| ** **

** **

**TABLE OF  CONTENTS**                                                                                                                         | ** ** |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|
| **FORM  10-KSB - PART I**                                                                                                                                              | ** ** |
| Item  1       Description of Business                                                                                                    | 24 - 35    |
| Item  2       Description of Property                                                                                                    | 35         |
| Item  3       Legal Proceedings                                                                                                          | 35         |
| Item 4       Submission of Matters  to a Vote of Security Holders                                                                        | 35         |
| **PART  II**                                                                                                                                                           | ** ** |
| Item 5       Market for Common  Equity and Related Stockholder Matters                                                                   | 36         |
| Item 6       Selected  Financial Data                                                                                                    | 37         |
| Item 7       Management's  Discussion and Analysis of Financial Condition and Results of Operations                                      | 38 - 42    |
| Item 8       Financial Statements                                                                                                        | F1 - F16   |
| Item 9       Changes In and  Disagreements with Accountants on Accounting and Financial Disclosure                                       | 43         |
| Item  9A     Controls and Procedures                                                                                                               | 43         |
| Item  9B     Other Information                                                                                                                     | 43         |
| ****
**PART  III**                                                                                                                                                     | ** ** |
| Item 10     Directors, Executive  Officers, Promoter, Control Persons and Corporate Governance; Compliance with  Section 16(a) of the Exchange Act | 43         |
| Item  11     Executive Compensation                                                                                                                | 43         |
| Item 12     Security Ownership of  Certain Beneficial Owners and Management and Related Stockholder Matters                                        | 43         |
| Item 13     Certain Relationships,  Related Transactions, and Director Independence                                                                | 44         |
| Item  14     Principal Accountant Fees and Services                                                                                                | 44         |
| Item  15     Exhibits                                                                                                                              | 44 - 46    |
| Signatures                                                                                                                                                             | 47         |

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**UNITED STATESSECURITIES AND EXCHANGE COMMISSION**

**Washington,D.C.  20549**

** **

**FORM 10-KSB**

(Mark One)

(X)        ANNUALREPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE ACTOF 1934

For the fiscalyear ended:  September 30, 2007

OR

(  )        TRANSITIONREPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE ACTOF 1934

For thetransition period from ____________ to _____________

Commissionfile number: 000-18590

**Good TimesRestaurants Inc.**

(Name of smallbusiness issuer in its charter)

 

Nevada                                 84-1133368

(State orother jurisdiction of      (I.R.S. Employer

incorporationor organization)     Identification No.)

601 CorporateCircle, Golden, Colorado     80401

(Address ofprincipal executive offices)     (Zip Code)

Issuer'stelephone number:  (303) 384-1400

Securitiesregistered under Section 12(b) of the Exchange Act:

                                       Titleof each class                                      Name of each exchangeon which registered

Common Stock$.001 par value, Preferred Stock $.01 par value              The NASDAQ StockMarket, LLC

 (Title ofclass)

Securitiesregistered under Section 12(g) of the Exchange Act:

Check whetherthe issuer (1) filed all reports required to be filed by Section 13 or 15(d) ofthe Exchange Act during the past 12 months (or for such shorter period that theregistrant was required to file such reports), and (2) has been subject to suchfiling requirements for the past 90 days.

Yes   [X]  No   [   ]

Check if thereis no disclosure of delinquent filers in response to Item 405 of Regulation S-Bcontained in this form, and no disclosure will be contained, to the best ofregistrant's knowledge, in definitive proxy or information statementsincorporated by reference in Part III of this Form 10-KSB or any amendment tothis Form 10-KSB [X]

Indicate by check mark whetherthe registrant is a shell company (as defined in Rule 12b-2 of the ExchangeAct). Yes [   ]     No [X]

The issuer's revenues for itsmost recent fiscal year ended September 30, 2007 were $24,955,000.

As of December 6, 2007, theaggregate market value of the 1,926,389 shares of common stock held bynon-affiliates of the issuer, based on the closing sales price of the commonstock on December 6, 2007 of $6.00 per share as reported on the Nasdaq CapitalMarket, was $11,558,334.

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As of December 6, 2007, theissuer had 3,875,472 shares of common stock outstanding.

**DOCUMENTSINCORPORATED BY REFERENCE**

The information required byItems 10 through 13 and 15 of Part III of this form is incorporated byreference from the issuer's definitive proxy statement to be filed with the SECnot later than 120 days after the end of the fiscal year covered by this formin connection with the issuer's annual meeting of shareholders to be held on January24, 2008.

TransitionalSmall Business Disclosure Format  Yes [    ]     No [X] 

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**PARTI**

**Item 1.           Description ofBusiness.**

**Overview:**Good Times Restaurants Inc., a Nevada corporation (the "Company"),was organized in 1987.  The Company is essentially a holding company for itswholly owned subsidiary, Good Times Drive Thru Inc., which is engaged in thebusiness of developing, owning, operating and franchising hamburger-orienteddrive-through restaurants under the name Good Times Burgers & FrozenCustard.  Most of our restaurants are located in the front range communities ofColorado but we also have franchised restaurants in Idaho, North Dakota andWyoming.  The terms "Good Times", "we", "us" and"our" where used herein refer to the operations of Good Times DriveThru Inc. and of the Company.

RecentDevelopments: On February 10, 2005 we closed on the private placement of atotal of 1,240,000 shares of Series B Preferred Stock for $2.50 per share,including 60,000 shares issued to one of the investors in consideration foradvice and assistance with respect to the sale of 1,000,000 shares of theSeries B Preferred Stock.  We had certain mandatory conversion rights whichwere exercised on June 8, 2006.  The preferred shares accrued dividends at therate of 6% per annum beginning on the first anniversary of the issuance of theshares.  A declared dividend of $25,000 for the period from February 10, 2006to March 31, 2006 was paid on May 15, 2006.  Upon the mandatory conversion ofthe preferred shares to common shares on June 8, 2006 dividends of $35,000 werepaid for the period April 1, 2006 to June 8, 2006. We used the net proceedsfrom the preferred stock offering for the development of new restaurants andfor the refurbishment of existing restaurants.

The initial store of a dual brand test with alarge regional Mexican quick service restaurant chain, Taco John's International,opened in the spring of 2004. We converted two existing underperforming GoodTimes to the dual brand format in June 2005 and February 2006 and we opened anew dual brand company-owned restaurant in August 2006.  Four additionalfranchised dual brand restaurants were opened during fiscal 2006 in Coloradoand North Dakota and two additional franchised dual brand restaurants wereopened during fiscal 2007 in Wyoming and North Dakota.  Initial sales at the teststores are generally meeting or exceeding expectations.  However, operatingcosts are higher than anticipated and customer service measures are lower inthe dual brand operation so we are evaluating the future expansion potentialand strategic fit for the dual brand concept. In December 2007 we grantedpermission for a North Dakota franchisee to terminate their Good Timesfranchise agreement in the dual brand concept.  We have extended our Dual BrandTest Agreement with Taco John's International through March 31, 2008. 

Over the pastfew years, we have been developing new restaurants with a building format thatincludes a 70 seat dining room, incorporates a new design on the exterior and hasa higher level of finishes on the interior, including slate, stone andextensive use of wood.  The last seven stores opened under this format haveaverage annual sales of approximately $1.2 million, which is approximately 30%higher than the average annual sales of stores under the older, double drivethru format.  We anticipate that all future stores will be developed with thisformat.  We are refining the prototype design to heighten the merchandising andformat for our fountain menu category, to maximize the exterior curb appeal andvisibility of the building and to gain additional labor efficiencies within therestaurant.  

OnDecember 3, 2007, we entered into a development agreement with Zen Partners LLCthat is comprised of a Development Agreement, a Management Agreement and a SiteSelection, Construction Management and Pre-Opening Services Agreement.  DavidGrissen, a significant stockholder and a member of our board of directors, hasa 20% ownership interest in Zen Partners LLC.  The agreements provide for thedevelopment of up to twenty-five restaurants with a five year developmentschedule for up to ten restaurants with an option to develop an additionalfifteen restaurants, exercisable any time during the initial five year period. We will operate the restaurants utilizing our employees on the same basis as wewould company-owned restaurants; however, Zen Partners LLC will provide alldevelopment and operating capital.  For each restaurant that is developed, wewill receive a monthly management fee of 5% of gross operating revenues for therestaurant, and a services fee of $25,000.  We may provide a limited leaseguarantee on the initial three restaurants developed, for which we will receivea lease guaranty fee equal to 1% of net sales of the restaurant for so long asthe lease guaranty is in effect.  We may also arrange sale leasebacktransactions for sites of the restaurants developed, for which we will receivea sale leaseback fee of $7,500 per restaurant.  We will also participate in theongoing profitability of the restaurants by receiving an incentive fee equal to(i) 30% of the incentive income (as defined in the Management Agreement) peryear until Zen Partners LLC has received a 25% return on its net equityinvestment and (ii) 20% of the incentive income per year thereafter.  The totalfuture amounts of these fees and participations, if any, to be received by us,and the interest therein of David Grissen, in connection with this transactionare not currently determinable.

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OnOctober 1, 2007 we hired a new Vice President of Franchise Sales & Developmentto lead a new franchise growth initiative into the Midwestern states ofNebraska, Iowa, Missouri, Kansas, South Dakota and Western Illinois.   We planon seeking both experienced multi-unit franchisees of other restaurant conceptsinterested in developing multiple restaurants and other experienced operatorsinterested in owning and operating individual restaurants. Our expansionstrategy will be based on concentrating multiple sites within each definedtelevision market (Designated Marketing Area) to gain media, distribution andoperational efficiencies.

**Concept andBusiness Strategy:** We operate with two different formatsthat have evolved over the course of our history:  a smaller, 880 square footdouble drive thru building focused on drive thru service and limited walk upservice; and a newer 2,400 to 2,700 square foot, 70 seat dining room format thatis the model for future stores.

The most reliable measure of customer loyalty istheir likelihood to recommend a brand.  Our objective is to have every customerand every employee want to recommend Good Times to their friends.  To achievethis, we have developed the following strategies.

§  *Focuson our most important drivers of success:*

o   *Values. *Westrive to build and develop behaviors and expectations around what we valuemost throughout the company: integrity, continued improvement, customer loyaltyand respect for each other.

o   *People.* Beginningwith our Operating Partner Program, people are our strongest asset.  We seek tohire high quality people throughout and provide them with comprehensivetraining programs to ensure that we deliver consistently superior products andservice.

o   *Distinctivequality. *Westrive to offer unique, highly distinctive tastes with the highest qualityingredients available in the quick service restaurant category.

o   *Excellentsystems.* Westrive to provide the best systems and processes in every area to free ourmanagement to focus on leading their people.

§ *Offerhigh quality, unique menu items that provide exceptional value. *Ourrestaurants feature menu items that are unique in the quick service segment,and flavor profiles that are associated more with casual theme than with fastfood.  Whenever possible, products support the brand umbrella of "fresh, highquality ingredients" such as fresh frozen custard made fresh throughout the dayin every restaurant, 100% all natural Coleman beef, fresh squeezed lemonade,fresh leaf lettuce, grilled honey cured bacon, sliced Bermuda onions andtoppings such as real guacamole,  grilled pineapple and sautéed mushrooms. Each menu category has signature recipes with fun, irreverent names that buildGood Times' non-traditional personality such as Wild Fries with Wild DippinSauce, Big Daddy Bacon Cheeseburger, Mighty Deluxe, Burnin' Buffalo Chicken andCappuccino Mocha Joe, Raspberry Torte and Strawberry Cheesecake Addiction CustardSpoonbenders.  We use a culinary consultant to assist in the ongoingdevelopment of new products and validate a product's appeal through research,testing and customer feedback panels prior to its rollout.  We rolled out a new100% all natural Coleman beef snack-sized burger available in 3 packs and 5packs called the Bambino Burger to appeal to the more budget conscious consumerin May of 2007.  We are following that with the system-wide rollout of ChickenBambinos in January, 2008.   We do not offer $.99 menu items and we anticipatethis strategy will increase customer frequency and provide a broader customerbase.  We also anticipate refining our frozen custard menu in fiscal 2008,adjusting portion sizing and pricing, adding some new menu items and changingour approach to design in new restaurants in order to increase that category'soverall sales mix.

§ *Continuallyimprove our fast, friendly, personal customer service.*We strive tooptimize and personalize the interaction between our employees and customers,particularly at the points of order and payment to build a reputation as havingthe friendliest service.  We manage the face to face interaction with ourcustomers through extensive employee screening and hospitality training toensure their experience is punctuated by attentive, friendly service.  Speed ofservice through our drive thru lanes is important to the consumers' need forconvenience but is always secondary to delivering the highest quality productpossible.  We monitor each car's service time and have developed incentiveprograms for management and employees to maintain our quick service standards.

§ *Buildcustomer loyalty through a unique brand experience. *In addition tofast friendly service and great tasting products, we strive to maintain clean,safe and appealing facilities with a particular emphasis on well groomedlandscaping, freshly painted exteriors and merchandising that highlights theunique product attributes and flavors of our products.  We believe thateverything the customer sees, smells, hears and feels influences their overallimpression and reputation of Good Times and that Good Times' target customer isseeking more out of even a quick service restaurant experience.  Whileproviding an excellent value at an average check slightly over $5 per person,we do not focus on offering the lowest price or the biggest portions.  Westrive to continually elevate each element of the customer's overall experiencewith the goal of delivering the most "Addictive Experience" in quick service.

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§ *Buildawareness of the Good Times Burgers & Frozen Custard brand.*We believethat Good Times has built substantial brand equity among our customers and hasbecome known for our quality, service and signature tastes, particularly withinthe hamburger category.  We believe there is significant opportunity tocontinue to build that reputation within the hamburger category by continuingto build a stronger overall value proposition and increase awareness of our frozencustard and fountain category.   We plan additional product introductions inthose categories in the next two fiscal years and anticipate an increase intheir overall contribution to our sales mix.  As we continue to build out theColorado market, our media advertising presence will increase, raising ouroverall awareness and building a highly differentiated brand personality.  Ourobjective is to create customer loyalty and affinity for Good Times.

§ *Continuallyimprove our employees' knowledge and proficiency of our core processes.*Our customers'experience is driven by the ability of our management and employees toconsistently execute clearly defined processes in every area of our business. We believe that our employees' abilities and attitudes are directly related toour ability to provide well designed service, production and operatingprocesses and effective training that allows them to continually learn, improveand succeed.  We train, test, certify and retrain all employees and managementon all of our core operating and management processes to continually improvelevels of proficiency.

**Current fiscal year initiatives**

1.    **ConsistentlyGrow Same Store Sales:** We will continue to focus on comparable restaurantsales driven by increases in guest counts and increases in the average guestcheck.  Same store sales increased 5.9% in fiscal 2007 and began to acceleratein the last half of the year as we introduced a new television advertisingcampaign and our new Bambino Burger value proposition.  We finished the year with15 consecutive quarters of growth in same store sales (factoring out the effectof lost sales days due to storms in December and January).   We aim to increaseguest counts in fiscal 2008 through a multi-faceted approach to continuallyimprove the Good Times brand experience for our customers by:

•      Augmentingand growing our Bambino value proposition for the budget constrained consumer. While our consumer target profile is one who is "seeking more out of life" andmore out of their restaurant experience than simply convenience or price, thatprofile crosses through all demographic segments, including those that onlyhave a few dollars to spend for a high quality quick meal.  We are currentlytesting and plan on rolling out a smaller sized, lower priced 100% all breastmeat chicken Bambino that can be bundled in the same 3 pack and 5 pack multiplesas the Bambino Burgers.

•      Expandingour core consumer target to include more 16 to 29 year olds, who show a higheraffinity for all natural products and are amongst the heaviest users of quickservice restaurants.  Historically, we have focused our marketing, pricing andpromotions toward a slightly older 18 to 54 consumer.  That group will continueto be an important part of our customer base, but we believe we have asignificant opportunity as our brand resonates with a younger consumer.

•      Growingour transactions from the fountain category.  Historically, our brand has beenidentified with great burgers.  We have evolved our fountain menu to include awider selection of frozen custard treats, fresh squeezed flavored lemonades,frozen flavored Glacier lemonades, soft drinks, fresh brewed iced tea andshakes.   We believe that we still have an opportunity to significantlyincrease our sales from this category with additional television advertising,product development and new merchandising.  We are redesigning our prototype toelevate the presentation of these offerings as we enter new markets.

•      Increasingour media presence with more television advertising and increased frequency ofmessaging.

•      Improvingour execution on customer service and the delivery of our brand experiencethrough evaluating our labor allocations and staffing levels. 

•      Continuingto reinvest in our existing facilities with enhanced landscaping, patios andexterior building finishes to improve the restaurants' curb appeal andappearance.  We will be remodeling select restaurants with finishes consistentwith our new restaurants so that we have a common image, regardless of theformat or age of the restaurant.  

