchases of investments                                                          |                                    |                                        | (2,100                                | )     |                |        | (10,451 | )    
|                                                   | Sales and maturities of investments                                               |                                    |                                        | 1,770                                 |       |                |        | 14,119  |      
|                                                   |                                                                                   |                                    |                                        |                                       |       |                |        |        
|                                                   |                                                                                   |                                    |                                        | Cash used in investing activities     |       |                | (1,937 | )       |       |        | (1,096 | )
|                                                   |                                                                                   |                                    |                                        |                                       |       |                |        |        
|FINANCING ACTIVITIES:                              |                                                                                   |                                    |                                        |                                       |       |                |        |        
|                                                   | Proceeds from exercise of common stock options                                    |                                    |                                        | 218                                   |       |                |        | 45      |      
|                                                   |                                                                                   |                                    |                                        |                                       |       |                |        |        
|INCREASE IN CASH AND CASH EQUIVALENTS              |                                                                                   |                                    | 2,592                                  |                                       |       |                | 1,931  |        
|CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD   |                                                                                   |                                    | 4,710                                  |                                       |       |                | 1,311  |        
|                                                   |                                                                                   |                                    |                                        |                                       |       |                |        |        
|CASH AND CASH EQUIVALENTS AT END OF PERIOD         |                                                                                   | $                                  | 7,302                                  |                                       |       | $              | 3,242  |        
|                                                   |                                                                                   |                                    |                                        |                                       |       |                |        |        
|SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: |                                                                                   |                                    |                                        |                                       |       |                |        |        
|                                                   | Cash paid for interest                                                            |                                    | $                                      | 50                                    |       |                | $      |        |      
|                                                   | Net income tax refund received                                                    |                                    | $                                      | (875                                  | )     |                | $      |        |      

See notes to consolidated financial statements-unaudited.

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RUBIOS RESTAURANTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  UNAUDITED

1. BASIS OF PRESENTATION

The accompanying consolidated financial information has been prepared by
Rubios Restaurants, Inc. and its wholly-owned subsidiary, Rubios Restaurants
of Nevada, Inc. (collectively, the Company) without audit, in accordance with
the instructions to Form 10-Q and therefore does not include all information
and notes necessary for a fair presentation of financial position, results of
operations and cash flows in conformity with accounting principles generally
accepted in the United States of America.

UNAUDITED INTERIM FINANCIAL DATA  In the opinion of management, the
unaudited consolidated financial statements for the interim periods presented
reflect all adjustments, consisting of only normal recurring accruals,
necessary for a fair presentation of the financial position and results of
operations as of and for such periods indicated. These consolidated financial
statements and related notes should be read in conjunction with the
consolidated financial statements and related notes for the fiscal year ended
December 30, 2001 included in the Companys annual report on Form 10-K and the
review of our more critical accounting policies identified under the caption
Critical Accounting Policies in that report. Results for the interim periods
presented in this report are not necessarily indicative of results which may be
reported for any other interim period or for the entire fiscal year.

RECLASSIFICATION  Certain prior period amounts have been reclassified to
conform to the current period presentation. Specifically, the Company has
reclassified $28,000 and $46,000 of licensing revenue for the 13 and 26 weeks
ended July 1, 2001, respectively, from restaurant sales to franchise and
licensing revenue to conform to the presentation for the 13 and 26 weeks ended
June 30, 2002, respectively.

2. ASSET IMPAIRMENT AND STORE CLOSURE EXPENSE  The Company periodically
assesses its ability to recover the carrying value of its long-lived assets.
If the Company concludes that the carrying value will not be recovered based on
expected future cash flows, an impairment write-down is recorded to reduce the
asset to its estimated fair value. Impairment is reviewed at the lowest levels
for which there are identifiable cash flows that are independent of the cash
flows of other groups of assets. In the Companys circumstances, such analysis
is performed on an individual restaurant basis. For assets to be held and
used, the impairment charge is the difference between the carrying value and
the estimated fair value of the assets. For assets to be disposed of, the
impairment charge is the difference between the carrying value and the fair
value less cost to sell.

The Company makes decisions to close stores based on their cash flows and
anticipated future profitability. The Company records losses associated with
the closure of restaurants in the same quarter that the decision to close these
restaurants is made. These store closure charges primarily represent a
liability for the future lease obligations after the expected closure dates,
net of estimated sublease income, if any.

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RUBIOS RESTAURANTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  UNAUDITED (continued)

2. ASSET IMPAIRMENT AND STORE CLOSURE EXPENSE (continued)

Asset impairment and store closure expenses are estimates that the Company
has recorded based on reasonable assumptions related to these restaurant
locations at a point in time. The conditions regarding these locations may
change in
the future and could be materially affected by factors such as the Companys
ability to maintain or improve sales levels, the Companys ability to secure
subleases, the Companys success at negotiating early termination agreements
with lessors, the general health of the economy and resultant demand for
commercial property. Amounts recorded may not be sufficient and adjustments
may be necessary.

During the second half of fiscal year 2001, the Company recorded a $6.6
million charge related to the impairment of a select number of under-performing
restaurants. Additionally, the Company recorded a $4.8 million charge related
to store closures, consisting primarily of future lease obligations on these
closed stores (net of estimated sublease income, if any), severance and other
related charges, when management committed to its store closure plan during the
fourth quarter of 2001. Total charges recorded in fiscal year 2001 related to
impairment and store closures were $11.4 million.

The changes in the store closure reserve during the 26 weeks ended June
30, 2002 were as follows (in thousands):

|                                  |                             |   |              |        |           |   |      |      |            |   |       |        |  
|--------------------------------- | --------------------------- | - | ------------ | ------ | --------- | - | ---- | ---- | ---------- | - | ----- | ------ | -
|                                  |                             |   | Reserve      |        |           |   |      |      | Reserve   
|                                  |                             |   | Balance at   |        |           |   |      |      | Balance at
|                                  |                             |   | December 30, |        |           |   |      |      | June 30,  
|                                  |                             |   | 2001         |        | Net Usage |   | 2002
|                                  |                             |   |              |        |           |   |     
|Reserve for stores closed in 2001 |                             | $ | 2,800        |        |           | $ | (606 | )    |            | $ | 2,194 |       
|Reserve for stores to be closed   |                             |   | 1,150        |        |           |   | (4   | )    |            |   | 1,146 |       
|Severance and other costs         |                             |   | 527          |        |           |   | (211 | )    |            |   | 316   |       
|                                  |                             |   |              |        |           |   |      |      |            |   |       |       
|                                  | Total store closure reserve |   |              | 4,477  |           |   | $    | (821 | )          |   |       | 3,656  |  
|                                  |                             |   |              |        |           |   |      |      |            |   |       |       
|                                  | Less: current portion       |   |              | (1,496 | )         |   |      |      |            |   |       | (1,280 | )
|                                  |                             |   |              |        |           |   |      |      |            |   |       |       
|                                  | Non-current                 |   | $            | 2,981  |           |   |      |      |            |   | $     | 2,376  |  
|                                  |                             |   |              |        |           |   |      |      |            |   |       |       

In addition, the Company has decided to pursue a franchising effort on 13
selected Company-owned locations in certain regions. On April 15, 2002, the
Company completed the sale of four of its Company-owned stores in the Las
Vegas, Nevada market to a franchisee. There was no gain or loss on the sale of
the stores as they had been written down to their estimated fair value less
costs to sell as part of the 2001 fiscal year impairment write-down. Although
the leases for those locations were assigned as part of the franchise
arrangements, the Company remains contingently liable under those leases. The
Company is also actively marketing its stores in Salt Lake City, Utah, Denver,
Colorado and Tucson, Arizona for sale to qualified franchisees. During the 26
weeks ending June 30, 2002, there have been no significant changes to the
estimates used to determine the reserve balances.

