RUBIOS RESTAURANTS INC, 10-K, 2000-03-27

RUBIOS RESTAURANTS INC
10-K, 2000-03-27
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-K

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934

FOR THE FISCAL YEAR ENDED DECEMBER 26, 1999
COMMISSION FILE NUMBER: 000-26125

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

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

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

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

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK, PAR VALUE $0.001 PER SHARE

Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
----- -----

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of the Form 10-K or any
amendment to this Form 10-K.

The aggregate market value of the voting stock held by non-affiliates of the
Registrant as of February 16, 2000 was approximately $27,560,869. This amount
excludes 4,934,448 shares of the Registrant's common stock held by executive
officers, directors and affiliated parties at February 16, 2000. Exclusion of
such shares should not be construed to indicate that any such person
possesses the power, direct or indirect, to direct or cause the direction of
the management or policies of the Registrant or that such person is
controlled by or under common control with the Registrant.

As of February 16, 2000, there were 8,871,715 shares of the Registrant's common
stock, par value $0.001 per share, outstanding.

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DOCUMENTS INCORPORATED BY REFERENCE

PART III incorporates information by reference from the definitive proxy
statement for the 2000 Annual Meeting of Stockholders to be held on June 6,
2000.

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RUBIO'S RESTAURANTS, INC.

TABLE OF CONTENTS

Page
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<S> <C>
PART I

Item 1 Business 4

Item 2. Properties 18

Item 3. Legal Proceedings 18

Item 4. Submission of Matters to a Vote of Security Holders 18

PART II

Item 5. Market for Registrant's Common Equity and Related 18
Stockholders Matters

Item 6. Selected Financial Data 19

Item 7. Management's Discussion and Analysis of Financial Condition
And Results of Operations 20

Item 7A. Quantitative and Qualitative Disclosure About Market Risk 26

Item 8. Financial Statements and Supplementary Data 26

Item 9. Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure 27

Part III

Item 10. Directors and Executive Officers of the Registrant 27

Item 11. Executive Compensation 27

Item 12. Security Ownership of Certain Beneficial Owners and Management 27

Item 13. Certain Relationships and Related Transactions 27

Part IV

Item 14. Exhibits and Financial Statement Schedules 27

Signatures 29

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PART I
Item 1. BUSINESS

This annual report on Form 10-K may contain certain projections, estimates and
other forward-looking statements that involve a number of risks and
uncertainties, including without limitation, those discussed below at "Risks
Factors." While this outlook represents our current judgment on the future
direction of the business, such risks and uncertainties could cause actual
results to differ materially from any future performance suggested below. We
undertake no obligation to release publicly the results of any revisions to
these forward-looking statements to reflect events or circumstances arising
after the date of this annual report.

As of March 16, 2000, we own and operate 95 high-quality, quick-service
Mexican restaurants that offer traditional Mexican cuisine combined with fresh
seafood indicative of the Baja region of Mexico. Our restaurants are located in
California, Arizona, Nevada, Utah and Colorado.

RUBIO'S BAJA GRILL CONCEPT

The Rubio's Baja Grill concept successfully evolved from the original
"Rubio's, Home of the Fish Taco" concept, which our co-founder Ralph Rubio first
developed following his college spring break trips to the Baja peninsula of
Mexico in the mid-1970s. Ralph opened the first Rubio's restaurant with his
father, Rafael, over 17 years ago in the Mission Bay area of San Diego. Building
on the success of our original "fish taco" concept, we later expanded our menu
offerings and upgraded our store layout to appeal to a broader customer base. We
believe the "Rubio's Baja Grill" concept is uniquely positioned between the
quick-service and casual dining segments of the restaurant industry. The
critical elements of our market positioning are as follows:

- DISTINCTIVE, FRESH, HIGH-QUALITY FOOD. We seek to differentiate
ourselves from other quick-service and fast food Mexican restaurants
by offering high-quality products made-to-order using authentic
regional Baja Mexican recipes. We have experienced a high degree of
success to date developing distinctive and flavorful offerings that
generate strong customer loyalty and are often described as
"craveable." Our signature items include our Baja-style fish tacos as
well as limited time promotions such as our lobster burrito, crab and
shrimp enchilada and tequila shrimp burrito. Our menu is served at
both lunch and dinner. It features a variety of other freshly prepared
items, including tacos and burritos made with chargrilled chicken,
steak, shrimp and a featured "fish of the day", as well as grilled
quesadillas. Freshly prepared salsas are offered at our complimentary
salsa bar. Our menu also includes reduced fat "Healthmex" offerings
and "Kid Pesky" meals designed for children.

- CASUAL, FUN DINING EXPERIENCE. We strive to promote an enjoyable
overall customer experience by creating a fun and relaxed setting in
each of our restaurants. Unlike the generic decor of a typical fast
food restaurant, our restaurants are designed to create an authentic
personality capturing the relaxed, beach-like atmosphere of the Baja
region of Mexico. Our design elements include colorful Mexican tiles,
saltwater aquariums with tropical fish, Baja beach photos and tropical
prints, surfboards on the walls and authentic palm-thatched patio
umbrellas, or palapas, in most existing locations.

- EXCELLENT DINING VALUE. Our restaurants offer guests high-quality food
typically associated with sit-down, casual dining restaurants at
quick-service prices. In addition to favorable prices, we offer the
convenience and rapid delivery of a traditional quick-service format.
We provide guests a clean and comfortable environment in which to
enjoy their meal on site. We also offer guests the convenience of
take-out service. We believe the strong value we deliver to our
customers is

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critical to building strong repeat business and customer loyalty. We
were incorporated in California in May 1985, and reincorporated in
Delaware in October 1997. We have a wholly owned subsidiary, Rubio's
Restaurants of Nevada, Inc., which was incorporated in Nevada in 1997.

OUR BUSINESS STRATEGIES

Our business objective is to become the leading high-quality, quick-service
Mexican restaurant brand nationwide. In order to achieve our business
objective, we have developed the following strategies:
- CREATE A DISTINCTIVE CONCEPT AND BRAND. Our restaurants provide guests
with a distinctive dining experience which, we believe, helps promote
frequent visiting patterns and strong customer loyalty. We continue to
focus on several key initiatives designed to enhance the performance of
our existing restaurants and strengthen our brand identity. These
initiatives include developing and expanding proprietary menu offerings
such as the Baja-style fish taco, lobster burrito and "Baja Bowl," a
flavorful combination of chargrilled steak or chicken served over rice
and beans with fresh tomatoes, onions and cilantro. In addition, we
focus on securing high-visibility, high-traffic store locations and
promoting the awareness of our brand through comprehensive regional and
local media campaigns. As a result of these initiatives, we experienced
comparable store sales increases of 6.0% in 1999, 10.4% in 1998 and
18.0% in 1997.

- ACHIEVE ATTRACTIVE RESTAURANT-LEVEL ECONOMICS. We believe that we have
been able to achieve attractive operating results due to the broad appeal
of our concept, careful site selection and cost-effective development,
consistent application of our management and training programs and
favorable product costs. We utilize centralized information and
accounting systems which allow our management to monitor and control
labor, food and other direct operating expenses, and provide them with
timely access to financial and operating data. We believe we achieve a
lower-than-average product cost compared to our competitors, due to the
popularity of our fish items versus higher-cost items such as chicken
and steak. We also believe that our culture and emphasis on training
leads to a lower employee turnover ratio, and therefore higher
productivity, compared to many of our competitors.

- EXECUTE DISCIPLINED EXPANSION STRATEGY. We believe that our restaurant
concept has broad national appeal and that, as a result, we have
significant opportunities to expand our operations and generate attractive
unit level economics. With the addition of selected senior management
in operations, development, marketing and finance in 1996, we
implemented an accelerated expansion strategy. Our current expansion
plan calls for us to open 36 restaurants in 2000. Through our rigorous
site selection process and criteria developed by our real estate
committee, we principally target high-traffic, high-visibility
locations in urban and suburban markets with medium to high family
income levels.

- ENSURE HIGH-QUALITY GUEST EXPERIENCE. We strive to provide a consistent,
high-quality guest experience in order to generate frequent visiting
patterns and brand loyalty. To achieve this goal, we focus on creating a
fun, team-like culture for our restaurant employees, which we believe
fosters a friendly and inviting atmosphere for our guests. Through
extensive training, experienced restaurant-level management and rigorous
operational controls, we seek to ensure prompt, friendly and efficient
service to our guests. Our commitment to making each guest's experience a
consistently positive one is evidenced by Rubio's list of "House Rules",
which is prominently displayed in each restaurant and defines the high
level of quality and service our guests can expect from us. Overall, we
design our concept to appeal to a broad variety of guests, including
families, and believe the cleanliness of our facilities provides an
additional advantage over many of our competitors.

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UNIT ECONOMICS

In 1999, the 59 units open the entire year generated on a per unit
basisaverage sales of $944,000, average operating income of $170,000, or 18.1%
of sales, and average cash flow of $208,000, or 22.1% of sales. Comparable
restaurant sales increased 6.0% in 1999, following a 10.4% increase in 1998.

We currently have 23 units open outside California. Of these, eight units
have over 12 months of operating results. These units generated average sales of
$905,000 for the most recent 12 months, average operating income of $128,000, or
14.2% of sales, and average cash flow of $174,000 or 19.2% of sales. These
results are not necessarily indicative of the results we will obtain in
connection with the other units currently open, or those we may open in the
future.

We currently lease all of our restaurant locations with the exception of one
owned building. We plan to continue to lease substantially all of our future
restaurant locations in order to minimize the cash investment associated with
each unit. Our site selection strategy is to locate our restaurants in
high-profile, high-traffic locations, preferably on an end-cap location in line
with other retail properties.

Historically, the size of our restaurants has generally ranged from 1,800 to
3,600 square feet, excluding our smaller, food court locations. We expect the
size of our future sites to range from 2,000 to 2,400 square feet. We intend to
continue to develop restaurants that will require, on average, a total cash
investment of approximately $380,000, including pre-opening expenses of $20,000.

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EXISTING AND PROPOSED LOCATIONS

The following table sets forth information about our existing and proposed
Units. As of March 16, 2000, we operate 33 restaurants in San Diego county, 37
restaurants in greater Los Angeles, which includes Los Angeles, Orange, San
Bernardino, Ventura and Riverside counties, 11 restaurants in Phoenix/Tucson,
Arizona, five restaurants in Las Vegas, Nevada, four restaurants in Denver,
Colorado, three restaurants in Salt Lake City, Utah and two in the Sacramento,
California area. In addition, we license our concept to other restaurant
operators for three non-traditional locations at Qualcomm Stadium, the San Diego
International Airport food court and the Del Mar Thoroughbred Club. Eight of the
31 units we plan to open in the balance of 2000 are under construction. We have
signed leases for an additional 27 units. The majority of our units are in
high-traffic retail centers, and are not stand-alone units.

Under Lease
Locations Opened Construction Stores
- --------- ------ ------------ ------
<S> <C> <C> <C>
San Diego Area 33 1 1
Los Angeles Area 37 2 16
Phoenix/Tucson Area 11 1 4
Las Vegas Area 5 - 1
Denver Area 4 - 3
Salt Lake City Area 3 3 1
Sacramento Area 2 1 1
-- -- --
Totals 95 8 27
== == ==

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EXPANSION AND SITE SELECTION

We plan to open 36 units during 2000, five of which have opened to date, and
44 units in 2001. Leases for seven of the 44 units to be opened in 2001 have
been signed. We opened our first unit outside of California in Phoenix, Arizona
in April 1997. We currently operate a total of 23 units outside of California,
including eleven in Arizona, five in Las Vegas, four in Denver and three in
Utah.

Our expansion strategy targets major metropolitan areas that have attractive
demographic characteristics. Once a metropolitan area is selected, we identify
viable trade areas that have high-traffic patterns, strong demographics, such as
high density of white collar families, medium to high family incomes, high
education levels, and density of both daytime employment and residential
developments, limited competition within the trade area and strong retail and
entertainment developments. Within a desirable trade area, we select sites that
provide specific levels of visibility, accessibility, parking, co-tenancy and
exposure to a large number of potential customers.

We believe that the quality of our site selection criteria is critical to
our continuing success. Therefore, our senior management team is actively
involved in the selection of each new market and specific site, personally
visiting all new markets and most sites or conducting a video site tour of all
sites prior to granting final approval. Each new market and site must be
approved by our Real Estate Site Acquisition Committee, which consists of
members of senior management. This process allows us to analyze each potential
location taking into account its effect on all aspects of our business.

In connection with our strategy to rapidly expand into selected markets, we
expect to initiate a franchising program sometime in 2000. Adopting a
franchising strategy will require the Company to devote management and financial
resources to build the operational infrastructure needed to support the
franchise of our restaurants. Once implemented, the franchising program will
earn revenue through initial franchise fees payable to the Company by
franchisees and through royalty income based on a percentage of restaurant
sales. Franchising programs typically involve substantially lower initial cash
investments compared to unit expansion strategies where company-owned units are
developed and leased.

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Our menu features made-to-order burritos, soft-shell tacos, and quesadillas
made with marinated, chargrilled chicken breast and lean steak, as well as
seafood indicative of the Baja region of Mexico, such as chargrilled mahi mahi,
sauteed shrimp and our signature Baja-style fish taco. Side items including our
chips, beans and rice are all made fresh daily. Other ingredients, such as our
fresh, handmade guacamole, shredded natural cheeses and our zesty chipotle
sauce, also contribute to our quality image and distinctive flavor profiles. We
also offer a self-serve salsa bar where guests can choose from three different
salsas made fresh every day at each restaurant. Our prices range from $1.79 for
a Baja-style fish taco to $5.79 for a Cabo Combo, which includes a shrimp
burrito, fish taco, chips and beans. Most units also offer a selection of
imported Mexican and domestic beers.

To provide added variety, from time to time we introduce limited time
offerings such as our lobster burrito, tequila shrimp burrito, "killer" shark
tacos, shrimp and crab enchiladas and Baja Bowls. Some of these items have been
permanently added to the menu, such as the Baja Bowl. Other items, such as the
lobster burrito, are offered seasonally due to limited availability.

Substantially all of our units include a HealthMex section on their menu and
Kid Pesky meals designed for children. Our HealthMex items are designed to have
less than 22% of their calories from fat, and include a chargrilled mahi mahi
taco or a chargrilled chicken burrito served on a whole wheat tortilla.

The Kid Pesky meals consist of a choice of a fish taco, chicken taquitos,
quesadilla or a bean and cheese burrito, along with a side dish, drink, churro
dessert and toy surprise.

DECOR AND ATMOSPHERE

We believe that the decor and atmosphere of our restaurants is a critical
factor in our guests' overall dining experience. We strive to create the
relaxed, casual environment that is reminiscent of the Baja region of Mexico.
Our design elements include colorful Mexican tiles, saltwater aquariums with
tropical fish, Baja beach photos and tropical prints, surfboards on the walls
and authentic palm-thatched patio umbrellas, or palapas, in most existing
locations. We believe the decor and atmosphere of our restaurants appeal to a
broad variety of consumers, including families.

MARKETING

We utilize broadcast advertising as a marketing tool to increase our brand
awareness, attract new guests and build customer loyalty. Our advertising is
designed to portray ourselves as a high-quality, quick-service Mexican food
restaurant and to promote special offers to increase sales. Examples of these
offers include limited-time-only product introductions, such as our lobster
burrito or tequila shrimp burrito, as well as price promotions, such as our
99-cent fish taco special. Media used for these promotions include television,
radio, coupons and in-store merchandising materials. We believe word-of-mouth
advertising is also a key component in attracting new guests.

As part of our expansion strategy, we select target markets which we believe
will support multiple units and the efficient use of broadcast advertising. Upon
entry into each new market, we also hire local public relations firms to help
establish brand awareness for our restaurants as we build toward media
efficiency. In 1999, we spent approximately $2.1 million on marketing. We expect
our marketing expenditures to increase as we add new restaurants and expand into
new markets.

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OPERATIONS

UNIT MANAGEMENT AND EMPLOYEES

Our typical restaurant employs one general manager, one to two assistant
managers and 22 to 25 hourly employees, approximately 60% of which are full-time
employees and approximately 40% of which are part-time employees. The general
manager is responsible for the day-to-day operations of the restaurant,
including food quality, service, staffing and purchasing. We seek to hire
experienced general managers and staff and to motivate and retain them by
providing opportunities for increased responsibilities and advancement, as well
as performance-based cash incentives. These performance incentives are tied to
sales, profitability and qualitative measures such as mystery shoppers, who
anonymously evaluate individual restaurants. We also grant general managers
options to purchase shares of our common stock when hired or promoted. All
employees working more than 20 hours per week are eligible for health benefits
and participation in our 401(k) plan.

We currently employ 13 district managers, each of whom reports to a regional
manager. These district managers direct unit management in all phases of
restaurant operations, as well as assist in opening new units. We also grant
district managers options to purchase shares of our common stock when hired or
promoted.

TRAINING

We strive to maintain quality and consistency in each of our units through
the careful training and supervision of personnel and the establishment of, and
adherence to, high standards relating to personnel performance, food and
beverage preparation and maintenance of facilities. We have implemented a
training program that is designed to teach new managers the technical and
supervisory skills necessary to direct the operations of our restaurants in a
professional and profitable manner. Each manager must successfully complete a
five-week training course, which includes hands-on experience in both the
kitchen and dining areas. We have also prepared operations manuals and
videotapes relating to food and beverage handling, preparation and service. In
addition, we maintain a continuing education program to provide our unit
managers with ongoing training and support. We strive to maintain a
team-oriented atmosphere and instill enthusiasm and dedication in our employees.
We regularly solicit employee suggestions concerning the improvement of our
operations in order to be responsive to both them and our guests.

QUALITY CONTROLS

Our emphasis on excellent customer service is enhanced by our quality
control programs. We welcome comments on the quality of service and food at our
restaurants by maintaining a toll-free customer hotline and distributing
customer surveys. District managers are directly responsible for ensuring that
these comments are addressed to achieve a high level of customer satisfaction.
Our Director of Food and Beverage is also responsible for ensuring product
consistency and quality among our restaurants. Furthermore, we engage a
third-party service whereby an anonymous customer or mystery shopper evaluates
and reports to management key elements of the Rubio's experience, including
product quality, cleanliness and customer service.

HOURS OF OPERATIONS

Our units are generally open Sunday through Thursday from 10:30 a.m. until
10:00 p.m., and on Friday and Saturday from 10:30 a.m. until 11:00 p.m.

MANAGEMENT INFORMATION SYSTEMS

All of our restaurants use computerized point-of-sale systems, which are
designed to improve operating efficiency, provide corporate management timely
access to financial and marketing data, and reduce restaurant and corporate
administrative time and expense. These systems record each order and print the

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food requests in the kitchen for the cooks to prepare. The data captured for
use by operations and corporate management includes gross and net sales
amounts, cash and credit card receipts, and quantities of each menu item
sold. Sales and receipts information is generally transmitted to the
corporate office daily, where it is reviewed and reconciled by the accounting
department before being recorded in the accounting system. The daily sales
information is polled nightly to the corporate office and distributed to
management via an intranet web page each morning. A back office system,
including personal computers, has been installed in all operating units. This
system allows managers to compare actual food cost to ideal food costs on a
daily basis. On a monthly basis, a trend report of actual food cost compared
to ideal food cost is also generated.

Our corporate systems provide management with operating reports that show
restaurant performance comparisons with budget and prior year results both for
the current accounting period and year-to-date, as well as trend formats by both
dollars and percents of sales. These systems allow us to closely monitor
restaurant sales, cost of sales, labor expense and other restaurant trends on a
daily, weekly, and monthly basis. We believe these systems will enable both unit
and corporate management to adequately manage the operational and financial
performance of the restaurants in support of our planned expansion.

PURCHASING

The Company strives to obtain consistently high-quality ingredients at
competitive prices from reliable sources. To attain operating efficiencies and
to provide fresh ingredients for our food products while obtaining the lowest
possible prices for the required quality, purchasing employees at the corporate
office control the purchasing of food items through buying from a variety of
national, regional and local suppliers at negotiated prices. Most food, produce
and other products are shipped from a central distributor directly to the units
two to four times per week. Tortillas are delivered daily from local suppliers
to ensure product freshness. We do not maintain a central food product warehouse
or commissary. As is typical in this industry, we do not have any long-term
contracts with our food suppliers. We have not experienced significant delays in
receiving our food and beverage inventories, restaurant supplies or equipment.

COMPETITION

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

TRADEMARKS

We have registered trademarks and service marks include "Rubio's," "Baja
Grill," "Home of the Fish Taco," "HealthMex" and "Pesky" with the United States
Patents and Trademark Office. We believe that the trademarks, service marks and
other proprietary rights have significant value and are important to the
marketing of our restaurant concept.

EMPLOYEES

As of February 23, 2000, we had approximately 2,738 employees, including
approximately 43 employees located at the corporate headquarters.

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GOVERNMENT REGULATION

Our restaurants are subject to licensing and regulation by state and local
health, sanitation, safety, fire and other authorities, including licensing and
regulation requirements for the sale of alcoholic beverages and food. To date,
we have not experienced an inability to obtain or maintain any necessary
licenses, permits or approvals, including restaurant, alcoholic beverage and
retail licensing. In addition, the development and construction of additional
units are also be subject to compliance with applicable zoning, land use and
environmental regulations.

