UNITEDSTATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

X QUARTERLYREPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE

ACT OF1934

For thequarterly period ended March 31, 2009

OR

o TRANSITION REPORT PURSUANTTO SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGEACT OF 1934

CommissionFile Number: 0-18590

GOODTIMES RESTAURANTS, INC.

(ExactName of Registrant as Specified in Its Charter)

|  NEVADA                                                        |  |  84-1133368                                      |
|--------------------------------------------------------------------------|--|-------------------------------------------------------|
| (State  or Other Jurisdiction of  

Incorporation  or Organization) |  |     (I.R.S. Employer Identification Number) |

601CORPORATE CIRCLE, GOLDEN, CO 80401

(Addressof Principal Executive Offices, Including Zip Code)

(303) 384-1400

(Registrant'sTelephone Number, Including Area Code)

Indicate by check mark whether the registrant: (1) has filed allreports required to be filed by Section 13 or 15(d) of the Securities ExchangeAct of 1934 during the preceding 12 months (or for such shorter period that theregistrant was required to file such reports), and (2) has been subject to suchfiling requirements for the past 90 days.

Yes x  No            

Indicate by check mark whether the registrant is a largeaccelerated filer, an accelerated filer, a non-accelerated filer or a smallerreporting 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 May15, 2009, there were 3,898,559 shares of the Registrant's common stock, parvalue $0.001 per share, issued and outstanding.

----

 

**Form10-Q**

**QuarterEnded March 31, 2009**

| ** ** | **INDEX**                                                                              | **PAGE**     |
|------------|----------------------------------------------------------------------------------------|--------------|
|            |                                                                                        |              |
|            | **PART  I - FINANCIAL INFORMATION**                                                    |              |
|            |                                                                                        |              |
| Item  1.   | Financial Statements                                                                   |              |
|            |                                                                                        |              |
|            | Condensed Consolidated Balance Sheets -                                                |              |
|            | March 31, 2009  (unaudited) and September 30, 2008                                     | 3 - 4        |
|            |                                                                                        |              |
|            | Condensed  Consolidated Statements of Operations (unaudited)                      |              |
|            | For the three and  six months ended March 31, 2009 and 2008                            | 5            |
|            |                                                                                        |              |
|            | Condensed  Consolidated Statements of Cash Flow (unaudited)                            |              |
|            | For the six months  ended March 31, 2009 and 2008                                      | 6            |
|            |                                                                                        |              |
|            | Notes  to Financial Statements                                                         | 7 - 11       |
|            |                                                                                        |              |
| Item  2.   | Management's  Discussion and Analysis of Financial Condition and Results of Operations | 11 - 20      |
|            |                                                                                        |              |
| Item  3.   | Quantitative  and Qualitative Disclosures About Market Risk                            | 21           |
|            |                                                                                        |              |
| Item 4T.   | Controls  and Procedures                                                               | 21           |
|            |                                                                                        |              |
|            | **PART  II - OTHER INFORMATION**                                                       |              |
|            |                                                                                        |              |
| Item 1.    | Legal  Proceedings                                                                     | 21           |
|            |                                                                                        |              |
| Item 1A.   | Risk  Factors                                                                          | 21           |
|            |                                                                                        |              |
| Item  2.   | Unregistered  Sales of Equity Securities and Use of Proceeds                           | 21           |
|            |                                                                                        |              |
| Item  3.   | Defaults  Upon Senior Securities                                                       | 21           |
|            |                                                                                        |              |
| Item  4.   | Submission  of Matters to a Vote of Security Holders                                   | 21           |
|            |                                                                                        |              |
| Item  5.   | Other  Information.                                                                    | 21           |
|            |                                                                                        |              |
| Item  6.   | Exhibits                                                                               | 21           |
|            |                                                                                        |              |
|            | **SIGNATURES**                                                                         | 22           |
|            | ** **                                                                             |              |
|            | **CERTIFICATIONS**                                                                     | Exhibit 31.1 |
|            | ** **                                                                             | Exhibit 31.2 |
|            | ** **                                                                             | Exhibit 32.1 |

2

----

**PART I - FINANCIALINFORMATION**

**ITEM 1.            FINANCIAL STATEMENTS**

**GOOD TIMESRESTAURANTS INC. AND SUBSIDIARIES**

**CONDENSEDCONSOLIDATED BALANCE SHEETS**

**ASSETS**

|                                                                                            | **Unaudited**                               |        |                                             |
|--------------------------------------------------------------------------------------------|---------------------------------------------|--------|---------------------------------------------|
|                                                                                            | March 31,                                   |        | September 30,                               |
|                                                                                            | 2009                                        |        | 2008                                        |
| CURRENT  ASSETS:                                                                           |                                             |        |                                             |
|       Cash  and cash equivalents                                  | $601,000                                    |        | $1,414,000                                  |
|       Receivables,  net of allowance for doubtful

accounts of $0 | 138,000                                     |        | 160,000                                     |
|       Prepaid  expenses and other                                 | 90,000                                      |        | 79,000                                      |
|       Inventories                                                 | 237,000                                     |        | 240,000                                     |
|       Notes  receivable                                           |      37,000             |   |      35,000             |
|            Total  current assets         | 1,103,000                                   |        | 1,928,000                                   |
|                                                                                            |                                             |        |                                             |
| PROPERTY  AND EQUIPMENT, at cost:                                                          |                                             |        |                                             |
|       Land  and building                                          | 6,588,000                                   |        | 6,566,000                                   |
|       Leasehold  improvements                                     | 4,107,000                                   |        | 4,017,000                                   |
|       Fixtures  and equipment                                     |   8,415,000                            |   |   8,303,000                            |
|                                                                                            | 19,110,000                                  |        | 18,886,000                                  |
|                                                                                            |                                        |        |                                        |
|       Less  accumulated depreciation and amortization             | (11,229,000)                                |        | (10,602,000)                                |
|                                                                                            | 7,881,000                                   |        | 8,284,000                                   |
|                                                                                       |                                        |   |                                        |
|       Assets  held for sale                                       | 1,595,000                                   |   | 1,574,000                                   |
|                                                                                       |                                        |   |                                        |
| OTHER  ASSETS:                                                                             |                                        |   |                                        |
|       Notes  receivable, net of current portion                   | 90,000                                      |        | 83,000                                      |
|       Deposits  and other assets                                  |        49,000 |        |        51,000 |
|                                                                                            |      139,000            |        |      134,000            |
|                                                                                            |                                             |        |                                             |
| TOTAL  ASSETS                                                                              | $10,718,000                                 |        | $11,920,000                                 |
|                                                                                            |                                             |        |                                             |

### LIABILITIES AND STOCKHOLDERS' EQUITY

|  CURRENT  LIABILITIES:                                                                     |                            |        |                      |
|-------------------------------------------------------------------------------------------------|----------------------------|--------|----------------------|
|       Current  maturities of long-term debt                            | $910,000                   |        | $2,304,000           |
|       Accounts  payable                                                | 349,000                    |        | 628,000              |
|       Deferred  income                                                 | 70,000                     |        | 139,000              |
|       Other  accrued liabilities                                       | 1,124,000                  |        |    939,000 |
|             Total  current liabilities   | 2,453,000                  |        | 4,010,000            |
|                                                                                                 |                            |        |                      |
| LONG-TERM  LIABILITIES:                                                                         |                       |   |                 |
|       Debt, net of  current portion                                    | 2,500,000                  |        | 846,000              |
|       Deferred  liabilities                                            |     987,000 |        | 1,071,000            |
|             Total  long-term liabilities | 3,487,000                  |        | 1,917,000            |
|                                                                                                 |                            |        |                      |
| MINORITY INTERESTS IN PARTNERSHIPS                                                              | 509,000                    |        | 584,000              |

 

3

See accompanyingnotes to condensed consolidated financial statements

----

**GOOD TIMESRESTAURANTS INC. AND SUBSIDIARIES**

**CONDENSEDCONSOLIDATED BALANCE SHEETS (Continued)**

|                                                                                                                               | **Unaudited**                      |        |                                    |
|------------------------------------------------------------------------------------------------------------------------------------|------------------------------------|--------|------------------------------------|
|                                                                                                                               | March 31,                          |        | September 30,                      |
|                                                                                                                               | 2009                               |   | 2008                               |
| STOCKHOLDERS'  EQUITY:                                                                                                             |                               |   |                               |
| Preferred  stock, $.01 par value;                                                                                                  |                                    |        |                                    |
| 5,000,000 shares authorized, none issued                                                                                           |                                    |        |                                    |
| and outstanding as of September 30, 2008  and