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RUBIOS RESTAURANTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  UNAUDITED (continued)

3. BALANCE SHEET DETAILS as of June 30, 2002 and December 30, 2001,
respectively (in thousands):

|                                        |                                                 |   |        |         |      |   |        |         |  
|--------------------------------------- | ----------------------------------------------- | - | ------ | ------- | ---- | - | ------ | ------- | -
|                                        |                                                 |   | 2002   |         | 2001
|                                        |                                                 |   |        |         |     
|OTHER RECEIVABLES:                      |                                                 |   |        |         |      |   |        |        
|                                        | Tenant improvement receivables                  |   | $      | 175     |      |   | $      | 274     |  
|                                        | Other                                           |   |        | 340     |      |   |        | 399     |  
|                                        |                                                 |   |        |         |      |   |        |        
|Total                                   |                                                 | $ | 515    |         |      | $ | 673    |        
|                                        |                                                 |   |        |         |      |   |        |        
|INVESTMENTS:                            |                                                 |   |        |         |      |   |        |        
|                                        | Corporate bonds                                 |   | $      | 1,623   |      |   | $      | 505     |  
|                                        | Municipal bonds                                 |   |        | 371     |      |   |        | 173     |  
|                                        | Tax-free municipals                             |   |        |        |      |   |        | 900     |  
|                                        | Mortgage and asset-backed securities            |   |        |        |      |   |        | 91      |  
|                                        |                                                 |   |        |         |      |   |        |        
|                                        |                                                 |   | 1,994  |         |      |   | 1,669  |        
|                                        | Less: current portion                           |   |        | (1,994  | )    |   |        | (1,302  | )
|                                        |                                                 |   |        |         |      |   |        |        
|Non-current                             |                                                 | $ |       |         |      | $ | 367    |        
|                                        |                                                 |   |        |         |      |   |        |        
|PROPERTY  at cost:                     |                                                 |   |        |         |      |   |        |        
|                                        | Building and leasehold improvements             |   | $      | 27,769  |      |   | $      | 26,643  |  
|                                        | Equipment and furniture                         |   |        | 24,422  |      |   |        | 23,586  |  
|                                        | Construction in process and related costs       |   |        | 190     |      |   |        | 885     |  
|                                        |                                                 |   |        |         |      |   |        |        
|                                        |                                                 |   | 52,381 |         |      |   | 51,114 |        
|                                        | Less: accumulated depreciation and amortization |   |        | (17,501 | )    |   |        | (15,203 | )
|                                        |                                                 |   |        |         |      |   |        |        
|Total                                   |                                                 | $ | 34,880 |         |      | $ | 35,911 |        
|                                        |                                                 |   |        |         |      |   |        |        
|ACCRUED EXPENSES AND OTHER LIABILITIES: |                                                 |   |        |         |      |   |        |        
|                                        | Compensation                                    |   | $      | 1,383   |      |   | $      | 1,178   |  
|                                        | Sales taxes                                     |   |        | 720     |      |   |        | 807     |  
|                                        | Vacation pay                                    |   |        | 547     |      |   |        | 585     |  
|                                        | Workers compensation                            |   |        | 506     |      |   |        | 293     |  
|                                        | Other                                           |   |        | 1,059   |      |   |        | 771     |  
|                                        |                                                 |   |        |         |      |   |        |        
|Total                                   |                                                 | $ | 4,215  |         |      | $ | 3,634  |        
|                                        |                                                 |   |        |         |      |   |        |        

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RUBIOS RESTAURANTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  UNAUDITED (continued)

4. CREDIT FACILITIES

REVOLVING LINE OF CREDIT  As of June 30, 2002 and December 30, 2001, the
Company had available $10.4 million of a $12 million revolving line of credit
with a maturity date of July 2004. The credit line bears interest based on
certain leverage ratios and ranges from the lower of a bank reference rate
plus 1%  2%, or an adjusted London Interbank Offered Rate plus
2.5%  3.5%
per annum (4.38% as of June 30, 2002). The Company pays a commitment fee on
the unused portion of the line of credit. As of June 30, 2002 and December
30, 2001, the Company had borrowings of $1.0 million on the line of credit and
$0.6 million assigned to a standby letter of credit, related to the Companys
workers compensation insurance policy, that matures in October 2002.

The credit facility contains various covenants including a minimum EBITDA,
fixed charge coverage ratio, minimum interest coverage ratio, and maximum total
leverage ratio, and places restrictions on fixed asset purchases. The
revolving line of credit restricts the payment of cash dividends and other
stock redemptions or repurchases. The Companys assets collateralize
borrowings under the revolving line of credit.

5. COMMITMENTS AND CONTINGENCIES

LITIGATION  On June 28, 2001, a class action complaint was filed against
the Company in Orange County, California Superior Court by a former employee,
who worked in the position of general manager. A second similar class action
complaint was filed in Orange County, California Superior Court on December 21,
2001, on behalf of another former employee who worked in the positions of
general manager and assistant manager. The Company classifies both positions
as exempt. The former employees each purport to represent a class of former and
current employees who are allegedly similarly situated. These cases currently
involve the issue of whether employees and former employees in the general and
assistant manager positions who worked in the California restaurants during
specified time periods were misclassified as exempt and deprived of overtime
pay. In addition to unpaid overtime, these cases seek to recover waiting time
penalties, interest, attorneys fees, and other types of relief on behalf of
the current and former employees that these former employees purport to
represent.

The Company believes these cases are without merit and intends to
vigorously defend against the related claims. These cases are in the early
stages of discovery and the status of the class action certification is yet to
be determined for both suits. It is probable that the latter action may either
be stayed pending resolution of the previously described action or consolidated
into the former action. The Company is presently unable to predict the probable
outcome of these matters and the amounts of damages at issue are also unknown
at this time.

The Company is unaware of any other litigation that could have a material
adverse effect on the Companys results of operations, financial position or
business.

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RUBIOS RESTAURANTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  UNAUDITED (continued)

6. EARNINGS PER SHARE

A reconciliation of basic and diluted earnings per share in accordance
with Statement of Financial Accounting Standards (SFAS) No. 128, Earnings
Per Share, is as follows (in thousands, except per share data):

|                    |          |                                                |                                                                       |      |                |       |                |      |          |       |         |      |       |       |   |      |       |       | 
|------------------- | -------- | ---------------------------------------------- | --------------------------------------------------------------------- | ---- | -------------- | ----- | -------------- | ---- | -------- | ----- | ------- | ---- | ----- | ----- | - | ---- | ----- | ----- | 
|                    |          |                                                |                                                                       |      | 13 Weeks Ended |       | 26 Weeks Ended
|                    |          |                                                |                                                                       |      |                |       |               
|                    |          |                                                |                                                                       |      | June 30,       |       | July 1,        |      | June 30, |       | July 1,
|                    |          |                                                |                                                                       |      | 2002           |       | 2001           |      | 2002     |       | 2001   
|                    |          |                                                |                                                                       |      |                |       |                |      |          |       |        
|Numerator           |          |                                                |                                                                       |      |                |       |                |      |          |       |         |      |       |       |   |     
|                    | Basic:   |                                                |                                                                       |      |                |       |                |      |          |       |         |      |       |       |   |      |      
|                    |          | Net income attributable
to common stockholders |                                                                       | $    | 1,128          |       |                | $    | 798      |       |         | $    | 1,555 |       |   | $    | 644   |      
|                    |          |                                                |                                                                       |      |                |       |                |      |          |       |         |      |       |       |   |     
|                    | Diluted: |                                                |                                                                       |      |                |       |                |      |          |       |         |      |       |       |   |      |      
|                    |          | Net income attributable
to common stockholders |                                                                       | $    | 1,128          |       |                | $    | 798      |       |         | $    | 1,555 |       |   | $    | 644   |      
|                    |          |                                                |                                                                       |      |                |       |                |      |          |       |         |      |       |       |   |     
|Denominator         |          |                                                |                                                                       |      |                |       |                |      |          |       |         |      |       |       |   |     
|                    | Basic:   |                                                |                                                                       |      |                |       |                |      |          |       |         |      |       |       |   |      |      
|                    |          | Weighted average common
shares outstanding     |                                                                       |      | 8,998          |       |                |      | 8,922    |       |         |      | 8,982 |       |   |      | 8,917 |      
|                    | Diluted: |                                                |                                                                       |      |                |       |                |      |          |       |         |      |       |       |   |      |      
|                    |          | Effect of dilutive
securities:                 |                                                                       |      |                |       |                |      |          |       |         |      |       |       |   |      |       |      
|                    |          |                                                | Common stock options                                                  |      |                | 187   |                |      |          | 80    |         |      |       | 144   |   |      |       | 81    | 
|                    |          |                                                |                                                                       |      |                |       |                |      |          |       |         |      |       |       |   |     
|                    |          |                                                | Total weighted
average common and
potential common
shares outstanding |      |                | 9,185 |                |      |          | 9,002 |         |      |       | 9,126 |   |      |       | 8,998 | 
|                    |          |                                                |                                                                       |      |                |       |                |      |          |       |         |      |       |       |   |     
|Earnings per share: |          |                                                |                                                                       |      |                |       |                |      |          |       |         |      |       |       |   |     
|                    | Basic    |                                                | $                                                                     | 0.13 |                |       | $              | 0.09 |          |       | $       | 0.17 |       |       | $ | 0.07 |      
|                    |          |                                                |                                                                       |      |                |       |                |      |          |       |         |      |       |       |   |     
|                    | Diluted  |                                                | $                                                                     | 0.12 |                |       | $              | 0.09 |          |       | $       | 0.17 |       |       | $ | 0.07 |      
|                    |          |                                                |                                                                       |      |                |       |                |      |          |       |         |      |       |       |   |     

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Item 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

This quarterly report on Form 10-Q may contain predictions, projections,
estimates and other forward-looking statements that involve a number of risks
and uncertainties, including without limitation, those discussed below under
Risk Factors. While this outlook represents our current judgment on the
future direction of the business, such risks and uncertainties could cause
actual results to differ materially from any future performance suggested
below. We undertake no obligation to release publicly the results of any
revisions to these forward-looking statements to reflect events or
circumstances arising after the date of this quarterly report. The cautionary
statements made in this discussion and analysis should be read as applying to
all related forward-looking statements wherever they appear in this 10-Q.

