****UNITED STATES****

****SECURITIES AND EXCHANGE COMMISSION****

****Washington, D.C. 20549****

****FORM 10-Q****

| **x**      | **QUARTERLY REPORT  PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF  1934**                                                                                                                                                                                     |
|------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ** ** |                                                                                                                                                                                                                                                                                        | ** ** |
| ** ** | **For the quarterly period ended April 1, 2007**                                                                                                                                                                                                                                            |
|       |                                                                                                                                                                                                                                                                                        |   |
| **Or**     |
|       |                                                                                                                                                                                                                                                                                        |   |
| **o**      | **TRANSITION REPORT  PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF  1934**                                                                                                                                                                                    |
|       |                                                                                                                                                                                                                                                                                        |   |
| ** ** | **For the transition period from                        to                      .** |
|            |                                                                                                                                                                                                                                                                                             |  |  |

 

**Commission file number 333-116310**

****REAL MEXRESTAURANTS, INC.****

(Exact name of Registrantas specified in its charter)

| **Delaware**                                                     |   | **13-4012902**                        |
|------------------------------------------------------------------|--------|---------------------------------------|
| (State or other  jurisdiction of  incorporation or organization) |   | (I.R.S. Employer  Identification No.) |

 

**5660Katella Avenue, Suite 100**

**Cypress,CA 90630**

(Address of principal executive offices)

Registrant’stelephone number, including area code:

**(562)-346-1200**

Indicate by check mark whether the registrant: (1) has filed allreports required to be filed by Section 13 or 15(d) of the SecuritiesExchange Act of 1934 during the preceding 12 months (or for such shorter periodthat the registrant was required to file such reports) and (2) has beensubject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant is a large acceleratedfiler, an accelerated filer or a non-accelerated filer.

(See definition of “accelerated filer and large accelerated filer” inRule 12b-2 of the Exchange Act). (Check one):
| Large Accelerated Filer o  | Accelerated  Filer o | Non-Accelerated  Filer x |
|--------------------------------------|---------------------------|-------------------------------|

 

Indicate by check markwhether the registrant is a shell company (as defined in Rule 12b-2 of theExchange Act).

o Yes  x No

As of May 1, 2007, the registranthad outstanding 1,000 shares of Common Stock, par value $0.001 per share.

 

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**Real Mex Restaurants, Inc.**

**Index**
| PART I FINANCIAL INFORMATION |
|-----------------------------------|
|                              |   |
| Item 1.                           | Financial Statements |
|                              | Consolidated Balance  Sheets |
|                              | Consolidated Statements  of Operations |
|                              | Consolidated  Statements of Cash Flows |
|                              | Notes to  Consolidated Financial Statements |
| Item 2.                           | Management’s  Discussion and Analysis of Financial Condition and Results of Operations |
| Item 3.                           | Quantitative  and Qualitative Disclosures About Market Risk |
| Item 4.                           | Controls and Procedures |
|                              |   |   |
| PART II OTHER INFORMATION    |
|                              |   |
| Item 1.                           | Legal Proceedings |
| Item  1A.                         | Risk  Factors |
| Item 2.                           | Unregistered  Sales of Equity 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 |
| SIGNATURE                         |   |

 

2

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**FORWARD-LOOKING STATEMENTS**

*Thisreport includes “forward looking statements” within the meaning ofSection 27A of the Securities Act of 1933 and Section 21E of theSecurities Exchange Act of 1934 (the “Exchange Act”).  Forward looking statements are those that donot relate solely to historical fact. They include, but are not limited to, anystatement that may predict, forecast, indicate or imply future results,performance, achievements or events. They may contain words such as “believe,” “anticipate,”“expect,” “estimate,” “intend,” “project,” “plan,” “will,” “should,” “may,” or “could”or words or phrases of similar meaning. They may relate to, among other things:our liquidity and capital resources; legal proceedings and regulatory mattersinvolving our Company; food-borne illness incidents; increases in the cost ofingredients; our dependence upon frequent deliveries of food and othersupplies; our vulnerability to changes in consumer preferences and economicconditions; our ability to compete successfully with other casual diningrestaurants; our ability to expand; and anticipated growth in the restaurantindustry and our markets.*

*Theseforward looking statements reflect our current views with respect to futureevents and are based on assumptions and subject to risksand uncertainties, including, but not limited to, economic, competitive,governmental and technological factors outside of our control, thatmay cause actual results to differ materially from trends, plans orexpectations set forth in the forward looking statements. These risks anduncertainties may include these factors and the risks and uncertaintiesdescribed elsewhere in this report and in Item 1A “Risk Factors” of our annualreport on Form 10-K filed with the SEC on March 20, 2007. Given theserisks and uncertainties, we urge you to read this report completely and withthe understanding that actual future results may be materially differentfrom what we plan or expect. All of the forward-looking statements made in thisForm 10-Q are qualified by these cautionary statements and we cannotassure you that the actual results or developments anticipated by our Companywill be realized or, even if substantially realized, that they will have theexpected consequences to or effects on our Company or our business oroperations. In addition, these forward-looking statements present our estimatesand assumptions only as of the date of this report. Except for any ongoingobligation to disclose material information as required by federal securitieslaws, we do not intend to update you concerning any future revisions to anyforward looking statements to reflect events or circumstances occurring afterthe date of this report.*

*Unless otherwise provided in this report,references to “we”, “us” “our” and “ Company” refer to Real MexRestaurants, Inc. and its consolidated subsidiaries.*

3

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**PART I**

**FINANCIALINFORMATION**

**Item 1. Financial Statements**

**Real Mex Restaurants, Inc.**

**ConsolidatedBalance Sheets**

**(in thousands, except for share data)**
| ** **                                                                                                                   | ** ** | **April 1,** | ** ** | **December 31,** | ** ** |
|------------------------------------------------------------------------------------------------------------------------------|------------|-------------------|------------|-----------------------|------------|
| ** **                                                                                                                   | ** ** | **2007**          | ** ** | **2006**              | ** ** |
| ** **                                                                                                                   | ** ** | **(unaudited)**   | ** ** | ** **            | ** ** |
| **Assets**                                                                                                                   |       |              |       |                  |       |
| Current assets:                                                                                                              |       |              |       |                  |       |
| Cash and cash  equivalents                                                                                                   |       | $                 | 2,524      |                  | $          | 2,710 |   |
| Trade  receivables, net                                                                                                      |       | 9,462             |       | 8,604                 |       |
| Other  receivables                                                                                                           |       | 2,911             |       | 1,572                 |       |
| Related party  receivables                                                                                                   |       | 3,662             |       | 3,591                 |       |
| Inventories                                                                                                                  |       | 10,577            |       | 10,565                |       |
| Prepaid expenses  and other current assets                                                                                   |       | 5,192             |       | 6,037                 |       |
| Current portion  of favorable lease asset, net                                                                               |       | 3,780             |       | 4,910                 |       |
| Deferred tax  asset                                                                                                          |       | 8,265             |       | 8,265                 |       |
| Total current assets                                                                                                         |       | 46,373            |       | 46,254                |       |
|                                                                                                                         |       |              |       |                  |       |
| Property and equipment,  net                                                                                                 |       | 89,765            |       | 90,802                |       |
| Goodwill, net                                                                                                                |       | 286,403           |       | 277,461               |       |
| Deferred charges                                                                                                             |       | 4,092             |       | 3,939                 |       |
| Deferred tax asset                                                                                                           |       | 806               |       | 1,149                 |       |
| Favorable lease asset,  less current portion, net                                                                            |       | 13,877            |       | 17,753                |       |
| Other assets                                                                                                                 |       | 9,746             |       | 9,777                 |       |
| Total assets                                                                                                                 |       | $                 | 451,062    |                  | $          | 447,135 |   |
|                                                                                                                         |       |              |       |                  |       |
| **Liabilities and stockholders’  equity**                                                                               |       |              |       |                  |       |
| Current liabilities:                                                                                                         |       |              |       |                  |       |
| Accounts payable                                                                                                             |       | $                 | 24,756     |                  | $          | 23,354 |   |
| Accrued  self-insurance reserves                                                                                             |       | 15,259            |       | 15,877                |       |
| Accrued  compensation and benefits                                                                                           |       | 11,449            |       | 15,576                |       |
| Other accrued  liabilities                                                                                                   |       | 20,287            |       | 18,469                |       |
| Current portion  of long-term debt                                                                                           |       | 10,301            |       | 9,573                 |       |
| Current portion  of capital lease obligations                                                                                |       | 230               |       | 224                   |       |
| Total current  liabilities                                                                                                   |       | 82,282            |       | 83,073                |       |
|                                                                                                                         |       |              |       |                  |       |
| Long-term debt, less  current portion                                                                                        |       | 172,985           |       | 173,345               |       |
| Capital lease  obligations, less current portion                                                                             |       | 704               |       | 763                   |       |
| Unfavorable lease  asset, less current portion, net                                                                          |       | 5,720             |       | 2,514                 |       |
| Other liabilities                                                                                                            |       | 4,773             |       | 3,363                 |       |
| Total liabilities                                                                                                            |       | 266,464           |       | 263,058               |       |
|                                                                                                                         |       |              |       |                  |       |
| Commitments and  contingencies                                                                                               |       |              |       |                  |       |
|                                                                                                                         |       |              |       |                  |       |
| Stockholders’ equity:                                                                                                   |       |              |       |                  |       |
| Common stock,  $.001 par value, 1,000 shares authorized, issued and outstanding at April 1,  2007 and December 31, 2006 |       | —            |       | —                |       |
| Additional  paid-in capital                                                                                                  |       | 199,132           |       | 199,124               |       |
| Accumulated  deficit                                                                                                         |       | (14,534           | )          | (15,047               | )          |
| Total stockholders’  equity                                                                                             |       | 184,598           |       | 184,077               |       |
| Total liabilities and stockholders’ equity                                                                              |       | $                 | 451,062    |                  | $          | 447,135 |   |

 

See notes to consolidated financial statements.