2.     **ManageRestaurant Operating Costs:** Fiscal 2007 was a challenging macro environmentfor food, paper and labor costs in the restaurant industry, with unprecedentedincreases in commodity costs that affected most of our product ingredientcosts. We implemented a cumulative total weighted menu price increase of 7.3%from January to September, 2007, enabling us to maintain our gross profitmargin, but we don't believe we will have much pricing flexibility in fiscal2008 unless the competitive pricing environment changes.  Colorado minimum wageincreased from $5.15 to $6.85 per hour on January 1, 2007 (and will increase to$7.02 on January 1, 2008) which increased our overall wage scale byapproximately $.60 per employee hour.   During fiscal 2008, our goal is toengineer labor hours out of our system through improved efficiencies withoutaffecting our service levels.  Typically, our newly opened restaurantsinitially experience higher operating costs in both dollars and percentage ofrevenues when compared to our restaurants open for more than a year. Accordingly, sales volumes, timing of openings and initial operating margins ofour new restaurants are expected to have an impact on our overall profitabilityuntil our restaurant operating base is large enough to mitigate the impact ofthese opening costs and inefficiencies.

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3.      **NewCompany Restaurant Growth:**  Our newer prototype model stores located onhigh profile pad sites in big box retail and strip centers in higher incomedemographic areas are performing consistently above the average of our olderstores.  We are pursuing a disciplined growth strategy for company-ownedrestaurants in Colorado on those types of sites and we believe that we can addan additional 10 to 15 restaurants over the next several years as sites becomeavailable.  We believe this enables us to enhance consumer convenience and easeof access, leverage existing operating infrastructure and increase mediaadvertising efficiencies and brand awareness.  As we add to the development pipelinefor Colorado, we are acquiring new sites in the Nebraska market and evaluatingsites in other new markets for joint venture and franchise expansion that wemay augment with additional company owned development in order to acceleratemarket penetration of select markets.  Good Times is also offering franchisesfor the development of additional Good Times restaurants.

**Expansion strategy and site selection:** Our longerterm strategy is to become a super regional brand in select continuous markets,maximizing our overall brand awareness and distribution, marketing andoperational efficiencies.  Currently, we plan on expanding east from Coloradointo Nebraska, Kansas, Missouri, Iowa, South Dakota and Western Illinois and wewill focus our franchising efforts on those markets. 

We plan on developing our new prototype restaurantdesign on sites that are on or adjacent to big box or grocery store anchoredshopping centers in high activity and employment areas.  Our site selection fornew restaurants is oriented toward slightly higher income demographic areasthan many of our urban locations and most of our targeted trade areas are inrelatively high growth areas of the Denver, Colorado Springs and northernColorado markets.

We lease most of our sites.  When we do purchaseand develop a site, we intend to sell the developed site into the sale-leasebackmarket under a long term lease.  Our primary site objective is to secure asuitable site, with the decision to buy or lease as a secondary objective.  Oursite criteria includes a mix of substantial daily traffic, density of at least30,000 people within a three mile radius, strong daytime population andemployment base, retail and entertainment traffic generators, good visibilityand easy access.

**Restaurant locations:** We currentlyoperate and franchise a total of fifty-four Good Times restaurants, of which forty-sevenare in Colorado, with forty-two in the Denver greater metropolitan area, threein Colorado Springs, one in Grand Junction and one in Silverthorne.

| ** **                              | **Total** | **Denver, CO**

**Greater  Metro** | **Colorado**

**Other** | **Idaho** | **Wyoming** | **North Dakota** |
|-----------------------------------------|-----------|------------------------------------|-------------------------|-----------|-------------|------------------|
| Good  Times co-owned & co-developed | 24        | 21                                 | 3                       |           |             |                  |
| Good  Times franchised                  | 20        | 16                                 | 2                       | 1         | 1           |                  |
| Dual  brand co-owned                    | 3         | 3                                  |                         |           |             |                  |
| Dual  brand franchised                  | 7         | 2                                  |                         |           | 2           | 3                |
| Total                                   | 54        | 42                                 | 5                       | 1         | 3           | 3                |

| **DECEMBER**                   |
|--------------------------------|
|                                | **2006** | **2007** |
| Company-owned restaurants      | 17 | 18 |
| Joint venture restaurants      | 9 | 9 |
| Franchise operated restaurants | 23 | 27 |
| Total  restaurants             | 49 | 54 |

In fiscal 2007 we opened one new company-ownedrestaurant in Littleton, Colorado in May 2007 and one new company-owned restaurantin Colorado Springs, Colorado in August 2007.  In May 2007 we sold one existingcompany-owned restaurant to a new franchisee.  One new franchised Good Timesrestaurant opened in Longmont, Colorado in March 2007, and two new franchiseddual brand restaurants opened in February 2007, one in Gillette, Wyoming andone in Dickinson, North Dakota.  Seven additional Good Times restaurants areunder development, three in Colorado and four in Omaha, Nebraska.

**Menu:** The menu of aGood Times Burgers & Frozen Custard restaurant is limited to hamburgers,cheeseburgers, chicken sandwiches, french fries, onion rings, fresh squeezed andfrozen lemonades, soft drinks and frozen custard products.  Each menu item ismade to order at the time the customer places the order and is notpre-prepared.

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The hamburger patty is prepared with speciallyformulated and seasoned Coleman 100% natural beef, served on a 4 1/4 inch bun. Hamburgers and cheeseburgers are garnished with fresh leaf lettuce, freshsliced sweet redonions, mayonnaise, mustard,ketchup, pickles and fresh sliced tomatoes.  Other specialty hamburger toppingsinclude guacamole, fresh grilled honey cured bacon, and proprietary sauces. The chicken products include a spiced, battered whole muscle breast patty and agrilled seasoned breast patty, both served with mayonnaise, lettuce andtomatoes on a whole grain bun and Chicken Dunkers, whole breast meat breadedstrips. Signature chicken sandwiches include the Burnin' Buffalo, TastyTeriyaki, Peppercorn Ranch and Guacamole Chicken.  Equipment has been automatedand equipped with compensating computers to deliver a consistent product andminimize variability in operating systems.

Coleman beef is raised without the use of anyhormones, antibiotics or animal byproducts that are normally used in the openbeef market.  We believe that Coleman beef delivers a better tasting productand, because of the rigorous protocols and testing that are a part of theColeman processes, also minimizes the risk of any food-borne bacteria-relatedillnesses.  Good Times is the only quick service restaurant chain servingexclusively Coleman 100% natural beef.

Fresh frozen custard is a premium ice cream(requiring in excess of 10% butterfat content) with a proprietary vanilla blendthat is prepared from highly specialized equipment that minimizes the amount ofair that is added to the mix and that creates smaller ice crystals than otherfrozen dairy desserts.  The custard is scooped similarly to hard-packed icecream but is served at a slightly warmer temperature. The resulting product issmoother, creamier and thicker than typical soft serve or hard-packed ice creamproducts.  Good Times serves the frozen custard in cups and cones, specialtysundaes and "Spoonbenders", a mix of custard and toppings, and weanticipate it will continue to become a larger percentage of sales as wecontinue to develop custard products and awareness.

**Marketing & Advertising:** Our marketingstrategy focuses on:  1) driving comparable restaurant sales through attractingnew customers and increasing the frequency of visits by current customers; 2)communicating specific product news and attributes to build strong points ofdifference from competitors; and 3) communicating a unique, strong andconsistent brand.

Media is an important component of building GoodTimes' brand awareness and distinctiveness.  We spent our ad dollars on both televisionand radio media during fiscal 2007.  The Colorado market is an expensive mediamarket, so most of our ad placement is not in prime time but in early and latefringe, prime access and late news time slots.  As we continue to develop moreand more distinctiveness to Good Times' brand and increase penetration of theColorado market, we anticipate we will continue to use media advertising to increaseoverall awareness.

Another important component of our marketingefforts is point-of-sale and on-site merchandising.  We rotate new four color productpoint-of-purchase displays every other month and support new productintroductions with extensive merchandising. Our restaurants with dining roomshave back-lit and front-lit product displays, table tents and product messagingthroughout.  Menu boards are kept fresh with new food photography and graphicseach month.

During fiscal 2006 we re-designed and expanded theuse of our website and have begun to use email marketing as a tool to buildcustomer loyalty.  We have a marketing agreement with the Pepsi Center inDenver, Colorado to serve and promote Good Times' products in that venue infiscal 2008.

As we develop new markets, our marketing willfocus on generating new customer trial through grand opening campaigns, publicrelations, direct response mail and charitable tie-ins.  We plan onconcentrating our new market development to attain a critical mass ofrestaurants in each market to support radio and television advertising. 

**Operations**

**Restaurant Management:** We aredeveloping Operating Partners in most of our restaurants as we are able torecruit qualified candidates.  We believe that this is a distinct competitiveadvantage that provides a higher level of service, quality control andstability over time. The objective of the Operating Partner Program is to haveeach partner develop a relationship with the employees, the customers and thecommunity at their restaurant and develop an ownership mentality withcommensurate rewards as sales increase over a longer period of time.  Theprogram allows an Operating Partner to earn 25% of a restaurant's improvementin cash flow over an established baseline.  Each Good Times unit employs anoperating partner or a general manager, one to two assistant managers andapproximately 15 to 25 employees, most of whom work part-time during threeshifts.  An eight to ten week training program is utilized to train restaurantmanagers on all phases of the operation.  Ongoing training is provided asnecessary. We believe that incentive compensation of our restaurant managers isessential to the success of our business.  Accordingly, in addition to asalary, managerial employees may be paid a bonus based upon proficiency inmeeting financial, customer service and quality performance objectives tied toa monthly scorecard of measures.

**Operational systems and processes:** We believethat we have some of the best operating systems and processes in the industry. Detailed processes have been developed for hourly, daily, weekly and monthlyresponsibilities that drive consistency across our system of restaurants andperformance against our standards within different day parts.  We utilize alabor program to determine optimal staffing needs of each restaurant based onits actual customer flow and demand.  We also employ several additionaloperational tools to continuously monitor and improve speed of service, foodwaste, food quality, sanitation, financial management and employeedevelopment.  We are moving toward automating and computerizing as many ofthese systems as possible into an integrated, digital management system.

The order system at each Good Times restaurant isequipped with an internal timing device that displays and records the time eachorder takes to prepare and deliver.  The total transaction time for thedelivery of food at the window is approximately 30 to 60 seconds during peaktimes.

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We use several sources of customer feedback toevaluate each restaurant's service and quality performance, including anextensive, computerized secret shopper program, customer comment phone line,telephone surveys and web site comments.  Additionally, management uses bothits own primary consumer research for product development and to determinecustomer usage and attitude patterns as well as third party market researchthat evaluates Good Times' performance ratings on several different operatingattributes against key competitors.

**Training:** We strive tomaintain quality and consistency in each of our restaurants through the carefultraining and supervision of all our employees at all levels and theestablishment of, and adherence to, high standards relating to personnelperformance, food and beverage preparation and maintenance of our restaurants. Each manager must complete an eight to ten week training program, be certifiedon several core processes and is then closely supervised to show bothcomprehension and capability before they are allowed to manage autonomously. All of our training and development is based upon a "train, test, certify,retrain" cycle around standards and operating processes at all levels.  Weconduct a semi-annual performance review with each manager to discuss prior performanceand future performance goals.  We have a defined weekly and monthly goalsetting process around service, employee development, financial management andstore maintenance goals for every restaurant.  During fiscal 2008, we willbegin to develop our On-line Campus consisting of  video and other multi-mediatraining tools, operating manuals, reference documents and other informationused by restaurant management and franchisees.

**Recruiting and retention:** We seek tohire experienced restaurant managers and Operating Partners.  We supportemployees by offering competitive wages and benefits, including a 401(k) plan,medical insurance, stock options for regional managers and incentives plans atevery level that are tied to performance against key goals and objectives.  Wemotivate and prepare our employees by providing them with opportunities forincreased responsibilities and advancement.  We also provide various otherincentives, including vacations, car allowances, monthly performance bonusesand monetary rewards for managers who develop future managers for ourrestaurants.

**Franchising:** Good Timeshas prepared prototype area rights and franchise agreements, a UniformFranchise Offering Circular and advertising material to be utilized insoliciting prospective franchisees.  We seek to attract franchisees that areexperienced restaurant operators, well capitalized and have demonstrated theability to develop one to five restaurants.  We currently review sites selectedfor franchises and monitor performance of franchise units.  We are currentlyconsidering potential franchisees for development of units in Nebraska and willbe soliciting franchisees in additional markets, subject to state franchiseregistration requirements.

We estimate that it will cost a franchisee onaverage approximately $750,000 to $1,000,000 to open a restaurant with diningroom seating, including pre-opening costs and working capital, assuming theland is leased.  A franchisee typically will pay a royalty of 4% of net sales,an advertising materials fee of at least 1.5% of net sales, plus participationin regional advertising up to an additional 4% of net sales, or a higher amountapproved by the advertising cooperative, and initial development and franchisefees totaling $25,000 per restaurant.  Among the services and materials whichwe provide to franchisees are site selection assistance, plans andspecifications for construction of the Good Times Burgers and Frozen Custardrestaurants, an operating manual which includes product specifications andquality control procedures, training, on-site opening supervision and advicefrom time to time relating to operation of the franchised restaurants.

After a franchise agreement is signed, we activelywork with and monitor our franchisees to ensure successful franchise operationsas well as compliance with Good Times systems and procedures.  During thedevelopment phase, we assist in the selection of sites and the development ofprototype and building plans, including all required changes by localmunicipalities and developers.  We provide an opening team of trainers toassist in the opening of the restaurant and training of the employees.  Weadvise the franchisee on menu, management training, marketing, and employeedevelopment.  On an ongoing basis we conduct standards reviews of all franchiserestaurants in key areas including product quality, service standards,restaurant cleanliness and sanitation, food safety and people development.

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We have entered into fourteen franchise agreementsin the greater Denver metropolitan area.  Sixteen franchise restaurants and ninejoint-venture restaurants are operating in the Denver metropolitan area mediamarket.  Good Times franchise restaurants also operate in Colorado Springs andGrand Junction, Colorado; Boise, Idaho; and, Laramie, Wyoming.  Dual brandedfranchised restaurants operate in Cheyenne and Gillette, Wyoming; Ft. Collinsand Windsor, Colorado; and Bismarck, Dickinson and Williston, North Dakota.

**Management Information Systems:** Financial andmanagement control is maintained through the use of automated data processingand centralized accounting and management information systems that weprovide.    Sales, labor and cash data is collected daily via a restaurant backoffice system which gathers data from the restaurant point-of-sale system. Management receives daily, weekly and monthly reports identifying food, laborand operating expenses and other significant indicators of restaurantperformance.  We believe that these reporting systems are sophisticated, andenhance our ability to control and manage operations.

**Food Preparation, Quality Control& Purchasing:**We believe that we have some of the highest food quality standards in the quickservice restaurant industry.  Our systems are designed to protect our foodsupply throughout the preparation process.  We inspect specific qualifiedmanufacturers and work together with those manufacturers to providespecifications and quality controls.  Our operations management teams aretrained in a comprehensive safety and sanitation course provided by theNational Restaurant Association.  Minimum cook temperature requirements andline checks throughout the day ensure the safety and quality of both burgersand other items we use in our restaurants.

We currently purchase 100% of our restaurant foodand paper supplies from Yancey's Food Service.  We do not believe that thecurrent reliance on this sole vendor will have any long-term material adverseeffect since we believe that there are a sufficient number of other suppliersfrom which food and paper supplies could be purchased.  We do not anticipateany difficulty in continuing to obtain an adequate quantity of food and papersupplies of acceptable quality and at acceptable prices.

**Employees:** At December 6,2007, we had approximately 551 employees of which 453 are part time hourlyemployees and 98 are salaried employees working full time.  We considerour employee relations to be good.  None of our employees are covered by acollective bargaining agreement.

**Competition:** Therestaurant industry, including the fast food segment, is highly competitive. Good Times competes with a large number of other hamburger-oriented fast foodrestaurants in the areas in which it operates.  Many of these restaurants areowned and operated by regional and national restaurant chains, many of whichhave greater financial resources and experience than we do.  Restaurantcompanies that currently compete with Good Times in the Denver market includeMcDonald's, Burger King, Wendy's, Carl's Jr. and Sonic.  Double drive-throughrestaurant chains such as Rally's Hamburgers and Checker's Drive-InRestaurants, which currently operate a total of over 800 double drive-throughrestaurants in various markets in the United States, are not currently operatingin Colorado.  Management believes that these double drive-through restaurantchains will not expand into Colorado based on their publicly reportedobjectives and resources.  Culver's is the only significant competitor offeringfrozen custard as a primary menu item operating in the Denver and ColoradoSprings markets and has a significant presence in the targeted Midwesternmarkets for expansion.

