| ** **

** **

**UNITED STATES**                                              |
|----------------------------------------------------------------------------------------|
| **SECURITIES AND EXCHANGE COMMISSION**                                                 |
| **WASHINGTON, D.C. 20549**                                                             |
| **FORM 10-Q**                                                                          |
| (Mark One)                                                                             |
| [x]  QUARTERLY REPORT PURSUANT TO  SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE |
| ACT OF 1934                                                                            |
|                                                                                        |
| For the quarterly period ended March 31,  2011                                         |
|                                                                                        |
| OR                                                                                     |
|                                                                                        |
| [  ]  TRANSITION REPORT PURSUANT TO  SECTION 13 OR 15(d) OF THE SECURITIES   |
| EXCHANGE ACT OF 1934                                                                   |
| Commission File Number: 0-18590                                                        |
|                                                                                        |
| **GOOD TIMES RESTAURANTS, INC**.                                                       |
| (Exact Name of Registrant as Specified  in Its Charter)                                |
| NEVADA                                                          |  | 84-1133368                              |
|-----------------------------------------------------------------|--|-----------------------------------------|
| (State or Other Jurisdiction of

Incorporation or Organization) |  | (I.R.S. Employer Identification Number) |
| 601 CORPORATE CIRCLE, GOLDEN, CO 80401                        |
|---------------------------------------------------------------|
| (Address of Principal Executive Offices,  Including Zip Code) |
| (303) 384-1400                                                |
| (Registrant's Telephone Number,  Including Area Code)         |
|                                                               |
| Indicate by  check mark whether the registrant: (1) has filed all reports required to be  filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during  the preceding 12 months (or for such shorter period that the registrant was  required to file such reports), and (2) has been subject to such filing  requirements for the past 90 days. | Yes [x] | No [  ] |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|---------|--------------|
| Indicate by  check mark whether the registrant is a large accelerated filer, an  accelerated filer, a non-accelerated filer or a smaller reporting company, as  defined in Rule 12b-2 of the Exchange Act |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Large accelerated filer  [  ]                 |  | Accelerated  filer                         [  ] |
|---------------------------------------------------------|--|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Non-accelerated filer     [  ] |  | Smaller  reporting company     [x]                                                                                                                       |
| Indicate by  check mark whether the registrant is a shell company (as defined in Rule 12b-2  of the Exchange Act). | Yes [  ] | No [x] |
|--------------------------------------------------------------------------------------------------------------------|---------------|--------|
| As of May 16,  2011, there were 2,726,214 shares of the Registrant's common stock, par value  $0.001 per share, issued and outstanding. |
|-----------------------------------------------------------------------------------------------------------------------------------------|

 

----

 

**Form 10-Q**

**Quarter Ended March 31,2011**
| ** ** | **INDEX**                                                                                                               | **PAGE** |
|------------|-------------------------------------------------------------------------------------------------------------------------|----------|
|            | **PART I - FINANCIAL INFORMATION**                                                                                      |          |
|            |                                                                                                                         |          |
| Item 1.    | Financial  Statements                                                                                                   |          |
|            |                                                                                                                         |          |
|            | Condensed  Consolidated Balance Sheets (unaudited) - March 31,  2011  and September 30, 2010                       | 3 - 4    |
|            |                                                                                                                         |          |
|            | Condensed Consolidated Statements of Operations  (unaudited) for the three and six months ended March  31, 2011and 2010 | 5        |
|            |                                                                                                                         |          |
|            | Condensed Consolidated Statements of Cash Flow  (unaudited) for the six months ended March 31, 2011and  2010            | 6        |
|            |                                                                                                                         |          |
|            | Notes to Condensed  Consolidated Financial Statements                                                                   | 7 - 13   |
|            |                                                                                                                         |          |
| Item 2.    | Management's Discussion and  Analysis of Financial Condition and Results of Operations                                  | 13 - 22  |
|            |                                                                                                                         |          |
| Item 3.    | Quantitative and  Qualitative Disclosures About Market Risk                                                             | 22       |
|            |                                                                                                                         |          |
| Item  4T.  | Controls and Procedures                                                                                                 | 22       |
|            |                                                                                                                         |          |
|            | **PART II - OTHER INFORMATION**                                                                                         |          |
|            |                                                                                                                         |          |
| Item 1.    | Legal Proceedings                                                                                                       | 22       |
|            |                                                                                                                         |          |
| Item  1A.  | Risk Factors                                                                                                            | 22       |
|            |                                                                                                                         |          |
| Item 2.    | Unregistered Sales of  Equity Securities and Use of Proceeds                                                            | 22       |
|            |                                                                                                                         |          |
| Item 3.    | Defaults Upon Senior  Securities                                                                                        | 22       |
|            |                                                                                                                         |          |
| Item 4.    | (Removed and reserved)                                                                                                  | 22       |
|            |                                                                                                                         |          |
| Item 5.    | Other Information.                                                                                                      | 22       |
|            |                                                                                                                         |          |
| Item 6.    | Exhibits                                                                                                                | 22       |
|            |                                                                                                                         |          |
|            | **SIGNATURES**                                                                                                          | 23       |
|            | ** **                                                                                                              |          |
|            | **CERTIFICATIONS**                                                                                                      |          |

2

----

**PART I. - FINANCIAL INFORMATION**

**ITEM 1.                FINANCIALSTATEMENTS**

** **

**GOOD TIMES RESTAURANTS INC. AND SUBSIDIARIES**

**CONDENSED CONSOLIDATED BALANCE SHEETS**

**(Unaudited)**

** **

**ASSETS**
|                                                                                                       | **March 31,**                                          |  | **September 30,**                          |
|-------------------------------------------------------------------------------------------------------|--------------------------------------------------------|--|--------------------------------------------|
|                                                                                                       | **2011**                                               |  | **2010**                                   |
| CURRENT ASSETS:                                                                                       |                                                        |  |                                            |  |
|         Cash and cash  equivalents                                 | $987,000                                          |  | $429,000                              |  |
|         Receivables, net of  allowance for doubtful accounts of $0 | 131,000                                           |  | 157,000                               |  |
|         Prepaid expenses  and other                                | 106,000                                           |  | 38,000                                |  |
|         Inventories                                                | 193,000                                           |  | 201,000                               |  |
|         Notes receivable                                           |         3,000  |  |       9,000  |  |
|         Total current  assets                                      | 1,420,000                                         |  | 834,000                               |  |
|                                                                                                       |                                                        |  |                                            |  |
| PROPERTY AND EQUIPMENT, at  cost:                                                                     |                                                        |  |                                            |  |
|         Land and building                                          | 5,475,000                                         |  | 5,653,000                             |  |
|         Leasehold  improvements                                    | 3,501,000                                         |  | 3,821,000                             |  |
|         Fixtures and  equipment                                    |   7,637,000                                  |  |   8,229,000                      |  |
|                                                                                                       | 16,613,000                                        |  | 17,703,000                            |  |
|                                                                                                       |                                                        |  |                                            |  |
|         Less accumulated  depreciation and amortization            | (12,217,000)                                           |  | (12,828,000)                               |  |
|                                                                                                       | 4,396,000                                         |  | 4,875,000                             |  |
|                                                                                                       |                                                        |  |                                            |  |
|         Assets held for  sale                                      | 1,595,000                                         |  | 2,445,000                             |  |
|                                                                                                       |                                                        |  |                                            |  |
| OTHER ASSETS:                                                                                         |                                                        |  |                                            |  |
|         Notes receivable,  net of current portion                  | 16,000                                            |  | 10,000                                |  |
|         Deposits and other  assets                                 | 79,000                                            |  | 154,000                               |  |
|                                                                                                       | 95,000                                            |  | 164,000                               |  |
|                                                                                                       |                                                        |  |                                            |  |
| TOTAL ASSETS                                                                                          | 7,506,000                                         |  | 8,318,000                             |  |

**LIABILITIES AND STOCKHOLDERS' EQUITY**
|  CURRENT LIABILITIES:                                                                                                                                                                                 |                                  |  |                                  |  |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|----------------------------------|--|----------------------------------|--|
|         Current maturities of long-term debt, net of  discounts of

            $26,000 and $27,000 respectively | 210,000                     |  | 702,000                     |  |
|         Accounts payable                                                                                                                                                | 622,000                     |  | 716,000                     |  |
|         Deferred income                                                                                                                                                 | 43,000                      |  | 89,000                      |  |
|         Liabilities related to discontinued  operations                                                                                                                 | 14,000                      |  | 20,000                      |  |
|         Other accrued liabilities                                                                                                                                       | 1,104,000                   |  | 1,176,000                   |  |
|         Total current liabilities                                                                                                                                       | 1,993,000                   |  | 2,703,000                   |  |
| LONG-TERM LIABILITIES:                                                                                                                                                                                     |                             |  |                                  |  |
|         Debt, net of current portion and net of  discounts of $20,000 and $33,000, respectively                                                                         | 2,042,000                   |  | 3,005,000                   |  |
|         Liabilities related to discontinued  operations                                                                                                                 | 89,000                      |  | 123,000                     |  |
|         Deferred liabilities                                                                                                                                            |     689,000  |  |     793,000  |  |
|         Total long-term liabilities                                                                                                                                     | 2,820,000                   |  | 3,921,000                   |  |

 