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**Real Mex Restaurants, Inc.**

**ConsolidatedStatements of Operations (unaudited)**

**(in thousands)**
| ** **                                                                  | ** ** | **Three Months Ended** | ** ** |
|-----------------------------------------------------------------------------|------------|----------------------------------|------------|
| ** **                                                                  | ** ** | **Successor**                    | ** ** | **Predecessor** | ** ** |
| ** **                                                                  | ** ** | **April 1,**                | ** ** | **March 26,** | ** ** |
| ** **                                                                  | ** ** | **2007**                         | ** ** | **2006** | ** ** |
| Revenues:                                                                   |       |                             |       |   |   |
| Restaurant revenues                                                         |       | $                                | 130,295    |   | $ | 129,798 |   |
| Other revenues                                                              |       | 7,201                            |       | 6,840 |   |
| Franchise revenues                                                          |       | 1,015                            |       | 944 |   |
| Total revenues                                                              |       | 138,511                          |       | 137,582 |   |
| Costs and  expenses:                                                        |       |                             |       |   |   |
| Cost of sales                                                               |       | 32,826                           |       | 32,538 |   |
| Labor                                                                       |       | 49,676                           |       | 47,807 |   |
| Direct operating and occupancy expense                                      |       | 36,171                           |       | 36,177 |   |
| General and administrative expense                                          |       | 7,681                            |       | 6,846 |   |
| Depreciation and amortization                                               |       | 5,753                            |       | 4,524 |   |
| Amortization of favorable lease asset and  unfavorable lease liability, net |       | 27                               |       | — |   |
| Legal settlement costs                                                      |       | 166                              |       | 2,022 |   |
| Pre-opening costs                                                           |       | 390                              |       | 273 |   |
|                                                                        |       |                             |       |   |   |
| Operating income                                                            |       | 5,821                            |       | 7,395 |   |
|                                                                        |       |                             |       |   |   |
| Other income  (expense):                                                    |       |                             |       |   |   |
| Interest expense                                                            |       | (4,846                           | )          | (6,012 | ) |
| Other income (expense), net                                                 |       | (94                              | )          | 51 |   |
|                                                                        |       |                             |       |   |   |
| Total other expense, net                                                    |       | (4,940                           | )          | (5,961 | ) |
|                                                                        |       |                             |       |   |   |
| Income before  income tax provision                                         |       | 881                              |       | 1,434 |   |
|                                                                        |       |                             |       |   |   |
| Income tax  provision                                                       |       | 368                              |       | 571 |   |
|                                                                        |       |                             |       |   |   |
| Net income                                                                  |       | 513                              |       | 863 |   |
|                                                                        |       |                             |       |   |   |
| Redeemable  preferred stock accretion                                       |       | —                           |       | (3,899 | ) |
|                                                                        |       |                             |       |   |   |
| Net income (loss)  attributable to common stockholders                      |       | $                                | 513        |   | $ | (3,036 | ) |

 

See notes to consolidated financial statements.

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**Real Mex Restaurants, Inc.**

**Consolidated Statements of Cash Flows (unaudited)**

**(in thousands)**
| ** **                                                                         | ** ** | **Three Months Ended** | ** ** |
|------------------------------------------------------------------------------------|------------|----------------------------------|------------|
| ** **                                                                         | ** ** | **Successor**                    | ** ** | **Predecessor** | ** ** |
| ** **                                                                         | ** ** | **April 1,**                | ** ** | **March 26,** | ** ** |
| ** **                                                                         | ** ** | **2007**                         | ** ** | **2006** | ** ** |
| **Operating  activities**                                                          |       |                             |       |   |   |
| Net income                                                                         |       | $                                | 513        |   | $ | 863 |   |
| Adjustments to  reconcile net income to net cash provided by operating activities: |       |                             |       |   |   |
| Depreciation and amortization                                                      |       | 5,753                            |       | 4,524 |   |
| Amortization of:                                                                   |       |                             |       |   |   |
| Favorable lease asset and unfavorable lease  liability, net                        |       | 28                               |       | — |   |
| Debt premium                                                                       |       | (293                             | )          | — |   |
| Deferred financing costs                                                           |       | 558                              |       | 442 |   |
| (Gain) loss on disposal of property and equipment                                  |       | (51                              | )          | 5 |   |
| Deferred tax asset                                                                 |       | 343                              |       | 353 |   |
| Other                                                                              |       | (159                             | )          | — |   |
| Changes in operating assets and liabilities:                                       |       |                             |       |   |   |
| Trade and other receivables                                                        |       | (2,197                           | )          | (1,764 | ) |
| Inventories                                                                        |       | (12                              | )          | (107 | ) |
| Prepaid expenses and other current assets                                          |       | 845                              |       | 983 |   |
| Related party receivable                                                           |       | (71                              | )          | — |   |
| Deferred charges, net                                                              |       | (177                             | )          | (6 | ) |
| Other assets                                                                       |       | (2                               | )          | (253 | ) |
| Accounts payable and accrued liabilities                                           |       | (2,118                           | )          | 3,413 |   |
| Other liabilities                                                                  |       | 1,445                            |       | 926 |   |
| Net cash  provided by operating activities                                         |       | 4,405                            |       | 9,379 |   |
|                                                                               |       |                             |       |   |   |
| **Investing  activities**                                                          |       |                             |       |   |   |
| Additions to  property and equipment                                               |       | (4,665                           | )          | (3,275 | ) |
| Net cash used in  investing activities                                             |       | (4,665                           | )          | (3,275 | ) |
|                                                                               |       |                             |       |   |   |
| **Financing  activities**                                                          |       |                             |       |   |   |
| Net borrowing  under revolving credit facility                                     |       | 750                              |       | — |   |
| Payments on  long-term debt agreements and capital lease obligations               |       | (142                             | )          | (64 | ) |
| Payment of  financing costs                                                        |       | (534                             | )          | — |   |
| Net cash  provided by (used in) financing activities                               |       | 74                               |       | (64 | ) |
| Net (decrease)  increase in cash and cash equivalents                              |       | (186                             | )          | 6,040 |   |
|                                                                               |       |                             |       |   |   |
| Cash and cash  equivalents at beginning of period                                  |       | 2,710                            |       | 14,871 |   |
| Cash and cash  equivalents at end of period                                        |       | $                                | 2,524      |   | $ | 20,911 |   |
|                                                                               |       |                             |       |   |   |
| **Supplemental  disclosure of cash flow information**                              |       |                             |       |   |   |
| Interest paid                                                                      |       | $                                | 2,391      |   | $ | 2,919 |   |
| Income taxes paid                                                                  |       | $                                | 24         |   | $ | 2 |   |

 

See notes toconsolidated financial statements.

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**Real Mex Restaurants, Inc. and Subsidiaries**

**Notes to Consolidated Financial Statements(unaudited)**

**April 1, 2007**

**(in thousands, except for share data and amountsstated in millions)**

**1.****                                      Basisof Presentation**

Real MexRestaurants, Inc. (the surviving corporation resulting from a merger on August21, 2006 with RM Integrated, Inc. (the “Merger”)), a Delaware corporation, wasformed on May 15, 1998.

After the Merger theCompany is referred to as the “Successor” and before the Merger the Company isreferred to as the “Predecessor”.

Real MexRestaurants, Inc., primarily through its major subsidiaries El ToritoRestaurants, Inc. (El Torito), Chevys Restaurants, LLC (Chevys) andAcapulco Restaurants, Inc. (Acapulco), operated 194 restaurants, of which160 were located in California and the remainder were located in 12 otherstates, primarily under the trade names El Torito Restaurant®, Chevys FreshMex® and Acapulco Mexican Restaurant Y Cantina®. Real Mex Restaurants, Inc.’sother major subsidiary, Real Mex Foods, Inc., provides internalproduction, purchasing and distribution services for the restaurant operationsand also manufactures specialty products for sale to outside customers.

The accompanyingunaudited consolidated financial statements include the accounts of Real MexRestaurants, Inc. and its wholly owned subsidiaries. Our consolidatedfinancial statements have been prepared in accordance with accountingprinciples generally accepted in the United States for interim financialinformation and with the instructions to Form 10-Q and Rule 10-01 ofRegulation S-X.

Certain information andfootnote disclosures normally included in consolidated financial statements inaccordance with U.S. generally accepted accounting principles have been omittedpursuant to requirements of the Securities and Exchange Commission (SEC). Adescription of our accounting policies and other financial information isincluded in our audited consolidated financial statements as filed with the SECin our annual report on Form 10-K for the year ended December 31,2006. We believe that the disclosures included in our accompanying interimconsolidated financial statements and footnotes are adequate to make theinformation not misleading, but should be read in conjunction with ourconsolidated financial statements and notes thereto included in the our annualreport on Form 10-K. The accompanying consolidated balance sheet as ofDecember 31, 2006 has been derived from our audited financial statements.