Our management believes that we may have acompetitive advantage in terms of quality of product compared to traditionalfast food hamburger chains.  Early development of our double drive-throughconcept in Colorado has given us an advantage over other double drive-throughchains that may seek to expand into Colorado because of our brand awareness andpresent restaurant locations.  Nevertheless, we may be at a competitivedisadvantage to other restaurant chains with greater name recognition andmarketing capability.  Furthermore, most of our competitors in the fast-foodbusiness operate more restaurants, have been established longer, and havegreater financial resources and name recognition than we do.  There is alsoactive competition for management personnel, as well as for attractivecommercial real estate sites suitable for restaurants.

**Trademarks**: Good Timeshas registered its mark "Good Times! Drive Thru Burgers"(SM) with theState of Colorado.  We have also registered our mark "Good Times Burgers &Frozen Custard" federally and with the State of Colorado.  Good Times receivedapproval of its federal registration of "Good Times" in 2003.  Inaddition we own trademarks or service marks that have been registered, or forwhich applications are pending, with the United States Patent and TrademarkOffice including but not limited to: "Mighty Deluxe", "Wild Fries","Spoonbender",  "Chicken Dunkers" "Big Daddy Bacon Cheeseburger", and"Wild Dippin' Sauce". Trademarks expire between 2009 and 2015.

**Government Regulation:** Each GoodTimes restaurant is subject to the regulations of various health, sanitation,safety and fire agencies in the jurisdiction in which the restaurant islocated.  Difficulties or failures in obtaining the required licenses orapprovals could delay or prevent the opening of a new Good Times restaurant. Federal and state environmental regulations have not had a material effect onour operations. More stringent and varied requirements of local governmentalbodies with respect to zoning, land use and environmental factors could delayor prevent development of new restaurants in particular locations.  We aresubject to the Fair Labor Standards Act, which governs such matters as minimumwages, overtime, and other working conditions.  In addition, we are subject tothe Americans With Disabilities Act, which requires restaurants and otherfacilities open to the public to provide for access and use of facilities bythe handicapped.  Management believes that we are in compliance with theAmericans With Disabilities Act.

30

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We are also subject to federal and state lawsregulating franchise operations, which vary from registration and disclosurerequirements in the offer and sale of franchises to the application ofstatutory standards regulating franchise relationships.

**Available Information:** Our Internetwebsite address is www.goodtimesburgers.com.  We make available free of chargethrough our website's investor information section our annual reports on Form10-KSB, quarterly reports on Form 10-QSB, current reports on Form 8-K, and anyamendments to those reports filed with or furnished to the SEC under applicablesecurities laws as soon as reasonably practical after we electronically filesuch material with, or furnish it to, the SEC.  Our website information is notpart of or incorporated by reference into this Annual Report on Form 10-KSB.

**Special Note About Forward-LookingStatements:**From time-to-time the Company makes oral and written statements that reflectthe Company's current expectations regarding future results of operations,economic performance, financial condition and achievements of the Company.  Wetry, whenever possible, to identify these forward-looking statements by usingwords such as "anticipate," "assume," "believe,""estimate," "expect," "intend," "plan,""project," "may," "will," "would," andsimilar expressions  Certain forward-looking statements are included in thisForm 10-KSB, principally in the sections captioned "Description of Business,"and "Management's Discussion and Analysis of Financial Condition andResults of Operations."  Forward-looking statements are related to, amongother things:

§  businessobjectives and strategic plans;

§  operatingstrategies;

§  our ability toopen and operate additional restaurants profitably and the timing of suchopenings;

§  restaurant andfranchise acquisitions;

§  anticipatedprice increases;

§  expectedfuture revenues and earnings, comparable and non-comparable restaurant sales,results of operations, and future restaurant growth (both company-owned andfranchised);

§  estimatedcosts of opening and operating new restaurants, including general andadministrative, marketing, franchise development and restaurant operatingcosts;

§  anticipatedselling, general and administrative expenses and restaurant operating costs,including commodity prices, labor and energy costs; 

§  future capitalexpenditures;

-    ourexpectation that we will have adequate cash from operations and credit facilityborrowings to meet all future debt service, capital expenditure and workingcapital requirements in fiscal year 2007;

-    thesufficiency of the supply of commodities and labor pool to carry on our business;

-    success ofadvertising and marketing activities;

-    the absence ofany material adverse impact arising out of any current litigation in which weare involved;

-    impact of theadoption of new accounting standards and our financial and accounting systemsand analysis programs;

-    expectationsregarding competition and our competitive advantages;

-    impact of ourtrademarks, service marks, and other proprietary rights; and

-    effectivenessof our internal control over financial reporting.

Although we believe that the expectationsreflected in our forward-looking statements are based on reasonableassumptions, such expectations may prove to be materially incorrect due toknown and unknown risks and uncertainties.

In some cases, information regarding certainimportant factors that could cause actual results to differ materially from anyforward-looking statements appears together with such statement.  In addition,the factors described under Critical Accounting Policies and Estimates in Item6 and Risk Factors in this Item 1, as well as other possible factors notlisted, could cause actual results to differ materially from those expressed inforward-looking statements, including, without limitation, the following:concentration of restaurants in certain markets and lack of market awareness innew markets; changes in disposable income; consumer spending trends and habits;increased competition in the quick service restaurant market; costs andavailability of food and beverage inventory; our ability to attract qualified managers,employees, and franchisees; changes in the availability of capital or creditfacility borrowings; costs and other effects of legal claims by employees,franchisees, customers, vendors, stockholders and others, including settlementof those claims; effectiveness of management strategies and decisions; weatherconditions and related events in regions where our restaurants are operated;and changes in accounting standards policies and practices or relatedinterpretations by auditors or regulatory entities.

All forward-looking statements speak only as ofthe date made.  All subsequent written and oral forward-looking statementsattributable to us, or persons acting on our behalf, are expressly qualified intheir entirety by the cautionary statements.  Except as required by law, weundertake no obligation to update any forward-looking statement to reflectevents or circumstances after the date on which it is made or to reflect theoccurrence of anticipated or unanticipated events or circumstances.

**Risk Factors:** You shouldconsider carefully the following risk factors before making an investmentdecision with respect to Good Times Restaurants' securities. You are cautionedthat the risk factors discussed below are not exhaustive.

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***We have accumulated losses.*** We haveincurred losses in every fiscal year since inception except 1999, 2002, 2006 and2007.  As of September 30, 2007 we had an accumulated deficit of $11,084,000. We cannot assure you that we will not have a loss for the current fiscal yearending September 30, 2008.  As of September 30, 2007, we had working capital of$532,000.

***We must sustain same store sales increases*****.****As we developadditional restaurants, we expect that the increase in operating incomegenerated by those restaurants will improve our financial results.  However, wecannot assure you that we will sustain profitability on a consistent basis.  Wemust sustain same store sales increases in existing restaurants to sustainprofitability.  Sales increases will depend in part on the success of ouradvertising and promotion of new and existing menu items and consumeracceptance.  We cannot assure that our advertising and promotional efforts willin fact be successful.

***New restaurants, once opened, may notbe profitable, if at all, for several months****.*   Weanticipate that our new restaurants will generally take several months to reachnormalized operating levels due to inefficiencies typically associated with newrestaurants, including lack of market awareness, the need to hire and train asufficient number of employees, operating costs, which are often materiallygreater during the first several months of operation then thereafter,pre-opening costs and other factors.  Further, some, or all of our newrestaurants may not attain anticipated operating results or results similar tothose of our existing restaurants.  We have experienced delays in opening someof our restaurants and may experience delays in the future.  In addition,restaurants opened in new markets may open at lower average weekly salesvolumes than restaurants opened in existing markets, and may have higherrestaurant-level operating expense ratios than in existing markets.  Sales atrestaurants opened in new markets may take longer to reach average annualcompany-owned restaurant sales, if at all, thereby affecting the profitabilityof these restaurants.

***Our operations are susceptible to thecost of and changes in food availability which could adversely affect ouroperating results.***  Our profitability depends in part on our abilityto anticipate and react to changes in food costs.  Various factors beyond ourcontrol, including adverse weather conditions, governmental regulation,production, availability, recalls of food products and seasonality may affectour food costs or cause a disruption in our supply chain.  We enter into annualcontracts with our beef and chicken suppliers.  Our contracts for chicken are fixedprice contracts.  Our contracts for beef are generally based on current marketprices plus a processing fee.  Changes in the price or availability of chickenor beef could materially adversely affect our profitability.  We cannot predictwhether we will be able to anticipate and react to changing food costs byadjusting our purchasing practices and menu prices, and a failure to do socould adversely affect our operating results.  In addition, because we providea "value-priced" product, we may not be able to pass along priceincreases to our guests.

***Price increases may impact guestvisits.*** We may take price increases on selected menu items in order to offset increasedoperating expenses we believe will be recurring.  Although we have notexperienced significant consumer resistance to our past price increases, wecannot provide assurance that this or other future price increases will notdeter guests from visiting our restaurants or affect their purchasingdecisions.

***The hamburger restaurant market is highlycompetitive*****.** The hamburgerrestaurant market is highly competitive.  Our competitors include manyrecognized national and regional fast-food hamburger restaurant chains such asMcDonald's, Burger King, Wendy's, Carl's Jr., Sonic and Culver's.  We alsocompete with small regional and local hamburger and other fast-foodrestaurants, many of which feature drive-through service.  Most of ourcompetitors have greater financial resources, marketing programs and namerecognition.  All of the major hamburger chains have increasingly offeredselected food items and combination meals at discounted prices and haverecently intensified their promotions of value priced meals.  Continueddiscounting by competitors may adversely affect the revenues and profitabilityof our restaurants.

***Sites may be difficult to acquire.*** Location ofour restaurants in high-traffic and readily accessible areas is an importantfactor for our success.  Drive-through restaurants require sites with specificcharacteristics and there are a limited number of suitable sites available inour geographic markets.  Since suitable locations are in great demand, we may notbe able to obtain optimal sites at a reasonable cost.  In addition, we cannotassure you that the sites we do obtain will be successful.

***We may require additional financing*****.** In order tofully develop the Denver and Colorado Springs/Pueblo markets and to expand intomarkets outside of Colorado, we will require additional financing.  Although wehave recently obtained debt facilities for the borrowing of additional capital,we cannot assure you that these facilities will adequately finance our planneddevelopments or that additional financing will be available on reasonableterms.

***If our franchisees cannot develop orfinance new restaurants, build them on suitable sites or open them on schedule,our growth and success may be impeded.***  Under our current form ofarea development agreement, some franchisees must develop a predeterminednumber of restaurants according to a schedule that lasts for the term of theirdevelopment agreement.  Franchisees may not have access to the financial ormanagement resources that they need to open the restaurants required by theirdevelopment schedules, or may be unable to find suitable sites on which todevelop them.  Franchisees may not be able to negotiate acceptable lease orpurchase terms for the sites, obtain the necessary permits and governmentapprovals or meet construction schedules.  From time to time in the past, wehave agreed to extend or modify develop schedules and we may do so in thefuture.  Any of these problems could slow our growth and reduce our franchiserevenues.

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Additionally, our franchisees depend uponfinancing from banks and other financial institutions in order to construct andopen new restaurants.  If any franchisee experienced difficulty in obtainingadequate financing, the lack of adequate availability of such financing couldadversely affect the number and rate of new restaurant openings by ourfranchisees and adversely affect our future franchise revenues.

***The dual brand test and futureexpansion could be terminated.*** We are currently operating under atest agreement with Taco John's International and the test agreement isterminable by either party.  If the agreement is terminated, it will require usto discontinue the development of additional dual brand restaurants.

***Our franchisees could take actionsthat could harm our business.***  Franchisees are independentcontractors but are not our employees.  We provide training and support tofranchisees; however, franchisees operate their restaurants as independentbusinesses.  Consequently, the quality of franchised restaurant operations maybe diminished by any number of factors beyond our control.  Moreover,franchisees may not successfully operate restaurants in a manner consistentwith our standards and requirements, or may not hire and train qualified managersand other restaurant personnel.  Our image and reputation, and the image andreputation of other franchisees, may suffer materially and system-wide salescould significantly decline if our franchisees do not operate successfully.

***We depend on key management employees*****.** We believeour current operations and future success depend largely on the continuedservices of our management employees, in particular Boyd E. Hoback, ourpresident and chief executive officer and Scott LeFever, our vice president of operations. Although we have entered into an employment agreement with Mr. Hoback, he mayvoluntarily terminate his employment with us at any time.  In addition, we donot maintain key-person insurance on Mr. Hoback's or Mr. Lefever's life.  Theloss of Mr. Hoback's or Mr. LeFever's services, or other key managementpersonnel, could have a material adverse effect on our financial condition andresults of operations.

***Labor shortages could slow our growthor harm our business.*** Our success depends in part upon our ability toattract, motivate and retain a sufficient number of qualified, high-energyemployees.  Qualified individuals needed to fill these positions are in shortsupply in some areas.  The inability to recruit and retain these individualsmay delay the planned openings of new restaurants or result in high employeeturnover in existing restaurants, which could harm our business.  Additionally,competition for qualified employees could require us to pay higher wages toattract sufficient employees, which could result in higher labor costs.  Mostof our employees are paid on an hourly basis.  The employees are paid inaccordance with applicable minimum wage regulations.  Accordingly, any increasein the minimum wage, whether state or federal, could have a material adverseimpact on our business.

***Nevada law and our articles of incorporation and bylawshave provisions that discourage corporate takeovers and could preventstockholders from realizing a premium on their investment.*** Weare subject to anti-takeover laws for Nevada corporations.  These anti-takeoverlaws prevent a Nevada corporation from engaging in a business combination withany stockholder, including all affiliates and associates of the stockholder,who owns 10% or more of the corporation's outstanding voting stock, for threeyears following the date that the stockholder acquired 10% or more of thecorporation's voting stock, unless specified conditions are met.

Our articles of incorporation and our bylawscontain a number of provisions that may deter or impede takeovers or changes ofcontrol or management.  These provisions:

§ authorizeour board of directors to establish one or more series of preferred stock, theterms of which can be determined by the board of directors at the time ofissuance;

§ donot allow for cumulative voting in the election of directors unless required byapplicable law.  Under cumulative voting, a minority stockholder holding asufficient percentage of a class of shares may be able to ensure the electionof one or more directors;

§ statethat special meetings of our stockholders may be called only by the chairman ofthe board, the president or any two directors, and must be called by thepresident upon the written request of the holders of ten percent of theoutstanding shares of capital stock entitled to vote at such special meeting;and

§ providethat the authorized number of directors is currently set at seven.

These provisions, alone or in combination with eachother, may discourage transactions involving actual or potential changes ofcontrol, including transactions that otherwise could involve payment of apremium over prevailing market prices to stockholders for their common stock.

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***Future changes in financial accounting standards maycause adverse unexpected operating results and affect our reported results ofoperations.***  Changes in accounting standards can have a significanteffect on our reported results and may affect our reporting of transactionscompleted before the change is effective.  As an example, in 2006, we have adoptedthe change that requires us to record compensation expense in the statement ofoperations for employee stock options using the fair value method.  See Note 1to our Consolidated Financial Statements for further discussion.  Newpronouncements and varying interpretations of pronouncements have occurred andmay occur in the future.  Changes to existing rules or differinginterpretations with respect to our current practices may adversely affect ourreported financial results.

***OurNASDAQ Listing Is Important.*****Our commonstock is currently listed for trading on the NASDAQ Capital Market.  The NASDAQmaintenance rules require among other things that our common stock priceremains above $1.00 per share and that we have minimum net tangible assets inexcess of $2 million.  We were required to obtain shareholder approval in 1998for a reverse stock split to maintain a sufficient per share price to preserveour NASDAQ listing.

***Weare subject to extensive government regulation that may adversely hinder orimpact our ability to govern various aspects of our business including ourability to expand and develop our restaurants.***  The restaurant industry issubject to various federal, state and local government regulations, includingthose relating to the sale of food.  While in the past we have been able toobtain and maintain the necessary governmental licenses, permits and approvals,our failure to maintain these licenses, permits and approvals, including foodlicenses, could adversely affect our operating results.  Difficulties orfailures in obtaining the required licenses and approvals could delay or resultin our decision to cancel the opening of new restaurants.  Local authoritiesmay suspend or deny renewal of our food licenses if they determine that our conductdoes not meet applicable standards or if there are changes in regulations.

Variousfederal and state labor laws govern our relationship with our employees andaffect operating costs.  These laws govern minimum wage requirements, such asthose to be imposed by recently enacted legislation in Colorado, overtime pay,meal and rest breaks, unemployment tax rates, workers' compensation rates,citizenship or residency requirements, child labor regulations and salestaxes.  Additional government-imposed increases in minimum wages, overtime pay,paid leaves of absence and mandated health benefits.

Thefederal Americans with Disabilities Act prohibits discrimination on the basisof disability in public accommodations and employment.  Although ourrestaurants are designed to be accessible to the disabled, we could be requiredto make modifications to our restaurants to provide service to, or makereasonable accommodations for, disabled persons.