March 31, 2009                                                                      | -                                  |        | -                                  |
|                                                                                                                                    |                                    |        |                                    |
| Common  stock, $.001 par value; 50,000,000 shares                                                                                  |                                    |        |                                    |
| Authorized, 3,898,559 shares issued and                                                                                            |                                    |        |                                    |
| outstanding as of September 30, 2008 and

March 31, 2009                                                                           | 4,000                              |        | 4,000                              |
|                                                                                                                                    |                                    |        |                                    |
| Accumulated other comprehensive loss                                                                                               | -                                  |        | (68,000)                           |
| Capital contributed in excess of par value                                                                                         | 17,671,000                         |        | 17,633,000                         |
| Accumulated deficit                                                                                                                | (13,406,000)                       |        | (12,160,000)                       |
|                   Total  stockholders' equity |      4,269,000 |        |      5,409,000 |
|                                                                                                                                    |                                    |        |                                    |
| TOTAL  LIABILITIES AND STOCKHOLDERS' EQUITY                                                                                        | $10,718,000                        |        | $11,920,000                        |

4

See accompanyingnotes to condensed consolidated financial statements

----

**GOOD TIMESRESTAURANTS INC. AND SUBSIDIARIES**

**CONDENSEDCONSOLIDATED STATEMENTS OF OPERATIONS**

**(Unaudited)**

|                                                                                               | **Three Months Ended March 31,**                        | **Six Months Ended March 31,** |
|----------------------------------------------------------------------------------------------------|---------------------------------------------------------|--------------------------------|
|                                                                                                    | **2009**                                                | ** **                     | **2008** |  | **2009** | ** ** | **2008** |
| NET  REVENUES:                                                                                     |                                                         |                                |  |  |  |  |  |
|       Restaurant sales, net                                                    | $5,420,000                                              |                                | $5,883,000 |  | $10,927,000 |  | $11,918,000 |
|       Franchise revenues                                                       |     135,000                              |                           |    160,000 |   |      274,000 |   |      322,000 |
|            Total revenues                             | 5,555,000                                               |                                | 6,043,000 |  | 11,201,000 |  | 12,240,000 |
|                                                                                                    |                                                         |                                |  |  |  |  |  |
| RESTAURANT  OPERATING COSTS:                                                                       |                                                         |                                |  |  |  |  |  |
|       Food and packaging costs                                                 | 1,804,000                                               |                                | 1,829,000 |  | 3,659,000 |  | 3,675,000 |
|       Payroll and other employee benefit costs                                 | 1,962,000                                               |                                | 2,149,000 |  | 4,027,000 |  | 4,278,000 |
|       Occupancy and other operating costs                                      | 1,187,000                                               |                                | 1,179,000 |  | 2,391,000 |  | 2,297,000 |
|       Accretion of deferred rent                                               | -                                                       |                                | 8,000 |  | - |  | 15,000 |
|       Opening costs                                                            | -                                                       |                           | - |   | 15,000 |   | - |
|       Depreciation and amortization                                            |     316,000                              |                           |    314,000 |   |      627,000 |   |      623,000 |
|            Total restaurant operating costs           | 5,269,000                                               |                                | 5,479,000 |  | 10,719,000 |  | 10,888,000 |
|                                                                                                    |                                                         |                           |  |   |  |  |  |
|       General and administrative costs                                         | 402,000                                                 |                           | 484,000 |   | 891,000 |  | 1,039,000 |
|       Advertising costs                                                        | 308,000                                                 |                                | 361,000 |  | 623,000 |  | 731,000 |
|       Franchise costs                                                          | 33,000                                                  |                                | 91,000 |  | 73,000 |  | 188,000 |
|       (Gain) loss on sale of restaurant building and equipment                 |     (7,000)                              |                                |    (11,000) |  |       (15,000) |  |       (19,000) |
|                                                                                                    |                                                         |                                |  |  |  |  |  |
| LOSS  FROM OPERATIONS                                                                              | (450,000)                                               |                                | (361,000) |  |       (1,090,000) |  | (587,000) |
|                                                                                                    |                                                         |                                |  |  |  |  |  |
| OTHER  INCOME AND (EXPENSES):                                                                      |                                                         |                                |  |  |  |  |  |
|       Minority income (expense), net                                           | 30,000                                                  |                                | (9,000) |  | 64,000 |  | (41,000) |
|       Unrealized  income (loss) on interest rate swap                          | 3,000                                                   |                                | - |  |         (116,000) |  | - |
|       Interest income (expense), net                                           |     (64,000)                             |                                |                  - |  |    (105,000) |  |            3,000 |
|            Total other income and (expenses)          |     (31,000)                             |                                |       (9,000) |  |    (157,000) |  |       (38,000) |
|                                                                                                    |                                                    |                           |   |   |   |   |   |
| NET  LOSS                                                                                          | ($ 481,000)                                             |                           | ($ 370,000) |   | ($1,247,000) |   | ($   625,000) |
|                                                                                                    |                                                    |                           |   |   |   |   |   |
| BASIC  AND DILUTED NET LOSS PER COMMON SHARE                                                       | ($         .12) |                           | ($         .10) |   | ($          .32) |   | ($          .16) |
|                                                                                                    |                                                         |                                |  |  |  |  |  |
| WEIGHTED  AVERAGE COMMON SHARES AND EQUIVALENTS

USED  IN PER SHARE CALCULATION: BASIC AND DILUTED | 3,898,559                                               |                                | 3,878,833 |  | 3,898,559 |  | 3,876,300 |

5

See accompanyingnotes to condensed consolidated financial statements

----

**GOODTIMES RESTAURANTS INC. AND SUBSIDIARIES**

**CONDENSEDCONSOLIDATED STATEMENTS OF CASH FLOWS**

**(Unaudited)**

|                                                                                                                                                           | For the Six Months  Ended

March 31,                                                    |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------|-----------------------------------------------------------------------------------------|
| CASH FLOWS FROM  OPERATING ACTIVITIES:                                                                                                                    | 2009                                                                                    |  | 2008 |
|      Net  loss                                                                                                                        | ($1,247,000)                                                                            |  | ($625,000) |
|      Adjustments  to reconcile net loss to net cash                                                                                   |                                                                                         |  |  |
|         provided by (used in) operating activities:                                                                              |                                                                                         |  |  |
|          Depreciation  and amortization                                                                           | 627,000                                                                                 |  | 623,000 |
|          Stock  based compensation expense                                                                        | 39,000                                                                                  |  | 48,000 |
|          Unrealized  loss on interest rate swap                                                                   | 116,000                                                                                 |  | - |
|          Accretion  of deferred rent                                                                              | -                                                                                       |  | 15,000 |
|          Minority  interest                                                                                       | (64,000)                                                                                |  | 41,000 |
|          Recognition  of deferred (gain) on sale of restaurant building                                           | (15,000)                                                                                |  | (16,000) |
|           Loss (gain) on sale of assets                                                                           | -                                                                                       |  | (3,000) |
|          Changes  in operating assets and liabilities:                                                            |                                                                                         |  |  |
|               (Increase)  decrease in:                                                   |                                                                                         |  |  |
|                  Receivables  and other                                   | 11,000                                                                                  |  | (107,000) |
|                  Inventories                                              | 3,000                                                                                   |  | (24,000) |
|                  Deposits  and other                                      | 9,000                                                                                   |  | (3,000) |
|             (Decrease)  increase in:                                                               |                                                                                         |  |  |
|                  Accounts  payable                                        | (279,000)                                                                               |  | (9,000) |
|                  Accrued  liabilities and deferred income                 |    (8,000)                                                                    |  |    62,000 |
|              Net  cash provided by (used in) operating activities                             | (808,000)                                                                               |  | 2,000 |
|                                                                                                                                                           |                                                                                         |  |  |
| CASH FLOWS USED IN  INVESTING ACTIVITIES                                                                                                                  |                                                                                         |  |  |
|      Payments  for the purchase of property and equipment                                                                             | (245,000)                                                                               |  | (276,000) |
|      Proceeds  from sale of fixed assets                                                                                              | -                                                                                       |  | 747,000 |
|      Purchase  of franchisee assets                                                                                                   | -                                                                                       |  | (272,000) |
|      Loans  made to franchisees and to others                                                                                         | (31,000)                                                                                |  | - |
|      Payments  received on loans to franchisees and to others                                                                         |    22,000                                                                     |  |    43,000 |
|                Net  cash provided by (used in) investing activities                 | (254,000)                                                                               |  | 242,000 |
|                                                                                                                                                           |                                                                                         |  |  |
| CASH FLOWS FROM  FINANCING ACTIVITIES:                                                                                                                    |                                                                                         |  |  |
|      Principal  payments on notes payable, and long-term debt                                                                         | (60,000)                                                                                |  | (59,000) |
|      Net  Proceeds (repayments) on revolving lines of credit                                                                          | 320,000                                                                                 |  | (750,000) |
|      Proceeds  from exercise of options                                                                                               | -                                                                                       |  | 41,000 |
|      Distributions  paid to minority interests in partnerships                                                                        |      (11,000)                                                       |  |    (122,000) |
|                Net  cash provided by (used in) financing activities                 |      249,000                                                        |  |    (890,000) |
|                                                                                                                                                           |                                                                                         |  |  |
| NET CHANGE IN CASH AND CASH EQUIVALENTS                                                                                                                   | (813,000)                                                                               |  | (646,000) |
|                                                                                                                                                           |                                                                                         |  |  |
| CASH AND CASH EQUIVALENTS, beginning of period                                                                                                            | $1,414,000                                                                              |  | $2,465,000 |
|                                                                                                                                                           |                                                                                         |  |  |
| CASH AND CASH EQUIVALENTS, end of period                                                                                                                  | $   601,000                                                                   |  | $1,819,000 |
|                                                                                                                                                           |                                                                                         |  |  |
| SUPPLEMENTAL  DISCLOSURES OF CASH FLOW INFORMATION:                                                                                                       |                                                                                         |  |  |
|      Cash  paid for interest                                                                                                          | $   133,000                                                                   |  | $     41,000 |
|      Non-cash  deferred hedging losses                                                                                                | $               - |  | $     61,000 |
|      Non-cash  acquisition price of franchise stores for forgiveness of