OVERVIEW

We opened our first restaurant under the name Rubios, Home of the Fish
Taco in 1983. We position our restaurants in the high-quality, quick-service
Mexican food segment of the restaurant industry. Our business strategy is to
become the leading brand in this industry segment nationwide.

Rubios Restaurants, Inc. was incorporated in California in 1985 and
reincorporated in Delaware in 1997. In May 1999, we completed our initial
public offering. In late 2000 and early 2001, we started a franchise program by
entering into agreements with two franchisee groups. These two agreements
represent commitments to open 14 units, of which three units were open as of
August 1, 2002. On April 15, 2002, we completed the sale of four company-owned
stores in the Las Vegas, Nevada market to a new franchisee. We opened five
stores during the first quarter of 2002. We also closed one underperforming
store in Arizona on February 8, 2002. We plan to close one other location in
Southern California by the end of fiscal 2002. Our current expansion plan
calls for us to open approximately nine company-owned restaurants and our
franchisees to open one restaurant in fiscal year 2002. We also decided to
actively pursue several franchise groups in an effort to sell the remaining
company-owned locations in Colorado and Utah. We will continue to focus our
efforts on building our presence in our core markets in California and Arizona.

As a result of our expansion, period-to-period comparisons of our
financial results may not be meaningful. When a new unit opens, it will
typically incur higher than normal levels of food and labor costs until new
personnel gain experience. Hourly labor schedules are gradually adjusted
downward during the first three months of a restaurant opening, in order to
reach operating efficiencies similar to those at established units. In
calculating our comparable restaurant base, we introduce a restaurant into our
comparable restaurant base once it has been in operation for 15 calendar
months.

Revenues represent gross restaurant sales, less coupons and other
discounts, and franchise and licensing revenue. Cost of sales is composed of
food, beverage, and paper supply expense. Components of restaurant labor,
occupancy and other expenses include direct hourly and management wages,
bonuses, fringe benefit costs, rent and other occupancy costs, advertising and
promotion, operating supplies, utilities, maintenance and repairs, and other
operating expenses.

General and administrative expenses include all corporate and
administrative functions that support existing operations and provide
infrastructure to facilitate our future growth. Components of this category
include management, supervisory and staff salaries and employee benefits,
travel, information systems, training, corporate rent, professional and
consulting fees and franchise expense.

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Pre-opening expenses, which are expensed as incurred, consist of the costs
of hiring and training the initial workforce, travel, the cost of food used in
training, the cost of the initial stocking of operating supplies and other
direct costs related to opening a new restaurant.

On June 14, 2002, we entered into a one-year consulting agreement with
Jack Goodall, a non-employee member of our Board of Directors. Under the
consulting agreement, Mr. Goodall advises and consults with our President and
Chief Executive Officer on various issues including marketing review, real
estate review and other strategic corporate initiatives as identified by our
Board of Directors. In consideration for his services and in lieu of cash
compensation, Mr. Goodall received a non-statutory stock option to purchase an
aggregate of 50,000 registered shares of our common stock pursuant to our 1999
Stock Incentive Plan. The option is fully vested and immediately exercisable
and expires on June 14, 2004. The Board of Directors, with Mr. Goodall
recusing himself, approved the consulting agreement and the option.

CRITICAL ACCOUNTING POLICIES

The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make assumptions and estimates that can have a material impact on
a companys financial condition and results. Critical accounting policies are
those that are most important to the portrayal of a companys financial
condition and results, and that require managements most difficult, subjective
or complex judgements, often as a result of the need to make estimates about
the effect of matters that are inherently uncertain. A summary of our critical
accounting policies is set forth in our annual report on Form 10-K for the
fiscal year ended December 30, 2001 under the caption Critical Accounting
Policies.

RESULTS OF OPERATIONS

All comparisons under this heading between 2002 and 2001 refer to the
13-week period ended June 30, 2002 and the 13-week period ended July 1, 2001,
respectively, unless otherwise indicated.

Our operating results, expressed as a percentage of revenue, were as
follows:

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|                           |                                         |  |                |      |         |  |       |      | 
|-------------------------- | --------------------------------------- |  | -------------- | ---- | ------- |  | ----- | ---- | 
|                           |                                         |  | 13 Weeks Ended
|                           |                                         |  |               
|                           |                                         |  | June 30,       |      | July 1,
|                           |                                         |  | 2002           |      | 2001   
|                           |                                         |  |                |      |        
|Revenue (1)                |                                         |  | 100.0          | %    |         |  | 100.0 | %   
|Costs and expenses:        |                                         |  |                |      |         |  |       |     
|                           | Cost of sales                           |  |                | 27.0 |         |  |       | 27.3 | 
|                           | Restaurant labor, occupancy and other   |  |                | 54.5 |         |  |       | 54.9 | 
|                           | General and administrative expenses (2) |  |                | 8.1  |         |  |       | 8.7  | 
|                           | Depreciation and amortization           |  |                | 4.3  |         |  |       | 4.5  | 
|                           | Pre-opening expenses                    |  |                |     |         |  |       | 0.3  | 
|                           | Loss on disposal/sale of property       |  |                |     |         |  |       |     | 
|                           |                                         |  |                |      |         |  |       |     
|Operating income           |                                         |  | 6.1            |      |         |  | 4.3   |     
|Other (expense) income:    |                                         |  |                |      |         |  |       |     
|                           | Interest income, net                    |  |                |     |         |  |       | 0.2  | 
|                           |                                         |  |                |      |         |  |       |     
|Income before income taxes |                                         |  | 6.1            |      |         |  | 4.5   |     
|Income tax expense         |                                         |  | 2.4            |      |         |  | 1.8   |     
|                           |                                         |  |                |      |         |  |       |     
|Net income                 |                                         |  | 3.7            | %    |         |  | 2.7   | %   
|                           |                                         |  |                |      |         |  |       |     



---

|(1) |  | Includes $94,000 and $63,000 in franchise and licensing revenue for the 13
weeks ended June 30, 2002 and July 1, 2001, respectively.
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------
|   
|   
|   
|   
|(2) |  | Includes $129,000 and $130,000 in franchise expense for the 13 weeks ended
June 30, 2002 and July 1, 2001, respectively.            

13 WEEKS ENDED JUNE 30, 2002 COMPARED TO THE 13 WEEKS ENDED JULY 1, 2001

Results of operations reflect 13 weeks of operations for 134 restaurants
and a partial period of operations for four restaurants for the 13 weeks ended
June 30, 2002. Results of operations also reflect 13 weeks of operations for
130 restaurants and a partial period of operations for five restaurants for the
13 weeks ended July 1, 2001.

REVENUE. Revenue increased $1.8 million or 6.2%, to $30.7 million for the
13 weeks ended June 30, 2002 from $28.9 million for the 13 weeks ended July 1,
2001. The increase in 2002 was primarily due to sales of $1.4 million from our
five 2002 store openings, a $2.1 million increase in sales generated by a full
quarter of operations from units opened in 2001 that were not yet in our
comparable unit base, an increase in comparable store sales of $0.2 million or
0.9%, a $0.1 million increase in franchising and licensing revenue, offset by a
decrease of $1.4 million in sales at the 12 stores that have been closed and
$0.6 million for the four stores sold to a franchisee. Units enter the
comparable store base after 15 full months of operation. The increase in
comparable store sales was primarily due to a 2.2% increase in average check,
offset by a 1.3% decrease in transactions. The increase in comparable store
sales is due primarily to the success of the company-wide fajita promotion,
followed by the crispy shrimp taco promotion in San Diego, Los Angeles and
Orange Counties in California.

COST OF SALES. Cost of sales as a percentage of revenue decreased to
27.0% in the 13 weeks ended June 30, 2002 from 27.3% in the 13 weeks ended July
1, 2001. The decrease was primarily due to the elimination of certain
discounts, (0.3%), and enhanced operational controls, (0.6%), partially offset
by an increase in produce prices, (0.6%).