3

See accompanying notes to condensed consolidatedfinancial statements

----

**GOOD TIMES RESTAURANTS INC.AND SUBSIDIARIES**

**CONDENSED CONSOLIDATED BALANCE SHEETS (Continued)**

**(Unaudited)**
|                                                                                           | **March 31,**    |  | **September 30,** |
|-------------------------------------------------------------------------------------------|------------------|--|-------------------|
|                                                                                           | **2011**         |  | **2010**          |
| STOCKHOLDERS' EQUITY:                                                                     |                  |  |                   |  |
| Non-controlling interest                                                                  | 210,000     |  | 274,000      |  |
| Preferred stock, $.01 par  value;                                                         |                  |  |                   |  |
|       5,000,000 shares  authorized, none issued and outstanding  |                  |  |                   |  |
|       as of March 31, 2011  and September 30, 2010               | -           |  | -            |  |
|                                                                                           |                  |  |                   |  |
| Common stock, $.001 par  value; 50,000,000 shares authorized                              |                  |  |                   |  |
|       2,726,214 and  1,299,520 shares issued and outstanding     |                  |  |                   |  |
|       as of March 31, 2011 and September 30, 2010,  respectively | 8,000       |  | 4,000        |  |
|                                                                                           |                  |  |                   |  |
| Capital contributed in excess  of par value                                               | 19,946,000  |  | 18,153,000   |  |
| Accumulated deficit                                                                       | (17,471,000)     |  | (16,737,000)      |  |
|         Total stockholders'  equity                    | 2,693,000   |  | 1,694,000    |  |
|                                                                                           |                  |  |                   |  |
| TOTAL LIABILITIES AND  STOCKHOLDERS' EQUITY                                               | $7,506,000  |  | $8,318,000   |  |

4

See accompanying notes to condensed consolidatedfinancial statements

----

**GOOD TIMES RESTAURANTS INC. AND SUBSIDIARIES**

**CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS**

**(Unaudited)**

** **
|                                                                                                                               | **Three Months Ended**                       |  | **Six Months Ended**                                    |
|-------------------------------------------------------------------------------------------------------------------------------|----------------------------------------------|--|---------------------------------------------------------|
|                                                                                                                               | **March 31,**                                |  | **March 31,**                                           |
|                                                                                                                               | **2011**                                     |  | **2010**                                                |  | **2011** |  | **2010** |
| NET REVENUES:                                                                                                                 |                                              |  |                                                         |  |  |  |  |
|         Restaurant sales,  net                                                             | $4,607,000                              |  | $4,675,000                                         |  | $9,589,000  |  | $9,313,000  |
|         Franchise revenues                                                                 |      96,000         |  |      111,000                   |  |      199,000  |  |       224,000  |
|                 Total  revenues                    | 4,703,000                               |  | 4,786,000                                          |  | 9,788,000  |  | 9,537,000  |
|                                                                                                                               |                                              |  |                                                         |  |  |  |  |
| RESTAURANT OPERATING COSTS:                                                                                                   |                                              |  |                                                         |  |  |  |  |
|         Food and packaging  costs                                                          | 1,660,000                               |  | 1,647,000                                          |  | 3,418,000  |  | 3,182,000  |
|         Payroll and other  employee benefit costs                                          | 1,725,000                               |  | 1,793,000                                          |  | 3,484,000  |  | 3,532,000  |
|         Occupancy and other  operating costs                                               | 1,020,000                               |  | 1,139,000                                          |  | 2,104,000  |  | 2,263,000  |
|         Depreciation and  amortization                                                     |       203,000  |  |     240,000                         |  |      408,000  |  |       472,000  |
|                 Total  restaurant operating costs  | 4,608,000                               |  | 4,819,000                                          |  | 9,414,000  |  | 9,449,000  |
|                                                                                                                               |                                              |  |                                                         |  |  |  |  |
|         General and  administrative costs                                                  | 332,000                                 |  | 365,000                                            |  | 677,000  |  | 735,000  |
|         Advertising costs                                                                  | 198,000                                 |  | 280,000                                            |  | 414,000  |  | 550,000  |
|         Franchise costs                                                                    | 19,000                                  |  | 35,000                                             |  | 37,000  |  | 65,000  |
|         Gain on sale of  restaurant buildings and equipment                                | (  86,000)                              |  | (     8,000)                        |  | (    98,000) |  | (       15,000) |
| LOSS FROM OPERATIONS                                                                                                          | ( 368,000)                                   |  | ( 705,000)                                              |  | (  656,000) |  | ( 1,247,000) |
|                                                                                                                               |                                              |  |                                                         |  |  |  |  |
| OTHER INCOME AND  (EXPENSES):                                                                                                 |                                              |  |                                                         |  |  |  |  |
|         Unrealized income  on interest rate swap                                           | 10,000                                  |  | 10,000                                             |  | 23,000  |  | 10,000  |
|         Interest expense,  net                                                             | (57,000)                                     |  | (171,000)                                               |  | (  168,000) |  | (240,000) |
|                 Total other  income and (expenses) | (47,000)                                     |  | (161,000)                                               |  | (  145,000) |  | (230,000) |
|                                                                                                                               |                                              |  |                                                         |  |  |  |  |
| LOSS FROM CONTINUING  OPERATIONS                                                                                              | ($415,000)                                   |  | ($   866,000)                                 |  | ($801,000) |  | ( $1,477,000) |
|                                                                                                                               |                                              |  |                                                         |  |  |  |  |
|         Income (loss) from  discontinued operations                                        |      27,000         |  | (     400,000)                      |  |      24,000  |  | (       471,000) |
|                                                                                                                               |                                              |  |                                                         |  |  |  |  |
| NET LOSS                                                                                                                      | ($388,000)                                   |  | ($1,266,000)                                            |  | ($777,000) |  | ($1,948,000) |
|         Income (expense)  from non-controlling interest                                    | (    11,000)                  |  |         62,000  |  | (    27,000) |  |       110,000  |
| NET LOSS APPLICABLE TO  COMMON SHAREHOLDERS                                                                                   | ($399,000)                                   |  | ($1,204,000)                                            |  | ($804,000) |  | ($1,838,000) |
|                                                                                                                               |                                              |  |                                                         |  |  |  |  |
| Net loss per share - basic  and diluted                                                                                       |                                              |  |                                                         |  |  |  |  |
| Continuing operations                                                                                                         | ($.15)                                       |  | ($.67)                                                  |  | ($.37) |  | ($1.14) |
| Discontinued operations                                                                                                       | $.01                                    |  | ($.31)                                                  |  | $.01  |  | ($.36) |
| Net loss applicable to  common shareholders                                                                                   | ($.15)                                       |  | ($.93)                                                  |  | ($.37) |  | ($1.41) |
|                                                                                                                               |                                              |  |                                                         |  |  |  |  |
| WEIGHTED AVERAGE COMMON  SHARES AND EQUIVALENTS USED IN PER SHARE CALCULATION:

BASIC AND DILUTED                             | 2,726,214                               |  | 1,299,520                                          |  | 2,153,938  |  | 1,299,520  |

5

----

**GOOD TIMES RESTAURANTS INC.AND SUBSIDIARIES**

**CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS**

**(Unaudited)**

** **
|                                                                                                                                                                                                           | **Six Months Ended**                                                                    |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-----------------------------------------------------------------------------------------|
|                                                                                                                                                                                                           | **March 31,**                                                                           |
|                                                                                                                                                                                                           | **2011**                                                                                |   | **2010** |
| CASH FLOWS FROM OPERATING ACTIVITIES:                                                                                                                                                                     |                                                                                         |  |  |
|         Net loss                                                                                                                                                       | ($777,000)                                                                              |  | ($1,948,000) |
|         Income (loss) from  discontinued operations                                                                                                                    |     24,000                                                          |  |     (471,000) |
|         Net loss from  continuing operations                                                                                                                           | (801,000)                                                                               |  | (1,477,000) |
|                                                                                                                                                                                                           |                                                                                         |  |  |
|       Adjustments to  reconcile net loss to net cash used in operating activities:                                                                                               |                                                                                         |  |  |
|             Depreciation  and amortization                                                                                                         | 408,000                                                                            |  | 472,000  |
|             Amortization of  debt issuance costs                                                                                                   | 35,000                                                                             |  | 90,000  |
|             Stock based  compensation expense                                                                                                      | 30,000                                                                             |  | 44,000  |
|             Unrealized gain  on interest rate swap                                                                                                 | (23,000)                                                                                |  | (10,000) |
|             Accretion of  deferred rent                                                                                                            | (31,000)                                                                                |  | 1,000  |
|             Recognition of  deferred gain on sale of restaurant buildings                                                                          | (79,000)                                                                                |  | (15,000) |
|             Changes in  operating assets and liabilities:                                                                                          |                                                                                         |  |  |
|                   (Increase)  decrease in:                                                                           |                                                                                         |  |  |
|                         Receivables  and other                                         | 26,000                                                                             |  | (74,000) |
|                         Inventories                                                    | 8,000                                                                              |  | 19,000  |
|                         Deposits  and other                                            | (107,000)                                                                               |  | (49,000) |
|                   (Decrease)  increase in:                                                                           |                                                                                         |  |  |
|                         Accounts  payable                                              | (94,000)                                                                                |  | 341,000  |
|                         Accrued  liabilities and deferred income                       |     38,000                                                          |  |     81,000  |
|                   Net cash  used in operating activities from continuing operations                                  | (590,000)                                                                               |  | (577,000) |
|                   Net cash  used in operating activities from discontinued operations                                | (  4,000)                                                                          |  | (  93,000) |
|                             Net  cash used in operating activities | (594,000)                                                                               |  | (670,000) |
|                                                                                                                                                                                                           |                                                                                         |  |  |
| CASH FLOWS USED IN  INVESTING ACTIVITIES                                                                                                                                                                  |                                                                                         |  |  |
|       Proceeds from the  sale of fixed assets                                                                                                                                    | 946,000                                                                            |  | -  |
|       Payments for the  purchase of property and equipment                                                                                                                       | (10,000)                                                                                |  | (24,000) |
|       Payments received on  loans to franchisees and to others                                                                                                                   |               -   |  |     8,000  |
|                     Net  cash provided by (used in) investing activities                                   | 936,000                                                                            |  | (16,000) |
|                                                                                                                                                                                                           |                                                                                         |  |  |
| CASH FLOWS FROM FINANCING  ACTIVITIES:                                                                                                                                                                    |                                                                                         |  |  |
|       Proceeds from common  stock sale                                                                                                                                           | 1,727,000                                                                          |  | -  |
|       Principal payments on  notes payable and long-term debt                                                                                                                    | (1,490,000)                                                                             |  | (67,000) |
|       Borrowings on notes  payable and long-term debt                                                                                                                            | -                                                                                  |  | 400,000  |
|       Distributions,  net of contributions paid to non-controlling interests                                                                                                     | (21,000)                                                                                |  |     71,000  |
|                     Net  cash provided by financing activities                                             | 216,000                                                                            |  |   404,000  |
|                                                                                                                                                                                                           |                                                                                         |  |  |
| NET CHANGE IN CASH AND CASH  EQUIVALENTS                                                                                                                                                                  | 558,000                                                                            |  | (282,000) |
|                                                                                                                                                                                                           |                                                                                         |  |  |
| CASH AND CASH EQUIVALENTS,  beginning of period                                                                                                                                                           | 429,000                                                                            |  | 815,000  |
|                                                                                                                                                                                                           |                                                                                         |  |  |
| CASH AND CASH EQUIVALENTS,  end of period                                                                                                                                                                 | $987,000                                                                           |  | $533,000  |
|                                                                                                                                                                                                           |                                                                                         |  |  |
| SUPPLEMENTAL DISCLOSURES OF  CASH FLOW INFORMATION:                                                                                                                                                       |                                                                                         |  |  |
|       Cash paid for  interest                                                                                                                                                    |   141,000                                                                     |  | 146,000  |
|       Non-cash fair value  of warrants & beneficial conversion feature                                                                                                       |               -   |  | 277,000  |