RISKS FACTORS

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

OUR PLANNED EXPANSION INTO NEW GEOGRAPHIC AREAS INVOLVES A NUMBER OF
RISKS WHICH COULD DELAY OR PREVENT THE OPENING OF PLANNED NEW RESTAURANTS.

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

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

We may not be successful in addressing these risks. We also may not be
able to open our planned new operations on a timely basis, or at all in these
new areas. Delays in opening or failure to open planned new restaurants outside
the Southwest could have a material adverse effect on our business and results
of operations. We currently anticipate that our new restaurants will take
several months to reach planned operating levels due to inefficiencies typically
associated with expanding into new regions, such as lack of market awareness,
acceptance of our restaurant concept and inability to hire sufficient staff.

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

We intend to continue to pursue a rapid expansion strategy. Since 1996,
and as of March 16, 2000, we have opened 95 restaurants, 33 restaurants in San
Diego county, 37 restaurants in greater Los Angeles, which includes Los Angeles,
Orange, San Bernardino, Ventura and Riverside counties, 11 restaurants in
Phoenix/Tucson, Arizona, five restaurants in Las Vegas, Nevada, four restaurants
in Denver, Colorado, three restaurants in Salt Lake City, Utah and two in the
Sacramento, California area. We plan to open 36 restaurants in 2000, 5 of which
have been opened to date. Sixteen of the 36 planned 2000 openings are outside
Southern California. We plan to open an additional 44 restaurants in 2000. Our
ability to successfully achieve our expansion strategy will depend on a variety
of factors, many of which are beyond our control.

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These factors include:

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

If we are not able to successfully address these factors, we may not be
able to expand at a rate currently contemplated by our strategy, and our
business and results of operations may be adversely impacted.

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

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

In addition to seasonality, our quarterly and annual operating
results and comparable unit sales may fluctuate significantly as a result of a
variety of factors, including:

- labor costs for our hourly and management personnel, including
increases in federal or state minimum wage requirements;
- fluctuations in food costs, particularly the cost of chicken, beef,
fish, cheese and produce;
- the timing of new restaurant openings and related expenses;
- the amount of sales contributed by new and existing restaurants;
- our ability to achieve and sustain profitability on a quarterly or
annual basis;
- consumer confidence;
- changes in consumer preferences;
- the level of competition from existing or new competitors in the
quick-service restaurant industry;
- factors associated with closing a unit, including payment of the
base rent for the balance of the lease term;
- impact of weather on revenues and costs of food; and
- general economic conditions.

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

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

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particularly those focused on Mexican food such as Taco Bell and Del Taco
Competition in our industry segment is based primarily upon food quality, price,
restaurant ambiance, service and location. Although we believe we compete
favorably with respect to each of these factors, many of our direct and indirect
competitors are well-established national, regional or local chains and have
substantially greater financial, marketing, personnel and other resources than
we do. We also compete with many other retail establishments for site locations.

The performance of individual units may also be affected by factors
such as traffic patterns, demographic considerations and the type, number and
proximity of competing restaurants. In addition, factors such as inflation,
increased food, labor and employee benefit costs and the availability of
experienced management and hourly employees may also adversely affect the
restaurant industry in general and our units in particular.

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

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

OUR RESOURCES MAY BE STRAINED IN IMPLEMENTING OUR BUSINESS STRATEGY.

Our growth strategy will place a strain on our management, financial and
other resources. To manage our growth effectively, we must maintain the level of
quality and service at our existing and future restaurants. We must also
continue to enhance our operational, financial and management systems and
locate, hire, train and retain experienced and dedicated operating personnel,
particularly managers. We may not be able to effectively manage any one or more
of these or other aspects of our expansion. Failure to do so could have a
material adverse effect on our business and results of operations.

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

We believe that the proceeds from the recently completed initial public
offering together with anticipated cash flow from operations and funds
anticipated to be available from a credit facility will be sufficient to satisfy
our working capital requirements for at least the next 12 months. We plan to
incur substantial costs over the near-term in connection with our expansion
plans. We may need to seek additional financing sooner than we anticipate as a
result of the following factors:

- changes in our operating plans;
- acceleration of our expansion plans;
- lower than anticipated sales of our menu offerings;
- increased food and/or labor costs; and
- potential acquisitions.

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

13
<PAGE>

UNANTICIPATED COSTS OR DELAYS IN THE DEVELOPMENT OR CONSTRUCTION OF OUR
RESTAURANTS COULD PREVENT OUR TIMELY AND COST-EFFECTIVE OPENING OF NEW
RESTAURANTS.

We depend on contractors and real estate developers to construct our
restaurants. Many factors may adversely affect the cost and time associated with
the development and construction of our restaurants, including:

- labor disputes;
- shortages of materials and skilled labor;
- adverse weather;
- unforeseen engineering problems;
- environmental problems;
- construction or zoning problems;
- local government regulations;
- modifications in design; and
- other unanticipated increases in costs.

Any of these factors could give rise to delays or cost overruns which
may prevent us from developing additional restaurants within our anticipated
budgets or time periods. Any such failure could have a material adverse effect
on our business and results of operations.

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

As of March 16, 2000 all but seven of our existing restaurants are
located in the southwest region of the United States. Accordingly, we are
susceptible to fluctuations in our business caused by adverse economic or other
conditions in this region, including natural or other disasters. Our significant
investment in, and long-term commitment to, each of our units limits our ability
to respond quickly or effectively to changes in local competitive conditions or
other changes that could affect our operations. In addition, some of our
competitors have many more units than we do. Consequently, adverse economic or
other conditions in a region, a decline in the profitability of several existing
units or the introduction of several unsuccessful new units in a geographic area
could have a more significant effect on our results of operations than would be
the case for a company with a larger number of restaurants or with more
geographically dispersed restaurants.

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

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

14
<PAGE>

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

Our restaurant operating costs principally consist of food and labor
costs. Our profitability is dependent on our ability to anticipate and react to
changes in food and labor costs. Various factors beyond our control, including
adverse weather conditions and governmental regulation, may affect our food
costs. We may not be able to anticipate and react to changing food costs,
whether through our purchasing practices, menu composition or menu price
adjustment in the future. In the event that food and labor price increases cause
us to increase our menu prices, we face the risk that our guests will choose to
patronize lower-cost restaurants. Failure to react to changing food costs or to
retain guests if we are forced to raise menu prices could have a material
adverse effect on our business and results of operations.

A substantial number of our employees are subject to various minimum
wage requirements. Many of our employees work in restaurants located in
California and receive salaries equal to or slightly greater than the California
minimum wage. Effective March 1, 1998, the minimum wage in California increased
to $5.75 per hour from $5.15. Similar proposals may come before legislators or
voters in other jurisdictions in which we operate or seek to operate. Such
minimum wage increases could have a material adverse effect on our business and
results of operations.

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

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

WE MAY NOT BE ABLE TO OBTAIN AND MAINTAIN STATE AND LOCAL PERMITS
NECESSARY TO OPERATE OUR UNITS.

The failure to maintain necessary licenses, permits or approvals,
including food and alcoholic beverage licenses, or to comply with other
government regulations could have a material adverse effect on our business and
results of operations. In addition, difficulties or failures in obtaining
required licenses and approvals will result in delays in, or cancellations of,
the opening of new units. Restaurants are subject to licensing and regulations
by state and local health, environmental, labor relations, sanitation, building,
zoning, land use and environmental regulations. There can be no assurance that
we will be able to obtain necessary variances or other approvals on a
cost-effective and timely basis in order to construct and develop units in the
future. Changes in any or all of these laws or regulations, such as
government-imposed paid leaves of absence or mandated health benefits, could
have a material adverse effect on our business and results of operations.

OUR CURRENT INSURANCE MAY NOT PROVIDE ADEQUATE LEVELS OF COVERAGE
AGAINST CLAIMS.

There are types of losses we may incur that may be uninsurable or that
we believe are not economically insurable, such as losses due to earthquakes and
other natural disasters. In view of the location of many of our existing and
planned units, our operations are particularly susceptible to damage and
disruption caused by earthquakes. Further, we do not currently maintain any
insurance coverage for employee-related litigation or the effects of adverse
publicity. In addition, punitive damage awards are generally not covered by

15
<PAGE>

insurance. We may also be subject to litigation which, regardless of the
outcome, could result in adverse publicity and damages. Such litigation, adverse
publicity or damages could have a material adverse effect on our business and
results of operations.

IF WE ADOPT A FRANCHISING STRATEGY, WE MAY BE UNSUCCESSFUL IN EXECUTING
A FRANCHISING PROGRAM.

We may use a franchise strategy in selected markets. If we adopt a
franchising strategy, our failure to successfully execute a franchising program
could adversely affect our business and results of operations. We have not used
franchising to date and may not be successful in implementing a franchise
program in the future. We have not yet established any criteria to evaluate
prospective franchisees. We may be unable to identify and attract franchisees
that have the business abilities or access to financial resources necessary to
open our restaurants or to successfully develop or operate our restaurants in
their franchise areas in a manner consistent with our standards.

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

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

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

We only recently completed our initial public offering. Prior to this
offering, there was no public market for our common stock. We cannot predict
whether an active trading market in our common stock will develop or how liquid
that market might become.

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

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

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

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

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

As of March 8, 2000, the executive officers, directors and entities
affiliated with them, in the aggregate, beneficially own approximately 35.3%
of our outstanding common stock. These stockholders are able to exercise
control over all matters requiring approval by our stockholders, including
the election of directors and approval of significant corporate transactions.
This concentration of ownership may also have the effect of delaying or
preventing a change in control of our company.

16
<PAGE>

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

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

MANAGEMENT

OUR EXECUTIVE OFFICERS AND KEY EMPLOYEES

Our executive officers and key employees are as follows:

NAME AGE POSITION WITH THE COMPANY
- ------------------------ --- ------------------------------------------------
<S> <C> <C>
Ralph Rubio............. 44 President, Chief Executive Officer and Director

Stephen J. Sather....... 52 Chief Operating Officer

Joseph N. Stein......... 39 Chief Strategic and Financial Officer

Richard Rubio........... 36 Vice President of Real Estate Development

Bruce Frazer............ 40 Chief Marketing Officer

Ted Frumkin............. 38 Director of Real Estate

</TABLE>

RALPH RUBIO, a co-founder, has served as President, Chief Executive Officer
and Director since our inception in January 1983. Prior to founding Rubio's, Mr.
Rubio was employed in restaurant management and in various other positions at
the Old Spaghetti Factory, Hungry Hunter and Harbor House restaurant chains. Mr.
Rubio has more than 20 years of experience in the restaurant industry.

STEPHEN J. SATHER has served as Chief Operating Officer since July 1998.
He has served as Vice President of Operations from February 1996 to July
1998. Prior to joining us, Mr. Sather served as Vice President of New
Concepts for Rally's Hamburgers, Inc., a publicly held company, from December
1993 to February 1996. Prior to that, Mr. Sather served as Senior Vice
President of Operations for La Salsa Holding Company, a privately held
company, from December 1992 until November 1993. From April 1986 until
November 1992, Mr. Sather was employed by Taco Bell Corporation, a publicly
held company, and served as Director of New Concepts when he left. Mr. Sather
has more than 25 years of experience in the restaurant industry.

JOSEPH N. STEIN was elected Chief Strategic and Financial Officer in April
1999. Prior to joining us, Mr. Stein served as Executive Vice President and
Chief Administrative Officer of Checkers Drive-In Restaurants, Inc., a publicly
held company, from January 1997 to April 1999, and as Executive Vice President
and Chief Financial Officer of Rally's Hamburgers, Inc., a publicly held
company, from December 1997 to April 1999. From May 1995 to January 1997, Mr.
Stein was employed at CKE Restaurants, Inc., a publicly held company, serving as
Senior Vice President and Chief Financial Officer. From April 1990 to May 1995,
Mr. Stein held various executive positions at Fidelity National Title Insurance
Company, a publicly held company, including Senior Vice President and Director
of National Agency Operations. Mr. Stein has more than 13 years of experience in
the restaurant industry.

RICHARD RUBIO has served as Vice President of Real Estate Development since
November 1994. From October 1990 until November 1994, Mr. Rubio served as Vice
President of Construction, and has served in various other positions with us
since June 1983.

17
<PAGE>

BRUCE FRAZER has served as Chief Marketing Officer since July 1999. He has
served as Vice President of Marketing from June 1996 to July 1999. Prior to
joining us, Mr. Frazer served as Vice President of Food & Beverage/Product
Marketing at Family Restaurants, Inc. from May 1994 until May 1996. From
December 1984 until April 1994, Mr. Frazer was employed at Foodmaker, Inc., a
publicly held company, serving as Vice President of Product Marketing when he
left. Mr. Frazer has more than 15 years of experience in the restaurant
industry.

TED FRUMKIN has served as Director of Real Estate since May 1996. Prior to
joining us, Mr. Frumkin served as Real Estate Manager at Office Depot Inc., a
publicly held company, from December 1994 until May 1996. From July 1991 until
December 1994, Mr. Frumkin served as Real Estate Manager at Wal-Mart Stores
Inc., a publicly held company. Prior to that, Mr. Frumkin served as Real Estate
Manager at Taco Bell Corporation, a publicly held company, from December 1985
until July 1991.

Item 2: PROPERTIES

Our corporate headquarters are located in Carlsbad, California. We occupy
this facility under a lease which terminates on August 31, 2005, with options to
extend the lease for an additional 13 years. We lease each of our restaurant
facilities with the exception of the El Cajon unit, which is covered by a ground
lease. The majority of the leases are for 10-year terms and include options to
extend the terms. The majority of the leases also include both fixed rate and
percentage-of-sales rent provisions.

Item 3. LEGAL PROCEEDINGS

We are currently not a party to any litigation that could have a
material adverse effect on our results of operations and financial position or
its business and are not aware that any such litigation is threatened.

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

No matter was submitted to a vote of stockholders of the company during
the quarter ended December 26, 1999.

PART II
Item 5: MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS

(a) Our common stock is listed on the Nasdaq National Market under the
symbol RUBO. Our common stock began trading on May 21, 1999.

The following table sets forth, for the periods indicated, the high and
low closing sales prices for our common stock for each quarter in the last
fiscal year following the May 21, 1999 completion of our initial public
offering, as regularly reported on the Nasdaq National Market. Such quotations
represent inter-dealer prices without retail markup, markdown or commission and
may not necessarily represent actual transactions.

HIGH LOW
--------- -------
<S> <C> <C>
Second Quarter 1999 $16.50 $13.25
Third Quarter 1999 $15.50 $ 6.50
Fourth Quarter 1999 $10.00 $ 6.00

</TABLE>

Since our initial public offering in May, 1999, we have not declared or
paid any cash dividends on our common stock. We currently intend to retain all
earnings for the operation and expansion of our business and do not anticipate
paying any cash dividends in the foreseeable future. As of March 15, 2000, there
were approximately 6,938 beneficial stockholders of our common stock, including
255 holders of record.

18
<PAGE>

(b) The registration statement on Form S-1 filed by us with the SEC in
connection with our initial public offering (File No. 333-75087) as amended, was
declared effective by the SEC on May 20, 1999. Our net proceeds after deducting
the total expenses was approximately $23.4 million. Subsequent to our initial
public offering, as disclosed in our initial public offering prospectus, a
portion of the offering proceeds were used to repay the remaining $1.5 million
balance of our term loan agreement with a financial institution. The remaining
proceeds have conformed with our intended use outlined in the prospectus. We
currently have approximately $16 million remaining from our initial public
offering.

PART II
Item 6. SELECTED FINANCIAL DATA

The following selected consolidated financial data should be read in
conjunction with the Company's consolidated financial statements and
accompanying notes thereto and with Management's Discussion and Analysis of
Financial Condition and Results of Operations, which are included elsewhere in
this Annual Report on Form 10-K. The consolidated statement of operations data
for the years ended December 28, 1997, December 27, 1998 and December 26, 1999
and the consolidated balance sheet data at December 27, 1998 and December 26,
1999 are derived from, and are qualified by reference to, the consolidated
financial statements included elsewhere in this Annual Report on Form 10-K,
which has been audited by Deloitte & Touche LLP. The consolidated statement of
operations data for the years ended December 31, 1995 and December 29, 1996 are
derived from consolidated financial statements not included in this Annual

19
<PAGE>

Report on Form 10-K, which have also been audited. These historical results
are not necessarily indicative of the results to be expected in the future.

FISCAL
---------------------------------------------------
1995 1996 1997 1998 1999
--------- --------- --------- -------- --------
(In thousands, except share data)
<S> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS
DATA:
Sales................................. $ 14,811 $ 19,523 $ 29,704 $ 44,699 $ 67,854
Costs and expenses:
Cost of sales....................... 3,587 5,068 8,659 13,074 19,976
Restaurant labor, occupancy and other 8,141 10,441 15,639 22,616 33,984
General and administrative
expenses........................... 2,596 3,176 4,253 6,148 7,968
Depreciation and amortization........ 478 735 1,259 1,946 2,993
Pre-opening expenses................. -- 18 271 319 662
Loss on asset impairment............. -- -- 387 -- --
--------- -------- --------- -------- --------
Operating income (loss)................ 9 85 (764) 596 2,271
Other income (expense):
Interest income (expense), net...... (58) 17 (75) 268 501
Miscellaneous income (expense)....... 111 1 (6) (10) --
Gain (loss) on disposal/sale of
property........................... 2 (2) (56) (5) (4)
--------- -------- --------- -------- --------
Total other income (expense)....... 55 16 (137) 253 497
--------- -------- --------- -------- --------
Income (loss) before income taxes...... 64 101 (901) 849 2,768
Income tax benefit (expense)........... (48) (29) (99) 66 (1,117)
--------- -------- --------- -------- --------
Net income (loss)...................... $ 16 $ 72 $ (1,000) $ 915 $ 1,651
--------- -------- --------- -------- --------
--------- -------- --------- -------- --------
Net income (loss) attributable to
common stockholders.................. $ (39) $ 3 $ (1,095) $ 568 $ 1,513
--------- -------- --------- -------- --------
--------- -------- --------- -------- --------
Net income (loss) per share
Basic................................ $ (0.04) $ -- $ (1.08) $ 0.55 $ 0.26
Diluted.............................. (0.04) -- (1.08) 0.14 0.20
Shares used in computing net income
(loss) per share
Basic................................ 1,000 1,008 1,010 1,033 5,741
Diluted.............................. 1,000 1,026 1,010 6,418 8,094

CONSOLIDATED BALANCE SHEET DATA:
Cash and cash equivalents................. $ 1,004 $ 633 $ 866 $ 786 $ 3,459
Total assets.............................. 7,813 13,375 23,054 25,751 50,038
Long-term debt, including current portion. 1,923 2,483 2,562 1,856 --
Redeemable convertible preferred stock.... 3,171 7,550 17,003 17,695 --
Total stockholders' equity..... 4,317 8,474 (141) 196 43,122

</TABLE>

- -----------------
Please see the consolidated financial statements and related notes appearing
elsewhere in this report for the determination of number of shares used in
computing basic and diluted net income (loss) per share.
Net income (loss) attributable to common stockholders includes the effect of
the accretion on the redeemable convertible preferred stock which reduces net
income (loss) attributable to common stockholders for the related periods. Net
income attributable to common stockholders for the fiscal 1998 diluted earnings
per share calculation is $915,000. The difference from the basic calculation is
due to the reversal of the accretion on the redeemable convertible preferred
stock as such stock is assumed to be converted to common stock for purposes of
the diluted calculation.
Net income for fiscal year 1998 was favorably impacted by the reversal of a
$452,000 deferred tax asset allowance that was previously provided for in fiscal
year 1997. We eliminated the valuation allowance in 1998 due to our belief that
current year activity made realization of such benefit more likely than not.

Item 7.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

THE FOLLOWING DISCUSSION OF OUR FINANCIAL CONDITION AND RESULTS OF OPERATIONS
SHOULD BE READ IN CONJUNCTION WITH OUR CONSOLIDATED FINANCIAL STATEMENTS AND
NOTES APPEARING ELSEWHERE IN THIS REPORT. SEE "RISK FACTORS" REGARDING CERTAIN
FACTORS KNOWN TO US THAT COULD CAUSE REPORTED FINANCIAL INFORMATION NOT TO BE
NECESSARILY INDICATIVE OF FUTURE RESULTS.

20
<PAGE>

OVERVIEW

We opened our first restaurant under the name "Rubio's, Home of the Fish
Taco" in 1983 and grew steadily through 1994, at which time we operated 17
units. We accelerated the number of restaurant openings in recent years, going
from six new restaurants in 1995 to 31 in 1999.

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

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

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

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

We have leased all of our facilities, except for one building, in order to
minimize the cash investment associated the each unit. The majority of our
leases are for 10-year terms and include options to expend the terms. The
majority of our leases also include fixed rate and percentage-of-sales rent
provisions.