**2.****                                      MergerAgreement**

On August 17,2006, the Company entered into an Agreement and Plan of Merger (“MergerAgreement”) with RM Restaurant Holding Corp. (“RM Restaurant Holding”) and itssubsidiary, RM Integrated, Inc. (“RM Integrated”, and together with RMRestaurant Holding, “Buyer”).  Themajority of the stock of RM Restaurant Holding is owned by Sun Cantinas LLC (“SunLLC”), an affiliate of Sun Capital Partners, Inc. (“Sun Capital”).  On August 18, 2006, the stockholders of theCompany entitled to vote thereon (including the holders of a majority of the Company’sSeries C Preferred Stock, par value $0.001 per share) approved the MergerAgreement.  On August 21, 2006 (the “EffectiveTime”), the closing of the transactions contemplated by the Merger Agreementoccurred, and RM Integrated merged with and into Real Mex Restaurants, Inc.,with Real Mex Restaurants, Inc. continuing as the surviving corporation and the100% owned subsidiary of RM Restaurant Holding. The net purchase price of Real Mex Restaurants, Inc. was $199.1 million,consisting of $359.0 million in cash, plus net cash acquired of $35.2 million,plus a $2.8 million working capital adjustment and direct acquisition costs of$3.9 million, less indebtedness assumed of $188.2 million and seller costs of$7.6 million. Pursuant to the Merger Agreement, $6.0 million of the MergerConsideration is being held in escrow, indebtedness assumed included accruedinterest and the purchase price is subject to adjustment based on certain otheradjustments.  As a result of the Mergerand in accordance with the terms of the Merger Agreement, (i) all of theoutstanding capital stock of Real Mex Restaurants, Inc. was converted into theright to receive a portion of the purchase price, and all Real Mex Restaurants,Inc. stock options, warrants and shares of restricted stock were cancelled andconverted into the right to receive a portion of the purchase price, less theexercise prices or unpaid purchase prices therefore, as applicable, and (ii)the Company became a wholly-owned subsidiary of RM Restaurant Holding.  Prior to the Merger, Bruckmann, Rosser,Sherrill & Co., Inc. (“BRS”), together with its affiliates, was acontrolling stockholder of Real Mex Restaurants, Inc.  As described in the Merger Agreement, theAmended and Restated Management Agreement dated June 28, 2000 by and among theCompany, certain of its subsidiaries, BRS, and FS Private Investments, L.L.C.was terminated in connection with the Merger.

The foregoingdescription of the Merger Agreement is qualified in its entirety by referenceto the Merger Agreement filed with the Securities and Exchange Commission asExhibit 10.1 to Form 8-K (File No. 333-116310) on August 17, 2006 andincorporated by reference herein.

The Merger wasaccounted for under the purchase method of accounting and, accordingly, the purchaseprice has

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been allocated to theassets acquired and the liabilities assumed based on their estimated fairmarket values at the date of the Merger. The Companyattributes the goodwill associated with the Merger to the historical financialperformance and the anticipated future performance of the Company’s operations.

The followingtable presents the allocation of the acquisition costs, including professionalfees and other related transaction costs, to the assets acquired andliabilities assumed based on their estimated fair values (in thousands):

| Cash and cash equivalents                 |   | $       | 29,270  |   |
|-------------------------------------------|--------|---------|---------|--------|
| Trade and other  accounts receivable      |   | 11,625  |    |
| Inventories                               |   | 10,012  |    |
| Other current  assets                     |   | 5,615   |    |
| Property and  equipment                   |   | 88,997  |    |
| Deferred tax  asset                       |   | 6,196   |    |
| Other assets                              |   | 35,281  |    |
| Goodwill                                  |   | 286,403 |    |
| Total assets acquired                     |   | 473,399 |    |
|                                      |   |    |    |
| Accounts payable  and accrued liabilities |   | 20,881  |    |
| Long-term debt                            |   | 186,057 |    |
| Other  liabilities                        |   | 67,329  |    |
| Total liabilities assumed                 |   | 274,267 |    |
| Net assets acquired                       |   | $       | 199,132 |   |

 

**3.****                                      Long-TermDebt**

Long-term debt consists of the following:

|                                                | ** ** | **April 1,  2007** | ** ** | **December 31,  2006** | ** ** |
|------------------------------------------------|------------|-------------------------|------------|-----------------------------|------------|
| Senior Secured  Notes due 2010                 |       | $                       | 105,000    |                        | $          | 105,000 |   |
| Senior Secured  Notes unamortized debt premium |       | 3,516                   |       | 3,809                       |       |
| Senior Secured  Revolving Credit Facility      |       | 8,700                   |       | 7,950                       |       |
| Senior Unsecured  Credit Facility              |       | 65,000                  |       | 65,000                      |       |
| Mortgage                                       |       | 702                     |       | 711                         |       |
| Other                                          |       | 368                     |       | 448                         |       |
|                                           |       | 183,286                 |       | 182,918                     |       |
|                                           |       |                    |       |                        |       |
| Less current  portion                          |       | (10,301                 | )          | (9,573                      | )          |
|                                           |       |                    |       |                        |       |
|                                           |       | $                       | 172,985    |                        | $          | 173,345 |   |

 

*SeniorSecured Notes due 2010*. Interest on our senior securedregistered notes (“senior secured notes”) accrues at a contract rate of 10% perannum. (The interest rate was 10.25% through March 31, 2007 as, in fiscal year2005, we exceeded the capital expenditure limit under the indenture governingthe senior secured notes and as a result were required to pay a 0.25% increasein the stated rate. Exceeding the capital expenditure limit did not constitutea default with respect to the senior secured notes or indenture.) Interest ispayable semiannually on April 1 and October 1 of each year. Oursenior secured notes are fully and unconditionally guaranteed on a seniorsecured basis by all of our present and future domestic subsidiaries which arerestricted subsidiaries under the indenture governing our senior secured notes.Our senior secured notes and related guarantees are secured by substantiallyall of our and our domestic restricted subsidiaries’ tangible and intangibleassets, subject to the prior ranking claims on such assets by the lenders underour New Senior Secured Revolving Credit Facilities. The indenture governing oursenior secured notes contains various affirmative and negative covenants,subject to a number of important limitations and exceptions, including but notlimited those limiting our ability to incur additional indebtedness, makecapital expenditures, pay dividends, redeem stock or make other distributions,issue stock of our subsidiaries, make certain investments or acquisitions,grant liens on assets, enter into transactions with affiliates, merge,consolidate or transfer substantially all of our assets, and transfer and sellassets. The covenant that limits our incurrence of indebtedness requires that,after giving effect to any such incurrence of indebtedness and the applicationof the proceeds thereof, our fixed charge coverage ratio as of the date of suchincurrence will be at least 2.50 to 1.00 in the case of any incurrence afterApril 1, 2006. The indenture defines consolidated fixed charge coverageratio as the ratio of Consolidated Cash Flow (as defined therein) to FixedCharges (as defined therein). The Company was in compliance with all specifiedfinancial and other covenants under the senior secured notes indenture at April1, 2007.

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We can redeem oursenior secured notes on or after April 1, 2007. We are required to offerto redeem our senior secured notes under certain circumstances involving achange of control. Additionally, if we or any of our domestic restrictedsubsidiaries engage in assets sales, we generally must either invest the netcash proceeds from such sales in our business within 360 days, prepay theindebtedness obligations under our New Senior Secured Revolving Credit Facilityor certain other secured indebtedness or make an offer to purchase a portion ofour senior secured notes.

On September 19,2006, the Company commenced a change of control offer (the “Offer”) to purchaseany or all of its notes that remain outstanding under the indenture dated March31, 2004 by and among the Company, the guarantors thereto and Wells Fargo Bank,National Association, as trustee. The Offer was made pursuant to Section 4.15of the indenture as the Merger constituted a “change of control” under theindenture. In accordance with the terms of the indenture, the Company offeredto repurchase the notes at a purchase price in cash equal to 101% of theaggregate principal amount of the notes or portion of notes validly tenderedfor payment thereof, plus accrued and unpaid interest up to, but not including,the date of payment, upon the terms and subject to the conditions of the Offer.The Offer expired on October 19, 2006. No notes were tendered pursuant to theOffer and as of the expiration date of the Offer, $105.0 million aggregateprincipal amount of notes remained outstanding.

As a result of theMerger and under purchase accounting rules we recorded $4.2 million ofunamortized debt premium as additional debt related to our senior secured notesas the fair market value of the debt on the Merger date was greater than itscarrying value. The premium is amortized to interest expense over the remaininglife of the debt.

*SeniorSecured Revolving Credit Facilities*. In 2004, the Company entered into anamended and restated revolving credit agreement providing for $30.0 million ofsenior secured credit facilities. The revolving credit agreement included a$15.0 million letter of credit facility and a $15.0 million revolving creditfacility that could be used for letters of credit.

On October 5, 2006, theCompany entered into a new amended and restated revolving credit facility,pursuant to which the existing $15.0 million revolving credit facility and$15.0 million letter of credit facility, was increased to a $15.0 millionrevolving credit facility (the “Old Senior Secured Revolving Credit Facility”)and a $25.0 million letter of credit facility (the “Old Senior Secured Letterof Credit Facility”, together with the Old Senior Secured Revolving CreditFacility, the “Old Senior Secured Revolving Credit Facilities”) maturing onOctober 5, 2008, pursuant to which the Lenders agreed to make loans to theCompany and its subsidiaries (all of the proceeds of which were to be used forworking capital purposes) and issue letters of credit on behalf of the Company andits subsidiaries.

On January 29,2007, the Company entered into a Second Amended and Restated Credit Agreementpursuant to which the Old Senior Secured Revolving Credit Facilities wererefinanced with a new agent and administrative agent, General Electric CapitalCorporation, and a new $15.0 million revolving credit facility (the “New SeniorSecured Revolving Credit Facility”) and $25.0 million letter of credit facility(the “New Senior Secured Letter of Credit Facility”, together with the NewSenior Secured Revolving Credit Facility, the “New Senior Secured RevolvingCredit Facilities”), maturing on January 29, 2009, were put into place,pursuant to which the lenders agree to make loans and issue letters of creditto and on behalf of the Company and its subsidiaries.