6

----

**GOOD TIMES RESTAURANTS INC. AND SUBSIDIARIES**

**NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**

**(Unaudited)**

** **

**Note 1.           Basisof Presentation**

** **

In the opinion of management, the accompanyingunaudited condensed consolidated financial statements contain all of the normalrecurring adjustments necessary to present fairly the financial position of theCompany as of March 31, 2011 and the results of its operations and its cashflows for the three and six month periods ended March 31, 2011. Operatingresults for the three and six month periods ended March 31, 2011 are notnecessarily indicative of the results that may be expected for the year endingSeptember 30, 2011. The condensed consolidated balance sheet as of September30, 2010 is derived from the audited financial statements, but does not includeall disclosures required by generally accepted accounting principles.  As aresult, these financial statements should be read in conjunction with theCompany's Form 10-K for the fiscal year ended September 30, 2010.

**Note 2.           RecentDevelopments**

** **

Weentered into a purchase and sale agreement for the sale of two company-ownedrestaurants in Colorado Springs, Colorado that was effective February 1, 2011.The sale of one restaurant occurred in February, 2011 and the sale of thesecond restaurant is anticipated to occur on or prior to May 31, 2011. The netproceeds from the sale of the first restaurant in February were $99,000 andresulted in a gain on the sale of $71,000. The net proceeds for the sale of thesecond restaurant are estimated to be $169,000 with an estimated gain on thesale of $62,000.

Aspreviously disclosed in the Company's current report on Form 8-K filed December17, 2010, we entered into a new Credit and Loan Agreement with Wells Fargo Bankthat modified the loan covenants and provided additional collateral to WellsFargo for the remaining loan balance of $642,142. In addition we are using$90,000 of the proceeds from the sale of the two company-owned restaurants inColorado Springs, Colorado to further reduce the note payable over the next tenmonths and thereby releasing certain collateral.

OnDecember 31, 2010, following approval by the Company's stockholders at aspecial meeting on December 31, 2010, the Company effected a one-for-threereverse stock split of its issued and outstanding Common Stock. All referencesto numbers of shares and share prices in the following paragraphs andthroughout Items 1 and 2 are stated at post-reverse split amounts.

Aspreviously disclosed in the Company's current report on Form 8-K filed on November3, 2010, the Company entered into a Securities Purchase Agreement (the"Purchase Agreement"), dated October 29, 2010, with Small Island InvestmentsLimited, a Bermuda corporation ("SII"), under which the Company agreed to sell,and SII agreed to purchase, 1,400,000 shares (the "Shares") of the Company'scommon stock, par value $0.001 per share (the "Common Stock"), at a purchaseprice of $1.50 per share, or an aggregate of $2,100,000 (the "SII InvestmentTransaction").  The Purchase Agreement was amended on December 13, 2010 toclarify the scope of SII's director designation rights following the Closing.

OnDecember 13, 2010, following approval of the SII Investment Transaction andrelated matters by the Company's stockholders at a special meeting called forsuch purposes (the "Special Meeting"), the Company and SII completed theissuance and sale of the Shares to SII.  On December 13, 2010, the Company andSII also entered into a Registration Rights Agreement, pursuant to which theCompany granted SII certain registration rights with respect to resale of theShares.

Thecompletion of the SII Investment Transaction resulted in a change of control ofthe Company, with SII becoming the beneficial owner of approximately 51.4percent of the Company's outstanding Common Stock.  In addition, pursuant tothe Purchase Agreement, SII designated four new members of the Company's Boardof Directors to replace Richard J. Stark, Alan A. Teran, Ron Goodson and DavidGrissen, all of whom resigned as directors effective upon the closing of theSII Investment Transaction.

7

----

OnFebruary 1, 2010, the Company and GTDT entered into a loan agreement with WCapital, Inc. ("W Capital"), John T. McDonald ("McDonald") and Golden Bridge,LLC ("Golden Bridge"), pursuant to which the lenders made loans totaling$400,000 to be used for restaurant marketing and other working capital uses ofGTDT.  The loan agreement was subsequently amended as of April 1, 2010 toremove Golden Bridge as a lender, replacing it with additional loans from WCapital and McDonald.  The aggregate principal amount owing to W Capital andMcDonald was paid out of the proceeds of the SII Investment Transaction.  Inaddition, the accrued interest on such loans through December 13, 2010 of$39,715 was converted into an aggregate of 26,477 shares of our Common Stock.

Inconnection with the loans, the Company issued warrants to W Capital andMcDonald which entitle them at any time prior to December 13, 2013 to purchaseup to an aggregate of 33,334 shares of our Common Stock at an exercise price of25% less than the average price of our Common Stock during the 20 days prior toexercise, but at not less than $2.25 per share nor more than $3.24 per share. These warrants remain outstanding and exercisable in accordance with theirterms.

Proceedsof the SII transaction were also used to repay the outstanding principal amountof $185,000 due to Golden Bridge on a loan Golden Bridge made to the Company in2009, to reduce our accounts payable and accrued liabilities, to pay theexpenses related to the SII Investment Transaction, and to increase our workingcapital.  The SII Investment Transaction also allowed us to renegotiate theterms and covenants of our loan with Wells Fargo Bank, N.A. ("Wells Fargo") andto regain compliance with certain financial loan covenants that had been indefault.  We had never been in any payment default under the loan and WellsFargo agreed to accept additional equipment collateral in exchange formodifying the covenants of the loan without affecting our interest rate orrepayment term.   As a condition to the closing of the SII InvestmentTransaction, we entered into a new Credit Agreement and Promissory Note withWells Fargo effective as of December 13, 2010.  The prior loan covenant defaultshad caused us to show the entire balance of the loan as a short term liability;however, as of March 31, 2011, it is primarily classified as a long term notepayable under its terms.

SII'saffiliates have ownership interests in other full service restaurant chainsthat generate approximately $75 million in annual revenues.   The SIIInvestment Transaction may position the Company to pursue a larger platform inthe restaurant business through acquisitions, new investment and improvedeconomies of scale.  However, there can be no assurance that any acquisitionsor additional investment will occur.

Theshorter term objective for the Good Times brand will be to focus on maximizingits profitability and development in our core market of Colorado.  In fiscal 2010,we closed two Company-operated restaurants and a franchisee closed onerestaurant.  We continue to evaluate the near term realizable asset value ofeach restaurant compared to its longer term cash flow value and we may chooseto sell, sublease or close additional lower performing restaurants in fiscal2011as we position the company for growth in new store development.  We willrequire additional capital sources to develop additional company ownedrestaurants.

**Note 3.           DiscontinuedOperations**

Discontinuedoperations are presented in accordance with FASB ASC 205-20, Presentation ofFinancial Statements. During fiscal 2010 we closed two locations: onedual-branded restaurant in Commerce City, Colorado in March 2010 and oneco-developed restaurant in Denver, Colorado in June 2010. Fixed assets andassociated accumulated depreciation of $406,000 related to discontinuedoperations are included in the property and equipment of our condensedconsolidated balance sheet which are related to the Commerce City location.Current and long-term liabilities related to discontinued operations relate tothe future estimated lease obligations of the Commerce City location.

Followingis a summary of the costs from discontinued operations for the current andprior year periods:
|                                              | Three Months Ended March 31,                                         |        | Six Months Ended March 31, |
|----------------------------------------------|----------------------------------------------------------------------|--------|----------------------------|
|                                              |     2011                                              |   | 2010                       |   |      2011 |   | 2010 |
| Results  of operations and lease obligations | ($4,000)                                                             |        | ($66,000)                  |  | ($7,000) |  | ($137,000) |
| Future  lease obligations, fair value        | 31,000                                                               |        | (117,000)                  |  | 31,000 |  | (117,000) |
| Asset impairment charges  and other costs    |             - |   | (217,000)                  |   |             - |   | (217,000) |
|                                              |                                                                      |        |                            |  |  |  |  |
| Income  (loss) from discontinued operations  | $27,000                                                              |        | ($400,000)                 |  | $24,000 |  | ($471,000) |

8

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Withrespect to the Commerce City closed location, we have continuing lease obligationsof $715,000 and we have subleased the location for $582,000. We have recordedan estimated discounted liability of $103,000 related to this location. We haveterminated the lease on the Denver location effective February 1, 2011 and nolonger remain liable for any future lease obligations. In the three monthperiod ended March 31, 2011 we reversed the $31,000 accrued lease liabilityassociated with the Denver location.