         notes receivable | $               - |  | $    250,000 |

6

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**GOOD TIMESRESTAURANTS INC. AND SUBSIDIARIES**

**NOTES TO CONDENSEDCONSOLIDATED FINANCIAL STATEMENTS**

**(Unaudited)**

**Note 1.Basis of Presentation**

In the opinion of management, theaccompanying unaudited condensed consolidated financial statements contain allof the normal recurring adjustments necessary to present fairly the financialposition of the Company as of March 31, 2009, the results of its operations andits cash flows for the three and six month periods ended March 31, 2009. Operatingresults for the three and six month periods ended March 31, 2009 are notnecessarily indicative of the results that may be expected for the year endingSeptember 30, 2009. The condensed consolidated balance sheet as of September30, 2008 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-KSB for the fiscal year ended September 30, 2008.

**Note 2. Recent Developments**

After several years of same store salesgrowth, including several months of double digit growth in fiscal 2007 andearly fiscal 2008, we experienced a dramatic change in our sales trends,beginning in early calendar 2008 and continuing through March 2009, as theeconomy slowed and competitive pricing pressures intensified.  Due to thedramatic decline in consumer spending, the unprecedented rise in commoditycosts and the upheaval in the credit markets, we suspended most of ourrestaurant development.

**Note 3. Debt Covenant Compliance**

As reported on theform 8-K filed on January 23, 2009, we are in default of certain technical loancovenants on our note payable to Wells Fargo Bank, N.A. ("the Bank"). Thereforeall amounts owing under this facility are reflected as current in the accompanyingCondensed Consolidated Balance Sheet as of March 31, 2009. We have never beenin payment default on the note and expect to be able to remain current onpayments in fiscal 2009, depending on our sales trends and cash flow fromoperations.  On February 9, 2009 we received a Reservation of Rights letterfrom the Bank formally notifying us of the default of the Earnings BeforeInterest Taxes and Depreciation ("EBITDA") Coverage Ratio of not less than 1.5to 1.0 and the Tangible Net Worth of not less than $5,000,000 as set forth inthe Credit Agreement for the period ending December 31, 2008. The letter servesas notice that notwithstanding the foregoing events of default, the Bank isreserving all of its rights and remedies under the Credit Agreement and relatedagreements.

The Bank is not accelerating the Loan at thistime and is continuing to accept regularly scheduled payments of principal andinterest under the Loan, however the acceptance of payments under the Loan doesnot constitute a modification of the Credit Agreement or a waiver of any of thecovenants or of the Bank's rights or remedies under the Credit Agreement,including the right to accelerate the loan in the future after the giving ofnotice.  We will continue to work with the Bank on a Required Corrective Actionfor compliance with existing or modified loan covenants.  There can be noassurance that the Bank will agree to modify or waive any of the loan covenantsor waive any of its rights or remedies under the Credit Agreement and we wouldrequire additional financing to repay the loan balance.  The loan is secured bysecurity agreements in the equipment of four restaurants.

**Note 4. Stock-Based Compensation**

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

Our net loss for the six months ended March31, 2009 and March 31, 2008 includes $39,000 and $48,000, respectively, ofcompensation costs related to our stock-based compensation arrangements.

7

----

During the six months ended March 31, 2008, we granted12,000 non-statutory stock options and 68,400 incentive stock options both withexercise prices of $1.47. The per share weighted average fair value was $.97 forboth non-statutory stock option grants and incentive stock option grants.

In addition to the exercise and grant date prices of theawards, 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     | **69.7%**                    | 69.2%                            |
| Risk-free interest rate | **2.79%**                    | 2.84%                            |
| Expected dividends      | **0**                        | 0                                |

We estimate expected volatility based onhistorical weekly price changes of our common stock for a period equal to thecurrent expected term of the options. The risk-free interest rate is based onthe United States treasury yields in effect at the time of grant correspondingwith the expected term of the options. The expected option term is the numberof years we estimate that options will be outstanding prior to exerciseconsidering vesting schedules and our historical exercise patterns.

SFAS123(R) requires the cash flows resulting from the tax benefits for taxdeductions in excess of the compensation expense recorded for those options(excess tax benefits) to be classified as financing cash flows. These excesstax benefits were $0 for the three and six months ended March 31, 2009.

Asummary of stock option activity under our share-based compensation plan forthe six months ended March 31, 2009 is presented in the following table:

| ** **               | **Options**     | **Weighted Average Exercise  Price** | **Weighted Average  Remaining Contractual**

**Life (Yrs.)** | **Aggregate Intrinsic  Value** |
|--------------------------|-----------------|--------------------------------------|--------------------------------------------------------------|--------------------------------|
| Outstanding-beg of year  |  353,942   | $4.04                                |                                                              |                                |
| Granted                  |  80,400    | $1.47                                |                                                              |                                |
| Exercised                | -               |                                      |                                                              |                                |
| Forfeited                |  (14,760)  | $4.91                                |                                                              |                                |
| Expired                  |   (39,951) | $3.21                                |                                                              |                                |
| Outstanding Mar 31, 2009 | 379,631         | $3.55                                | 6.1                                                          | $0                             |
|                          |                 |                                      |                                                              |                                |
| Exercisable Mar 31, 2009 | 271,356         | $3.68                                | 4.9                                                          | $0                             |

Asof March 31, 2009, the total remaining unrecognized compensation cost relatedto unvested stock-based arrangements was $144,000 and is expected to be recognizedover a period of 2.63 years.

There were no stock options exercisedduring the six months ended March 31, 2009.

**Note 5. ComprehensiveIncome (Loss)**

Comprehensive incomeincludes net income or loss, changes in certain assets and liabilities that arereported directly in equity such as adjustments resulting from unrealized gainsor losses on held-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.

8

----

As of December 31, 2008 and continuing through March 31,2009 we are in default of certain technical covenants on the underlying termloan (see note 3 above) and we have therefore recognized an unrealized loss of$116,000 for the six months ended March 31, 2009 in the accompanying Condensed ConsolidatedStatement of Operations. As long as the underlying loan is in covenant defaultwe will adjust the unrealized gain or loss through the statement of operationsas non-cash income or expense.

