10KSB

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-KSB

(Mark One)

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

EXCHANGE ACT OF 1934

For the fiscal year ended: September 30, 2003

OR

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

EXCHANGE ACT OF 1934

For the transition period from ________________ to __________________

Commission file number: 000-18590

Good Times Restaurants Inc.

(Name of small business issuer in its charter)

Nevada 84-1133368

(State or other jurisdiction of (I.R.S. Employer

incorporation or organization) Identification No.)

601 Corporate Circle, Golden, Colorado 80401

(Address of principal executive offices) (Zip Code)

Issuer's telephone number: (303) 384-1400

Securities registered under Section 12(b) of the Exchange Act:

Title of each class Name of each exchange on which registered

None

Securities registered under Section 12(g) of the Exchange Act:

Common Stock, $.001 par value

(Title of class)

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

Yes [X] No [ ]

Check if there is no disclosure of delinquent filers in response to Item 405 of Regulation S-B contained in this form, and no disclosure will be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-KSB or any amendment to this Form 10-KSB [X]

The issuer's revenues for its most recent fiscal year ended September 30, 2003 were $15,479,000.

As of December 16, 2003, the aggregate market value of the 1,217,480 shares of common stock held by non-affiliates of the issuer, based on the closing sales price of the common stock on December 16, 2003 of $3.85 per share as reported on the Nasdaq Smallcap Market, was $4,687,298.

As of December 16, 2003, the issuer had 2,305,171 shares of common stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

The information required by Items 9 through 12 and 14 of Part III of this form is incorporated by reference from the issuer's definitive proxy statement to be filed with the SEC not later than 120 days after the end of the fiscal year covered by this form in connection with the issuer's annual meeting of shareholders to be held on January 22, 2004.

Transitional Small Business Disclosure Format Yes [ ] No [X]

TABLE OF CONTENTS

Part I

Item 1		Description of Business		3 - 2
Item 2		Description of Property		12
Item 3	Legal Proceedings		13
Item 4	Submission of Matters to a Vote of Security Holders		13
Part II
Item 5	Market for Common Equity and Related Stockholder Matters		13 - 14
Item 6	Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A)		15 - 20
Item 7	Financial Statements		F1 - F21
Item 8	Changes In and Disagreements with Accountants on Accounting and Financial Disclosure		21
Item 8a	Controls and Procedures		21
Part III
Items 9 - 12			21
Item 13	Exhibits and Reports on Form 8-K		21 - 24
Item 14	Principal Accounting Fees and Services		24
Signatures			25

PART I

Item 1. Description of Business.

Overview

Good Times Restaurants Inc., a Nevada corporation (the "Company"), was organized in 1987. The Company is essentially a holding company for its wholly owned subsidiary, Good Times Drive Thru Inc., which is engaged in the business of developing, owning, operating and franchising hamburger-oriented drive-through restaurants under the name Good Times Drive Thru Burgers^(SM). During 2001, the restaurants' brand name, trademark and logo were changed to Good Times Burgers & Frozen Custard to reflect a strategic repositioning of the Good Times concept. Most of the Company's restaurants are located in the Denver, Colorado metropolitan area. "Good Times" where used herein refers to the operations of Good Times Drive Thru Inc. and of the Company.

Recent Developments

During fiscal 2001, the Company began implementation of frozen custard as part of a broader repositioning of the concept to Good Times Burgers & Frozen Custard. The implementation was completed in early fiscal 2002 with new signage, equipment and logo graphics at every restaurant and frozen custard was part of the Company's advertising campaign throughout the year, resulting in same store sales increases of 12.4% in the first quarter, 5.0% in the second quarter, 13.3% in the third quarter and a decrease of 3.5% in the fourth quarter. Same store sales decreased 11.1% in fiscal 2003 due to: aggressive price discounting by the major fast food hamburger competitors; a general slowing of the Colorado economy; and comparisons to the prior year same store sales increases.

During fiscal 2002, the Company implemented the Operating Partner Program in order to develop more experienced and higher capacity restaurant management. Operating Partners must meet specific operating criteria and have the opportunity to share in the improvement in a restaurant's cash flow.

In July 2003 the Company introduced Coleman 100% natural beef in all of its hamburgers and changed to whole leaf lettuce, a whole grain bun on its chicken sandwiches, a new hamburger bun and new packaging. The changes are a part of the move to higher quality ingredients and more distinctive product attributes.

In November 2003 the Company engaged the Sterling Rice Group, a nationally acclaimed brand development company, to assist in refining and developing Good Times' overall brand experience in order to achieve a more defined niche in the Quick Service Restaurant category. Management anticipates that by early 2004, the project will be completed and implementation planned over the course of fiscal 2004.

The Company entered into a franchise agreement with a large regional Mexican quick service restaurant chain for the development of a co-branding test in a market outside of Good Times' Colorado market. Management anticipates the initial co-brand store will open in the spring of 2004. The objective behind the co-brand test is to develop an expansion vehicle with higher unit sales capacity and an attractive unit level return on investment for new market franchise growth outside of Colorado.

The Company redesigned its building format to include a 60 seat lobby and modified sites that were in development to accommodate the new design and format. Based upon the early sales performance of the new format, management anticipates generating higher sales than from the drive through only format.

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During fiscal year 2003 the Company became a co-maker on a $2,000,000 line of credit renewable annually at the Company's discretion, to a third party entity (Smart Development, LLC), established for the purchase of land and development of new restaurants for subsequent sale in sale-leaseback transactions, some of which may be operated as company-owned restaurants and some of which may be subleased or directly leased to franchisees. The proceeds of the sale leaseback transactions will be used for the reduction of the line of credit. In addition to the land and buildings under development, the sole member of Smart Development, LLC has provided a $400,000 certificate of deposit as collateral for the line of credit. At September 30, 2003, $923,000 was outstanding under the line of credit for the development of two restaurants. Smart Development LLC is developing two restaurants for sale to a franchisee upon completion and has completed one additional restaurant sale leaseback transaction. In the unlikely even t that Smart Development LLC does not execute a sale leaseback transaction, the Company may at that point be required to purchase the developed restaurant and would then establish permanent financing in place of the line of credit.

Good Times Restaurants Business

The Company currently operates and franchises a total of thirty-six Good Times restaurants, of which thirty-four are in Colorado, with thirty-two in the Denver greater metropolitan area, one in Grand Junction and one in Silverthorne. There is one franchised Good Times restaurant in Boise, Idaho and one in Laramie, Wyoming. Eleven of the restaurants are company-owned and eight are owned jointly with a co-development partner. Seventeen Good Times restaurants are franchised restaurants with twelve operating in the Denver metropolitan area, one in Grand Junction, Colorado, one in Longmont, Colorado, one in Loveland, Colorado, one in Boise, Idaho and one at the University of Wyoming in Laramie, Wyoming. Good Times is also offering franchises for the development of additional Good Times restaurants.

In fiscal 2003 the Company; 1) sold one under performing company-owned restaurant in May 2003; 2) purchased the interest in one co-developed restaurant from the joint venture partner in August 2003; 3) opened two new franchise restaurants in the Denver metropolitan area, in August and September 2003; and 4) terminated the licensing/coop agreement with the Winter Park Ski resort in July 2003. Three additional franchised restaurants are under development and the Company anticipates opening three to five total restaurants in fiscal 2004.

The Good Times Burgers & Frozen Custard Concept

Good Times was initially developed as a drive-through only, limited menu hamburger restaurant concept featuring high quality products and extremely fast service, with menu prices 30-40 percent lower than the major hamburger chains. The early price advantage diminished over the last few years due to continued aggressive price discounting by the major chains and the repositioning of Good Times' menu and pricing toward higher quality.

Over the last three fiscal years, the Company has positioned its business concept away from a price point focus to one based on the development of the frozen custard category and a strong differentiation in its core hamburger menu through:

• A more distinctive taste profile of its products,
• Fast, attentive, friendly service
• A strong brand personality built through its advertising and employee service methods, and
• The highest quality ingredients in the hamburger quick service segment.

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In fiscal 2001 the Company introduced fresh frozen custard, not only as an additional product category, but as a strategic repositioning of the concept with another high quality product that will complement Good Times' reputation and historical focus on high quality hamburgers. The repositioning is targeted at broadening Good Times' consumer appeal and demographic base, increasing sales in the afternoon and evening dayparts with a new snack or treat occasion and creating a more highly differentiated brand for the consumer. The repositioning involved building remodeling, new equipment, new signage and new graphics on uniforms, packaging and promotional materials in fiscal 2001 and early fiscal 2002. In late fiscal 2003, Good Times began using only Coleman 100% natural beef in all of its hamburgers and introduced fresh squeezed lemonade.

Coleman beef is raised without the use of any hormones, antibiotics or animal byproducts that are normally used in the open beef market. The Company believes that Coleman beef delivers a better tasting product and, because of the rigorous protocols and testing that are a part of the Coleman processes, also minimizes the risk of any food borne bacteria related illnesses. The Company is the only quick serve restaurant chain serving exclusively Coleman 100% natural beef.

Fresh frozen custard is a premium ice cream (requiring in excess of 10% butterfat content) with a proprietary vanilla blend that is prepared from highly specialized equipment that minimizes the amount of air that is added to the mix and that creates smaller ice crystals than other frozen dairy desserts. The custard is scooped similarly to hard-packed ice cream but is served at a slightly warmer temperature. The resulting product is smoother, creamier and thicker than typical soft serve or hard-packed ice cream products. Good Times serves the frozen custard in cups and cones, specialty sundaes and "Spoonbenders", a mix of custard and toppings, and we anticipate it will continue to become a larger percentage of sales as the Company continues to advertise the overall brand repositioning.

The Company plans to develop additional company-owned and franchised restaurants in Colorado, which is divided into two primary media markets ' Denver and Colorado Springs/Pueblo and has two building formats, one that is drive thru only with outside seating and a 2,400 square foot building with a dining room seating sixty guests. Good Times' food preparation and service systems deliver a quality meal with a faster order-delivery response time, providing the capacity to reach the same sales levels as traditional hamburger chains. Typically, a customer receives an order 30 to 60 seconds after their vehicle reaches the take-out window during peak order periods. The Company plans to implement additional improvements to its product and packaging design and quality of ingredients in fiscal 2004 with a primary focus on burgers, chicken, and frozen custard products in order to continue to differentiate the Good Times concept from the larger hamburger chains. The relatively limited menu allows maximum attention to be devoted to food quality and speed of service.

Menu

The menu of a Good Times Burgers & Frozen Custard restaurant is limited to hamburgers, cheeseburgers, chicken sandwiches, french fries, onion rings, ice cream shakes, soft drinks and frozen custard products. Each menu item is made to order at the time the customer places the order and is not pre-prepared.

The hamburger patty is prepared with specially formulated and seasoned Coleman 100% natural beef, served on a 4 inch bun. Hamburgers and cheeseburgers are garnished with fresh leaf lettuce, fresh sliced sweet red onions, mayonnaise, mustard, ketchup, pickles and fresh sliced tomatoes. Other specialty hamburger toppings include guacamole, fresh grilled, honey cured bacon, and proprietary sauces. The chicken products include a spiced, battered whole muscle breast patty and a grilled seasoned breast patty, both served with mayonnaise, lettuce and tomatoes on a whole grain bun and Chicken Dunkers, whole breast meat breaded strips. Equipment has been automated and equipped with compensating computers to deliver a consistent product and minimize variability in operating systems.

Fresh frozen custard is offered in cups, cones, waffle cones, specialty sundaes and "Spoonbenders", a blended combination of custard and various toppings. In addition to fresh vanilla frozen custard, management has developed several other proprietary flavors that are offered seasonally and on a rotating daily basis.

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The Building

The existing double drive-through Good Times restaurants are less than one-third the size of the typical restaurant buildings of the four largest hamburger chains and require approximately two-thirds of the land area. The current standard Good Times restaurant building is a double drive-through and walk-up style structure containing approximately 880 square feet built on 18,000 to 30,000 square-foot lots. Most existing restaurants utilize a double drive-through concept that allows simultaneous service from opposite sides of the restaurant and one or two walk-up windows with a patio for outdoor eating.

Management continually examines methods to refine the floor plan and design elements of the restaurant building to gain operating efficiencies and to enhance the look and feel of the dining area for customers. The Company has developed a 2,400 square foot prototype building with a 60 seat dining room and a 1,800 square foot building with 38 seats. After the implementation of frozen custard in fiscal 2002, the Company modified the building design for new restaurants to improve the service and functionality for customers purchasing frozen custard. Management anticipates new restaurants will be a 2,400 square foot building with a 60 seat dining room on 25,000 - 35,000 square feet lots located on high visibility, retail sites.

Management believes that the building form, design and aesthetic appeal address key issues and concerns of the consumer: speed, cleanliness, security, eye appeal, and an identifiable brand image. The exterior of the drive through only building consists of a cream-colored dry-vit system with an enclosed glass vestibule at the front for walk-up service. A brightly lit multi-colored fascia band runs the length of both sides of the building in addition to product and Good Times' proprietary signage. The double drive-through buildings are transportable and therefore can be moved from an unsuccessful site to a better location. Future buildings may be "stick built" on-site for greater cost efficiency, limiting our ability to relocate these stores. The new lobby seating model is a stone and dry-vit exterior with panelized proprietary facias and brightly lit awnings.

Management performs extensive site evaluation and expects a minimum number of buildings will ever have to be moved. However, one Good Times unit was relocated from a development condemned under eminent domain proceedings in 1999 and one franchise-owned building was relocated to a new site in fiscal 2001.

Plan of Operation

The Company's primary objective for fiscal 2004 is to stabilize its same store sales trends by continuing to reposition its business concept away from direct competition with the large national hamburger chains through the development and promotion of fresh frozen custard, highly differentiated taste profiles of its sandwiches and other core menu product and packaging improvements to drive increased consumer satisfaction. This repositioning is intended to build on the substantial brand equity that Good Times has in product quality and taste in its core menu of hamburgers and fries and to more definitively differentiate and integrate the Good Times brand experience.

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The Company's other objectives for fiscal 2004 are to:

• Improve customer value by offering a wide range of menu pricing,
• Continue the development of additional company-owned and franchised restaurants in Colorado based on the availability of sites and financing,
• Introduce limited new menu offerings,
• Develop product quality enhancements to continue to leverage Good Times' brand position based on superior taste and high quality ingredients,
• Reinvest in existing restaurants to freshen the exterior appearance,
• Develop the co-brand test out of our core market and evaluate its viability for out of market growth and,
• Improve overall customer satisfaction measures through enhanced management and training processes.

Good Times' ongoing objective is to stabilize and increase average restaurant sales through increased customer counts in each primary daypart (lunch, dinner and late-night), selective menu and price promotions and effective marketing of Good Times' competitive attributes of high quality products, unique taste profiles and demonstrable value. The Company expects modest product price increases in 2004 due to anticipated higher commodity costs.

Colorado is divided into two primary media markets, Denver and Colorado Springs/Pueblo. The Company has plans to fully develop the Denver market and then develop the Colorado Springs/Pueblo market, depending on availability of financing and suitable restaurant sites. Management estimates that the Denver market will support 45-55 Good Times restaurants and the Colorado Springs/Pueblo market will support 10-12 restaurants. Media advertising is important to effectively build brand awareness and the repositioning of the concept. All of our growth for fiscal 2004 and 2005 will be focused in Colorado to increase media and supervision efficiencies.

As of December 16, 2003, the Company operated nineteen company-owned and joint venture Good Times restaurants and had fifteen franchised restaurants open in Colorado, one in Boise, Idaho and one in Laramie, Wyoming.

	December 16, 2002	December 16, 2003
Company-owned restaurants	11	11
Joint venture restaurants	9	8
Franchise operated restaurants	16	17
Total restaurants	36	36

Management anticipates that Good Times and its franchisees will begin development of a total of five to seven Good Times units in Colorado in 2004 depending on site and financing availability.

Operations and Management

Good Times has defined three additional ingredients essential to its success:

1. Consistent delivery of high quality, great tasting products that are proprietary whenever possible,
2. Superior levels of friendly, fast service, and
3. Competitive pricing.

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

Each Good Times unit employs an operating partner or a general manager, one to two assistant managers and approximately 15 to 25 employees, most of who work part-time during three shifts. Operating systems and training materials are utilized to ensure consistent performance to Good Times' standards. An eight to ten week training program is utilized to train restaurant managers on all phases of the operation. Ongoing training is provided as necessary. Management of Good Times believes that incentive compensation of its restaurant managers is essential to the success of its business. Accordingly, in addition to a salary, managerial employees may be paid a bonus based upon proficiency in meeting financial, customer service and quality performance objectives. The Operating Partner Program was introduced in fiscal 2002 whereby a store Operating Partner may earn 25% of a restaurant's improvement in cash flow over a base year.

The Company uses several sources of customer feedback to evaluate each restaurant's service and quality performance, including an extensive, computerized secret shopper program, a computerized monthly telephone survey of fifty customers per restaurant, customer comment phone line, telephone surveys and web site comments. Additionally, management uses both its own primary consumer research for product development and customer usage and attitude patterns as well as third party market research that evaluates Good Times' performance ratings on several different operating attributes against key competitors.