** **

**Note 4.           Stock-BasedCompensation**

* *

Followingthe guidance of FASB ASC 718-10-30, Compensation - Stock Compensation,stock-based compensation is measured at the grant date, based on the calculatedfair value of the award, and is recognized as an expense over the requisiteemployee service period (generally the vesting period of the grant).

TheCompany measures the compensation cost associated with share-based payments byestimating the fair value of stock options as of the grant date using theBlack-Scholes option pricing model. The Company believes that the valuationtechnique and the approach utilized to develop the underlying assumptions areappropriate in calculating the fair values of the Company's stock optionsgranted during all years presented. Estimates of fair value are not intended topredict actual future events or the value ultimately realized by the employeeswho receive equity awards.

Ournet loss for the six months ended March 31, 2011 and March 31, 2010 includes$30,000 and $44,000, respectively, of compensation costs related to ourstock-based compensation arrangements.

During the six months ended March 31, 2011, we granted4,000 non-statutory stock options and 53,233 incentive stock options withexercise prices of $1.56.  The per-share weighted average fair value was $1.26for both the non-statutory stock option grants and incentive stock optiongrants.

In addition to the exercise and grant date prices ofthe awards, certain weighted average assumptions that were used to estimate thefair value of stock option grants are listed in the following table:
|                          | **Incentive**

**Stock Options** | ** ** | **Non-Statutory**

**Stock Options** |
|--------------------------|----------------------------------|------------|--------------------------------------|
| Expected  term (years)   | **6.5**                          |            | 6.7                                  |
| Expected  volatility     | **98.54%**                       |            | 97.35%                               |
| Risk-free  interest rate | **2.46%**                        |            | 2.52%                                |
| Expected  dividends      | **0**                            |            | 0                                    |

We estimate expected volatility based on historicalweekly price changes of our common stock for a period equal to the currentexpected term of the options. The risk-free interest rate is based on theUnited States treasury yields in effect at the time of grant corresponding withthe expected term of the options. The expected option term is the number ofyears we estimate that options will be outstanding prior to exerciseconsidering vesting schedules and our historical exercise patterns.

A summary of stock option activity under ourshare-based compensation plan for the six months ended March 31, 2011 ispresented in the following table: (The numbers of options and the exerciseprices shown in this table have been adjusted to effect the one for threereverse stock split that occurred on December 31, 2010.)
| ** **                | **Options**    | **Weighted Average Exercise Price** | **Weighted Average Remaining Contractual Life (Yrs.)** | **Aggregate Intrinsic Value** |
|---------------------------|----------------|-------------------------------------|--------------------------------------------------------|-------------------------------|
| Outstanding-beg  of year  | 130,027        | $  9.89                        |                                                        |                               |
| Granted                   | 57,233         | $  1.56                        |                                                        |                               |
| Exercised                 | -              |                                     |                                                        |                               |
| Forfeited                 | (19,371)       | $11.62                              |                                                        |                               |
| Expired                   | (  1,200) | $  4.14                        |                                                        |                               |
| Outstanding  Mar 31, 2011 | 166,689        | $  6.87                        | 6.5                                                    | $39,000                       |
|                           |                |                                     |                                                        |                               |
| Exercisable  Mar 31, 2011 |   80,819  | $11.38                              | 3.8                                                    | $  3,000                 |

9

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Asof March 31, 2011, the total remaining unrecognized compensation cost relatedto unvested stock-based arrangements was $85,000 and is expected to berecognized over a period of 2.7 years.

There were no stock options exercised during the sixmonths ended March 31, 2011.

** **

**Note 5.           Comprehensive Income (Loss)**

** **

Comprehensive income includes net income or loss,changes in certain assets and liabilities that are reported directly in equitysuch as adjustments resulting from unrealized gains or losses onheld-to-maturity investments and certain hedging transactions.

In May 2007, the Company entered into an interest rateswap agreement, designated as a cash flow hedge, which hedges the Company'sexposure to interest rate fluctuations on the Company's floating rate$1,100,000 term loan. 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. Inaddition we have recognized an unrealized gain of $23,000 for the six monthsended March 31, 2011 in the accompanying Condensed Consolidated Statement ofOperations to adjust the liability related to the interest rate swap to fairmarket value.

**Note 6.           Contingent Liabilities**

** **

Weremain contingently liable on various land leases underlying restaurants thatwere previously sold to franchisees.  We have never experienced any lossesrelated to these contingent lease liabilities, however if a franchisee defaultson the payments under the leases, we would be liable for the lease payments asthe assignor or sublessor of the lease.  Currently we have not been notifiednor are we aware of any leases in default by the franchisees, however there canbe no assurance that there will not be in the future which could have amaterial effect on our future operating results.

**Note 7.           Related Party Transactions**

In fiscal 2009 the Company entered into a loan agreementwith Golden Bridge, LLC ("Golden Bridge"), pursuant to which Golden Bridge madea loan of $185,000 to the Company.  Eric Reinhard, Ron Goodson, David Grissen,Richard Stark, and Alan Teran, who were all members of the Company's Board ofDirectors and stockholders of the Company, are the sole members of GoldenBridge. The Company's and GTDT's obtaining of the Loan from Golden Bridge andrelated transactions were duly approved in advance by the Company's Board ofDirectors by the affirmative vote of members thereof who did not have aninterest in the transaction.   The Loan was paid in full in December2010 following the closing of the SII Investment Transaction.  Amounts dueto related parties that are included in notes payable are $0 at March 31, 2011and $185,000 at September 30, 2010.

** **

**Note8.           Assets Held for Sale**

** **

Wehave classified $1,595,000 as assets held for sale in the accompanyingcondensed consolidated balance sheet. These costs are related to a site inFirestone, Colorado which has been fully developed. The proceeds of a saleleaseback transaction, if consummated, are required to be used for thereduction of the line of credit payable to PFGI II, LLC. The effect on ouroperating cash flow is not material as the interest expense on the line of creditis approximately equal to the proposed rental rate on a sale leasebacktransaction.

**Note 9.           Impairmentof Long-Lived Assets**

Wereview our long-lived assets for impairment in accordance with the guidance ofFASB ASC 360-10, Property, Plant, and Equipment, including land, property andequipment whenever events or changes in circumstances indicate that thecarrying amount of an asset may not be recoverable. Recoverability of assets tobe held and used is measured by a comparison of the capitalized costs of theassets to the future undiscounted net cash flows expected to be generated bythe assets and the expected cash flows are based on recent historical cashflows at the restaurant level (the lowest level that cash flows can bedetermined).

10

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An analysis was performed ona restaurant by restaurant basis at March 31, 2011. Assumptions used inpreparing expected cash flows were as follows:

•        Sales projections are as follows:Fiscal 2011 sales are projected to increase 3% to 5% over fiscal 2010, for fiscalyears 2012 to 2024 we have used annual increases of 2% to 3%. We believe the 2%to 3% increase in the years beyond 2011 is a reasonable expectation of growthand that it would be unreasonable to expect no growth in our sales. Theseincreases include menu price increases in addition to any real growth.Historically our weighted menu prices have increased 1.5% to 6%.

•        Our variable and semi-variablerestaurant operating costs are projected to increase proportionately with thesales increases as well as increasing an additional 1.5% per year consistentwith inflation.

•        Our other fixed restaurantoperating costs are projected to increase 1.5% to 2% per year.

•        Food and packaging costs areprojected to remain flat in relation to our recent fiscal 2010 food and packagingcosts as a percentage of sales.

•        Salvage value has been estimatedon a restaurant by restaurant basis considering each restaurant's particularequipment package and building size.

Giventhe results of our impairment analysis at March 31, 2011 there are norestaurants which are impaired as their projected undiscounted cash flows showrecoverability of their asset values.

Ourimpairment analysis included a sensitivity analysis with regard to the cashflow projections that determine the recoverability of each restaurant's assets.The results indicate that even with a 15% decline in our projected cash flowswe would still not have any potential impairment issues.  However if we electto sublease, close or otherwise exit a restaurant location impairment could berequired. We have experienced higher than normal food and packaging costs as apercentage of restaurant sales in recent years and we do not believe thesecosts will remain at these levels in future years. However for purposes of ourcash flow projections in the asset impairment analysis we have assumed our foodand packaging costs will remain at these higher levels.

Eachtime we conduct an impairment analysis in the future we will compare actualresults to our projections and assumptions, and to the extent our actualresults do not meet expectations, we will revise our assumptions and this couldresult in impairment charges being recognized.

Allof the judgments and assumptions made in preparing the cash flow projectionsare consistent with our other financial statement calculations and disclosures.The assumptions used in the cash flow projections are consistent with otherforward-looking information prepared by the company, such as those used forinternal budgets, discussions with third parties, and/or reporting tomanagement or the board of directors.

Infiscal 2010 we closed two company operated restaurants resulting in totalcharges of $396,000. Projecting the cash flows for the impairment analysisinvolves significant estimates with regard to the performance of eachrestaurant, and it is reasonably possible that the estimates of cash flows maychange in the near term resulting in the need to write down operating assets tofair value. If the assets are determined to be impaired, the amount of impairmentrecognized is the amount by which the carrying amount of the assets exceedstheir fair value. Fair value would be determined using forecasted cash flowsdiscounted using an estimated average cost of capital and the impairment chargewould be recognized in income from operations.

**Note10.         Fair Value Measurements**

TheCompany adopted the provisions of FASB ASC 820, Fair Value Measurements andDisclosures, effective October 1, 2008. FASB ASC 820 defines fair value,establishes a framework for measuring fair value under generally acceptedaccounting principles and enhances disclosures about fair value measurements.

Fairvalue is defined as the price that would be received to sell an asset or paidto transfer a liability in an orderly transaction between market participantsat the measurement date. Valuation techniques used to measure fair value, asrequired by Topic 820 of the FASB ASC, must maximize the use of observableinputs and minimize the use of unobservable inputs.