**Note 6. Contingent Liabilities**

We remain contingently liable on various landleases underlying restaurants that were previously sold to franchisees.  Wehave never experienced any losses related to these contingent leaseliabilities, however if a franchisee defaults on the payments under the leases,we would be liable for the lease payments as the assignor or sublessor of thelease.  Currently there are no leases in default by the franchisees, however therecan be no assurance that there will not be in the future which could have amaterial effect on our future operating results.

**Note 7. Assets Held for Sale**

We have classified $1,595,000 as assets heldfor sale in the accompanying condensed consolidated balance sheet. These costsare related to a site in Firestone, Colorado which has been fully developed.  A sale and leaseback agreement that was under contract in the first quarter offiscal 2009 was terminated and the restaurant is being marketed for sale andleaseback.  The proceeds of a sale leaseback transaction, if consummated, arerequired to be used for the reduction of the line of credit payable to PFGI II, LLC. The effect on our operating cash flow is not material as the interest expense onthe line of credit is approximately equal to the proposed rental rate on a saleleaseback transaction.

**Note 8.****Im****pairment ofLong-Lived Assets**

The Company reviews its long-lived assets inaccordance with SFAS No. 144, including land, property and equipment for impairmentwhenever events or changes in circumstances indicate that the carrying amountof an asset may not be recoverable. Recoverability of assets to be held andused is measured by a comparison of the capitalized costs of the assets to thefuture undiscounted net cash flows expected to be generated by the assets andthe expected cash flows are based on recent historical cash flows at therestaurant level (the lowest level that cash flows can be determined). If theassets are determined to be impaired, the amount of impairment recognized isthe amount by which the carrying amount of the assets exceeds their fair value.Fair value is determined using forecasted cash flows discounted using anestimated average cost of capital. 

To date we have notwritten down any assets due to impairment, however if we continue to experiencedeclining restaurant sales an asset impairment may materially affect futureoperating results.

**Note 9. Fair Value Measurements**

InSeptember 2006, the Financial Accounting Standards Board (FASB) issuedStatement of Financial Accounting Standards No. 157, "Fair ValueMeasurements" ("SFAS 157"). SFAS 157 defines fair value,establishes a framework for measuring fair value and expands disclosures aboutfair value measurements. Effective October 1, 2008, the Company adopted the provisions of SFAS 157 related to financial assets and liabilities, as well asother assets and liabilities carried at fair value on a recurring basis. Theseprovisions, which have been applied prospectively, did not have a materialimpact on the Company's consolidated financial statements. Certain otherprovisions of SFAS 157 related to other non-financial assets and liabilitieswill be effective for the Company on July 1, 2009, and will be applied prospectively. The adoption of the provisions of SFAS 157 related to othernon-financial assets and liabilities is not expected to have a material impacton the consolidated financial statements of the Company.

SFAS 157defines three levels of inputs that may be used to measure fair value andrequires that the assets or liabilities carried at fair value be disclosed bythe input level under which they were valued. The input levels defined underSFAS 157 are as follows:

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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 forsimilar assets or liabilities; quoted prices in markets that are not active; orother inputs that are observable or can be corroborated by observable marketdata for substantially the full term of the assets or liabilities.

Level 3: Unobservable inputs thatare not corroborated by observable market data.

The following table summarizesfinancial assets and liabilities that are measured at fair value on a recurringbasis as of March 31, 2009:

Level 2

InterestRate Swap liability       $116,000

**Note 10. Accounting Policies**

In June 2006, theFASB issued FIN 48, "Accounting for Uncertainty in Income Taxes - aninterpretation of FASB Statement 109," which clarifies the accounting foruncertainty in income taxes recognized in an enterprise's financial statementsin accordance with FAS 109, "Accounting for Income Taxes."  FIN48 provides interpretive guidance for the financial statement recognition andmeasurement of a tax position taken, or expected to be taken, in a tax return.FIN 48 requires the affirmative evaluation that it is more-likely-than-not,based on the technical merits of a tax position, that an enterprise is entitledto economic benefits resulting from positions taken in income tax returns. If atax position does not meet the "more-likely-than-not" recognition threshold,the benefit of that position is not recognized in the financial statements. FIN 48 was effective for the fiscal year beginning October 1, 2007 and there is no cumulative effect of applying FIN 48.

In February 2007, theFinancial Accounting Standards Board ("FASB") issued SFAS No. 159.  "The FairValue Option for Financial Assets and Financial Liabilities - including anamendment of FASB Statement No. 115" ("SFAS 159"). SFAS 159 provides companieswith an option to report selected financial assets and financial liabilities atfair value.  Unrealized gains and losses on items for which the fair valueoption has been elected are reported in earnings at each subsequent reportingdate.  SFAS 159 was effective for the fiscal year beginning October 1, 2008. The adoption of SFAS 159 did not have any effect on the Company's financial position,results of operations or cash flows.

In March 2008, theFASB issued SFAS No. 161, "Disclosures about Derivative instruments and HedgingActivities" ("SFAS 161").  SFAS 161 amends and expands the disclosurerequirements in SFAS 133, "Accounting for Derivative Instruments and HedgingActivities".  SFAS 161 is effective for fiscal years and interim periodsbeginning after November 15, 2008, which became effective for our interimperiod beginning January 1, 2009.  The adoption of SFAS 161 did not have anyeffect on the Company's financial position, results of operations or cashflows.

**Note 11. Income Taxes**

On October 1, 2007, the Company adopted the provisions of FIN 48. There were no material taxpositions not meeting the "more-likely-than-not" recognition threshold andtherefore there is no cumulative effect of applying FIN 48.

Although the Companyhas not incurred interest and penalties associated with unrecognized taxbenefits; future interest and penalties associated with unrecognized taxbenefits, if any, will be recognized in income tax expense in the ConsolidatedStatements of Operations and the corresponding liability in income taxespayable or income taxes receivable, net on the Consolidated Balance Sheets. 

The Company is currently not undergoing anyexaminations by any taxing jurisdictions, with the tax years for the FiscalYears Ending September 30, 2004 through 2008 remaining open to examination.

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**Note 12. New Accounting Pronouncements**

In December 2007, theFASB issued FASB Statement No. 141 (revised 2007), "Business Combinations"("FAS 141 (R)"), which establishes accounting principles and disclosurerequirements for all transactions in which a company obtains control overanother business.  This accounting pronouncement is effective for fiscal yearsbeginning after December 15, 2008, which will effective for our fiscal yearbeginning October 1, 2009.  The requirements of FAS 141 will only impact futurebusiness combination transactions that we may enter into.

In December 2007, theFASB issued FASB Statement No. 160, "Noncontrolling Interests in ConsolidatedFinancial Statements and amendment to ARB No. 51" ("FAS 160").  This standardprescribes the accounting by a parent company for minority interests held byother parties in a subsidiary of the parent company.  FAS 160 is effective forfiscal years beginning after December 15, 2008, which will be effective for ourfiscal year beginning October 1, 2009.  We are currently evaluating therequirements of FAS 160 and have not yet determined the impact on our financialstatements.

**Note 13. Stock Transactions**

None.

**ITEM 2.      MANAGEMENT'SDISCUSSION AND ANALYSIS OF FINANCIAL CONDITION**

**                  AND RESULTS OF OPERATIONS**

### General

ThisForm 10-Q contains or incorporates by reference forward-looking statementswithin the meaning of Section 27A of the Securities Act of 1933, as amended andthe disclosure of risk factors in the Company's form 10-KSB for the fiscal yearended September 30, 2008.  Also, documents subsequently filed by us with theSEC and incorporated herein by reference may contain forward-lookingstatements.  We caution investors that any forward-looking statements made byus are not guarantees of future performance and actual results could differmaterially from those in the forward-looking statements as a result of variousfactors, including but not limited to the following:

(I)         We compete with numerouswell established competitors who have substantially greater financial resourcesand longer operating histories than we do.  Competitors have increasinglyoffered selected food items and combination meals, including hamburgers, atdiscounted prices, and continued discounting by competitors may adverselyaffect revenues and profitability of Company restaurants.

(II)      We may benegatively impacted if we continue to experience consistent same store salesdeclines.  Same store sales comparisons will be dependent, among other things,on the success of our advertising and promotion of new and existing menuitems.  No assurances can be given that such advertising and promotions will infact be successful.