Obligations underthe New Senior Secured Revolving Credit Facilities are guaranteed by all of theCompany’s subsidiaries as well as by RM Restaurant Holding, which wholly ownsthe Company and has made a first priority pledge of all of its equity interestsin the Company as security for the obligations.  Interest on the NewSenior Secured Revolving Credit Facility accrues pursuant to an ApplicableMargin as set forth in the Second Amended and Restated Credit Agreement. The New Senior Secured Revolving Credit Facilities are secured by, amongother things, first priority pledges of all of the equity interests of theCompany’s direct and indirect subsidiaries, and first priority securityinterests (subject to customary exceptions) in substantially all of the currentand future property and assets of the Company and its direct and indirectsubsidiaries, with certain limited exceptions.  In connection with theCompany’s entrance into the New Senior Secured Revolving Credit Facilities onJanuary 29, 2007, the Company borrowed $7.4 million under the New SeniorSecured Revolving Credit Facility, the proceeds of which were used to pay theoutstanding revolving borrowings under the Old Senior Secured Revolving CreditFacility. As of April 1, 2007, there was $8.7 million outstanding under the NewSenior Secured Revolving Credit Facility.

Our New SeniorSecured Revolving Credit Facilities contain various affirmative and negativecovenants and restrictions, which among other things, require us to meetcertain financial tests (including certain leverage and cash flow ratios), andlimits our and our subsidiaries’ ability to incur or guarantee additionalindebtedness, make certain capital expenditures, pay dividends or make otherequity distributions, purchase or redeem capital stock, make certaininvestments, enter into arrangements that restrict dividends from subsidiaries,sell assets, engage in transactions with affiliates and effect a consolidationor merger. We are required to maintain a cash flow ratio determined on anannual basis equal to 1.70 to 1.00 until maturity. Pursuant to the termsof the Senior Secured Revolving Credit Facilities, the Cash Flow Ratio isdefined as the ratio of (a) Consolidated Cash Flow (as defined therein) to (b)Consolidated Financial Obligations (as defined therein).

As of April 1,2007, under the terms of the agreement, the Cash Flow Ratio covenant was not,and the lender has waived such noncompliance. The Company was in compliancewith all other specified financial and other covenants under the New SeniorSecured Revolving Credit Facilities at April 1, 2007.

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*SeniorUnsecured Credit Facility*. In 2005 we entered into a $75.0million senior unsecured credit facility (the “Old Senior Unsecured CreditFacility”) consisting of a single term loan maturing on December 31, 2008, allof the proceeds of which were used to finance a portion of the cashconsideration of an acquisition and pay related fees and expenses. On October5, 2006, the Company entered into an Amended and Restated Senior UnsecuredCredit Facility, pursuant to which the Old Senior Unsecured Credit Facility wasdecreased to a $65.0 million senior unsecured credit facility (the “ New SeniorUnsecured Credit Facility”), consisting of a single term loan maturing onOctober 5, 2010. All of the proceeds of the New Senior Unsecured CreditFacility were used to repay in full any term loans outstanding under the OldSenior Unsecured Credit Facility and not continued on the restatementdate.  The total amount of term loansrepaid was $10.0 million. Obligations under the New Senior Unsecured CreditFacility are guaranteed by all of the Company’s subsidiaries. Interest on theterm loan outstanding under the New Senior Unsecured Credit Facility accrues,at the Company’s option, at either (i) the greater of the prime rate or therate which is 0.5% in excess of the federal funds rate, plus 4.0% or (ii) areserve adjusted Eurodollar rate, plus 5.0%. As of April 1, 2006, the interestrate on the New Senior Unsecured Credit Facility term loan was 10.35%.

Our New SeniorUnsecured Credit Facility contains various affirmative and negative covenantswhich, among other things, require us to meet certain financial tests(including certain leverage and interest coverage ratios) and limits our andour subsidiaries’ ability to incur or guarantee additional indebtedness, grantcertain liens, make certain restricted payments, make capital expenditures,engage in transactions with affiliates, make certain investments, sell ourassets, make acquisitions, effect a consolidation or merger and amend or modifyinstruments governing certain indebtedness (including relating to our seniorsecured notes and the New Senior Secured Revolving Credit Facilities). We are requiredto maintain certain minimum interest coverage ratios ranging from (i) 2.15to 1.00 for the fiscal quarters ending on or after March 31, 2007 throughDecember 31, 2007 and (ii) 2.30 to 1.00 thereafter until maturity.Pursuant to the terms of the New Senior Unsecured Credit Facility, the InterestCoverage Ratio is defined as the ratio as of the last day of any fiscal quarterof (a) Consolidated EBITDA (as defined therein) for the four-fiscalquarter period then ending to (b) Consolidated Interest Expense (asdefined therein) for such four-fiscal quarter period. The Company was incompliance with all specified financial and other covenants under the NewSenior Unsecured Credit Facility at April 1, 2007.

*Mortgage.*In 2005, concurrent with an acquisition, we assumed a $0.8 million mortgagesecured by the building and improvements of one of the restaurants acquired inthe transaction. The mortgage carries a fixed annual interest rate of 9.28% andrequires equal monthly payments of principal and interest through April 2015.As of April 1, 2007, the principal amount due on the mortgage was $0.7 million.

Interest rates forthe Company’s long-term debt are shown the following table:

|                                           | ** ** | **April 1,  2007** | ** ** | **December 31,  2006** | ** ** |
|-------------------------------------------|------------|-------------------------|------------|-----------------------------|------------|
| Senior secured  notes due 2010            |       | 10.00                   | %          | 10.25                       | %          |
| Senior Secured  Revolving Credit Facility |       | 7.57 to 9.00            | %          | 8.25                        | %          |
| Senior Unsecured  Credit Facility         |       | 10.35                   | %          | 10.35                       | %          |
| Mortgage                                  |       | 9.28                    | %          | 9.28                        | %          |

 

**4.****                                      Capitalization**

**CommonStock**

The Company isauthorized to issue 1,000 shares of common stock. At April 1, 2007 and December31, 2006, there were 1,000 shares of common stock authorized, issued andoutstanding.

**Redeemable PreferredStock-Predecessor**

The Company wasauthorized to issue 100,000 shares of Preferred Stock. Shares were issued uponapproval of the board of directors and all outstanding shares of PreferredStock were redeemable at any time at the option of the Company, subject torestrictions under certain debt covenants.

Series A 12.5% Cumulative Compounding RedeemablePreferred Stock (Series A) and Series B 13.5% Cumulative CompoundingRedeemable Preferred Stock (Series B) had a liquidation preference equalto $1 per share plus accreted dividends. With respect to dividend rights andrights of liquidation, Series A ranked senior to all classes of CommonStock and Series B. Series B ranked senior to all classes of Common Stock.

Series C 15%Cumulative Compounding Participating Preferred stock (Series C) ranked seniorwith respect to payment of dividends, liquidation, and redemption to all otherseries of preferred stock and common stock of the Company. The Series Chad a liquidation preference equal to two times the original issue price of $1per share, plus accreted dividends. As a result of the liquidation preference,Series C was recorded at liquidation value at the date of issuance. Holders ofSeries C were entitled to receive, in addition to the liquidationpreference, an amount equal to 40% of any amounts that would otherwise beavailable to the holders of Common Stock in the event of a liquidation or saleof the Company.

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The liquidationpreference on the Series A, Series B and Series C accreted at thestated rates on the liquidation preference value thereof; dividends(representing accreted liquidation preference) were to be paid from legallyavailable funds, when and if declared by the board of directors. Dividends werepayable only when and if declared, or upon a sale or liquidation of the Companyor upon redemption of the applicable series of preferred stock. Accretion ofthe liquidation preference on the redeemable preferred stock was reflected asan increase in the preferred stock values and an increase in the accumulateddeficit. Accretion of the liquidation preference on the Redeemable PreferredStock was $3,898 during the Predecessor period ended March 26, 2006. In thePredecessor period, net loss attributable to common stockholders includes theeffect of the accretion of the liquidation preference on the redeemablepreferred stock which reduced net income attributable to common stockholdersfor the period.

On August 21,2006, as a result of the Merger and in accordance with the terms of the MergerAgreement, all issued and outstanding preferred stock was converted into theright to receive a portion of the Merger consideration.

**Stock Option Plans**

As a result of theMerger and in accordance with the terms of the Merger Agreement all of theCompany’s outstanding vested and unvested stock options were cancelled and convertedinto the right to receive a portion of the purchase price, less the exerciseprices thereon, as applicable. Concurrently with the Merger, the Company’s 1998and 2000 Stock Option Plans were terminated. The Company does not currentlyhave a stock option plan.

In accordance with SFAS No. 148, Accounting forStock-Based Compensation-Transition and Disclosure, the Company accounted forthe stock-based compensation plans using the intrinsic value-based measurementprinciples of APB Opinion No. 25, Accounting for Stock Issued toEmployees, and related interpretations. No stock-based employee compensationcost is reflected in net income for the period ended March 26, 2006, as alloptions granted under the Plans had an exercise price equal to the market valueof the underlying common stock on the date of grant. If the Company had electedto recognize compensation cost based on the fair value of the options grantedat the grant rate as prescribed by SFAS No. 148, there would have been no proforma effects to net income in the Successor period from January 1, 2007 toApril 1, 2007 or the Predecessor period from December 26, 2005 to March 26,2006.