11

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FASBASC 820 defines three levels of inputs that may be used to measure fair valueand requires that the assets or liabilities carried at fair value be disclosedby the input level under which they were valued. The input levels defined underFASB ASC 820 are as follows:
| Level  1: | Quoted  market prices in active markets for identical assets and liabilities.                                                                                                                                                                                                                                  |
|-----------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Level  2: | Observable  inputs other than defined in Level 1, such as quoted prices for similar  assets or liabilities; quoted prices in markets that are not active; or other  inputs that are observable or can be corroborated by observable market data  for substantially the full term of the assets or liabilities. |
| Level  3: | Unobservable  inputs that are not corroborated by observable market data.                                                                                                                                                                                                                                      |

Thefollowing table summarizes financial assets and liabilities that are measuredat fair value on a recurring basis as of March 31, 2011:

Level2:

InterestRate Swap liability:
| Balance  at December 31, 2010 | $71,000 |
|-------------------------------|---------|
| Balance  at March 31, 2011    | $61,000 |
| Net  change                   | $10,000 |

Theunrealized gains for the three and six month periods ending March 31, 2011 of$10,000 and $23,000, respectively, are reported in the Condensed ConsolidatedStatement of Operations. There were no transfers in or out of Level 3 for thethree or six month periods ending March 31, 2011.

** **

**Note11.         Income Taxes**

We account for income taxes in accordance with FASBASC 740, Income Taxes. FASB ASC 740 prescribes the use of the liability methodwhereby deferred tax asset and liability account balances are determined basedon differences between the financial reporting and tax bases of assets andliabilities and are measured using the enacted tax rates and laws that will bein effect when the differences are expected to reverse. The Company provides avaluation allowance, if necessary, to reduce deferred tax assets to theirestimated realizable value. The deferred tax assets are reviewed periodicallyfor recoverability, and valuation allowances are adjusted as necessary.  Webelieve it is more likely than not that the recorded deferred tax assets willbe realized.

Althoughthe Company has not incurred interest and penalties associated withunrecognized tax benefits; future interest and penalties associated withunrecognized tax benefits, if any, will be recognized in income tax expense inthe Consolidated Statements of Operations and the corresponding liabilityin income taxes payable or income taxes receivable, net on theConsolidated Balance Sheets.

TheCompany is currently not undergoing any examinations by any taxingjurisdictions, with the tax years for the Fiscal Years Ending September 30,2005 through 2009 remaining open to examination.

**Note 12.         Non-controllingInterests**

Non-controllinginterests, previously called minority interests, are presented as a separateitem in the equity section of the consolidated balance sheet. The amount ofconsolidated net income or loss attributable to non-controlling interests ispresented on the face of the consolidated income statement. Changes in aparent's ownership interest in a subsidiary that do not result indeconsolidation are equity transactions, deconsolidation of a subsidiaryrequires gain or loss recognition in net income based on the fair value on thedeconsolidation date.

**Note 13.         SubsequentEvents**

None.

12

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**Note 14.         RecentAccounting Pronouncements**

InJanuary 2010, the FASB issued an update regarding guidance over the disclosurerequirements of fair value measurements. This update adds new requirements fordisclosure about transfers into and out of Levels One and Two and also adds additionaldisclosure requirements about purchases, sales, issuances, and settlementsrelating to Level Three measurements.  The guidance is effective for reportingperiods beginning after December 15, 2009 for the disclosure requirementsaround Levels One and Two measurements, and is effective for reporting periodsbeginning after December 15, 2010 for the disclosure requirements around LevelThree.

**Note 15.         StockTransactions**

OnDecember 13, 2010 the company completed a stock sale of 1,400,000 shares of CommonStock, par value $.001, at a price of $1.50 per share to one investor (see Note2. above for details of the stock sale).

OnDecember 13, 2010 the company received Board of Directors approval to effect aone-for-three reverse stock split of its Common Stock no later than December31, 2010. The reverse stock split was effected on December 31, 2010.Immediately prior to the reverse stock split the company had 8,177,989 ofCommon Stock outstanding and immediately following the reverse split the outstandingshares were approximately 2,725,996 (subsequently 218 shares have been issuedfor rounding of fractional shares resulting from the reverse split).

** **

**ITEM 2.        MANAGEMENT'S DISCUSSION AND ANALYSIS OFFINANCIAL CONDITION AND RESULTS OF OPERATIONS**

**General**

This Form 10-Q contains or incorporates by referenceforward-looking statements within the meaning of Section 27A of the SecuritiesAct of 1933, as amended and the disclosure of risk factors in the Company'sform 10-K for the fiscal year ended September 30, 2010.  Also, documentssubsequently filed by us with the SEC and incorporated herein by reference maycontain forward-looking statements.  We caution investors that anyforward-looking statements made by us are not guarantees of future performanceand actual results could differ materially from those in the forward-lookingstatements as a result of various factors, including but not limited to thefollowing:

(I).         We compete with numerous well establishedcompetitors who have substantially greater financial resources and longeroperating histories than we do.  Competitors have increasingly offered selectedfood items and combination meals, including hamburgers, at discounted prices,and continued discounting by competitors may adversely affect revenues andprofitability of Company restaurants.

(II).       We may benegatively impacted if we experience consistent same store sales declines. Same store sales comparisons will be dependent, among other things, on thesuccess of our advertising and promotion of new and existing menu items.  Noassurances can be given that such advertising and promotions will in fact besuccessful.

We may also be negatively impacted by other factorscommon to the restaurant industry such as: changes in consumer tastes away fromred meat and fried foods; increases in the cost of food, paper, labor, healthcare, workers' compensation or energy; inadequate number of hourly paidemployees; and/or decreases in the availability of affordable capitalresources.  We caution the reader that such risk factors are not exhaustive,particularly with respect to future filings.

* *

*Restaurant Locations*

We currently operate and franchise a total offorty-seven Good Times restaurants, of which forty-three are in Colorado, withforty in the Denver greater metropolitan area, two in Colorado Springs and onein Silverthorne. Six of these restaurants are "dual brand", operated pursuantto a Dual Brand Test Agreement with Taco John's International, of which thereis one in North Dakota, two in Wyoming, and three in Colorado.

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

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

**Other** | **Idaho** | **Wyoming** | **North Dakota** |
|-----------------------------------------|-----------|-----------------------------------|-------------------------|-----------|-------------|------------------|
| Good Times co-owned &  co-developed | 25        | 23                                | 2                       |           |             |                  |
| Good Times franchised                   | 16        | 14                                | 1                       | 1         |             |                  |
| Dual brand co-owned                     | 1         | 1                                 |                         |           |             |                  |
| Dual brand franchised                   | 5         | 2                                 |                         |           | 2           | 1                |
| **Total**                               | **47**    | **40**                            | **3**                   | **1**     | **2**       | **1**            |
|                                 | **As of March 31,** |
|---------------------------------|---------------------|
|                                 | **2011**            | **2010** |
| Company-owned  restaurants      | 19                  | 20 |
| Co-developed  restaurants       | 7                   | 9 |
| Franchise  operated restaurants | 21                  | 21 |
| **Total restaurants**           | **47**              | **50** |

* *

*Fiscal2010:* In October 2009 a franchiseeoperating a Good Times restaurant in Thornton, Colorado terminated theirfranchise agreement and closed the restaurant.  In March 2010 we closed onecompany-owned dual branded restaurant in Commerce City, Colorado and in June2010 we closed one co-developed Good Times restaurant in Denver, Colorado (seeNote 3. above - Discontinued Operations). Additionally in June 2010 we sold oneco-developed restaurant in Denver, Colorado to a new franchisee operator.

*Fiscal2011:* In December 2010 a franchiseeoperating a Good Times restaurant in Grand Junction, Colorado terminated theirfranchise agreement and closed the restaurant. In February 2011 we sold onedual branded company-owned restaurant in Colorado Springs, Colorado. Weanticipate that franchisees may close up to two low volume franchisedrestaurants in fiscal 2011. We have entered into a purchase and sale agreementfor the sale of one additional company-owned restaurant in Colorado Springs,Colorado that was effective February 1, 2011 and is anticipated to occur on orprior to May 31, 2011. See the "Liquidity and Capital Resources" section belowfor further details.

The following presents certain historical financialinformation of our operations.  This financial information includes results forthe three and six months ended March 31, 2011 and results for the three and sixmonths ended March 31, 2010.

**Results of Operations**

 

*Net Revenues*

Net revenues for the three months ended March 31, 2011decreased $83,000 (1.7%) to $4,703,000 from $4,786,000 for the three monthsended March 31, 2010.  Same store restaurant sales increased $224,000 (5.7%)during the three months ended March 31, 2011 for the restaurants that were openfor the full three month periods ending March 31, 2011 and March 31, 2010. Restaurants are included in same store sales after they have been open a fullfifteen months and only Good Times restaurants are included with dual brandedrestaurants excluded. Restaurant sales decreased $177,000 due to oneco-developed store sold to a franchisee in June 2010. Restaurant salesdecreased $105,000 due to two company-owned dual branded restaurants notincluded in same store sales, one of which was sold in February 2011.Restaurant sales also decreased $10,000 due to one non-traditionalcompany-owned restaurant not included in same store sales.

Net revenues for the six months ended March 31, 2011increased $251,000 (2.6%) to $9,788,000 from $9,537,000 for the six monthsended March 31, 2010.  Same store restaurant sales increased $747,000 (9.6%)during the six months ended March 31, 2011 for the restaurants that were openfor the full six month periods ending March 31, 2011 and March 31, 2010.Restaurant sales decreased $352,000 due to one co-developed store sold to afranchisee in June 2010. Restaurant sales decreased $112,000 due to twocompany-owned dual branded restaurants not included in same store sales, one ofwhich was sold in February 2011. Restaurant sales also decreased $7,000 due toone non-traditional company-owned restaurant not included in same store sales.