21
<PAGE>

RESULTS OF OPERATIONS

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

FISCAL
---------------------------------
1997 1998 1999
-------- --------- --------
<S> <C> <C> <C>
Sales........................................ 100.0% 100.0% 100.0%
Costs and expenses:
Cost of sales.............................. 29.2 29.2 29.4
Restaurant labor, occupancy and other...... 52.6 50.6 50.1
General and administrative expenses........ 14.3 13.8 11.7
Depreciation and amortization.............. 4.2 4.4 4.4
Pre-opening expenses....................... 0.9 0.7 1.0
Loss on asset impairment................... 1.3 -- --
-------- -------- --------
Operating income (loss)...................... (2.5) 1.3 3.4
Other income (expense):
Interest income (expense), net............. (0.3) 0.6 0.7
Miscellaneous income (expense)............. -- -- --
Gain (loss) on disposal/sale of property... (0.2) -- --
-------- -------- --------
Total other income (expense)............. (0.5) 0.6 0.7
-------- -------- --------
Income (loss) before income taxes............ (3.0) 1.9 4.1
Income tax (expense) benefit................. (0.3) 0.1 (1.7)
-------- -------- --------
Net income (loss)............................ (3.3)% 2.0% 2.4%
-------- -------- --------
-------- -------- --------

</TABLE>

52 WEEKS ENDING DECEMBER 26, 1999 COMPARED TO THE 52 WEEKS ENDING DECEMBER 27,
1998

Results of operations reflect a full 52 weeks of operations for 59
restaurants and 43 restaurants for the periods ending December 26, 1999 and
December 27, 1998, respectively. Results of operations also reflect a partial
period of operations for 31 and 16 restaurants for the 52 weeks ended December
26, 1999 and December 27, 1998, respectively.

SALES. Sales increased $23.2 million, or 51.8%, to $67.9 million for the 52
weeks ended December 26, 1999 from $44.7 million for the 52 weeks ended December
27, 1998. This increase was principally due to the $8.9 million in sales
generated by a full year of operations from the units opened in 1998 which have
been opened for less than 15 months, combined with the $11.9 million from the 31
units opened during 1999. In addition, comparable unit sales increased $2.4
million, or 6.0%. Units enter the comparable store base after 15 full months of
operation. The comparable unit sales increase was primarily driven by; 1) the
success of the $0.99 Fish Taco, Tequila Shrimp Burrito, Lobster Burrito, and the
Crab and Shrimp Enchilada promotions, 2)slightly weaker sales in the early part
of 1998 due to poor weather and 3) a price increase of approximately a 1.5% at
the beginning of 1999.

COST OF SALES. Cost of sales as a percentage of sales increased to 29.4% in
the 52 weeks ended December 26, 1999 from 29.2% in the 52 weeks ended December
27, 1998 primarily due to inefficiencies in our new markets.

RESTAURANT LABOR, OCCUPANCY AND OTHER. Restaurant labor, occupancy, and other
decreased as a percentage of sales to 50.1% for the 52 weeks ended December 26,
1999 from 50.6% in the 52 weeks ended December 27, 1998. The improvement as a
percentage of sales is primarily a function of leveraging our fixed costs as our
average unit volume increases. The improvements in our fixed costs were slightly
offset by an increase in labor. This labor increase was due primarily to
expected inefficiencies in the new stores.

22
<PAGE>

GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses
increased to $8.0 million for the 52 weeks ended December 26, 1999 from $6.1
million for the 52 weeks ended December 27, 1998. The increase is primarily due
to increases in salary and benefits related to the hiring of additional
corporate employees and field management required to support and manage unit
expansion, as well as other corporate level expenses required to support and
manage unit expansion. General and administrative expenses decreased as a
percentage of sales to 11.7% in 1999 from 13.8% in 1998 primarily due to our
expanding revenue base.

DEPRECIATION AND AMORTIZATION. Depreciation and amortization expenses
increased to $3.0 million in the 52 weeks ended December 26, 1999 from $1.9
million in the 52 weeks ended December 27, 1998. The $1.1 million increase was
primarily due to the additional depreciation on the 31 new units opened during
1999 and the 16 new units opened during 1998. As a percentage of sales,
depreciation and amortization remained constant at 4.4% of sales in both 1999
and 1998.

PRE-OPENING EXPENSES. Pre-opening expenses increased to $662,000 for the 52
weeks ended December 26, 1999 from $319,000 for the 52 weeks ended December 27,
1998 primarily due to the increase in unit openings to 31 in 1999 compared to 16
in 1998. In addition, we opened restaurants in four new markets. The first store
in a new market will typically have higher opening costs than a new store in an
existing market.

INTEREST INCOME (EXPENSE), NET. Net interest income increased to $501,000
for the 52 weeks ended December 26, 1999 from $268,000 in net interest income
for the 52 weeks ending December 27, 1998. Interest income increased to $654,000
for the 52 weeks ended December 26, 1999 from $521,000 for the 52 weeks ended
December 27, 1998 due to increase in cash available for investing after our May
1999 initial public offering. In addition, interest expense declined to $153,000
in 1999 from $253,000 in 1998 as a result of the repayment of all long-term debt
with the proceeds from the May 1999 initial public offering.

INCOME TAXES. The provision for income taxes in the 52 weeks ended December
26, 1999 and December 27, 1998 is based on the approximate annual effective tax
rate applied to the respective period's pretax book income (loss). The 40.4% tax
rate applied to 1999 comprises the federal and state statutory rates based on
the annual effective rate for 1999. The 7.8% tax benefit applied to 1998 is
primarily a result of the recognition of 1997 net deferred tax assets previously
valued, due to the 1998 net income and the future realizability of such net
deferred tax assets.

YEAR ENDED DECEMBER 27, 1998 COMPARED TO YEAR ENDED DECEMBER 28, 1997

Results of operations reflect a full year of operations of 43 restaurants
and 31 restaurants for the years ended December 27, 1998 and December 28, 1997,
respectively. Results of operations also reflect partial year of operations of
16 restaurants and 12 restaurants for the years ended December 27, 1998 and
December 28, 1997, respectively. Net income in 1998 was $915,000 as compared to
a net loss of $1,000,000 in 1997. Net income attributable to common stockholders
for 1998 was $568,000 as compared to a net loss of $1,095,000 in 1997. Net
income for fiscal year 1998 was favorably impacted by the reversal of a $452,000
deferred tax asset allowance that was previously provided for in fiscal year
1997. The factors contributing to these results are discussed below.

SALES. Sales increased $15.0 million, or 50.5%, to $44.7 million in 1998
from $29.7 million in 1997. This increase was principally due to $6.4 million in
sales generated by a full year of operations from 12 units opened in 1997 and
$5.7 million in sales derived from the 16 units opened in 1998, along with a
comparable unit sales increase of $2.8 million, or 10.4%. The comparable unit

23
<PAGE>

sales increase was driven both by the momentum generated by the Baja Grill
concept, as well as the success of the lobster burrito promotion, which took
place from June through September 1998. We also introduced a price increase of
approximately 1.5% at the beginning of 1998.

COST OF SALES. Cost of sales as a percentage of sales remained constant at
29.2% in 1998 and 1997.

RESTAURANT LABOR, OCCUPANCY AND OTHER. Restaurant labor, occupancy and other
decreased as a percentage of sales to 50.6% in 1998 from 52.6% in 1997. This
reduction was due primarily to lower labor, minimum rent and other fixed unit
operating expenses as a percentage of sales as a result of the efficiencies
associated with increased unit sales. In addition, there were non-recurring
expenses incurred in 1997, related to the modification of our restaurant
concept. These one-time expenses included higher levels of hourly employee
training and operating supplies, resulting in higher 1997 total expenses in this
category.

GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses
increased to $6.1 million in 1998 from $4.3 million in 1997, primarily due to
$1.0 million in salary and benefits related to the hiring of additional
corporate employees and field management required to support and manage unit
expansion, $296,000 related to a senior management bonus expense incurred in
1998 which was not incurred in 1997, and $586,000 in other corporate level
expenses related to our business growth. General and administrative expenses
decreased as a percentage of sales to 13.8% in 1998 from 14.3% in 1997 primarily
due to our expanding revenue base.

DEPRECIATION AND AMORTIZATION. Depreciation and amortization increased to
$1.9 million in 1998 from $1.3 million in 1997. The increase was primarily due
to the additional depreciation on the 16 new units opened during 1998.

PRE-OPENING EXPENSES. Pre-opening expenses increased to $319,000 in 1998
from $271,000 in 1997 primarily due to the increase in unit openings in 1998 to
16 from 12 in the prior period.

LOSS ON ASSET IMPAIRMENT. There was no loss on asset impairment in 1998.
Loss on asset impairment of $387,000 in 1997 reflects the difference between the
carrying value and the estimated fair value of the assets of one restaurant
location.

INTEREST INCOME (EXPENSE), NET. Net interest income increased to $268,000 in
1998 from $75,000 in net interest expense in 1997. This increase was primarily
due to an increase in interest income from $188,000 in 1997 to $521,000 in 1998
resulting from interest and other investment income associated with the
investment of the net proceeds from our $10.1 million preferred stock private
placement in November 1997.

INCOME TAXES. The provision (benefit) for income taxes in 1998 and 1997 is
based on the approximate tax rate applied to the respective year's pre-tax book
income (loss). The 7.8% tax benefit applied in 1998 is primarily a result of the
recognition of prior year net deferred tax assets previously valued, due to the
current year net income and the future realizability of such net deferred tax
assets.

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

24
<PAGE>

INFLATION

Components of our operations subject to inflation include food, beverage,
lease and labor costs. Our leases require us to pay taxes, maintenance, repairs,
insurance and utilities, all of which are subject to inflationary increases. We
believe inflation has not had a material impact on our results of operations
during the past three years.

LIQUIDITY AND CAPITAL RESOURCES

We have funded our capital requirements in recent years through cash flow from
operations, private placement of preferred stock, bank debt, and the public sale
of equity securities. We generated $4.6 million in cash flow from operating
activities for the 52 weeks ended December 26, 1999 and $4.2 million for the 52
weeks ended December 27, 1998. The $4.2 million in 1998 includes a $1.2 million
increase in accounts payable, of which $720,000 are costs related to two stores
opened close to year end.

Net cash generated from financing activities was $21.7 million for the 52 weeks
ended December 26, 1999 compared to net cash used of $0.7 million for the 52
weeks ended December 27, 1998. Financing activities in 1999 primarily consisted
of the initial public offering of our common stock, which generated $23.4
million net of offering costs. Part of the offering proceeds were used to repay
the remaining $1.5 million balance of our term loan agreement with a financial
institution. The remaining proceeds were primarily used toward the development
and opening of new restaurants and the purchase of investments.

Net cash used in investing activities was $23.6 million for the 52 weeks ended
December 26, 1999 compared to $3.6 million for the 52 weeks ended December 27,
1998, due to the increase in cash available for investing after our May 1999
initial public offering. Financing activities in 1998 primarily consisted of
$0.6 million in debt payments on our long-term debt. In addition, we have a $7.5
million line of credit agreement with a financial institution, but as of
December 26, 1999 there was no outstanding balance under this agreement.
Interest on the line is calculated on either a bank reference rate plus 0.75% or
on an adjusted LIBOR plus 3.0% per annum (9.18% at December 26, 1999).

Our principal financial needs arise from the development and opening of new
units. We incurred $13.8 million in capital expenditures during the 52 weeks
ended December 26, 1999, of which, $12.0 million was for new unit openings and
$0.6 million was for point of sale systems upgrades and a company-wide back
office system roll-out. During the 52 weeks ended December 27, 1998, we incurred
$6.9 million in capital expenditures, of which $6.6 million was for new unit
openings and $0.3 was for corporate expenditures.

Total capital expenditures in 2000 are expected to be approximately $15.0
million, of which approximately $13.6 is expected to be invested in the opening
of new restaurants. We plan to open 36 units in 2000 and 44 units in 2001. We
expect that future locations will generally cost approximately $360,000 per unit
net of landlord allowances and excluding pre-opening expenses. Pre-opening
expenses are expected to average approximately $20,000 per restaurant.

We lease restaurant and office facilities and real property under operating
leases expiring through 2014. Our future minimum lease payments for our
headquarters and restaurants are expected to be as follows: $5.9 million in
2000, $5.9 million 2003, $5.8 million in 2004 and $19.4 million thereafter.

We believe that the anticipated cash flow from operations combined with funds
anticipated to be available from a credit facility will be sufficient to satisfy
our working capital and capital expenditure requirements for at least the next
12 months. We plan to incur substantial costs over the near term in connection
with our expansion program. Changes in our operating plans, acceleration of our
expansion plans, lower than anticipated sales, increased expenses, potential
acquisitions or other events my cause us to seek additional

25
<PAGE>

financing sooner than anticipated. Additional financing may not be available on
acceptable terms, or at all. Failure to obtain additional financing as needed
could have a material adverse effect on our business and results of operations.

Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Our market risk exposures are related to our cash, cash equivalents and
investments. We invest our excess cash in highly liquid short-term investments
with maturities of less than one year and corporate bonds, mortgage-backed
securities, commercial paper, tax free municipals, municipal bonds, U.S.
Treasury notes and agencies with maturities in excess of one year. These
investments are not held for trading or other speculative purposes. Changes in
interest rates affect the investment income we earn on our investments and,
therefore, impact our cash flows and results of operations.

In addition, we have a $7.5 million line of credit agreement with a
financial institution. Interest on the line is calculated on either a bank
reference rate plus 0.75% or on an adjusted LIBOR plus 3.0% per annum (9.18% at
December 26, 1999). However, there currently is no outstanding balance under
this agreement. Should we draw on this line in the future, changes in interest
rates would affect the interest expense on these loans and, therefore, impact
our cash flows and results of operations.

RESULTS OF YEAR 2000 ISSUE

We have reviewed both our information technology and our non-information
technology systems to determine whether they were year 2000 compliant. To date,
have had no guest related, material processing or significant supplier or
service provider issues with respect to the year 2000 issue. To date, we have
incurred costs of less than $25,000 in connection with our year 2000 plan. No
additional costs related to the Year 2000 issue are expected.

IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS

In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, as amended in June 1999 by SFAS No. 137
"Accounting for Derivative Instruments and Hedging Activities." SFAS No. 137
establishes accounting and reporting standards for derivative instruments,
including derivative instruments embedded in other contracts, and for hedging
activities. SFAS No. 137 is effective for all fiscal quarters of fiscal years
beginning after June 15, 2000. We have not yet assessed the effect of this
standard on our current reporting and disclosures.

In April 1998, Statement of Position 98-5, "Reporting on the Costs of
Start-Up Activities" was issued by the Accounting Standards Executive Committee.
SOP 98-5 provides guidance on the financial reporting of start-up costs and
organization costs. It requires costs of start-up activities and organization
costs to be expensed as incurred, and is effective for fiscal years beginning
after December 15, 1998. We chose to early adopt this SOP for the fiscal year
ended December 28, 1997. The adoption of this SOP did not have a material effect
on our operations.

PART II - FINANCIAL INFORMATION
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The Company's consolidated financial statements as of December 26, 1999
and December 27, 1998, and for each of the three years in the period ended
December 26, 1999 and the report of independent public accountants are included
in this report as listed in the index on page F-1 of this report (Item 14(a))
(1) and (2).

26
<PAGE>

Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

None

PART III
Item 10. DIRECTORS AND EXECUTIVES OF THE REGISTRANT

The information required by this item is incorporated by reference from
the Proxy Statement in the section entitled "Election of Directors" and
"Compliance with Section 16(a) of the Securities Exchange Act of 1934." The
balance of the response to this item regarding information on our executive
officers is contained in the discussion entitled "Our Executive Officers and Key
Employees" in Part I of this report.

Item 11. EXECUTIVE COMPENSATION

The information required by this item is incorporated by reference from
the section entitled "Executive Compensation and Other Information" in our Proxy
Statement for the 2000 annual meeting of stockholders.

Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The information required by this item is incorporated by reference from
the section entitled "Ownership of Securities" in our Proxy Statement for the
2000 annual meeting of stockholders.

Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The information required by this item is incorporated by reference from
the section entitled "Certain Transactions" in our Proxy Statement for the 2000
annual meeting of stockholders.

PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

(a)(1) Financial Statements

See index to financial statements on page F-1 for a list
of the financial statements being filed herein.

(a)(2) Financial Statement Schedules

None required.

(a)(3) Exhibits

See Exhibits below for all Exhibits being filed or
incorporated by reference herein.

27
<PAGE>

NUMBER DESCRIPTION
------ -----------
<S> <C>
3.1 Second Amended and Restated Certificate of Incorporation.
(Exhibit 3.2)
3.2 Restated Bylaws (Exhibit 3.4)
4.1(1) Specimen common stock certificate.
10.1(1) Amended and Restated Investors' Rights Agreement,
dated November 19, 1997 (Exhibit 10.7).
10.2(1) Amendment No. 1 to the Amended and Restated
Investors' Rights Agreement, dated December 31,
1997 (Exhibit 10.8).
10.3(1) Amendment No. 2 to the Amended and Restated
Investors' Rights Agreement, dated May 1998
(Exhibit 10.9).
10.4(1) Amended and Restated Stock Restriction Agreement,
dated November 19, 1997 (Exhibit 10.10).
10.5(1) Series D Preferred Stock Purchase Warrant granted to
FSC Corp., dated May 11, 1998 (Exhibit 10.12).
10.6(1) Stock Purchase Agreement, dated June 16, 1998
(Exhibit 10.13).
10.7(1) Revolving Credit and Term Loan Agreement between us
and BankBoston, N.A., dated May 1998
(Exhibit 10.14).
10.8(1) Lease Agreement between us and Macro Plaza
Enterprises, dated October 27, 1997 (Exhibit
10.15).
10.9(1) First Amendment to Lease Agreement between us and
Cornerstone Corporate Centre, LLC, dated October
16, 1998 (Exhibit 10.16).
10.10(1) Agreement between us and Service America Corporation
dated April 9, 1992 (Exhibit 10.17).
10.11(1) Test Agreement between us and Host International,
Inc., dated August 4, 1995 (Exhibit 10.18).
10.12(1) Amendment to Agreement between us and Pacific Basin
Foods, Inc., dated November 20, 1998 (Exhibit
10.20).
10.13(1) Agreement between us and Coca-Cola US Fountain, dated
March 10, 1998 (Exhibit 10.21).
10.14(1) Agreement between us and Dr. Pepper/Seven Up, Inc.,
dated June 23, 1998 (Exhibit 10.22).
10.15(1) Rental Agreement between us and Premier Food
Services, Inc., dated July 10, 1998 (Exhibit
10.23).
10.16(1) Letter Agreement between us and Volume Service America, dated
March 29, 1999 (Exhibit 10.24)
10.17(1)(2) Form of Indemnification Agreement between us and each
of its directors (Exhibit 10.25).
10.18(1)(2) Form of Indemnification Agreement between us and each
of its officers(Exhibit 10.26).
10.19(1)(2) 1993 Stock Option/Stock Issuance Plan, as amended
(Exhibit 10.27).
10.20(1)(2) 1993 Stock Option/Stock Issuance Plan Form of Notice
of Grant of Stock Option (Exhibit 10.28).
10.21(1)(2) 1993 Stock Option/Stock Issuance Plan Form of Stock
Option Agreement (Exhibit 10.29).
10.22(1)(2) 1993 Stock Option/Stock Issuance Plan Form of Stock
Purchase Agreement (Exhibit 10.30).
10.23(1)(2) 1993 Stock Option/Stock Issuance Plan Form of
Restricted Stock Issuance Agreement (Exhibit
10.31).
10.24(1)(2) 1995 Stock Option/Stock Issuance Plan (Exhibit 10.32).
10.25(1)(2) 1995 Stock Option/Stock Issuance Plan Form of Notice
of Grant of Stock Option (Exhibit 10.33).
10.26(1)(2) 1995 Stock Option/Stock Issuance Plan Form of Stock
Option Agreement (Exhibit 10.34).
10.27(1)(2) 1995 Stock Option/Stock Issuance Plan Form of Stock
Purchase Agreement (Exhibit 10.35).
10.28(1)(2) 1995 Stock Option/Stock Issuance Plan Form of Stock
Issuance Agreement (Exhibit 10.36).
10.29(1)(2) 1998 Stock Option/Stock Issuance Plan (Exhibit 10.37).
10.30(1)(2) 1998 Stock Option/Stock Issuance Plan Form of Notice
of Grant of Stock Option (Exhibit 10.38).

</TABLE>

28
<PAGE>

<TABLE>

<S> <C>
10.31(1)(2) 1998 Stock Option/Stock Issuance Plan Form of Stock
Option Agreement (Exhibit 10.39).
10.32(1)(2) 1998 Stock Option/Stock Issuance Plan Form of
Addendum to Stock Option Agreement (Exhibit 10.40).
10.33(1)(2) 1998 Stock Option/Stock Issuance Plan Form of Stock
Purchase Agreement (Exhibit 10.41).
10.34(1)(2) 1998 Stock Option/Stock Issuance Plan Form of
Addendum to Stock Purchase Agreement (Exhibit
10.42).
10.35(1)(2) 1998 Stock Option/Stock Issuance Plan Form of Stock
Issuance Agreement (Exhibit 10.43).
10.36(1)(2) 1998 Stock Option/Stock Issuance Plan Form of
Addendum to Stock Issuance Agreement (Exhibit
10.44).
10.37(1)(2) 1999 Stock Incentive Plan (Exhibit 10.45).
10.38(1)(2) Employee Stock Purchase Plan (Exhibit
10.46).
10.39(1)(2) Letter Agreement between us and Host International, Inc., dated
May 18, 1999 (Exhibit 10.47).
21.1(1) Subsidiary List.
23.1 Independent Auditors' Consent.
24.1 Powers of Attorney (Included under the caption
"Signatures").
27.1 Financial Data Schedule for the year ended December
26, 1999.