**5.****                                      RelatedParty Transactions**

**Successor Transactions**

The Company has aManagement Services Agreement (the Management Agreement”) dated August 21,2006, by and between the Company and Sun Capital Partners Management IV, LLC(the “Manager”), an affiliate of Sun Cantinas LLC, the indirect holder of themajority of the capital stock of the Company. The Manager is paid annual feesequal to the greater of (i) $500 or (ii) 1% of the Company’s EBITDA for suchperiod. EBITDA is defined as (A) net income (or loss) after taxes of theCompany and its direct and indirect subsidiaries on a consolidated basis (“NetIncome”), plus (B) interest expense which has been deducted in thedetermination of Net Income, plus (C) federal, state and local taxes which havebeen deducted in determining Net Income, plus (D) depreciation and amortizationexpenses which have been deducted in determining Net Income, including withoutlimitation amortization of capitalized transaction expenses incurred inconnection with the transactions contemplated by the Merger plus (E) extraordinarylosses which have been deducted in the determination of Net Income, plus (F)un-capitalized transaction expenses incurred in connection with the Merger,plus (G) all other non-cash charges, minus (H) extraordinary gainswhich have been included in the determination of Net Income.  EBITDA is computed without taking into considerationthe fees payable under the Management Agreement. The Company pays the fees inquarterly installments in advance equal to the greater of (i) $125 or (ii) 1%of EBITDA for the immediately preceding fiscal quarter. Expenses relating tothe Management Agreement of $125 were recorded as general and administrativeexpense in the Successor Period from January 1, 2007 to April 1, 2007.Additionally, the Company prepaid $125 in fees under the agreement for thesecond quarter of 2007.

In September 2006, the Company made a dividenddistribution of $10,000 to RM Restaurant Holding Corp., its parent, which wasrecorded as a reduction to retained earnings. The Company has also madesubsequent additional distributions to RM Restaurant Holding Corp. in the amountof $3,537 and has recorded the distributions as a related party receivable.

**Predecessor Transactions**

The Company had anAmended and Restated Management Agreement dated June 28, 2000 with two of itsformer stockholders Bruckman, Rosser, Sherrill & Co., L.P. and FS PrivateInvestments, LLC. The stockholders were paid annual fees equating to .667% and..333%, respectively, of consolidated earnings before interest, income taxes,depreciation and amortization of the Company. As described in the MergerAgreement, the Amended and Restated Management Agreement dated June 28, 2000was terminated in connection with the Merger. Expenses relating to theagreement of $124 were recorded as general and administrative expense in thepredecessor period from December 26, 2005 to March 26, 2006.

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In April 2004, weentered into an oral agreement with RA Patina, pursuant to which Real MexFoods, Inc. provided food distribution services to certain restaurants owned byRA Patina. From December 26, 2005 to March 26, 2006 we received $311 forservices rendered under this food distribution service arrangement. FortunatoN. Valenti, one of our former directors, is the Chief Executive Officer of RAPatina and Richard Stockinger, also one of our former directors, is thePresident of RA Patina.

**6.****                                      Impact of Recently Issued Accounting Principles**

In July 2006, the Financial Accounting Standards Board (“FASB”) issued Interpretation No. 48 (“FINNo. 48”) *Accounting for Uncertaintyin Income Taxes: an interpretation of FASB Statement No. 109.*Thisinterpretation clarifies the accounting for uncertainty in income taxesrecognized in an entity’s financial statements in accordance with Statement ofFinancial Accounting Standards (“SFAS”)No. 109, *Accounting*far *Income Taxes.*FIN No. 48 prescribes a recognitionthreshold and measurement principles for financial statement disclosure of taxpositions taken or expected to be taken on a tax return. The Company adoptedthe provision of this interpretation effective January 1, 2007. The adoption ofFIN No. 48 did not have a material impact on the Company’s consolidatedfinancial position and results of operations.

In September 2006, the FASB issued SFAS No. 157, *Fair Value Measurements.*ThisStandard defines fair value, establishes a framework for measuring fair valuein generally accepted accounting principles and expands disclosures about fairvalue measurements. SFAS No. 157 is effective for financial statements issuedfor fiscal years beginning after November 15, 2007, which is the year beginningDecember 31, 2007 for the Company. The adoption of SFAS No. 157 is not expectedto have a material impact on the Company’s financial position, results ofoperations or cash flows.

In February 2007, the FASB issued SFAS No. 159, *The Fair Value Option for Financial Assets and Financial liabilities - Including an Amendmentof FASB Statement No. 115.*SFASNo. 159 permits entities to choose to measure many financial instruments andcertain other items at fair value. Unrealized gains and losses on items forwhich the fair value option has been elected will be recognized in earnings ateach subsequent reporting date. SFAS No. 159 is effective for financialstatements issued for fiscal years beginning after November 15, 2007, which isthe year beginning December 31, 2007forthe Company. The Company is evaluating the impact that the adoption of SFAS No. 159 will have on its consolidated results of operations and financialcondition.

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**Item2.    Management’s Discussion and Analysisof Financial Condition and Results of Operations**

*You should read the following discussion togetherwith our consolidated financial statements and related notes thereto includedelsewhere in this report. The following discussion and analysis of ourfinancial condition and results of operations contains forward lookingstatements within the meaning of the federal securities laws. See thediscussion under the heading “Forward-Looking Statements” elsewhere in this report.*

**Overview**

We are one of the largest full service, casual dining Mexicanrestaurant chain operators in the United States in terms of number ofrestaurants. As of April 1, 2007 we operated 194 restaurants, of which 160 arelocated in California, with additional restaurants in Arizona, Florida,Indiana, Illinois, Maryland, Missouri, Nevada, New Jersey, New York, Oregon,Virginia and Washington. Our four major subsidiaries are El ToritoRestaurants, Inc., Acapulco Restaurants, Inc., Chevys Restaurants,LLC and a purchasing, distribution, and manufacturing subsidiary, Real MexFoods, Inc.

El Torito, El Torito Grill, Acapulco and Chevys, our primary restaurantconcepts, offer high quality Mexican food, a wide selection of alcoholicbeverages and excellent guest service. In addition to the El Torito, El ToritoGrill, Acapulco and Chevys concepts, we operate 16 additional restaurantlocations, most of which are also full service Mexican formats, under thefollowing brands: Las Brisas; Casa Gallardo; El Paso Cantina; GuadalaHarry’s;Who Song & Larry’s; and Fuzio Universal Pasta.

In2006 we opened sixrestaurants: three El Torito restaurants, an El Torito Grill restaurant and aChevys restaurant, all in California and a Chevys restaurant in New York. In 2007 we opened an El Torito Grill restaurant inAnaheim, CA. We also have in the past, and may in the future, convert selectrestaurants to the El Torito or Chevys brand and divest underperformingrestaurants.

Our restaurant revenues include sales of food and alcoholic and otherbeverages. Other revenues consist primarily of sales by Real MexFoods, Inc. to outside customers of processed and packaged prepared foodsand other merchandise items.

Cost of sales is comprised primarily of food and alcoholic beverageexpenses. The components of cost of sales are variable and increase with salesvolume. In addition, the components of cost of sales are subject to increase ordecrease based on fluctuations in commodity costs and depend in part onthe success of controls we have in place to manage cost of sales in ourrestaurants. The cost, availability and quality of the ingredients we use toprepare our food and beverages are subject to a range of factors including, butnot limited to, seasonality, political conditions, weather conditions, andingredient shortages.

Labor cost includes direct hourly and management wages, operationsmanagement bonus expense, vacation pay, payroll taxes, workers’ compensationinsurance and health insurance expenses.

Direct operating and occupancy expense includes operating supplies,repairs and maintenance, advertising expenses, utilities, and other restaurantrelated operating expenses. This expense also includes all occupancy costs suchas fixed rent, percentage rent, common area maintenance charges, real estatetaxes and other related occupancy costs.

General and administrative expense includes all corporate andadministrative functions that support our operations. Expenses within thiscategory include executive management, supervisory and staff salaries, bonusand related employee benefits, travel and relocation costs, informationsystems, training, corporate rent and professional and other consulting fees.

Depreciation principally includes depreciation of capital expendituresfor restaurants.

Amortization of favorablelease asset and unfavorable lease liability, net, represents the amortizationof the asset in excess of the approximate fair market value and the liabilityin excess of the approximate fair market value of the leases assumed as of August21, 2006, the date of the Merger of the Company.  The amounts are being amortized over theremaining primary terms of the underlying leases.

Legal settlement costsinclude amounts paid or accrued to settle various legal actions against theCompany, excluding costs to defend the actions.

Pre-opening costs are expensed as incurred and include costs associatedwith the opening of a new restaurant or the conversion of an existingrestaurant to a different concept.

Goodwill is deemed to have an indefinite life and is subject to anannual impairment test.  Other intangibleassets are amortized over their useful lives in accordance with Statement ofFinancial Accounting Standards No. 142, “Goodwill and Other IntangibleAssets”

Our fiscal year consists of 52 or 53 weeks and ends on the last Sundayin December of each year. The three months ended 

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April 1, 2007 and March 26, 2006 consist of thirteenweeks. When calculating comparable store sales, we include a restaurant thathas been open for more than 18 months and for the entirety of each comparableperiod. As of April 1, 2007, we had 184 restaurants that met this criterion.