Our second fiscal quarter same store restaurant saleswere positively affected by better than average weather in March 2011. Samestore sales increased 8.6% in March 2011. Our first fiscal quarter same storerestaurant sales were positively affected by better than average weather inboth October and December 2010. Same store sales increased 20.3% and 14.2% inOctober and December 2010, respectively.

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The positive same storesales results for the first and second fiscal quarters of 2011 also reflect thecontinuation of the positive momentum we experienced in the last fiscal quarterof 2010 when same store sales increased 1.8%, after nine consecutive quartersof same store sales declines.

Our outlook for fiscal 2011 is more optimistic basedon the last ten months' sales trends, however our sales trends are influencedby many factors and the macroeconomic environment remains challenging forsmaller restaurant chains.  Our average transaction has increased in fiscal2011 compared to fiscal 2010 and we are continuing to manage our marketing communicationsto balance growth in customer traffic and their average expenditure.

Franchise revenues for the three months ended March31, 2011 decreased $15,000 to $96,000 from $111,000 for the three months endedMarch 31, 2010 due to a decrease in franchise royalties. Same store Good Timesfranchise restaurant sales increased 3.5% during the three months ended March31, 2011 for the franchise restaurants that were open for the full periodsending March 31, 2011 and March 31, 2010. Dual branded franchise restaurantsales decreased 7.5% during the three months ended March 31, 2011, compared tothe same prior year period. In late fiscal 2010 we elected to terminate theoperations of a Good Times licensee operating in the Pepsi Center in Denver,Colorado which contributed to the decrease in our franchise royalty income forthe three months ended March 31, 2011 compared to the same prior year period.

Franchise revenues for the six months ended March 31,2011 decreased $25,000 to $199,000 from $224,000 for the six months ended March31, 2010 due to a decrease in franchise fees and royalties. Same store GoodTimes franchise restaurant sales increased 7% during the six months ended March31, 2011 for the franchise restaurants that were open for the full periodsending March 31, 2011 and March 31, 2010. Dual branded franchise restaurantsales decreased 3.8% during the six months ended March 31, 2011, compared tothe same prior year period. Operations of the Good Times licensee operating inthe Pepsi Center in Denver, Colorado that was closed in late fiscal 2010contributed to the reduction in our franchise royalty income for the six monthsended March 31, 2011 compared to the same prior year period.

*Restaurant Operating Costs*

Restaurant operating costs as a percent of restaurantsales were 100% during the three months ended March 31, 2011 compared to 103.1%in the same prior year period and were 98.2% during the six months ended March31, 2011 compared to 101.5% in the same prior year period.

The changes in restaurant-level costs are explained asfollows:
|                                                             | Three Months Ended March  31, 2011 | Six Months Ended March  31, 2011 |
|-------------------------------------------------------------|------------------------------------|----------------------------------|
| Restaurant-level costs for  the period ended March 31, 2010 | 103.1%                             | 101.5%                           |
| Increase in food and  packaging costs                       | .8%                                | 1.5%                             |
| Decrease in payroll and  other employee benefit costs       | (     .9%)     | (  1.6%)                    |
| Decrease in occupancy and  other operating costs            | (   2.3%)                | (  2.4%)                    |
| Decrease in depreciation  and amortization                  | (     .7%)     | (    .8%)         |
| Restaurant-level costs for  the period ended March 31, 2011 | 100.0%                             | 98.2%                            |

*Food and Packaging Costs*

Forthe three months ended March 31, 2011 our food and paper costs increased$13,000 to $1,660,000 (36% of restaurant sales) from $1,647,000 (35.2% ofrestaurant sales) compared to the same prior year period.

Forthe six months ended March 31, 2011 our food and paper costs increased $236,000to $3,418,000 (35.6% of restaurant sales) from $3,182,000 (34.2% of restaurantsales) compared to the same prior year period.

Infiscal 2010 our weighted food and packaging costs increased approximately 11%. The total menu price increases taken during fiscal 2010 were 7.1%, all of whichwere taken in the last four months of the year. The introduction of the $2.89Craver combo meals in May 2010 negatively impacted our cost of sales by anestimated 1% of restaurant sales however we believe the new value offer is asignificant driver of customer traffic.

15

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Infiscal 2011 our weighted food and packaging costs have increased approximately4.7%. We took a 1.7% menu price increase in February 2011 and we anticipateadditional limited price increases for the balance of fiscal 2011. Weanticipate continued cost pressure on several core commodities, including beef,bacon and dairy for the remainder of fiscal 2011. However we anticipate ourfood and packaging costs as a percentage of sales will remain at current levelsin fiscal 2011 from a combination of price increases, product sales mix changesand recipe modifications.

*Payroll and OtherEmployee Benefit Costs*

For the three months ended March 31, 2011 our payrolland other employee benefit costs decreased $68,000 to $1,725,000 (37.4% ofrestaurant sales) from $1,793,000 (38.4% of restaurant sales) compared to thesame prior year period.

For the six months ended March 31, 2011 our payrolland other employee benefit costs decreased $48,000 to $3,484,000 (36.3% ofrestaurant sales) from $3,532,000 (37.9% of restaurant sales) compared to thesame prior year period.

The decrease in payroll and other employee benefitexpenses as a percent of restaurant sales for the three and six month periodsended March 31, 2011 is primarily the result of higher restaurant sales.Because payroll costs are semi-variable in nature they decrease as a percentageof restaurant sales when there is an increase in restaurant sales.

*Occupancy and OtherOperating Costs*

For the three months ended March 31, 2011 ouroccupancy and other operating costs decreased $119,000 to $1,020,000 (22.1% ofrestaurant sales) from $1,139,000 (24.4% of restaurant sales) compared to thesame prior year period.

For the six months ended March 31, 2011 our occupancyand other operating costs decreased $159,000 to $2,104,000 (21.9% of restaurantsales) from $2,263,000 (24.3% of restaurant sales) compared to the same prioryear period.

For the three and six month periods ended March 31,2011 we experienced decreases in rent, property taxes, utility costs, commonarea maintenance costs and repairs and maintenance costs compared to the sameprior year period primarily due to the sale of one co-developed restaurant inJune 2010. We also had a decrease in our accretion for deferred rent of $31,000compared to the same prior year period due to a lease termination and the saleof restaurants. Additionally, during fiscal 2010 we successfully negotiated thereduction of base rents at four company-owned restaurants. The reductions willresult in total savings of approximately $96,000 per year. We are alsocontinuing to negotiate rent reductions on additional restaurants.

*Depreciation and Amortization*

For the three months ended March 31, 2011, ourdepreciation and amortization decreased $37,000 to $203,000 (4.4% of restaurantsales) from $240,000 (5.1% of restaurant sales) compared to the same prior yearperiod.

For the six months ended March 31, 2011, ourdepreciation and amortization decreased $64,000 to $408,000 (4.3% of restaurantsales) from $472,000 (5.1% of restaurant sales) compared to the same prior yearperiod.

The decrease in depreciation and amortization for thethree and six month periods ended March 31, 2011 is primarily due to the saleof one co-developed restaurant in June 2010 as well as declining depreciationexpense in our aging company-owned and co-developed restaurants.

*General and Administrative Costs*

For the three months ended March 31, 2011, general andadministrative costs decreased $33,000 to $332,000 (7.1% of total revenues)from $365,000 (7.6% of total revenues) for the same prior year period.

For the six months ended March 31, 2011, general andadministrative costs decreased $58,000 to $677,000 (6.9% of total revenues)from $735,000 (7.7% of total revenues) for the same prior year period.

The decrease in general and administrative costs forthe six month period ended March 31, 2011 compared to the same prior yearperiod is primarily attributable to decreases in payroll and employee benefitcosts of $51,000 and a $14,000 decrease in our incentive stock optioncompensation expense as well as decreases in other costs. In July 2010 we implementedsalary reductions which resulted in annualized savings in payroll and employeebenefit costs of approximately $89,000. The decreases in payroll and employeebenefit costs were partially offset by an increase in our training andrecruiting costs of $12,000 attributable to our crew incentive programs as wellas an increase of $11,000 in our stock exchange fees and expenses related tothe one for three reverse stock split.

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*AdvertisingCosts*

For the three months ended March 31, 2011 advertisingcosts decreased $82,000 to $198,000 (4.3% of restaurant sales) from $280,000(6% of restaurant sales) for the same prior year period.

For the six months ended March 31, 2011 advertisingcosts decreased $136,000 to $414,000 (4.3% of restaurant sales) from $550,000(5.9% of restaurant sales) for the same prior year period.

Contributions are made to the advertising materialsfund and regional advertising cooperative based on a percentage of sales andthere was a reduction in the percentage contribution for fiscal 2011 comparedto the same prior year period.

* *

*Franchise Costs*

For the three months ended March 31, 2011, franchisecosts decreased $16,000 to $19,000 (.4% of total revenues) from $35,000 (.7% oftotal revenues) for the same prior year period.

For the six months ended March 31, 2011, franchisecosts decreased $28,000 to $37,000 (.4% of total revenues) from $65,000 (.7% oftotal revenues) for the same prior year period.

Thedecrease in franchise costs for the three and six month periods ended March 31,2011 is primarily attributable to sponsorship costs incurred in the prior yearperiods associated with the Good Times licensee operating in the Pepsi Centerin Denver, Colorado which closed in late fiscal 2010.

* *

*Gain on Sale of Assets*

For the three months ended March 31, 2011, our gain onthe sale of assets increased $78,000 to $86,000 from $8,000 for the same prioryear period. The current three month period ending March 31, 2011 includes again of $71,000 related to the sale of one company-owned restaurant in February2011.

For the six months ended March 31, 2011, our gain onthe sale of assets increased $83,000 to $98,000 from $15,000 for the same prioryear period. The current six month period ending March 31, 2011 includes a gainof $71,000 related to the sale of one company-owned restaurant in February 2011and a $4,000 gain on the sale of land in December 2010.

* *

*Loss from Operations*

We had a loss from operations of ($368,000) in thethree months ended March 31, 2011 compared to a loss from operations of($705,000) for the same prior year period.