</TABLE>

- ---------------------------

(1) Incorporated by reference to the above noted exhibit to our Registration
Statement S-1 (333-75087) filed with the SEC on March 26, 1999, as amended.
(2) Management contract or compensation plan.

(b) Reports on Form 8-K

None.

The exhibits required by this Item are listed under Item
14(a)(3).

(d) Financial Statements Schedules

The financial statement schedules required by this Item are
listed under Item 14(a)(2).

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto dully authorized.

Dated: March 24, 2000 RUBIO'S RESTAURANTS, INC.

/s/ Ralph Rubio
----------------------------------------
Ralph Rubio
Chief Executive Officer, President, and Chairman

29
<PAGE>

POWER OF ATTORNEY

Know all persons by these present, that each person whose signature appears
below constitutes and appoints Ralph Rubio or Joseph N. Stein, his or her
attorney-in-fact, with power of substitution in any and all capacities, to sign
any amendments to this Annual Report on Form 10-K, and to file the same with
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, hereby ratifying and confirming all that the
attorney-in-fact or his or her substitute or substitutes may do or cause to be
done by virtue hereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated.

SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Ralph Rubio
- -----------------------------------------
Ralph Rubio Chief Executive Officer, March 24, 2000
President, and Chairman
(Principal Executive Officer)

/s/ Joseph N. Stein
- -----------------------------------------
Joseph N. Stein Chief Strategic and Financial March 24, 2000
Officer (Principal Financial and
Accounting Officer)

/s/ Kyle A. Anderson
- -----------------------------------------
Kyle A. Anderson Director March 24, 2000

/s/ Craig Andrews
- -----------------------------------------
Craig Andrews Director March 24, 2000

/s/ Michael Dooling
- -----------------------------------------
Michael Dooling Director March 24, 2000

/s/ Kim Lopdrup
- -----------------------------------------
Kim Lopdrup Director March 24, 2000

/s/ Timothy J. Ryan
- -----------------------------------------
Timothy J. Ryan Director March 24, 2000

</TABLE>

30
<PAGE>

RUBIO'S RESTAURANTS, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Page
<S> <C>
Report of Independent Accountants F-2

Consolidated Balance Sheets as of December 26, 1999 and December 27, 1998 F-3

Consolidated Statements of Operations for Fiscal Years 1999, 1998 and 1997 F-4

Consolidated Statements of Equity for Fiscal Years 1999, 1998 and 1997 F-5

Consolidated Statements of Cash Flows for Fiscal Years 1999, 1998 and 1997 F-6

Notes to Consolidated Financial Statements F-7

</TABLE>

F-1
<PAGE>

INDEPENDENT AUDITORS' REPORT

To the Board of Directors and Stockholders of
Rubio's Restaurants, Inc.:

We have audited the accompanying consolidated balance sheets of Rubio's
Restaurants, Inc. and subsidiary (the "Company") as of December 27, 1998 and
December 26, 1999, and the related consolidated statements of operations,
stockholders' equity and of cash flows for each of the three years in the period
ended December 26, 1999. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of Rubio's Restaurants, Inc. and
subsidiary as of December 27, 1998 and December 26, 1999, and the results of its
operations and its cash flows for each of the three years in the period ended
December 26, 1999 in conformity with generally accepted accounting principles.

DELOITTE & TOUCHE LLP

San Diego, California
February 21, 2000

F-2
<PAGE>

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

December 27, December 26,
1998 1999
------------ ------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 787 $ 3,459
Short-term investments 2,722 7,376
Other receivables 170 579
Income taxes receivable 99 215
Inventory 360 618
Prepaid expenses 295 562
Deferred income taxes 53 50
------- -------
Total current assets 4,486 12,859

INVESTMENTS 3,391 8,544
PROPERTY- net 17,133 27,923
OTHER ASSETS 347 439
DEFERRED INCOME TAXES 394 273
------- -------
TOTAL $25,751 $50,038
------- -------
------- -------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 2,943 $ 3,235
Accrued expenses and other liabilities 2,150 2,572
Current portion of long-term debt 743 --
Income taxes payable 105 --
------- -------
Total current liabilities 5,941 5,807

DEFERRED RENT 805 1,109
LONG-TERM DEBT 1,114 --
------- -------
Total liabilities 7,860 6,916
------- -------
COMMITMENTS AND CONTINGENCIES (NOTE 4)
REDEEMABLE CONVERTIBLE PREFERRED STOCK:
Series B redeemable ($4.04 per share liquidation preference),
$.001 par value, 1,092,007 shares authorized, issued
and outstanding in 1998 3,409 --
Series C redeemable ($6.27 per share liquidation preference),
$.001 par value, 793,640 shares authorized, issued
and outstanding in 1998 4,254 --
Series D redeemable ($7.77 per share liquidation preference),
$.001 par value, 1,524,595 shares authorized, 1,452,491
issued and outstanding in 1998 10,032 --
------- -------
Total redeemable convertible preferred stock 17,695 --
------- -------
STOCKHOLDERS' EQUITY:
Convertible preferred stock Series A ($2.00 per share liquidation
preference), $.001 par value, 1,973,395 shares authorized,
1,924,747 issued and outstanding in 1998 2 --
Preferred Stock, $.001 par value, 5,000,000 shares authorized,
no shares issued or outstanding -- --
Common stock, $.001 par value, 75,000,000 shares authorized,
1,048,600 issued and outstanding in 1998 and 8,871,775 issued
and outstanding in 1999 1 9
Paid-in capital -- 41,357
Deferred compensation 23 88
Accumulated other comprehensive income 44 29
Retained earnings 126 1,639
------- -------
Total stockholders' equity 196 43,122
------- -------
TOTAL $25,751 $50,038
------- -------
------- -------

</TABLE>

F-3
<PAGE>

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

Years Ended
---------------------------------------------------
December 28, December 27, December 26,
1997 1998 1999
------------- ------------- -------------
<S> <C> <C> <C>
SALES $ 29,704 $ 44,699 $ 67,854
COSTS AND EXPENSES:
Cost of sales 8,659 13,074 19,976
Restaurant labor, occupancy and other 15,639 22,616 33,984
General and administrative expenses 4,254 6,148 7,968
Depreciation and amortization 1,259 1,946 2,993
Pre-opening expenses 271 319 662
Loss on asset impairment 387 - -
-------- -------- --------

OPERATING INCOME (LOSS) (765) 596 2,271
-------- -------- --------
OTHER INCOME (EXPENSE):
Interest and investment income 188 521 654
Interest expense (263) (253) (153)
Miscellaneous expense (5) (10) -
Loss on disposal/sale of property (56) (5) (4)

-------- -------- --------
Other income (loss) - net (136) 253 497
-------- -------- --------

INCOME (LOSS) BEFORE INCOME TAXES (901) 849 2,768
INCOME TAX (EXPENSE) BENEFIT (99) 66 (1,117)
-------- -------- --------

NET INCOME (LOSS) $ (1,000) $ 915 $ 1,651
-------- -------- --------
-------- -------- --------

NET INCOME (LOSS) ATTRIBUTABLE TO
COMMON STOCKHOLDERS: (NOTE 8)
Basic $ (1,095) $ 568 $ 1,513
-------- -------- --------
-------- -------- --------

Diluted $ (1,095) $ 915 $ 1,651
-------- -------- --------
-------- -------- --------

NET INCOME (LOSS) PER SHARE:

Basic $ (1.08) $ 0.55 $ 0.26
-------- -------- --------
-------- -------- --------

Diluted $ (1.08) $ 0.14 $ 0.20
-------- -------- --------
-------- -------- --------

SHARES USED IN CALCULATING
NET INCOME (LOSS) PER SHARE:

Basic 1,010 1,033 5,741
--------- --------- ---------
--------- --------- ---------

Diluted 1,010 6,418 8,094
--------- --------- ---------
--------- --------- ---------

</TABLE>

F-4
<PAGE>

RUBIO'S RESTAURANTS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 28, 1997, DECEMBER 27, 1998 AND DECEMBER 26, 1999
(In thousands, except number of shares)

CONVERTIBLE ACCUMULATED
PREFERRED STOCK OTHER
SERIES A COMMON STOCK COMPRE-
---------------------- ---------------------- PAID-IN DEFERRED HENSIVE
SHARES AMOUNT SHARES AMOUNT CAPITAL COMPENSATION INCOME
--------- ----------- --------- ----------- --------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 29, 1996 1,973,395 $ 2 1,010,107 $ 1 $ 28
Exercise of common stock options -- -- 450 -- --
Net loss -- -- -- -- --
Accretion of redemption--preferred stock -- -- -- -- --
--------- ----------- --------- ----------- ---------
BALANCE, DECEMBER 28, 1997 1,973,395 2 1,010,557 1 28
Exercise of common stock options -- -- 38,043 -- 52
Repurchase shares of Series A preferred stock (48,648) -- -- -- (80)
Deferred compensation--stock options -- -- -- -- -- $ 23
Net income -- -- -- -- -- --
Accretion of redemption--preferred stock -- -- -- -- -- --
Other comprehensive income:
Net unrealized gain on available-for-sale
investments, net of $31 tax -- -- -- -- -- -- $ 44
Total comprehensive income -- -- -- -- -- -- --
------------
--------- ----------- --------- ----------- --------- ----------- ------------

BALANCE, DECEMBER 27, 1998 1,924,747 2 1,048,600 1 -- 23 44
Stock options exercised 33,987 -- 53
Deferred compensation-stock options 65
Accretion of redemption preferred stock
Series A preferred stock converted to common (1,924,747) (2) 1,924,747 2
Series B preferred stock converted to common 1,092,007 1 3,432
Series C preferred stock converted to common 793,640 1 4,258
Series D preferred stock converted to common 1,452,491 2 10,140
Initial Public Offering-net of $2,636 in
offering costs 2,486,748 2 23,474
Exercise of Warrants 39,555 -- --
Net income
Other comprehensive income:
Net unrealized loss on available-for-sale
investments, net of $10 tax credit (15)
Total comprehensive income
----------- ---------- ---------- ---------- ----------- ------------ ---------
BALANCE, DECEMBER 26, 1999 -- $ -- 8,871,775 $ 9 $ 41,357 $ 88 $ 29
----------- ---------- ---------- ---------- ----------- ------------ ---------

</TABLE>

RETAINED TOTAL
EARNINGS TOTAL COMPRE-
(ACCUMULATED STOCKHOLDER'S HENSIVE
DEFICIT) EQUITY INCOME
----------- ------------- -------
<S> <C> <C> <C>
BALANCE, DECEMBER 29, 1996 $ 923 $ 954
Exercise of common stock options -- --
Net loss (1,000) (1,000)
Accretion of redemption--preferred stock (95) (95)
----------- -------------
BALANCE, DECEMBER 28, 1997 (172) (141)
Exercise of common stock options -- 52
Repurchase shares of Series A preferred stoc (270) (350)
Deferred compensation--stock options -- 23
Net income 915 915 $ 915
Accretion of redemption--preferred stock (347) (347)
Other comprehensive income:
Net unrealized gain on available-for-sale
investments, net of $31 tax -- 44 44
-----------
Total comprehensive income -- -- $ 959
---------- ----------- -----------

BALANCE, DECEMBER 27, 1998 126 196
Stock options exercised 53
Deferred compensation-stock options 65
Accretion of redemption preferred stock (138) (138)
Series A preferred stock converted to common --
Series B preferred stock converted to common 3,433
Series C preferred stock converted to common 4,259
Series D preferred stock converted to common 10,142
Initial Public Offering-net of $2,636 in
offering costs 23,476
Exercise of Warrants --
Net income 1,651 1,651 1,651
Other comprehensive income:
Net unrealized loss on available-for-sale
investments, net of $10 tax credit (15) (15)
-----------
Total comprehensive income $1,636
----------- ------------ -----------
BALANCE, DECEMBER 26, 1999 $ 1,639 $ 43,122 -----------
----------- ------------

</TABLE>

F-5
<PAGE>

RUBIO'S RESTAURANTS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)

YEARS ENDED
----------------------------------------
DECEMBER 28, DECEMBER 27, DECEMBER 26,
1997 1998 1999
------------ -------------- -----------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net income (loss) $ (1,000) $ 915 $ 1,651
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization 1,259 1,946 2,993
Deferred compensation -- 23 65
Loss on asset impairment 387 -- --
Loss on disposal/sale of property 56 5 4
Changes in assets and liabilities:
Other receivables 12 (157) (409)
Income taxes receivable 9 (96) (116)
Inventory (80) (106) (258)
Prepaid expenses 52 (121) (267)
Other assets 56 (146) (92)
Deferred income taxes 34 (447) 110
Accounts payable 540 1,177 292
Accrued expenses and other liabilities. 535 924 422
Income taxes payable -- 105 (105)
Deferred rent 136 167 304
------------ -------------- -----------
Cash provided by operating activities 1,996 4,189 4,594
------------ -------------- -----------
INVESTING ACTIVITIES:
Proceeds from sale of property 9 7 26
Purchase of property (6,423) (6,924) (13,813)
Purchases of investments (17,264) (29,648) (112,436)
Sales and maturities of investments 12,291 32,955 102,629
------------ -------------- -------------
Cash used for investing activities (11,387) (3,610) (23,594)
------------ -------------- -------------
FINANCING ACTIVITIES:
Proceeds from long-term debt 837 2,228 --
Principal payments on long-term debt (758) (2,934) (1,856)
Payments under line of credit -- -- (1,000)
Proceeds from line of credit borrowing -- -- 1,000
Proceeds from sale of redeemable preferred stock 9,388 350 --
Transfer of cash from restricted deposit 157 -- --
Repurchase of Series A preferred stock -- (350) --
Initial public offering-net of $2,636 in offering costs -- -- 23,476
Stock offering costs (5) --
Proceeds from exercise of stock options -- 52 53
------------ -------------- -----------
Cash provided by (used for) financing activities 9,624 (659) 21,673
------------ -------------- -----------

INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 233 (80) 2,673
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 633 866 786
------------ -------------- -----------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 866 $ 786 $ 3,459
------------ -------------- -----------
------------ -------------- -----------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for interest $ 261 $ 220 $ 166

Cash paid (refunded) for income taxes- net $ (61) $ 403 $ 1,202

SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND
FINANCING ACTIVITIES:
Holding gains (losses) on available-for-sale
investments, before tax $ -- $ 75 $ (25)

</TABLE>

F-6
<PAGE>

RUBIO'S RESTAURANTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 28, 1997, DECEMBER 27, 1998 AND DECEMBER 26, 1999

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

NATURE OF OPERATIONS--Rubio's Restaurants, Inc. was incorporated in
California in 1985 and reincorporated in Delaware in 1997 (see Note 7). Rubio's
Restaurants, Inc. has a wholly-owned subsidiary which was incorporated in Nevada
in 1997. As of December 26, 1999, Rubio's Restaurants, Inc. and its subsidiary
(collectively, the "Company") , own and operate a chain of 90 restaurants and
three concessions in California, Nevada, Arizona, Colorado and Utah.

PRINCIPALS OF CONSOLIDATION--The consolidated financial statements include
the accounts of the Company and its wholly owned subsidiary.

BASIS OF FINANCIAL STATEMENT PRESENTATION--The Company operates and reports
on a 52-53 week fiscal year ending on the Sunday closest to December 31.

ACCOUNTING ESTIMATES--The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and contingencies at the date of the financial statements and the
reported amounts of revenues and expenses during the year. Actual results may
differ from those estimates.

CASH EQUIVALENTS--Cash equivalents consist of money market instruments
purchased with an original maturity date of three months or less.

INVESTMENTS--The Company's investments are composed primarily of commercial
paper, corporate bonds, tax-free municipals and mortgage-backed securities.
While it is the Company's general intent to hold such securities until maturity,
management will occasionally sell particular securities for cash flow purposes.
Therefore, pursuant to Statement of Financial Accounting Standards ("SFAS") No.
115, "Accounting for Certain Investments in Debt and Equity Securities," the
Company's investments are classified as available-for-sale based upon the
Company's intent, and are accounted for at fair market value. The fair market
value of such investments is determined based on quoted market prices at
December 26, 1999. Holding gains and losses on these investments are included as
other accumulated comprehensive income in the statements of stockholders'
equity. Short-term investments are investments with original maturities of
greater than three months and remaining maturities of less than one year, or
investments that are reasonably expected to be realized in cash or consumed in
operations over the next year (see Note 2).

INVENTORY--Inventory consists of food, beverage and restaurant supplies and
is stated at the lower of cost (first-in, first-out method) or market.

PROPERTY--Property is stated at cost. Depreciation and amortization are
computed using the straight-line method over the estimated useful lives of the
assets or the remaining lease term, whichever is less. The Company capitalizes
costs related to construction of new leased restaurant facilities. The lives for
equipment are 3 - 7 years and for building and leasehold improvements, 5 - 20
years.

The Company periodically assesses its ability to recover the carrying value
of its long-lived assets. If management concludes that the carrying value will
not be recovered, an impairment write-down is recorded to reduce the asset to
its estimated fair value.

In 1997, in accordance with SFAS No. 121, "Accounting for the Impairment
of Long-Lived Assets to be Disposed Of," the Company recorded a loss of $386,928
on long-lived assets where circumstances indicated that the assets were impaired
based on the expected future cash flows of one of the restaurant locations.
Impairment is reviewed at the lowest levels for which there are identifiable
cash flows that are independent of the cash flows of other groups of assets. In
the Company's

F-7
<PAGE>

RUBIO'S RESTAURANTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
YEARS ENDED DECEMBER 28, 1997, DECEMBER 27, 1998 AND DECEMBER 26, 1999

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

circumstances, such analysis is performed on an individual restaurant basis. The
impairment charge was the difference between the carrying value and the
estimated fair value of the assets. The Company estimated fair values based on
sales prices for comparable assets. The Company will continue to operate this
store to the end of the lease term. The Company did not have any impairment
losses in fiscal 1998 or 1999.

DEFERRED RENT--Rent expense on operating leases with scheduled or minimum
rent increases is expensed on the straight-line basis over the lease terms.
Deferred rent represents the excess of rent charged to expense over rent payable
under the lease agreement.

UNEARNED USAGE ALLOWANCE--The Company receives payments from the Company's
beverage suppliers under the suppliers' marketing allowance programs and records
such amounts as an unearned usage allowance. The Company recognizes the usage
allowance as a reduction to cost of sales based on the actual quantity purchased
on a monthly basis.

STORE PRE-OPENING EXPENSES--Costs incurred in connection with the training
of personnel and promotion of new store openings are expensed as incurred.

ADVERTISING--Advertising costs incurred to produce media advertising for new
campaigns are expensed in the year in which the advertising first takes place.
Other advertising costs are expensed when incurred. Net advertising costs
included in Restaurant, Labor & Other Expenses totaled $2.1 million, $1.4
million and $1.1 million, respectively, for the years 1999, 1998 and 1997.

STOCK-BASED COMPENSATION--Effective January 1, 1996, the Company adopted
SFAS No. 123, "Accounting for Stock-Based Compensation." SFAS No. 123
encourages, but does not require, companies to record compensation cost for
stock-based employee compensation plans at fair value. The Company has chosen to
continue to account for stock-based compensation using the intrinsic value
method prescribed in Accounting Principles Board ("APB") Opinion No. 25,
"Accounting for Stock Issued to Employees," and related Interpretations.
Accordingly, compensation cost for stock options is measured as the excess, if
any, of the fair market value of the Company's stock at the date of the grant
over the amount an employee must pay to acquire the stock (see Note 7).

CONCENTRATION OF CREDIT RISK--The Company invests its excess cash in money
market accounts and debt securities. The Company has not experienced any
material losses on its cash accounts or other investments.

EARNINGS PER SHARE--In February 1997, the Financial Accounting Standards
Board ("FASB") issued SFAS No. 128, "Earnings Per Share" (EPS), effective for
all financial statements issued after December 15, 1997. SFAS No. 128 requires
dual presentation of "Basic" and "Diluted" EPS by entities with complex capital
structures, replacing "Primary" and "Fully Diluted" EPS under APB Opinion No.
15. Basic EPS is computed by dividing net income or loss attributable to common
stockholders by the weighted average of common shares outstanding for the
period. Diluted EPS reflects the potential dilution that could occur if
securities or other contracts to issue common stock (convertible preferred
stock, warrants to purchase common stock and common stock options using the
treasury stock method) were exercised or converted into common stock. Potential
common shares in the diluted EPS computation are excluded where their effect
would be antidilutive. EPS for all periods have been computed in accordance with
SFAS No. 128 (see Note 8).

F-8
<PAGE>

RUBIO'S RESTAURANTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
YEARS ENDED DECEMBER 28, 1997, DECEMBER 27, 1998 AND DECEMBER 26, 1999

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

RECENT ACCOUNTING PRONOUNCEMENTS-- In April 1998, Statement of Position
("SOP") 98-5, "Reporting on the Costs of Start-Up Activities" was issued by the
Accounting Standards Executive Committee. SOP 98-5 provides guidance on the
financial reporting of start-up costs and organization costs. It requires costs
of start-up activities and organization costs to be expensed as incurred, and is
effective for fiscal years beginning after December 15, 1998. The Company early
adopted this SOP for the fiscal year ended December 28, 1997. The adoption of
this SOP did not have a material effect on the results of operations.