The Company currently purchases 100% of its restaurant food and paper supplies from Yancey's Food Service. The Company does not believe that the current reliance on this sole vendor will have any long-term material adverse effect since the Company believes that there are a sufficient number of other suppliers from which food and paper supplies could be purchased. The Company does not anticipate any difficulty in continuing to obtain an adequate quantity of food and paper supplies of acceptable quality and at acceptable prices.

Financial and management control is maintained through the use of automated data processing and centralized accounting and management information systems that are provided by the Company. Restaurant managers forward sales reports, vendor invoices, payroll data and other operating information to Good Times' headquarters weekly and sales, labor and cash data is collected daily via an automated "polling" of each restaurant's point-of-sale system. Management receives daily, weekly and monthly reports identifying food, labor and operating expenses and other significant indicators of restaurant performance. Management of Good Times believes that these reporting systems enhance its ability to control and manage operations.

Marketing and Advertising

In recent years, the Company has been limited to utilizing radio as its primary media for advertising due to increasing costs of television advertising in the Denver area. Management believes that television advertising is important to successfully complete the repositioning of the concept, increase trials of its frozen custard products and increase the overall audience for its advertising. As additional restaurants are added in Colorado, the Company's ability to support television advertising is expected to increase. Each franchised and company-owned restaurant contributes an equal percentage of net sales to an advertising cooperative for the implementation of media advertising and promotions.

Signage is one of the most important elements for establishing identity at each location. The Good Times restaurant sign package that has been developed offers flexibility based on local codes, site layout and surrounding property. The Company's signage, logos and graphics for all restaurants were revised in fiscal 2001 and 2002 to support the strategic repositioning of the brand to Good Times Burgers & Frozen Custard.

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Franchise Program

Good Times has prepared prototype area rights and franchise agreements, a Uniform Franchise Offering Circular and advertising material to be utilized in soliciting prospective franchisees. Good Times seeks to attract franchisees that are experienced restaurant operators, well capitalized and have demonstrated the ability to develop multiple restaurants. Good Times currently reviews sites selected for franchises and monitors performance of franchise units. Good Times is currently considering potential franchisees only for development of units in Colorado and has developed a single unit, owner-operator franchise agreement in addition to its traditional franchise agreement.

Good Times estimates that it will cost a franchisee on average approximately $575,000 to $675,000 to open a Good Times drive-through restaurant, and $700,000 - $800,000 to open a restaurant with dining room seating, including pre-opening costs and working capital, assuming the land is leased. A franchisee typically will pay a royalty of 4% of net sales, an advertising fee of at least 0.5% of net sales, plus participation in regional advertising up to 5% of net sales, or a higher amount approved by the advertising cooperative, and initial development and franchise fees totaling $25,000 per restaurant. Among the services and materials which Good Times provides to franchisees are site selection assistance, plans and specifications for construction of the Good Times Drive Thru restaurants, an operating manual which includes product specifications and quality control procedures, training, on-site opening supervision and advice from time to time relating to operation of the franchised restaurant.

Good Times has entered into fourteen franchise agreements in the greater Denver metropolitan area. Fourteen franchise restaurants and eight joint-venture restaurants are operating in the Denver metropolitan area media market. One franchise restaurant is open in Grand Junction, Colorado, one in Boise, Idaho and one in Laramie, Wyoming. Two multi-unit franchise development agreements were entered into during fiscal 2002 for the development of eleven restaurants in the Colorado Springs market and two in the Denver area.

Employees

At December 16, 2003, the Company had approximately 305 employees of which 145 are part time employees and 160 are full-time employees. The Company considers its employee relations to be good. None of its employees is covered by a collective bargaining agreement.

Competition

The restaurant industry, including the fast food segment, is highly competitive. Good Times competes with a large number of other hamburger-oriented fast food restaurants in the areas in which it operates. Many of these restaurants are owned and operated by regional and national restaurant chains, many of which have greater financial resources and experience than does the Company. Restaurant companies that currently compete with Good Times in the Denver market include McDonald's, Burger King, Wendy's, Carl's Jr. and Sonic. Double drive-through restaurant chains such as Rally's Hamburgers and Checker's Drive-In Restaurants, which currently operate a total of over 800 double drive-through restaurants in various markets in the United States, are not currently operating in Colorado. Management of Good Times believes that these double drive-through restaurant chains will not expand into Colorado based on their publicly reported objectives and resources. However, the Company cannot assure you that they will not enter the Colorado market and become significant competitors of Good Times.

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Management of Good Times believes that it may have a competitive advantage in terms of quality of product compared to traditional fast food hamburger chains. However, price discounting by the major fast food hamburger chains has had a detrimental effect on Good Times' customer transactions in fiscal 2003. Early development of its double drive-through concept in Colorado has given Good Times an advantage over other double drive-through chains that may seek to expand into Colorado because of Good Times' brand awareness and present restaurant locations. Nevertheless, Good Times may be at a competitive disadvantage with other restaurant chains with greater name recognition and marketing capability. Furthermore, most of Good Times' competitors in the fast-food business operate more restaurants, have been established longer and have greater financial resources and name recognition than Good Times. There is also active competition for management personnel, as well as for attractive commercial real estate sites s uitable for restaurants.

Trademarks

Good Times has registered its mark "Good Times! Drive Thru Burgers"(SM) with the State of Colorado and intends to register that mark in each state where it or a franchisee intends to open a restaurant. Good Times has also registered its new mark "Good Times Burgers & Frozen Custard" federally and with the State of Colorado. Good Times received approval of its federal registration of "Good Times" in 2003.

In addition we own trademarks or service marks that have been registered, or for which applications are pending, with the United States Patent and Trademark Office including but not limited to: "Mighty Deluxe", "Wild Fries" and "Chicken Dunkers".

Government Regulation

Each Good Times restaurant is subject to the regulations of various health, sanitation, safety and fire agencies in the jurisdiction in which the restaurant is located. Difficulties or failures in obtaining the required licenses or approvals could delay or prevent the opening of a new Good Times restaurant. Federal and state environmental regulations have not had a material effect on Good Times' operations. More stringent and varied requirements of local governmental bodies with respect to zoning, land use and environmental factors could delay or prevent development of new restaurants in particular locations. Good Times is subject to the Fair Labor Standards Act, which governs such matters as minimum wages, overtime, and other working conditions. In addition, Good Times is subject to the Americans With Disabilities Act, which requires restaurants and other facilities open to the public to provide for access and use of facilities by the handicapped. Management believes that Good Times is in complia nce with the Americans With Disabilities Act.

Good Times is also subject to federal and state laws regulating franchise operations, which vary from registration and disclosure requirements in the offer and sale of franchises to the application of statutory standards regulating franchise relationships.

Available Information

Our Internet website address is www.goodtimesburgers.com. We make available free of charge through our website's investor information section our annual reports on Form 10-KSB, quarterly reports on Form 10-QSB, current reports on Form 8-K, and any amendments to those reports filed with or furnished to the SEC under applicable securities laws as soon as reasonably practical after we electronically file such material with, or furnish it to, the SEC. Our website information is not part of or incorporated by reference into this Annual Report on Form 10-KSB.

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Special Note About Forward-Looking Statements

Certain statements in this Form 10-KSB under "Item 1. Description of Business," "Item 6. Management's Discussion and Analysis of Financial Condition and Results of Operations" and elsewhere in this Form 10-KSB constitute "forward-looking statements" within the meaning of the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended. When we use the words such as "believes", "expects", "anticipates" or similar expressions, we are making forward-looking statements. Such forward-looking statements involve known and unknown risks, uncertainties, and other factors such as the risk factors discussed below which may cause the actual results, performance, or achievements of the Company to be materially different from any future results, performance, or achievements expressed or implied by such forward-looking statements.

Risk Factors

You should consider carefully the following risk factors before making an investment decision with respect to Good Times Restaurants securities.

We Have Accumulated Losses. We have incurred losses in every fiscal year since inception except 1999 and 2002 and as of September 30, 2003 we had an accumulated deficit of $9,453,000. As of September 30, 2003, we had working capital of $690,000.

We Must Sustain Same Store Sales Increases. As we develop additional restaurants, we expect that the increase in operating income generated by those restaurants will improve our financial results. However, we cannot assure you that we will achieve profitability on a consistent basis. We must sustain same store sales increases in existing restaurants to achieve profitability. Sales increases will depend in part on the success of our advertising and promotion of new and existing menu items and the consumer acceptance of the concept repositioning. We cannot assure you that our advertising and promotional efforts will in fact be successful.

The Hamburger Restaurant Market Is Highly Competitive. The hamburger restaurant market is highly competitive. Our competitors include many recognized national and regional fast-food hamburger restaurant chains such as McDonald's, Burger King, Wendy's, Carl's Jr. and Sonic. We also compete with small regional and local hamburger and other fast-food restaurants, many of which feature drive-through service. Most of our competitors have greater financial resources, marketing programs and name recognition. All of the major hamburger chains have increasingly offered selected food items and combination meals at discounted prices and have recently intensified their promotions of value priced meals. Continued discounting by competitors may adversely affect the revenues and profitability of our restaurants.

Sites May Be Difficult To Acquire. Location of our restaurants in high-traffic and readily accessible areas is an important factor for our success. Drive-through restaurants require sites with specific characteristics and there are a limited number of suitable sites available in our geographic markets. Since suitable locations are in great demand, we may not be able to obtain optimal sites at a reasonable cost. In addition, we cannot assure you that the sites we do obtain will be successful.

We May Require Additional Financing. In order to fully develop the Denver and Colorado Springs/Pueblo markets and to expand into markets outside of Colorado, we will require additional financing. Although we have recently obtained debt facilities for the borrowing of additional capital, we cannot assure you that these facilities will adequately finance our planned developments or that additional financing will be available on reasonable terms.

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We Depend on Key Management Employees. We believe our current operations and future success depend largely on the continued services of our management employees, in particular Boyd E. Hoback, our president and chief executive officer. Although we have entered into an employment agreement with Mr. Hoback, he may voluntarily terminate his employment with us at any time. In addition, we do not maintain key-person insurance on Mr. Hoback's life. The loss of Mr. Hoback's services, or other key management personnel, could have a material adverse effect on our financial condition and results of operations.

Our Board Of Directors Has Adopted A Shareholder Rights Plan. The plan makes it more difficult for a third party to acquire control of us without approval of the board of directors, even if the acquisition would be at a premium to the market price of our common stock. In addition, our articles of incorporation authorize the board of directors to issue without shareholder approval up to 5,000,000 shares of preferred stock. The issuance of preferred stock could make it more difficult for a third party to acquire us.

Our Nasdaq Listing Is Important. Our common stock is currently listed for trading on the Nasdaq SmallCap Market. The Nasdaq maintenance rules require among other things that our common stock price remains above $1.00 per share and that we have minimum net tangible assets in excess of $2 million. We were required to obtain shareholder approval in 1998 for a reverse stock split to maintain a sufficient per share price to preserve our Nasdaq listing.

You are cautioned that the risk factors discussed above are not exhaustive.

Item 2. Description of Property.

The Company currently leases approximately 3,350 square feet of space for its executive offices in Golden, Colorado for approximately $45,000 per year. The lease is for a three year term ending April 2005. The space is leased from The Bailey Company, a significant stockholder of the Company, at their corporate headquarters.

As of December 16, 2003, Good Times has an ownership interest in nineteen Good Times units, all of which are located in Colorado. Eight of these restaurants are held in joint venture limited partnerships of which Good Times is the general partner and has a 50% interest in seven of the partnership restaurants and a 78% interest in one partnership restaurant. There are eleven Good Times units that are wholly owned by Good Times.

Most existing Good Times restaurants are free-standing structures containing approximately 880 square feet (except for three conversions of other fast food restaurants that are 1,700-2,500 square feet, one conversion of a double drive-through building to one of 1,900 square feet with seating, two prototype 2,300 square foot buildings with seating and one prototype 1,800 square foot building with seating) situated on lots of approximately 18,000 to 30,000 square feet. Certain restaurants serve as collateral for the underlying debt financing arrangements as discussed in the Notes to Consolidated Financial Statements included in this report. Good Times intends to acquire new sites both through ground leases and purchase agreements supported by mortgage and leasehold financing arrangements and through sale leaseback agreements.

All of the restaurants are regularly maintained by the Company's repair and maintenance staff as well as by outside contractors, when necessary. Management believes that all of its properties are in good condition and that there will not be a need for significant capital expenditures to maintain the operational and aesthetic integrity of the Company's properties for the foreseeable future, other than recurring maintenance and periodic capital improvements. All of the Company's properties are covered up to replacement cost under its insurance policies and in the opinion of management are adequately covered by insurance.

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Item 3. Legal Proceedings.

The Company is not involved in any material legal proceedings. The Company is subject to various lawsuits in the normal course of business. These lawsuits are not expected to have a material impact on the Company.

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

No matters were submitted to a vote of security holders during the fourth quarter of the fiscal year ended September 30, 2003.

PART II

Item 5. Market for Common Equity and Related Stockholder Matters.

Shares of Good Times Restaurants common stock are listed for trading on the Nasdaq Smallcap Market under the symbol "GTIM." The following table presents the quarterly high and low bid prices for Good Times Restaurants common stock as reported by the Nasdaq Smallcap Market for each quarter within the last two fiscal years. The quotations reflect interdealer prices, without retail mark-ups, markdowns or commissions and may not represent actual transactions.

Quarter Ended	High	Low
December 31, 2001	$2.50	$1.60
March 31, 2002	4.62	2.29
June 30, 2002	5.22	3.38
September 30, 2002	2.70	2.70
December 31, 2002	2.80	2.01
March 31, 2003	2.80	2.14
June 30, 2003	2.84	2.25
September 30, 2003	4.52	2.30

As of December 16, 2003 there were approximately 320 holders of record of Common Stock. However management estimates that there are not fewer than 1,500 beneficial owners of the Company's Common Stock.

Dividend Policy

The Company has never paid dividends on its common stock and does not anticipate paying dividends in the foreseeable future. In addition, the Company has obtained financing under loan agreements that restrict the payment of dividends. The Company's ability to pay future dividends will necessarily depend on its earnings and financial condition. However, since restaurant development is capital intensive, the Company currently intends to retain any earnings for that purpose.

Disclosure with Respect to the Company's Equity Compensation Plans

The Company maintains the 2001 Good Times Restaurants Stock Option Plan, pursuant to which it may grant equity awards to eligible persons, and has outstanding stock options granted under its 1992 Incentive Stock Option Plan and 1992 Non-Statutory Stock Option Plan. In addition, in 1999 the Company issued a warrant to a significant Shareholder for the purchase of 25,000 shares of common stock at an exercise price of $4.00 per share. The warrant expires March 31, 2004. For additional information, see Note 10, Stock-Based Compensation, in the Notes to the Consolidated Financial Statements included in this report. The following table gives information about equity awards under the Company's plans and warrants as of September 30, 2003.

13

Equity Compensation Plan Information

	(a)	(b)	(c)
Plan category	Number of securities to be issued upon exercise of outstanding options, warrants and rights	Weighted-average exercise price of outstanding options, warrants and rights	Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))
Equity compensation plans approved by security holders	536,579	$2.70	109,840
Equity compensation plans not approved by security holders	25,000	$4.00	0
Total	561,579	$2.76	109,840

14

Item 6. Management's Discussion and Analysis of Financial Condition and Results of Operations.

The following selected financial data is derived from the Company's historical financial statements and is qualified in its entirety by such financial statements which are included in Item 7 hereof.

GOOD TIMES RESTAURANTS INC. AND SUBSIDIARY

The following presents certain historical financial information of the Company. This financial information includes the combined operations of the Company and Good Times for the fiscal years ended September 30, 2002 and 2003.

September 30,

Operating Data:	2003	2002
Total Net Revenues	15,479,000	17,536,000
Restaurant Operating Costs:
Food and paper costs	4,790,000	5,481,000
Labor, occupancy and other	7,497,000	7,866,000
Depreciation and amortization	929,000	1,004,000
Total restaurant operating costs	13,216,000	14,351,000
Income From Restaurant Operations	2,263,000	3,185,000
Other Operating Expenses:
Selling, General and Administrative Expense	2,141,000	2,300,000
Loss (Gain) on disposal of restaurants and equipment	(89,000)	3,000
Total Other Operating Expenses	2,052,000	2,303,000
Income (Loss) from Operations	211,000	882,000
Other Income and (expenses)
Minority income (expense), net	(227,000)	(432,000)
Interest, net	(80,000)	(123,000)
Other, net	(136,000)	(79,000)
Total other income and (expenses)	(443,000)	(634,000)
Net Income (loss) attributable to Common Shareholders	($232,000)	$248,000
Basic and Diluted Earnings Per Share	($.10)	$.11
Weighted average shares and equivalents used in per share calculations:
Basic	2,265,089	2,251,164
Diluted	2,265,089	2,323,769

Balance Sheet Data:

Working Capital	$690,000	$77,000
Total assets	7,587,000	8,999,000
Minority Interest	774,000	1,004,000
Long-term debt	1,230,000	2,152,000
Stockholders' equity	$3,922,000	$4,066,000

15

Results of Operations

Net Revenues

Net revenues for the fiscal year ended September 30, 2003 decreased $2,057,000 (11.7%) to $15,479,000 from $17,536,000 for the fiscal year ended September 30, 2002. Same store restaurant sales decreased $1,756,000 or 11.1%, during fiscal 2003 for restaurants that were open for the full fiscal 2002 and 2003 periods. Restaurant sales decreased $44,000 due to one company-owned restaurant in Silverthorne, Colorado and $272,000 due to one company-owned restaurant that was sold in May 2003. Net revenues increased $15,000 in fiscal 2003 due to a $75,000 increase in franchise fees offset by a $60,000 decrease in franchise royalties.