RESTAURANT LABOR, OCCUPANCY AND OTHER. Restaurant labor, occupancy, and
other decreased as a percentage of revenue to 54.5% for the 13 weeks ended June
30, 2002 from 54.9% in the 13 weeks ended July 1, 2001. The decrease as a
percentage of revenue is due in part to a decrease in total direct and related
labor costs of approximately 1.4%. These labor decreases were primarily due to
the closure of

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under-performing stores, (0.9%), combined with improved operational
efficiencies, (0.5%). The 1.4% labor cost decrease was offset by 0.7% increase
in advertising and a 0.3% increase in menu upgrade and concept repositioning
costs.

GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses
of $2.5 million for the 13 weeks ended June 30, 2002 were consistent with the
13 weeks ended July 1, 2001. As a percentage of revenue, general and
administrative expenses decreased to 8.1% for the 13 weeks ended June 30, 2002
from 8.7% for the 13 weeks ended July 1, 2001. The decrease as a percentage of
sales was primarily due to the leveraging of our expanding revenue base.

DEPRECIATION AND AMORTIZATION. Depreciation and amortization expenses of
$1.3 million in the 13 weeks ended June 30, 2002 were essentially flat to $1.3
million in the 13 weeks ended July 1, 2001. As a percentage of restaurant
sales, depreciation and amortization decreased to 4.3% for the 13 weeks ended
June 30, 2002 from 4.5% for the 13 weeks ended July 1, 2001.

PRE-OPENING EXPENSES. Pre-opening expenses decreased to $3,000 for the 13
weeks ended June 30, 2002 from $93,000 for the 13 weeks ended July 1, 2001. The
decrease was due to no new stores opening during the 13 weeks ended June 30,
2002.

INTEREST INCOME, NET. Net interest income (expense) fluctuated to
$(8,000) for the 13 weeks ended June 30, 2002 from $48,000 in net interest
income for the 13 weeks ended July 1, 2001, primarily due to interest expense
incurred by our borrowing on the credit line in July 2001 and the reduction in
interest rates paid on our investments. Interest income decreased to $24,000
for the 13 weeks ended June 30, 2002 from $70,000 for the 13 weeks ended June
1, 2001 primarily due to lower interest rates paid on our investments.

INCOME TAXES. The provision for income taxes for the 13 weeks ended June
30, 2002 and 13 weeks ended July 1, 2001 is based on the approximate annual
effective tax rate of 40% applied to the respective periods pretax book
income. The 40% tax rate applied to the 13 weeks ended June 30, 2002
comprises the federal and state statutory rates based on the estimated annual
effective rate on pre-tax income of $1,880,000. The 40% tax rate applied to
the 13 weeks ended July 1, 2001 comprises the federal and state statutory rates
based on the estimated annual effective rate on pre-tax income of $1,330,000.

All comparisons in the following section refer to the 26-week period ended
June 30, 2002 and the 26-week period ended July 1, 2001, respectively, unless
otherwise indicated.

Our operating results, expressed as a percentage of revenue, were as
follows:

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|                           |                                         |  |                |      |         |  |       |      | 
|-------------------------- | --------------------------------------- |  | -------------- | ---- | ------- |  | ----- | ---- | 
|                           |                                         |  | 26 Weeks Ended
|                           |                                         |  |               
|                           |                                         |  | June 30,       |      | July 1,
|                           |                                         |  | 2002           |      | 2001   
|                           |                                         |  |                |      |        
|Revenue (1)                |                                         |  | 100.0          | %    |         |  | 100.0 | %   
|Costs and expenses:        |                                         |  |                |      |         |  |       |     
|                           | Cost of sales                           |  |                | 27.4 |         |  |       | 27.7 | 
|                           | Restaurant labor, occupancy and other   |  |                | 55.3 |         |  |       | 56.3 | 
|                           | General and administrative expenses (2) |  |                | 8.6  |         |  |       | 9.4  | 
|                           | Depreciation and amortization           |  |                | 4.3  |         |  |       | 4.6  | 
|                           | Pre-opening expenses                    |  |                | 0.1  |         |  |       | 0.4  | 
|                           | Loss on disposal/sale of property       |  |                |     |         |  |       |     | 
|                           |                                         |  |                |      |         |  |       |     
|Operating income           |                                         |  | 4.3            |      |         |  | 1.6   |     
|Other income (expense):    |                                         |  |                |      |         |  |       |     
|                           | Interest income, net                    |  |                |     |         |  |       | 0.2  | 
|                           |                                         |  |                |      |         |  |       |     
|Income before income taxes |                                         |  | 4.3            |      |         |  | 1.8   |     
|Income tax expense         |                                         |  | 1.7            |      |         |  | 0.7   |     
|                           |                                         |  |                |      |         |  |       |     
|Net income                 |                                         |  | 2.6            | %    |         |  | 1.1   | %   
|                           |                                         |  |                |      |         |  |       |     



---

|(1) |  | Includes $129,000 and $111,000 in franchise and licensing revenue for the 26
weeks ended June 30, 2002 and July 1, 2001, respectively.
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------
|   
|   
|   
|   
|(2) |  | Includes $213,000 and $218,000 in franchise expense for the 26 weeks ended
June 30, 2002 and July 1, 2001, respectively.              

26 WEEKS ENDED JUNE 30, 2002 COMPARED TO THE 26 WEEKS ENDED JULY 1, 2001

Results of operations reflect 26 weeks of operations for 129 restaurants
and partial period operations for ten restaurants for the 26 weeks ended June
30, 2002. Results of operations also reflect 26 weeks of operations for 126
restaurants and a partial period of operations for nine restaurants for the 26
weeks ended July 1, 2001.

REVENUE. Revenue increased $5.1 million or 9.2%, to $60.6 million for the
26 weeks ended June 30, 2002 from $55.5 million for the 26 weeks ended July 1,
2001. The increase in 2002 was primarily due to sales of $2.3 million from our
five 2002 store openings, $5.3 million in sales generated by a full six months
of operations from units opened in 2001 and 2000 that were not yet in our
comparable unit base, an increase in comparable store sales of $0.7 million or
1.4%, offset by a decrease of $2.6 million in sales from the 12 stores that
have been closed and $0.6 million for the four stores sold to a franchisee.
Units enter the comparable store base after 15 full months of operation. The
increase in comparable store sales was primarily due to a 1.0% increase in the
average check amount and a 0.3% increase in transactions.

COST OF SALES. Cost of sales as a percentage of revenue decreased to
27.4% in the 26 weeks ended June 30, 2002 from 27.7% in the 26 weeks ended July
1, 2001. The decrease was primarily due to the elimination of certain
discounts, (0.4%), and enhanced operational controls, (0.3%), partially offset
by an increase in produce prices, (0.4%).

RESTAURANT LABOR, OCCUPANCY AND OTHER. Restaurant labor, occupancy, and
other decreased as a percentage of revenue to 55.3% for the 26 weeks ended June
30, 2002 from 56.3% in the 26 weeks ended July 1, 2001. The decrease as a
percentage of sales is due in part to a decrease in total direct and related
labor costs of approximately 1.5%. These labor decreases were primarily due to
the closure of under-performing stores combined with improved operational
efficiencies. In addition, unit operating expenses were 0.3% lower than last
year primarily due to lower utility costs. Partially offsetting the decreases
in labor and unit operating expenses was a 0.4% increase in advertising costs
and 0.3% in costs related to our concept repositioning project.

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GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses
of $5.2 million for the 26 weeks ended June 30, 2002 were essentially flat to
$5.2 million for the 26 weeks ended July 1, 2001. As a percentage of
restaurant sales, general and administrative expenses decreased to 8.6% for the
26 weeks ended June 30, 2002 from 9.4% for the 26 weeks ended July 1, 2001.
The decrease as a percentage of sales was primarily due to the leveraging of
our expanding revenue base.

DEPRECIATION AND AMORTIZATION. Depreciation and amortization expenses
increased to $2.6 million in the 26 weeks ended June 30, 2002 from $2.5 million
in the 26 weeks ended July 1, 2001. The net $0.1 million increase was
primarily due to the additional depreciation on the 9 new units opened during
the last six months of 2001 and the 5 new units opened during 2002, offset by
the reduction in depreciation from the stores closed or impaired in 2001. As a
percentage of revenue, depreciation and amortization decreased to 4.3% for the
26 weeks ended June 30, 2002 from 4.6% for the 26 weeks ended July 1, 2001.