**Critical Accounting Policies**

The discussion andanalysis of our financial condition and results of operations are based uponour consolidated financial statements, which have been prepared in accordancewith accounting principles generally accepted in the United States. Thepreparation of these financial statements requires us to make estimates andjudgments that affect the reported amounts of assets, liabilities, revenues andexpenses, and related disclosure of contingent assets and liabilities. On anongoing basis, we evaluate our estimates, including those related to propertyand equipment, impairment of long-lived assets, valuation of goodwill,self-insurance reserves, income taxes and revenue recognition. We base ourestimates on historical experience and on various other assumptions and factorsthat are believed to be reasonable under the circumstances, the results ofwhich form the basis for making judgments about the carrying values ofassets and liabilities that are not readily apparent from other sources. Basedon our ongoing review, we plan to adjust our judgments and estimates wherefacts and circumstances dictate. Actual results could differ from ourestimates.

For further information regarding the accounting policies that webelieve to be critical accounting policies that affect our more significantjudgments and estimates used in preparing our consolidated financialstatements, see Note 4 of the Consolidated Financial Statements in our reporton Form 10-K filed for the fiscal year ended December 31, 2006.

**Results of Operations**

The discussion of and the results of operations forthe 13 weeks (“first quarter”) ended April 1, 2007 and March 26, 2006 is andare based on the results for the 13 week Successor period from January 1, 2007to April 1, 2007 and the 13 week Predecessor period from December 26, 2005 toMarch 26, 2006.  Because of purchase accountingadjustments to the fair market value of long-term assets and long-termliabilities, certain amounts may not be comparable between the periods endedApril 1, 2007 and March 26, 2006.

Our operating results for the 13 week periods ended April 1, 2007 andMarch 26, 2006 are expressed as a percentage of total revenues below:
|                                         | ** ** | **13 Weeks Ended** | ** ** |
|-----------------------------------------|------------|------------------------------|------------|
| ** **                              | ** ** | **Successor**                | ** ** | **Predecessor** | ** ** |
| ** **                              | ** ** | **April 1, 2007**  | ** ** | **March 26, 2006** | ** ** |
| Total revenues                          |       | 100.0                        | %          | 100.0 | % |
| Cost of sales                           |       | 23.7                         |       | 23.6 |   |
| Labor                                   |       | 35.9                         |       | 34.7 |   |
| Direct operating  and occupancy expense |       | 26.1                         |       | 26.3 |   |
| Total operating  costs                  |       | 85.7                         |       | 84.7 |   |
| General and  administrative expense     |       | 5.5                          |       | 5.0 |   |
| Depreciation                            |       | 4.2                          |       | 3.3 |   |
| Legal settlement  costs                 |       | 0.1                          |       | 1.5 |   |
| Pre-opening  costs                      |       | 0.3                          |       | 0.2 |   |
| Operating income                        |       | 4.2                          |       | 5.4 |   |
| Interest expense                        |       | 3.5                          |       | 4.4 |   |
| Income before  tax provision            |       | 0.6                          |       | 1.0 |   |
| Net income                              |       | 0.4                          |       | 0.6 |   |

 

**Thirteenweeks ended April 1, 2007 compared to the thirteen weeks ended March 26, 2006**

*Total Revenues*. Total revenues increased by $0.9 million, or 0.7%,to $138.5 million in the first quarter of 2007 from $137.6 million in the firstquarter of 2006 due to a $0.5 million increase in restaurant revenues, a $0.4million increase in other revenues and a $0.07 million increase in royalty andfranchise fees. The increase in restaurant revenues was partially due tocomparable store sales increases of 0.3% in the quarter and new restaurantopenings. The increase in comparable store sales was partially driven by a 1.2%average menu price increase in all brands that was implemented in January 2007.  The increase in other revenues was primarilydue to an increase in sales to outside customers by Real Mex Foods, Inc., ourdistribution and manufacturing subsidiary.

*Cost of Sales*. Total cost of sales of $32.8 million in the firstquarter of 2007 increased $0.3 million or 0.9% as compared to the first quarterof 2006. As a percentage of total revenues, cost of sales increased to 23.7%for the first quarter of 2007 from 23.6% for the first quarter of 2006. Thisincrease was due to higher commodity costs resulting from weather conditionscombined with higher costs associated with the increase in sales to outsidecustomers by our distribution facility.

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*Labor*. Labor costs of $49.7 million in the first quarter of2007 increased by $1.9 million or 3.9% as compared to the first quarter of2006. As a percentage of total revenues, labor costs increased to 35.9% in thefirst quarter of 2007 from 34.7% in the first quarter of 2006.This increase wasprimarily due to minimum wage increases which took place in January in the majorityof the states in which we operate. Payroll and benefits remain subject to inflation and governmentregulation; especially wage rates currently at or near the minimum wage, andexpenses for health insurance.

*Direct Operating and Occupancy Expense*. Direct operating and occupancy expenseof $36.2 million in the first quarter of 2007 was relatively unchanged versusthe first quarter of 2006. Direct operating and occupancy expense as apercentage of sales decreased to 26.1% in the first quarter of 2007 from 26.3%in the first quarter of 2006.

*General and Administrative Expense*. General and administrative expense of$7.7 million in the first quarter of 2007 increased by $0.8 million or 12.2% ascompared to the first quarter of 2006 primarily due to increased expenditurelevels for legal expenses related to litigation and an increase in salary andwage rates. General and administrative expense as a percentage of salesincreased to 5.5% in the first quarter of 2007 from 5.0% in the first quarterof 2006.

*Depreciation and amortization*. Depreciation and amortization expenseof $5.8 million in the first quarter of 2007 increased $1.2 million or 27.2% ascompared to the first quarter of 2006. As a percentage of total revenues, depreciation and amortizationincreased to 4.2% for the first quarter of 2007 from 3.3% for the first quarterof 2006. The increase in expense is due to the increase in the depreciablebasis of furniture, fixtures and equipment to fair market value required underpurchase accounting rules due to the Merger on August 21, 2006.

*Amortization of favorable lease asset andunfavorable lease liability, net*. Amortization expense was $(0.3) million in the firstquarter of 2007 and nil in the first quarter of 2006. The favorable lease assetand unfavorable lease liability were recorded on the Merger date of August 21,2006 as part of the allocation of the fair market value of the assets purchasedand the liabilities assumed in the Merger and accordingly, there was noamortization in the first quarter of 2006. Amortization is based on theremaining life of the primary term of the underlying leases.

*Legal Settlement Costs.*Legal settlement costs of $0.2 million inthe first quarter of 2007 decreased by $1.9 million or 91.8% in the firstquarter of 2007 as compared to the first quarter of 2006. The legal settlementexpense in the first quarter of 2006 related to lawsuits filed against us in2004 and 2006.

*Interest Expense*. Interest expense of $4.8 million in the firstquarter of 2007 decreased $1.2 million or 19.4% as compared to the firstquarter of 2006 primarily due to a $10.0 million reduction in our seniorunsecured credit facility, a reduction in the interest rate on our seniorunsecured credit facility from 14.17% in the first quarter of 2006 to 10.35% inthe first quarter of 2007.  As apercentage of total revenues, interest expense was 3.5% in the first quarter of2007 and 4.4% in the first quarter of 2006.

*Incometax provision.*The income tax provision for the first quarter of 2007 and 2006 was based on estimatedannual effective tax rates. A rate of 41.8% was applied to the first quarter of2007 versus a rate of 39.8% in the first quarter of 2006. The rates arecomprised of the combined federal and state statutory rates.

**Liquidity and Capital Resources**

Our principal liquidity requirements are to service our debt and meetour capital expenditure and working capital needs. Our indebtedness, includingcapital lease obligations and excluding unamortized debt premium, at April 1,2007 was $180.7 million, and we had $6.3 million of revolving creditavailability under our revolving credit facility. Our ability to make principaland interest payments and to fund planned capital expenditures will depend onour ability to generate cash in the future, which, to a certain extent, issubject to general economic, financial, competitive, legislative, regulatoryand other factors that are beyond our control. Based on our current level ofoperations, we believe our cash flow from operations, available cash andavailable borrowings under our revolving credit facility will be adequate tomeet our liquidity needs for the near future. In addition, wemay partially fund restaurant openings through credit received from tradesuppliers and landlord contributions, if favorable terms are available. Wecannot assure you, however, that our business will generate sufficient cashflow from operations or that future borrowing will be available to us under ourrevolving credit facility in an amount sufficient to enable us to service our indebtednessor to fund our other liquidity needs. If we consummate an acquisition, our debtservice requirements could increase. We may need to refinance all or aportion of our indebtedness on or before maturity. We cannot assure you that wewill be able to refinance any of our indebtedness on commercially reasonableterms or at all.

**Working Capital and Cash Flows**

We presently have, in the past have had, and in the future are likelyto have, negative working capital balances. The working capital deficit principallyis the result of accounts payable and accrued liabilities being in excess ofcurrent asset levels. The largest components of our accrued liabilities includereserves for our self-insured workers’ compensation and general liabilityinsurance 

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programs, accrued compensation and related employeebenefits costs, sales and property taxes and gift certificate and gift cardliabilities. We receive trade credit based upon negotiated terms in purchasingfood and supplies. Funds available from cash sales not needed immediately topay for food and supplies or to finance receivables or inventories typicallyhave been used for capital expenditures and debt service payments under ourexisting indebtedness.

*Operating Activities*. We had net cash provided by operating activities of$4.4 million for the quarter ended April 1, 2007 compared with net cashprovided by operating activities of $9.4 million for the quarter ended March26, 2006. The decrease in cash provided by operating activities was primarilyattributable to a decrease in accounts payable and other accrued liabilities.The decrease in accounts payable and other accrued liabilities is the result ofthe change in our period end date from March 26th in 2006 to April 1st in 2007,and the resultant timing difference in the accruals for and payments ofproperty taxes, sales taxes, payroll and rent.