We had a loss from operations of ($656,000) in the sixmonths ended March 31, 2011 compared to a loss from operations of ($1,247,000)for the same prior year period.

The decrease in loss from operations for the three andsix month periods is due primarily to the increase in net revenues offset byother matters discussed in the "Restaurant Operating Costs","General and Administrative Costs", "Franchise Costs" and "Loss onSales of Assets" sections of Item 2 above.

* *

*Loss from Continuing Operations*

The net loss from continuing operations was ($415,000)for the three months ended March 31, 2011 compared to a net loss fromcontinuing operations of ($866,000) for the same prior year period. The changefrom the three month period ended March 31, 2010 to March 31, 2011 was attributableto the decrease in loss from operations for the three months ended March 31,2011, as well as a decrease in net interest expense of $114,000 compared to thesame prior year period. Net interest expense for the three months ended March31, 2011 includes non-cash amortization of debt issuance costs of $7,000related to the extension of the PFGI II loan in January, 2010. Net interestexpense for the three months ended March 31, 2010 includes non-cashamortization of debt issuance costs of $81,000 related to: 1) the extension ofthe PFGI II loan in January, 2010; and 2) the loanagreement with W Capital and John T. MacDonald entered into in February2010.

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The net loss from continuing operations was ($801,000)for the six months ended March 31, 2011 compared to a net loss from continuingoperations of ($1,477,000) for the same prior year period. The change from thesix month period ended March 31, 2010 to March 31, 2011 was attributable to thedecrease in loss from operations for the six months ended March 31, 2011, aswell as: 1) a decrease in net interest expense of $72,000 compared to the sameprior year period; and 2) an increase in the unrealized gain related to ourinterest rate swap liability of $13,000 compared to the same prior year period. Net interest expense for the six months ended March 31, 2011 includes non-cashamortization of debt issuance costs of $35,000 related to: 1) the extension ofthe PFGI II loan in January, 2010; and 2) the loanagreement with W Capital and John T. MacDonald entered into in February2010. Net interest expense for the six months ended March 31, 2010 includesnon-cash amortization of debt issuance costs of $90,000 related to: 1) theextension of the PFGI II loan in January, 2010; and 2) the loan agreement with W Capital and John T. MacDonaldentered into in February 2010.

*Income (loss) from Discontinued Operations*

The income from discontinued operations of $27,000 forthe three month period ended March 31, 2011 represents our lease liabilitycosts in excess of our accrued liability for the Commerce City location offsetby a reversal of the $31,000 lease accrual associated with the Denver location.The lease on the Denver location was terminated in February 2011 and there areno remaining lease obligations. The loss from discontinued operations of($400,000) for the prior year three month period ended March 31, 2010represents the results of operations attributable to our Commerce City,Colorado dual-branded restaurant that was closed in March 2010 and our Denver,Colorado co-developed restaurant that was closed in June 2010, as well as anasset write-down and lease liability accrual of $334,000 related to theCommerce City location.

The income from discontinued operations of $24,000 forthe six month period ended March 31, 2011 represents our lease liability costsin excess of our accrued liability for the Commerce City location offset by areversal of the $31,000 lease accrual associated with the Denver location. Theloss from discontinued operations of $471,000 for the prior year six monthperiod ended March 31, 2010 represents the results of operations attributableto our Commerce City, Colorado dual-branded restaurant that was closed in March2010 and our Denver, Colorado co-developed restaurant that was closed in June2010, as well as an asset write-down and lease liability accrual of $334,000related to the Commerce City location. 

**Liquidity and Capital Resources**

* *

*Cash and Working Capital*

Asof March 31, 2011, we had $987,000 in cash and cash equivalents on hand.  Wecurrently plan to use the cash balance and any cash generated from operationsfor our working capital needs and capital improvements to existing restaurantsin fiscal 2011 and beyond. As of March 31, 2011, we had a working capitaldeficit of $573,000 primarily due to 2010 property taxes of approximately$400,000 due in April 2011. We will require additional capital sources for thedevelopment of new restaurants.

Weentered into a purchase and sale agreement for the sale of two company-ownedrestaurants in Colorado Springs, Colorado that was effective February 1, 2011.The sale of one restaurant occurred in February, 2011 and the sale of thesecond restaurant is anticipated to occur on or prior to May 31, 2011. The netproceeds from the sale of the first restaurant in February were $99,000 andresulted in a gain on the sale of approximately $71,000. The net proceeds forthe sale of the second restaurant are estimated to be $169,000 with anestimated gain on the sale of $62,000.

*Financing Activities*

WellsFargo Note Payable: In May 2007 weborrowed $1,100,000 from Wells Fargo Bank under a note payable with an eightyear term with a floating interest rate at .50% below prime.  We simultaneouslyentered into an interest rate swap transaction with Wells Fargo Bank for thefull $1,100,000 with a fixed interest rate of 7.77% for the full eight yearterm coinciding with the note payable.  As previously reported, we were indefault of certain financial loan covenants and had been operating under aforbearance and reservation of rights agreement with Wells Fargo.   Aspreviously disclosed in the Company's current report on Form 8-K filed December17, 2010, we entered into a new Credit and Loan Agreement that modified theloan covenants and provided additional collateral to Wells Fargo for theremaining loan balance of $642,142. In addition we are using $90,000 of theproceeds from the sale of two company-owned restaurants in Colorado Springs,Colorado to further reduce the note payable over the next ten months andthereby releasing certain collateral.  The loan covenants were modified torequire minimum Tangible Net Worth of $2,500,000, Total Liabilities Divided byTangible Net Worth not greater than 3.0 to 1.0 and an EBITDA Coverage Ratio notless than 0.9 to 1.0 as of the end of the first fiscal quarter of 2012, notless than 1.2 to 1.0 as of the end of the second fiscal quarter of 2012 and notless than 1.5 to 1.0 thereafter. As of March 31, 2011 we are in compliance withall loan covenants.

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PFGIII LLC Promissory Note: In July 2008,we entered into a $2,500,000 promissory note with an unrelated third party(PFGI II, LLC) and amended that note on April 20, 2009 extending the maturityto July 10, 2010. Effective January 2, 2010, the Company entered into an agreementto amend its loan with PFGI II LLC.  The maturity date was extended to December31, 2012, the interest rate was increased to 8.65% and monthly payments ofprincipal and interest are payable beginning January 31, 2010, based upon a 25year amortization prior to maturity. In connection with the agreement, theCompany issued a three-year warrant dated January 2, 2010 to PFGI II, LLC whichprovides that PFGI II, LLC may at any time from January 2, 2010 until December31, 2012 purchase up to 37,537 shares of the Company's common stock at anexercise price of $3.33 per share. The number of shares purchasable uponexercise of the warrant and the exercise price are subject to customaryanti-dilution adjustments upon the occurrence of any stock dividends, stocksplits, reverse stock splits, recapitalizations, reclassifications, stockcombinations or similar events. The fair value of the warrant issued to PFGIII, LLC was determined to be $79,000 with the following assumptions; 1) riskfree interest rate of 1.7%, 2) an expected life of 3 years, and 3) an expecteddividend yield of zero. The fair value of $79,000 was charged to the notediscount and credited to Additional Paid in Capital. The note discount is beingamortized over the term of thirty six months and charged to interest expense.

Thepromissory note originally constituted a revolving line-of-credit for thedevelopment of new restaurants which was advanced and repaid on a monthly basisfrom time to time.  The promissory note now constitutes a term loan withmonthly payments of principal and interest.  The loan is secured by separateleasehold deeds of trust and security agreements related to six company-ownedrestaurants and a first deed of trust on one real property funded by the lineof credit. The total outstanding balance on the promissory note was $1,656,000at March 31, 2011.  Of the $1,656,000 outstanding balance, $1,595,000 isrelated to the construction of one company-owned restaurant in Firestone,Colorado that opened in October 2008. The fully developed restaurant iscurrently being marketed in the sale-leaseback market.  On December 5, 2010 thecompany sold a parcel of land in Aurora, Colorado and used approximately$812,000 of the net proceeds to reduce the loan balance.

GoldenBridge Loan Agreement: On April 20,2009 as reported on Form 8-K, the Company entered into a loan agreement withGolden Bridge, LLC ("Golden Bridge"), pursuant to which Golden Bridge made aloan of $185,000 (the "Golden Bridge Loan") to GTDT to be used for restaurant marketingand other working capital costs.  Eric Reinhard, Ron Goodson, David Grissen,Richard Stark, and Alan Teran, who were all members of the Company's Board ofDirectors at the time of the transaction and stockholders of the Company, arethe sole members of Golden Bridge.  The loan was repaid in full on December 13,2010 from the proceeds of the SII Investment Transaction (see "SII InvestmentTransaction" below).

Inconnection with the Golden Bridge Loan, the Company issued a three-year warrantdated April 20, 2009 to Golden Bridge which provides that Golden Bridge may atany time from April 20, 2009 until April 20, 2012 purchase up to 30,833 sharesof the Company's common stock at an exercise price of $3.45 per share.  Thenumber of shares purchasable upon exercise of the warrant and the exerciseprice are subject to customary anti-dilution adjustments upon the occurrence ofany stock dividends, stock splits, reverse stock splits, recapitalizations,reclassifications, stock combinations or similar events. The fair value of thewarrant issued to Golden Bridge was determined to be $42,000. The note discountwas amortized over fourteen months and charged to interest expense.

W. Capital and John T. MacDonald Loan Agreement: OnFebruary 1, 2010, the Company entered into a loan agreement with W Capital,Inc. ("W Capital"), John T. McDonald ("McDonald") and Golden Bridge, pursuantto which the lenders made loans totaling $200,000, with up to an additional$200,000 available through April 30, 2010, to be used for restaurant marketingand other working capital uses of GTDT.  As set forth below, the loan agreementwas subsequently amended as of April 1, 2010 to remove Golden Bridge as alender and to replace it with additional loans from W Capital and McDonald.  OnDecember 13, 2010, the outstanding principal amount of the Bridge Loans waspaid in full from the proceeds of the SII Investment Transaction, and accruedinterest on the Bridge Loans was converted into 26,477 shares of Common Stock.