PRE-OPENING EXPENSES. Pre-opening expenses decreased to $93,000 for the
26 weeks ended June 30, 2002 from $234,000 for the 26 weeks ended July 1, 2001.
The decrease was due in part to opening four less units in the first six months
of 2002 versus 2001. The average pre-opening cost per new unit opening
decreased from approximately $26,000 per new unit in the prior year to
approximately $19,000 per new unit in the current year due to opening more
locations in mature markets in 2002 than in 2001. New markets traditionally
require higher pre-opening costs than mature markets due to the lack of
leveraging an existing regions resources.

INTEREST INCOME, NET. Net interest income (expense) decreased to $(8,000)
for the 26 weeks ended June 30, 2002 from $147,000 in net interest income for
the 26 weeks ended July 1, 2001. Interest income decreased to $56,000 for the
26 weeks ended June 30, 2002 from $188,000 for the 26 weeks ended July 1, 2001.
The decrease is primarily due to reduced interest rates paid on investments.
Interest expense increased to $64,000 in the current year from $41,000 in the
same prior year period due to interest expense incurred by our borrowing on the
credit line in July 2001.

INCOME TAXES. The provision for income taxes for the 26 weeks ended June
30, 2002 and 26 weeks ended July 1, 2001 is based on the approximate annual
effective tax rate of 40% applied to the respective periods pretax book
income. The 40% tax rate applied to the 26 weeks ended June 30, 2002
comprises the federal and state statutory rates based on the estimated annual
effective rate on pre-tax income of $2,591,000. The 40% tax rate applied to
the 26 weeks ended July 1, 2001 comprises the federal and state statutory rates
based on the estimated annual effective rate on pre-tax income of $1,073,000.

SEASONALITY

Historically, we have experienced seasonal variability in our quarterly
operating results with higher sales per restaurant in the second and third
quarters than in the first and fourth quarters. The higher sales in the second
and third quarters improve profitability by reducing the impact of our
restaurants fixed and semi-fixed costs, as well as through increased revenues.
This seasonal impact on our operating results is expected to continue.

INFLATION

Components of our operations subject to inflation include labor, food,
beverage, and lease costs. Our leases require us to pay taxes, maintenance,
repairs, insurance and utilities, all of which are subject to inflationary
increases. We believe that current adverse conditions in the insurance,
utility

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and labor areas specifically, could have an impact on our results of
operations during the upcoming year.

DEFERRED TAX ASSETS

The Company utilizes Statement of Financial Accounting Standards No. 109,
Accounting for Income Taxes, which requires the recognition of deferred income
tax assets and liabilities for the expected future tax consequences of events
that have been included in the financial statements and income tax returns.
Under this method, deferred income taxes are recorded based on current income
tax rates applied to differences between the financial statement and tax basis
of assets and liabilities, as well as the effects of operating loss
carryforwards and income tax credits. Valuation allowances are established,
when necessary, to reduce deferred income tax assets to the amount expected to
be realized. Management must make estimates and judgments on future taxable
income, considering feasible tax planning strategies and taking into account
existing facts and circumstances, to determine the proper valuation allowance.
The Company does not believe a valuation allowance is necessary at June 30,
2002. The provision for income taxes represents the income tax payable for the
period and the change during the period in deferred income tax assets and
liabilities. For the 26 weeks ended June 30, 2002, the Companys income tax
provision of $1,036,000 consisted of a reduction in deferred income taxes of
$896,000 and an increase in income taxes payable of $140,000.

LIQUIDITY AND CAPITAL RESOURCES

We have funded our capital requirements in recent years through the public
sale of equity securities, cash flow from operations and bank debt. We
generated $4.3 million in cash flow from operating activities for the 26 weeks
ended June 30, 2002 and $3.0 million for the 26 weeks ended July 1, 2001.

Net cash used by investing activities was $1.9 million for the 26 weeks
ended June 30, 2002 compared to net cash used by investing activities of $1.1
million for the 26 weeks ended July 1, 2001. Net cash used by investing
activities for the 26 weeks ended June 30, 2002 included $1.9 million in
capital expenditures, where net cash used by investing activities for the 26
weeks ended July 1, 2001 consisted of $5.3 million of capital expenditures
offset by a net $3.7 million provided by the sale, purchases and maturities of
investments.

Net cash provided by financing activities was $218,000 for the 26 weeks
ended June 30, 2002 compared to net cash provided of $45,000 for the 26 weeks
ended July 1, 2001. Financing activities in both quarters consisted of
proceeds from the exercise of common stock options.

As of June 30, 2002, we had available $10.4 million of a $12.0 million
revolving line of credit agreement with a financial institution that matures in
July 2004. On July 25, 2001, we drew $1.0 million on the line of credit. As of
June 30, 2002, our outstanding principal balance under this agreement was $1.0
million and we had $0.6 million assigned to a standby letter of credit that
matures in October 2002. Interest on the revolving line of credit is
calculated on the lower of either a bank reference rate plus 1%  2%, or on an
adjusted London Interbank Offered Rate plus 2.5%  3.5% per annum.

Our funds are principally used for the development and opening of new
units. We incurred $1.9 million in capital expenditures during the 26 weeks
ended June 30, 2002, of which $1.3 million was for newly opened units, $0.4
million for existing locations and $0.2 million for corporate and information
technology expenditures. During the 26 weeks ended July 1, 2001, we incurred
$5.3 million in capital expenditures, of which $3.6 million was for new unit
openings, $0.2 million for future openings, $0.9 million for remodels and point
of sale system upgrades, $0.5 million for existing locations and $0.1 million
for corporate and information technology expenditures.

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We currently expect total capital expenditures in 2002 to be approximately
$6.2 million, of which approximately $3.6 million is forecasted for the opening
of new restaurants, $1.5 million to implement the concept repositioning, $0.7
million for existing stores and $0.4 million for corporate, information
technology and other. We currently plan to open approximately nine units in
2002 and a minimum of ten units in 2003. We currently expect that future
locations will generally cost between $425,000 and $500,000 per unit, net of
landlord allowances and excluding pre-opening expenses. Some units may exceed
this range due to the area in which they are built and the specific
requirements of the project. Pre-opening expenses are expected to average
between $19,000 and $25,000 per restaurant.

The Company is undertaking a number of projects in 2002 and carrying over
into 2003 that are designed to potentially improve sales. Certain of these
projects, including proposed new store design, a potential retrofit design that
can be incorporated into existing restaurants, signage changes, and new menu
items, bigger portions, the addition of some value priced menu items,
additional salsa bar choices, and new product packaging could require a
significant amount of capital. These projects may require that certain
existing assets be disposed of as a result of these projects. The Company is
unable to estimate the capital requirements for these projects or the potential
asset disposals until certain project tests are complete and rollout schedules
are determined.

We believe that anticipated cash flow from operations combined with funds
anticipated to be available from our $12.0 million credit facility and our cash
and investments balance of $9.3 million as of June 30, 2002 will be sufficient
to satisfy our working capital and capital expenditure requirements for at
least the next 12 months. Changes in our operating plans, changes in our
expansion plans, lower than anticipated sales, our ability to meet the
financial covenants of our credit facility, increased expenses, potential
acquisitions or other events may cause us to seek additional financing sooner
than anticipated. Additional financing may not be available on acceptable
terms, or at all. Failure to obtain additional financing as needed could have a
material adverse effect on our business and results of operations.

RELATED PARTY TRANSACTION

On June 14, 2002, we entered into a one-year consulting agreement with Jack
Goodall, a non-employee member of our Board of Directors. Under the consulting
agreement, Mr. Goodall advises and consults with our President and Chief
Executive Officer on various issues including marketing review, real estate
review and other strategic corporate initiatives as identified by our Board of
Directors. In consideration for his services and in lieu of cash compensation,
Mr. Goodall received a non-statutory stock option to purchase an aggregate of
50,000 registered shares of our common stock pursuant to our 1999 Stock
Incentive Plan. The option is fully vested and immediately exercisable and
expires on June 14, 2004. The Board of Directors, with Mr. Goodall recusing
himself, approved the consulting agreement and the option.

RISK FACTORS

Any investment in our common stock involves a high degree of risk. You
should consider carefully the following information about these risks, together
with the other information contained in this quarterly report, before you
decide to buy our common stock. If any of the following risks actually occur,
our business would likely suffer. In such case, the trading price of our
common stock could decline, and you may lose all or part of the money you paid
to buy our common stock.

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OUR EXPECTED REVENUES, COMPARABLE STORE SALES AND OVERALL EARNINGS PER SHARE
MAY NOT BE ATTAINED DUE TO FACTORS REGARDING OUR BRAND AWARENESS, MARKETING
STRATEGY AND OUR ABILITY TO MANAGE ONGOING AND UNANTICIPATED COSTS.