*InvestingActivities*. We had net cash used in investing activities,comprised entirely of additions to property and equipment, of $4.7 million and$3.3 million for the quarters ended April 1, 2007 and March 26, 2006,respectively. The $1.4 million increase in cash used in investing activitieswas primarily due to an increase in expenditures for the construction of newrestaurants as in 2006 we had one new restaurant under construction andcurrently in 2007 we had two under construction.

We expect to makecapital expenditures totaling approximately $26.0 million in fiscal year 2007.Approximately $3.5 million is expected to be spent on restaurant remodels andrefurbishment and approximately $10.4 million is expected to be used to buildor complete the building of up to six new El Torito, El Torito Grill or Chevysrestaurants. We expect pre-opening expenses associated with the new restaurantsto total approximately $1.2 million. We expect fiscal year 2007 capitalexpenditures for information technology to be approximately $2.3 million,including approximately $1.5 million for restaurant point of sale and backoffice equipment. In 2007, we will move the existing manufacturing facility ofReal Mex Foods, Inc. to a new, larger, location and expect the cost to finishout and equip the new facility to be approximately $3.3 million. Maintenancecapital expenditures for our restaurants are expected to be approximately $6.5million. These and other similar costs may be higher in the future due toinflation and other factors. We expect to fund the expenditures for newrestaurants and other capital expenditures from cash flow from operations,available cash, available borrowings under our senior secured revolving creditfacility, landlord allowances (if favorable terms are available) and tradefinancing received from trade suppliers.

*FinancingActivities*. We had net cash provided by financing activitiesof $0.1 million in the quarter ended April 1, 2007 compared with net cash usedin financing activities of $0.1 million in the quarter ended March 26, 2006.The increase in cash provided by financing activities was primarily due to thenet borrowing under our New Senior Secured Revolving Credit Facility in 2007versus no borrowing in 2006.

**Debt and Other Obligations**

*SeniorSecured Notes due 2010*. Interest on our senior securedregistered notes (“senior secured notes”) accrues at a contract rate of 10% perannum. . (The interest rate was 10.25% through March 31, 2007 as, in fiscalyear 2005, we exceeded the capital expenditure limit under the indenturegoverning the senior secured notes and as a result were required to pay a 0.25%increase in the stated rate. Exceeding the capital expenditure limit did notconstitute a default with respect to the senior secured notes orindenture.)  Interest is payablesemiannually on April 1 and October 1 of each year. Our seniorsecured notes are fully and unconditionally guaranteed on a senior securedbasis by all of our present and future domestic subsidiaries which arerestricted subsidiaries under the indenture governing our senior secured notes.Our senior secured notes and related guarantees are secured by substantiallyall of our and our domestic restricted subsidiaries’ tangible and intangibleassets, subject to the prior ranking claims on such assets by the lenders underour New Senior Secured Revolving Credit Facilities. The indenture governing oursenior secured notes contains various affirmative and negative covenants,subject to a number of important limitations and exceptions, including but notlimited those limiting our ability to incur additional indebtedness, makecapital expenditures, pay dividends, redeem stock or make other distributions,issue stock of our subsidiaries, make certain investments or acquisitions,grant liens on assets, enter into transactions with affiliates, merge,consolidate or transfer substantially all of our assets, and transfer and sellassets. The covenant that limits our incurrence of indebtedness requires that,after giving effect to any such incurrence of indebtedness and the applicationof the proceeds thereof, our fixed charge coverage ratio as of the date of suchincurrence will be at least 2.50 to 1.00 in the case of any incurrence afterApril 1, 2006. The indenture defines consolidated fixed charge coverageratio as the ratio of Consolidated Cash Flow (as defined therein) to FixedCharges (as defined therein). The Company was in compliance with all specifiedfinancial and other covenants under the senior secured notes indenture at April1, 2007.

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We can redeem oursenior secured notes on or after April 1, 2007. We are required to offerto redeem our senior secured notes under certain circumstances involving achange of control. Additionally, if we or any of our domestic restrictedsubsidiaries engage in assets sales, we generally must either invest the netcash proceeds from such sales in our business within 360 days, prepay theindebtedness obligations under our New Senior Secured Revolving Credit Facilityor certain other secured indebtedness or make an offer to purchase a portion ofour senior secured notes.

On September 19,2006, the Company commenced a change of control offer (the “Offer”) to purchaseany or all of its notes that remain outstanding under the indenture dated March31, 2004 by and among the Company, the guarantors thereto and Wells Fargo Bank,National Association, as trustee. The Offer was made pursuant to Section 4.15of the indenture as the Merger constituted a “change of control” under theindenture. In accordance with the terms of the indenture, the Company offeredto repurchase the notes at a purchase price in cash equal to 101% of theaggregate principal amount of the notes or portion of notes validly tenderedfor payment thereof, plus accrued and unpaid interest up to, but not including,the date of payment, upon the terms and subject to the conditions of the Offer.The Offer expired on October 19, 2006. No notes were tendered pursuant to theOffer and as of the expiration date of the Offer, $105.0 million aggregateprincipal amount of notes remained outstanding.

As a result of theMerger and under purchase accounting rules we recorded $4.2 million ofunamortized debt premium as additional debt related to our senior secured notesas the fair market value of the debt on the Merger date was greater than itscarrying value. The premium is amortized to interest expense over the remaininglife of the debt.

*SeniorSecured Revolving Credit Facilities*. In 2004, the Company entered into anamended and restated revolving credit agreement providing for $30.0 million ofsenior secured credit facilities. The revolving credit agreement included a$15.0 million letter of credit facility and a $15.0 million revolving creditfacility that could be used for letters of credit.

On October 5, 2006, theCompany entered into a new amended and restated revolving credit facility,pursuant to which the existing $15.0 million revolving credit facility and$15.0 million letter of credit facility, was increased to a $15.0 millionrevolving credit facility (the “Old Senior Secured Revolving Credit Facility”)and a $25.0 million letter of credit facility (the “Old Senior Secured Letterof Credit Facility”, together with the Old Senior Secured Revolving CreditFacility, the “Old Senior Secured Revolving Credit Facilities”) maturing onOctober 5, 2008, pursuant to which the Lenders agreed to make loans to theCompany and its subsidiaries (all of the proceeds of which were to be used forworking capital purposes) and issue letters of credit on behalf of the Companyand its subsidiaries.

On January 29,2007, the Company entered into a Second Amended and Restated Credit Agreementpursuant to which the Old Senior Secured Revolving Credit Facilities wererefinanced with a new agent and administrative agent, General Electric CapitalCorporation, and a new $15.0 million revolving credit facility (the “New SeniorSecured Revolving Credit Facility”) and $25.0 million letter of credit facility(the “New Senior Secured Letter of Credit Facility”, together with the NewSenior Secured Revolving Credit Facility, the “New Senior Secured RevolvingCredit Facilities”), maturing on January 29, 2009, were put into place,pursuant to which the lenders agree to make loans and issue letters of creditto and on behalf of the Company and its subsidiaries.

Obligations underthe New Senior Secured Revolving Credit Facilities are guaranteed by all of theCompany’s subsidiaries as well as by RM Restaurant Holding, which wholly ownsthe Company and has made a first priority pledge of all of its equity interestsin the Company as security for the obligations.  Interest on the NewSenior Secured Revolving Credit Facility accrues pursuant to an Applicable Marginas set forth in the Second Amended and Restated Credit Agreement.  The NewSenior Secured Revolving Credit Facilities are secured by, among other things,first priority pledges of all of the equity interests of the Company’s directand indirect subsidiaries, and first priority security interests (subject tocustomary exceptions) in substantially all of the current and future propertyand assets of the Company and its direct and indirect subsidiaries, withcertain limited exceptions.  In connection with the Company’s entranceinto the New Senior Secured Revolving Credit Facilities on January 29, 2007,the Company borrowed $7.4 million under the New Senior Secured Revolving CreditFacility, the proceeds of which were used to pay the outstanding revolvingborrowings under the Old Senior Secured Revolving Credit Facility. As of April1, 2007, there was $8.7 million outstanding under the New Senior SecuredRevolving Credit Facility.

Our New SeniorSecured Revolving Credit Facilities contain various affirmative and negativecovenants and restrictions, which among other things, require us to meetcertain financial tests (including certain leverage and cash flow ratios), andlimits our and our subsidiaries’ ability to incur or guarantee additionalindebtedness, make certain capital expenditures, pay dividends or make otherequity distributions, purchase or redeem capital stock, make certaininvestments, enter into arrangements that restrict dividends from subsidiaries,sell assets, engage in transactions with affiliates and effect a consolidationor merger. We are required to maintain a cash flow ratio determined on anannual basis equal to 1.70 to 1.00 until maturity. Pursuant to the termsof the Senior Secured Revolving Credit Facilities, the Cash Flow Ratio is definedas the ratio of (a) Consolidated Cash Flow (as defined therein) to (b)Consolidated Financial Obligations (as defined therein).

As of April 1,2007, under the terms of the agreement, the Cash Flow Ratio covenant was not,and the lender has waived such noncompliance. The Company was in compliancewith all other specified financial and other covenants under the New SeniorSecured Revolving Credit Facilities at April 1, 2007.