Same store restaurant sales were negatively impacted in fiscal 2003 by the following: 1) in the prior year period same store sales had increased 5.8% due primarily to the introduction of the frozen custard product; 2) in mid-March 2003 the Denver metropolitan area sustained a severe blizzard which resulted in an estimated $100,000 loss in sales as all restaurants were closed for approximately two to three days; 3) heavy discounting within the fast food industry; and, 4) a general decline in the overall economy.

Total restaurant sales for Good Times and its franchisees were $25,139,000 for fiscal 2003 compared to $27,887,000 for fiscal 2002.

Average restaurant gross sales for fiscal 2002 and 2003 were as follows:

	Fiscal 2002	Fiscal 2003
Company operated	$921,000	$816,000
Franchise operated	$836,000	$736,000
System total	$888,000	$784,000

Food and Paper Costs

Food and paper costs for fiscal 2003 decreased $691,000 from $5,481,000 (32% of restaurant sales) to $4,790,000 (31.8% of restaurant sales). Food and paper costs decreased as a percentage of restaurant sales primarily due to reduced discounting by the Company while beef costs rose to historic highs, increasing 38% from October 1, 2002 to October 1, 2003. Management anticipates beef costs will begin to decline in mid 2004 based upon industry projections and the lifting of the Canadian beef embargo.

Labor, Occupancy and Other Expenses

For fiscal 2003 labor, occupancy and other expenses decreased $369,000 from $7,866,000 (45.9% of restaurant sales) to $7,497,000 (49.8% of restaurant sales), compared to fiscal 2002. The $369,000 decrease in labor, occupancy and other expenses is primarily attributable to the decrease in restaurant sales of $2,072,000 as labor expenses decrease as sales decrease. The increase in labor, occupancy and other expenses as a percentage of restaurant sales is attributable to:

• The largely fixed nature of these expenses, as sales decrease the percentage of these expenses to restaurant sales increases,
• An increase in the average wages for restaurant employees of approximately 1.1%,
• Property tax expense increase of $18,000 due to an increase in equipment values,

16

• Bank fees increase of $14,000 due to a greater number of customer transactions using credit cards, and
• Building, property and liability insurance expense increase of $39,000 due to increases in the insurance market as a whole.

Depreciation and Amortization Expenses

For fiscal 2003 depreciation and amortization expenses decreased $75,000 from $1,004,000 to $929,000, compared to fiscal 2002. Depreciation expense decreased due to the aging of the Company's capital assets, as well as the sale of one company-owned restaurant in May 2003.

Income from Restaurant Operations

For fiscal 2003 income from restaurant operations was $2,263,000 compared to $3,185,000 for fiscal 2002. Income from restaurant operations as a percentage of restaurant sales was 15.0% for fiscal 2003, a decrease from 18.6% for fiscal 2002. Cash flow from restaurant operations (income from restaurant operations plus depreciation, opening expenses and accretion of deferred rent) as a percentage of restaurant sales was 21.3% for fiscal 2003 compared to 24.7% for fiscal 2002.

The decrease in both income and cash flow from restaurants as a percentage of restaurant sales for fiscal 2003 was primarily a result of the decrease in same store sales in the current period. Income from restaurant operations reflects regional supervision, opening expenses and accretion of deferred rent of $320,000 for fiscal 2003 and $332,000 for fiscal 2002.

Other Operating Expenses

Selling, general and administrative expenses decreased from $2,300,000 (13.4% of restaurant sales) in fiscal 2002 to $2,141,000 (14.2% of restaurant sales) in fiscal 2003. The decrease in selling, general and administrative expenses is partially attributable to decreased advertising expenses, which decreased to $984,000 (6.5% of restaurant sales) for fiscal 2003 from $1,087,000 (6.3% of restaurant sales) for fiscal 2002, as well as a decrease in general and administrative expenses, which decreased to $1,157,000 (7.7% of restaurant sales) for fiscal 2003 from $1,213,000 (7.1% of restaurant sales) for fiscal 2002.

Management anticipates that fiscal 2004 advertising will consist primarily of radio advertising, potential television advertising, on-site and point of purchase merchandising totaling approximately 6% - 7% of restaurant sales.

Loss (gain) or disposal of restaurants and equipment decreased $92,000 to ($89,000) from $3,000 in fiscal 2002. The $89,000 gain on disposal of restaurants and equipment is primarily due to the sale of one company-owned restaurant in May 2003.

Income from Operations

Income from operations decreased to $211,000 in fiscal 2003 compared to $882,000 in fiscal 2002. This decrease was attributable to the decrease in income from restaurant operations, offset by the decrease in other operating expenses for fiscal 2003.

Net Income (Loss)

Net loss was ($232,000) for fiscal 2003 compared to net income of $248,000 in fiscal 2002. The change from fiscal 2002 to fiscal 2003 was primarily attributable to the decrease in income from operations for fiscal 2003 of $671,000. In addition, 1) minority interest expense decreased $205,000 due to decreased income from restaurant operations of the joint venture restaurants for fiscal 2003; 2) net interest expense decreased $43,000 to $80,000 from $123,000 in fiscal 2002 due to reduced debt in the current period; and 3) other expenses increased $57,000 to $136,000 from $79,000 in fiscal 2002. The $57,000 increase in other expenses is primarily attributable to a $29,000 expense related to a restaurant sublease in Las Vegas, Nevada; an increase in franchise expense due to support costs for the opening of two new franchise restaurants; and a $22,000 expense related to a write down in the holding value of land.

17

Liquidity and Capital Resources

Cash and Working Capital

As of September 30, 2003, the Company had $1,480,000 of cash on hand. The Company currently plans to use the cash balance and cash generated from operations for increasing the Company's working capital reserves and, along with additional debt financing, for the development of new company-owned restaurants. Management believes that the current cash on hand and additional cash expected from operations in fiscal 2004 will be sufficient to cover the Company's working capital requirements for fiscal 2004.

As of September 30, 2003, the Company had working capital of $690,000. Because restaurant sales are collected in cash and accounts payable for food and paper products are paid two to four weeks later, restaurant companies often operate with working capital deficits. The Company anticipates that working capital deficits will be incurred in the future as new Good Times restaurants are opened.

In May 2003, the Company sold one under performing co-owned restaurant for $857,000 (net of closing costs). Proceeds of the sale were used to reduce debt by $593,000 and increase working capital by $264,000.

Capital Expenditures

The Company is currently negotiating purchase and lease agreements for additional company-owned and franchise restaurants and is negotiating debt and sale leaseback financing for the development of those restaurants. Additionally, management anticipates upgrading several of the Company's point of sale systems and implementing a new management information system (MIS). A portion of the MIS and point of sale capital expenditures will be funded from cash flow from operations and a portion from debt or lease financing.

Financing Transactions

In January 2002 the Company secured $175,000 in debt financing through GE Capital for the purpose of lending these funds to the Company's franchisees to purchase signage related to the frozen custard implementation. Through September 30, 2003 the Company had loaned all of the $175,000 to five separate franchisees. The Company has secured and personally guaranteed notes receivable from each franchisee bearing a higher rate of interest than the Company is obligated to pay under the GE Capital note.

Cash Flows

Net cash provided by operating activities was $707,000 for fiscal 2003 compared to $1,155,000 in fiscal 2002. The decreased net cash provided by operating activities for fiscal 2003 was the result of a decrease in the net income (loss) to ($232,000) and non-cash reconciling items totaling $939,000 (comprised principally of depreciation and amortization of $950,000, minority interest of $227,000, a gain on the disposal of property of $86,000, and decreases in operating assets and liabilities totaling $152,000).

Net cash used in investing activities in fiscal 2002 was $949,000, which reflects payments for the purchase of property and equipment of $807,000, and loans made to franchisees (net of payments received) of $142,000. In fiscal 2002 capital expenditures related to the implementation of frozen custard were $525,000 and capital expenditures related to preliminary site costs for new stores were $205,000.

Net cash provided by investing activities in fiscal 2003 was $448,000, which reflects payments for the purchase of property and equipment of $182,000, proceeds from the sale of assets of $383,000, proceeds from the sale of investments of $201,000 and payments received on loans made to franchisees of $46,000.

Net cash used in financing activities in fiscal 2002 was $436,000, which includes principal payments on notes payable and long term debt of $278,000, net repayments on lines of credit of $132,000, borrowings on notes payable and long-term debt of $447,000, distributions to minority interests in partnerships of $564,000, contributions from minority interests in partnerships of $64,000 and proceeds from the exercise of stock options of $27,000.

Net cash used in financing activities in fiscal 2003 was $646,000, which includes principal payments on notes payable and long term debt of $258,000, net repayments on lines of credit of $137,000, distributions (net of contributions) to minority interests in partnerships of $340,000 and proceeds from the exercise of stock options of $89,000.

18

Contingencies and Off-Balance Sheet Arrangements

The Company remains contingently liable on one Las Vegas restaurant lease. Management anticipates minimal future losses from the Las Vegas lease contingency. The Company is also contingently liable on several ground leases and one land and building lease that have been subleased or assigned to franchisees. The Company has never experienced any losses nor does it anticipate any future losses from these contingent lease liabilities. The Company is also a guarantor on a Small Business Administration loan to a franchisee of approximately $295,000.

The Company is a co-maker on a $2,000,000 line of credit to a third party entity, established for the purchase of land and development of new restaurants for subsequent sale in sale-leaseback transactions, some of which may then be operated as company-owned restaurants and some of which may be subleased to franchisees. The proceeds of the sale leaseback transactions will be used for the reduction of the line of credit. In addition to the land and buildings under development, the sole member of Smart Development, LLC has provided a $400,000 certificate of deposit as collateral for the line of credit. At September 30, 2003, $923,000 was outstanding for the development of two restaurants. For additional information, see the "Recent Developments" section of Item 1.

Critical Accounting Policies and Estimates

The Company evaluates the collectability of its note receivables from franchisees. Historically, such amounts have been fully repaid and the Company believes the collateral and guarantees are adequate to provide for future payments; therefore no allowance for amounts estimated to be uncollected have been provided. The Company also periodically reviews its long-term assets for potential impairment as well as their estimated remaining life. Historically, the Company has not been required to impair its long-term assets nor revise their estimated life, however, the restaurant industry is extremely competitive and the Company continues to be responsive to changes in its operating environment. Therefore such estimates are considered significant and subject to change.

19

New Accounting Pronouncements

In December 2002, the FASB issued Statements of Financial Accounting Standards No.148, Accounting for Stock-Based Compensation ' Transition and Disclosure ' An Amendment of FASB Statement 123 (SFAS 123). For entities that change their accounting for stock-based compensation from the intrinsic method to the fair value method under SFAS 123, the fair value method is to be applied prospectively to those awards granted after the beginning of the period of adoption (the prospective method). The amendment permits two additional transition methods for adoption of the fair value method. In addition to the prospective method, the entity can choose to either (i) restate all periods presented (retroactive restatement method) or (ii) recognize compensation cost from the beginning of the fiscal year of adoption as if the fair value method had been used to account for awards (modified prospective method). For fiscal years beginning December 15, 2003, the prospective method will no longer be allowed. The Company currently accounts for its stock-based compensation using the intrinsic value method as proscribed by Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees and plans on continuing using this method to account for stock options , therefore, it does not intend to adopt the transition requirements as specified in SFAS 148. The Company has adopted the new SFAS 148 disclosure requirements in these financial statements.

SFAS No. 150, Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity, was issued in May 2003 and requires issuers to classify as liabilities (or assets in some circumstances) three classes of freestanding financial instruments that embody obligations for the issuer. SFAS No. 150 is effective for financial instruments entered into or modified after May 31, 2003 and is otherwise effective at the beginning of the first interim period beginning after June 15, 2003. Management believes the adoption of SFAS No. 150 will have no immediate impact on its financial position or results of operations.

The FASB issued Interpretation ("FIN") No. 45, Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others, in November 2002 and FIN No. 46, Consolidation of variable Interest Entities, in January 2003. FIN No. 45 is applicable on a prospective basis for initial recognition and measurement provisions to guarantees issued after December 2002; however, disclosure requirements are effective immediately. FIN No. 45 requires a guarantor to recognize, at the inception of a guarantee, a liability for the fair value of the obligations undertaken in issuing the guarantee and expands the required disclosures to be made by the guarantor about its obligation under certain guarantees that it has issued. The adoption of FIN No. 45 did not have a material impact on the Company's financial position or results of operations. FIN No. 46 requires that a company that controls another entity through interest other than voting interest should consolid ate such controlled entity in all cases for interim periods beginning after June 15, 2003. Management does not believe the adoption of FIN No. 46 will have a material impact on its financial position or results of operations.

20

Item 7. Financial Statements

INDEX TO FINANCIAL STATEMENTS

PAGE

Independent Auditor's Report	F-2
Consolidated Balance Sheet ' September 30, 2003	F-3
Consolidated Statements of Operations ' For the Years Ended September 30, 2003 and 2002	F-5
Consolidated Statement of Stockholders' Equity - For the Period from October 1, 2001 through September 30, 2003	F-6
Consolidated Statements of Cash Flows - For the Years Ended September 30, 2003 and 2002	F-7
Notes to Consolidated Financial Statements	F-8

INDEPENDENT AUDITOR'S REPORT

To the Stockholders and

Board of Directors

Good Times Restaurants, Inc.

Golden, Colorado

We have audited the accompanying consolidated balance sheet of Good Times Restaurants, Inc. and Subsidiary as of September 30, 2003, and the related consolidated statements of operations, stockholders' equity and cash flows for the years ended September 30, 2003 and 2002. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

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

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Good Times Restaurants, Inc. and Subsidiary as of September 30, 2003, and the results of their operations and their cash flows for the years ended September 30, 2003 and 2002, in conformity with accounting principles generally accepted in the United States of America.

Hein + Associates llp

Denver, Colorado

November 4, 2003

F-2

GOOD TIMES RESTAURANTS INC. AND SUBSIDIARY

CONSOLIDATED BALANCE SHEET

SEPTEMBER 30, 2003

ASSETS
Current Assets:
Cash and cash equivalents	$ 1,480,000
Notes receivable	66,000
Receivables and other	206,000
Inventories	112,000
Total current assets	1,864,000
Property and Equipment, at cost:
Land and buildings	3,505,000
Leasehold improvements	2,711,000
Fixtures and equipment	4,989,000
	11,205,000
Less accumulated depreciation and amortization	(6,112,000)
	5,093,000
Other Assets:
Notes receivable	546,000
Other	84,000
	630,000
Total Assets	$ 7,587,000

F-3

GOOD TIMES RESTAURANTS INC. AND SUBSIDIARY

CONSOLIDATED BALANCE SHEET

SEPTEMBER 30, 2003

(continued)

LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current maturities of long-term debt	$ 338,000
Accounts payable	209,000
Deferred income	85,000
Other accrued liabilities	542,000
Total current liabilities	1,174,000
Long-Term Liabilities:
Debt, net of current portion	1,230,000
Deferred liabilities	487,000
Total long-term liabilities	1,717,000
Minority Interests in Partnerships	774,000
Commitments and Contingencies (Note 4)
Stockholders' Equity:
Preferred stock, $.01 par value, 5,000,000 shares authorized, none issued and outstanding	'
Common stock, $.001 par value; 50,000,000 shares authorized, 2,302,971 shares issued and outstanding	2,000
Capital contributed in excess of par value	13,372,000
Accumulated deficit	(9,452,000)
Total stockholders' equity	3,922,000
Total Liabilities and Stockholders' Equity	$7,587,000

F-4

GOOD TIMES RESTAURANTS INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF OPERATIONS

	For the Years Ended September 30,
	2003	2002
Net Revenues:
Restaurant sales	$ 15,056,000	$ 17,128,000
Area development and franchise fees	75,000	'
Franchise royalties	348,000	408,000
Total net revenues	15,479,000	17,536,000
Restaurant Operating Costs:
Food and paper costs	4,790,000	5,481,000
Restaurant labor costs	4,862,000	5,297,000
Restaurant occupancy costs	2,068,000	1,966,000
Accretion of deferred rent	22,000	31,000
Other restaurant operating costs	545,000	568,000
Opening expenses	'	4,000
Depreciation and amortization	929,000	1,004,000
Total restaurant operating costs	13,216,000	14,351,000
Income from Restaurant Operations	2,263,000	3,185,000
Other Operating Expenses (Income):
General and administrative	1,157,000	1,213,000
Advertising	984,000	1,087,000
(Gain) loss on disposal of restaurants and equipment	(89,000)	3,000
Total other operating expenses	2,052,000	2,303,000
Income From Operations	211,000	882,000
Other Expenses:
Interest income	57,000	57,000
Interest expense	(137,000)	(180,000)
Minority interest in income of partnerships	(227,000)	(432,000)
Other, net	(136,000)	(79,000)
Total other expenses, net	(443,000)	(634,000)
Net Income (Loss)	$ (232,000)	$ 248,000
Basic Earnings (Loss) Per Share	$ (.10)	$ .11
Diluted Earnings (Loss) Per Share	$ (.10)	$ .11
Weighted Average Common Shares Outstanding:
Basic	2,265,089	2,251,164
Diluted	2,265,089	2,323,769