In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities," effective for fiscal years beginning after
June 15, 1999. SFAS No. 133 establishes accounting and reporting standards for
derivative instruments, including derivative instruments embedded in other
contracts, and for hedging activities.

In June 1999, the FASB issued SFAS No. 137, "Accounting for Derivative
Instruments and Hedging Activities-Deferral of the Effective Date of FASB
Statement No. 133"-an amendment of FASB Statement No. 133. SFAS No. 137 defers
the effective date of SFAS No. 133 to fiscal years beginning after June 15,
2000. The adoption of this FASB will not have a material effect on the results
of operations.

2. BALANCE SHEET DETAILS as of December 27, 1998 and December 26, 1999,
respectively: (in thousands)

1998 1999
------------- -------------
<S> <C> <C>
PROPERTY--at cost:
Building and leasehold improvements $ 11,209 $ 17,308
Equipment and furniture 10,319 17,395
Construction in process and related costs 1,060 1,586
------------- -------------
22,588 36,289
Less: accumulated depreciation and amortization (5,455) (8,366)
------------- -------------
Total $ 17,133 $ 27,923

OTHER ASSETS:
Long-term deposits $ 269 $ 366
Other 78 73
------------- ------------
Total $ 347 $ 439
------------- ------------
------------- ------------
ACCRUED EXPENSES AND OTHER LIABILITIES:
Compensation $ 1,069 $ 1,161
Sales taxes 334 499
Vacation pay 248 300
Unearned usage allowance 206 95
Other 293 517
------------- ------------
Total $ 2,150 $ 2,572
------------- ------------
------------- ------------

</TABLE>

F-9
<PAGE>

RUBIO'S RESTAURANTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
YEARS ENDED DECEMBER 28, 1997, DECEMBER 27, 1998 AND DECEMBER 26, 1999

2. BALANCE SHEET DETAILS as of December 27, 1998 and December 26, 1999,
respectively: (in thousands) (continued)

1998 1999
------------- -------------
<S> <C> <C>
INVESTMENTS:
Corporate Bonds -- $ 6,177
Mortgage and Asset-backed securities $ 1,201 2,645
Commercial Paper -- 2,371
Tax Free Municipals -- 1,761
Municipal Bonds -- 1,503
U.S. Treasury notes 4,912 1,121
Agencies -- 342
------------- ------------
6,113 15,920
Less current portion (2,722) (7,376)
------------- ------------
Non-current $ 3,391 $ 8,544
------------- ------------
------------- ------------

</TABLE>

3. LONG-TERM DEBT AND CREDIT FACILITIES

CAPITAL EXPANSION LINE--In 1997, the Company obtained a $3,000,000 capital
expansion line (the "Capital line") with a bank which provided for interest at
1.0% over the bank's referenced rate (8.50% at December 28, 1997). The purpose
of the Capital line was to assist the Company in financing leasehold
improvements and equipment in new restaurant locations. Interest expense for the
borrowings under the Capital line was $262,622, $82,081 and $0 for the years
ended December 28,1997, December 27, 1998 and December 26, 1999, respectively.
The Company refinanced the remaining borrowings under the Capital line with the
Term Loan in May 1998.

TERM LOAN--In May 1998, the Company entered into a term loan (the "Term
Loan") with another bank to refinance the remaining borrowings under the Capital
line. On April 1, 1999, the Company amended the Revolving Credit and Term Loan
Agreement. The amendment eliminated the provision to prepay the Term Loan
including interest not later than 90 days after the completion of an initial
public offering. The amendment also provides for a decrease in the interest
rate, at the election of the Company, to a bank reference rate plus 0.75% or an
adjusted LIBOR plus 3.0% per annum (9.18% at December 26, 1999). There was
$1,856,433 and $0 outstanding under the Term Loan as of December 27, 1998 and
December 26, 1999, respectively. Interest expense was $171,494 and $153,258
under the Term Loan for the years ended December 27, 1998 and December 26, 1999,
respectively. The Term Loan was paid off in its entirety in May of 1999 after
receiving proceeds from the Company's initial public offering.

REVOLVING LINE OF CREDIT--In May 1998, the Company entered into a revolving
line of credit (the "Credit line") in conjunction with the Term Loan. On April
1, 1999, the Company amended the Revolving Credit and Term Loan Agreement. The
amendment decreased the rate for any unused commitment fees to 0.375%. In
addition, the amendment provides for a decrease in the interest rate, at the
election of the Company, to a bank reference rate plus 0.75% or and an adjusted
LIBOR plus 3.0% per annum (9.18% at December 26, 1999). Principal and interest
payments due under the Credit line are payable upon or before maturity at May
12, 2001. There were no borrowings outstanding against the Credit line at
December 26, 1999.

The Term Loan and Credit line contain various covenants including a fixed
charge coverage ratio, minimum interest coverage ratio, and maximum total
leverage ratio, and place certain restrictions on fixed asset purchases. The
Term Loan and Credit

F-10
<PAGE>

RUBIO'S RESTAURANTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
YEARS ENDED DECEMBER 28, 1997, DECEMBER 27, 1998 AND DECEMBER 26, 1999

3. LONG-TERM DEBT AND CREDIT FACILITIES (continued)

line restrict the payment of cash dividends and other stock redemptions or
repurchases, as defined in the agreement, without prior consent of the lender.
Borrowings under the Credit line and the Term Loan are secured by the Company's
assets. The Company was in compliance with all such covenants as of December 26,
1999.

The following summarizes the balances outstanding as long-term debt as of
December 27, 1998 and December 26, 1999:

1998 1999
------------ -----------
<S> <C> <C>
Term Loan, total quarterly installment payments of
$185,643, interest payable in arrears ranging
from 9.14% to 9.25% $ 1,856 $ --

Less current portion (742) --
------------ ------------

Long-term debt $ 1,114 $ --
------------ ------------
------------ ------------

</TABLE>

4. COMMITMENTS AND CONTINGENCIES

The Company leases restaurant and office facilities, vehicles, and office
equipment under various operating leases expiring through 2013. The leases
generally provide renewal options from three to ten years. Certain leases are
subject to minimum annual increases based upon the consumer price index, not to
exceed specific maximum amounts. Certain leases have built-in contingent
percentage rents based upon sales, and other leases pass through common area
charges to the Company. Rental expense under these operating leases was
$2,495,415, $3,545,546 and $5,350,047 for fiscal years 1997, 1998 and 1999,
respectively.

Future minimum annual lease commitments, as of December 26, 1999, are as
follows (in thousands):

FISCAL YEAR
- -----------
<S> <C>
2000 $ 5,852
2001 5,909
2002 5,855
2003 5,860
2004 5,791
Thereafter 19,390
------------
Total $ 48,657
------------
------------

</TABLE>

EMPLOYEE SAVINGS PLAN--On January 31, 1997, the Company adopted a defined
contribution benefit 401(k) plan. This plan allows eligible employees to
contribute a percentage of their salary, subject to annual limits. The Company
matches 25% of each eligible employee's contributions up to 6% of their gross
salary. The contributions vest over a five-year period. The Company contributed
$42,913 to the plan for the year ended December 26, 1999.

F-11
<PAGE>

RUBIO'S RESTAURANTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
YEARS ENDED DECEMBER 28, 1997, DECEMBER 27, 1998 AND DECEMBER 26, 1999

5. INCOME TAXES

The Company accounts for income taxes in accordance with SFAS No. 109,
"Accounting for Income Taxes." Under SFAS No. 109, the deferred tax (provision)
benefit is determined under the liability method. Under this method, deferred
tax assets and liabilities are recognized based on differences between the
financial statement and tax basis of assets and liabilities using presently
enacted tax rates.

The components of the income taxes expense for the years ended December
28, 1997, December 27, 1998 and December 26, 1999 are as follows: (in thousands)

1997 1998 1999
---------- ----------- -----------
<S> <C> <C> <C>
Federal (expense) benefit:
Current $ 42 $ (307) $ (736)
Deferred (127) 368 (134)
State (expense) benefit:
Current 10 (105) (246)
Deferred (24) 110 (1)
---------- ----------- -----------
Total income tax (expense) benefit $ (99) $ 66 $ (1,117)

</TABLE>

The income tax expense differs from the Federal statutory rate because of
the effect of the following items for the years ended December 28, 1997,
December 27, 1998 and December 26, 1999:

1997 1998 1999
--------- --------- ---------
<S> <C> <C> <C>
Statutory rate 34.0 % (35.0)% (34.0)%
State income taxes, net of Federal benefit (1.1) (5.9) (5.9)
Non-deductible items ( .1) (.9) (.3)
Valuation allowance (49.2) 53.2 -
Other 5.3 (3.6) (.1)
--------- --------- ---------
Effective tax (expense) benefit rate (11.1)% 7.8 % (40.3)%
--------- --------- ---------
--------- --------- ---------

</TABLE>

Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for reporting and the
amounts used for income tax purposes.

The tax effects of items comprising the Company's net deferred tax assets as
of December 27, 1998 and December 26, 1999 are as follows: (in thousands)

1998 1999
----------- -----------
<S> <C> <C>
Deferred rent $ 353 $ 475
Differences between book and tax basis of property (326) (462)
Reserves currently not deductible 262 231
Deferred compensation -- 37
Credits 245 148
Other (18) (49)
Unrealized gain on investments (31) (20)
State taxes (38) (37)
----------- -----------
Net deferred tax assets 447 323
Less: current portion (53) (50)
----------- -----------
Net non-current asset $ 394 $ 273
----------- -----------
----------- -----------

</TABLE>

F-12
<PAGE>

RUBIO'S RESTAURANTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
YEARS ENDED DECEMBER 28, 1997, DECEMBER 27, 1998 AND DECEMBER 26, 1999

5. INCOME TAXES (continued)

The Company has Federal credit carryforwards available to offset future tax
liabilities of $148,046.

The Company provided a valuation allowance equal to the net deferred tax
asset as of December 28, 1997, but eliminated the valuation allowance in 1998
due to management's belief that current year activity made realization of
such benefit more likely than not.

6. CONVERTIBLE AND REDEEMABLE CONVERTIBLE PREFERRED STOCK

Upon the Company's initial public offering in May 1999, Convertible
Preferred Stock Series A (approximately 1.9 million shares) and all Redeemable
Convertible Preferred Stock, Series B, C and D (approximately 3.4 million
shares) were automatically converted into the Company's common stock. The
conversion of the preferred stock was on a 1 for 1 basis. Upon conversion of the
preferred stock, all preferred stock dividends and other rights previously
assigned ceased.

7. STOCKHOLDERS' EQUITY

REINCORPORATION--In 1997, the Company changed its state of incorporation
from California to Delaware. In connection with this change, the outstanding
shares of the Company's no par value common and convertible preferred stock were
converted into and exchanged for an equal number of shares of $.001 par value
common and convertible preferred stock of the Delaware entity. The financial
statements for all periods presented reflect this change.

INITIAL PUBLIC OFFERING--The Company completed its initial public offering
on May 21, 1999 (the "Offering"). The Offering resulted in the issuance of
2,486,748 shares of common stock at $10.50 per share, resulting in net proceeds
to the Company of approximately $23.5 million. In connection with the Offering,
39,555 shares of common stock were issued upon the exercise of certain
outstanding warrants.

COMMON STOCK--Holders of common stock are entitled to one vote per share.
The rights of the common stock are subject to prior rights of the preferred
stock.

DEBT ISSUE COSTS--In connection with the Term Loan (see Note 3), the Company
issued a warrant to purchase up to 45,000 shares (subject to adjustment under a
formula defined in the warrant) of the Company's common stock. The warrant is
exercisable under certain conditions specified in the warrant. The warrant term
extends until the earlier of December 31, 2002 or the business day preceding an
acquisition. The exercise price is $7.19454 per share. The fair value of the
warrant upon date of issuance was not material.

STOCK OPTIONS AND PURCHASE PLANS

i) 1995 STOCK OPTION/STOCK ISSUANCE PLAN--On May 30, 1996, the stockholders
of the Company approved the 1995 Stock Option/Stock Issuance Plan (the "Plan").
The Plan supersedes and incorporates all options outstanding under the 1993
Stock Option Plan. The Plan provides for the issuance of incentive and
nonstatutory options and for the purchase of common stock for eligible
individuals. The Board of Directors administers the Plan.

Each option granted under the Plan has a maximum term of either five or ten
years (depending on stock ownership) and will be subject to earlier termination
in the event of the optionee's termination of service. The 1995 Plan was
incorporated into the 1999 Stock Incentive Plan.

F-13
<PAGE>

RUBIO'S RESTAURANTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
YEARS ENDED DECEMBER 28, 1997, DECEMBER 27, 1998 AND DECEMBER 26, 1999

7. STOCKHOLDERS' EQUITY (continued)

ii) 1998 STOCK OPTION/STOCK ISSUANCE PLAN--On March 27, 1998, the
stockholders of the Company approved the 1998 Stock Option/Stock Issuance Plan
(the "1998 Plan"). The 1998 Plan provides for the issuance of incentive and
nonstatutory options and for the purchase of common stock for eligible
individuals. The Board of Directors administers the 1998 Plan. The stock
issuable under the 1998 Plan is shares of authorized but unissued or reacquired
common stock.

Each option granted under the 1998 Plan has a maximum term of either five or
ten years (depending on stock ownership) and will be subject to earlier
termination in the event of the optionee's termination of service. The 1998 Plan
was incorporated into the 1999 Stock Incentive Plan.

iii) 1999 STOCK INCENTIVE PLAN--On March 18, 1999 and March 24, 1999, the
Board of Directors and the stockholders, respectively, of the Company approved
the 1999 Stock Incentive Plan (the "1999 Plan"). All outstanding options under
the 1993 Stock Option Plan, the 1995 Stock Option/Stock Issuance Plan and the
1998 Stock Option/Stock Issuance Plan (collectively, the "predecessor plans")
are incorporated into the 1999 Plan. No further grants will be made under the
predecessor plans. Except as otherwise noted below, the options previously
granted under the predecessor plans will have substantially the same terms as in
effect for new grants made under the 1999 Plan.

The stock issuable under the 1999 Plan shall be shares of authorized but
unissued or reacquired common stock, including shares repurchased by the Company
on the open market. A total of 1,123,938 shares of common stock have been
authorized for issuance under the 1999 Plan, which includes the shares subject
to outstanding options under the predecessor plans. As of December 26, 1999,
501,125 options were available for grant under the predecessor plans. The number
of shares of common stock reserved for issuance under the 1999 Plan will
automatically increase on the first trading day in January each year, beginning
in calendar year 2000. The increase will be equal to 3% of the total number of
shares of common stock outstanding as of the last trading day in December of the
preceding year, not to exceed 450,000 shares in any given year. In addition, no
participant in the 1999 Plan may be granted stock options, separately
exercisable stock appreciation rights and direct stock issuances for more than
500,000 shares of common stock in the aggregate per calendar year. Each option
shall have a maximum term of either five or ten years, depending on the related
program, and will be subject to earlier termination in the event of the
optionee's termination of service.

The 1999 Plan is divided into five separate components; (1) the
discretionary option grant program, (2) the stock issuance program, (3) the
salary investment option grant program, (4) the automatic option grant program
and (5) the director fee option grant program.

1) The discretionary option grant and 2) stock issuance programs provide for
the issuance of incentive and nonstatutory options for eligible employees. The
option exercise price per share is fixed by the 1999 Plan administrator in
accordance with the following provisions: (1) the exercise price shall not be
less than 100% of the fair market value per share of the common stock on the
date of grant, and (2) if the person to whom the option is granted is a 10%
stockholder, then the exercise price per share shall not be less than 110% of
the fair market value per share of the common stock on the date of grant. The
purchase price for stock issuances is determined by the 1999 Plan administrator
and shall not be less than 100% of the fair market value of a share of common
stock at the time of issuance. Each option shall be exercisable at such time or
times, during such period and for such number of shares as shall be determined
by the 1999 Plan administrator as set forth in the related individual option
agreements.

F-14
<PAGE>

RUBIO'S RESTAURANTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
YEARS ENDED DECEMBER 28, 1997, DECEMBER 27, 1998 AND DECEMBER 26, 1999

7. STOCKHOLDERS' EQUITY (continued)

3) The salary investment option grant program, if activated, would be
available to executive officers and other highly compensated eligible employees.
The participants may elect, prior to the start of a calendar year, to reduce
their base salary by a specific dollar amount not less than $10,000 nor more
than $50,000. The options will be exercisable at a price equal to one-third of
the fair market value of the options at grant date. The options will vest
monthly for one year and are subject to full and immediate vesting upon certain
changes in ownership of the Company.

4) The automatic option grant program is available to non-employee board
members. When the 1999 Plan becomes effective, eligible individuals will
automatically receive an option grant for 25,000 shares on the date of joining
the board provided that they have not been previously employed by the Company.
In addition, at the date of each annual meeting of stockholders, each
non-employee board member will automatically be granted an option to purchase
5,000 shares of common stock, provided that the individual has served on the
board for at least six months. All grants under the automatic option grant
program vest immediately upon issuance. The exercise price per share shall be
equal to 100% of the fair market value of the common stock on the date of grant.

5) The director fee option grant program allows, if activated, for
non-employee board members to apply any of their annual retainer fees to the
acquisition of a special option grant. The options will be exercisable at a
price equal to one-third of the fair market value of the options at the grant
date. The options will vest monthly for one year and are subject to full and
immediate vesting upon certain changes in ownership of the Company.

The board may amend or modify the 1999 Plan at any time, subject to any
required stockholder approval. The 1999 Plan will terminate at the earliest of
(1) March 17, 2009, (2) the date on which all shares available for issuance
under our 1999 Plan have been issued as fully-vested shares or (3) the
termination of all outstanding options in connection with certain ownership
changes.

iv) 1999 EMPLOYEE STOCK PURCHASE PLAN--On March 18, 1999 and March 24, 1999,
the Board of Directors and stockholders, respectively, approved the 1999
Employee Stock Purchase Plan ("ESPP"). The ESPP became effective upon the
execution of the underwriting agreement and pricing of the common stock with
respect to the Company's initial public offering. The ESPP allows eligible
employees, as specified in the ESPP, to purchase shares of common stock in
semi-annual intervals through payroll deductions under this plan. The
accumulated payroll deductions will be applied to the purchase of shares on the
employee's behalf at a price per share equal to 85% of the lower of (1) the fair
market value of the Company's common stock at the date of entry into the current
offering period or (2) the fair market value on the purchase date. An initial
reserve of 200,000 shares of common stock has been authorized for issuance under
the ESPP. The Board of Directors may alter, suspend or discontinue the ESPP.
However, certain amendments to the ESPP may require stockholder approval.

F-15
<PAGE>

RUBIO'S RESTAURANTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
YEARS ENDED DECEMBER 28, 1997, DECEMBER 27, 1998 AND DECEMBER 26, 1999

7. STOCKHOLDERS' EQUITY (continued)

The following is a summary of stock option activity for fiscal 1997, 1998
and 1999:

SHARES
----------------------- WEIGHTED
OPTIONS AVERAGE EXERCISE
AVAILABLE OPTIONS PRICE
FOR GRANT OUTSTANDING PER SHARE
---------- ----------- -----------------
<S> <C> <C> <C>
Balance at December 29, 1996 160,523 154,370 $ 1.40
Authorized
Granted (87,930) 87,930 1.54
Exercised (450) 1.00
Forfeited 17,200 (17,200) 1.50
---------- -----------
Balance at December 28, 1997 89,793 224,650 1.33
Authorized 150,000 - -
Granted (137,140) 137,140 2.63
Exercised (38,043) 1.39
Forfeited 43,207 (43,207) 1.75
---------- -----------
Balance at December 27, 1998 145,860 280,540 1.96
Authorized 700,000 - -
Granted (405,950) 405,950 9.72
Exercised (33,987) 1.57
Forfeited 61,215 (61,215) 5.77
---------- -----------
Balance at December 26, 1999 501,125 591,288 6.77
---------- -----------
---------- -----------
Exercisable, December 28, 1997 66,010 1.33
-----------
-----------
Exercisable, December 27, 1998 92,585 1.46
-----------
-----------
Exercisable, December 26, 1999 178,702 4.09
-----------
-----------

</TABLE>

The Company applies APB Opinion No. 25 and related interpretations in
accounting for its employee stock option plans (see Note 1). Under APB Opinion
No. 25, the Company will record compensation expense resulting from the
difference between the respective grant price per share and the estimated fair
market value of the common stock at the dates of grant. Total deferred
compensation for fiscal 1998 grants was $300,540 and will be recorded ratably
over the vesting period of the respective options. For the year ended December
26, 1999 the Company recorded $64,532 of deferred compensation expense
associated with these option grants.