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*SeniorUnsecured Credit Facility*. In 2005 we entered into a $75.0million senior unsecured credit facility (the “Old Senior Unsecured CreditFacility”) consisting of a single term loan maturing on December 31, 2008, allof the proceeds of which were used to finance a portion of the cash considerationof an acquisition and pay related fees and expenses. On October 5, 2006, theCompany entered into an Amended and Restated Senior Unsecured Credit Facility,pursuant to which the Old Senior Unsecured Credit Facility was decreased to a$65.0 million senior unsecured credit facility (the “ New Senior UnsecuredCredit Facility”), consisting of a single term loan maturing on October 5,2010. All of the proceeds of the New Senior Unsecured Credit Facility were usedto repay in full any term loans outstanding under the Old Senior UnsecuredCredit Facility and not continued on the restatement date.  The total amount of term loans repaid was$10.0 million. Obligations under the New Senior Unsecured Credit Facility areguaranteed by all of the Company’s subsidiaries. Interest on the term loanoutstanding under the New Senior Unsecured Credit Facility accrues, at theCompany’s option, at either (i) the greater of the prime rate or the rate whichis 0.5% in excess of the federal funds rate, plus 4.0% or (ii) a reserveadjusted Eurodollar rate, plus 5.0%. As of April 1, 2006, the interest rate onthe New Senior Unsecured Credit Facility term loan was 10.35%.

Our New SeniorUnsecured Credit Facility contains various affirmative and negative covenantswhich, among other things, require us to meet certain financial tests(including certain leverage and interest coverage ratios) and limits our andour subsidiaries’ ability to incur or guarantee additional indebtedness, grantcertain liens, make certain restricted payments, make capital expenditures,engage in transactions with affiliates, make certain investments, sell ourassets, make acquisitions, effect a consolidation or merger and amend or modifyinstruments governing certain indebtedness (including relating to our seniorsecured notes and the New Senior Secured Revolving Credit Facilities). We arerequired to maintain certain minimum interest coverage ratios ranging from(i) 2.15 to 1.00 for the fiscal quarters ending on or after March 31,2007 through December 31, 2007 and (ii) 2.30 to 1.00 thereafter untilmaturity. Pursuant to the terms of the New Senior Unsecured Credit Facility,the Interest Coverage Ratio is defined as the ratio as of the last day of anyfiscal quarter of (a) Consolidated EBITDA (as defined therein) for thefour-fiscal quarter period then ending to (b) Consolidated InterestExpense (as defined therein) for such four-fiscal quarter period. The Companywas in compliance with all specified financial and other covenants under theNew Senior Unsecured Credit Facility at April 1, 2007.

*Mortgage.*In 2005, concurrent with an acquisition, we assumed a $0.8 million mortgagesecured by the building and improvements of one of the restaurants acquired inthe transaction. The mortgage carries a fixed annual interest rate of 9.28% andrequires equal monthly payments of principal and interest through April 2015.As of April 1, 2007, the principal amount due on the mortgage was $0.7 million.

Interest rates forthe Company’s long-term debt are shown the following table:
|                                           | ** ** | **April 1,  2007** | ** ** | **December 31,  2006** | ** ** |
|-------------------------------------------|------------|-------------------------|------------|-----------------------------|------------|
| Senior secured  notes due 2010            |       | 10.00                   | %          | 10.25                       | %          |
| Senior Secured  Revolving Credit Facility |       | 7.57 to 9.00            | %          | 8.25                        | %          |
| Senior Unsecured  Credit Facility         |       | 10.35                   | %          | 10.35                       | %          |
| Mortgage                                  |       | 9.28                    | %          | 9.28                        | %          |

 

*CapitalLeases*. The Company leases certain leasehold improvementsunder agreements that are classified as capital leases. The capital leaseobligations have a weighted-average interest rate of 10.0%. As of April 1,2007, the principal amount due relating to capital lease obligations was $0.9million. Principal and interest payments on the capital lease obligations aredue monthly and range from $2,200 to $7,000 per month. The capital leaseobligations mature between 2009 and 2025.

**Inflation**

Over the past five years, inflation has not significantly affected ouroperations. However, the impact of inflation on labor, food and occupancy costscould, in the future, significantly affect our operations. We pay many of ouremployees hourly rates related to the federal or applicable state minimum wage.Our workers’ compensation and health insurance costs have been and are subjectto continued inflationary pressures. Costs for construction, taxes, repairs,maintenance and insurance all impact our occupancy costs. Many of our leasesrequire us to pay taxes, maintenance, repairs, insurance and utilities, all ofwhich may be subject to inflationary increases. We believe that ourcurrent practice of maintaining operating margins through a combination ofperiodic menu price increases, cost controls, careful evaluation of propertyand equipment needs, and efficient purchasing practices is our most effectivetool for dealing with inflation.

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**Item 3.   Quantitativeand Qualitative Disclosures About Market Risk**

The inherent risk in market risk sensitive instruments and positionsprimarily relates to potential losses arising from adverse changes in foreignexchange rates and interest rates.

We consider the U.S. dollar to be the functional currency for all ofour entities. All of our net sales and our expenses in fiscal years 2006 and2005 were denominated in U.S. dollars. Therefore, foreign currency fluctuationsdid not materially affect our financial results in those periods.

We are also subject to market risk from exposure to changes in interestrates based on our financing activities. This exposure relates to borrowingsunder our senior secured and unsecured credit facilities that are payable atfloating rates of interest. As of April 1, 2007, we had $65.0 millionoutstanding under our Senior Unsecured Credit Facility and $8.7 millionoutstanding under our New Senior Secured Revolving Credit Facility. Ahypothetical 10% fluctuation in interest rates, as of April 1, 2007, wouldresult in an after tax reduction of $0.5 million in earnings on an annualizedbasis.

Many of the food products purchased by us are affected by changes inweather, production, availability, seasonality and other factors outside ourcontrol. In an effort to control some of this risk, we have entered intocertain fixed price purchase agreements with varying terms of generally no morethan year duration. In addition, we believe that almost all of our food andsupplies are available from several sources, which helps to control foodcommodity risks.

**Item 4.   Controls and Procedures**

As of the end ofthe period covered by this report, we conducted an evaluation, under thesupervision and with the participation of the principal executive officer (“CEO”)and principal financial officer (“CFO”), of the effectiveness of the design andoperation of our disclosure controls and procedures (as defined inRules 13a-15(e) and 15d-15(e) under the Securities Exchange Actof 1934 (the “Exchange Act”)). Based on this evaluation, the CEO and CFOconcluded that, as of the end of the record period covered by this report, ourdisclosure controls and procedures are effective to provide reasonableassurance that information required to be disclosed by us in reports that wefile or submit under the Exchange Act is recorded, processed, summarized andreported within the time periods specified in Securities and ExchangeCommission rules and forms. There was no change in our internal controlover financial reporting during our most recently completed fiscal quarter thathas materially affected, or is reasonably likely to materially affect, ourinternal control over financial reporting.

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**PART IIOTHER INFORMATION**

**Item1. Legal Proceedings**

We are periodically a defendant in cases involving personal injury,labor and employment and other matters incidental to our business. While anypending or threatened litigation has an element of uncertainty, we believe thatthe outcome of these lawsuits or claims, individually or combined, will notmaterially adversely affect our consolidated financial position, results ofoperations or cash flows.

**Item1A. Risk Factors**

No material changes from the risk factors disclosed in Item 1A of ourreport on Form 10-K for the fiscal year ended December 31, 2006.

**Item2. Unregistered Sales of Equity Securities and Use of Proceeds**

Not applicable.

**Item3. Defaults Upon Senior Securities**

Not applicable.

**Item4. Submission of Matters to a Vote of Security Holders**

Not applicable.

**Item5. Other Information**

Not applicable.

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**Item6.    Exhibits**
| Exhibit No. | ** ** | **Description**                                                                                                                                                                                                                                  |
|------------------|------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|             |       |                                                                                                                                                                                                                                             |
| 10.2             |       | Amended and Restated Credit Agreement (Filed with  the Securities and Exchange Commission as Exhibit 10.2 to the Company’s  Report on Form 8-K (File No. 333-116310) on February 2, 2007 and  incorporated by reference herewith) |
|             |       |                                                                                                                                                                                                                                             |
| 31.1             |       | Certification pursuant to  Rule 13a-14(a) or Rule 15d-14(a) of the Securities  Exchange Act of 1934 of the Chief Executive Officer.                                                                                          |
|             |       |                                                                                                                                                                                                                                             |
| 31.2             |       | Certification pursuant to  Rule 13a-14(a) or Rule 15d-14(a) of the Securities  Exchange Act of 1934 of the Chief Financial Officer.                                                                                          |
|             |       |                                                                                                                                                                                                                                             |
| 32.1             |       | Certification pursuant to 18 U.S.C.  Section 1350, as adopted pursuant to Section 906 of the  Sarbanes-Oxley Act of 2002, of the Chief Executive Officer.                                                                              |
|             |       |                                                                                                                                                                                                                                             |
| 32.2             |       | Certification pursuant to 18 U.S.C.  Section 1350, as adopted pursuant to Section 906 of the  Sarbanes-Oxley Act of 2002, of the Chief Financial Officer.                                                                              |

 

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**SIGNATURE**

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 theundersigned thereunto duly authorized.
|                          |   | REAL MEX RESTAURANTS, INC. |
|--------------------------|--------|---------------------------------|
|                     |   |                            |   |   |
|                     |   |                            |   |   |
| Dated: May 10, 2007 |   | By:                             |   | /s/ Frederick F. Wolfe |   |
|                     |   |                            |   | Frederick F. Wolfe |
|                     |   |                            |   | President & Chief Executive Officer   (principal executive officer) |
|                     |   |                            |   |   |
| Dated: May 10, 2007 |   | By:                             |   | /s/ Steven Tanner |   |
|                     |   |                            |   | Steven Tanner |
|                     |   |                            |   | Chief Financial Officer   (principal financial officer) |

 

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