Wemay also be negatively impacted by other factors common to the restaurantindustry such as: changes in consumer tastes away from red meat and friedfoods; increases in the cost of food, paper, labor, health care, workers'compensation or energy; inadequate number of hourly paid employees; and/ordecreases in the availability of affordable capital resources.  We caution thereader that such risk factors are not exhaustive, particularly with respect tofuture filings.

*RestaurantLocations*

Wecurrently operate and franchise a total of fifty-two Good Times restaurants, ofwhich forty-eight are in Colorado, with forty-three in the Denver greatermetropolitan area, three in Colorado Springs, one in Grand Junction and one inSilverthorne. Eight of these restaurants are "dual brand", operated pursuant toa Dual Brand Test Agreement with Taco John's International, of which there is onein North Dakota, two in Wyoming, and five in Colorado.

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

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

**Other** | **Idaho** | **Wyoming** | **North Dakota** |
|-----------------------------------------|-----------|-----------------------------------|-------------------------|-----------|-------------|------------------|
| Good  Times co-owned & co-developed | 27        | 24                                | 3                       |           |             |                  |
| Good  Times franchised                  | 17        | 14                                | 2                       | 1         |             |                  |
| Dual  brand co-owned                    | 3         | 3                                 |                         |           |             |                  |
| Dual  brand franchised                  | 5         | 2                                 |                         |           | 2           | 1                |
| **Total**                               | **52**    | **43**                            | **5**                   | **1**     | **2**       | **1**            |

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|                                | **April** |
|--------------------------------|-----------|
|                                | **2008**  | **2009** |
| Company-owned restaurants      | 18        | 21 |
| Joint venture restaurants      | 9         | 9 |
| Franchise operated restaurants | 25        | 22 |
| **Total restaurants**          | **52**    | **52** |

*Fiscal 2008:* In January 2008 a North Dakota franchise terminated their Good Times franchise agreement in the dual brandconcept and stopped selling Good Times products in their two locations.  InMarch 2008 we purchased two Good Times restaurants from an existingfranchisee.  In June 2008 the Good Times franchisee operating at the University of Wyoming Food Court ceased operations when the contract to operate in the foodcourt expired.  There are no plans for this franchisee to operate in anotherlocation.

*Fiscal 2009:* In October 2008 weopened one new company-owned restaurant in Firestone, Colorado. In December2008 a Wyoming franchise terminated their Good Times franchise agreement in thedual brand concept and has stopped selling Good Times products in one location.Also in December 2008 a franchisee opened a new dual brand restaurant in Sheridan, Wyoming.

Thefollowing presents certain historical financial information of our operations. This financial information includes results for the three and six months ended March31, 2008 and results for the three and six months ended March 31, 2009.

**Resultsof Operations**

*NetRevenues*

Netrevenues for the three months ended March 31, 2009 decreased $488,000 (8.1%) to$5,555,000 from $6,043,000 for the three months ended March 31, 2008.  Samestore restaurant sales decreased $655,000 (13.5%) during the three months endedMarch 31, 2009 for the restaurants that were open for the full periods ending March31, 2009 and March 31, 2008.  Restaurants are included in same store salesafter they have been open a full fifteen months and only Good Times restaurantsare included with dual branded restaurants excluded.  Restaurant salesincreased $260,000 due to six company-owned restaurants not included in samestore sales. Three are dual branded restaurants, two were purchased from afranchisee in March 2008 and one opened in October 2008.  Restaurant sales decreased$68,000 due to one non-traditional company-owned restaurant not included in samestore sales.

Netrevenues for the six months ended March 31, 2009 decreased $1,039,000 (8.5%) to$11,201,000 from $12,240,000 for the six months ended March 31, 2008.  Samestore restaurant sales decreased $1,443,000 (14.5%) during the six months endedMarch 31, 2009 for the restaurants that were open for the full periods ending March31, 2009 and March 31, 2008.  Restaurants are included in same store salesafter they have been open a full fifteen months and only Good Times restaurantsare included with dual branded restaurants excluded.  Restaurant salesincreased $633,000 due to six company-owned restaurants not included in samestore sales. Three are dual branded restaurants, two were purchased from afranchisee in March 2008 and one opened in October 2008.  Restaurant sales decreased$181,000 due to one non-traditional company-owned restaurant not included insame store sales.

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Oursame store restaurant sales declines of 14.8% and 13.5% for the first andsecond fiscal quarters, respectively, reflect the adverse impact themacroeconomic environment is having on consumers' discretionary spending andthe proliferation of heavy promotion of $1 value menus and discounting bycompetitors.  Additionally, we are comparing the 2009 sales declines to samestore sales increases of 11.6% and 7.6% in the first and second quarters offiscal 2008, respectively. We also experienced a severe snow storm in March2009, and we estimate that we lost approximately $100,000 in sales due to thestorm. Our outlook for fiscal 2009 remains cautious as the economic pressuresmay continue to impact consumer spending and we anticipate that we willcontinue to face increased competitive pricing pressure. However we begin tocompare our same store sales to consistent prior year decreases in May 2009 andwe expect the trend in sales comparisons to improve during the last six monthsof fiscal 2009.

Whilewe are implementing several broad product and brand initiatives during fiscal2009 to improve our core value proposition, we are not planning to implement abroader $1 menu and our sales may be adversely affected during the economicrecession.

Franchiserevenues decreased $25,000 to $135,000 from $160,000 for the three months endedMarch 31, 2009 due to a decrease in franchise royalties. Same store Good Times franchiserestaurant sales decreased 13.6% during the three months ended March 31, 2009for the franchise restaurants that were open for the full periods ending March31, 2009 and March 31, 2008.  Dual branded franchise restaurant sales increased9.1% during the three months ended March 31, 2009, compared to the same prioryear period, primarily due to the opening of one new dual branded restaurant inDecember 2008.

Franchise revenues decreased $48,000to $274,000 from $322,000 for the six months ended March 31, 2009 due to a decreasein franchise royalties of $60,000 offset by an increase in franchise fee incomeof $12,000. Same store Good Times franchise restaurant sales decreased 13.2%during the six months ended March 31, 2009 for the franchise restaurants thatwere open for the full periods ending March 31, 2009 and March 31, 2008.  Dualbranded franchise restaurant sales decreased 4.1% during the six months endedMarch 31, 2009, compared to the same prior year period, primarily due to theclosure of two restaurants in January 2008, offset by the opening of one newdual branded restaurant in December 2008.

*RestaurantOperating Costs*

Restaurantoperating costs as a percent of restaurant sales were 97.2% during the threemonths ended March 31, 2009 compared to 93.1% in the same prior year period andwere 98.1% during six month period ended March 31, 2009 compared to 91.4% inthe same prior year period.

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Thechanges in restaurant-level costs are explained as follows:

|                                                                  | Three  Months Ended

March  31, 2009 | Six  Months Ended

March  31, 2009 |
|------------------------------------------------------------------|--------------------------------------|------------------------------------|
| Restaurant-level  costs for the period ended March 31, 2008      | 93.1%                                | 91.4%                              |
| Increase  in food and packaging costs                            | 2.2%                                 | 2.6%                               |
| Increase  (decrease) in payroll and other employee benefit costs | (.3%)                                | 1.0%                               |
| Increase  in occupancy and other operating costs                 | 1.9%                                 | 2.6%                               |
| Increase  in depreciation and amortization                       | .5%                                  | .5%                                |
| Decrease  in opening costs and deferred rent                     | (.2%)                                | 0%                                 |
| Restaurant-level  costs for the period ended March 31, 2009      | 97.2%                                | 98.1%                              |

*Food andPackaging Costs*

For the three monthsended March 31, 2009 our food and paper costs, increased $25,000 to $1,804,000(33.3% of restaurant sales) from $1,829,000 (31.1% of restaurant sales)compared to the same prior year period.

For the six monthsended March 31, 2009 our food and paper costs, decreased $16,000 to $3,659,000(33.5% of restaurant sales) from $3,675,000 (30.8% of restaurant sales)compared to the same prior year period.

We have implementedsignificant product portion and ingredient changes in the first six months of thecurrent fiscal year to improve our overall value to the customer which hasresulted in an approximate 1% increase in our food and paper costs as apercentage of restaurant sales.