Weare also subject to federal and state laws that regulate the offer and sale offranchises and aspects of the licensor-licensee relationship.  Many statefranchise laws impose restrictions on the franchise agreement, includinglimitations on non-competition provisions and the termination or non-renewal ofa franchise.  Some states require that franchise materials be registered beforefranchises can be offered or sold in the state.

***Compliancewith changing regulation of corporate governance and public disclosure mayresult in additional expenses.*** Keeping abreast of, and in compliance with, changing laws, regulations andstandards relating to corporate governance and public disclosure, including theSarbanes-Oxley Act of 2002, new SEC regulations and The NASDAQ  Market rules,has required an increased amount of management attention.  We remain committedto maintaining high standards of corporate governance and public disclosure. As a result, we intend to invest all reasonably necessary resources to complywith evolving standards, and this investment has resulted in and will continueto result in increased general and administrative expenses and a diversion ofmanagement time and attention from revenue-generating activities to complianceactivities.

***Risksrelated to internal controls.*** Public companies in the United States are required to review their internalcontrols as set forth in the Sarbanes-Oxley Act of 2002.  It should be notedthat any system of controls, however well designed and operated, can provideonly reasonable, and not absolute, assurance that the objectives of the systemare met.  In addition, the design of any control system is based in part uponcertain assumptions about the likelihood of future events.  Because of theseand other inherent limitations of control systems, there can be no assurancethat any design will succeed in achieving its stated goals under all potentialfuture conditions, regardless of how remote.  If the internal controls put inplace by us are not adequate or in conformity with the requirements of theSarbanes-Oxley Act of 2002, and the rules and regulations promulgated by theSecurities and Exchange Commission, we may be forced to restate our financialstatements and take other actions which will take significant financial andmanagerial resources, as well as be subject to fines and other governmentenforcement actions.

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***Healthconcerns relating to the consumption of beef, chicken or other food productscould affect consumer preferences and could negatively impact our results ofoperations.*** Like other restaurant chains, consumer preferences could be affected by healthconcerns about the avian influenza, also knows as bird flu, or the consumptionof beef, the key ingredient in many of our menu items, or negative publicityconcerning food quality, illness and injury generally, such as negativepublicity concerning E. coli, "mad cow" or "foot-and-mouth"disease, publication of government or industry findings concerning foodproducts served by us, or other health concerns or operating issues stemmingfrom one restaurant or a limited number of restaurants.  This negativepublicity may adversely affect demand for our food and could result in adecrease in guest traffic to our restaurants.  If we react to the negativepublicity by changing our concept or our menu we may lose guests who do notprefer the new concept or menu, and may not be able to attract a sufficient newguest base to produce the revenue needed to make our restaurants profitable. In addition, we may have different or additional competitors for our intendedguests as a result of a concept change and may not be able to competesuccessfully against those competitors.  A decrease in guest traffic to ourrestaurants as a result of these health concerns or negative publicity or as aresult of a change in our menu or concept could materially harm our business.

**Item2.          Description of Property.**

We currently lease approximately 3,700 square feetof space for our executive offices in Golden, Colorado for approximately $54,000per year.  The lease is for a two year term ending September 2008. The space isleased from The Bailey Company, a significant stockholder, at their corporateheadquarters.  We anticipate extending the lease or leasing comparable space onterms similar to our current lease.

As of December 6, 2007, Good Times has anownership interest in twenty-seven Good Times units, all of which are locatedin Colorado.  Nine of these restaurants are held in joint venture limitedpartnerships of which Good Times is the general partner and has a 50% interestin seven of the partnership restaurants, a 78% interest in one restaurant and a51% interest in another restaurant.  There are eighteen Good Times units thatare wholly owned by Good Times.

Most of our existing Good Times restaurants are acombination of free-standing structures containing approximately 880 squarefeet for the double drive thru format and approximately 2400 square feet forour prototype building with a 70 seat dining room.  In addition, we haveseveral restaurants that are conversions from other concepts in various sizesranging from 1700 square feet to 3500 square feet.  The buildings are situatedon lots of approximately 18,000 to 50,000 square feet.  Certain restaurantsserve as collateral for the underlying debt financing arrangements as discussedin the Notes to Consolidated Financial Statements included in this report.  Weintend to acquire new sites both through ground leases and purchase agreementssupported by mortgage and leasehold financing arrangements and through sale-leasebackagreements.

All of the restaurants are regularly maintained byour repair and maintenance staff as well as by outside contractors, whennecessary.  We believe that all of our properties are in good condition andthat there will be a need for periodic capital expenditures to maintain theoperational and aesthetic integrity of our properties for the foreseeablefuture, including recurring maintenance and periodic capital improvements.  Allof our properties are covered up to replacement cost under our property andcasualty insurance policies and in the opinion of management are adequatelycovered by insurance.

**Item 3.          Legal Proceedings.**

Weare not involved in any material legal proceedings.  We are subject, from timeto time, to various lawsuits in the normal course of business.  These lawsuitsare not expected to have a material impact.

**Item 4.           Submission ofMatters to a Vote of Security Holders.**

No matters were submitted to a vote of securityholders during the fourth quarter of the fiscal year ended September 30, 2007.

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**PART II**

**Item 5.           Market for CommonEquity and Related Stockholder Matters.**

Shares of Good Times Restaurants Inc. common stockare listed for trading on the NASDAQ Capital Market under the symbol "GTIM."  The following table presents the quarterly high and low bid prices for Good TimesRestaurants common stock as reported by the NASDAQ Capital Market for eachquarter within the last two fiscal years.  The quotations reflect interdealerprices, without retail mark-ups, markdowns or commissions and may not representactual transactions.

| **2006**               | **2007** |
|------------------------|----------|
| ****
**Quarter Ended** | **High** | **Low** | **Quarter Ended** | **High** | **Low** |  
December 31, 2005

5.47

4.90

December 31, 2006

$6.89

$5.51

 
March 31, 2006

5.25

5.25

March 31, 2007

$6.00

$4.75

 
June 30, 2006

5.39

5.00

June 30, 2007

$6.00

$4.99

 
September 30, 2006

6.24

6.03

September 30, 2007

$6.25

$3.95

 
As of December 6, 2007 there were approximately 311holders of record of Common Stock.  However management estimates that there arenot fewer than 1,390 beneficial owners of our Common Stock.

**Dividend Policy:** We have neverpaid dividends on our common stock and do not anticipate paying dividends inthe foreseeable future.  In addition, we have obtained financing underloan agreements that restrict the payment of dividends.  Our ability topay future dividends will necessarily depend on our earnings and financialcondition.  However, since restaurant development is capital intensive, wecurrently intend to retain any earnings for that purpose.

Subject to the provisions of the Series BPreferred Stock Agreement, cash dividends of $61,000 were paid in fiscal 2006prior to the mandatory conversion of all the outstanding preferred stock onJune 8, 2006.

**Disclosure with Respect to theCompany's Equity Compensation Plans:** We maintain the 2001 Good Times RestaurantsStock Option Plan, pursuant to which we may grant equity awards to eligiblepersons, and have outstanding stock options granted under our 1992 IncentiveStock Option Plan and 1992 Non-Statutory Stock Option Plan.  For additionalinformation, see Note 10, Stock-Based Compensation, in the Notes to theConsolidated Financial Statements included in this report. The following tablegives information about equity awards under our plans as of September 30, 2007.

**Equity Compensation Plan Information**
****
** **

**(a)**

**(b)**

**(c)**

**Plan category**

**Number of  securities to be issued upon exercise of outstanding options, warrants &  rights**

**Weighted-average  exercise price of outstanding options, warrants & rights**

**Number of  securities remaining available for future issuance under equity compensation  plans (excluding securities reflected in column (a))**

Equity  compensation plans approved by security holders

366,905

$3.89

66,830

Total

366,905

$3.89

66,830

36

**Item 6.      SelectedFinancial Data.**

The selected financial data on the following pagesare derived from our historical financial statements and is qualified in itsentirety by such financial statements which are included in Item 8 hereof.

**GOOD TIMESRESTAURANTS INC. AND SUBSIDIARY**

The followingpresents certain historical financial information of the Company.  Thisfinancial information includes the combined operations of the Company and itssubsidiary for the fiscal years ended September 30, 2006 and 2007.

** **

**September**

**Operating  Data:**

**2007**

**2006**

Restaurant  sales

$24,215,000

$20,329,000

Franchise  fees and royalties

     740,000

     606,000

           Total Net Revenues

24,955,000

20,935,000

Restaurant Operating Costs:

      Food and packaging costs

7,589,000

6,338,000

      Payroll and other employee benefit costs

8,063,000

6,584,000

      Occupancy and other operating costs

4,393,000

3,797,000

      New store pre-opening costs

118,000

182,000

      Depreciation and amortization

  1,223,000

     997,000

          Total restaurant operating  costs

21,386,000

17,898,000

     Selling, General &  Administrative Expenses

3,226,000

2,733,000

     Gain on disposal of restaurants  and equipment

  (17,000)

   (57,000)

Income  from Operations

$  360,000

$  361,000

Other Income and (expenses)

    Minority  income (expense), net

(211,000)

(246,000)

      Interest income, net

40,000

87,000

      Other, net

(160,000)

(185,000)

          Total other income and  (expenses)

(331,000)

(344,000)

Net  Income available to Common Shareholders

$29,000

$17,000

Basic and Diluted Earnings Per Share

$      .01

$      .01

Weightedaverage shares and equivalents used in per share calculations

           Basic

3,838,867

2,913,077

           Diluted

3,975,957

3,054,952

*Balance Sheet Data:*

Working Capital

$    532,000

$1,547,000

Total assets

11,544,000

10,693,000

Minority Interest

751,000

795,000

Long-term debt

970,000

1,293,000

Stockholders' equity

$ 6,333,000

$6,082,000

37

**Item 7.      Management's Discussionand Analysis of Financial Condition and Results of Operations.**

**Results of Operations**

**Net Revenues:** Net revenuesfor fiscal 2007 increased $4,020,000 (19.2%) to $24,955,000 from $20,935,000for fiscal 2006.  Same store restaurant sales increased $991,000 or 5.9%,during fiscal 2007. Restaurants are included in same store sales after theyhave been open a full fifteen months and only Good Times restaurants areincluded with dual branded restaurants excluded.  Restaurant sales increased $223,000due to one non-traditional company-owned restaurant not included in same storesales and increased $2,032,000 due to five new, acquired or dual branded company-ownedrestaurants that were opened or acquired in fiscal 2005 and 2006.  Restaurantsales also increased $640,000 due to two new company-owned restaurants openedin May and August of 2007. Net revenues increased $134,000 in fiscal 2007 dueto an increase in franchise fees of $10,000 and an increase in franchiseroyalties of $124,000.

Our same store restaurant sales were severelyimpacted by adverse weather conditions in the Denver, Colorado metropolitanarea in December 2006 and January 2007.  The severe weather caused storeclosures and limited operating hours on two separate occasions duringDecember.  December 2006 was the fifth snowiest month on record in the Denverarea, and the eighth coldest on record.  Management estimates that lost salesdue to the storms were approximately $425,000 in its company-owned andco-developed restaurants.  The estimate is based on sales trends prior to thesevere weather.

In May 2007 we launched a television advertisingcampaign featuring our new "Bambino" burgers.  The new product launch wassupported with television advertising and our same store sales increased 9.5%and 14.1% in May and June 2007, respectively and increased 11.9% in the fourthquarter.

We have had same store sales increases in each ofthe last fifteen quarters with the exception of the quarter ending December 31,2006 due to the weather issues discussed above.

Total restaurant sales for Good Times and itsfranchisees were $42,304,000 for fiscal 2007 compared to $35,312,000 for fiscal2006.

Average restaurant sales (including double drivethru restaurants and restaurants with dining rooms but excluding dual brandrestaurants) for fiscal 2006 and 2007 were as follows:

** **

**Fiscal  2007**

**Fiscal  2006**

Company  operated

$930,000

$858,000

Franchise  operated

$819,000

$787,000

**Restaurant Operating Costs:** Restaurantoperating costs as a percent of restaurant sales were 88.3% for fiscal 2007compared to 88.1% in fiscal 2006.

The changes in restaurant-level costsare explained as follows:

Restaurant-level costs for the  period ended September 30, 2006

88.1%

Increase in food and packaging costs

.1%

Increase in payroll and other  employee benefit costs

.9%

Decrease in occupancy and other operating  costs

(.6%)

Decrease in pre-open costs

(.4%)

Increase in depreciation and  amortization costs

 .2%

Restaurant-level costs for the  period ended September 30, 2007

88.3%

**Food and Packaging Costs:** Food andpackaging costs for fiscal 2007 increased $1,251,000 from $6,338,000 (31.2% ofrestaurant sales) in fiscal 2006 to $7,589,000 (31.3% of restaurant sales). Weexperienced unprecedented increases in commodity costs including beef, bakery,soft drinks, cheese, dairy and packaging costs with the majority of thoseincreases occurring in April through September 2007.

Our weighted food and packaging costs haveincreased approximately 6.5% since the beginning of the fiscal 2007 year.  However,food and packaging costs increased only slightly as a percent of restaurantsales due to menu price increases taken in January, July and September 2007. The cumulative weighted menu price increases taken during the fiscal year wereapproximately 7.3%.

**Payroll and Other Employee BenefitCosts**:For fiscal 2007 payroll and other employee benefit costs increased $1,479,000from $6,584,000 (32.4% of restaurant sales) in fiscal 2006 to $8,063,000 (33.3%of restaurant sales).

38

The increase in payroll and other employee benefitcosts for fiscal 2007 is primarily due to an increase in restaurant sales andthe addition of new company-owned and co-developed restaurants opened in latefiscal 2006 and during 2007, as well as a state mandated increase in the minimumwages paid to hourly employees in January 2007.  Payroll and benefit costs aresemi-variable and therefore increase or decrease as sales fluctuate. Additionally, the new restaurants operate at a higher labor cost as a percentof sales due to higher initial labor costs at new stores until they reachmature staffing levels.  The three dual branded restaurants also have a higherlabor cost as a percent of sales than Good Times single brand restaurants.  InNovember 2006 Colorado voters approved an increase in the minimum wage from$5.15 to $6.85 as of January 1, 2007.  The impact on wages paid in fiscal 2007due to the increase is estimated to be approximately $187,000 (.8% ofrestaurant sales).

**Occupancy and Other Costs:** For fiscal2007 occupancy and other costs increased $596,000 from $3,797,000 (18.7% ofrestaurant sales) in fiscal 2006 to $4,393,000 (18.1% of restaurant sales). The $596,000 increase in occupancy and other costs are primarily attributableto:

§ Increasesin building rent of $290,000 due to the addition of company-owned andco-developed restaurants.

§ Increasesin bank fees of $39,000 due to a greater number of customer transactions using creditcards in addition to the new restaurants.

§ Increasesin property taxes related to the new and purchased restaurants.

§ Increasesin utility costs related to the new and purchased restaurants.

Occupancy costs may increase as a percent of salesas new company-owned restaurants are developed due to higher rent associatedwith sale-leaseback operating leases, as well as increased property taxes onthose locations.

**New Store Pre-opening Costs:** For fiscal2007 new store pre-opening costs decreased $64,000 from $182,000 in fiscal 2006to $118,000.  New store pre-opening costs in fiscal 2007 are related to theopening of two new company-owned restaurants.  Fiscal 2006 new storepre-opening costs were related to the opening of two new company-ownedrestaurants, one new co-developed restaurant and the purchase of one restaurantfrom a franchisee that was converted to the dual brand format.

**Depreciation and Amortization** Costs: Forfiscal 2007 depreciation and amortization costs increased $226,000 from $997,000in fiscal 2006 to $1,223,000.  Depreciation costs increased due to the additionof new company-owned and co-developed restaurants in late fiscal 2006 and twonew company-owned restaurants opened in fiscal 2007.

**Selling General and AdministrativeCosts:**Selling, general and administrative costs increased $493,000 from $2,733,000 (13.4%of restaurant sales) in fiscal 2006 to $3,226,000 (13.3% of restaurant sales)in fiscal 2007.  The increase in selling, general and administrative costs arepartially attributable to increased advertising costs, which increased to $1,427,000(5.9% of restaurant sales) for fiscal 2007 from $1,185,000 (5.8% of restaurantsales) for fiscal 2006, and an increase in general and administrative costs,which increased to $1,799,000 (7.4% of restaurant sales) for fiscal 2007 from$1,548,000 (7.6% of restaurant sales) for fiscal 2006 (as explained below).

The increase in advertising costs is due to theincrease in restaurant sales (contributions based on sales are made to theadvertising funds) as well as the addition of a Director of Marketing to theinternal corporate staff.

Management anticipates that fiscal 2008advertising will consist primarily of television advertising, on-site and point-of-purchasemerchandising totaling approximately 5.8% of restaurant sales.

The $251,000 increase in general andadministrative cost is primarily attributable to:

§ Incentivestock options compensation expense of $84,000 related to the adoption of FSASNo. 123.