Our expected sales levels and earnings rely heavily on the acceptability
and quality of the products we serve. If any variances are experienced with
respect to the recognition of our brand, the acceptableness of our promotions,
or the ability to manage our ongoing operations as well as the ability to
absorb unexpected costs, we could fall short of our revenue and earnings
expectations. Factors that could have a significant impact on earnings
include:



| |  |  | labor costs for our hourly and management personnel, including
increases in federal or state minimum wage requirements;
| | - |  | -----------------------------------------------------------------------------------------------------------------------
|
| |  |  | fluctuations in food and beverage costs, particularly the cost
of chicken, beef, fish, cheese and produce;             
|
| |  |  | costs related to our leases;                                                                                           
|
| |  |  | timing of new restaurant openings and related expenses;                                                                
|
| |  |  | the amount of sales contributed by new and existing restaurants;                                                       
|
| |  |  | our ability to achieve and sustain profitability on a quarterly
or annual basis;                                       
|
| |  |  | the ability for our marketing initiatives and earnings
improvement projects to increase sales;                         
|
| |  |  | consumer confidence;                                                                                                   
|
| |  |  | changes in consumer preferences;                                                                                       
|
| |  |  | the level of competition from existing or new competitors in
the quick-service restaurant industry;                    
|
| |  |  | impact of weather on revenues and costs of food;                                                                       
|
| |  |  | insurance and utility costs; and                                                                                       
|
| |  |  | general economic conditions.                                                                                           

WE HAVE RECENTLY CREATED RESERVES RELATED TO THE CLOSURE OF SOME SELECTED
STORES. IF THE AMOUNTS OF THESE RESERVES ARE INADEQUATE, WE COULD EXPERIENCE
AN ADVERSE EFFECT TO OUR EARNINGS EXPECTATIONS IN THE FUTURE.

Our reserves for expenses related to closed stores are estimates. The
amounts we have recorded are our reasonable assumptions based on the condition
of these locations at this point in time. The conditions regarding these
locations may adversely change in the future and materially affect our future
earnings. We will review these reserves on a quarterly basis and will likely
have adjustments that may materially have a positive or negative impact to our
future earnings.

OUR CURRENT PROJECTS TO IMPROVE OUR BRAND COULD HAVE A MATERIAL ADVERSE IMPACT
ON THE COMPANY.

We are working on a number of projects designed to improve the strength of
our brand and increase sales. These projects include a proposed new store
design, a potential store remodel for existing restaurants, signage changes and
new menu items, bigger portions, the addition of some value priced menu items,
additional salsa bar choices and new product packaging.

The testing and implementation of these projects will have capital costs
and expenses associated with them. The packaging and salsa bar changes will
increase the food and paper cost of our restaurants. There is a risk that if
these changes do not result in increased sales, either through increased
transactions or higher average check, there could be a material adverse impact
on the companys earnings. Also, the capital requirements of these projects
could have an adverse material impact on our cash balances and liquidity.

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WE MAY NOT PREVAIL IN OUR DEFENSE OF THE CLASS ACTION CLAIMS RELATED TO
CALIFORNIA EXEMPT EMPLOYEE LAWS.

During 2001, two similar class action claims were filed against us that
currently involve the issue of whether employees and former employees in the
general manager and assistant manager positions who worked in our California
restaurants during specified time periods were misclassified as exempt and
deprived of overtime pay. Although we believe these cases are without merit
and intend to vigorously defend the claims related to these matters, we are
unable at present to predict the probable outcome of these matters or the
amount of damages that may occur if we do not prevail. An unfavorable outcome
in these matters may have a material adverse impact on our earnings.

OUR OPERATING RESULTS MAY FLUCTUATE SIGNIFICANTLY DUE TO SEASONALITY AND OTHER
FACTORS, WHICH COULD HAVE A NEGATIVE EFFECT ON THE PRICE OF OUR COMMON STOCK.

Our business is subject to seasonal fluctuations. Historically, sales in
most of our restaurants have been higher during the second and third quarters
of each fiscal year. As a result, we expect our highest earnings to occur in
the second and third quarters of each fiscal year.

Accordingly, results for any one quarter or for any year are not
necessarily indicative of results to be expected for any other quarter or for
any year. Comparable unit sales for any particular future period may decrease.

WE CONTINUE TO PURSUE A FRANCHISE STRATEGY. WE MAY BE UNSUCCESSFUL IN FULLY
EXECUTING THIS PROGRAM.

We started a franchise program by entering into agreements with two
franchisee groups in late 2000 and early 2001. These two agreements represent
commitments to open 14 units. As of August 1, 2002, three franchisee
restaurants are open under these two agreements. In addition, on April 15,
2002, we completed the sale of four company-owned stores in the Las Vegas,
Nevada market to a new franchisee. Restaurant companies typically rely on
franchise revenues as a significant source of revenues and potential for
growth. Our inability to successfully execute our franchising program could
adversely affect our business and results of operations. The opening and
success of franchised restaurants is dependent on a number of factors,
including availability of suitable sites, negotiations of acceptable lease or
purchase terms for new locations, permitting and government regulatory
compliance and the ability to meet construction schedules. The franchisees may
not have all of the business abilities or access to financial resources
necessary to open our restaurants or to successfully develop or operate our
restaurants in their franchise areas in a manner consistent with our standards.

WE MAY BE UNABLE TO FUND OUR SUBSTANTIAL WORKING CAPITAL REQUIREMENTS AND MAY
NEED ADDITIONAL FUNDING SOONER THAN WE ANTICIPATE.

We believe that the proceeds from the initial public offering completed in
May 1999, together with anticipated cash flow from operations and funds
anticipated to be available from a credit facility will be sufficient to
satisfy our working capital requirements for at least the next 12 months. We
may need to seek additional financing sooner than we anticipate as a result of
the following factors:



| |  |  | capital needs associated with the potential upgrade and remodel
of our restaurants, signage changes, menu related changes and other
projects;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | changes in our operating plans;                                                                                                              
|
| |  |  | changes in our expansion plans;                                                                                                              

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| |  |  | lower than anticipated sales of our menu offerings;                
| | - |  | -------------------------------------------------------------------
|
| |  |  | our ability to meet the financial covenants of our credit facility;
|
| |  |  | increased food, labor costs or other expenses; and                 
|
| |  |  | potential acquisitions or other events.                            

Additional financing may not be available on acceptable terms, or at all.
If we fail to get additional financing as needed, our business and results of
operations would likely suffer.

FUTURE EXPANSION INTO NEW GEOGRAPHIC AREAS INVOLVES A NUMBER OF RISKS THAT
COULD DELAY OR PREVENT THE OPENING OF NEW RESTAURANTS OR REQUIRE US TO ADJUST
OUR EXPANSION STRATEGY.

Almost all of our current restaurants are located in the southwest region
of the United States. Our expansion into geographic areas outside the
Southwest involves a number of risks, including:



| |  |  | lack of market awareness or acceptance of our restaurant
concept in new geographic areas;                                            
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | uncertainties related to local demographics, tastes and
preferences;                                                                 
|
| |  |  | local custom, wages, costs and other legal and economic
conditions particular to new regions;                                        
|
| |  |  | the need to develop relationships with local distributors and
suppliers for fresh produce, fresh tortillas and other ingredients;
and
|
| |  |  | potential difficulties related to management of operations
located in a number of broadly dispersed locations.                       

We may not be successful in addressing these risks. Although we do not
have current plans to expand substantially into new markets outside our core
markets, if and when we do, we may not be able to open planned new operations
on a timely basis, or at all in these new areas. Also, new restaurants
typically will take several months to reach planned operating levels due to
inefficiencies typically associated with expanding into new regions, such as
lack of market awareness, acceptance of our restaurant concept and inability to
hire sufficient staff.

IF WE ARE NOT ABLE TO SUCCESSFULLY PURSUE OUR EXPANSION STRATEGY, OUR BUSINESS
AND RESULTS OF OPERATIONS MAY BE ADVERSELY IMPACTED.

We currently plan to open approximately nine company-owned restaurants in
2002, five of which have been opened as of August 1, 2002. Three of the nine
planned 2002 openings are outside Southern California. Our ability to
successfully achieve our expansion strategy will depend on a variety of
factors, many of which are beyond our control.