We experienced unprecedented increases incommodity costs during fiscal 2008 including beef, bakery, soft drinks, dairyand packaging costs with the majority of those increases occurring in Maythrough July 2008. Our weighted food and packaging costs increasedapproximately 12% in the fiscal 2008 year. During the first six months offiscal 2009 we experienced a moderation in food and packaging cost increases. Wetook cumulative weighted menu price increases during fiscal 2008 ofapproximately 4.8% and in February 2009 we implemented a 1% weighted menu priceincrease.  We anticipate moderate price increases for the balance of fiscal2009 with more stable commodity costs.

*Payroll and Other Employee BenefitCosts*

Forthe three months ended March 31, 2009 our payroll and other employee benefitcosts decreased $187,000 to $1,962,000 (36.2% of restaurant sales) from $2,149,000(36.5% of restaurant sales) compared to the same prior year period.

Forthe six months ended March 31, 2009 our payroll and other employee benefitcosts decreased $251,000 to $4,027,000 (36.9% of restaurant sales) from $4,278,000(35.9% of restaurant sales) compared to the same prior year period.

Beginningin December 2008 we reduced our labor hours allocation through increasedefficiencies and improved our sales per employee hour efficiencies on servicehours, thereby eliminating approximately $190,000 of annual payroll costs. Thesereductions led to the decrease in payroll and other employee benefit expensesas a percent of restaurant sales for the three months ended March 31, 2009. Inaddition, beginning in March 2009 we implemented further reductions in ouremployee and other benefit costs totaling approximately $300,000 in annualcosts through the restructuring of regional supervision personnel along withother reductions in fixed employee benefit costs.

Theincrease in payroll and other employee benefit expenses as a percent ofrestaurant sales for the six months ended March 31, 2009 is primarily theresult of lower restaurant sales. Becausepayroll costs are semi-variable in nature they increase as a percentage ofrestaurant sales when there is a decrease in store sales.  Additionally, our new restaurant thatopened in October 2008 operated at a higher labor cost as a percent of salesdue to higher initial labor costs until it reached mature staffing levels in January2009.

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Thecurrent three and six month periods ending March 31, 2009 include twoadditional company-owned restaurants purchased from a franchisee in March 2008and one new company-owned restaurant opened in October 2008, that represent $108,000and $276,000, respectively, of the total costs in the current periods.

*Occupancy and Other Operating Costs*

Forthe three months ended March 31, 2009 our occupancy and other operating costsincreased $8,000 to $1,187,000 (21.9% of restaurant sales) from $1,179,000 (20%of restaurant sales) compared to the same prior year period.

Forthe six months ended March 31, 2009 our occupancy and other operating costsincreased $94,000 to $2,391,000 (21.9% of restaurant sales) from $2,297,000 (19.3%of restaurant sales) compared to the same prior year period.

The current three and six month periodsending March 31, 2009 includes two additional company-owned restaurants purchasedfrom a franchisee in March 2008and one new company-owned restaurant opened in October 2008, that represent $65,000 and $147,000, respectively,of the increases compared to the same prior year periods. Additionally weexperienced reductions in common area maintenance fees and personal propertytaxes compared to the same prior year periods. Occupancy and other operatingcosts may increase as a percent of sales as new company-owned restaurants aredeveloped due to higher rent associated with sale-leaseback operating leases,as well as higher property taxes at those locations.

*OpeningCosts*

Forthe three months ended March 31, 2009 and March 31, 2008 our new store openingcosts were $0.

Forthe six months ended March 31, 2009 our new store opening costs were $15,000compared to $0 for the same prior year period. The current year costs arerelated to a new company-owned restaurant that opened in October 2008.

*Depreciationand Amortization*

Forthe three months ended March 31, 2009, our depreciation and amortizationincreased $2,000 to $316,000 (5.8% of restaurant sales) from $314,000 (5.3% ofrestaurant sales) compared to the same prior year period. The $2,000 increasein depreciation and amortization for the three months ended March 31, 2009 isdue to $24,000 of depreciation expense in the three acquired and new company-ownedrestaurants, offset by declining depreciation expense in our agingcompany-owned restaurants.

For the six months ended March 31, 2009,our depreciation and amortization increased $4,000 to $627,000 (5.7% ofrestaurant sales) from $623,000 (5.2% of restaurant sales) compared to the sameprior year period. The $4,000 increase in depreciation and amortization for thesix months ended March 31, 2009 is due to $49,000 of depreciation expense inthe three acquired and new company-owned restaurants, offset by decliningdepreciation expense in our aging company-owned restaurants.

*Generaland Administrative Costs*

Forthe three months ended March 31, 2009, general and administrative costs decreased$82,000 to $402,000 (7.2% of total revenues) from $484,000 (8.0% of totalrevenues) for the same prior year period.

Forthe six months ended March 31, 2009, general and administrative costs decreased$148,000 to $891,000 (8.0% of total revenues) from $1,039,000 (8.5% of totalrevenues) for the same prior year period.

Thedecrease in general and administrative costs for the three months ended March31, 2009 compared to the same prior year period is primarily attributable to decreasesin: 1) payroll and employee benefit costs of $60,000,  2) incentive stockoption compensation expense of $5,000 and 3) net reductions in various otherfixed expenses of $17,000.

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The decrease in general andadministrative costs for the six months ended March 31, 2009 compared to thesame prior year period is primarily attributable to decreases in: 1) payrolland employee benefit costs of $86,000,  2) incentive stock option compensationexpense of $10,000, 3) training and recruiting costs of $23,000, 4)professional services costs of $19,000 and 5) net reductions in various otherfixed expenses of $10,000.

We have reduced annualizedselling, general and administrative and franchise costs by approximately $450,000for fiscal 2009, compared to fiscal 2008, through the elimination of executivemanagement positions, salary reductions and professional services costs.

*Advertising Costs*

Forthe three months ended March 31, 2009 advertising costs decreased $53,000 to $308,000(5.7% of restaurant sales) from $361,000 (6.1% of restaurant sales) for thesame prior year period.

Forthe six months ended March 31, 2009 advertising costs decreased $108,000 to $623,000(5.7% of restaurant sales) from $731,000 (6.1% of restaurant sales) for thesame prior year period.

The decrease in advertising costs forboth the three and six month periods is primarily due to the decrease inrestaurant sales, as contributionsare made to the advertising materials fund and regional advertising cooperativebased on a percentage of sales. In addition, $48,000 of payroll and employeebenefit costs have been eliminated in the current six month period when ourVice President of Marketing retired in November 2008. We currently have noplans to fill the position in the immediate future.

*FranchiseCosts*

For the three months ended March 31, 2009, franchisecosts decreased $58,000 to $33,000 (.6% of total revenues) from $91,000 (1.5%of total revenues) for the same prior year period.

For the six months ended March 31, 2009, franchise costsdecreased $115,000 to $73,000 (.7% of total revenues) from $188,000 (1.5% oftotal revenues) for the same prior year period.

The decrease in franchisecosts for both the three and six month periods is primarily attributable to thereduction in payroll and employee benefit costs related to the Vice Presidentof Franchise Development position that was eliminated in July 2008 inconjunction with Good Times' exit from the planned Midwest expansion. We alsoincurred $13,000 in legal costs in the prior six month period ended March 31,2008 related to franchise registration filings.

*Lossfrom Operations*

Wehad a loss from operations of ($450,000) in the three months ended March 31,2009 compared to a loss from operations of ($361,000) for the same prior yearperiod.

Wehad a loss from operations of ($1,090,000) in the six months ended March 31,2009 compared to a loss from operations of ($587,000) for the same prior yearperiod.

The increase in loss from operations forboth the three and six month periods is due primarily to the decrease in netrevenues and by other matters discussed in the "Restaurant OperatingCosts", "General and Administrative Costs" and "Franchise Costs"sections of Item 2.

*NetLoss*

Thenet loss was ($481,000) for the three months ended March 31, 2009 compared to anet loss of ($370,000) for the same prior year period. The change from thethree month period ended March 31, 2008 to March 31, 2009 was primarilyattributable to the increase in loss from operations for the three months endedMarch 31, 2009, as well as: 1) a decrease in minority interest expense of $39,000compared to the same prior year period; and 2) an increase in net interest expenseof $64,000 compared to the same prior year period, which is primarily relatedto the $2,500,000 PFGI II line of credit.