F-16
<PAGE>

RUBIO'S RESTAURANTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
YEARS ENDED DECEMBER 28, 1997, DECEMBER 27, 1998 AND DECEMBER 26, 1999

7. STOCKHOLDERS' EQUITY (continued)

The following table summarizes the impact on the Company's net income (loss)
had compensation cost been determined based upon the fair value at the grant
date for awards under the stock option plans consistent with the methodology
prescribed under SFAS No. 123: (in thousands, except per share data)

FISCAL YEARS
-------------------------------------
1997 1998 1999
---------- ------------- ----------
<S> <C> <C> <C>
Net income (loss) attributable to common stockholders:
Basic $ (1,095) $ 568 $ 1,513
Diluted (1,095) 915 1,651

As adjusted under SFAS No. 123:
Net income (loss):
Basic $ (1,127) $ 520 $ 1,228
Diluted (1,127) 868 1,366

Net income (loss) per share:
Basic $ (1.12) $ 0.50 $ 0.21
Diluted (1.12) 0.14 0.17

</TABLE>

The following table summarizes the weighted average fair value at grant date
for the options granted during fiscal 1997, 1998 and 1999 using the
Black-Scholes option-pricing model with the following weighted average
assumptions:

FISCAL YEARS
------------------------------------
1997 1998 1999
--------- ------------- ----------
<S> <C> <C> <C>
Expected dividend None None None
Expected stock price volatility None None 57%
Risk-free interest rate 6.00% 5.60% 5.14%
Assumed forfeiture rate 20% 10% 15%
Expected lives of options 8 years 5 years 5 years
Weighted average fair value per share $0.58 $0.57 $5.59

</TABLE>

The estimated fair value of options granted is subject to the assumptions
made and if the assumptions changed, the estimated fair value amounts could be
significantly different.

The following table summarizes information as of December 26, 1999
concerning currently outstanding and exercisable options:

OPTIONS OUTSTANDING OPTIONS EXERCISABLE
----------------------------------------------- ---------------------

WEIGHTED AVERAGE WEIGHTED
REMAINING WEIGHTED AVERAGE
NUMBER CONTRACTUAL LIFE AVERAGE NUMBER EXERCISE
RANGE OF EXERCISE PRICES OUTSTANDING (YEARS) EXERCISE PRICE EXERCISABLE PRICE
- ------------------------ ----------- ----------------- --------------- ----------- ---------
<S> <C> <C> <C> <C> <C>
$1.00----$2.00......... 204,258 7 $ 1.67 116,331 $ 1.56
$4.00----$9.00......... 169,370 9 $ 7.98 27,371 $ 7.26
$10.00--$10.00......... 192,000 9 $ 10.00 35,000 $ 10.00
$15.00--$15.60......... 25,660 9 $ 15.00 0 $ 0.00
----------- -----------
591,288 $ 6.77 178,702 $ 4.09
----------- -----------
----------- -----------

</TABLE>

F-17
<PAGE>

RUBIO'S RESTAURANTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
YEARS ENDED DECEMBER 28, 1997, DECEMBER 27, 1998 AND DECEMBER 26, 1999

8. EARNINGS PER SHARE

Reconciliation of basic and diluted earnings per share in accordance with
SFAS No. 128 (see Note 1) is as follows: (in thousands, except per share data)

FISCAL YEAR
-----------------------------------------
1997 1998 1999
------------ ------------- ------------
<S> <C> <C> <C>
Numerator
Basic:
Net income (loss) $ (1,000) $ 915 $ 1,651
Accretion on redeemable
convertible preferred stock (95) (347) (138)
------------ ------------- ------------
Net income (loss) attributable
to common stockholders (1,095) 568 1,513
Diluted:
Reversal of accretion on redeemable
convertible preferred stock -- 347 138
------------ ------------- ------------
Net income (loss) attributable
to common stockholders $ (1,095) $ 915 $ 1,651
------------ ------------- ------------
------------ ------------- ------------

</TABLE>

FISCAL YEAR
-----------------------------------------
1997 1998 1999
------------ ------------ ------------
<S> <C> <C> <C>
Denominator
Basic:
Weighted average common shares
Outstanding 1,010 1,034 5,741
------------ ------------ ------------
Total weighted average common
shares outstanding 1,010 1,034 5,741
Diluted:
Effect of dilutive securities:
Common stock options -- 121 241
Conversion of convertible
preferred stock -- 5,263 2,112
----------- ----------- ------------
Total weighted average common
and potential common shares
outstanding 1,010 6,418 8,094
----------- ----------- ------------
----------- ----------- ------------
Earnings (loss) per share:
Basic $ (1.08) $ 0.55 $ 0.26
Diluted $ (1.08) $ 0.14 $ 0.20

</TABLE>

9. SEGMENTED INFORMATION

The Company owns and operates high-quality, quick-service Mexican
restaurants under the name "Rubio's Baja Grill," with restaurants primarily in
California, Arizona and Nevada. In accordance with SFAS No. 131, the Company
currently considers its business to consist of one reportable operating segment.

F-18
<PAGE>

RUBIO'S RESTAURANTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
YEARS ENDED DECEMBER 28, 1997, DECEMBER 27, 1998 AND DECEMBER 26, 1999

10. SUBSEQUENT EVENTS

Stock Options -

On January 14, 2000, an additional 134,573 Incentive Stock Options and
23,627 Non-Qualified Options to purchase shares of common stock were issued at
$7.375 per share, subject to five year vesting.

On February 3, 2000, an additional 55,160 Non-Qualified Options to
purchase shares of common stock were issued at $7.1875 per share, subject to
five year vesting.

11. QUARTERLY FINANCIALS (UNAUDITED)

Summarized unaudited quarterly financial data (in thousands, except
income per share) for fiscal 1999 and 1998 was as follows:

Fiscal 1999
----------------------------------
First Second Third Fourth
Quarter Quarter Quarter Quarter
------- ------- ------- -------
<S> <C> <C> <C> <C>
Total revenues $14,383 $16,322 $19,729 $17,421
Income from operations 72 603 1,574 22
Net income 45 394 1,090 122
Diluted net income (loss) per share $ (0.04) $ 0.05 $ 0.12 $ 0.01

</TABLE>

Fiscal 1998
-----------------------------------
First Second Third Fourth
Quarter Quarter Quarter Quarter
------- ------- ------- -------
<S> <C> <C> <C> <C>
Total revenues $ 9,217 $10,907 $12,935 $11,640
Income (loss) from operations (254) 282 637 (68)
Net income (loss) (180) 347 742 6
Diluted net income (loss) per share $ (0.26) $ 0.05 $ 0.12 $ (0.08)

</TABLE>

F-19
<PAGE>

EXHIBIT INDEX TO FORM 10-K
RUBIO'S RESTAURANTS, INC.

NUMBER DESCRIPTION
<S> <C>
3.1 Second Amended and Restated Certificate of Incorporation. (Exhibit 3.2)
3.2 Restated Bylaws (3.4)
4.1(1) Specimen common stock certificate.
10.1(1) Amended and Restated Investors' Rights Agreement, dated November 19, 1997 (Exhibit 10.7).
10.2(1) Amendment No. 1 to the Amended and Restated Investors' Rights Agreement, dated December 31,
1997 (Exhibit 10.8).
10.3(1) Amendment No. 2 to the Amended and Restated Investors' Rights Agreement, dated May 1998
(Exhibit 10.9).
10.4(1) Amended and Restated Stock Restriction Agreement, dated November 19, 1997 (Exhibit 10.10).
10.5(1) Series D Preferred Stock Purchase Warrant granted to FSC Corp., dated May 11, 1998 (Exhibit
10.12).
10.6(1) Stock Purchase Agreement, dated June 16, 1998 (Exhibit 10.13).
10.7(1) Revolving Credit and Term Loan Agreement between us and BankBoston, N.A., dated May 1998
(Exhibit 10.14).
10.8(1) Lease Agreement between us and Macro Plaza Enterprises, dated October 27, 1997 (Exhibit
10.15).
10.9(1) First Amendment to Lease Agreement between us and Cornerstone Corporate Centre, LLC, dated
October 16, 1998 (Exhibit 10.16).
10.10(1) Agreement between us and Service America Corporation dated April 9, 1992 (Exhibit 10.17).
10.11(1) Test Agreement between us and Host International, Inc., dated August 4, 1995 (Exhibit
10.18).
10.12(1) Amendment to Agreement between us and Pacific Basin Foods, Inc., dated November 20, 1998
(Exhibit 10.20).
10.13(1) Agreement between us and Coca-Cola US Fountain, dated March 10, 1998 (Exhibit 10.21).
10.14(1) Agreement between us and Dr. Pepper/Seven Up, Inc., dated June 23, 1998 (Exhibit 10.22).
10.15(1) Rental Agreement between us and Premier Food Services, Inc., dated July 10, 1998 (Exhibit
10.23).
10.16(1) Letter Agreement Between us and Volume Service America, dated March 29, 1999 (Exhibit
10.24).
10.17(1)(2) Form of Indemnification Agreement between us and each of its directors (Exhibit 10.25).
10.18(1)(2) Form of Indemnification Agreement between us and each of its officers(Exhibit 10.26).
10.19(1)(2) 1993 Stock Option/Stock Issuance Plan, as amended (Exhibit 10.27).
10.20(1)(2) 1993 Stock Option/Stock Issuance Plan Form of Notice of Grant of Stock Option (Exhibit
10.28).
10.21(1)(2) 1993 Stock Option/Stock Issuance Plan Form of Stock Option Agreement (Exhibit 10.29).
10.22(1)(2) 1993 Stock Option/Stock Issuance Plan Form of Stock Purchase Agreement (Exhibit 10.30).
10.23(1)(2) 1993 Stock Option/Stock Issuance Plan Form of Restricted Stock Issuance Agreement (Exhibit
10.31).
10.24(1)(2) 1995 Stock Option/Stock Issuance Plan (Exhibit 10.32).
10.25(1)(2) 1995 Stock Option/Stock Issuance Plan Form of Notice of Grant of Stock Option (Exhibit
10.33).
10.26(1)(2) 1995 Stock Option/Stock Issuance Plan Form of Stock Option Agreement (Exhibit 10.34).
10.27(1)(2) 1995 Stock Option/Stock Issuance Plan Form of Stock Purchase Agreement (Exhibit 10.35).
10.28(1)(2) 1995 Stock Option/Stock Issuance Plan Form of Stock Issuance Agreement (Exhibit 10.36).
10.29(1)(2) 1998 Stock Option/Stock Issuance Plan (Exhibit 10.37).
10.30(1)(2) 1998 Stock Option/Stock Issuance Plan Form of Notice of Grant of Stock Option (Exhibit
10.38).
10.31(1)(2) 1998 Stock Option/Stock Issuance Plan Form of Stock Option Agreement (Exhibit 10.39).
10.32(1)(2) 1998 Stock Option/Stock Issuance Plan Form of Addendum to Stock Option Agreement (Exhibit
10.40).
10.33(1)(2) 1998 Stock Option/Stock Issuance Plan Form of Stock Purchase Agreement (Exhibit 10.41).
10.34(1)(2) 1998 Stock Option/Stock Issuance Plan Form of Addendum to Stock Purchase Agreement (Exhibit
10.42).
10.35(1)(2) 1998 Stock Option/Stock Issuance Plan Form of Stock Issuance Agreement (Exhibit 10.43).
10.36(1)(2) 1998 Stock Option/Stock Issuance Plan Form of Addendum to Stock Issuance Agreement (Exhibit
10.44).
10.37(1)(2) 1999 Stock Incentive Plan (Exhibit 10.45).
10.38(1)(2) Employee Stock Purchase Plan (Exhibit 10.46).
10.39(1)(2) Letter Agreement Between us and Host International, Inc., dated May 18, 1999. (Exhibit
10.47).
21.1(1) Subsidiary List.
23.1 Independent Auditors' Consent.
24.1 Powers of Attorney (Included under the caption "Signatures").
27.1 Financial Data Schedule for the year ended December 26, 1999.

</TABLE>

- ---------------------------

(1) Incorporated by reference to the above noted exhibit to our Registration
Statement S-1 (333-75087) filed with the SEC on March 26, 1999, as amended.
(2) Management contract or compensation plan.

<PAGE>

Exhibit 3.1

SECOND AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF RUBIO'S RESTAURANTS, INC.,
A DELAWARE CORPORATION

RUBIO'S RESTAURANTS, INC., a corporation organized and existing under
the laws of the state of delaware, hereby certifies as follows:

1. The name of the corporation is RUBIO'S RESTAURANTS, INC. The
original Certificate of incorporation of the corporation was filed with the
Secretary of State of the State of Delaware on September 2, 1997 and was
amended pursuant to an Amended and Restated Certificate of Incorporation
filed with the Secretary of State of the State of Delaware on November 18,
1997.

2. Pursuant to Sections 242 and 245 of the General Corporation Law of
the State of Delaware, this Second Restated Certificate of Incorporation was
adopted by the corporation's Board of Directors and stockholders.

3. The text of the Certificate of Incorporation as heretofore amended
or supplemented is hereby restated and further amended to read in its
entirety as follows:

ARTICLE I

The name of this corporation is RUBIO'S RESTAURANTS, INC.

ARTICLE II

The address of this corporation's registered office in the State of
Delaware is 1050 S. State Street, City of Dover, County of Kent. The name of
its registered agent at such address is CorpAmerica, Inc.

ARTICLE III

The purpose of this corporation is to engage in any lawful act or
activity for which a corporation may now or hereafter be organized under the
Delaware General Corporation Law.

ARTICLE IV

(A) CLASSES OF STOCK. This corporation is authorized to issue two
classes of stock, denominated Common Stock and Preferred Stock. The Common
Stock shall have a par value of $0.001 per share and the Preferred Stock
shall have a par value of $0.001 per share. The total number of shares of
Common Stock which the Corporation is authorized to issue is seventy-five
million (75,000,000), and the total number of shares of Preferred Stock which
the Corporation is authorized to issue is five million (5,000,000), which
shares of Preferred Stock shall be undesignated as to series.

<PAGE>

(B) ISSUANCE OF PREFERRED STOCK. The Preferred Stock may be issued
from time to time in one or more series. The Board of Directors is hereby
authorized, by filing one or more certificates pursuant to the Delaware
General Corporation Law (each, a "Preferred Stock Designation"), to fix or
alter from time to time the designations, powers, preferences and rights of
each such series of Preferred Stock and the qualifications, limitations or
restrictions thereof, including without limitation the dividend rights,
dividend rate, conversion rights, voting rights, rights and terms of
redemption (including sinking fund provisions), redemption price or prices,
and the liquidation preferences of any wholly-unissued series of Preferred
Stock, and to establish from time to time the number of shares constituting
any such series and the designation thereof, or any of them; and to increase
or decrease the number of shares of any series subsequent to the issuance of
shares of that series, but not below the number of shares of such series then
outstanding. In case the number of shares of any series shall be decreased
in accordance with the foregoing sentence, the shares constituting such
decrease shall resume the status that they had prior to the adoption of the
resolution originally fixing the number of shares of such series.

1. DIVIDEND RIGHTS. Subject to the prior or equal rights of
holders of all classes of stock at the time outstanding having prior or equal
rights as to dividends, the holders of the Common Stock shall be entitled to
receive, when and as declared by the Board of Directors, out of any assets of
the corporation legally available therefor, such dividends as may be declared
from time to time by the Board of Directors.

2. REDEMPTION. The Common Stock is not redeemable upon demand of
any holder thereof or upon demand of this corporation.

3. VOTING RIGHTS. The holder of each share of Common Stock shall
have the right to one vote, and shall be entitled to notice of any
stockholders' meeting in accordance with the Bylaws of this corporation, and
shall be entitled to vote upon such matters and in such manner as may be
provided by law.

ARTICLE V

(A) EXCULPATION. A director of the corporation shall not be personally
liable to the corporation or its stockholders for monetary damages for breach
of fiduciary duty as a director, except for liability (i) for any breach of
the director's duty of loyalty to the corporation or its stockholders, (ii)
for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (iii) under Section 174 of the
Delaware General Corporation Law or (iv) for any transaction from which the
director derived any improper personal benefit. If the Delaware General
Corporation Law is hereafter amended to further reduce or to authorize, with
the approval of the corporation's stockholders, further reductions in the
liability of the corporation's directors for breach of fiduciary duty, then a
director of the corporation shall not be liable for any such breach to the
fullest extent permitted by the Delaware General Corporation Law as so
amended.

(B) INDEMNIFICATION. To the extent permitted by applicable law, this
corporation is also authorized to provide indemnification of (and advancement
of expenses to) such agents (and

2
<PAGE>

any other persons to which Delaware law permits this corporation to provide
indemnification) through bylaw provisions, agreements with such agents or
other persons, vote of stockholders or disinterested directors or otherwise,
in excess of the indemnification and advancement otherwise permitted by
Section 145 of the Delaware General Corporation Law, subject only to limits
created by applicable Delaware law (statutory or non-statutory), with respect
to actions for breach of duty to the corporation, its stockholders and others.

(C) EFFECT OF REPEAL OR MODIFICATION. Any repeal or modification of
any of the foregoing provisions of this Article V shall be prospective and
shall not adversely affect any right or protection of a director, officer,
agent or other person existing at the time of, or increase the liability of
any director of the corporation with respect to any acts or omissions of such
director occurring prior to, such repeal or modification.

ARTICLE VI

Elections of directors need not be by written ballot except and to the
extent provided in the Bylaws of the corporation. At the next Annual Meeting
of Stockholders, the Directors shall be classified into three classes, as
nearly equal in number as possible as determined by the Board of Directors,
with the term of office of the first class to expire at the second Annual
Meeting of Stockholders, the term of office of the second class to expire at
the third Annual Meeting of Stockholders and the term of the third class to
expire at the fourth Annual Meeting of Stockholders. At each Annual Meeting
of Stockholders following such initial classification and election, Directors
elected to succeed those Directors whose terms expire shall be elected for a
term of office to expire at the third succeeding Annual Meeting of
Stockholders after their election. Additional directorships resulting from
an increase in the number of Directors shall be apportioned among the classes
as equally as possible as determined by the Board of Directors.

ARTICLE VII

No holder of shares of stock of the corporation shall have any
preemptive or other right, except as such rights are expressly provided by
contract, to purchase or subscribe for or receive any shares of any class, or
series thereof, of stock of the corporation, whether now or hereafter
authorized, or any warrants, options, bonds, debentures or other securities
convertible into, exchangeable for or carrying any right to purchase any
share of any class, or series thereof, of stock; but such additional shares
of stock and such warrants, options, bonds, debentures or other securities
convertible into, exchangeable for or carrying any right to purchase any
shares of any class, or series thereof, of stock may be issued or disposed of
by the Board of Directors to such persons, and on such terms and for such
lawful consideration as in its discretion it shall deem advisable or as the
corporation shall have by contract agreed.

ARTICLE VIII

The corporation is to have a perpetual existence.

ARTICLE IX

The corporation reserves the right to repeal, alter, amend or rescind
any provision contained in this Second Amended and Restated Certificate of
Incorporation and/or any

3
<PAGE>

provision contained in any amendment to or restatement of this Second Amended
and Restated Certificate of Incorporation, in the manner now or hereafter
prescribed by statute, and all rights conferred on stockholders herein are
granted subject to this reservation.

ARTICLE X

The Board of Directors may from time to time make, amend, supplement or
repeal the Bylaws by the requisite affirmative vote of Directors as set forth
in the Bylaws; provided, however, that the stockholders may change or repeal
any bylaw adopted by the Board of Directors by the requisite affirmative vote
of stockholders as set forth in the Bylaws; and, provided further, that no
amendment or supplement to the Bylaws adopted by the Board of Directors shall
vary or conflict with any amendment or supplement thus adopted by the
stockholders.

ARTICLE XI

No action shall be taken by the stockholders of the corporation except
at an annual or special meeting of stockholders called in accordance with the
Bylaws, and no action shall be taken by the stockholders by written consent.

ARTICLE XII

Advance notice of stockholder nominations for the election of directors and
of business to be brought by stockholders before any meeting of the stockholders
of the corporation shall be given in the manner provided in the Bylaws of the
corporation.

[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]

4
<PAGE>

IN WITNESS WHEREOF, this Second Amended and Restated Certificate of
Incorporation has been signed under the seal of the corporation as of this
21st day of May, 1999.

RUBIO'S RESTAURANTS, INC.,
A Delaware Corporation

By: /s/ RALPH RUBIO
--------------------------------------------
Ralph Rubio,
President and Chief Executive Officer

[SIGNATURE PAGE TO SECOND AMENDED AND RESTATED CERTIFICATE OF
INCORPORATION OF RUBIOS RESTAURANTS, INC.]

<PAGE>

EXHIBIT 3.2

RESTATED BYLAWS

RUBIO'S RESTAURANTS, INC.

ARTICLE I
OFFICES

Section 1. REGISTERED OFFICE. The registered office shall be in the
City of Dover, County of Kent, State of Delaware.

Section 2. OTHER OFFICES. The corporation may also have offices at such
other places both within and without the State of Delaware as the Board of
Directors may from time to time determine or the business of the corporation
may require.

ARTICLE II
MEETINGS OF STOCKHOLDERS

Section 1. PLACE OF MEETINGS. All meetings of the stockholders for the
election of Directors shall be held in the City of San Diego, State of
California, at such place as may be fixed from time to time by the Board of
Directors, or at such other place either within or without the State of
California as shall be designated from time to time by the Board of Directors
and stated in the notice of the meeting. Meetings of stockholders for any
other purpose may be held at such time and place, within or without the State
of California, as shall be stated in the notice of the meeting or in a duly
executed waiver of notice thereof.

Section 2. ANNUAL MEETING.

(a) The annual meeting of the stockholders of the corporation,
for the purpose of election of Directors and for such other business as may
lawfully come before it, shall be held on such date and at such time as may
be designated from time to time by the Board of Directors.

