10-Q/A

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q/A

(Amendment No. 2)

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

For the quarterly period ended September 30, 2012

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

Commission file number 000-53948

GIGGLES N HUGS, INC.

(Exact name of registrant as specified in its charter)

Nevada	20-1681362
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

10250 Santa Monica, #155, Los Angeles, CA	90067
(Address of principal executive offices)	(Zip Code)

(310) 553-4847

(Registrant’s telephone number, including area code)

Copies of Communications to:

Richardson & Patel, LLP

1100 Glendon Avenue

Suite 850

Los Angeles, CA 90024

(310) 208-1182

Fax (310) 208-1154

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

Yes [X] No [  ]

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes [X] No [  ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	[  ]	Accelerated filer	[  ]
Non-accelerated filer	[  ] (Do not check if a smaller reporting company)	Smaller reporting company	[X]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes [  ] No [X]

The number of shares of Common Stock, $0.001 par value, outstanding on November 14, 2012 was 22,894,145 shares.

Restatement

Giggles N Hugs, Inc. (hereinafter referred to as “us,” “we,” or the “Company”) is filing this Amendment No. 2 on Form 10-Q/A (the “Second Amendment”) to its Quarterly Report for the quarterly period ended September 30, 2012, which was filed with the Securities and Exchange Commission (“SEC”) on November 19, 2012 (the “Original Report”) in response to certain issues set forth in our Current Report on Form 8-K filed with the SEC on March 20, 2013 (the “Form 8-K”). As previously reported in the Form 8-K, we announced that the consolidated financial statements contained in our Quarterly Report on Form 10-Q for the three months ended March 31, 2012, the three and six months ended June 30, 2012 and the three and nine months ended September 30, 2012 required restatement in order to correct an error related to the following:

● Total stock-based compensation expense in connection with options granted to employees was not correctly recognized for employee options issued in February 2012 in the consolidated statement of operations for and nine months ended September 30, 2012 in accordance with Accounting Standards Codification (“ASC”) 718 “Compensation - Stock Compensation”).

This Second Amendment reflects the restatement of our previously issued consolidated financial statements contained in the Original Report for the three and nine months ended September 30, 2012. The adjustment is fully discussed in Note 4 to the consolidated financial statements contained in this Second Amendment.

This Second Amendment speaks only of the original filing date of the Original Report and, except for those Items disclosed in this Explanatory Note, is unchanged from the Original Report. You should read this Second Amendment together with our other reports that update and supersede the information contained in this Second Amendment.

2

GIGGLES N HUGS, INC.

QUARTERLY PERIOD ENDED SEPTEMBER 30, 2012

Index to Report on Form 10-Q/A

		Page No.
PART I - FINANCIAL INFORMATION
Item 1.	Financial Statements	F-1
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	4
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	12
Item 4T.	Controls and Procedures	12
PART II - OTHER INFORMATION
Item 1.	Legal Proceedings	13
Item 1A.	Risk Factors	13
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	13
Item 3.	Defaults Upon Senior Securities	14
Item 4.	Mine Safety Disclosure	14
Item 5.	Other Information	14
Item 6.	Exhibits	14
	Signature	15

3

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements.

GIGGLES N HUGS, INC.

CONSOLIDATED BALANCE SHEETS

(unaudited)

	September 30, 2012			December 31, 2011
		(As Restated See Note 4)
Assets
Current assets:
Cash and equivalents	$	94,725		$	608,309
Inventory		15,055			14,297
Prepaid stock compensation		328,400			-
Prepaid expenses		3,487			-
Total current assets		441,667			622,606
Fixed assets:
Total fixed assets, net		966,011			880,999
Other assets:
Security deposits		32,500			30,000
Total assets	$	1,440,178		$	1,533,605
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	127,873		$	116,031
Incentive from less or – current portion		48,530			44,406
Accrued expenses		57,895			15,888
Deferred revenue		17,130			16,942
Total current liabilities		251,428			193,267
Long-term liabilities:
Incentive from lessor – long-term		498,862			490,059
Total long-term liabilities		498,862			490,059
Total liabilities		750,290			683,326
Stockholders’ equity:
Common stock, $0.001 par value, 1,125,000,000 shares authorized, 22,894,145 and 22,862,145 shares issued and outstanding as of September 30, 2012 and December 31, 2011, respectively		22,894			22,862
Common stock payable		675,800			-
Additional paid-in capital		2,944,999			2,001,168
Accumulated deficit		(2,953,805	)		(1,173,751	)
Total stockholders’ equity		689,888			850,279
Total liabilities and stockholders’ equity	$	1,440,178		$	1,533,605

See Accompanying Notes to Financial Statements.