§ Humanresource and training costs increase of $50,000 primarily related to thedevelopment of video training.

§ Corporatesalary and bonus expense increase of $96,000.

**Gain on disposal of restaurants andequipment:**For fiscal 2007 the gain on disposal of restaurants and equipment decreased $40,000to $17,000 from $57,000.  The $17,000 gain on disposal of restaurants andequipment in fiscal 2007 is from the partial recognition of deferred gainsrelated to two sale-leaseback transactions that were completed in fiscal 2004and 2006, offset by the write off of $29,000 of goodwill related to arestaurant sold to a franchisee in May 2007.

**Income from Operations:** Income fromoperations was $360,000 in fiscal 2007 compared to income from operations of $361,000in fiscal 2006.

**Net Income:**Net income was $29,000 for fiscal 2007 compared to net income of $17,000 infiscal 2006.  The change from fiscal 2006 to fiscal 2007 was primarilyattributable to the matters discussed in the "Net Revenues", "Foodand Packaging Costs", "Selling General and Administrative Costs"and "New Store Pre-opening Costs" sections of Item 6.  In addition,1) minority interest expense decreased $35,000 due to decreased income fromrestaurant operations of the joint venture restaurants for fiscal 2007; 2) net interestincome decreased $47,000 to $40,000 from $87,000 in fiscal 2006 due to increasedinterest expense on debt and reduced earnings on cash reserves in the currentperiod; and, 3) other expenses decreased $25,000 to $160,000 from $185,000 infiscal 2006.  Other expenses include $160,000 in franchise related expensescompared to $166,000 in the same prior year period.  Franchise expenses in thecurrent year include all support costs related to the three franchisedrestaurants that opened in fiscal 2007.

39

**Liquidity and Capital Resources**

**Cash and Working Capital:** As ofSeptember 30, 2007, we had $2,465,000 of cash and cash equivalents on hand. Wecurrently plan to use the cash balance and cash generated from operations forincreasing our working capital reserves and, along with additional debtfinancing, for the development of new company-owned restaurants.  Managementbelieves that the current cash on hand and additional cash expected fromoperations in fiscal 2008 will be sufficient to cover our working capitalrequirements for fiscal 2008.

As of September 30, 2007, we had working capitalof $532,000.  Because restaurant sales are collected in cash and accountspayable for food and paper products are paid two to four weeks later,restaurant companies often operate with working capital deficits. We anticipatethat working capital deficits will be incurred in the future as new Good Timesrestaurants are opened.

In July 2006 we purchased an existingrestaurant from a franchisee for total consideration of $329,000, whichincluded forgiving a note receivable due from the franchisee in the amount of$77,000, payment in full of the franchisee's note payable with GE Capital inthe amount of $140,000 and cash of approximately $112,000.  The transactionresulted in the recording of $33,000 of goodwill.  In May 2007 we sold therestaurant to an unrelated third party franchisee, resulting in the write offof the goodwill.  The land, building and improvements for this site wereoriginally sold in a sale leaseback transaction.  We will remain contingentlyliable on that lease which was subleased to the new franchisee.  We maintainedownership of the fixtures and equipment and entered into a lease agreement forthose assets with the franchisee.

In August 2007 we completed a sale-leasebacktransaction related to a company-owned restaurant that opened that month.  Thenet proceeds to us were approximately $1,580,000, which were equal to the costof the land, building and improvements of the new restaurant, and a gain of$15,000.

We are also currently negotiating purchaseand lease agreements for additional company-owned and franchise restaurants andare negotiating debt and sale-leaseback financing for the development of thoserestaurants.  We also anticipate investing approximately $600,000 during fiscal2008 in existing company-owned and joint venture restaurants to upgrade theexterior building finishes and dining rooms as well as to improve the patios.

**Financing:** In May 2007the Company borrowed $1,100,000 from Wells Fargo Bank under a note payable withan eight year term with a floating interest rate at .50% below prime.  Wesimultaneously entered into an interest rate swap transaction with Wells FargoBank for the full $1,100,000 with a fixed interest rate of 7.7% for the fulleight year term coinciding with the note payable.  Partial proceeds from theloan were used to: 1) payoff our existing GE Capital notes payable of $398,000;and, 2) fund new store construction.  The balance of the proceeds will be usedto partially fund the purchase of an existing restaurant from a franchisee.

In August 2006 we entered into a$1,000,000 promissory note with an unrelated third party (PFGI II, LLC) and in March 2007 we entered into a second $1,000,000 promissory note with the samethird party.  The promissory notes constitute revolving lines of credit for thedevelopment of new restaurants which may be advanced and repaid on a monthlybasis from time to time.  Prior to maturity, no principal payments are required,and monthly payments of interest only at the prime rate plus 2% are due, withall unpaid principal due on July 10, 2008.  The loans are secured by separateleasehold deeds of trust related to six company-owned restaurants.  The totaloutstanding balance on both lines of credit was $750,000 at September 30,2007.  Subsequent to the fiscal year end the balance was repaid in full.

**Cash Flows:** Net cashprovided by operating activities was $1,763,000 for fiscal 2007 compared to $1,454,000in fiscal 2006.  The increased net cash provided by operating activities forfiscal 2007 was the result of net income of $29,000 and non-cash reconcilingitems totaling $1,734,000 (comprised principally of depreciation andamortization of $1,223,000, minority interest of $211,000 and increases inoperating assets and liabilities totaling $300,000).

Net cash used in investing activities in fiscal2007 was $2,057,000 compared to $1,382,000 in fiscal 2006.  The fiscal 2007activity reflects payments for the purchase of property and equipment of $3,738,000,proceeds from a sale-leaseback transaction of $1,580,000 and payments receivedon loans made to franchisees of $101,000.

Net cash provided by financing activities infiscal 2007 was $146,000 compared to $778,000 in fiscal 2006.  The fiscal 2007activity includes principal payments on notes payable and long term debt of $559,000,borrowings on notes payable and long-term debt of $1,100,000, distributions tominority interests in partnerships of $319,000, contributions from minorityinterest partners of $10,000, proceeds from the exercise of stock options of $164,000and net repayments on the revolving lines-of-credit of $250,000.

**Contingencies and Off-Balance SheetArrangements:**We are contingently liable on several ground leases that have been subleased orassigned to franchisees.  We have never experienced any losses nor do weanticipate any future losses from these contingent lease liabilities.

**Critical Accounting Policies andEstimates**

40

**Notes Receivable:** We evaluatethe collectability of our note receivables from franchisees annually. Historically, such amounts have been fully repaid and we believe the collateraland guarantees are adequate to provide for future payments; therefore noallowances for amounts estimated to be uncollectable have been provided.

**Impairment of Long-Lived Assets:** We review ourlong-lived assets annually for potential impairment as well as their estimatedremaining life. Historically, we have not been required to impair our long-termassets nor revise their estimated life, however, the restaurant industry isextremely competitive and we continue to be responsive to changes in itsoperating environment.  Therefore such estimates are considered significant andsubject to change.

**Income Taxes:** The deferredtax assets are reviewed periodically for recoverability, and valuationallowances are adjusted as necessary.  We believe it is more likely than notthat the recorded deferred tax assets will be realized.

**Variable Interest Entities**: In December2003, the Financial Accounting Standards Board (the "FASB") finalizedFASB Interpretation No. 46R, Consolidation of Variable Interest Entities--AnInterpretation of ARB51 (FIN 46R).  FIN 46R expands the scope of ARB51 and can require consolidation of "Variable Interest Entities (VIEs)."  Once anentity is determined to be a VIE, the party with the controlling financialinterest, the primary beneficiary, is required to consolidate it.  We haveseveral franchisees with notes payable to the Company and after analysis wehave determined that, while these franchisees are Variable Interest Entities asdefined by FIN 46R, we are not the primary beneficiary of the entities, andtherefore they are not required to be consolidated under FIN 46R.

**New Accounting Pronouncements:** In June 2006,the FASB issued FIN 48, "Accounting for Uncertainty in Income Taxes - aninterpretation of FASB Statement 109," which clarifies the accounting foruncertainty in income taxes recognized in an enterprise's financial statementsin accordance with FAS 109, "Accounting for Income Taxes."  FIN 48 prescribes arecognition threshold and measurement attribute for the financial statementrecognition and measurement of a tax position taken or expected to be taken ina tax return.  FIN 48 is effective for fiscal years beginning after December15, 2006, which will be our fiscal year beginning October 1, 2007.  The adoption of this statement will not have a material impacton the Company's financial position or results of operations.

In September 2006, the FASBissued Statement of Financial Accounting Standards No. 157, "Fair ValueMeasurements" ("SFAS 157").  SFAS 157 defines fair value, establishesa framework for using fair value to measure assets and liabilities, and expandsdisclosures about fair value measurements.  This statement appliesunder other accounting pronouncements that currently require or permit fairvalue measurements and is effective for fiscal years beginning after November15, 2007, which will be our fiscal year beginning October 1,2008.  In February 2007, the FASB issued Statement of Financial AccountingStandards No. 159, "The Fair Value Option for Financial Assets and FinancialLiabilities" ("SFAS 159").  SFAS 159 permits companies to choose tomeasure many financial instruments and certain other items at fairvalue.  If the fair value option is elected, unrealized gains andlosses will be recognized in earnings at each subsequent reportingdate.  SFAS 159 has the same effective date as SFAS157.  The adoption of these statements is not expected to have amaterial impact on the Company's financial position or results of operations.

In November 2007, the FASB issued SFASNo. 141 (revised 2007), *Business Combination* (FAS 141(R)) andSFAS No. 160, *Noncontrolling Interests in Consolidated FinancialStatements, an amendment of ARB No. 51*(FAS 160). FAS 141(R) will change how businessacquisitions are accounted for and will impact financial statements both on theacquisition date and in subsequent periods. FAS 160 will change the accounting and reporting for minorityinterests, which will be recharacterized as noncontrolling interests andclassified as a component of equity. FAS 141(R) and FAS 160 are effective for both public and private companiesfor fiscal years beginning on or after December 15, 2008 (fiscal 2010 forthe Company). FAS 141(R) will be applied prospectively. FAS 160 requiresretroactive adoption of the presentation and disclosure requirements forexisting minority interests. All other requirements of FAS 160 will be applied prospectively. Early adoption isprohibited for both standards. Management is currently evaluating therequirements of FAS 141(R) and FAS 160 and has not yet determined the impact on itsfinancial statements.

**SubsequentEvents:**On December 3, 2007, we entered into a developmentagreement with Zen Partners LLC that is comprised of a Development Agreement, aManagement Agreement and a Site Selection, Construction Management andPre-Opening Services Agreement.  The agreements provide for the development ofup to twenty five restaurants with a five year development schedule for up to tenof the restaurants with an option to develop an additional fifteen restaurants,exercisable any time during the initial five year period.   We will manage andoperate the restaurants utilizing our employees on the same basis as we wouldcompany-owned restaurants, however the Zen Partners LLC will provide alldevelopment and operating capital.  We will receive a fixed fee for thedevelopment of each restaurant and a recurring management fee based on apercentage of sales for the operation of the restaurants.   We may provide alimited lease guarantee on the initial three restaurants developed, for whichwe will receive an additional recurring guarantee fee.  We will alsoparticipate in the ongoing profitability of the restaurants after Zen PartnersLLC has received a priority return on its invested capital.  A member of ourBoard of Directors and significant shareholder, David Grissen, is an owner ofZen Partners LLC.

41

**Pre-approval of non-audit services:** On November 17,2007, the Audit Committee of the Board of Directors of Good Times RestaurantsInc. approved in advance certain non-audit services to be performed by Hein& Associates, Good Times' independent auditor.  These non-audit servicesare to consist primarily of corporate income tax compliance services.

42

**Item 8.          FinancialStatements**

**INDEX TOFINANCIAL STATEMENTS**

**PAGE**

Report  of Independent Registered Public Accounting Firm

F-2

Consolidated  Balance Sheet - September 30, 2007

F-3

Consolidated  Statements of Operations - For the Years Ended September 30, 2007 and 2006

F-4

Consolidated  Statements of Stockholders' Equity - For the Period from October 1, 2005  through September 30, 2007

Consolidated  Statements of Cash Flows - For the Years Ended September 30, 2007 and 2006

F-6

Notes  to Consolidated Financial Statements

F-7

**REPORT OFINDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**

To the Stockholders and

Board of Directors

Good Times Restaurants, Inc.

Golden,Colorado

We have audited the accompanyingconsolidated balance sheet of Good Times Restaurants, Inc. and Subsidiary as ofSeptember 30, 2007, and the related consolidated statements of operations,stockholders' equity, comprehensive income and cash flows for the years endedSeptember 30, 2007 and 2006.  These consolidated financial statements arethe responsibility of the Company's management.  Our responsibility is toexpress an opinion on these consolidated financial statements based on ouraudits.

We conducted our audits in accordance with thestandards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonableassurance about whether the consolidated financial statements are free ofmaterial misstatement.  An audit includes examining, on a test basis, evidencesupporting the amounts and disclosures in the financial statements.  An auditalso includes assessing the accounting principles used and significantestimates made by management, as well as evaluating the overall financialstatement presentation. We believe that our audits provide a reasonable basisfor our opinion.

In our opinion, the consolidated financialstatements referred to above present fairly, in all material respects, thefinancial position of Good Times Restaurants, Inc. and Subsidiary as ofSeptember 30, 2007, and the results of their operations and their cashflows for the years ended September 30, 2007 and 2006, in conformity withU.S. Generally Accepted Accounting Principles.

*HEIN & ASSOCIATES LLP*

Denver, Colorado

December 13, 2007

F-2

GOOD TIMESRESTAURANTS INC. AND SUBSIDIARY

CONSOLIDATEDBALANCE SHEET

SEPTEMBER 30,2007

ASSETS

Current Assets:

Cash and cash equivalents

$2,465,000

Receivables, net of allowance for  doubtful accounts of $0

187,000

Inventories

191,000

Prepaid expenses and other

39,000

Notes receivable

88,000

Total  current assets

2.970,000

Property and Equipment:

Land and building

5,252,000

Leasehold improvements

3,737,000

Fixtures and equipment

7,798,000

16,787,000

Less accumulated depreciation

(9,371,000)

7,416,000

           Assets held for sale

779,000

Other Assets:

Notes receivable

300,000

Other

79,000

379,000

Total Assets 

$11,544,000

LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities:

Current maturities of long-term debt  and leases

$870,000

Accounts payable

387,000

Deferred income

119,000

Other accrued liabilities

1,062,000

Total  current liabilities

2,438,000

Long-Term Liabilities:

Debt and leases, net of current  portion 

970,000

Deferred and other liabilities

1,052,000

Total  long-term liabilities

2,022,000

Minority  Interests in Partnerships

751,000

Commitments and Contingencies   (Notes  3, 5 and 11)

Stockholders' Equity:

Preferred  stock, $.01 par value, 5,000,000 shares authorized, none issued and  outstanding

-

Common stock,  $.01 par value; 50,000,000 shares authorized, 3,866,896 issued and  outstanding

4,000

Accumulated other comprehensive loss

(26,000)

Capital contributed in excess of par  value

17,439,000

Accumulated deficit

(11,084,000)

Total  stockholders' equity

  6,333,000

Total Liabilities and Stockholders' Equity

$11,544,000

***Seeaccompanying notes to these consolidated financial statements.***

F-3

GOOD TIMESRESTAURANTS INC. AND SUBSIDIARY

CONSOLIDATEDSTATEMENTS OF OPERATIONS

For the Years Ended

September 30,

2007

2006

Net Revenues:

Restaurant sales

$24,215,000

$20,329,000

Area development and franchise fees

70,000

60,000

Franchise royalties 

670,000

546,000

Total  net revenues

24,955,000

20,935,000

Restaurant Operating Costs:

Food and packaging costs

7,589,000

6,338,000

Payroll and other employee benefit  costs

8,063,000

6,584,000

Restaurant occupancy costs

3,310,000

2,877,000

Accretion of deferred rent

32,000

35,000

Other restaurant operating costs

1,051,000

885,000

New store pre-opening costs

118,000

182,000

Depreciation and amortization

1,223,000

 

997,000

Total  restaurant operating costs

21,386,000

17,898,000

General and administrative

1,799,000

1,548,000

Advertising

1,427,000

1,185,000

Gain on disposal of restaurants and  equipment

(17,000)

 

(57,000)

Income From  Operations

360,000

361,000

Other Income (Expenses):

Interest income

99,000

141,000

Interest expense

(59,000)

(54,000)

Minority interest in income of  partnerships

(211,000)

(246,000)

Other, net

(160,000)

(185,000)

Total  other expenses, net

(331,000)

(344,000)

Net Income 

$29,000

$17,000

Basic Income  per Share

$0.01

$0.01

Diluted  Income per Share

$0.01

$0.01

Weighted Average Common Shares Outstanding:

Basic

3,838,867

2,913,077

Diluted

3,975,957

3,054,952

***Seeaccompanying notes to these consolidated financial statements.***

F-4

GOOD TIMESRESTAURANTS INC. AND SUBSIDIARY

CONSOLIDATEDSTATEMENTS OF STOCKHOLDERS' EQUITY

FOR THE PERIODFROM OCTOBER 1, 2005 THROUGH SEPTEMBER 30, 2007

Preferred  Stock

Common Stock

Issued

Shares

Par

Value

Issued

Shares

Par

Value

Capital  Contributed in Excess of Par Value

Accumulated  Deficit

Accumulated  Other Comprehensive Loss

Comprehensive  Income

Total

Balances,  October 1, 2005

1,240,000

 $   12,000

2,497,647

$  2,000

$17,054,000

$(11,069,000)

$            0

$            0

$5,999,000

 

 

 

 

 

 

 

 

 

Preferred  stock issuance

 (19,000)

(19,000)

Preferred  dividends

(61,000)

(61,000)

Preferred  stock conversion

(1,240,000)

(12,000)

1,240,000

1,000

(11,000)

Stock  issued for exercised stock options

73,504

1,000

156,000

157,000

Net income

                  

                  

                  

            

                    

17,000

                

                

    17,000

Balances,  September 30, 2006

0

0

3,811,151

4,000

17,191,000

(11,113,000)

0

0

6,082,000

Stock option  compensation cost

84,000

84,000

Stock issued  for exercised stock options

55,745

164,000

164,000

Comprehensive  income (Loss)

    Net  Income

29,000

29,000

29,000

    Deferred  hedging losses

(26,000)

(26,000)

          Comprehensive  loss

                  

                  

                

              

                    

                      

                  

(26,000)

                  

Balances,  September 30, 2007

                  

$                

3,866,896

$   4,000

$17,439,000

$(11,084,000)

$    (26,000)

$   3,000

$6,333,000

***Seeaccompanying notes to these consolidated financial statements.***

F-5

GOOD TIMESRESTAURANTS INC. AND SUBSIDIARY

CONSOLIDATEDSTATEMENTS OF CASH FLOWS

For the Years Ended

September 30,

2007

2006

Cash Flows from Operating  Activities:

Net income

 $29,000

$17,000

Adjustments  to reconcile net income to net cash provided by operating activities:

Depreciation and amortization

 1,223,000

997,000

Accretion of deferred rent

 32,000

35,000

Minority interest expense

 211,000

246,000

Gain on  disposal of property, restaurants and equipment

 (17,000)

(57,000)

Stock option  compensation cost

 84,000

-

Write off of  future site costs

-

13,000

Changes in  operating assets and liabilities:

(Increase)  decrease in:

Receivables

(97,000)

65,000

Inventories

13,000

(72,000)

Prepaid expenses and other

4,000

(6,000)

Deposits and other assets

(18,000)

(26,000)

(Decrease)  increase in:

Accounts payable

120,000

24,000

Accrued and other liabilities

229,000

173,000

Deferred franchise fees

  (50,000)

 

      45,000

Net cash provided by operating  activities

1,763,000

 

1,454,000

Cash Flows From Investing  Activities:

Payments for  the purchase of property and equipment 

(3,738,000)

(3,975,000)

 Proceeds  from the sale of assets

-

651,000

 Proceeds  from sale-leaseback transaction

1,580,000

-

 Proceeds  from sale of investments

-

1,900,000

 Loans made  to franchisees and to others

-

(102,000)

 Payments  received on loans to franchisees and to others

    101,000

 

     144,000

Net cash (used in) investing  activities

(2,057,000)

(1,382,000)

 Cash Flows From Financing Activities:

Principal  payments on notes payable, capital leases, and long‐term debt

(809,000)

(217,000)

Borrowings on  notes payable and long-term debt

1,100,000

1,000,000

Proceeds  (expenses) from preferred stock offering

-

(30,000)

Proceeds from  exercise of stock options

164,000

157,000

Preferred  dividends paid

-

(61,000)

Distributions  paid to minority interests in partnerships

(319,000)

(316,000)

Contributions  from minority interests in partnerships

   10,000

     245,000

Net cash provided by financing  activities

 146,000

 

     778,000

Net Change in Cash and Cash Equivalents

(148,000)

850,000

Cash and Cash Equivalents, beginning of year

2,613,000

 

1,763,000

Cash and Cash Equivalents, end of year

$2,465,000

 

$2,613,000

Supplemental Disclosures of Cash Flow Information:

Cash paid for interest

$ 106,000

 

$       54,000

Purchase of equipment with debt

$   27,000

 

$                  -

***Seeaccompanying notes to these consolidated financial statements.***

F-6

1.           Organization and Summary of Significant AccountingPolicies:

Organization - Good TimesRestaurants Inc. (Good Times or the Company) is a Nevada corporation. TheCompany operates through its wholly owned subsidiary Good Times Drive Thru Inc.(Drive Thru).

Drive Thru commenced operations in 1986 and, as ofSeptember 30, 2007, operates twenty-seven company-owned and jointventure drive-thru fast food hamburger restaurants.  The Company's restaurantsare located in Colorado. In addition, Drive Thru has twenty-seven franchises,twenty operating in Colorado, three in Wyoming, one in Idaho and three in NorthDakota, and is offering franchises for development of additional Drive Thrurestaurants.  

Principles of Consolidation - Theconsolidated financial statements include the accounts of Good Times, itssubsidiary and two limited partnerships, in which the Company exercises controlas general partner.  The Company owns an approximate 51% interest in bothpartnerships, is the sole general partner and receives a management fee priorto any distributions to the limited partners.  Because the Company owns anapproximate 51% interest in the partnerships and exercises complete managementcontrol over all decisions for the partnerships, except for certain vetorights, the financial statements of the partnerships are consolidated into theCompany's financial statements.  The equity interests of the unrelated limitedpartners are shown on the accompanying consolidated balance sheet as minorityinterest, and the limited partners' shares of net income in the partnerships isshown as minority interest expense in the accompanying consolidated statementof operations. All inter-company accounts and transactions are eliminated.

Accounting Estimates - Thepreparation of consolidated financial statements in conformity with U.S.Generally Accepted Accounting Principles requires management to make estimatesand assumptions that affect the amounts reported in these consolidatedfinancial statements and the accompanying notes.  Actual results could differfrom those estimates.

Cash and Cash Equivalents - The Companyconsiders all highly liquid debt instruments purchased with an initial maturityof three months or less to be cash equivalents.

Accounts Receivable - Accountsreceivable include uncollateralized receivables from our franchisees and ouradvertising fund, due in the normal course of business, generally requiringpayment within thirty days of the invoice date. On a periodic basis the Companymonitors all accounts for delinquency and provides for estimated losses ofuncollectible accounts. Currently and historically there have been noallowances for unrecoverable accounts receivable.

Inventories - Inventoriesare stated at the lower of cost or market, determined by the first-in,first-out method, and consist of restaurant food items and related packagingsupplies.

Property and Equipment -Depreciation is recognized using the straight-line method over the estimateduseful lives of the assets or the lives of the related leases, if shorter, asfollows:

Buildings

15 years

Leasehold improvements

7-15 years

Fixtures and equipment

3-8 years

Maintenance and repairs are charged toexpense as incurred, and expenditures for major improvements are capitalized. When assets are retired, or otherwise disposed of, the property accounts arerelieved of costs and accumulated depreciation with any resulting gain or losscredited or charged to income.

Assets held for sale of $779,000 shownin the accompanying condensed consolidated  balance sheet is related to twosites, one of which is under development and will be marketed in the salelease-back market, the second is under contract as of September 30, 2007 withexpected proceeds of approximately $750,000.

Impairment of Long-Lived Assets - The Companyreviews undiscounted cash flows of each restaurant as compared to the net bookvalue of each restaurant's respective properties.  If the undiscounted cashflows of each restaurant are less than their respective net book values, therespective properties are written down to their fair market values. 

*** ***

F-7

Sales of Restaurants and RestaurantEquity Interests- Sales of restaurants or non-controlling equity interests in restaurantsdeveloped by the Company are recorded under either the full accrual method orthe installment method of accounting.  Under the full accrual method, a gain isnot recognized until the collectibility of the sales price is reasonablyassured and the earnings process is virtually complete without furthercontingencies.  When a sale does not meet the requirements for incomerecognition, the related gain is deferred until those requirements are met. Under the installment method, the gain is incrementally recognized as principalpayments on the related notes receivable are collected.  The Company'saccounting policy, with regards to the sale of restaurants, is in accordancewith SFAS No. 66.  If the initial payment is less than the percentages setforth, use of the installment method is required.  The Company currently has$29,000 collected from the sale of one restaurant, which did not meet theinitial payment test of SFAS No. 66, and the gain from that sale has beendeferred and is being recognized ratably in proportion to the payments receivedon the related notes receivable.

The Company's accounting for the saleof restaurants is in accordance with SAB Topic 5-E because the risks and otherincidents of ownership have been transferred to the buyer.  Specifically, a) nocontinuing involvement by the Company exists in restaurants that are sold, b)sales contracts and related income recognition are not dependant on the futuresuccessful operations of the sold restaurants, and c) the Company is notinvolved as a guarantor on the purchasers' debts.

Deferred Liabilities - Rentexpense is reflected on a straight-line basis over the term of the lease forall leases containing step-ups in base rent.  An obligation representing futurepayments (which totaled $517,000 as of September 30, 2007) is reflected inthe accompanying consolidated balance sheet as a deferred liability.  Alsoincluded in the $1,052,000 deferred and other liability balance is a $482,000deferred gain on the sale of the building and improvements of two Company-ownedrestaurants in two separate sale leaseback transactions.  The building andimprovements were subsequently leased back from the third party purchasers. The gains will be recognized in future periods in proportion to the rents paidon the fifteen and twenty year leases.  The remaining balance includes adeferred gain of $27,000 on the sale of a restaurant, and a deferred hedgingloss liability of $26,000.  

Opening Costs - Openingcosts are expensed as incurred.

Advertising - The Companyincurs advertising expenses in connection with the marketing of its restaurantoperations.  Advertising costs are expensed when the related advertisingbegins.

Franchise and Area Development Fees - Individualfranchise fee revenue is deferred when received and is recognized as incomewhen the Company has substantially performed all of its obligations under thefranchise agreement and the franchisee has commenced operations.  The Company'scommitments and obligations pursuant to the franchise agreements consist of a)development assistance; including site selection, building specifications andequipment purchasing and b) operating assistance; including training ofpersonnel and preparation and distribution of manuals and operating materials. All of these obligations are effectively complete upon the opening of therestaurant at which time the franchise fee and the portion of any developmentfee allocable to that restaurant is recognized.  There are no additionalmaterial commitments or obligations.

The Company has not recognized anyfranchise fees that have not been collected.  The Company segregates initialfranchise fees from other franchise revenue in the statement of operations. Revenues and costs related to company-owned restaurants are segregated fromrevenues and costs related to franchised restaurants in the statement ofoperations.

Continuing royalties from franchisees,which are a percentage of the gross sales of franchised operations, arerecognized as income when earned.  Franchise development expenses, whichconsist primarily of legal costs and restaurant opening expenses associatedwith developing and opening franchise restaurants, are expensed against therelated franchise fee income.

Accounting for Notes Receivable - TheCompany's notes receivables are all due from Good Times franchisees, orfranchise advertising cooperatives. All of the notes receivable arecollateralized by real estate or equipment and certain of the notes arepersonally guaranteed by the franchisees. The notes are all term notes withinterest accruing at market rates. The Company reviews the notes from time totime to access collectability. The Company has determined that all notesreceivable at September 30, 2007 are collectable and allowances for write-downsare not necessary.

Operating Partner Program - OperatingPartners in a restaurant share in future increases of their restaurant's cashflows above an established baseline, which is based on the preceding twelvemonths' cash flow after full allocation of advertising and capital expenses. This program is designed to figuratively put Operating Partners in the shoes ofan owner so that a portion of their compensation is derived solely from theimprovement in the financial performance of their respective restaurants.  Theportion of cash flow increases allocable to the Operating Partners are expensedas incurred on a quarterly basis, with a cumulative adjustment made for anymonths where cash flows fall below the established baselines. Compensationunder this program is expensed to restaurant operations as incurred.  No otherlong term benefits accrue or vest to the Operating Partners in this program. Operating Partners are employees at will and are subject to termination fromthis program if certain operating, customer service and financial objectivesare not met.

Income Taxes - Incometaxes are recorded in accordance with asset and liability approaches whereby the recognition of deferred tax liabilities and assets are recorded for theexpected future tax consequences of temporary differences between the carryingamounts and the tax bases of the Company's assets and liabilities. Valuation allowancesare provided for deferred tax assets if their recovery is more not likely thannot.

*** ***

F-8

Net Income (Loss) Per Common Share - The income(loss) per share is presented in accordance with the provisions of SFASNo. 128, "Earnings Per Share."  Basic EPS is calculated by dividing theincome (loss) available to common stockholders by the weighted average numberof common shares outstanding for the period.  Diluted EPS reflects thepotential dilution that could occur if securities or other contracts to issuecommon stock were exercised or converted into common stock. Options for 137,090and 141,875 shares of common stock were included in computing diluted EPS for2007 and 2006 respectively because they were dilutive. 

Financial Instruments andConcentrations of Credit Risk - Credit risk represents theaccounting loss that would be recognized at the reporting date ifcounterparties failed completely to perform as contracted.  Concentrations ofcredit risk (whether on or off balance sheet) that arise from financialinstruments exist for groups of customers or counterparties when they havesimilar economic characteristics that would cause their ability to meetcontractual obligations to be similarly effected by changes in economic orother conditions.  Financial instruments with off-balance-sheet risk to theCompany include lease liabilities whereby the Company is contingently liable asa guarantor of certain leases that were assigned to third parties in connectionwith various sales of restaurants to franchisees (see Note 5).  

Financial instruments potentiallysubjecting the Company to concentrations of credit risk consist principally ofreceivables.  At September 30, 2007, notes receivable totaled $388,000 and aredue from eight entities.  Additionally, the Company has other currentreceivables totaling $187,000, which includes $81,000 of franchise receivables.

The Company purchases 100% of itsrestaurant food and paper from one vendor. The Company believes a sufficientnumber of other suppliers exist from which food and paper could be purchased toprevent any long-term, adverse consequences.  

The Company operates in one industrysegment, restaurants.  A geographic concentration exists because the Company'scustomers are generally located in the State of Colorado. 

The estimated fair values of financialinstruments are determined at discrete points in time based on relevant marketinformation.  These estimates involve uncertainties and cannot be determinedwith precision.  The carrying amounts of all financial instruments approximatefair value as a result of either the instrument's short-term maturities orinterest rates that approximate the Company's current expected borrowing andlending rates. 

Comprehensive Income (Loss) -Comprehensive income includes net income or loss, changes in certain assets andliabilities that are reported directly in equity such as adjustments resultingfrom unrealized gains or losses on held-to-maturity investments and certainhedging transactions. See Note 10 for additional information. 

Stock-Based Compensation - EffectiveOctober 1, 2006, the Company adopted the provisions of Statement of FinancialAccounting Standard ("SFAS") No. 123(R), Share-Based Payment, using themodified prospective application transition method. Under the provisions ofSFAS 123(R), stock-based compensation is measured at the grant date, based onthe calculated fair value of the award, and is recognized as an expense overthe requisite employee service period (generally the vesting period of thegrant). See Note 10 for additional information.

Variable Interest Entities - In December2003, the FASB finalized FASB Interpretation No. 46R, "Consolidation ofVariable Interest Entities - An Interpretation of ARB51" (FIN 46R). FIN 46Rexpands the scope of ARB51 and can require consolidation of "variable interestentities" (VIEs).  Once an entity is determined to be a VIE, the party with thecontrolling financial interest, the primary beneficiary, is required toconsolidate it.  The Company has several franchisees with notes payable to theCompany.  These franchisees are variable interest entities as defined by FIN46R, however, the Company is not the primary beneficiary of these entities. Therefore they are not required to be consolidated under FIN 46R.

Accounting Changes and ErrorCorrections- In May 2005, FASB issued Statement of Financial Accounting Standards No. 154,"Accounting Changes and Error Corrections - A Replacement of APB Opinion No. 20and FASB Statement No. 3" ("SFAS No. 154").  SFAS No. 154 changes the requirementsfor the accounting for and reporting of a change in accounting principle. Theprovisions of SFAS No. 154 require, unless impracticable, retrospectiveapplication to prior periods' financial statements of (1) all voluntary changesin principles and (2) changes required by a new accounting pronouncement, if aspecific transition is not provided.  SFAS No. 154 also requires that a changein depreciation, amortization, or depletion method for long-lived,non-financial assets be accounted for as a change in accounting estimate, whichrequires prospective application of the new method.  SFAS No. 154 is effectivefor all accounting changes made in fiscal years beginning afterDecember 15, 2005, which is our fiscal year beginning October 1, 2006. Theadoption of SFAS No. 154 did not have a material impact on the Company'sconsolidated financial position or results of operations.