(b) At an annual meeting of the stockholders, only such business
shall be conducted as shall have been properly brought before the meeting.
To be properly brought before an annual meeting, business must be: (A)
specified in the notice of meeting (or any supplement thereto) given by or at
the direction of the Board of Directors, (B) otherwise properly brought
before the meeting by or at the direction of the Board of Directors, or (C)
otherwise properly brought before the meeting by a stockholder. For business
to be properly brought before an annual meeting by a stockholder, the
stockholder must have given timely notice thereof in writing to the Secretary
of the corporation. To be timely, a stockholder's notice must be delivered to
or mailed and received at the principal executive offices of the corporation
no later than the date specified in the corporation's proxy statement
released to stockholders in connection with the previous year's annual
meeting of stockholders, which date shall be not less

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than one hundred twenty (120) calendar days in advance of the date of such
proxy statement; provided, however, that in the event that no annual meeting
was held in the previous year or the date of the annual meeting has been
changed by more than thirty (30) days from the date contemplated at the time
of the previous year's proxy statement, notice by the stockholder to be
timely must be so received a reasonable time before the solicitation is made.
A stockholder's notice to the Secretary shall set forth as to each matter
the stockholder proposes to bring before the annual meeting: (i) a brief
description of the business desired to be brought before the annual meeting
and the reasons for conducting such business at the annual meeting, (ii) the
name and address, as they appear on the corporation's books, of the
stockholder proposing such business, (iii) the class and number of shares of
the corporation which are beneficially owned by the stockholder, (iv) any
material interest of the stockholder in such business and (v) ay other
information that is required to be provided by the stockholder pursuant to
Regulation 14A under the Securities Exchange Act of 1934, as amended (the
"1934 Act"), in such stockholder's capacity as a proponent to a stockholder
proposal. In addition to the foregoing, in order to include information with
respect to a stockholder proposal in the proxy statement and form of proxy
for a stockholder's meeting, stockholders must provide notice as required by
the regulations promulgated under the 1934 Act to the extent such regulations
require notice that is different from the notice required above.
Notwithstanding anything in these Bylaws to the contrary, no business shall
be conducted at any annual meeting except in accordance with the procedures
set forth in this paragraph (b) of this Section 2. The chairman of the
annual meeting shall, if the facts warrant, determine and declare at the
meeting that business was not properly brought before the meeting and in
accordance with the provisions of this paragraph (b), and, if he or she
should so determine, the chairman shall so declare at the meeting that any
such business not properly brought before the meeting shall not be transacted.

(c) Only persons who are nominated in accordance with the
procedures set forth in this paragraph (c) shall be eligible for election as
Directors. Nominations of persons for election to the Board of Directors of
the corporation may be made at a meeting of stockholders by or at the
direction of the Board of Directors or by any stockholder of the corporation
entitled to vote in the election of Directors at the meeting who complies
with the notice procedures set forth in this paragraph (c). Such
nominations, other than those made by or at the direction of the Board of
Directors, shall be made pursuant to timely notice in writing to the
Secretary of the corporation in accordance with the provisions of paragraph
(b) of this Section 2. Timely notice shall also be given of any
stockholder's intention to cumulate votes in the election of Directors at a
meeting if cumulative voting is available. Such stockholder's notice shall
set forth (i) as to each person, if any, whom the stockholder proposes to
nominate for election or re-election as a Director: (A) the name, age,
business address and residence address of such person, (B) the principal
occupation or employment of such person, (C) the class and number of shares
of the corporation that are beneficially owned by such person, (D) a
description of all arrangements or understandings between the stockholder and
each nominee and any other person or persons (naming such person or persons)
pursuant to which the nominations are to be made by the stockholder, and (E)
any other information relating to such person that is required to be
disclosed in solicitations of proxies for election of Directors, or is
otherwise required, in each case pursuant to Regulation 14A under the 1934
Act (including without limitation such person's written consent to being
named in the proxy statement, if any, as a nominee and to serving as a
Director if elected); and (ii) as to such stockholder giving notice, the
information required to be provided pursuant to subitems (ii), (iii) and (iv)
of paragraph (b) of this Section 2 and, if

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cumulative voting is available to such stockholder, whether such stockholder
intends to request cumulative voting in the election of Directors at the
meeting. At the request of the Board of Directors, any person nominated by a
stockholder for election as a Director shall furnish to the Secretary of the
corporation that information required to be set forth in the stockholder's
notice of nomination which pertains to the nominee. No person shall be
eligible for election as a Director of the corporation unless nominated in
accordance with the procedures set forth in this paragraph (c). The chairman
of the meeting shall, if the facts warrant, determine and declare at the
meeting that a nomination was not made in accordance with the procedures
prescribed by these Bylaws, and if the chairman should so determine, he or
she shall so declare at the meeting, and the defective nomination shall be
disregarded.

Section 3. NOTICE OF ANNUAL MEETING. Written notice of the annual
meeting stating the place, date and hour of the meeting shall be given to
each stockholder entitled to vote at such meeting not less than ten (10) nor
more than sixty (60) days before the date of the meeting.

Section 4. VOTING LIST. The officer who has charge of the stock ledger
of the corporation shall prepare and make, or have prepared and made, at
least ten (10) days before every meeting of stockholders, a complete list of
the stockholders entitled to vote at the meeting, arranged in alphabetical
order, and showing the address of each stockholder and the number of shares
registered in the name of each stockholder. Such list shall be open to the
examination of any stockholder, for any purpose germane to the meeting,
during ordinary business hours, for a period of at least ten (10) days prior
to the meeting, either at a place within the city where the meeting is to be
held, which place shall be specified in the notice of the meeting, or, if not
so specified, at the place where the meeting is to be held. The list shall
also be produced and kept at the time and place of the meeting during the
whole time thereof, and may be inspected by any stockholder who is present.

Section 5. SPECIAL MEETINGS. Special meetings of the stockholders, for
any purpose or purposes, unless otherwise prescribed by statute or by the
Certificate of Incorporation, as amended from time to time, may only be
called as provided in this Section 5 by the President, Chief Executive
Officer or Chairman of the Board and shall be called by the President or
Secretary at the request in writing of a majority of the Board of Directors.
Such request shall state the purpose or purposes of the proposed meeting.
The place, date and time of any special meeting shall be determined by the
Board of Directors. Such determination shall include the record date for
determining the stockholders having the right of and to vote at such meeting.

Section 6. NOTICE OF SPECIAL MEETING. Written notice of a special
meeting stating the place, date and hour of the meeting and the purpose or
purposes for which the meeting is called shall be given not less than ten
(10) nor more than sixty (60) days before the date of the meeting, to each
stockholder entitled to vote at such meeting.

Section 7. ACTION AT SPECIAL MEETING. Business transacted at any
special meeting of stockholders shall be limited to the purposes stated in
the notice.

Section 8. QUORUM AND ADJOURNMENTS.

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(a) The holders of a majority of the stock issued and outstanding
and entitled to vote thereat, present in person or represented by proxy,
shall constitute a quorum at all meetings of the stockholders for the
transaction of business except as otherwise provided by statute or by the
Certificate of Incorporation, as amended. If, however, such quorum shall not
be present or represented at any meeting of the stockholders, the
stockholders entitled to vote thereat, present in person or represented by
proxy, shall have the power to adjourn the meeting from time to time, without
notice other than announcement at the meeting, until a quorum shall be
present or represented. At such adjourned meeting at which a quorum shall be
present or represented, any business may be transacted which might have been
transacted at the meeting as originally notified. If the adjournment is for
more than thirty (30) days, or if after the adjournment a new record date is
fixed for the adjourned meeting, a notice of the adjourned meeting shall be
given to each stockholder of record entitled to vote at the meeting.

(b) When a quorum is present at any meeting, the vote of the
holders of a majority of the stock having voting power present in person or
represented by proxy shall decide any question brought before such meeting,
unless the question is one upon which by express provision of statute or of
the Certificate of Incorporation, as amended, a different vote is required,
in which case such express provision shall govern and control the decision of
such question.

Section 9. VOTING RIGHTS. Unless otherwise provided in the Certificate
of Incorporation, as amended, each stockholder shall at every meeting of the
stockholders be entitled to one (1) vote in person or by proxy for each share
of the capital stock having voting power held by such stockholder, but no
proxy shall be voted on after three (3) years from its date, unless the proxy
provides for a longer period.

Section 10. ACTION WITHOUT MEETING. No action shall be taken by the
stockholders of the corporation except at an annual or special meeting of
stockholders called in accordance with these Bylaws, and no action shall be
taken by the stockholders by written consent.

ARTICLE III
DIRECTORS

Section 1. CLASSES, NUMBER, TERM OF OFFICE AND QUALIFICATION. At the
next annual meeting of stockholders following the adoption of these Bylaws,
the Directors shall be classified into three classes, as nearly equal in
number as possible as determined by the Board of Directors, with the term of
office of the first class to expire at the second annual meeting of
stockholders following the adoption of these Bylaws and the term of office of
the second class to expire at the third annual meeting of stockholders
following the adoption of these Bylaws and the term of office of the third
class to expire at the fourth annual meeting of stockholders following the
adoption of these Bylaws. At each annual meeting of stockholders following
such initial classification and election, Directors elected to succeed those
Directors whose terms expire shall be elected for a term of office to expire
at the third succeeding annual meeting of stockholders after their election.
Additional directorships resulting from an increase in the number of
Directors shall be apportioned among the classes as equally as possible as
determined by the Board of Directors. The number of directors that shall
constitute the whole board shall not be less than six (6) nor more than ten
(10). The number of Directors which shall constitute the whole Board shall
be fixed by resolution of the Board of Directors, with the number initially
fixed at eight (8). The number of Directors shall be

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determined by resolution of sixty-six and two-thirds percent (66-2/3%) of the
Directors then in office or by sixty-six and two-thirds percent (66-2/3%) of
the stockholders at the annual meeting of the stockholders, and each Director
elected shall hold office until his or her successor is elected and
qualified. Directors need not be stockholders.

Section 2. VACANCIES. Vacancies may be filled only by a two-thirds
majority of the Directors then in office or by a sole remaining Director.
Each Director so chosen shall hold office until a successor is duly elected
and shall qualify or until his or her earlier death, resignation or removal.
If there are no Directors in office, then an election of Directors may be
held in the manner provided by statute; provided, however, that each Director
shall be elected by an affirmative vote of at least two-thirds of the
stockholders. If, at the time of filling any vacancy, the Directors then in
office shall constitute less than a majority of the whole Board (as
constituted immediately prior to any such increase), the Court of Chancery
may, upon application of any stockholder or stockholders holding at least ten
percent of the total number of the shares at the time outstanding having the
right to vote for such Directors, summarily order an election to be held to
fill any such vacancies, or to replace the Directors chosen by the Directors
then in office.

Section 3. POWERS. The business of the corporation shall be managed by
or under the direction of its Board of Directors which may exercise all such
powers of the corporation and do all such lawful acts and things as are not
by statute or by the Certificate of Incorporation, as amended, from time to
time, or by these Bylaws directed or required to be exercised or done by the
stockholders.

Section 4. REGULAR AND SPECIAL MEETINGS. The Board of Directors of the
corporation may hold meetings, both regular and special, either within or
without the State of California.

Section 5. ANNUAL MEETING. The annual meeting of the Board of Directors
shall be held without notice other than this Bylaw immediately after, and at
the same place as, the annual meeting of stockholders. In the event the
annual meeting of the Board of Directors shall not be held immediately after,
and at the same place as, the annual meeting of stockholders, the meeting may
be held at such time and place as shall be specified in a notice given as
hereinafter provided for special meetings of the Board of Directors.

Section 6. NOTICE OF REGULAR MEETINGS. Regular meetings of the Board of
Directors may be held without notice at such time and at such place as shall
from time to time be determined by the Board.

Section 7. NOTICE OF SPECIAL MEETINGS. Special meetings of the Board
may be called by the Chief Executive Officer or President on no less than
forty-eight (48) hours notice to each Director either personally, or by
telephone, mail, telegram or facsimile; special meetings shall be called by
the Chief Executive Officer, President or Secretary in like manner and on
like notice on the written request of two Directors unless the Board consists
of only one Director, in which case special meetings shall be called by the
Chief Executive Officer, President or Secretary in like manner and on like
notice on the written request of the sole Director. A written waiver of
notice, signed by the person entitled thereto, whether before or after the
time of the meeting stated therein, shall be deemed equivalent to notice.

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Section 8. QUORUM. At all meetings of the Board a majority of the
Directors shall constitute a quorum for the transaction of business and the
act of a majority of the Directors present at any meeting at which there is a
quorum shall be the act of the Board of Directors, except as may be otherwise
specifically provided by these Bylaws, by statute or by the Certificate of
Incorporation, as amended. If a quorum shall not be present at any meeting
of the Board of Directors, the Directors present thereat may adjourn the
meeting from time to time, without notice other than announcement at the
meeting, until a quorum shall be present.

Section 9. ACTION WITHOUT MEETING. Unless otherwise restricted by the
Certificate of Incorporation, as amended from time to time, or these Bylaws,
any action required or permitted to be taken at any meeting of the Board of
Directors or of any committee thereof may be taken without a meeting, if all
members of the Board or committee, as the case may be, consent thereto in
writing, and the writing or writings are filed with the minutes of
proceedings of the Board or committee.

Section 10. MEETINGS BY TELEPHONE CONFERENCE CALLS. Unless otherwise
restricted by the Certificate of Incorporation, as amended from time to time,
or these Bylaws, members of the Board of Directors, or any committee
designated by the Board of Directors, may participate in a meeting of the
Board of Directors, or any committee, by means of conference telephone, video
conference or similar communications equipment by means of which all persons
participating in the meeting can hear each other, and such participation in a
meeting shall constitute presence in person at the meeting.

Section 11. COMMITTEES. The Board of Directors may, by resolution passed
by a majority of the whole Board, designate one or more committees, each
committee to consist of one or more of the Directors of the corporation. The
Board may designate one or more Directors as alternate members of any
committee, who may replace any absent or disqualified member at any meeting
of the committee.

In the absence of disqualification of a member of a committee, the
member or members thereof present at any meeting and not disqualified from
voting, whether or not he, she or they constitute a quorum, may unanimously
appoint another member of the Board of Directors to act at the meeting in the
place of any such absent or disqualified member.

Any such committee, to the extent provided in the resolution of the Board
of Directors, shall have and may exercise all the powers and authority of the
Board of Directors in the management of the business and affairs of the
corporation, and may authorize the seal of the corporation to be affixed to
all papers which may require it; but no such committee shall have the power
or authority in reference to amending the Certificate of Incorporation, as
amended from time to time, adopting an agreement of merger or consolidation,
recommending to the stockholders the sale, lease or exchange of all or
substantially all of the corporation's property and assets, recommending to
the stockholders a dissolution of the corporation or a revocation of a
dissolution, or amending the Bylaws of the corporation; and, unless the
resolution or the Certificate of Incorporation, as amended from time to time,
expressly so provide, no such committee shall have the power or authority to
declare a dividend or to authorize the issuance of stock. Such committee or
committees shall have such name or names as may be determined from time to
time by resolution adopted by the Board of Directors.

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Each committee shall keep regular minutes of its meetings and report the
same to the Board of Directors when required.

Section 12. FEES AND COMPENSATION. Unless otherwise restricted by the
Certificate of Incorporation, as amended, or these Bylaws, the Board of
Directors shall have the authority to fix the compensation of Directors. The
Directors may be paid their expenses, if any, of attendance at each meeting
of the Board of Directors and may be paid a fixed sum for attendance at each
meeting of the Board of Directors or a stated salary as Director. No such
payment shall preclude any Director from serving the corporation in any other
capacity and receiving compensation therefor. Members of special or standing
committees may be allowed like compensation for attending committee meetings.

Section 13. REMOVAL. Subject to any limitations imposed by law or the
Certificate of Incorporation, as amended from time to time, the Board of
Directors, or any individual Director, may be removed from office at any time
only with cause by the affirmative vote of the holders of at least a majority
of shares entitled to vote at an election of Directors.

ARTICLE IV
NOTICES

Section 1. NOTICE. Whenever, under the provisions of statute or of the
Certificate of Incorporation, as amended, or of these Bylaws, notice is
required to be given to any Director or stockholder, it shall not be
construed to mean personal notice, but such notice may be given in writing,
by mail, addressed to such Director or stockholder, at his, her or its
address as it appears on the records of the corporation, with postage thereon
prepaid, and such notice shall be deemed to be given at the time when the
same shall be deposited in the United States mail. Notice to Directors may
also be given personally, by telephone, including a voice messaging system or
other system or technology designed to record and communicate messages,
telegram, facsimile electronic mail or other electronic means.

Section 2. WAIVER OF NOTICE. Whenever any notice is required to be
given under the provisions of statute or of the Certificate of Incorporation,
as amended from time to time, or of these Bylaws, a waiver thereof in
writing, signed by the person or persons entitled to said notice, whether
before or after the time stated therein, shall be deemed equivalent thereto.

ARTICLE V
OFFICERS

Section 1. ENUMERATION. The officers of the corporation shall be chosen
by the Board of Directors and shall include a Chief Executive Officer, a
Chief Financial Officer and a Secretary. The Board of Directors may elect
from among its members a Chairman of the Board and a Vice Chairman of the
Board. The Board of Directors may also choose a President, one or more Vice
Presidents and one or more Assistant Secretaries. Any number of offices may
be held by the same person, unless the Certificate of Incorporation, as
amended, or these Bylaws otherwise provide.

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The compensation of all officers and agents of the corporation shall be
fixed by the Board of Directors, and no officer shall be prevented from
receiving such compensation by virtue of such officer also being a Director of
the corporation.

Section 2. ELECTION OR APPOINTMENT. The Board of Directors at its first
meeting after each annual meeting of stockholders shall choose a Chief
Executive Officer, a Chief Financial Officer and a Secretary and may choose a
President, one or more Vice Presidents and one or more Assistant Secretaries.

The Board of Directors may appoint such other officers and agents as it
shall deem necessary who shall hold their offices for such terms and shall
exercise such powers and perform such duties as shall be determined from time
to time by the Board.

Section 3. TENURE, REMOVAL AND VACANCIES. The officers of the
corporation shall hold office until their successors are chosen and
qualified. Any officer elected or appointed by the Board of Directors may be
removed at any time by the affirmative vote of a majority of the Board of
Directors. Any vacancy occurring in any office of the corporation shall be
filled by the Board of Directors.

Section 4. CHAIRMAN OF THE BOARD. The Chairman of the Board, if any,
shall preside at all meetings of the Board of Directors and of the
stockholders at which he or she shall be present. The Chairman of the Board
shall have and may exercise such powers as are, from time to time, assigned
to him or her by the Board and as may be provided by law.

Section 5. VICE CHAIRMAN OF THE BOARD. In the absence of the Chairman
of the Board, the Vice Chairman of the Board, if any, shall preside at all
meetings of the Board of Directors and of the stockholders at which he or she
shall be present. The Vice Chairman of the Board shall have and may exercise
such powers as are, from time to time, assigned to him or her by the Board
and as may be provided by law.

Section 6. CHIEF EXECUTIVE OFFICER. The Chief Executive Officer of the
corporation shall, subject to the control of the Board of Directors, have
general supervision, direction and control of the business and the officers
of the corporation. In the absence or nonexistence of a Chairman of the
Board and a Vice Chairman of the Board, the Chief Executive Officer shall
preside at all meetings of the Board of Directors and of the stockholders.
The Chief Executive Officer shall have the general powers and duties of
management usually vested in the Chief Executive Officer of a corporation,
including general supervision, direction and control of the business and
supervision of other officers of the corporation, and shall have such other
powers and duties as may be prescribed by the Board of Directors or these
Bylaws.

The Chief Executive Officer shall, without limitation, have the authority
to execute bonds, mortgages and other contracts requiring a seal, under the
seal of the corporation, except where required or permitted by law to be
otherwise signed and executed and except where the signing and execution
thereof shall be expressly delegated by the Board of Directors to some other
officer or agent of the corporation.

Section 7. PRESIDENT. Subject to such supervisory powers as may be
given by these Bylaws or the Board of Directors to the Chairman of the Board
or the Chief Executive Officer, if

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there be such officers, the President shall have general supervision,
direction and control of the business and supervision of other officers of
the corporation, and shall have such other powers and duties as may be
prescribed by the Board of Directors or these Bylaws. In the event a Chief
Executive Officer shall not be appointed, the President shall have the duties
of such office.

Section 8. VICE PRESIDENTS. The Vice President, or if there shall be
more than one, the Vice Presidents in the order determined by the Board of
Directors, shall, in the absence or disability of the President, act with all
of the powers and be subject to all the restrictions of the President. The
Vice Presidents shall also perform such other duties and have such other
powers as the Board of Directors, the Chief Executive Officer, the President
or these Bylaws may, from time to time, prescribe.

Section 9. SECRETARY. The Secretary shall attend all meetings of the
Board of Directors, all meetings of the committees thereof and all meetings
of the stockholders and record all the proceedings of the meetings in a book
or books to be kept for that purpose. Under the Chief Executive Officer's or
President's supervision, the Secretary shall give, or cause to be given, all
notices required to be given by these Bylaws or by law; shall have such
powers and perform such duties as the Board of Directors, the Chief Executive
Officer, the President or these Bylaws may, from time to time, prescribe; and
shall have custody of the seal of the corporation. The Secretary, or an
Assistant Secretary, shall have authority to affix the seal of the
corporation to any instrument requiring it and when so affixed, it may be
attested by his or her signature or by the signature of such Assistant
Secretary. The Board of Directors may give general authority to any other
officer to affix the seal of the corporation and to attest the affixing by
his or her signature.