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Thenet loss was ($1,247,000) for the six months ended March 31, 2009 compared to anet loss of ($625,000) for the same prior year period. The change from the sixmonth period ended March 31, 2008 to March 31, 2009 was primarily attributableto the increase in loss from operations for the six months ended March 31, 2009,as well as: 1) a decrease in minority interest expense of $105,000 compared tothe same prior year period; 2) an increase in net interest expense of $108,000compared to the same prior year period; and 3) a $116,000 unrealized loss inthe current period related to our interest rate swap liability.

**Liquidityand Capital Resources**

*Cashand Working Capital*

Asof March 31, 2009, we had $601,000 cash and cash equivalents on hand. Wecurrently plan to use the cash balance and any cash generated from operationsfor our working capital needs in fiscal 2009. If we continue to experiencesignificant declines in our sales trends we will require additional workingcapital. However, we begin to compare to significant negative sales trends fromthe prior year in May 2009 and we expect our same store sales trends, cash flowfrom operations and liquidity to improve during the last half of fiscal 2009compared to the first half of fiscal 2009.  As reported on form 8-K filed onApril 20, 2009 we have raised $185,000 of financing for additional workingcapital and extended the maturity of a $2,500,000 line of credit with PFGI II,LLC to July, 2010 (see "Subsequent Events" below).  As a result, we currentlydo not anticipate the need for additional working capital during fiscal 2009,however there is no assurance that our sales and cash flow from operations willmeet our projections.

As of March 31, 2009, we had a workingcapital deficit of $1,350,000 primarily because the entire note payable toWells Fargo Bank, N.A. of $904,000 is shown as a current liability due tocertain technical loan covenant defaults that exist as of March 31, 2009, whichare described in Note 3 of the Condensed Consolidated Financial Statements. Asnoted in Note 3 to the Condensed Consolidated Financial Statements, we havereceived a Forbearance and Reservation of Rights letter from Wells Fargo Bank statingthat they are accepting current principal and interest payments and are notcurrently accelerating the note, subject to agreeing to an acceptable RequiredCorrective Action for the covenant defaults.  It is unlikely that we will havean acceptable Required Corrective Action until our Earnings Before InterestTaxes and Depreciation ("EBITDA") improves.  If Wells Fargo were to acceleratethe note payable, we would need additional financing and we do not currentlyhave a source for such financing.  Additionally, we have recorded a $116,000 currentliability related to the unrealized loss on our interest rate swap, as noted inNote 5 to the Condensed Consolidated Financial Statements.

*FinancingActivities*

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 (see note 5 in item I. above). Asdiscussed above we are in default of certain technical loan covenants as of March31, 2009 on this Wells Fargo note, however we are not currently, and have neverbeen, in payment default under the note.

On March 1, 2008, weacquired the assets of two restaurants from an existing franchisee for a totalpurchase price of $1,330,000, including the land, site improvements, buildingand equipment for one restaurant and site improvements, building and equipmenton one restaurant.  The purchase price was funded primarily from cash on handof $272,000 and $849,000 in net proceeds from a simultaneous sale-leasebacktransaction to a third party investor involving the land, building andimprovements of one of the restaurants acquired.

As additionalconsideration and accounting in the acquisition, notes receivable from thefranchisee of $250,000 were forgiven, and a deferred gain of $26,000 waswritten off. The deferred gain was related to a prior sale to the franchisee ofone of the restaurants acquired. We did not record a gain or loss related tothis acquisition. The financial results of the two restaurants have beenincluded in our financial results from the acquisition date forward.

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The acquisition ofthe two restaurants was accounted for using the purchase method as defined inSFAS No. 141, Business Combinations, (SFAS 141). The purchase price wasallocated as follows:

| Current assets net of current liabilities                                    | $     14,000 |
|------------------------------------------------------------------------------|----------------------------------|
| Property and equipment          |   1,316,000                 |
| Total purchase price                                                         | $1,330,000                       |

The sale-leaseback transaction was enteredinto simultaneously with the acquisition and involved selling the land,building and improvements of one of the acquired restaurants for net proceedsof $849,000. The sale-leaseback was the funding vehicle for the purchase of thetwo restaurants and was not used to raise cash for the company or increase ourliquidity. The assets sold in the sale-leaseback transaction were neverrecorded in our financial statements as the long term lease entered into doesnot meet any of the criteria for a capital lease and therefore qualifies as anoperating lease, as defined in SFAS No. 13, Accounting for Leases. After thesale-leaseback transaction was accounted for, it resulted in $476,000 in fixedassets and $14,000 in current assets recorded on the Company's financialstatements. We believe the $476,000 represents the fair value of the net assetsacquired (after completion of the simultaneous sale-leaseback transaction)consisting of furniture, fixtures and equipment in two restaurants and the siteimprovements and building in one restaurant.

In July 2008, we entered into a $2,500,000promissory note with an unrelated third party (PFGI II, LLC) and amended thatnote on April 20, 2009 (see Subsequent Events below).  The promissory noteconstitutes a revolving line-of-credit for the development of new restaurantswhich may be advanced and repaid on a monthly basis from time to time.  Priorto maturity, no principal payments are required and monthly payments ofinterest only at the prime rate plus 2% (with a minimum rate of 8%) are due,with all unpaid principal due in July 2010.  The loan is secured by separateleasehold deeds of trust and security agreements related to six company-owned restaurantsand first deeds of trust on two real properties funded by the line of credit.The total outstanding balance on the line of credit was $2,500,000 at March 31,2009.  Of the $2,500,000 outstanding balance, $1,595,000 is related to theconstruction of one company-owned restaurant in Firestone, Colorado that openedin October 2008. The fully developed restaurant is currently being marketed inthe sale-leaseback market.  The remaining balance is related to the purchase,entitlement and other development fees on a parcel of land in Aurora, Colorado that will be either developed into a company-owned restaurant or sold.

*CapitalExpenditures*

We do not have any plans for any significantcapital expenditures for the balance of fiscal 2009, other than normalrecurring capital expenditures for existing restaurants. Additional commitmentsfor the development of new restaurants in fiscal 2009 and beyond will depend onthe Company's sales trends, cash generated from operations and our access to additionalcapital.

*Cash Flows*

Netcash used in operating activities was $808,000 for the six months ended March31, 2009. The net cash used in operating activities for the six months ended March31, 2009 was the result of a net loss of ($1,247,000) as well as cash andnon-cash reconciling items totaling $439,000 (comprised of depreciation andamortization of $627,000, an unrealized loss of $116,000 related to ourinterest rate swap liability, minority interest of $64,000, an accounts payabledecrease of $279,000 and a net increase in other operating assets andliabilities of $39,000).

Net cash provided by operatingactivities was $2,000 for the six months ended March 31, 2008.  The net cash providedby operating activities for the six months ended March 31, 2008 was the resultof a net loss of ($625,000) as well as cash and non-cash reconciling itemstotaling $627,000 (comprised of depreciation and amortization of $623,000,minority interest of $41,000, stock based compensation expense of $48,000 and anet decrease in other operating assets and liabilities of $85,000).

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Netcash used in investing activities for the three months ended March 31, 2009 was$254,000 which reflects payments of $245,000 for the purchase of property andequipment (including $205,000 for new store development and $40,000 formiscellaneous restaurant related capital expenditures), $31,000 in loans madeto franchisees and $22,000 in principal payments received on loans tofranchisees.

Netcash provided by investing activities for the six months ended March 31, 2008was $242,000 which reflects payments of $276,000 for the purchase of propertyand equipment (including $140,000 for new store development, $48,000 forrestaurant remodeling costs and $88,000 for miscellaneous restaurant relatedcapital expenditures), $272,000 for the purchase of two existing franchiserestaurants, $747,000 from the sale of fixed assets and $43,000 in principalpayments received on loans to franchisees.

Netcash provided by financing activities for the six months ended March 31, 2009was $249,000, which includes principal payments on notes payable and long termdebt of $60,000; an advance on our revolving line of credit of $320,000; and distributionsto minority interests in partnerships of $11,000.

Net cash used in financing activitiesfor the six months ended March 31, 2008 was $890,000, which includes principalpayments on notes payable and long term debt of $59,000, a repayment on ourrevolving line of credit of $750,000, distributions to minority interests inpartnerships of $122,000 and paid in capital activity of $41,000 related to theexercise of stock options.