F-5

GOOD TIMES RESTAURANTS INC. AND SUBSIDIARY

CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY

FOR THE PERIOD FROM OCTOBER 1, 2001 THROUGH SEPTEMBER 30, 2003

	Common Stock		Capital Contributed In Excess of Par Value	Accumulated Deficit	Total
	Issued Shares	Par Value
Balances, October 1, 2001	2,242,263	$ 2,000	$13,240,000	$(9,468,000)	$3,774,000
Stock issued to employee benefit plan	9,767	'	17,000	'	17,000
Stock issued for exercised stock options	10,580	'	27,000	'	27,000
Net income	'	'	'	248,000	248,000
Balances, September 30, 2002	2,262,610	2,000	13,284,000	(9,220,000)	4,066,000
Stock issued for exercised stock options	40,361	'	88,000	'	88,000
Net loss	'	'	'	(232,000)	(232,000)
Balances, September 30, 2003	2,302,971	$2,000	$13,372,000	$(9,452,000)	$3,922,000

F-6

GOOD TIMES RESTAURANTS INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS

	For the Years Ended September 30,
	2003	2002
Cash Flows from Operating Activities:
Net income (loss)	$(232,000)	$248,000
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization	950,000	1,023,000
Accretion of deferred rent	22,000	31,000
Minority interest	227,000	432,000
Loss (gain) on disposal of property, restaurants and equipment, net	(86,000)	3,000
Loss on lease buyout	34,000	'
Recognition of deferred income	(3,000)	'
Write-down of land	22,000	'
Common stock issued to 401(k) Plan for Company match	'	17,000
Changes in operating assets and liabilities:
(Increase) decrease in:
Receivables	(85,000)	(52,000)
Inventories	(16,000)	'
Prepaid expenses and other	(10,000)	(11,000)
Deposits and other assets	(25,000)	'
(Decrease) increase in:
Accounts payable	6,000	(440,000)
Accrued and other liabilities	(157,000)	(96,000)
Deferred franchise fees	60,000	'
Net cash provided by operating activities	707,000	1,155,000
Cash Flows Used In Investing Activities:
Payments for the purchase of property and equipment	(182,000)	(807,000)
Proceeds from sale of assets	383,000	'
Proceeds from sale of investments	201,000	'
Loans made to franchisees and to others	'	(181,000)
Payments received on loans to franchisees and to others	46,000	39,000
Net cash provided (used) in investing activities	448,000	(949,000)
Cash Flows From Financing Activities:
Principal payments on notes payable, capital leases, and long-term debt	(258,000)	(278,000)
Borrowings on notes payable and long-term debt	'	447,000
Net repayments on line-of-credit	(137,000)	(132,000)
Proceeds from exercise of stock options	89,000	27,000
Distributions paid to minority interests in partnerships	(344,000)	(564,000)
Contributions from minority interest in partnerships	4,000	64,000
Net cash used in financing activities	(646,000)	(436,000)
Increase (Decrease) in Cash and Cash Equivalents	509,000	(230,000)
Cash and Cash Equivalents, beginning of period	971,000	1,201,000
Cash and Cash Equivalents, end of period	$1,480,000	$971,000
Supplemental Disclosures of Cash Flow Information:
Cash paid for interest	$137,000	$186,000
Payment of debt from sale of property	$632,000	$'
Purchase of equipment with debt	$26,000	$'
Transfer of assets through dissolution of partnership	$177,000	$'
Note receivable on sale of assets	$101,000	$'

F-7

1. Organization and Summary of Significant Accounting Policies:

Organization ' Good Times Restaurants Inc. (Good Times or the Company) is a Nevada corporation. The Company operates through its wholly owned subsidiary Good Times Drive Thru Inc. (Drive Thru).

Drive Thru commenced operations in 1986 and, as of September 30, 2003, operates 19 company-owned and joint venture drive-thru fast food hamburger restaurants. The Company's restaurants are located in Colorado. In addition, Drive Thru has 15 franchises operating in Colorado, one in Laramie, Wyoming, and one in Boise, Idaho, and is offering franchises for development of additional Drive Thru restaurants.

Principles of Consolidation ' The consolidated financial statements include the accounts of Good Times, its subsidiary and certain limited partnerships that are approximately 50% owned, in which the Company exercises control as general partner. All intercompany accounts and transactions are eliminated. The unrelated limited partners' equity of each partnership has been recorded as minority interest in the accompanying consolidated financial statements.

Opening Costs ' Opening costs are expensed as incurred.

Cash and Cash Equivalents ' The Company considers all highly liquid debt instruments purchased with an initial maturity of three months or less to be cash equivalents.

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

Property and Equipment 'Depreciation is recognized on the straight-line method over the estimated useful lives of the assets or the lives of the related leases, if shorter, as follows:

Building	15 years
Leasehold improvements	7-15 years
Fixtures and equipment	3-8 years

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

Impairment ' The Company follows SFAS No. 144, when assessing properties for impairment. The undiscounted cash flows are compared to the net book value on a restaurant-by-restaurant basis. If the undiscounted cash flows are less than the net book value, the restaurant is written down to its fair market value.

F-8

Sales of Restaurants and Restaurant Equity Interests ' Sales of restaurants or non-controlling equity interests in restaurants developed by the Company are accounted for under the full accrual method or the installment method. Under the full accrual method, gain is not recognized until the collectibility of the sales price is reasonably assured and the earnings process is virtually complete without further contingencies. When a sale does not meet the requirements for income recognition, gain is deferred until those requirements are met. Under the installment method, gain is recognized as principal payments on the related notes receivable are collected.

Deferred Liabilities ' Rent expense is reflected on a straight-line basis over the term of the lease for all leases containing step-ups in base rent. An obligation representing future payments (which totaled $391,000 as of September 30, 2003) has been reflected in the accompanying consolidated balance sheet as a deferred liability. The remaining balance includes a deferred gain of $36,000 on the sale of a restaurant, and deferred franchise development fees of $60,000.

Advertising ' The Company incurs advertising expense in connection with marketing of its restaurant operations. Advertising costs are expensed the first time the advertising takes place.

Franchise and Area Development Fees ' Individual franchise fee revenue is deferred when received and is recognized as income when the Company has substantially performed all of its obligations under the franchise agreement and the franchisee has commenced operations. Area development fees and related direct expenses are recognized ratably upon opening of the applicable restaurants. Continuing royalties from franchisees, which are a percentage of the gross sales of franchised operations, are recognized as income when earned. Franchise development expenses, which consist primarily of legal costs and restaurant opening expenses associated with developing and opening franchise restaurants, are expensed against the related franchise fee income.

Statement of Cash Flows 'For purposes of the statements of cash flows, the Company considers all highly liquid debt instruments purchased with an original maturity of three months or less to be cash equivalents.

Income Taxes ' Income taxes are provided for in accordance with SFAS No. 109, Accounting for Income Taxes. SFAS No. 109 requires an asset and liability approach in the recognition of deferred tax liabilities and assets for the expected future tax consequences of temporary differences between the carrying amounts and the tax bases of the Company's assets and liabilities.

Net Income (Loss) Per Common Share ' The income (loss) per share is presented in accordance with the provisions of SFAS No. 128, Earnings Per Share. Basic EPS is calculated by dividing the income or loss available to common shareholders by the weighted average number of common shares outstanding for the period. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock.

F-9

Financial Instruments and Concentrations of Credit Risk 'Credit risk represents the accounting loss that would be recognized at the reporting date if counterparties failed completely to perform as contracted. Concentrations of credit risk (whether on or off balance sheet) that arise from financial instruments exist for groups of customers or counterparties when they have similar economic characteristics that would cause their ability to meet contractual obligations to be similarly effected by changes in economic or other conditions. Financial instruments with off-balance-sheet risk to the Company include lease liabilities whereby the Company is contingently liable as a guarantor of certain leases that were assigned to third parties in connection with various sales of restaurants to franchisees (see Note 4).

Financial instruments which potentially subject the Company to concentration of credit risk consist principally of cash and cash equivalents and receivables. At September 30, 2003, notes receivable totaled $612,000 and were from seven entities. Additionally, the Company has other current receivables of $190,000, which includes $46,000 of current franchise receivables.

The Company purchases 100% of its restaurant food and paper from one vendor. The Company believes that there are a sufficient number of other suppliers from which food and paper could be purchased to prevent any long-term adverse consequences.

The Company operates in one industry segment, restaurants. A geographic concentration exists because the Company's customers are generally located in the State of Colorado.

The estimated fair values for financial instruments are determined at discrete points in time based on relevant market information. These estimates involve uncertainties and cannot be determined with precision. The carrying amounts of all the Company's financial instruments approximate fair value as a result of the short-term maturities or interest rates that approximate the Company's current expected borrowing and lending rates.

Comprehensive Income (Loss) 'Comprehensive income includes net income or loss, changes in certain assets and liabilities that are reported directly in equity such as adjustments resulting from unrealized gains or losses on held to maturity investments. The Company's comprehensive income (loss) was equal to its net income (loss) for all periods presented in these financial statements.

Accounting Estimates'The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in these financial statements and the accompanying notes. The actual results could differ from those estimates.

F-10

Stock-Based Compensation Disclosures - The Company applies APB Opinion 25 and related interpretations in accounting for stock options and warrants which are granted to employees. Accordingly, no compensation cost has been recognized for grants of options and warrants to employees since the exercise prices were not less than the fair value of the Company's common stock on the grant dates. Had compensation cost been determined based on the fair value at the grant dates for awards under those plans consistent with the method of SFAS No. 123, the Company's net income (loss) and net income (loss) per share would have been changed to the pro forma amounts indicated below.

	Year Ended September 30,
	2003	2002
Net income (loss) applicable to common stockholders:
As reported	$(232,000)	$248,000
Pro forma expense	(176,000)	(225,000)
Pro forma net income	(408,000)	23,000
Net income (loss) per common share:
As reported	$(.10)	$.11
Pro forma	(.18)	.01

The fair value of each employee option granted in 2003 and 2002 was estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted average assumptions:

	Year Ended September 30,
	2003	2002
Expected volatility	80%	104%
Risk-free interest rate	3.7%	5%
Expected dividends	'	'
Expected terms (in years)	5-10	3-5

Reclassification ' Certain reclassifications have been made to conform 2002 financial statements to the presentation in 2003. The reclassifications had no effect on net income.

F-11

New Accounting Pronouncements 'In December 2002, the FASB issued Statements of Financial Accounting Standards No.148, Accounting for Stock-Based Compensation ' Transition and Disclosure ' An Amendment of FASB Statement 123 (SFAS 123). For entities that change their accounting for stock-based compensation from the intrinsic method to the fair value method under SFAS 123, the fair value method is to be applied prospectively to those awards granted after the beginning of the period of adoption (the prospective method). The amendment permits two additional transition methods for adoption of the fair value method. In addition to the prospective method, the entity can choose to either (i) restate all periods presented (retroactive restatement method) or (ii) recognize compensation cost from the beginning of the fiscal year of adoption as if the fair value method had been used to account for awards (modified prospective method). For fiscal years beginning December 15, 2003, the prospective m ethod will no longer be allowed. The Company currently accounts for its stock-based compensation using the intrinsic value method as proscribed by Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees and plans on continuing using this method to account for stock options , therefore, it does not intend to adopt the transition requirements as specified in SFAS 148. The Company has adopted the new SFAS 148 disclosure requirements in these financial statements.

SFAS No. 150, Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity, was issued in May 2003 and requires issuers to classify as liabilities (or assets in some circumstances) three classes of freestanding financial instruments that embody obligations for the issuer. SFAS No. 150 is effective for financial instruments entered into or modified after May 31, 2003 and is otherwise effective at the beginning of the first interim period beginning after June 15, 2003. Management believes the adoption of SFAS No. 150 will have no immediate impact on its financial position or results of operations.

The FASB issued Interpretation ("FIN") No. 45, Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others, in November 2002 and FIN No. 46, Consolidation of variable Interest Entities, in January 2003. FIN No. 45 is applicable on a prospective basis for initial recognition and measurement provisions to guarantees issued after December 2002; however, disclosure requirements are effective immediately. FIN No. 45 requires a guarantor to recognize, at the inception of a guarantee, a liability for the fair value of the obligations undertaken in issuing the guarantee and expands the required disclosures to be made by the guarantor about its obligation under certain guarantees that it has issued. The adoption of FIN No. 45 did not have a material impact on the Company's financial position or results of operations. FIN No. 46 requires that a company that controls another entity through interest other than voting interest should consolid ate such controlled entity in all cases for interim periods beginning after June 15, 2003. Management does not believe the adoption of FIN No. 46 will have a material impact on its financial position or results of operations.

F-12

2. Notes Receivable:

Notes receivable consists of the following as of September 30, 2003:

Notes receivable from franchisees related to the sale of restaurants, 7% to 12%, monthly payments of principal and interest are due in the amount of approximately $4,000 with the final payment due in 2008 collateralized by a second interest in a building and equipment and guaranteed by an individual.	$328,000
Notes receivable from franchisees related to installation of certain equipment, 10%, monthly payments of principal and interest are due in the amount of approximately $3,000 with final payment in 2009 collateralized by all fixtures and equipment of the related restaurants.	284,000
	612,000
Less current portion.	(66,000)
	$546,000

3. Debt:

Note payable with GE Capital Business Asset Funding with monthly payments of principal and interest (7.83%) due in the amount of $18,600 with the final payment due in November 2008. The loan is collateralized by the building, leasehold interest and equipment of two Good Times Restaurants and all custard equipment and signage purchased under the note.	$946,000
Line of Credit with Merrill Lynch Business Financial Services (fully extended) providing for monthly principal reductions ranging from 1.17% to 1.53% of the original amount borrowed until 2007 at which time any outstanding balance is payable in full. The interest rate on the line of credit is variable at a per annum rate equal to the sum of 2.75% plus the 30-day Dealer Commercial Paper Rate (3.8% at September 30, 2003) collateralized by the building, leasehold interest and equipment at one Good Times Restaurant.	356,000
Line of Credit with Merrill Lynch Business Financial Services (fully extended) providing for monthly principal reductions ranging from 1.80% to 1.96% of the original amount borrowed until 2005 at which time any outstanding balance is payable in full. The interest rate on the line of credit is variable at a per annum rate equal to the sum of 2.75% plus the 30-day Dealer Commercial Paper Rate (3.8% at September 30, 2003). The loan is guaranteed by a significant stockholder (see Note 8), collateralized by equipment at one Good Times Restaurant.	90,000

F-13

Note payable with GE Capital Business Asset Funding with monthly principal and variable interest (interest rate at September 30, 2003 was 5.74%), with the final payment due January 2009. Through January 2004, the Company has the option to fix the interest rate at 3.75%, plus the weekly average of five year U.S. Dollar Interest Rate Swaps. The loan is collateralized by the building, leasehold interest and equipment at one Good Times Restaurant.	139,000
Capital lease obligation for equipment, payable monthly in installments with interest of 9.15%, with lease expiring August 2007.	14,000
Other, various terms.	23,000
	1,568,000
Less current portion.	(338,000)
	$1,230,000

As of September 30, 2003, principal payments on debt, excluding capital lease payments, over the next five years are as follows:

Years Ended September 30,
2004	$335,000
2005	333,000
2006	319,000
2007	283,000
2008	241,000
Thereafter	43,000
	$1,554,000

 F-14

The Company leases certain equipment under capital leases. The liabilities under capital leases are recorded at the present value of the minimum lease payments.

Future minimum lease payments due as of September 30, 2003 are as follows:

2004	$ 3,000
2005	3,000
2006	4,000
2007	5,000
	15,000
Less amount representing interest	(1,000)
Present value of future minimum lease payments	$14,000

The net book value of the equipment under capital leases at September 30, 2003 is approximately $14,000.

In connection with certain of the above loans, the Company has agreed to certain covenants, which includes minimum tangible net worth and minimum cash flows, as defined in the agreements. As of September 30, 2003, the Company was in compliance with its loan covenants.

4. Commitments and Contingencies:

The Company's office space, and the land underlying the Drive Thru restaurant facilities, are leased under operating leases. Certain leases include provisions for additional contingent rental payments if sales volumes exceed specified levels. The Company paid no material amounts as a result of these provisions.

Following is a summary of operating lease activities:

	Operating Leases 2003
Minimum rentals	$1,394,000
Less sublease rentals	(349,000)
Net rent paid	$1,045,000

 F-15

As of September 30, 2003, future minimum rental commitments required under the Company's operating leases that have initial or remaining noncancellable lease terms in excess of one year are as follows:

	Operating Leases
2004	$1,496,000
2005	1,397,000
2006	1,283,000
2007	1,303,000
2008	1,286,000
Thereafter	8,448,000
	15,213,000
Less sublease rentals	(4,864,000)
	$10,349,000

The Company's parent is also a guarantor on a Small Business Administration loan to a franchisee for approximately $295,000.