These factors include:



| |  |  | our ability to operate our restaurants profitably;                                                                                                            
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | our ability to respond effectively to the intense competition in the
quick-service restaurant industry;                                                       
|
| |  |  | our ability to locate suitable restaurant sites or negotiate
acceptable lease terms;                                                                          
|
| |  |  | our ability to obtain required local, state and federal governmental
approvals and permits related to construction of the sites, food and
alcoholic beverages;
|
| |  |  | our dependence on contractors to construct new restaurants in a
timely manner;                                                                                
|
| |  |  | our ability to attract, train and retain qualified and experienced
restaurant personnel and management;                                                       

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| |  |  | our need for additional capital and our ability to obtain such
capital on favorable terms or at all; and
| | - |  | --------------------------------------------------------------------------------------------------------
|
| |  |  | general economic conditions.                                                                            

If we are not able to successfully address these factors, we may not be
able to expand at the rate contemplated and may have to adjust our expansion
strategy, and our business and results of operations may be adversely impacted.

THE ABILITY TO ATTRACT AND RETAIN HIGHLY QUALIFIED PERSONNEL TO OPERATE AND
MANAGE OUR RESTAURANTS IS EXTREMELY IMPORTANT AND OUR FAILURE TO DO SO COULD
ADVERSELY AFFECT US.

Our success and the success of our individual restaurants depend upon our
ability to attract and retain highly motivated, well-qualified restaurant
operators and management personnel, as well as a sufficient number of qualified
employees, including guest service and kitchen staff, to keep pace with our
expansion schedule. Qualified individuals needed to fill these positions are
in short supply in some geographic areas. Our ability to recruit and retain
such individuals may delay the planned openings of new restaurants or result in
higher employee turnover in existing restaurants, which could have a material
adverse effect on our business or results of operations. We also face
significant competition in the recruitment of qualified employees. In
addition, we are heavily dependent upon the services of our officers and key
management involved in restaurant operations, marketing, finance, purchasing,
expansion, human resources and administration. The loss of any of these
individuals could have a material adverse effect on our business and results of
operations. We currently do not have employment agreements with any of our
employees.

GOVERNMENT REGULATION CHANGES MAY IMPACT OUR BUSINESS

Our restaurants are subject to licensing and regulation by state and local
health, sanitation, safety, fire and other authorities, including licensing and
regulation requirements for the sale of alcoholic beverages and food. A
substantial number of our employees are subject to various minimum wage
requirements. Many of our employees work in restaurants located in California
and receive salaries equal to or slightly greater than the California minimum
wage. The State of California has raised the minimum wage from $5.75 to $6.75
since January 1, 2001. Additionally, the State of California has increased
benefits provided to employees covered under workers compensation insurance.
Over the last year, the State of California has entered into long-term energy
contracts at fixed prices. Similar proposals may come before legislators or
voters in other jurisdictions in which we operate or seek to operate. The
effect of these and further governmental regulations and actions may have a
material adverse impact on our earnings.

IF WE ARE NOT ABLE TO ANTICIPATE AND REACT TO INCREASES IN OUR FOOD COSTS, OUR
PROFITABILITY COULD BE ADVERSELY AFFECTED.

Our restaurant operating costs principally consist of food and labor
costs. Our profitability is dependent on our ability to anticipate and react
to changes in food and labor costs. Various factors beyond our control,
including adverse weather conditions and governmental regulation, may affect
our food costs. We may be unable to anticipate and react to changing food
costs, whether through our purchasing practices, menu composition or menu price
adjustments in the future. In the event that food price increases cause us to
increase our menu prices, we face the risk that our guests will choose to
patronize lower-cost restaurants. Failure to react to changing food costs or
to retain guests if we are forced to raise menu prices could have a material
adverse effect on our business and results of operations.

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OUR RESTAURANTS ARE CONCENTRATED IN THE SOUTHWEST REGION OF THE UNITED STATES,
AND THEREFORE, OUR BUSINESS IS SUBJECT TO FLUCTUATIONS IF ADVERSE CONDITIONS
OCCUR IN THAT REGION.

As of August 1, 2002 all but six of our existing restaurants are located
in the southwest region of the United States. Accordingly, we are susceptible
to fluctuations in our business caused by adverse economic or other conditions
in this region, including natural or other disasters. Our significant
investment in, and long-term commitment to, each of our units limits our
ability to respond quickly or effectively to changes in local competitive
conditions or other changes that could affect our operations. In addition,
some of our competitors have many more units than we do. Consequently, adverse
economic or other conditions in a region, a decline in the profitability of
several existing units or the introduction of several unsuccessful new units in
a geographic area could have a more significant effect on our results of
operations than would be the case for a company with a larger number of
restaurants or with more geographically dispersed restaurants.

AS A RESTAURANT SERVICE PROVIDER, WE COULD BE SUBJECT TO ADVERSE PUBLICITY OR
CLAIMS FROM OUR GUESTS.

We may be the subject of complaints or litigation from guests alleging
food-related illness, injuries suffered on the premises or other food quality,
health or operational concerns. Adverse publicity resulting from such
allegations may materially affect us and our restaurants, regardless of whether
such allegations are true or whether we are ultimately held liable. A lawsuit
or claim could result in an adverse decision against us that could have a
material adverse effect on our business and results of operations.

THE RESTAURANT INDUSTRY IS INTENSELY COMPETITIVE AND WE MAY NOT HAVE THE
RESOURCES TO COMPETE ADEQUATELY.

The restaurant industry is intensely competitive. There are many
different segments within the restaurant industry that are distinguished by
types of service, food types and price/value relationships. We position our
restaurants in the high-quality, quick-service Mexican food segment of the
industry. In this segment, our direct competitors include Baja Fresh, La Salsa
and Chipotle. We also compete indirectly with full-service Mexican restaurants
including Chevys, Chi Chis and El Torito, and fast food restaurants,
particularly those focused on Mexican food such as Taco Bell and Del Taco.
Competition in our industry segment is based primarily upon food quality,
price, restaurant ambiance, service and location. Many of our direct and
indirect competitors are well-established national, regional or local chains
and have substantially greater financial, marketing, personnel and other
resources than we do. We also compete with many other retail establishments
for site locations.

OUR CURRENT INSURANCE MAY NOT PROVIDE ADEQUATE LEVELS OF COVERAGE AGAINST
CLAIMS OR THE AFFECTS OF ADVERSE PUBLICITY.

There are types of losses we may incur that may be uninsurable or that we
believe are not economically insurable, such as losses due to earthquakes and
other natural disasters. In view of the location of many of our existing and
planned units, our operations are particularly susceptible to damage and
disruption caused by earthquakes. Further, we do maintain insurance coverage
for employee-related litigation, however, the deductible per incident is high
and we carry only limited insurance for the effects of adverse publicity. In
addition, punitive damage awards are generally not covered by insurance. We
may also be subject to litigation which, regardless of the outcome, could
result in adverse publicity and damages. Such litigation, adverse publicity or
damages could have a material adverse effect on our business and results of
operations. We do from

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time to time have employee related claims brought against us. These
claims and expenses related to these claims typically have not been material to
our overall financial performance. We may experience claims or be the subject
of complaints or allegations from former, current or prospective employees from
time to time that are material in nature and that may have a material adverse
effect on our financial results.

OUR FAILURE OR INABILITY TO ENFORCE OUR CURRENT AND FUTURE TRADEMARKS AND TRADE
NAMES COULD ADVERSELY AFFECT OUR EFFORTS TO ESTABLISH BRAND EQUITY.

Our ability to successfully expand our concept will depend on our ability
to establish and maintain brand equity through the use of our current and
future trademarks, service marks, trade dress and other proprietary
intellectual property, including our name and logos. We currently hold four
trademarks and have 12 service marks relating to our brand. Some or all of the
rights in our intellectual property may not be enforceable, even if registered,
against any prior users of similar intellectual property or our competitors who
seek to utilize similar intellectual property in areas where we operate or
intend to conduct operations. If we fail to enforce any of our intellectual
property rights, we may be unable to capitalize on our efforts to establish
brand equity. It is also possible that we will encounter claims from prior
users of similar intellectual property in areas where we operate or intend to
conduct operations. Claims from prior users could limit our operations and
possibly cause us to incur costs through the payment of damages, licensing fees
to a prior user or registrant of similar intellectual property, or attorneys
fees or other legal costs as well.

THE LARGE NUMBER OF SHARES ELIGIBLE FOR PUBLIC SALE COULD CAUSE OUR STOCK PRICE
TO DECLINE.

The market price of our common stock could decline as a result of sales by
our existing stockholders of a large number of shares of our common stock in
the market or the perception that such sales could occur. These sales also
might make it more difficult for us to sell equity securities in the future at
a time and at a price that we deem appropriate.

OUR COMMON STOCK MAY NOT DEVELOP AN ACTIVE, LIQUID TRADING MARKET.

We completed our initial public offering in May 1999. Prior to this
offering, there was no public market for our common stock. An active trading
market in and increased liquidity of our common stock may not develop.

THE MARKET PRICE OF OUR STOCK MAY BE ADVERSELY AFFECTED BY MARKET VOLATILITY.