*** ***

F-9

New Accounting Pronouncements - In June2006, the FASB issued FIN 48, "Accounting for Uncertainty in Income Taxes - aninterpretation of FASB Statement 109," which clarifies the accounting foruncertainty in income taxes recognized in an enterprise's financial statementsin accordance with FAS 109, "Accounting for Income Taxes."  FIN 48 prescribes arecognition threshold and measurement attribute for the financial statementrecognition and measurement of a tax position taken or expected to be taken ina tax return.  FIN 48 is effective for fiscal years beginning after December15, 2006, which will be our fiscal year beginning October 1, 2007.  Theadoption of this statement will not have a material impact on the Company'sfinancial position or results of operations.

In September2006, the FASB issued Statement of Financial Accounting Standards No. 157,"Fair Value Measurements" ("SFAS 157").  SFAS 157 defines fair value,establishes a framework for using fair value to measure assets and liabilities,and expands disclosures about fair value measurements.  Thisstatement applies under other accounting pronouncements that currently requireor permit fair value measurements and is effective for fiscal years beginningafter November 15, 2007, which will be our fiscal year beginning October 1,2008.  In February 2007, the FASB issued Statement of FinancialAccounting Standards No. 159, "The Fair Value Option for Financial Assets andFinancial Liabilities" ("SFAS 159").  SFAS 159 permits companies tochoose to measure many financial instruments and certain other items at fairvalue.  If the fair value option is elected, unrealized gains and losseswill be recognized in earnings at each subsequent reportingdate.  SFAS 159 has the same effective date as SFAS157.  The adoption of these statements is not expected to have amaterial impact on the Company's financial position or results of operations.

In November 2007, the FASB issuedSFAS No. 141 (revised 2007), *Business Combination* (FAS 141(R))and SFAS No. 160, *Noncontrolling Interests in Consolidated FinancialStatements, an amendment of ARB No. 51* (FAS 160). FAS 141(R)will change how business acquisitions are accounted for and will impactfinancial statements both on the acquisition date and in subsequent periods.FAS 160 will change the accounting and reporting for minority interests,which will be recharacterized as noncontrolling interests and classified as acomponent of equity. FAS 141(R) and FAS 160 are effective for bothpublic and private companies for fiscal years beginning on or afterDecember 15, 2008 (fiscal 2010 for the Company). FAS 141(R) will beapplied prospectively. FAS 160 requires retroactive adoption of thepresentation and disclosure requirements for existing minority interests. Allother requirements of FAS 160 will be applied prospectively. Earlyadoption is prohibited for both standards. Management is currently evaluatingthe requirements of FAS 141(R) and FAS 160 and has not yet determinedthe impact on its financial statements.

2.           Notes Receivable:

Notesreceivable consists of the following as of September 30, 2007:

Notes  receivable from franchisees related to the sale of restaurants; 8.15%  interest per annum; monthly payments of principal and interest are due in the  amount of approximately $3,100; final payment due in 2017; collateralized by  a second security interest in buildings and equipment and guaranteed by an  individual.

$255,000

 

Notes  receivable from franchisees related to installation of certain equipment;  8.5% to 10% interest per annum; monthly payments of principal and interest  are due in the amount of approximately $3,200; final payment due in 2010;  collateralized by all fixtures and equipment of the related restaurants.

61,000

 

Other,  various terms

72,000

388,000

Less  current portion

(88,000)

Notes receivable, net of current  portion

$300,000

*** ***

F-10

3.           Debt:

Notes  payable with PFGI II, LLC with monthly payments of interest (prime rate +2%,  the prime rate at September 30, 2007 was 7.5%) with all unpaid principal due  on July 10, 2008.  The loans are secured by four Leasehold Deeds of Trust and  two Security Agreements and Assignment of Rents and  Fixture Filings related to those six corporate restaurants.  The promissory  notes constitute a revolving line of credit which may be advanced, repaid and  re-advanced from time to time. The maximum available under these lines is  $2,000,000.

$750,000

Note payable  with Wells Fargo Bank, NA with payments of principal and interest (prime rate  less .5%) due monthly and the final payment due in April 2015.  The loan is  secured by four Security Agreements related to four corporate restaurants.

1,066,000

Other, various terms

24,000

1,840,000

Less current portion

(870,000)

$970,000

In conjunctionwith the Wells Fargo Bank term loan, the Company entered into a variable tofixed interest rate swap agreement with Wells Fargo Bank effective May 9, 2007,with a notional amount of $1,100,000, a pay rate of 7.77% and a receive ratebased on the bank prime rate less .50%. The swap agreement has an eight-yearterm and has the effect of normalizing the effective interest rate at 7.77%.

Asof September 30, 2007, the fair value of the contract was a loss of $26,000.This change in the fair value has been recorded in other comprehensive loss.

As of September 30, 2007, principalpayments on debt became due as follows:

Years Ending

September  30,

2008

$   870,000

2009

124,000

2010

124,000

2011

134,000

2012

144,000

Thereafter

    444,000

 

$1,840,000

In connection with the WellsFargo Bank loan, the Company has agreed to certain covenants, which includeminimum tangible net worth, a total liabilities to tangible net worth ratio anda fixed charge coverage ratio, as defined in the agreement. As of September 30,2007, the Company was in compliance with its loan covenants.

4.           Other Accrued Liabilities:

Otheraccrued liabilities consist of the following at September 30, 2007:

Wages  and other employee benefits

$   311,000

Taxes,  other than income tax

525,000

Other

226,000

$1,062,000

*** ***

F-11

5.           Commitments and Contingencies:

The Company's office space, and theland and buildings related to the Drive Thru restaurant facilities areclassified as operating leases and expire over the next 17 years. Some leasescontain escalation clauses over the lives of the leases. Most of the leasescontain one to three five-year renewal options at the end of the initial term. Certainleases include provisions for additional contingent rent payments if salesvolumes exceed specified levels. The Company paid no material contingentrentals during fiscal 2007 and 2006.

Following is a summary of operatinglease activities:

Year Ended  September 30,

2007

Minimum  rentals

$2,214,000

Less  sublease rentals

   (386,000)

Net rent  paid

$1,828,000

As of September 30, 2007, future minimumrental commitments required under the Company's operating leases   that haveinitial or remaining noncancellable lease terms in excess of one year are asfollows:

Years   Ending September 30,

      2008

$ 2,345,000

      2009

2,250,000

      2010

2,003,000

      2011

1,841,000

      2012

1,729,000

   Thereafter

 11,908,000

22,076,000

Less sublease rentals

 (3,465,000)

$18,611,000

The Company is contingently liable onseveral ground leases that have been subleased or assigned to franchisees. Thesubleased and assigned leases expire between 2008 and 2021. The Company hasnever experienced any losses from these contingent lease liabilities.

The Company was a guarantor on a franchisee'sSmall Business Administration note payable with a bank. The note payable waspaid in full by the franchisee in October 2006.  The Company has no otherguarantees related to franchisees.

6.        Financing Transactions:

In July 2006, the Company purchased the equipmentand improvements from a franchisee for total consideration of $329,000.  Theassets of the restaurant were recorded on the Company's books at the fairmarket value of $296,000, resulting in the recording of goodwill in the amountof $33,000.  In May 2007 the Company sold the restaurant to an unrelated thirdparty franchisee, resulting in the write off of the goodwill. The land.building and improvements for this site were originally sold in a salelease-back transaction. We will remain contingently liable on that lease whichwas subleased to the new franchisee. The Company has maintained ownership ofthe fixtures and equipment and entered into a lease of those assets with thefranchisee.

In May 2007 theCompany borrowed $1,100,000 from Wells Fargo Bank under a note payable with aneight year term with a floating interest rate at .50% below prime.  Wesimultaneously entered into an interest rate swap transaction with Wells FargoBank for the full $1,100,000 with a fixed interest rate of 7.77% for the fulleight year term coinciding with the note payable.  Partial proceeds from theloan were used to: 1) payoff our existing GE Capital notes payable of $398,000;and, 2) fund new store construction. The balance of the proceeds will be usedto partially fund the purchase of an existing restaurant from a franchisee.

7.        Managed Limited Partnerships:

*** ***

F-12

Drive Thru is the general partner of two limitedpartnerships that were formed to develop Drive Thru restaurants.  Limitedpartner contributions have been used to construct new restaurants.  Drive Thru,as a general partner, generally receives an allocation of approximately 51% ofthe profit and losses and a fee for its management services.  The limitedpartners' equity has been recorded as a minority interest in the accompanyingconsolidated financial statements.

8.        Income Taxes:

Deferred tax assets (liabilities) are comprised ofthe following at September 30, 2007:
     CurrentLong Term
Deferred  assets (liabilities):

Tax effect  of net operating loss carryforward

$         -

$1,703,000

Partnership  basis difference

-

157,000

Deferred  revenue

-

205,000

Property and  equipment basis differences

-

34,000

Other  accrued liability difference

14,000

 

               -

Net  deferred tax assets

14,000

2,099,000

Less  valuation allowance*

(14,000)

(2,099,000)

 

 

Net  deferred tax assets

$         -

$             -

*   Thevaluation allowance increased by $55,000 during the year endedSeptember 30, 2007.

The Company has net operating losscarryforwards of approximately $4,363,000 for income tax purposes which expirefrom 2008 through 2026.  The use of these net operating loss carryforwards maybe restricted due to changes in ownership.

Total income tax expense for the yearsended 2007 and 2006 differed from the amounts computed by applying the U.S.Federal statutory tax rates to pre-tax income as follows:

2007

2006

Total  expense (benefit) computed by applying the U.S. Statutory rate (35%)

$10,000

$    6,000

State income tax, net of  federal tax benefit

1,000

 1,000

Effect of change in valuation  allowance

 55,000

 19,000

Permanent differences

 41,000

(87,000)

Other

      (107,000)

(39,000)

Provision for income taxes

$       -

$         -

 

*** ***

F-13

9.              Related Parties:

A significant stockholder has enteredinto two franchise and management agreements with the Company.  The Companyalso leases office space from this stockholder under a lease agreement whichexpires in 2008.  Rent paid to the stockholder in 2007 and 2006 for officespace was $54,000 and $53,000, respectively.  One of the Company's Boardmembers is a principal of the stockholder.

TheBailey Company is also the owner of two franchised Good Times Drive Thrurestaurants which are located in Thornton and Loveland, Colorado.  The BaileyCompany has entered into two franchise and management agreements with us, andpayments under those agreements totaled $90,000 for the fiscal year endedSeptember 30, 2007.

10.          Stockholders' Equity:

Preferred Stock - The Companyhas the authority to issue 5,000,000 shares of preferred stock.  The Board ofDirectors has the authority to issue such preferred shares in series anddetermine the rights and preferences of the shares as may be determined by theBoard of Directors.

On February 10, 2005 the Companyclosed on the private placement of a total of 1,240,000 shares of Series BPreferred Stock for $2.50 per share. The aggregate purchase price for the1,180,000 shares issued for cash was $2,950,000 with net proceeds ofapproximately $2,666,000. The Company had certain mandatory conversion rightswhich were exercised on June 8, 2006. The preferred shares accrued dividends atthe rate of 6% per annum beginning on the first anniversary of the issuance ofthe shares. A declared dividend of $25,000 for the period from February 10,2006 to March 31, 2006 was paid on May 15, 2006. Upon the mandatory conversionof the preferred shares to common shares on June 8, 2006 dividends of $35,000were paid for the period April 1, 2006 to June 8, 2006

Common Stock Dividend Restrictions - As long asat least two-thirds of the shares of common stock into which the Series BPreferred Stock was converted remains held by the former holders of suchconverted Series B Preferred Stock, without the written consent or affirmativevote of the holders of three-quarters of the then outstanding votes of theshares of the Series B Preferred Stock and the shares of the common stock, theCompany cannot institute any payment of cash dividends or other distributionson any shares of common stock.

Stock Option Plans - The Companyhas a stock option plan (the "2001 Stock Option Plan") whereby 66,830 sharesare available for future grants as either incentive stock options ornon-statutory stock options.  No further shares are available for future grantsunder the Company's 1992 Incentive Stock Option Plan and the 1992 Non-StatutoryStock Option Plan.

Effective October 1, 2006, the Companyadopted the provisions of Statement of Financial Accounting Standard ("SFAS")No. 123(R), Share-Based Payment, using the modified prospective applicationtransition method. Under the provisions of SFAS 123(R), stock-basedcompensation is measured at the grant date, based on the calculated fair valueof the award, and is recognized as an expense over the requisite employeeservice period (generally the vesting period of the grant).

On August 3, 2006, the Company's Boardof Directors, upon the review and recommendation by the Compensation Committeeof the Board, approved the acceleration of the vesting, effective August 3,2006, of outstanding unvested stock options to purchase a total ofapproximately 108,235 shares of the Company's common stock, representing alloutstanding unvested stock options granted under the Company's 2001 StockOption Plan that are held by current employees, including all executiveofficers of the Company. Stock options held by the Company's non-employeemembers of the Board were not accelerated. As a result, the acceleratedoptions, which would otherwise have vested at various times over the next fouryears, became fully vested on August 3, 2006. As a result there were nounvested options outstanding as of October 1, 2006.

The Company measures the compensationcost associated with share-based payments by estimating the fair value of stockoptions as of the grant date using the Black-Scholes option pricing model. TheCompany believes that the valuation technique and the approach utilized todevelop the underlying assumptions are appropriate in calculating the fairvalues of the Company's stock options granted during fiscal 2007. Estimates offair value are not intended to predict actual future events or the valueultimately realized by the employees who receive equity awards.

Net income for the fiscal year endedSeptember 30, 2007 includes $84,000 of compensation costs related to ourstock-based compensation arrangements.

During the fiscal year ended September30, 2007, we granted 12,000 non-statutory stock options and 52,775 incentivestock options both with exercise prices of $6.38. The per share weightedaverage fair values were $3.84 for non-statutory stock option grants and $3.67for incentive stock option grants.

*** ***

F-14

In addition to the exercise and grantdate prices of the awards, certain weighted average assumptions that were usedto estimate the fair value of stock option grants are listed in the followingtable:

Incentive  Stock Options

Non-Statutory  Stock Options

Expected term (years)

6.0

6.7

Expected volatility

56%

56%

Risk-free interest rate

4.6%

4.6%

Expected dividends

0

0

We estimate expected volatility basedon historical weekly price changes of our common stock for a period equal tothe current expected term of the options. The risk-free interest rate is basedon the United States treasury yields in effect at the time of grantcorresponding with the expected term of the options. The expected option termis the number of years we estimate that options will be outstanding prior toexercise considering vesting schedules and our historical exercise patterns.

SFAS 123(R) requires the cash flowsresulting from the tax benefits for tax deductions in excess of thecompensation expense recorded for those options (excess tax benefits) to beclassified as financing cash flows. These excess tax benefits were $0 for thefiscal year ended September 30, 2007.

A summary ofstock option activity under our share-based compensation plan for the fiscalyear ended September 30, 2007 is presented in the following table:

Options

Weighted  Average Exercise Price

Weighted  Average Remaining Contractual Life (Yrs.)

Aggregate  Intrinsic Value

Outstanding-beg of year

 358,775

$3.29

Granted

 64,775

$6.38

Exercised

(55,745)

$2.96

Forfeited or expired

 (900)

$2.37

Outstanding  Sept 30, 2007

366,905

$3.89

5.5

$650,000

Exercisable Sept 30, 2007

314,130

$3.47

4.9

$650,000

As of September 30, 2007, the totalremaining unrecognized compensation cost related to unvested stock-basedarrangements was $145,000 and is expected to be recognized over a weightedaverage period of 3.1 years.

The total intrinsic value of stockoptions exercised during the fiscal year ended September 30, 2007, was$157,000. Cash received from stock option exercises for the fiscal year endedSeptember 30, 2007 was $164,000.

Accumulated Other Comprehensive Loss -  In May2007, the Company entered into an interest rate swap agreement, designated as acash flow hedge, which hedges the Company's exposure to interest ratefluctuations on the Company's floating rate $1,100,000 term loan. The Companyrecords the fair value of these contracts in the balance sheet, with the offsetto other comprehensive loss. The contract requires monthly settlements of thedifference between the amounts to be received and paid under the agreement, theamount of which is recognized in current earnings as interest expense. See NoteThree for additional information.

11.         Retirement Plan:

The Company has a 401(k) profitsharing plan (the "Plan").  Eligible employees may make voluntary contributionsto the Plan, which are matched by the Company, in an amount equal to 25% of theemployee's contribution up to 6% of their compensation.  The amount of employeecontributions is limited as specified in the Plan. The Company may, at itsdiscretion, make additional contributions to the Plan or change the matchingpercentage.  The Company made matching contributions of $30,000 in both fiscal2007 and fiscal 2006.  All matching contributions are made in cash.