5. Financing Transactions:

The Company is a co-maker on a $2,000,000 line of credit to a third party entity, established for the purchase of land and development of new restaurants for subsequent sale in sale-leaseback transactions, some of which may be operated as company-owned restaurants and some of which may be leased to franchisees. The proceeds of the sale leaseback transactions will be used for the reduction of the line of credit. In addition to the land and buildings under development, the sole member of Smart Development, LLC has provided a $400,000 certificate of deposit as collateral for the line of credit. At September 30, 2003, $923,000 was outstanding for the development of three restaurants.

6. Managed Limited Partnerships:

Drive Thru is the general partner of a limited partnership that was formed to develop Drive Thru restaurants. Limited partner contributions have been used to construct new restaurants. Drive Thru, as a general partner, generally receives an allocation of approximately 50% of the profit and losses and a fee for its management services. The limited partners' equity has been recorded as a minority interest in the accompanying consolidated financial statements.

F-16

7. Income Taxes:

Deferred tax assets (liabilities) are comprised of the following at September 30, 2003:

	Current	Long Term
Deferred assets (liabilities):
Partnership basis difference	$'	$386,000
Tax effect of net operating loss carryforward	'	1,455,000
Exercise of non-qualified stock options	'	10,000
Property and equipment basis differences	'	(790,000)
Other accrued liability difference	14,000	12,000
Net deferred tax assets	14,000	1,073,000
Less valuation allowance*	(14,000)	(1,073,000)
Net deferred tax assets	$'	$'

* The valuation allowance decreased by $390,000 during the year ended September 30, 2003.

The Company has net operating loss carryforwards of approximately $3,928,000 for income tax purposes which expire from 2003 through 2021. The use of these net operating loss carryforwards may be restricted due to changes in ownership. As a result of certain non-qualified stock options which have been exercised, approximately $38,000 of net operating loss carryforward will be charged to "paid in capital," when, and if, the losses are utilized.

Total income tax expense for the years ended 2003 and 2002 differed from the amounts computed by applying the U.S. Federal statutory tax rates to pre-tax income as follows:

	2003	2002
Total expense (benefit) computed by applying the U.S. Statutory rate (34%)	$(72,000)	$84,000
State income tax, net of federal tax benefit	(7,000)	8,000
Effect of change in valuation allowance	390,000	121,000
Recovery of previously fully reserved deferred tax asset related to utilization of net operating loss	(193,000)	(198,000)
Other	(118,000)	(15,000)
Provision for income taxes	$'	$'

F-17

8. Related Parties:

A significant stockholder has entered into two franchise and management agreements with the Company. The Company also leases office and restaurant space from this stockholder under lease agreements which exist until 2005 and 2003, respectively. Rent paid to the stockholder in 2003 and 2002 for office space was $45,000 and $45,000, respectively. Rent paid to the stockholder in 2003 and 2002 for the restaurant was $40,000 and $48,000, respectively. The lease agreement for the restaurant is no longer in effect as the property was sold to a third party in August 2003. The stockholder is also a guarantor of 50% of the outstanding loan balance on a Merrill Lynch line of credit. The total outstanding balance on this debt at September 30, 2003 and 2002 was $90,000 and $141,000, respectively. The stockholder's construction division has performed remodeling for the Company. The Company believes these transactions are at fair market value. Two of the Company's Board members are principals of the stockholder.

9. Stockholders' Equity:

The Company has the authority to issue 5,000,000 shares of preferred stock. The Board of Directors has the authority to issue such preferred shares in series and determine the rights and preferences of the shares as may be determined by the Board of Directors.

10. Stock-Based Compensation:

The Company has a stock option plan (the 2001 Stock Option Plan) whereby 109,840 shares are available for future grants as either incentive stock options or non-statutory stock options. As of September 30, 2003, options for the purchase of 441,530 shares and 95,049 shares of common stock are outstanding under the Company's 1992 Incentive Stock Option Plan and the 1992 Non-Statutory Stock Option Plan, respectively. In fiscal 2003, 40,361 options were exercised.

The following is a summary of activity under these stock option plans for the years ended September 30, 2003 and 2002.

F-18

Incentive Stock Options - Activity for incentive stock options is summarized below.

	2003		2002
	Number Of Shares	Weighted Average Exercise Price	Number Of Shares	Weighted Average Exercise Price
Outstanding, beginning of year	423,770	$2.58	328,970	$2.83
Canceled	(4,990)	$2.44	(2,520)	$2.10
Exercised	(5,410)	2.28	(580)	$2.52
Granted	28,160	$2.70	97,900	$1.75
Outstanding, end of year	441,530	$2.84	423,770	$2.58

Subsequent to year end, the Company granted 28,740 options to employees at an exercise price of $3.60.

For all incentive stock options granted during 2003 and 2002, the weighted average fair value per option was approximately $2.24 and $1.35, respectively. All options granted in 2003 and 2002 had an exercise price equal to the market price on the date of grant.

Options will become exercisable as follows:

Year Ending September 30,	Number of Shares	Weighted Average Exercise Price
Options exercisable at 2003	284,643	$2.84
2004	57,664	$2.47
2005	41,892	$1.81
2006	46,468	$1.92
2007	10,863	$2.70
Total	441,530

F-19

If not previously exercised, options outstanding at September 30, 2003 will expire as follows:

Year Ending September 30,	Number of Shares	Weighted Average Exercise Price
2007	64,650	$2.50
2008	32,980	$2.50
2009	127,600	$3.15
2010	74,990	$3.12
2011	18,650	$1.38
2012	95,500	$1.75
2013	27,160	$2.70
Total	441,530

Non-Qualified Stock Options - The Company has also granted non-qualified options which are summarized as follows for the years ended September 30, 2003 and 2002:

	2003		2002
	Number of Shares	Weighted Average Exercise Price	Number Of Shares	Weighted Average Exercise Price
Outstanding, beginning of year	118,000	$2.01	72,001	$2.33
Granted	12,000	$2.70	59,999	$1.75
Exercised	(34,951)	$2.18	(10,000)	$2.50
Cancelled	'		(4,000)	$2.50
Outstanding, end of year	95,049	$ 2.04	118,000	$2.01

Subsequent to year end, the Company granted 12,000 options at an exercise price of $3.60 to directors.

For all non-qualified stock options granted during 2003 and 2002, the weighted average fair value per option was approximately $1.79 and $1.19, respectively. The outstanding options at September 30, 2003 and 2002 had weighted average exercise prices of $2.04 and $2.01, respectively. All non-qualified stock options were granted at an exercise price equal to market price on the date of grant.

F-20

All outstanding non-qualified options were exercisable at September 30, 2003. If not previously exercised, non-qualified options outstanding at September 30, 2003 will expire as follows:

Year Ending September 30,	Number of Shares	Weighted Average Exercise Price
2004	7,000	$2.31
2005	12,000	$3.12
2006	12,000	$1.38
2007	52,049	$1.75
2008	12,000	$2.70
Total	95,049

Stock Purchase Warrants ' In prior years, the Company granted 25,000 warrants at an exercise price of $4.00. All outstanding warrants were exercisable at September 30, 2003 and will expire in March 2004.

11. Retirement Plan:

The Company has a 401(k) profit sharing plan (the Plan). Eligible employees may make voluntary contributions to the Plan, which are matched by the Company, in an amount equal to 25% of the employee's contribution up to 6% of their compensation. The amount of employee contributions is limited as specified in the Plan. The Company may, at its discretion, make additional contributions to the Plan or change the matching percentage. The Company made matching contributions of $15,000 in fiscal 2003 and issued 9,767 shares of its common stock in 2002. All matching contributions are made in cash.

F-21

Item 8. Changes In and Disagreements with Accountants on Accounting and Financial Disclosure.

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

Item 8a. Controls and Procedures

The Company maintains a system of disclosure controls and procedures that are designed for the purposes of ensuring that information required to be disclosed in the Company's SEC reports is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms, and that such information is accumulated and communicated to the Company's management, including the Chief Executive Officer and the Controller, who currently performs the functions of principal financial officer of the Company, as appropriate to allow timely decisions regarding required disclosure.

As of the end of the period covered by this report, the Company carried out an evaluation, under the supervision and with the participation of the Company's management, including the Chief Executive Officer and the Controller, of the effectiveness of the design and operation of the Company's disclosure controls and procedures. Based upon that evaluation, the Chief Executive Officer and the Controller concluded that the Company's disclosure controls and procedures are effective for the purposes discussed above as of the end of the period covered by this report. There have been no significant changes in the Company's internal controls or in other factors that could significantly affect these controls during the fourth quarter of the fiscal year ended September 30, 2003.

PART III

Items 9-12.

The information required by Items 9 through 12 of Part III is incorporated by reference from the Company's definitive proxy statement to be filed with the SEC in connection with its Annual Meeting of Shareholders to be held on January 22, 2004.

Item 13. Exhibits and Reports on Form 8-K.

(a) Exhibits. The following exhibits are furnished as part of this report:

Exhibit Description

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

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

3.3 Amendment to Articles of Incorporation (previously filed as Exhibit 3.5 to the registrant's Annual Report on Form 10-KSB for the fiscal year ended September 30, 1996 and (File No. 000-18590) incorporated herein by reference)

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

21

4.1 Shareholder Rights Plan dated as of February 24, 1998 (previously filed as Exhibit 10.15 to the registrant's Annual Report on Form 10-K for the fiscal year ended September 30, 1998 (File No. 000-18590) and incorporated herein by reference)

4.2 Amendment No. 1 to Shareholder Rights Plan dated effective as of September 21, 1999 (previously filed as Exhibit 4.1 to the registrant's Current Report on Form 8-K dated October 14, 1999 (File No. 000-18590) and incorporated herein by reference)

4.3 Amendment No. 2 to Shareholder Rights Plan dated effective as of October 31, 2001 (previously filed as Exhibit 4.3 to the registrant's Current Report on Form 8-K dated November 15, 2001 (File No. 000-18590) and incorporated herein by reference)

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

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

10.3 Registration Rights Agreement dated May 31, 1996 regarding registration rights of the common stock issuable upon conversion of the Series A Convertible Preferred Stock (previously filed as Exhibit 10.15 to the registrant's Annual Report on Form 10-KSB/A for the fiscal year ended September 30, 1995 (File No. 000-18590) and incorporated herein by reference)

10.4 Amendment and Agreement regarding Series A Convertible Preferred Stock by and between Good Times Restaurants Inc. and The Bailey Company dated December 3, 1997, effective as of October 31, 1997 (previously filed as Exhibit 10.13 to the registrant's Annual Report on Form 10-KSB for the fiscal year ended September 30, 1997 (File No. 000-18590) and incorporated herein by reference)

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

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

10.7 The Bailey Company Guaranty Agreement (previously filed as Exhibit 10.13 to the registrant's Annual Report on Form 10-KSB for the fiscal year ended September 30, 1998 (File No. 000-18590) and incorporated herein by reference)

22

10.8 1992 Incentive Stock Option Plan, as amended (previously filed as Exhibit 4.9 to the registrant's Annual Report on Form 10-KSB for the fiscal year ended September 30, 1998 (File No. 000-18590) and incorporated herein by reference)

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

10.10 The Bailey Company Private Placement Letter Agreement dated March 12, 1999 (previously filed as Exhibit 10.1 to the registrant's Quarterly Report on Form 10-QSB for the quarter ended March 31, 1999 (File No. 000-18590) and incorporated herein by reference)

10.11 Warrant dated April 15, 1999 Issued to The Bailey Company, LLLP for the Purchase of 25,000 Shares of Common Stock of Good Times Restaurants Inc. (previously filed as Exhibit 4.2 to Amendment No. 4 to Schedule 13D filed on June 7, 1999 by The Bailey Company, LLLP, The Erie County Investment Co., and Paul T. Bailey (File No. 005-42729) and incorporated herein by reference)

10.12 Merrill Lynch Commitment Letter dated November 17, 1999 for Line of Credit (previously filed as Exhibit 10.18 to the registrant's Annual Report on Form 10-KSB for the fiscal year ended September 30, 1999 (File No. 000-18590) and incorporated herein by reference)

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

10.14 GE Capital Note dated November 14, 20012 (previously filed as Exhibit 10.1 to the registrant's Quarterly Report on Form 10-QSB for the quarter ended December 31, 2001 (File No. 000-18590 and incorporated herein by reference)

10.15 2001 Stock Option Plan (previously filed as Exhibit 99.1 to the registrant's Registration Statement on Form S-8 filed on August 20, 2002 (Registration No. 333-98407) and incorporated herein by reference

10.16 Employment Agreement dated October 3, 2001 between Registrant and Boyd E. Hoback

10.17 *Wells Fargo Credit Agreement Good Times Restaurants and Good Times Drive Thru Inc. and Smart Development, LLC dated May 12, 2003

14.1 *Code of Ethics

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

23.1 *Consent of HEIN + ASSOCIATES LLP

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

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

23

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

*Filed herewith.

(b) Reports on Form 8-K. There were no reports on Form 8-K filed by the registrant during the fourth quarter of the fiscal year ended September 30, 2003.

Item 14. Principal Accountant Fees and Services.

The information required by Item 14 of Part III is incorporated by reference from the Company's definitive proxy statement to be filed with the SEC in connection with its Annual Meeting of Shareholders to be held on January 22, 2004.

SIGNATURES

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

GOOD TIMES RESTAURANTS INC.

Date: December 16, 2003
	Boyd E. Hoback President and Chief Executive Officer

24

In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Signature	Title	Date
/s/ Geoffrey R. Bailey	Chairman of the Board	December 16, 2003
Geoffrey R. Bailey
/s/ Boyd E. Hoback	President and Chief Executive Officer	December 16, 2003
Boyd E. Hoback	and Director
/s/ Susan M. Knutson	Controller	December 16, 2003
Susan M. Knutson	(principal accounting and financial officer)
/s/ Dan W. James II	Director	December 16, 2003
Dan W. James II
/s/ David E. Bailey	Director	December 16, 2003
David E. Bailey
/s/ Thomas P. McCarty	Director	December 16, 2003
Thomas P. McCarty
/a/ Alan A. Teran	Director	December 16, 2003
Alan A. Teran
/s/ Richard J. Stark	Director	December 16, 2003
Richard J. Stark

25

EX-5

EXHIBIT 32.1

CERTIFICATION
PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report on Form 10-KSB of Good Times Restaurants Inc. (the "Company") for the fiscal year ended September 30, 2003 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), Boyd E. Hoback, as Chief Executive Officer of the Company, and Susan M. Knutson, as Controller of the Company, each hereby certifies, pursuant to and solely for the purpose of 18 U.S.C 1350, as adopted pursuant to 906 of the Sarbanes-Oxley Act of 2002, to the best of his or her knowledge and belief, that:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)); and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Boyd E. Hoback

Boyd E. Hoback, Chief Executive Officer

December 16, 2003

/s/ Susan M. Knutson

Susan M. Knutson, Controller

(principal financial officer)

December 16, 2003

EX-4

13: 14:

CREDIT AGREEMENT

THIS AGREEMENT is entered into as of May 12, 2003, by and between GOOD TIMES RESTAURANTS INC., a Nevada corporation ("GTRI"), GOOD TIMES DRIVE THRU INC., a Colorado corporation ("GTDTI"), SMART DEVELOPMENT, LLC ("Smart"), a Colorado limited liability company (each individually and collectively, "Borrower"), and WELLS FARGO BANK, NATIONAL ASSOCIATION ("Bank").

RECITALS

Borrower has requested that Bank extend or continue credit to Borrower as described below, and Bank has agreed to provide such credit to Borrower on the terms and conditions contained herein.

NOW, THEREFORE, for valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Bank and Borrower hereby agree as follows:

ARTICLE I

CREDIT TERMS

SECTION 1.1. LINE OF CREDIT.

(a) Line of Credit. Subject to the terms and conditions of this Agreement, Bank hereby agrees to make advances to Borrower from time to time up to and including April 30, 2004, not to exceed at any time the aggregate principal amount of Two Million Dollars ($2,000,000.00) ("Line of Credit"), the proceeds of which shall be used to purchase and improve real estate. Borrower's obligation to repay advances under the Line of Credit shall be evidenced by a promissory note substantially in the form of Exhibit "A" attached hereto ("Line of Credit Note"), all terms of which are incorporated herein by this reference.

(b) Mandatory Repayment. Borrower will reduce the principal balance of the Line of Credit by not less than 100% of the net proceeds from any Sale/Leaseback transaction from any real property purchased or improved with the proceeds of any credit extended hereunder.

(c) Borrowing and Repayment. Borrower may from time to time during the term of the Line of Credit borrow, partially or wholly repay its outstanding borrowings, and reborrow, subject to all of the limitations, terms and conditions contained herein or in the Line of Credit Note; provided however, that the total outstanding borrowings under the Line of Credit shall not at any time exceed the maximum principal amount available thereunder, as set forth above.

SECTION 1.2. INTEREST/FEES.

(a) Interest. The outstanding principal balance of each credit subject hereto shall bear interest at the rate of interest set forth in each promissory note or other instrument or document executed in connection therewith.

(b) Computation and Payment. Interest shall be computed on the basis of a 360-day year, actual days elapsed. Interest shall be payable at the times and place set forth in each promissory note or other instrument or document required hereby.

(c) Commitment Fee. Borrower shall pay to Bank a non-refundable commitment fee for the line of credit equal to one half of one percent (.500%) per annum, which fee shall be due and payable in full upon the execution of the promissory note.