The stock market has experienced extreme price and volume fluctuations.
The trading price of our common stock could be subject to wide fluctuations in
response to a number of factors, including:



| |  |  | fluctuations in our quarterly or annual results of
operations;                                             
| | - |  | -----------------------------------------------------------------------------------------------------------
|
| |  |  | changes in published earnings estimates by analysts and
whether our earnings meet or exceed such estimates;
|
| |  |  | additions or departures of key personnel; and                                                              
|
| |  |  | changes in overall market conditions, including the stock
prices of other restaurant companies.            

In the past, companies that have experienced volatility in the market
price of their stock have been the object of securities class action
litigation. If we were subject to securities class action litigation, it could
result in substantial costs and a diversion of our managements attention and
resources.

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THE INTERESTS OF OUR CONTROLLING STOCKHOLDERS MAY CONFLICT WITH YOUR INTERESTS.

As of August 1, 2002, the executive officers, directors and entities
affiliated with them, in the aggregate, beneficially own approximately 32.2% of
our outstanding common stock. These stockholders are able to exercise control
over all matters requiring approval by our stockholders, including the election
of directors and approval of significant corporate transactions. This
concentration of ownership may also have the effect of delaying or preventing a
change in control of our company.

ANTI-TAKEOVER PROVISIONS IN OUR CHARTER DOCUMENTS AND DELAWARE LAW COULD MAKE A
THIRD-PARTY ACQUISITION OF US DIFFICULT.

The anti-takeover provisions in our certificate of incorporation, our
bylaws and Delaware law could make it more difficult for a third party to
acquire us. As a result of these provisions, we could delay, deter or prevent
a takeover attempt or third party acquisition that our stockholders consider to
be in their best interest, including a takeover attempt that results in a
premium over the market price for the shares held by our stockholders.

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Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Our market risk exposures are related to our cash, cash equivalents and
investments. We invest our excess cash in highly liquid short-term investments
primarily with maturities of less than one year. The portfolio consists
primarily of corporate bonds and municipal bonds. As of June 30, 2002, we have
no investments that have maturities in excess of one year. These investments
are not held for trading or other speculative purposes. Changes in interest
rates affect the investment income we earn on our investments and, therefore,
impact our cash flows and results of operations. Due to the types of
investment and debt instruments the Company has, a 10% change in period-end
interest rates or a hypothetical 100 basis point adverse move in interest rates
would not have a significant negative affect on our financial results.

As of June 30, 2002, we had available $10.4 million of a total $12.0
million revolving line of credit with a maturity date of July 2004. As of June
30, 2002, we have $1.0 million borrowed against this facility and $0.6 million
assigned to a standby letter of credit related to our workers compensation
insurance policy that matures in October 2002. Interest on the revolving line
of credit is calculated on the lower of either a bank reference rate
plus 1%  2%, or on an adjusted London Interbank Offered Rate
plus 2.5%  3.5%, per annum
(4.38% as of June 30, 2002). We also pay a commitment fee on the unused
portion of the line of credit. Should we make additional draws on this line in
the future, changes in interest rates would affect the interest expense on
these loans and, therefore, impact our cash flows and results of operations.

Many of the food products purchased by us are affected by changes in
weather, production, availability, seasonality and other factors outside our
control. In an effort to control some of this risk, we have entered into some
fixed price purchase commitments with terms of less than one year. In
addition, we believe that almost all of our food and supplies are available
from several sources, which helps to control food commodity risks.

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PART II  OTHER INFORMATION




Item 1. LEGAL PROCEEDINGS

Not applicable




Item 2. CHANGES IN SECURITIES AND USE OF PROCEEDS



| | (a) |  | Not applicable                                                                                                                                                                                                                                                                                                                                                                    
| | --- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | (b) |  | Not applicable                                                                                                                                                                                                                                                                                                                                                                    
|
| | (c) |  | Not applicable                                                                                                                                                                                                                                                                                                                                                                    
|
| | (d) |  | We currently have approximately $2.0 million remaining from our
initial public offering in May 1999 as well as an additional $7.3
million of cash and cash equivalents generated from previous private
placements and operating cash flows. The use of proceeds during this
reporting period has conformed to our intended use outlined in our
initial public offering prospectus.




Item 3. DEFAULTS UPON SENIOR SECURITIES

Not applicable




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

At the Companys annual meeting of stockholders held on June 5, 2002, the
stockholders voted on the following matters:



| | (1) |  | Election of one director to serve for a three-year term ending upon
the 2005 annual meeting of stockholders. The director was elected as
follows:
| | --- |  | -------------------------------------------------------------------------------------------------------------------------------------------------

|                 |  |           |  |                |  |                
|---------------- |  | --------- |  | -------------- |  | ---------------
|Nominee          |  | Votes For |  | Votes Withheld |  | Broker Non-Vote
|                 |  |           |  |                |  |                
|Craig S. Andrews |  | 8,524,635 |  | 18,858         |  |               



| | (2) |  | Approval of an amendment to our 1999 Stock Incentive Plan to increase
the number of shares of our common stock authorized for issuance under
our 1999 plan by an additional 300,000 shares to 2,224,608.
| | --- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|          |  |               |  |               |  |                
|--------- |  | ------------- |  | ------------- |  | ---------------
|Votes For |  | Votes Against |  | Votes Abstain |  | Broker Non-Vote
|          |  |               |  |               |  |                
|8,383,993 |  | 131,649       |  | 27,781        |  |               



| | (3) |  | Ratification of the selection of Deloitte & Touche LLP as our
independent auditors for the fiscal year ending December 29, 2002.
| | --- |  | --------------------------------------------------------------------------------------------------------------------------------

|          |  |               |  |               |  |                
|--------- |  | ------------- |  | ------------- |  | ---------------
|Votes For |  | Votes Against |  | Votes Abstain |  | Broker Non-Vote
|          |  |               |  |               |  |                
|8,351,272 |  | 183,522       |  | 8,699         |  |               

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Item 5. OTHER INFORMATION

Not applicable




Item 6. EXHIBITS AND REPORTS ON FORM 8-K

| |  |    |  |  |      |   |  |  |     |  |  |                                                                                                       
| |  | -- |  |  | ---- | - |  |  | --- |  |  | ------------------------------------------------------------------------------------------------------
| |  | a) |  |  | 3.1  |   |  |  | (1) |  |  | Second Amended and Restated Certificate of
Incorporation (Exhibit 3.2)                                
|
|
|
|
|
|
|
|
| |  |    |  |  | 3.2  |   |  |  | (1) |  |  | Restated Bylaws (Exhibit 3.4)                                                                         
|
|
|
|
|
|
|
|
| |  |    |  |  | 3.3  |   |  |  | (2) |  |  | Certificate of Amendment to Bylaws (Exhibit 3.4)                                                      
|
|
|
|
|
|
|
|
| |  |    |  |  | 10.1 | * |  |  |     |  |  | Amendment dated June 21, 2002, to Agreement between us and Coca-Cola
USA Fountain dated March 6, 1998.
|
|
|
|
|
|
|
|
| |  |    |  |  | 10.2 |   |  |  |     |  |  | Consulting Agreement between us and Jack W. Goodall dated June 14,
2002                               
|
|
|
|
|
|
|
|
| |  |    |  |  | 10.3 |   |  |  |     |  |  | 1999 Stock Incentive Plan, as amended                                                                 
|
|
|
|
|
|
|
|
| |  |    |  |  | 99.1 |   |  |  |     |  |  | Certification under Section 906 of the Sarbanes-Oxley Act of 2002                                     



---

|(1) |  | Incorporated by reference to the above
noted exhibit to our registration statement on Form S-1
(333-75087) filed with the SEC on March 26, 1999, as
amended.                                                                                                                                                                                             
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|   
|   
|   
|(2) |  | Incorporated by reference to the above
noted exhibit to our annual report on Form 10-K filed
with the SEC on April 1, 2002.                                                                                                                                                                                                                              
|   
|   
|   
|   
|*   |  | Certain confidential portions of this Exhibit were omitted
by means of marking such portions with an asterisk (the
Mark). This Exhibit has been filed separately with the
Secretary of the Commission without the Mark pursuant to the
Companys Application Requesting Confidential Treatment under
Rule 24b-2 of the Securities Exchange Act of 1934.

b) Reports on Form 8-K:

None

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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.



|Dated: August 14, 2002 | RUBIOS RESTAURANTS, INC.
|---------------------- | -------------------------



| | /s/   IRA FILS
        
        Ira Fils
Chief Financial Officer
(Principal Financial and Accounting Officer)
| | -------------------------------------------------------------------------------------------------------------

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