*Contingencies*

We remain contingently liable on various landleases underlying restaurants that were previously sold to franchisees.  Wehave never experienced any losses related to these contingent leaseliabilities, however if a franchisee defaults on the payments under the leases,we would be liable for the lease payments as the assignor or sublessor of thelease.  Currently there are no leases in default under which we arecontingently liable, however there can be no assurance that there will not bein the future, which could have a material effect on our future operatingresults.

*Subsequent Events*

On April 20, 2009 asreported on form 8-K, Good Times Restaurants Inc. (the "Company") and GoodTimes Drive Thru Inc. ("GTDT"), a wholly owned subsidiary of the Company, entered into a loan agreement with GoldenBridge, LLC ("Golden Bridge"), pursuant to which Golden Bridge made a loan of$185,000 (the "Loan") to GTDT to be used for restaurant marketing and otherworking capital costs.  Eric Reinhard, Ron Goodson, David Grissen, RichardStark, and Alan Teran, who are all members of the Company's Board of Directorsand stockholders of the Company, are the sole members of Golden Bridge.  Eric Reinhard is the sole manager of Golden Bridge.  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 is evidencedby a promissory note dated April 20, 2009 (the "Note") made by the Company andGTDT, as co-makers, and shall bear interest at a rate of 10% per annum on theunpaid principal balance.  The Note provides for monthly interest payments andwill mature and be due and payable in full on July 10, 2010.  The commitmentfee for the Loan is $3,700.  The Loan Agreement contains customary event ofdefault provisions and a cross-default provision with respect to the loanagreement for the PFGI II, LLC loan (as described above under FinancingActivities).

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The Loan Agreementand the Note are subject to the terms of an intercreditor agreement dated April20, 2009 (the "Intercreditor Agreement"), among the Company, GTDT, GoldenBridge and PFGI II, LLC ("PFGI").  As previously reported by the Company, GTDTcurrently has a $2,500,000 revolving line of credit with PFGI (the "PFGI Loan"),which was scheduled to mature on July 10, 2009, under which $2,500,000 wasoutstanding as of April 20, 2009.  Under the Intercreditor Agreement, PFGI andGolden Bridge agreed that, upon any payments of principal or interest on theLoan or the PFGI Loan by GTDT, PFGI and Golden Bridge shall each be entitled toits pro rata share of such payments in the amount of 93.1% for PFGI and 6.9%for Golden Bridge.  The Intercreditor Agreement also provides that GTDT and theCompany may prepay the Loan in whole or in part with the prior consent of PFGI,and that any other indebtedness of the Company or GTDT to PFGI or Golden Bridgeshall be subordinate in payment and lien priority to the Loan and the PFGI Loanto the extent of the proceeds of the collateral.  Under the IntercreditorAgreement, all money received from any foreclosure on the collateral securingthe PFGI Loan shall be applied to PFGI and Golden Bridge for their expensesrelated to such event and then on a pari passu basis to PFGI and Golden Bridgein accordance with their respective pro rata shares.

Prior to the closingof the Loan, borrowings under the PFGI Loan were secured by GTDT's leaseholdestates and business assets with respect to certain of GTDT's restaurantslocated in Boulder, Adams, Jefferson and Larimer counties in Colorado and firstdeeds of trust on real property in Arapahoe and Weld counties in Coloradodeveloped under the PFGI Loan.  In connection with PFGI's entry into theIntercreditor Agreement, GTDT and the Company entered into a first amendment tothe amended and restated promissory note dated April 20, 2009 (the "PFGI NoteAmendment"), which extended the maturity date of the PFGI Loan until July 10,2010 and eliminated a loan balance threshold for release of the collateralsecuring the PFGI Loan.

In connection with the Loan, the Companyissued a three-year warrant dated April 20, 2009 (the "Warrant") to GoldenBridge which provides that Golden Bridge may at any time from April 20, 2009until April 20, 2012 purchase up to 92,500 shares of the Company's common stock(the "Warrant Shares") at an exercise price of $1.15 per share.  The number ofWarrant Shares and the exercise price are subject to customary antidilutionadjustments upon the occurrence of any stock dividends, stock splits, reversestock splits, recapitalizations, reclassifications, stock combinations orsimilar events.

**Impactof Inflation**

We experienced moderation in commoditycosts during fiscal 2005 and 2006 and significant increases in fiscal 2007 andfiscal 2008.  State increases in the minimum wage resulted in an increase inour average hourly wage of $.60 per employee hour during fiscal 2007,approximately $.23 per employee hour in fiscal 2008 and $.07 per employee hourin January 2009. It is anticipated that we will take moderate price increasesduring fiscal 2009, which may or may not be sufficient to recover increasedcommodity costs or 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.

**ITEM 3.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK**

Not required.

**ITEM 4T.  CONTROLS AND PROCEDURES**

**Conclusion Regardingthe Effectiveness of Disclosure Controls and Procedures**

Based on anevaluation of the Company's disclosure controls and procedures (as defined inRules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, asamended), as of the end of the period covered by this report on form 10Q, theCompany's Chief Executive Officer and Controller (its principal executiveofficer and principal financial officer, respectively) have concluded that theCompany's disclosure controls and procedures were effective.

**Changes in Internal Control overFinancial Reporting**

Therehave been no significant changes in the Company's internal control overfinancial reporting that occurred during the Company's fiscal quarter ended March 31,2009 that have materially affected, or are reasonably likely to materiallyaffect, the Company's internal control over financial reporting.

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**PARTII - OTHER INFORMATION**

Item 1.    Legal Proceedings

Good Times Restaurants is subject tolegal proceedings which are incidental to its business.  These legalproceedings are not expected to have a material impact on the Company.

Item 1A. Risk Factors

Not required.

Item 2.    UnregisteredSales of Equity Securities and Use of Proceeds

None.

Item 3.    Defaults uponSenior Securities

Weare in default of certain technical loan covenants as of March 31, 2009 on our $904,000note payable to Wells Fargo Bank, N.A. ("the Bank"). We have never been inpayment default on the note. On February 9, 2009 we received a Reservation ofRights letter from the Bank formally notifying us of the default of theEarnings Before Interest Taxes and Depreciation ("EBITDA") Coverage Ratio ofnot less than 1.5 to 1.0 and the Tangible Net Worth of not less than $5,000,000as set forth in the Credit Agreement for the period ending December 31, 2008.The letter serves as notice that notwithstanding the foregoing events ofdefault, the Bank is reserving all of its rights and remedies under the CreditAgreement and related agreements. The Bank is not now accelerating the Loan andis willing to continue to accept regularly scheduled payments of principal andinterest under the Loan.

Item4.    Submission of Matters to a Vote of Security Holders

On January 26, 2009, the Company heldits annual meeting of stockholders, at which the stockholders re-electedGeoffrey R. Bailey, Ron Goodson, Dave Grissen, Boyd Hoback, Eric Reinhard,Richard j. Stark and Alan Teran as directors for a one-year term expiring atthe annual meeting to be held in 2010.  The following table sets forth thevoting results for the directors:

|                    | FOR       | WITHHOLD |
|--------------------|-----------|----------|
| GEOFFREY  R BAILEY | 2,449,483 | 636,758  |
| RON  GOODSON       | 2,451,203 | 635,038  |
| DAVE  GRISSEN      | 2,451,003 | 635,238  |
| BOYD  E HOBACK     | 2,479,203 | 607,038  |
| ERIC  REINHARD     | 2,449,459 | 636,782  |
| RICHARD  J. STARK  | 2,445,295 | 640,946  |
| ALAN  A TERAN      | 2,449,395 | 636,846  |

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 ExecutiveOfficer pursuant to 18 U.S.C. Section 1350

*31.2     Certification of Controllerpursuant to 18 U.S.C. Section 1350

*32.1     Certificationof Chief Executive Officer and Controller pursuant to Section 906

*filed herewith

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**SIGNATURES**

In accordance with the requirements ofthe Exchange Act, the registrant caused this report to be signed on its behalfby the undersigned, thereunto duly authorized.

|                | **GOOD TIMES RESTAURANTS INC.**                       |
|---------------------|-------------------------------------------------------|
| DATE:  May 15, 2009 |                                                       |
|                     | /s/ Boyd E. Hoback                                    |
|                     | Boyd E. Hoback

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

Controller                          |

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