SECTION 1.3. COLLATERAL.

As security for all indebtedness of Borrower to Bank subject hereto, Smart hereby grants to Bank: (i) security interests in a deposit account held in the name of Smart Development, LLC with a minimum balance of $400,000.00, (ii) a lien of not less than first priority on those certain real properties located at 4975 North Federal Avenue, Denver Colorado 80221 and 808 East Colfax, Denver Colorado 80218 and (iii) a lien of not less than first priority on any real property purchased or improved after the date of this Agreement using any of the proceeds of any credit extended hereunder (the "After Acquired Real Property Collateral").

All of the foregoing shall be evidenced by and subject to the terms of such security agreements, financing statements, deeds of trust and other documents as Bank shall reasonably require, all in form and substance satisfactory to Bank. Borrower shall reimburse Bank immediately upon demand for all costs and expenses incurred by Bank in connection with any of the foregoing security, including without limitation, filing and recording fees and costs of appraisals, audits and title insurance.

ARTICLE II

REPRESENTATIONS AND WARRANTIES

Good Times Restaurants Inc., (GTRI) and Good Times Drive Thru Inc., (GTDTI) make all the following representations and warranties to Bank as such representations and warranties relate to Borrower, and Smart Development, LLC. (Smart) only makes the representations and warranties relating to itself. All representations and warranties shall survive the execution of this Agreement and shall continue in full force and effect until the full and final payment, and satisfaction and discharge, of all obligations of Borrower to Bank subject to this Agreement.

SECTION 2.1. LEGAL STATUS. GTRI is a corporation, duly organized and existing and in good standing under the laws of the State of Nevada, and is qualified or licensed to do business (and is in good standing as a foreign corporation, if applicable) in all jurisdictions in which such qualification or licensing is required or in which the failure to so qualify or to be so licensed could have a material adverse effect on GTRI.

SECTION 2.2. LEGAL STATUS. GTDTI is a corporation, duly organized and existing and in good standing under the laws of the State of Colorado, and is qualified or licensed to do business (and is in good standing as a foreign corporation, if applicable) in all jurisdictions in which such qualification or licensing is required or in which the failure to so qualify or to be so licensed could have a material adverse effect on GTDTI.

SECTION 2.3. LEGAL STATUS. Smart is a limited liability company, duly organized and existing and in good standing under the laws of the State of Colorado, and is qualified or licensed to do business (and is in good standing as a foreign corporation, if applicable) in all jurisdictions in which such qualification or licensing is required or in which the failure to so qualify or to be so licensed could have a material adverse effect on Smart.

SECTION 2.4. AUTHORIZATION AND VALIDITY. This Agreement and each promissory note, contract, instrument and other document required hereby or at any time hereafter delivered to Bank in connection herewith (collectively, the "Loan Documents") have been duly authorized, and upon their execution and delivery in accordance with the provisions hereof will constitute legal, valid and binding agreements and obligations of Borrower or the party which executes the same, enforceable in accordance with their respective terms.

SECTION 2.5. NO VIOLATION. The execution, delivery and performance by Borrower of each of the Loan Documents do not violate any provision of any law or regulation, or contravene any provision of the Articles of Incorporation, By-Laws, Articles of Organization or Operating Agreement of Borrower, as applicable, or result in any breach of or default under any contract, obligation, indenture or other instrument to which Borrower is a party or by which Borrower may be bound.

SECTION 2.6. LITIGATION. There are no pending, or to the best of Borrower's knowledge threatened, actions, claims, investigations, suits or proceedings by or before any governmental authority, arbitrator, court or administrative agency which could have a material adverse effect on the financial condition or operation of Borrower other than those disclosed by Borrower to Bank in writing prior to the date hereof.

SECTION 2.7. CORRECTNESS OF FINANCIAL STATEMENT. The financial statement of Borrower dated December 31, 2002, a true copy of which has been delivered by Borrower to Bank prior to the date hereof, (a) is complete and correct and presents fairly the financial condition of Borrower, (b) discloses all liabilities of Borrower that are required to be reflected or reserved against under generally accepted accounting principles, whether liquidated or unliquidated, fixed or contingent, and (c) has been prepared in accordance with generally accepted accounting principles consistently applied. Since the date of such financial statement there has been no material adverse change in the financial condition of Borrower, nor has Borrower mortgaged, pledged, granted a security interest in or otherwise encumbered any of its assets or properties except in favor of Bank or as otherwise permitted by Bank in writing.

SECTION 2.8. INCOME TAX RETURNS. Borrower has no knowledge of any pending assessments or adjustments of its income tax payable with respect to any year.

SECTION 2.9. NO SUBORDINATION. There is no agreement, indenture, contract or instrument to which Borrower is a party or by which Borrower may be bound that requires the subordination in right of payment of any of Borrower's obligations subject to this Agreement to any other obligation of Borrower.

SECTION 2.10. PERMITS, FRANCHISES. Borrower possesses, and will hereafter possess, all permits, consents, approvals, franchises and licenses required and rights to all trademarks, trade names, patents, and fictitious names, if any, necessary to enable it to conduct the business in which it is now engaged in compliance with applicable law.

SECTION 2.11. ERISA. Borrower is in compliance in all material respects with all applicable provisions of the Employee Retirement Income Security Act of 1974, as amended or recodified from time to time ("ERISA"); Borrower has not violated any provision of any defined employee pension benefit plan (as defined in ERISA) maintained or contributed to by Borrower (each, a "Plan"); no Reportable Event as defined in ERISA has occurred and is continuing with respect to any Plan initiated by Borrower; Borrower has met its minimum funding requirements under ERISA with respect to each Plan; and each Plan will be able to fulfill its benefit obligations as they come due in accordance with the Plan documents and under generally accepted accounting principles.

SECTION 2.12. OTHER OBLIGATIONS. Borrower is not in default on any obligation for borrowed money, any purchase money obligation or any other material lease, commitment, contract, instrument or obligation.

SECTION 2.13. ENVIRONMENTAL MATTERS. Except as disclosed by Borrower to Bank in writing prior to the date hereof, Borrower is in compliance in all material respects with all applicable federal or state environmental, hazardous waste, health and safety statutes, and any rules or regulations adopted pursuant thereto, which govern or affect any of Borrower's operations and/or properties, including without limitation, the Comprehensive Environmental Response, Compensation and Liability Act of 1980, the Superfund Amendments and Reauthorization Act of 1986, the Federal Resource Conservation and Recovery Act of 1976, and the Federal Toxic Substances Control Act, as any of the same may be amended, modified or supplemented from time to time. None of the operations of Borrower is the subject of any federal or state investigation evaluating whether any remedial action involving a material expenditure is needed to respond to a release of any toxic or hazardous waste or substance into the environment. Borrower has no material contingent liability in connection with any release of any toxic or hazardous waste or substance into the environment.

SECTION 2.14. REAL PROPERTY COLLATERAL. Except as disclosed by Borrower to Bank in writing prior to the date hereof, with respect to any real property collateral required hereby:

(a) All taxes, governmental assessments, insurance premiums, and water, sewer and municipal charges, and rents (if any) which previously became due and owing in respect thereof have been paid as of the date hereof.

(b) There are no mechanics' or similar liens or claims which have been filed for work, labor or material (and no rights are outstanding that under law could give rise to any such lien) which affect all or any interest in any such real property and which are or may be prior to or equal to the lien thereon in favor of Bank.

(c) None of the improvements which were included for purpose of determining the appraised value of any such real property lies outside of the boundaries and/or building restriction lines thereof, and no improvements on adjoining properties materially encroach upon any such real property.

(d) There is no pending, or to the best of Borrower's knowledge threatened, proceeding for the total or partial condemnation of all or any portion of any such real property, and all such real property is in good repair and free and clear of any damage that would materially and adversely affect the value thereof as security and/or the intended use thereof.

ARTICLE III

CONDITIONS

SECTION 3.1. CONDITIONS OF INITIAL EXTENSION OF CREDIT. The obligation of Bank to extend any credit contemplated by this Agreement is subject to the fulfillment to Bank's satisfaction of all of the following conditions:

(a) Approval of Bank Counsel. All legal matters incidental to the extension of credit by Bank shall be satisfactory to Bank's counsel.

(b) Documentation. Bank shall have received, in form and substance satisfactory to Bank, each of the following, duly executed:

(i) This Agreement and each promissory note or other instrument or document required hereby.

(ii) Corporate Resolution: Borrowing (2).

(iii) Certificate of Incumbency (2).

(iv) Limited Liability Company Certificate: Borrowing.

(v) Security Agreement.

6. Deed of Trust and Assignment of Rents and Leases (2).
7. Landlord Consent (2).

(viii) Such other documents as Bank may require under any other Section of this Agreement.

(c) Financial Condition. There shall have been no material adverse change, as determined by Bank, in the financial condition or business of Borrower, nor any material decline, as determined by Bank, in the market value of any collateral required hereunder or a substantial or material portion of the assets of Borrower.

(d) Insurance. Borrower shall have delivered to Bank evidence of insurance coverage on all Borrower's property, in form, substance, amounts, covering risks and issued by companies satisfactory to Bank, and where required by Bank, with loss payable endorsements in favor of Bank, including without limitation, policies of fire and extended coverage insurance covering all real property collateral required hereby, with replacement cost and mortgagee loss payable endorsements, and such policies of insurance against specific hazards affecting any such real property as may be required by governmental regulation or Bank.

(e) Appraisals. Bank shall have obtained, at Borrower's cost, an appraisal of all real property collateral required hereby, and all improvements thereon, issued by an appraiser acceptable to Bank and in form, substance and reflecting values satisfactory to Bank, in its discretion.

(f) Title Insurance. Bank shall have received an ALTA Policy of Title Insurance, with such endorsements as Bank may require, issued by a company and in form and substance satisfactory to Bank, in such amount as Bank shall require, insuring Bank's lien on the real property collateral required hereby to be of first priority, subject only to such exceptions as Bank shall approve in its discretion, with all costs thereof to be paid by Borrower.

(g) Tax Service Contract. Borrower shall have procured and delivered to Bank, at Borrower's cost, such tax service contract as Bank shall require for any real property collateral required hereby, to remain in effect as long as such real property secures any obligations of Borrower to Bank as required hereby.

SECTION 3.2. CONDITIONS OF EACH EXTENSION OF CREDIT. The obligation of Bank to make each extension of credit requested by Borrower hereunder shall be subject to the fulfillment to Bank's satisfaction of each of the following conditions:

(a) Compliance. The representations and warranties contained herein and in each of the other Loan Documents shall be true on and as of the date of the signing of this Agreement and on the date of each extension of credit by Bank pursuant hereto, with the same effect as though such representations and warranties had been made on and as of each such date, and on each such date, no Event of Default as defined herein, and no condition, event or act which with the giving of notice or the passage of time or both would constitute such an Event of Default, shall have occurred and be continuing or shall exist.

(b) Documentation. Bank shall have received all additional documents which may be required in connection with such extension of credit.

ARTICLE IV

AFFIRMATIVE COVENANTS

Borrower covenants that so long as Bank remains committed to extend credit to Borrower pursuant hereto, or any liabilities (whether direct or contingent, liquidated or unliquidated) of Borrower to Bank under any of the Loan Documents remain outstanding, and until payment in full of all obligations of Borrower subject hereto, Borrower shall, unless Bank otherwise consents in writing:

SECTION 4.1. PUNCTUAL PAYMENTS. Punctually pay all principal, interest, fees or other liabilities due under any of the Loan Documents at the times and place and in the manner specified therein.

SECTION 4.2. ACCOUNTING RECORDS. Maintain adequate books and records in accordance with generally accepted accounting principles consistently applied, and permit any representative of Bank, at any reasonable time, to inspect, audit and examine such books and records, to make copies of the same, and to inspect the properties of Borrower.

SECTION 4.3. FINANCIAL STATEMENTS. Provide to Bank all of the following, in form and detail satisfactory to Bank:

1. not later than 120 days after and as of the end of each fiscal year, an annual audited financial statement of Good Times Restaurants, Inc and Good Times Drive Thru, Inc., prepared by a certified public accountant acceptable to Bank, to include balance sheet, income statement, statement of cash flows and footnotes;

(b) not later than 120 days after and as of the end of each fiscal year, an annual internal prepared financial statement of Smart Development LLC prepared by a certified public accountant acceptable to Bank, to include balance sheet, income statement, statement of cash flows and footnotes;

(c) not later than 45 days after and as of the end of each quarter, a financial statement of Borrower, prepared by Borrower, to include balance sheet, income statement and statement of cash flows;

(d) company prepared projections due within 120 days after and as of the end of each fiscal year end.

(e) contemporaneously with each annual and calendar quarter end financial statement of Borrower required hereby, a certificate of the president or chief financial officer of Borrower that said financial statements are accurate and that there exists no Event of Default nor any condition, act or event which with the giving of notice or the passage of time or both would constitute an Event of Default;

6. construction budget due prior to the initial advance for each location;

(g) construction status report due within 30 days after and as of the end of each month end;

(h) copy of 10K report filed with the Securities Exchange Commission due within 120 days after and as the end of each fiscal year;

(i) copy of 10Q report filed with the Securities Exchange Commission due within 45 days after and as of the end of each quarter end;

(j) from time to time such other information as Bank may reasonably request, including without limitation, copies of rent rolls and other information with respect to any real property collateral required hereby.

SECTION 4.4. COMPLIANCE. Preserve and maintain all licenses, permits, governmental approvals, rights, privileges and franchises necessary for the conduct of its business; and comply with the provisions of all documents pursuant to which Borrower is organized and/or which govern Borrower's continued existence and with the requirements of all laws, rules, regulations and orders of any governmental authority applicable to Borrower and/or its business.

SECTION 4.5. INSURANCE. Maintain and keep in force insurance of the types and in amounts customarily carried in lines of business similar to that of Borrower, including but not limited to fire, extended coverage, public liability, flood, property damage and workers' compensation, with all such insurance carried with companies and in amounts satisfactory to Bank, and deliver to Bank from time to time at Bank's request schedules setting forth all insurance then in effect.

SECTION 4.6. FACILITIES. Keep all properties useful or necessary to Borrower's business in good repair and condition, and from time to time make necessary repairs, renewals and replacements thereto so that such properties shall be fully and efficiently preserved and maintained.

SECTION 4.7. TAXES AND OTHER LIABILITIES. Pay and discharge when due any and all indebtedness, obligations, assessments and taxes, both real or personal, including without limitation federal and state income taxes and state and local property taxes and assessments, except such (a) as Borrower may in good faith contest or as to which a bona fide dispute may arise, and (b) for which Borrower has made provision, to Bank's satisfaction, for eventual payment thereof in the event Borrower is obligated to make such payment.

SECTION 4.8. LITIGATION. Promptly give notice in writing to Bank of any litigation pending or threatened against Borrower with a claim in excess of $250,000.00.

SECTION 4.9. FINANCIAL CONDITION. Maintain GTRIs financial condition as follows using generally accepted accounting principles consistently applied and used consistently with prior practices (except to the extent modified by the definitions herein), with compliance determined commencing with GTRIs financial statements for the period ending March 31, 2003:

(a) Total Funded Debt to EBITDA not greater than 4.00 to 1.0 as of each fiscal year end, with "Funded Debt" defined as the sum of all obligations for borrowed money (including subordinated debt) plus all capital lease obligations, and with "EBITDA" defined as tailing 12 month net profit before tax plus interest expense (net of capitalized interest expense), depreciation expense and amortization expense.

(b) Fixed Charge Coverage Ratio not at any time less than 1.50 to 1.0 determined at the end of each fiscal year end, with "Fixed Charge Coverage Ratio" defined as a trailing 12 month net profit before tax, plus interest expense (net of capitalized interest), depreciation expense and amortization expense divided by current portion of long term (not including this facility) debt plus trailing 12 month interest expense.

SECTION 4.10. NOTICE TO BANK. Promptly (but in no event more than five (5) days after the occurrence of each such event or matter) give written notice to Bank in reasonable detail of: (a) the occurrence of any Event of Default, or any condition, event or act which with the giving of notice or the passage of time or both would constitute an Event of Default; (b) any change in the name or the organizational structure of Borrower; (c) the occurrence and nature of any Reportable Event or Prohibited Transaction, each as defined in ERISA, or any funding deficiency with respect to any Plan; or (d) any termination or cancellation of any insurance policy which Borrower is required to maintain, or any uninsured or partially uninsured loss through liability or property damage, or through fire, theft or any other cause affecting Borrower's property.

ARTICLE V

NEGATIVE COVENANTS

Borrower further covenants that so long as Bank remains committed to extend credit to Borrower pursuant hereto, or any liabilities (whether direct or contingent, liquidated or unliquidated) of Borrower to Bank under any of the Loan Documents remain outstanding, and until payment in full of all obligations of Borrower subject hereto, Borrower will not without Bank's prior written consent:

SECTION 5.1. USE OF FUNDS. Use any of the proceeds of any credit extended hereunder except for the purposes stated in Article I hereof.

SECTION 5.2. CAPITAL EXPENDITURES. Make any additional investment in fixed assets in any fiscal year, except as otherwise provided for in this Agreement exceeding $700,000.00

SECTION 5.3. LEASE EXPENDITURES. Incur operating lease expense in any fiscal year in excess of $500,000.00, except for ground leases and leases sale/leaseback transactions.