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In connection with the BridgeLoans, the Company issued warrants dated February 1, 2010 to W Capital andMcDonald which provide that the lenders may at any time from February 1, 2010until two years from the date of repayment or conversion of the Bridge Loanspurchase up to an aggregate of 16,667 shares of the Company's Common Stock atan exercise price of 25% less than the average price of the Company's commonstock during the 20 days prior to the exercise date, provided, however, thatthe exercise price shall not be below $2.25 per share nor above $3.24 pershare.  Pursuant to the terms of the loan agreement, because the Bridge Loanswere not repaid prior to August 1, 2010, the Company issued warrants to WCapital and McDonald for the purchase of 16,667 additional shares of theCompany's Common Stock upon the same terms as the initial warrants.  The numberof shares purchasable upon exercise of the warrants issued to W Capital andMcDonald and the exercise price are subject to customary anti-dilutionadjustments upon the occurrence of any stock dividends, stock splits, reversestock splits, recapitalizations, reclassifications, stock combinations orsimilar events.  The warrants will expire on December 12, 2012.

Thefair value of the warrants issued February 1, 2010 was determined to be $38,000with the following assumptions: 1) risk free interest rate of 1.41%, 2) anexpected life of 2.5 years, and 3) an expected dividend yield of zero. The fairvalue of $38,000 was charged to the note discount and credited to Additional Paidin Capital. The note discount was amortized over the term of seven months andcharged to interest expense.

Theintrinsic value of the embedded beneficial conversion feature of the BridgeLoans was determined to be $161,000. The intrinsic value of $161,000 wascharged to the note discount and credited to Additional Paid in Capital. Thenote discount was amortized over the term of seven months and charged tointerest expense.

Thefair value of the warrants issued August 1, 2010 was determined to be $36,000with the following assumptions: 1) risk free interest rate of .70%, 2) anexpected life of 2.4 years, and 3) an expected dividend yield of zero. The fairvalue of $36,000 was charged to the note discount and credited to AdditionalPaid in Capital. The note discount was amortized over the term of five monthsand charged to interest expense.

*SII InvestmentTransaction*

OnOctober 29, 2010, the Company and SII entered into the Purchase Agreement,pursuant to which the Company agreed to sell, and SII agreed to purchase,1,400,000 Shares of Common Stock at a purchase price of $1.50 per share, or anaggregate purchase price of $2,100,000.  The Purchase Agreement was amended onDecember 13, 2010.  On December 13, 2010, the Company and SII completed the SIIInvestment Transaction through the issuance and sale of the Shares to SII.  OnDecember 13, 2010, the Company and SII also entered into a Registration RightsAgreement, pursuant to which the Company granted SII certain registrationrights with respect to resale of the Shares.  As a result of the completion ofthe SII Investment Transaction, SII became the beneficial owner ofapproximately 51.4 percent of the Company's outstanding Common Stock.

ThePurchase Agreement provides that for so long as SII holds more than 50 percentof our outstanding common stock, (i) our Board of Directors shall consist ofseven members, and (ii) SII will have the right to designate four members ofour Board.  In addition, the Purchase Agreement provides that for a period ofthree years following the Closing, as long as SII continues to own at least 80percent of its Common Stock acquired, SII will have a right of first refusal topurchase additional securities which are offered and sold by the Company forthe purpose of maintaining its percentage interest in the Company.

Theproceeds from the SII Investment Transaction were used to pay approximately$288,000 of expenses related to the transaction, repay $585,000 in short termloans, reduce accrued liabilities by $200,000, reduce accounts payable byapproximately $150,000 and the balance going to increase the Company's workingcapital.

*Capital Expenditures*

Wedo not have any plans for any significant capital expenditures for the balanceof fiscal 2011, other than normal recurring capital expenditures for existingrestaurants and installation of new menu boards. Additional commitments for thedevelopment of new restaurants in fiscal 2011 and beyond will depend on theCompany's sales trends, cash generated from operations and our access toadditional capital.

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*Cash Flows*

Net cash used in operating activities was $594,000 forthe six months ended March 31, 2011. The net cash used in operating activitiesfor the six months ended March 31, 2011 was the result of a net loss of($801,000) as well as cash and non-cash reconciling items totaling $207,000(comprised of depreciation and amortization of $443,000, stock-basedcompensation expense of $30,000, a deferred gain of $79,000, an adjustment tothe accretion for deferred rent of $31,000, a $107,000 increase in deposits andother assets, an accounts payable decrease of $94,000 and a net decrease inother operating assets and liabilities of $45,000).

Net cash used in operating activities was $670,000 forthe six months ended March 31, 2010. The net cash used in operating activitiesfor the six months ended March 31, 2010 was the result of a net loss of($1,477,000) as well as cash and non-cash reconciling items totaling $920,000(comprised of depreciation and amortization of $580,000, stock basedcompensation expense of $44,000, an accounts payable increase of $341,000 and anet decrease in other operating assets and liabilities of $45,000).

Net cash provided by investing activities for the sixmonths ended March 31, 2011 was $936,000 which reflects proceeds from the saleof property of $946,000 and payments of $10,000 for miscellaneous restaurantrelated capital expenditures.

Net cash used in investing activities for the sixmonths ended March 31, 2010 was $16,000 which reflects payments of $24,000 formiscellaneous restaurant related capital expenditures and $8,000 in principalpayments received on loans to franchisees.

Net cash provided by financing activities for the sixmonths ended March 31, 2011 was $216,000, which includes net proceeds of$1,727,000 from the sale of common stock, principal payments on notes payableand long term debt of $1,490,000 and distributions to non-controlling interestsof $21,000.

Net cash provided by financing activities for the sixmonths ended March 31, 2010 was $404,000, which includes principal payments onnotes payable and long term debt of $67,000, borrowings on notes payable of$400,000 and receivables from non-controlling interests of $71,000.

*Contingencies*

Weremain contingently liable on various land leases underlying restaurants thatwere previously sold to franchisees.  We have never experienced any lossesrelated to these contingent lease liabilities, however if a franchisee defaultson the payments under the leases, we would be liable for the lease payments asthe assignor or sublessor of the lease.  Currently we have not been notifiednor are we aware of any leases in default under which we are contingentlyliable, however there can be no assurance that there will not be in the future,which could have a material effect on our future operating results.

*SubsequentEvents*

None.

**Impact of Inflation**

Infiscal 2010 our weighted food and packaging costs increased approximately 11%. The cumulative weighted menu price increases taken during fiscal 2010 were1.7%.  Most of the 2010 menu price increases were taken in the last four monthsof fiscal 2010 aggregating a 7.1% cumulative increase. In fiscal 2011 ourweighted food and packaging costs have increased approximately 4.7%. We took a1.7% menu price increase in February 2011. We anticipate continued costpressure on several core commodities, including beef, bacon and dairy for theremainder of fiscal 2011.We are planning moderate price increases in fiscal2011, which may or may not be sufficient to recover increased commodity costsor increases in other operating expenses.

**Seasonality**

Revenuesof the Company are subject to seasonal fluctuation based primarily on weatherconditions adversely affecting restaurant sales in December, January, Februaryand March.

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**ITEM 3.                QUANTITATIVE AND QUALITATIVEDISCLOSURES ABOUT MARKET RISK**

Not required.

** **

**ITEM 4T.             CONTROLSAND PROCEDURES**

**ConclusionRegarding the Effectiveness of Disclosure Controls and Procedures**

Basedon an evaluation of the Company's disclosure controls and procedures (asdefined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of1934, as amended), as of the end of the period covered by this report on form10Q, the Company's Chief Executive Officer and Controller (its principalexecutive officer and principal financial officer, respectively) have concludedthat the Company's disclosure controls and procedures were effective.

**Changesin Internal Control over Financial Reporting**

Therehave been no significant changes in the Company's internal control overfinancial reporting that occurred during the Company's fiscal quarter endedMarch 31, 2011 that have materially affected, or are reasonably likely tomaterially affect, the Company's internal control over financial reporting.

**PART II - OTHER INFORMATION**

** **

**ITEM1.                LEGAL PROCEEDINGS**

The Company is periodicallysubject to legal proceedings which are incidental to its business.  These legalproceedings are not expected to have a material impact on the Company.

**ITEM 1A.             RISKFACTORS**

                                Notrequired.

**ITEM2.                UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS**

                                None.

**ITEM 3.                DEFAULTSUPON SENIOR SECURITIES**

                              None.

**ITEM 4.                (REMOVED AND RESERVED)**

**ITEM 5.                OTHERINFORMATION**

                                None.

** **

**ITEM 6.                EXHIBITS**

      (a)         Exhibits. The following exhibits are furnished as part of this report:
| Exhibit No. | Description                                                                      |
|-------------|----------------------------------------------------------------------------------|
| *31.1       | Certification of Chief  Executive Officer pursuant to 18 U.S.C. Section 1350     |
| *31.2       | Certification of Controller  pursuant to 18 U.S.C. Section 1350                  |
| *32.1       | Certification of Chief  Executive Officer and Controller pursuant to Section 906 |

*filed herewith

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**SIGNATURES**

In accordance with therequirements of the Exchange Act, the registrant caused this report to besigned on its behalf by the undersigned, thereunto duly authorized.
|               | **GOOD  TIMES RESTAURANTS INC.**                        |
|--------------------|---------------------------------------------------------|
| DATE: May 16, 2011 |                                                         |
|                    | /s/ Boyd E. Hoback                                      |
|                    | Boyd  E. Hoback

President  and Chief Executive Officer |
|                    | * *                                                |
|                    | /s/ Susan M. Knutson                                    |
|                    | Susan  M. Knutson

Controller                           |

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