*** ***

F-15

12.         Subsequent Events:

On December 3, 2007, we entered into adevelopment agreement with Zen Partners LLC that is comprised of a DevelopmentAgreement, a Management Agreement and a Site Selection, Construction Management and Pre-Opening Services Agreement.  The agreements provide for thedevelopment of up to twenty five restaurants with a five year development schedulefor up to ten of the restaurants with an option to develop an additionalfifteen restaurants, exercisable any time during the initial five yearperiod.   We will manage and operate the restaurants utilizing our employees onthe same basis as we would company-owned restaurants, however the Zen PartnersLLC will provide all development and operating capital.  We will receive afixed fee for the development of each restaurant and a recurring management feebased on a percentage of sales for the operation of the restaurants.   We may provide a limited lease guarantee on the initial three restaurants developed, for which wewill receive an additional recurring guarantee fee.  We will also participatein the ongoing profitability of the restaurants after Zen Partners LLC has received a priority return on its invested capital.  A member of our Board of Directors and significant shareholder, David Grissen, is an owner of Zen Partners LLC.

*** ***

F-16

**Item 9.           ChangesIn and Disagreements with Accountants on Accounting and Financial Disclosure.**

During the two most recent fiscal years, GoodTimes Restaurants has not had any changes in or disagreements with itsindependent accountants on matters of accounting or financial disclosure.

**Item 9A.        Controls andProcedures**

We maintain a system of disclosure controls andprocedures that are designed for the purposes of ensuring that informationrequired to be disclosed in our SEC reports is recorded, processed, summarizedand reported within the time periods specified in the SEC's rules and forms,and that such information is accumulated and communicated to management,including the Chief Executive Officer and the Controller, who currentlyperforms the functions of principal financial officer, as appropriate to allowtimely decisions regarding required disclosure.

As of the end of the period covered by thisreport, we carried out an evaluation, under the supervision and with theparticipation of management, including the Chief Executive Officer and theController, of the effectiveness of the design and operation of our disclosurecontrols and procedures.  Based upon that evaluation, the Chief ExecutiveOfficer and the Controller concluded that our disclosure controls andprocedures are effective for the purposes discussed above as of the end of theperiod covered by this report.  There was no change in our internal controlover financial reporting that occurred during the fourth quarter of the fiscalyear ended September 30, 2007 that has materially affected, or is reasonablylikely to materially affect our internal control over financial reporting.

**Item 9B.         Other Information**

Nothing to report.

**PART III**

**Item 10.         Directors,Executive Officers, Promoters and Control Persons and Corporate Governance;Compliance with Section 16(a) of the Exchange Act**

The information required by this Item concerningour directors and executive officers is incorporated by reference to theinformation provided under the captions "Election of Directors" and"Executive Officers" in our definitive proxy statement for the annualmeeting of stockholders, to be held on January 24, 2008 and to be filed within120 days from September 30, 2007.  Information regarding the Company's Code ofEthics, nominating procedures and Audit Committee can be found on page 10 ofthe proxy statement.

The information required by this Item concerningcompliance with Section 16(a) of the Securities Exchange Act of 1934 isincorporated by reference to the information provided under the caption"Section 16(a) Beneficial Ownership Reporting Compliance" in ourdefinitive proxy statement for the annual meeting of stockholders, to be heldon January 24, 2008 and to be filed within 120 days from September 30, 2007.

**Item 11.         ExecutiveCompensation**

The information required by this Item isincorporated by reference to the information provided under the captions"Directors' Compensation" and "Executive Compensation" inour definitive proxy statement for the annual meeting of stockholders to beheld on January 24, 2008 and to be filed within 120 days from September 30, 2007.

**Item12.         Security Ownership of Certain Beneficial Owners and Management andRelated Stockholder Matters**

The information required by this Item concerningsecurity ownership of certain beneficial owners and management is incorporatedby reference to the information provided under the caption " Ownership of commonstock by Principal Stockholders and Management" in our definitive proxystatement for the 2008 annual meeting of stockholders to be filed within 120days from September 30, 2007.

The information required by this Itemconcerning securities authorized for issuance under equity compensation plansis incorporated by reference to the information provided under the caption"Disclosure with Respect to the Company's Equity Compensation Plan"in Part II - Item 5 - Market for Common Equity and Related Stockholder Matters,included in this Form 10-KSB.

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**Item 13.         CertainRelationships, Related Transactions and Director Independence.**

The information required by this Item isincorporated by reference to the information provided under the caption"Certain Relationships and Related Transactions" in our definitiveproxy statement for the 2007 annual meeting of stockholders to be filed within120 days from September 30, 2006.

Theinformation required by this Item concerning director independence isincorporated by reference to the information provided under the captions"Nominee selection process", "Nominees" and "Board Committees" in ourdefinitive proxy statement for the 2008 annual meeting of stockholders to befiled within 120 days from September 30, 2007.

** Item 14.        Principal AccountantFees and Services**

The information required by this Item isincorporated by reference to the information provided under the caption"Independent Public Accountants" in our definitive proxy statementfor the 2008 annual meeting of stockholders to be filed within 120 days fromSeptember 30, 2007.

**Item 15.         Exhibits**

The following exhibits are furnished as part ofthis report:

**Exhibit****           Description**

3.1             Articlesof Incorporation of the Registrant (previously filed on November 30, 1988 asExhibit 3.1 to the registrant's Registration Statement on Form S-18 (File No.33-25810-LA) and incorporated herein by reference)

3.2             Amendmentto Articles of Incorporation of the Registrant dated January 23, 1990(previously filed on January 18, 1990 as Exhibit 3.1 to the registrant'sCurrent Report on Form 8-K (File No. 000-18590) and incorporated herein byreference)

3.3             Amendmentto Articles of Incorporation (previously filed as Exhibit 3.5 to theregistrant's Annual Report on Form 10-KSB for the fiscal year ended September30, 1996 and (File No. 000-18590) incorporated herein by reference)

3.4             RestatedBylaws of Registrant dated November 7, 1997 (previously filed as Exhibit 3.6 tothe registrant's Annual Report on Form 10-KSB for the fiscal year endedSeptember 30, 1997 (File No. 000-18590) and incorporated herein by reference)

4.1             Certificateof Designations, Preferences, and Rights of Series B Convertible PreferenceStock of Good Times Restaurants Inc. (previously filed as Exhibit 1 to theAmendment No. 6 to Schedule 13D filed by The Erie County Investment Co., TheBailey Company, LLLP and Paul T. Bailey (File No. 005-42729) on February 14,2005 and incorporated herein by reference)

10.1           Formof Promissory Note dated November 3, 1995 by and between AT&T CommercialFinance Corporation, Boise Co-Development Limited Partnership, Good Times GoodTimes Inc. as general partner, and Good Times Restaurants Inc. as guarantor inthe amount of $254,625 (previously filed as Exhibit 10.34 to the registrant'sAnnual Report on Form 10-KSB/A for the fiscal year ended September 30, 1995(File No. 000-18590) and incorporated herein by reference)

10.2           Formof Promissory Note dated November 3, 1995 by and between AT&T CommercialFinance Corporation, Boise Co-Development Limited Partnership, Good Times GoodTimes Inc. as general partner, and Good Times Restaurants as guarantor in theamount of $104,055 (previously filed as Exhibit 10.35 to the registrant's AnnualReport on Form 10-KSB/A for the fiscal year ended September 30, 1995 (File No.000-18590) and incorporated herein by reference)

10.3           RegistrationRights Agreement dated May 31, 1996 regarding registration rights of the commonstock issuable upon conversion of the Series A Convertible Preferred Stock(previously filed as Exhibit 10.15 to the registrant's Annual Report on Form10-KSB/A for the fiscal year ended September 30, 1995 (File No. 000-18590) andincorporated herein by reference)

10.4           Amendmentand Agreement regarding Series A Convertible Preferred Stock by and betweenGood Times Restaurants Inc. and The Bailey Company dated December 3, 1997,effective as of October 31, 1997 (previously filed as Exhibit 10.13 to theregistrant's Annual Report on Form 10-KSB for the fiscal year ended September30, 1997 (File No. 000-18590) and incorporated herein by reference)

44

10.5           Indemnificationby Dr. Kenneth Dubach to Good Times Good Times Inc. dated December 10, 1996with respect to the promissory note of the Boise Co-Development LimitedPartnership dated November 3, 1995 in the original amount of $254,625 and thepromissory note dated November 3, 1995 in the original amount of $104,055(previously filed as Exhibit 10.14 to the registrant's Annual Report on Form10-KSB for the fiscal year ended September 30, 1997 (File No. 000-18590) andincorporated herein by reference)

10.6           Officelease (previously filed as Exhibit 10.12 to the registrant's Annual Report onForm 10-KSB for the fiscal year ended September 30, 1998 (File No. 000-18590)and incorporated herein by reference)

10.7           TheBailey Company Guaranty Agreement (previously filed as Exhibit 10.13 to theregistrant's Annual Report on Form 10-KSB for the fiscal year ended September30, 1998 (File No. 000-18590) and incorporated herein by reference)

10.8           1992Incentive Stock Option Plan, as amended (previously filed as Exhibit 4.9 to theregistrant's Annual Report on Form 10-KSB for the fiscal year ended September30, 1998 (File No. 000-18590) and incorporated herein by reference)

10.9           1992Non-Statutory Stock Option Plan, as amended (previously filed as Exhibit 4.10to the registrant's Annual Report on Form 10-KSB for the fiscal year endedSeptember 30, 1998 (File No. 000-18590) and incorporated herein by reference)

10.10          TheBailey Company Private Placement Letter Agreement dated March 12, 1999(previously filed as Exhibit 10.1 to the registrant's Quarterly Report on Form10-QSB for the quarter ended March 31, 1999 (File No. 000-18590) andincorporated herein by reference)

10.11          Warrantdated April 15, 1999 Issued to The Bailey Company, LLLP for the Purchase of25,000 Shares of Common Stock of Good Times Restaurants Inc. (previously filedas Exhibit 4.2 to Amendment No. 4 to Schedule 13D filed on June 7, 1999 by TheBailey Company, LLLP, The Erie County Investment Co., and Paul T. Bailey (FileNo. 005-42729) and incorporated herein by reference)

10.12          MerrillLynch Commitment Letter dated November 17, 1999 for Line of Credit (previouslyfiled as Exhibit 10.18 to the registrant's Annual Report on Form 10-KSB for thefiscal year ended September 30, 1999 (File No. 000-18590) and incorporatedherein by reference)

10.13          GECapital Term Note dated November 14, 2001 (previously filed as Exhibit 10.15 tothe registrant's Annual Report on Form 10-KSB for the fiscal year endedSeptember 30, 2001 (File No. 000-18590) and incorporated herein by reference)

10.14          GECapital Note dated November 14, 2001 (previously filed as Exhibit 10.1 to theregistrant's Quarterly Report on Form 10-QSB for the quarter ended December 31,2001 (File No. 000-18590 and incorporated herein by reference)

10.15          EmploymentAgreement dated October 3, 2001 between the registrant and Boyd E. Hoback

10.16          WellsFargo Credit Agreement (previously filed as Exhibit 10.17 to the registrant'sAnnual Report on Form 10-KSB for the fiscal year ended September 30, 2003 (FileNo. 000-18590) and incorporated herein by reference)

10.17          Formof Option Agreement (previously filed as Exhibit 10.18 to the registrant'sAnnual Report on Form 10-KSB for the fiscal year ended September 30, 2004 (FileNo. 000-18590) and incorporated herein by reference)

10.18          Formof Option Grant Notice (previously filed as Exhibit 10.19 to the registrant'sAnnual Report on Form 10-KSB for the fiscal year ended September 30, 2004 (FileNo. 000-18590) and incorporated herein by reference)

10.19          CashBonus Plan for Boyd Hoback (previously filed as Exhibit 10.20 to theregistrant's Annual Report on Form 10-KSB for the fiscal year ended September30, 2004 (File No. 000-18590) and incorporated herein by reference)

10.20          SecuritiesPurchase Agreements (previously filed on the registrant's Current Report onForm 8-K dated January 3, 2005 (File No. 000-18590) and incorporated herein byreference)

10.21          Amendmentto Securities Purchase Agreement (previously filed as Exhibit 10.1 to theregistrant's Form 8-K Report dated January 27, 2005 (File No. 000-18590) andincorporated herein by reference)

10.22          2001Stock Option Plan, as amended (previously filed as Exhibit 99.1 to theregistrant's Registration Statement on Form S-8 filed on May 23, 2005(Registration No. 333-125150) and incorporated herein by reference)

10.23          RegistrationStatement (previously filed on the registrant's Registration Statement on FormS-3 filed on February 17, 2005 (Registration No. 333-122890) and incorporatedherein by reference

45

10.24          AmendmentNo. 1 to Registration Statement (previously filed on the registrant'sRegistration Statement on Form S-3 filed on April 4, 2005 (Registration No.333-122890) and incorporated herein by reference

10.25          Conversionof Series B Convertible Preferred Stock (previously filed as Exhibit 99.1 tothe registrant's Form 8-K Report dated June 8, 2006 (File No. 000-18590) andincorporated herein by reference)

10.26          LoanAgreement and Promissory Note (previously filed as Exhibit 10.1 and 10.2 to theregistrant's Form 8-K Report dated August 7, 2006 (File No. 000-18590) andincorporated herein by reference)

10.27          Accelerationof Vesting of Stock Options and Form of Resale Restriction Agreement(previously filed as Exhibit 10.1 to the registrant's Form 8-K Report dated August8, 2006 (File No. 000-18590) and incorporated herein by reference)

10.28          Expansionof Loan Agreement and Promissory Note (previously filed as Exhibit 10.1 and10.2 to the registrant's Form 8-K Report dated March 15, 2007 (File No.000-18590) and incorporated herein by reference)

10.29          LoanAgreement and Promissory Note (previously filed as Exhibit 10.1 and 10.2 to theregistrant's Form 8-K Report dated May 7, 2007 (File No. 000-18590) andincorporated herein by reference)

10.30          AmendmentNo. 1 to Loan Agreement and Promissory Note (previously filed as Exhibit 10.1and 10.2 to the registrant's Form 8-K Report dated May 10, 2007 (File No.000-18590) and incorporated herein by reference)

10.31          DevelopmentAgreement (previously filed as Exhibit 10.1to the registrant's Form 8-K Reportdated December 2, 2007 (File No. 000-18590) and incorporated herein byreference)

10.32          ManagementAgreement (previously filed as Exhibit 10.2 to the registrant's Form 8-K Reportdated December 2, 2007 (File No. 000-18590) and incorporated herein byreference)

10.33          SiteSelection, Construction Management and Pre-Opening Services Agreement(previously filed as Exhibit10.3 to the registrant's Form 8-K Report datedDecember 2, 2007 (File No. 000-18590) and incorporated herein by reference)

14.1           Codeof Ethics (previously filed as Exhibit 14.1 to the registrant's Annual Reporton Form 10-KSB for the fiscal year ended September 30, 2003 (File No.000-18590) and incorporated herein by reference)

21.1           Subsidiariesof registrant (previously filed as Exhibit 21.1 to the registrant's AnnualReport on Form 10-KSB for the fiscal year ended September 30, 1998 (File No.000-18590) and incorporated herein by reference)

23.1           *Consentof HEIN & ASSOCIATES LLP

31.1           *Certificationof Chief Executive Officer pursuant to 18 U.S.C. Section 1350

31.2           *Certificationof Controller pursuant to 18 U.S.C. Section 1350

32.1           *Certificationof Chief Executive Officer and Controller pursuant to 18 U.S.C. Section 1350

*Filed herewith.

46

**SIGNATURES**

In accordancewith Section 13 or 15(d) of the Exchange Act, the registrant caused this reportto be signed on its behalf by the undersigned, thereunto duly authorized.

** **

**GOOD TIMES  RESTAURANTS INC.**

Date:  December 28, 2007

*/s/  Boyd E. Hoback*

Boyd  E. Hoback

President  and Chief Executive Officer

Inaccordance with the Exchange Act, this report has been signed below by thefollowing persons on behalf of the registrant and in the capacities and on thedates indicated.

*/s/  Eric W. Reinhard*

* *

*/s/ Boyd E. Hoback*

Eric  W. Reinhard, Chairman

and  Chief Development Officer

Date: December 28, 2007

Boyd E. Hoback, Director 

and President and CEO

Date: December 28, 2007

*/s/  Geoffrey R. Bailey*

*/s/  Susan M. Knutson*

Geoffrey  R. Bailey, Director

Date:  December 28, 2007

Susan  M. Knutson, Controller and

Principal  Financial Officer

Date: December 28, 2007

*/s/  Ron Goodson*

*/s/  Richard J. Stark*

Ron  Goodson, Director

Date: December 28, 2007

Richard  J. Stark, Director

Date:  December 28, 2007

*/s/  David Grissen*

* *

*/s/ Alan A. Teran*

David  Grissen, Director

Date:  December 28, 2007

Alan A. Teran, Director

Date: December 28, 2007

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