SECTION 5.4. MERGER, CONSOLIDATION, TRANSFER OF ASSETS. Merge into or consolidate with any other entity; make any substantial change in the nature of Borrower's business as conducted as of the date hereof; acquire all or substantially all of the assets of any other entity; nor sell, lease, transfer or otherwise dispose of all or a substantial or material portion of Borrower's assets except in the ordinary course of its business.

SECTION 5.5. LOANS, ADVANCES, INVESTMENTS. Make any loans or advances to or investments in any person or entity, except any of the foregoing existing as of, and disclosed to Bank prior to, the date hereof except to finance new locations as permitted in this agreement.

SECTION 5.6. DIVIDENDS, DISTRIBUTIONS. Declare or pay any dividend or distribution either in cash, stock or any other property on Borrower's stock now or hereafter outstanding, nor redeem, retire, repurchase or otherwise acquire any shares of any class of Borrower's stock now or hereafter outstanding, except for $250,000.00 during the life of this Agreement.

SECTION 5.7. DISTRIBUTIONS. Declare or pay any distributions to its members either in cash or any other property, nor redeem, retire, repurchase or otherwise acquire any membership interest in Borrower.

SECTION 5.8. NEW LOCATIONS. Have more than four new ________ locations under construction at any one time.

SECTION 5.9 NEW LOCATIONS. Have more than one new _____________ location under construction that Bank has not previously received a copy of a commitment for sale/leaseback acceptable to Bank in its discretion.

SECTION 5.10. NEW LOCATIONS. Open more than 10 new ____________ locations (whether company owned or franchised) in any fiscal year.

ARTICLE VI

EVENTS OF DEFAULT

SECTION 6.1. The occurrence of any of the following shall constitute an "Event of Default" under this Agreement:

(a) Borrower shall fail to pay when due any principal, interest, fees or other amounts payable under any of the Loan Documents.

(b) Any financial statement or certificate furnished to Bank in connection with, or any representation or warranty made by Borrower or any other party under this Agreement or any other Loan Document shall prove to be incorrect, false or misleading in any material respect when furnished or made.

(c) Any default in the performance of or compliance with any obligation, agreement or other provision contained herein or in any other Loan Document (other than those referred to in subsections (a) and (b) above), and with respect to any such default which by its nature can be cured, such default shall continue for a period of ten (10) days from its occurrence.

(d) Any default in the payment or performance of any obligation, or any defined event of default, under the terms of any contract or instrument (other than any of the Loan Documents) pursuant to which Borrower has incurred any debt or other liability to any person or entity, including Bank, which results in acceleration.

(e) The filing of a notice of judgment lien against Borrower in excess of $100,000.00; or the recording of any abstract of judgment against Borrower in any county in which Borrower has an interest in real property; or the service of a notice of levy and/or of a writ of attachment or execution, or other like process, against the assets of Borrower; or the entry of a judgment against Borrower.

(f) Borrower shall become insolvent, or shall suffer or consent to or apply for the appointment of a receiver, trustee, custodian or liquidator of itself or any of its property, or shall generally fail to pay its debts as they become due, or shall make a general assignment for the benefit of creditors; Borrower shall file a voluntary petition in bankruptcy, or seeking reorganization, in order to effect a plan or other arrangement with creditors or any other relief under the Bankruptcy Reform Act, Title 11 of the United States Code, as amended or recodified from time to time ("Bankruptcy Code"), or under any state or federal law granting relief to debtors, whether now or hereafter in effect; or any involuntary petition or proceeding pursuant to the Bankruptcy Code or any other applicable state or federal law relating to bankruptcy, reorganization or other relief for debtors is filed or commenced against Borrower, or Borrower shall file an answer admitting the jurisdiction of the court and the materi al allegations of any involuntary petition; or Borrower shall be adjudicated a bankrupt, or an order for relief shall be entered against Borrower by any court of competent jurisdiction under the Bankruptcy Code or any other applicable state or federal law relating to bankruptcy, reorganization or other relief for debtors.

(g) There shall exist or occur any event or condition which Bank in good faith believes impairs, or is substantially likely to impair, the prospect of payment or performance by Borrower of its obligations under any of the Loan Documents.

(h) The dissolution or liquidation of Borrower, or any of their directors, stockholders or members, shall take action seeking to effect the dissolution or liquidation of Borrower.

(i) Any change in ownership during the term of this Agreement of an aggregate of twenty-five percent (25%) or more of the common stock of or members' equity in Borrower.

(j) The sale, transfer, hypothecation, assignment or encumbrance, whether voluntary, involuntary or by operation of law, without Bank's prior written consent, of all or any part of or interest in any real property collateral required hereby.

SECTION 6.2. REMEDIES. Upon the occurrence of any Event of Default: (a) all indebtedness of Borrower under each of the Loan Documents, any term thereof to the contrary notwithstanding, shall at Bank's option and without notice become immediately due and payable without presentment, demand, protest or notice of dishonor, all of which are hereby expressly waived by each Borrower; (b) the obligation, if any, of Bank to extend any further credit under any of the Loan Documents shall immediately cease and terminate; and (c) Bank shall have all rights, powers and remedies available under each of the Loan Documents, or accorded by law, including without limitation the right to resort to any or all security for any credit subject hereto and to exercise any or all of the rights of a beneficiary or secured party pursuant to applicable law. All rights, powers and remedies of Bank may be exercised at any time by Bank and from time to time after the occurrence of an Event of Default, are cumulati ve and not exclusive, and shall be in addition to any other rights, powers or remedies provided by law or equity.

ARTICLE VII

MISCELLANEOUS

SECTION 7.1. NO WAIVER. No delay, failure or discontinuance of Bank in exercising any right, power or remedy under any of the Loan Documents shall affect or operate as a waiver of such right, power or remedy; nor shall any single or partial exercise of any such right, power or remedy preclude, waive or otherwise affect any other or further exercise thereof or the exercise of any other right, power or remedy. Any waiver, permit, consent or approval of any kind by Bank of any breach of or default under any of the Loan Documents must be in writing and shall be effective only to the extent set forth in such writing.

SECTION 7.2. NOTICES. All notices, requests and demands which any party is required or may desire to give to any other party under any provision of this Agreement must be in writing delivered to each party at the following address:

BORROWER: GOOD TIMES RESTAURANTS, INC.

GOOD TIMES DRIVE THRU INC.

601 Corporate Circle

Golden, Colorado 80401

SMART DEVELOPMENT, LLC

22856 Solitude Lane

Golden, Colorado 80401

BANK: WELLS FARGO BANK, NATIONAL ASSOCIATION

Colorado North RCBO #3837

1740 Broadway

Denver, Colorado 80274

or to such other address as any party may designate by written notice to all other parties. Each such notice, request and demand shall be deemed given or made as follows: (a) if sent by hand delivery, upon delivery; (b) if sent by mail, upon the earlier of the date of receipt or three (3) days after deposit in the U.S. mail, first class and postage prepaid; and (c) if sent by telecopy, upon receipt.

SECTION 7.3. COSTS, EXPENSES AND ATTORNEYS' FEES. Borrower shall pay to Bank immediately upon demand the full amount of all payments, advances, charges, costs and expenses, including reasonable attorneys' fees (to include outside counsel fees and all allocated costs of Bank's in-house counsel), expended or incurred by Bank in connection with (a) the negotiation and preparation of this Agreement and the other Loan Documents, Bank's continued administration hereof and thereof, and the preparation of any amendments and waivers hereto and thereto, (b) the enforcement of Bank's rights and/or the collection of any amounts which become due to Bank under any of the Loan Documents, and (c) the prosecution or defense of any action in any way related to any of the Loan Documents, including without limitation, any action for declaratory relief, whether incurred at the trial or appellate level, in an arbitration proceeding or otherwise, and including any of the foregoing incurred in connection wi th any bankruptcy proceeding (including without limitation, any adversary proceeding, contested matter or motion brought by Bank or any other person) relating to any Borrower or any other person or entity.

SECTION 7.4. SUCCESSORS, ASSIGNMENT. This Agreement shall be binding upon and inure to the benefit of the heirs, executors, administrators, legal representatives, successors and assigns of the parties; provided however, that Borrower may not assign or transfer its interest hereunder without Bank's prior written consent. Bank reserves the right to sell, assign, transfer, negotiate or grant participations in all or any part of, or any interest in, Bank's rights and benefits under each of the Loan Documents. In connection therewith, Bank may disclose all documents and information which Bank now has or may hereafter acquire relating to any credit subject hereto, Borrower or its business, or any collateral required hereunder.

SECTION 7.5. ENTIRE AGREEMENT; AMENDMENT. This Agreement and the other Loan Documents constitute the entire agreement between Borrower and Bank with respect to each credit subject hereto and supersede all prior negotiations, communications, discussions and correspondence concerning the subject matter hereof. This Agreement may be amended or modified only in writing signed by each party hereto.

SECTION 7.6. NO THIRD PARTY BENEFICIARIES. This Agreement is made and entered into for the sole protection and benefit of the parties hereto and their respective permitted successors and assigns, and no other person or entity shall be a third party beneficiary of, or have any direct or indirect cause of action or claim in connection with, this Agreement or any other of the Loan Documents to which it is not a party.

SECTION 7.7. TIME. Time is of the essence of each and every provision of this Agreement and each other of the Loan Documents.

SECTION 7.8. SEVERABILITY OF PROVISIONS. If any provision of this Agreement shall be prohibited by or invalid under applicable law, such provision shall be ineffective only to the extent of such prohibition or invalidity without invalidating the remainder of such provision or any remaining provisions of this Agreement.

SECTION 7.9. COUNTERPARTS. This Agreement may be executed in any number of counterparts, each of which when executed and delivered shall be deemed to be an original, and all of which when taken together shall constitute one and the same Agreement.

SECTION 7.10. GOVERNING LAW. This Agreement shall be governed by and construed in accordance with the laws of the State of Colorado.

SECTION 7.11. JOINT AND SEVERAL LIABILITY. As used in this Section 7.11, the term "Joint Credit" shall mean the each Line of Credit.

(a) Each Borrower has determined and represents to Bank that it is in its best interests and in pursuance of its legitimate business purposes to induce Bank to extend credit pursuant to this Agreement. Each Borrower acknowledges and represents that its business is related to the business of the other Borrowers, the availability of the commitments provided for herein benefits each Borrower, and advances and other credit extensions made hereunder will inure to the benefit of Borrowers, individually and as a group.

(b) Each Borrower has determined and represents to Bank that it has, and after giving effect to the transactions contemplated by this Agreement will have, assets having a fair saleable value in excess of its debts, after giving effect to any rights of contribution or subrogation which may be available to such Borrower, and each Borrower has, and will have, access to adequate capital for the conduct of its business and the ability to pay its debts as such debts mature.

(c) Each Borrower agrees that it is jointly and severally liable to Bank for, and each Borrower agrees to pay to Bank when due the full amount of, all indebtedness now existing or hereafter arising to Bank under or in connection with the Joint Credits and all modifications, extensions and renewals thereof, including without limitation all advances disbursed to any Borrower under the Joint Credits, all interest which accrues thereon and all fees, costs and expenses chargeable to any Borrower in connection therewith.

(d) The liability of each Borrower for the Joint Credits shall be reinstated and revived and the rights of Bank shall continue if and to the extent that for any reason any amount at any time paid on account of any of the Joint Credits is rescinded or must otherwise be restored by Bank, whether as a result of any proceedings in bankruptcy or reorganization or otherwise, all as though such amount had not been paid.

(e) Each Borrower authorizes Bank, without notice to or demand on such Borrower, and without affecting such Borrower's liability for the Joint Credits, from time to time to: (a) alter, compromise, extend, accelerate or otherwise change the time for payment of, or otherwise change the terms of, the liabilities and obligations of any other Borrower to Bank on account of any of the Joint Credits; (b) take and hold security from any other Borrower for the payment of any of the Joint Credits, and exchange, enforce, waive, subordinate or release any such security; (c) apply such security and direct the order or manner of sale thereof, including without limitation, a non-judicial sale permitted by the terms of the controlling security agreement or deed of trust, as Bank in its discretion may determine; (d) release or substitute any one or more of the endorsers or any guarantors of any of the Joint Credits, or any other party obligated thereon; and (e) apply payments received by Ba nk from the any other Borrower to indebtedness of such other Borrower to Bank other than the Joint Credits.

(f) Each Borrower represents and warrants to Bank that it has established adequate means of obtaining from any other Borrower on a continuing basis financial and other information pertaining to such other Borrower's financial condition, and each Borrower agrees to keep adequately informed from such means of any facts, events or circumstances which might in any way affect its risks hereunder Each Borrower further agrees that Bank shall have no obligation to disclose to it any information or material about any other Borrower which is acquired by Bank in any manner.

(g) Each Borrower waives any right to require Bank to: (i) proceed against any other Borrower or any other person; (ii) proceed against or exhaust any security held from any other Borrower or any other person; (iii) pursue any other remedy in Bank's power; (iv) apply payments received by Bank from any other Borrower to any of the Joint Credits; or (v) make any presentments or demands for performance, or give any notices of nonperformance, protests, notices of protest or notices of dishonor in connection with any of the Joint Credits.

(h) Each Borrower waives any defense to its liability for the Joint Credits based upon or arising by reason of: (i) any disability or other defense of any other Borrower or any other person; (ii) the cessation or limitation from any cause whatsoever, other than payment in full, of the liability of any other Borrower for the Joint Credits; (iii) any lack of authority of any officer, director, partner, agent or other person acting or purporting to act on behalf of any other Borrower or any defect in the formation of any other Borrower; (iv) the application by any other Borrower of the proceeds of any of the Joint Credits for purposes other than the purposes intended or understood by Bank or any Borrower; (v) any act or omission by Bank which directly or indirectly results in or aids the discharge of any other Borrower by operation of law or otherwise, or which in any way impairs or suspends any rights or remedies of Bank against any other Borrower; (vi) any impairment of the value of any interest in any security for any of the Joint Credits, including without limitation, the failure to obtain or maintain perfection or recordation of any interest in any such security, the release of any such security without substitution, and/or the failure to preserve the value of, or to comply with applicable law in disposing of, any such security; or (vii) any modification of the obligations or liabilities of any other Borrower for any of the Joint Credits, including without limitation the renewal, extension, acceleration or other change in time for payment of, or other change in the terms of, the indebtedness of any other Borrower for any of the Joint Credits, including increase or decrease of the rate of interest thereon. Until the Joint Credits and all indebtedness of each Borrower to Bank arising under or in connection with this Agreement shall have been paid in full, no Borrower shall have any right of subrogation. Each Borrower waives all rights and defenses it may have arising out of (A) any election of remedies by Bank, even though that election of remedies, such as a non-judicial foreclosure with respect to any security for any of the Joint Credits, destroys its rights of subrogation or its rights to proceed against any other Borrower for reimbursement, or (B) any loss of rights it may suffer by reason of any rights, powers or remedies of any other Borrower in connection with any anti-deficiency laws or any other laws limiting, qualifying or discharging any Borrower's indebtedness for any of the Joint Credits, whether by operation of Sections 726 or 580d of the Code of Civil Procedure as from time to time amended, or otherwise. Until the Joint Credits and all indebtedness of each Borrower to Bank arising under or in connection with this Agreement shall have been paid in full, each Borrower waives any right to enforce any remedy which Bank now has or may hereafter have against any other Borrower or any other person, and waives any benefit of, or any right to participate in, any security now or hereafter held by Bank.

(i) If any of the waivers herein is determined to be contrary to any applicable law or public policy, such waiver shall be effective only to the extent permitted by law.

(j) It is the position of the Borrowers that each Borrower benefits from the Joint Credits that have been made available by Bank under this Agreement and from each extension of credit thereunder, regardless of whether such credit is disbursed to a joint account of Borrowers or to or for the account of any Borrower.

SECTION 7.12. ARBITRATION.

(a) Arbitration. The parties hereto agree, upon demand by any party, to submit to binding arbitration all claims, disputes and controversies between or among them (and their respective employees, officers, directors, attorneys, and other agents), whether in tort, contract or otherwise arising out of or relating to in any way (i) the loan and related Loan Documents which are the subject of this Agreement and its negotiation, execution, collateralization, administration, repayment, modification, extension, substitution, formation, inducement, enforcement, default or termination; or (ii) requests for additional credit.

(b) Governing Rules. Any arbitration proceeding will (i) proceed in a location in Colorado selected by the American Arbitration Association ("AAA"); (ii) be governed by the Federal Arbitration Act (Title 9 of the United States Code), notwithstanding any conflicting choice of law provision in any of the documents between the parties; and (iii) be conducted by the AAA, or such other administrator as the parties shall mutually agree upon, in accordance with the AAAs commercial dispute resolution procedures, unless the claim or counterclaim is at least $1,000,000.00 exclusive of claimed interest, arbitration fees and costs in which case the arbitration shall be conducted in accordance with the AAA's optional procedures for large, complex commercial disputes (the commercial dispute resolution procedures or the optional procedures for large, complex commercial disputes to be referred to, as applicable, as the "Rules"). If there is any inconsistency between the terms hereof and the Rules, the terms and procedures set forth herein shall control. Any party who fails or refuses to submit to arbitration following a demand by any other party shall bear all costs and expenses incurred by such other party in compelling arbitration of any dispute. Nothing contained herein shall be deemed to be a waiver by any party that is a bank of the protections afforded to it under 12 U.S.C. 91 or any similar applicable state law.