Section 10. ASSISTANT SECRETARY. The Assistant Secretary, if any, or if
there be more than one, the Assistant Secretaries in the order determined by
the Board of Directors, shall, in the absence, disability or refusal to act
of the Secretary, perform the duties and exercise the powers of the Secretary
and shall perform such other duties and have such other powers as the Board
of Directors, the Chief Executive Officer, the President, the Secretary or
these Bylaws may, from time to time, prescribe.

Section 11. CHIEF FINANCIAL OFFICER. The Chief Financial Officer shall
act as Treasurer and shall have the custody of the corporate funds and
securities and shall keep full and accurate accounts of receipts and
disbursements in books belonging to the corporation and shall deposit all
moneys and other valuable effects in the name and to the credit of the
corporation in such depositories as may be designated by the Board of
Directors. The Chief Financial Officer may alternatively be designated by
the title "Treasurer."

The Chief Financial Officer shall disburse the funds of the corporation
as may be ordered by the Board of Directors, taking proper vouchers for such
disbursements, and shall render to the Chief Executive Officer or, if there
be no Chief Executive Officer, the President and the Board of Directors, at
its regular meetings, or when the Board of Directors so requires, an account
of all his or her transactions as Chief Financial Officer and of the
financial condition of the corporation.

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If required by the Board of Directors, the Chief Financial Officer shall
give the corporation a bond (which shall be renewed every six years) in such
sum and with such surety or sureties as shall be satisfactory to the Board of
Directors for the faithful performance of the duties of his or her office and
for the restoration to the corporation, in case of his or her death,
resignation, retirement or removal from office, of all books, papers,
vouchers, money and other property of whatever kind in the Chief Financial
Officer's possession or under his or her control belonging to the corporation.

Section 12. OTHER OFFICERS, ASSISTANT OFFICERS AND AGENTS. Officers,
assistant officers and agents, if any, other than those whose duties are
provided for in these Bylaws, shall have such authority and perform such
duties as may from time to time be prescribed by the Board of Directors, the
Chief Executive Officer or the President.

Section 13. ABSENCE OR DISABILITY OF OFFICERS. In the case of the
absence or disability of any officer of the corporation and of any person
hereby authorized to act in such officer's place during such officer's
absence or disability, the Board of Directors may delegate the powers and
duties of such officer to any officer or to any Director, or to any other
person who it may select.

ARTICLE VI
CERTIFICATES OF STOCK

Section 1. CERTIFICATES OF STOCK. Every holder of stock in the
corporation shall be entitled to have a certificate, signed by, or in the
name of the corporation by, the Chairman or Vice Chairman of the Board of
Directors, or the Chief Executive Officer or the President or a Vice
President and the Treasurer or an Assistant Treasurer, or the Secretary or an
Assistant Secretary of the corporation, certifying the number of shares owned
by him in the corporation.

Certificates may be issued for partly paid shares and in such case upon
the face or back of the certificates issued to represent any such partly paid
shares, the total amount of the consideration to be paid therefor, and the
amount paid thereon shall be specified.

If the corporation shall be authorized to issue more than one class of
stock or more than one series of any class, the powers, designations,
preferences and relative, participating, optional or other special rights of
each class of stock or series thereof and the qualifications, limitations or
restrictions of such preferences and/or rights shall be set forth in full or
summarized on the face or back of the certificate which the corporation shall
issue to represent such class or series of stock, provided that, except as
otherwise provided in Section 202 of the General Corporation Law of Delaware,
in lieu of the foregoing requirements, there may be set forth on the face or
back of the certificate which the corporation shall issue to represent such
class or series of stock, a statement that the corporation will furnish
without charge to each stockholder who so requests the powers, designations,
preferences and relative, participating, optional or other special rights of
each class of stock or series thereof and the qualifications, limitations or
restrictions of such preferences and/or rights.

Section 2. EXECUTION OF CERTIFICATES. Any or all of the signatures on
the certificate may be facsimile. In case any officer, transfer agent or
registrar who has signed or whose

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facsimile signature has been placed upon a certificate shall have ceased to
be such officer, transfer agent or registrar before such certificate is
issued, it may be issued by the corporation with the same effect as if he or
she were such officer, transfer agent or registrar at the date of issue.

Section 3. LOST CERTIFICATES. The Board of Directors may direct a new
certificate or certificates to be issued in place of any certificate or
certificates theretofore issued by the corporation alleged to have been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the
person claiming the certificate of stock to be lost, stolen or destroyed.
When authorizing such issue of a new certificate or certificates, the Board
of Directors may, in its discretion and as a condition precedent to the
issuance thereof, require the owner of such lost, stolen or destroyed
certificate or certificates, or the owner's legal representative, to
advertise the same in such manner as it shall require and/or to give the
corporation a bond in such sum as it may direct as indemnity against any
claim that may be made against the corporation with respect to the
certificate alleged to have been lost, stolen or destroyed.

Section 4. TRANSFER OF STOCK. Upon surrender to the corporation or the
transfer agent of the corporation of a certificate for shares duly endorsed
or accompanied by proper evidence of succession, assignation or authority to
transfer, it shall be the duty of the corporation to issue a new certificate
to the person entitled thereto, cancel the old certificate and record the
transaction upon its books.

Section 5. FIXING RECORD DATE. In order that the corporation may
determine the stockholders entitled to notice of or to vote at any meeting of
stockholder or any adjournment thereof, or entitled to receive payment of any
dividend or other distribution or allotment of any rights, or entitled to
exercise any rights in respect of any change, conversion or exchange of stock
or for the purpose of any other lawful action, the Board of Directors may
fix, in advance, a record date, which shall not be more than sixty (60) nor
less than ten (10) days before the date of such meeting, nor more than sixty
(60) days prior to any other action. A determination of stockholders of
record entitled to notice of or to vote at a meeting of stockholders shall
apply to any adjournment of the meeting; provided, however, that the Board of
Directors may fix a new record date for the adjourned meeting.

Section 6. REGISTERED STOCKHOLDERS. The corporation shall be entitled
to recognize the exclusive right of a person registered on its books as the
owner of shares to receive dividends, and to vote as such owner, and to hold
liable for calls and assessments a person registered on its books as the
owner of shares and shall not be bound to recognize any equitable or other
claim to or interest in such share or shares on the part of any other person,
whether or not it shall have express or other notice thereof, except as
otherwise provided by the laws of Delaware.

ARTICLE VII
INDEMNIFICATION

Section 1. INDEMNIFICATION OF DIRECTORS AND EXECUTIVE OFFICERS. The
corporation shall indemnify its Directors and executive officers to the
fullest extent not prohibited by the Delaware General Corporation Law;
provided, however, that the corporation may limit the extent

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<PAGE>

of such indemnification by individual contracts with its Directors and
executive officers; and, provided, further, that the corporation shall not be
required to indemnify any Director or executive officer in connection with
any proceeding (or part thereof) initiated by such person or any proceeding
by such person against the corporation or its Directors, officers, employees
or other agents unless (i) such indemnification is expressly required to be
made by law, (ii) the proceeding was authorized by the Board of Directors of
the corporation and (iii) such indemnification is provided by the
corporation, in its sole discretion, pursuant to the powers vested in the
corporation under the Delaware General Corporation Law.

Section 2. INDEMNIFICATION OF OTHER OFFICERS, EMPLOYEES AND OTHER
AGENTS. The corporation shall have power to indemnify its other officers,
employees and other agents as set forth in the Delaware General Corporation
Law.

Section 3. GOOD FAITH.

(a) For purposes of any determination under this Bylaw, a
Director or executive officer shall be deemed to have acted in good faith and
in a manner he or she reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal action or
proceeding, to have had no reasonable cause to believe that his or her
conduct was unlawful, if his or her action is based on information, opinions,
reports and statements, including financial statements and other financial
data, in each case prepared or presented by:

(1) one or more officers or employees of the corporation
whom the Director or executive officer believed to be reliable and competent
in the matters presented;

(2) counsel, independent accountants or other persons as to
matters which the Director or executive officer believed to be within such
person's professional competence; and

(3) with respect to a Director, a committee of the Board
upon which such Director does not serve, as to matters within such
committee's designated authority, which committee the Director believes to
merit confidence; so long as, in each case, the Director or executive officer
acts without knowledge that would cause such reliance to be unwarranted.

(b) The termination of any proceeding by judgment, order,
settlement, conviction or upon a plea of nolo contendere or its equivalent
shall not, of itself, create a presumption that the person did not act in
good faith and in a manner which such person reasonably believed to be in or
not opposed to the best interests of the corporation, and, with respect to
any criminal proceeding, that such person had reasonable cause to believe
that his or her consent was unlawful.

(c) The provisions of this Section 3 shall not be deemed to be
exclusive or to limit in any way the circumstances in which a person may be
deemed to have met the applicable standard of conduct set forth by the
Delaware General Corporation Law.

Section 4. EXPENSES. The corporation shall advance, prior to the final
disposition of any proceeding, promptly following request therefor, all
expenses incurred by any Director or

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<PAGE>

executive officer in connection with such proceeding upon receipt of an
undertaking by or on behalf of such person to repay said amounts if it should
be determined ultimately that such person is not entitled to be indemnified
under this Bylaw or otherwise.

Notwithstanding the foregoing, unless otherwise determined pursuant to
Section 4 of this Bylaw, no advance shall be made by the corporation if a
determination is reasonably and promptly made (i) by the Board of Directors
by a majority vote of a quorum consisting of Directors who were not parties
to the proceeding or (ii) if such quorum is not obtainable, or, even if
obtainable, a quorum of disinterested Directors so directs, by independent
legal counsel in a written opinion, that the facts known to the
decision-making party at the time such determination is made demonstrate
clearly and convincingly that such person acted in bad faith or in a manner
that such person did not believe to be in or not opposed to the best
interests of the corporation.

Section 5. ENFORCEMENT. Without the necessity of entering into an
express contract, all rights to indemnification and advances to Directors and
executive officers under this Bylaw shall be deemed to be contractual rights
and be effective to the same extent and as if provided for in a contract
between the corporation and the Director or executive officer. Any right to
indemnification or advances granted by this Bylaw to a Director or executive
officer shall be enforceable by or on behalf of the person holding such right
in any court of competent jurisdiction if (i) the claim for indemnification
or advances is denied, in whole or in part or (ii) no disposition of such
claim is made within ninety (90) days of request therefor. The claimant in
such enforcement action, if successful in whole or in part, shall be entitled
to be paid also the expense of prosecuting such claim. The corporation shall
be entitled to raise as a defense to any such action that the claimant has
not met the standards of conduct that make it permissible under the Delaware
General Corporation Law for the corporation to indemnify the claimant for the
amount claimed. Neither the failure of the corporation (including its Board
of Directors, independent legal counsel or its stockholders) to have made a
determination prior to the commencement of such action that indemnification
of the claimant is proper in the circumstances because he or she has met the
applicable standard of conduct set forth in the Delaware General Corporation
Law, nor an actual determination by the corporation (including its Board of
Directors, independent legal counsel or its stockholders) that the claimant
has not met such applicable standard of conduct, shall be a defense to the
action or create a presumption that the claimant has not met the applicable
standard of conduct.

Section 6. NON-EXCLUSIVITY OF RIGHTS. The rights conferred on any
person by this Bylaw shall not be exclusive of any other right which such
person may have or hereafter acquire under any statute, provision of the
Certificate of Incorporation, as amended from time to time, Bylaws,
agreement, vote of stockholders or disinterested Directors or otherwise, both
as to action in such person's official capacity and as to action in another
capacity while holding office. The corporation is specifically authorized to
enter into individual contracts with any or all of its Directors, officers,
employees or agents respecting indemnification and advances, to the fullest
extent not prohibited by the Delaware General Corporation Law.

Section 7. SURVIVAL OF RIGHTS. The rights conferred on any person by
this Bylaw shall continue as to a person who has ceased to be a Director,
officer, employee or other agent and shall inure to the benefit of the heirs,
executors and administrators of such a person.

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<PAGE>

Section 8. INSURANCE. To the fullest extent permitted by the Delaware
General Corporation Law, the corporation, upon approval by the Board of
Directors, may purchase insurance on behalf of any person required or
permitted to be indemnified pursuant to this Bylaw.

Section 9. AMENDMENTS. Any repeal or modification of this Bylaw shall
only be prospective and shall not affect the rights under this Bylaw in
effect at the time of the alleged occurrence of any action or omission to act
that is the cause of any proceeding against any agent of the corporation.

Section 10. SAVING CLAUSE. If this Bylaw or any portion hereof shall be
invalidated on any ground by any court of competent jurisdiction, then the
corporation shall nevertheless indemnify each Director and executive officer
to the full extent not prohibited by any applicable portion of this Bylaw
that shall not have been invalidated or by any other applicable law.

Section 11. CERTAIN DEFINITIONS. For the purposes of this Bylaw, the
following definitions shall apply:

(a) The term "proceeding" shall be broadly construed and shall
include, without limitation, the investigation, preparation, prosecution,
defense, settlement, arbitration and appeal of, and the giving of the
testimony in, any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative.

(b) The term "expenses" shall be broadly construed and shall
include, without limitation, court costs, attorneys' fees, witness fees,
fines, amounts paid in settlement or judgment and any other costs and
expenses of any nature or kind incurred in connection with any proceeding.

(c) The term the "corporation" shall include, in addition to the
resulting corporation, any constituent corporation (including any constituent
of a constituent) absorbed in a consolidation or merger which, if its
separate existence had continued, would have had power and authority to
indemnify its Directors, officers, and employees or agents, so that any
person who is or was a Director, officer, employee or agent of such
constituent corporation, or is or was serving at the request of such
constituent corporation as a Director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, shall
stand in the same position under the provisions of this Bylaw with respect to
the resulting or surviving corporation as such person would have with respect
to such constituent corporation if its separate existence had continued.

(d) References to a "Director," "officer," "employee," or "agent" of
the corporation shall include, without limitation, situations where such person
is serving at the request of the corporation as a Director, officer, employee,
trustee or agent of another corporation, partnership, joint venture, trust or
other enterprise.

(e) References to "other enterprises" shall include employee benefit
plans; references to "fines" shall include any excise taxes assessed on a person
with respect to an employee benefit plan; and references to "serving at the
request of the corporation" shall include any service as a Director, officer,
employee or agent of the corporation which imposes duties on,

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<PAGE>

or involves services by, such Director, officer, employee, or agent with
respect to an employee benefit plan, its participants, or beneficiaries; and
a person who acted in good faith and in a manner such person reasonably
believed to be in the interest of the participants and beneficiaries of an
employee benefit plan shall be deemed to have acted in a manner "not opposed
to the best interests of the corporation" as referred to in this Bylaw.

ARTICLE VIII
LOANS TO OFFICERS

Section 1. LOANS TO OFFICERS. The corporation may lend money to, or
guarantee any obligation of, or otherwise assist any officer or other
employee of the corporation or of its subsidiaries, including any officer or
employee who is a Director of the Corporation or its subsidiaries, whenever,
in the judgment of the Board of Directors, such loan, guarantee or assistance
may reasonably be expected to benefit the corporation. The loan, guarantee
or other assistance may be with or without interest and may be unsecured, or
secured in such manner as the Board of Directors shall approve, including,
without limitation, a pledge of shares of stock of the corporation. Nothing
in this Bylaw shall be deemed to deny, limit or restrict the powers of
guaranty or warranty of the corporation at common law or under any statute.

ARTICLE IX
GENERAL PROVISIONS

Section 1. DECLARATION OF DIVIDENDS. Dividends upon the capital stock
of the corporation, subject to the provisions of the Certificate of
Incorporation, as amended from time to time, if any, may be declared by the
Board of Directors at any regular or special meeting, pursuant to law.
Dividends may be paid in cash, in property, or in shares of the capital
stock, subject to the provisions of the Certificate of Incorporation, as
amended from time to time.

Section 2. DIVIDEND RESERVE. Before payment of any dividend, there may
be set aside out of any funds of the corporation available for dividends such
sum or sums as the Directors from time to time, in their absolute discretion,
think proper as a reserve or reserves to meet contingencies, or for
equalizing dividends, or for repairing or maintaining any property of the
corporation, or for such other purposes as the Directors shall think
conducive to the interest of the corporation, and the Directors may modify or
abolish any such reserve in the manner in which it was created.

Section 3. EXECUTION OF CORPORATE INSTRUMENTS. All checks or demands
for money and notes of the corporation shall be signed by such officer or
officers or such other person or persons as the Board of Directors may from
time to time designate.

Section 4. FISCAL YEAR. The fiscal year of the corporation shall be
fixed by resolution of the Board of Directors.

Section 5. CORPORATE SEAL. The Board of Directors may adopt a corporate
seal having inscribed thereon the name of the corporation, the year of its
organization and the words "Corporate Seal, Delaware." The seal may be used
by causing it or a facsimile thereof to be impressed or affixed or reproduced
or otherwise.

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<PAGE>

ARTICLE X
AMENDMENTS

Section 1. AMENDMENTS.

(a) Except as otherwise set forth in Section 9 of Article VII of
these Bylaws, the Bylaws may be altered or amended or new Bylaws adopted by
the affirmative vote of a majority of the voting power of all of the
then-outstanding shares of capital stock of the corporation entitled to vote
generally in the election of Directors (the "Voting Stock"). The Board of
Directors shall also have the power, if such power is conferred upon the
Board of Directors by the Certificate of Incorporation, as amended from time
to time, to adopt, amend or repeal Bylaws by a vote of the majority of the
Board of Directors unless a greater or different vote is required pursuant to
the provisions of the Bylaws, the Certificate of Incorporation or any
applicable provision of law.

(b) Notwithstanding any other provisions of these Bylaws or any
provision of law which might otherwise permit a lesser vote or no vote, but
in addition to any affirmative vote of the holders of any particular class or
series of the Voting Stock required by law, the Certificate of Incorporation,
as amended from time to time, or any Preferred Stock Designation (as the term
is defined in the Certificate of Incorporation, as amended), the affirmative
vote of the holders of at least sixty-six and two-thirds percent (66-2/3%) of
the voting power of all of the then-outstanding shares of the Voting Stock,
voting together as a single class, shall be required to alter, amend or
repeal this paragraph (b) or Section 2, Section 5 or Section 10 of Article II
or Section 1, Section 2 or Section 13 of Article III of these Bylaws.

(c) Notwithstanding any other provisions of these Bylaws or any
provision of law which might otherwise permit a lesser vote or no vote, but
in addition to any affirmative vote of the holders of any particular class or
series of the Voting Stock required by law, the Certificate of Incorporation,
as amended from time to time, or any Preferred Stock Designation (as the term
is defined in the Certificate of Incorporation, as amended), the affirmative
vote of at least sixty-six and two-thirds percent (66-2/3%) of the Directors
shall be required to alter, amend or repeal this paragraph (c) or Section 2,
Section 5 or Section 10 of Article II or Section 1, Section 2 or Section 13
of Article III of these Bylaws.

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<PAGE>

CERTIFICATE OF ASSISTANT SECRETARY

The undersigned, being the Assistant Secretary of RUBIO'S RESTAURANTS,
INC., a Delaware corporation, does hereby certify the foregoing to be the
Bylaws of said corporation, as adopted by a majority of the stockholders and
Directors of the corporation and which remain in full force and effect as of
the date hereof.

Executed at San Diego, California effective as of March 26, 1999.

/s/ RAFAEL RUBIO
-------------------------------------
Rafael Rubio, Assistant Secretary

<PAGE>

Exhibit 23.1

INDEPENDENT AUDITORS' CONSENT

We consent to the incorporation by reference of our report dated February 21,
2000 appearing in this Annual Report on Form 10-K of Rubios Restaurants Inc.,
for the year ended December 26, 1999 and to the reference to us under the
heading "Selected Financial Data" in such Form 10-K.

San Diego, California
March 23, 2000

<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AS OF DECEMBER 26, 1999 AND THE RELATED CONSOLIDATED
STATEMENT OF OPERATIONS FOR THE TWELVE MONTHS ENDED DECEMBER 26, 1999 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-26-1999
<PERIOD-START> DEC-28-1998
<PERIOD-END> DEC-26-1999
<CASH> 3,459
<SECURITIES> 7,376
<RECEIVABLES> 579
<ALLOWANCES> 0
<INVENTORY> 618
<CURRENT-ASSETS> 12,859
<PP&E> 36,289
<DEPRECIATION> (8,366)
<TOTAL-ASSETS> 50,038
<CURRENT-LIABILITIES> 5,807
<BONDS> 0
0
0
<COMMON> 9
<OTHER-SE> 43,133
<TOTAL-LIABILITY-AND-EQUITY> 50,038
<SALES> 67,854
<TOTAL-REVENUES> 67,854
<CGS> 19,976
<TOTAL-COSTS> 65,583
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (153)
<INCOME-PRETAX> 2,768
<INCOME-TAX> (1,117)
<INCOME-CONTINUING> 2,768
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,651
<EPS-BASIC> 0.26
<EPS-DILUTED> 0.20

</TABLE>