(c) No Waiver of Provisional Remedies, Self-Help and Foreclosure. The arbitration requirement does not limit the right of any party to (i) foreclose against real or personal property collateral; (ii) exercise self-help remedies relating to collateral or proceeds of collateral such as setoff or repossession; or (iii) obtain provisional or ancillary remedies such as replevin, injunctive relief, attachment or the appointment of a receiver, before during or after the pendency of any arbitration proceeding. This exclusion does not constitute a waiver of the right or obligation of any party to submit any dispute to arbitration or reference hereunder, including those arising from the exercise of the actions detailed in sections (i), (ii) and (iii) of this paragraph.

(d) Arbitrator Qualifications and Powers. Any arbitration proceeding in which the amount in controversy is $5,000,000.00 or less will be decided by a single arbitrator selected according to the Rules, and who shall not render an award of greater than $5,000,000.00. Any dispute in which the amount in controversy exceeds $5,000,000.00 shall be decided by majority vote of a panel of three arbitrators; provided however, that all three arbitrators must actively participate in all hearings and deliberations. The arbitrator will be a neutral attorney licensed in the State of Colorado or a neutral retired judge of the state or federal judiciary of Colorado, in either case with a minimum of ten years experience in the substantive law applicable to the subject matter of the dispute to be arbitrated. The arbitrator will determine whether or not an issue is arbitratable and will give effect to the statutes of limitation in determining any claim. In any arbitration proceeding the arbitrator will decide ( by documents only or with a hearing at the arbitrator's discretion) any pre-hearing motions which are similar to motions to dismiss for failure to state a claim or motions for summary adjudication. The arbitrator shall resolve all disputes in accordance with the substantive law of Colorado and may grant any remedy or relief that a court of such state could order or grant within the scope hereof and such ancillary relief as is necessary to make effective any award. The arbitrator shall also have the power to award recovery of all costs and fees, to impose sanctions and to take such other action as the arbitrator deems necessary to the same extent a judge could pursuant to the Federal Rules of Civil Procedure, the Colorado Rules of Civil Procedure or other applicable law. Judgment upon the award rendered by the arbitrator may be entered in any court having jurisdiction. The institution and maintenance of an action for judicial relief or pursuit of a provisional or ancillary remedy shall not constitute a waiver of the right of any party, including the plaintiff, to submit the controversy or claim to arbitration if any other party contests such action for judicial relief.

(e) Discovery. In any arbitration proceeding discovery will be permitted in accordance with the Rules. All discovery shall be expressly limited to matters directly relevant to the dispute being arbitrated and must be completed no later than 20 days before the hearing date and within 180 days of the filing of the dispute with the AAA. Any requests for an extension of the discovery periods, or any discovery disputes, will be subject to final determination by the arbitrator upon a showing that the request for discovery is essential for the party's presentation and that no alternative means for obtaining information is available.

(f) Class Proceedings and Consolidations. The resolution of any dispute arising pursuant to the terms of this Agreement shall be determined by a separate arbitration proceeding and such dispute shall not be consolidated with other disputes or included in any class proceeding.

(g) Payment Of Arbitration Costs And Fees. The arbitrator shall award all costs and expenses of the arbitration proceeding.

(h) Miscellaneous. To the maximum extent practicable, the AAA, the arbitrators and the parties shall take all action required to conclude any arbitration proceeding within 180 days of the filing of the dispute with the AAA. No arbitrator or other party to an arbitration proceeding may disclose the existence, content or results thereof, except for disclosures of information by a party required in the ordinary course of its business or by applicable law or regulation. If more than one agreement for arbitration by or between the parties potentially applies to a dispute, the arbitration provision most directly related to the Loan Documents or the subject matter of the dispute shall control. This arbitration provision shall survive termination, amendment or expiration of any of the Loan Documents or any relationship between the parties.

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the day and year first written above.

GOOD TIMES RESTAURANTS INC.	WELLS FARGO BANK, NATIONAL ASSOCIATION
By: /s/ Boyd E. Hoback	By: /s/ Marc Rosenberg
Boyd E. Hoback, President	Marc Rosenberg, Relationship Manager
GOOD TIMES DRIVE THRU INC.
By: /s/ Boyd E. Hoback
Boyd E. Hoback, President
SMART DEVELOPMENT, LLC
By:/s/ Mark M. Iwan
Mark M. Iwan, Manager

EX-3

INDEPENDENT AUDITOR'S CONSENT

We consent to the incorporation by reference of our report dated November 4, 2003, accompanying the consolidated financial statements of Good Times Restaurants, Inc., also incorporated by reference in the Form S-8 Registration statement of Good Times Restaurants, Inc., and to the use of our name and the statements with respect to us, as appearing under the heading "Experts" in the Registration Statement.

Hein + Associates llp

Denver, Colorado

December 16, 2003

EX-99.2R CODE ETH

Exhibit 14.1

Good Times Restaurants Inc.

Code of Business Conduct

1. Introduction

In this Code of Business Conduct ("the Code"), the terms "Good Times" and "Company" mean Good Times Restaurants Inc. and all of its subsidiaries. The policies and procedures set forth in this Code govern the conduct of every aspect of the business of Good Times. While this Code provides a brief summary of the standards of conduct that are the foundation of Good Times' business operations, it is not possible to cover all situations confronting Good Times personnel in the day to day conduct of their many activities. Good Times must rely on the individual judgment, common sense and personal ethical standards of all personnel to maintain a high standard of honesty and integrity in the conduct of Good Times business.

This Code applies to all members of the Board of Directors (the "Board," with the members referred to herein as "Directors"), officers, employees and franchisees of Good Times and to all Good Times business locations. Any violations of this Code must be promptly reported to management at the appropriate level, including, if necessary and appropriate, to a supervisor, the Chief Executive Officer, a Director or Directors, or a member or members of the Audit Committee of the Board (the "Audit Committee"). The confidentiality of a report and the reporting person will be protected to the extent possible, consistent with the law and the requirements necessary to conduct an effective investigation of the conduct or matter, and no reporting person will suffer retaliation because of a report he or she makes in good faith and with respect to conduct or a matter which the reporting person reasonably believes constitutes a violation of this Code (except that appropriate disciplinar y action may be taken against the reporting person if such person was involved in the violation).

2. General Policy

It is the policy of Good Times to conduct its business in compliance with applicable governmental laws, rules and regulations, with honesty and integrity, in a manner which demonstrates respect for all people and with a strong commitment to the highest standards of ethics. Good Times demands high standards of integrity and sound ethical judgment from its personnel at all times, and in performing their work for Good Times all personnel must comply with all applicable governmental laws, rules and regulations.

3. Conflicts of Interest

Directors, officers and employees of Good Times have a duty to avoid financial, business or other personal interests or relationships which might interfere, or even appear to interfere, with the interests of Good Times or make it difficult to perform their Good Times duties objectively and effectively. Directors, officers and employees should conduct themselves in a manner that avoids even the appearance of a conflict between their personal interests and those of the Company.

A conflict of interest situation may arise in many ways. It is not possible to discuss every circumstance that may lead to a conflict of interest, but the following examples are illustrative:

(a) Owning or holding a substantial financial interest in a company which has material business dealings with Good Times or which engages in any significant field of activity engaged in by Good Times.

(b) Acting as a director, officer, consultant or employee for any business enterprise with which Good Times has a competitive or significant business relationship, unless so requested or approved by the Company.

(c) Accepting gifts, payments, or services of significant value from those seeking to do business with Good Times.

(d) Knowingly competing with Good Times in the purchase or sale of property or diverting from Good Times a business opportunity in which Good Times has or is likely to have an interest.

(e) Placing of business with a firm owned or controlled by a Good Times employee, officer or Director without the prior specific approval of the Audit Committee and the Board.

It is Good Times' policy that actual or apparent conflicts of interest must be avoided, and any material transaction or relationship involving a potential conflict of interest must be approved in advance by the Board. In addition, all related party transactions of Good Times must be reviewed and approved by the Audit Committee.

Conflicts of interest may also arise if an employee, officer or Director, or a member of his or her family, receives improper personal benefits as a result of his or her position with Good Times. Company loans to or guarantees of obligations of such persons are of special concern, and personal loans to executive officers and Directors are prohibited by the Sarbanes-Oxley Act of 2002. It is Good Times' policy that such conflicts of interest involving improper personal benefits are prohibited.

4. Unauthorized Use of Company Property and Services

No employee, officer or Director may use any Company property or services for his or her own personal benefit, or for the personal benefit of anyone else. It should be noted that, with regard to some activities, there are both personal and Company benefits. These would include, for example, employee participation in continuing education programs. Therefore, any employee use of Company property or services which is not solely for the Company's benefit must be approved beforehand by the employee's immediate supervisor. Computer work stations and computer software are provided for the furtherance of Company business only. The Company's computer facilities should not be utilized for individual or outside projects for any purpose without the specific permission of your immediate supervisor. The Company's software programs are in many instances proprietary to the Company or are utilized by the Company through license and usage agreements with outside authors. Software programs should not be copied or tra nsmitted by any means to any third party for private usage.

5. Accounting Records

Financial statements and the books and records on which they are based must accurately reflect all corporate transactions. All receipts and disbursements of Company funds must be properly recorded in the books, and records must disclose the nature and purpose of the Company's transactions. All records and transactions are subject to review by internal and external auditors. Full cooperation with the auditors is expected and under no circumstances will any relevant information be intentionally withheld from them.

The following requirements apply to all Company records:

(a) No undisclosed or unrecorded fund or asset of the Company shall be established for any purpose.

(b) No false or artificial entries shall be made in the books and records of the Company for any reason, and no employee or officer shall engage in any arrangement that results in such prohibited act.

(c) All transactions shall be executed in accordance with management's general or specific authorization.

(d) Transactions shall be properly recorded to permit preparation of financial statements in accordance with generally accepted accounting principles and to maintain accountability for assets.

(e) No payment on behalf of the Company shall be approved or made with the intention or understanding that any part of such payment is to be used for any purpose other than that described by the documents supporting the payment.

6. Political Contributions and Activities

Good Times encourages its employees to maintain an interest in political matters, but recognizes that participation in politics is primarily a matter of individual choice. Involvement and participation in political activities must be on an individual basis, on the employee's own time, and at the employee's own expense. Further, when an employee speaks on public issues, it must be made clear that comments or statements made are those of the individual and not the Company.

No Company funds or assets, including the work time of any employee, will be contributed, loaned, or made available, directly or indirectly, to any political party or the campaign of any candidate for political office.

7. Trade Secrets and Confidential Information

With regard to trade secrets and confidential information of Good Times, employees must be guided by loyalty to Good Times and prudence in maintaining the secrecy of such trade secrets and confidential information. Employees should take care to refuse to allow the public or any other company, including our competitors, to obtain improper access to trade secret and confidential information. The following policies should be followed:

(a) Confidential information and trade secrets should be discussed only on a need-to-know basis with other employees.

(b) Be careful to avoid inadvertent disclosures of information in the course of social conversations or normal business relations with suppliers and customers.

(c) Any disclosure of trade secret or confidential information outside of the Company should be done only when appropriate protective agreements have been signed which have been approved by Good Times' attorneys.

8. Employee Relations

Good Times' policy is to provide good jobs and to operate under sound and legal personnel policies. All employment is on an at-will basis, and employees are always subject to discharge at any time for any reason or for no reason. Our objective, however, is to be equitable and fair in the treatment of all our employees in all situations. This includes the following:

(a) The selection and placement of any employee is based on that employee's qualifications, and such decisions are always made without regard to race, religion, national origin, sex, age or physical or mental disabilities (so long as the employee/applicant is qualified for and can perform the job).

(b) Compensation shall be in accordance with the employee's contribution to the Company, and compensation decisions shall also be made entirely independent of the considerations listed above.

(c) The Company will make every effort to provide a safe and healthy work environment for all employees. The Company will not tolerate any sexual harassment in the workplace, and appropriate disciplinary action will be taken should any instances of sexual harassment be discovered.

9. Drug and Alcohol Abuse

Company policy precludes the use or possession of any illegal drugs or any alcohol on Company property. Employees are also prohibited from being on Company property under the influence of either drugs or alcohol.

10. Consultants

Good Times' policy is that all consultants that we retain should abide by the same code of business conduct as our employees. It is the responsibility of any Company employee retaining a consultant for any purpose to make sure the consultant is aware of our Code and agrees to abide by all of its provisions.

11. Disclosures in SEC Reports and Other Public Communications

The United States Securities and Exchange Commission (the "SEC") and The Nasdaq Stock Market ("Nasdaq") require prompt public disclosure of material information about the Company. It is Good Times' policy that all disclosures to the public, including disclosures in reports and documents that the Company files with or submits to the SEC, press releases, speeches and stockholder and other public communications by the Company, will be full, fair, accurate, timely and understandable.

12. Insider Trading

Directors, officers and employees must not use for personal gain, or reveal outside of the Company, material information which is neither known nor available to the general public. All Directors, officers and employees who are aware of material inside information are subject to the Company's Insider Trading Policy.

13. Discipline and Compliance

Failure to comply with this Code may result in disciplinary actions, including warnings, suspensions, termination of employment or such other actions as may be appropriate under the circumstances. The responsibility for compliance with this Code, including the duty to seek interpretation when in doubt, rests with each person subject to this Code.

14. Searches

Good Times policy allows the use of any lawful method of investigation which Good Times believes is necessary to determine whether any person has engaged in conduct that interferes with or adversely affects Good Times' business. This includes the theft of any Company property or any property of any Company employee or visitor. It also includes suspicion of possession of drugs, alcohol, firearms or anything else, the possession of which on Company property is prohibited or restricted. All Company employees are expected to participate in Good Times' reasonable security efforts. Failure to do so may result in disciplinary action, including dismissal.

15. Questions and Interpretations

Routine questions concerning this Code should be directed to the employee's immediate supervisor. Requests for specific interpretations of this Code should be referred to any officer of the Company. The Code is intended to provide a statement of Company policies and to provide guidance to Good Times personnel. No representation is made, however, either express or implied, that the policies stated in the Code are all the relevant policies, nor that they are a comprehensive, full or complete explanation of the laws, rules and regulations which are applicable to the Company and its personnel. All Company personnel have a continuing obligation to familiarize themselves with applicable laws, rules and regulations and Company policy, particularly specific policies, values and expectations in the Operations Manual and Management Orientation.

16. Changes to or Waivers from the Code

The Board shall review this Code as circumstances dictate, and when necessary or desirable amend the Code to ensure that Good Times continues to comply with applicable laws, rules and regulations, including those of the SEC and Nasdaq.

Any changes to this Code and any waiver from this Code, including an implicit waiver resulting from inaction with respect to a reported or known violation of this Code, for an executive officer or Director of Good Times may be made only by the Board and shall be promptly disclosed to shareholders and others as required by law, SEC rules and regulations, and Nasdaq rules. Any other change or waiver may be made only by an executive officer of Good Times or the Board.

17. Other Good Times Policies and Procedures

This Code is not intended to supersede the existing Good Times policies and procedures already in place and set forth in the Company's Operations Manual and Management Orientation, and in the Insider Trading Policy. Certain policies and procedures referred to herein are contained in their entirety in those other documents, and you should refer to those documents for a complete description of such policies and procedures.

18. Summary

It is expected that all Good Times personnel will transact the Company's business with the highest standards of integrity. By maintaining a sensitivity to and an awareness of the ethical aspects of business, we can ensure that our business conduct in all respects is exemplary. Good Times and its employees enjoy an outstanding reputation. Adherence to this Code will uphold and enhance that reputation.

EX-2

EXHIBIT 31.2

CERTIFICATION

I, Susan M. Knutson, certify that:

1. I have reviewed this annual report on Form 10-KSB of Good Times Restaurants Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the small business issuer as of, and for, the periods presented in this report;

4. The small business issuer's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the small business issuer and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the small business issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Evaluated the effectiveness of the small business issuer's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(c) Disclosed in this report any change in the small business issuer's internal control over financial reporting that occurred during the small business issuer's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the small business issuer's internal control over financial reporting; and

5. The small business issuer's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the small business issuer's auditors and the audit committee of the small business issuer's board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the small business issuer's ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the small business issuer's internal control over financial reporting.

Date: December 16, 2003

 /s/ Susan M. Knutson

Susan M. Knutson, Controller

EX-1

EXHIBIT 31.1

CERTIFICATION

I, Boyd E. Hoback, certify that:

1. I have reviewed this annual report on Form 10-KSB of Good Times Restaurants Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the small business issuer as of, and for, the periods presented in this report;

4. The small business issuer's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the small business issuer and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the small business issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Evaluated the effectiveness of the small business issuer's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(c) Disclosed in this report any change in the small business issuer's internal control over financial reporting that occurred during the small business issuer's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the small business issuer's internal control over financial reporting; and

5. The small business issuer's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the small business issuer's auditors and the audit committee of the small business issuer's board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the small business issuer's ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the small business issuer's internal control over financial reporting.

Date: December 16, 2003

 /s/ Boyd E. Hoback

Boyd E. Hoback, Chief Executive Officer