F-1

GIGGLES N HUGS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)

	For the three months ended						For the nine months ended
	September 30,						September 30,
	2012			2011			2012			2011
							(as Restated See Note 4)
Revenue
Food and beverage sales	$	199,075		$	175,242		$	534,885		$	503,939
Private party rentals		70,875			81,791			266,824			228,214
Other sales		79,828			62,843			213,718			176,661
Allowances, returns and discounts		(16,741	)		(28,686	)		(40,516	)		(83,854	)
Net sales		333,037			291,190			974,911			824,960
Costs and operating expenses
Cost of sales including food and beverage		78,516			69,427			217,321			204,742
Labor		97,109			130,986			329,485			388,573
Occupancy cost		62,323			56,014			181,790			182,277
Depreciation		26,101			25,449			77,633			76,062
Total operating expenses		264,049			281,875			806,229			851,653
Other expenses
Executive compensation		108,783			-			318,458			38,269
Employee stock-based compensation		-			-			1,100,883			-
Non-employee stock based compensation		62,900			-			115,380			-
Consulting expenses		12,000			26,306			27,000			417,895
Professional expenses		80,320			71,412			235,349			202,182
General and administrative expenses		19,753			109,746			150,066			214,693
Total costs and operating expenses		547,805			489,338			2,753,365			1,724,692
Loss before provision for income taxes	$	(214,768	)	$	(198,148	)	$	(1,778,454	)	$	(899,732	)
Provision for income taxes	$	-		$	-		$	(1,600	)	$	-
Net loss	$	(214,768	)	$	(198,148	)	$	(1,780,054	)	$	(899,732	)
Net loss per share - basic	$	(0.01	)	$	(0.01	)	$	(0.08	)	$	(0.05	)
Weighted average number of common shares outstanding - basic		22,875,692			18,854,020			22,875,692			18,709,590

See Accompanying Notes to Financial Statements.

F-2

GIGGLES N HUGS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

	For the nine months ended
	September 30,
	2012			2011
	(As restated See Note 4)
Cash flows from operating activities
Net loss	$	(1,780,054	)	$	(899,732	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		77,633			76,062
Stock based compensation		115,380			-
Employee stock based compensation		1,100,883			-
Changes in operating assets and liabilities:
Increase in prepaid expenses and deposits		(5,987	)		-
Increase in inventory		(758	)		(6,214	)
Increase (decrease) in accounts payable		11,842			(80,631	)
Increase (decrease) in lease incentive liability		12,927			(29,621	)
Increase in accrued expenses		42,007			8,928
Increase in deferred revenue		188			7,878
Net cash used in operating activities		(425,939	)		(923,331	)
Cash flows from investing activities
Acquisition of fixed assets		(162,645	)		(40,324	)
Net cash used in investing activities		(162,645	)		(40,324	)
Cash flows from financing activities
Proceeds from note payable		-			(3,000	)
Members’ distribution		-			(20,836	)
Proceeds from reverse merger		-			769
Proceeds from shares issued		-			2,003,500
Proceeds from common stock payable		75,000			-
Net cash provided by financing activities		75,000			1,980,433
NET INCREASE (DECREASE) IN CASH		(513,584	)		1,016,778
CASH AT BEGINNING OF PERIOD		608,309			15,584
CASH AT END OF PERIOD	$	94,725		$	1,032,362
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid	$	-		$	-
Income taxes paid	$	-		$	-
NON-CASH INVESTING AND FINANCING ACTIVITIES:
Incentive from lessor	$	-		$	590,000
Liabilities assumed with the merger	$	-		$	79,725

See Accompanying Notes to Financial Statements.

F-3

GIGGLES N’ HUGS, INC.

(FORMERLY TEACHER’S PET, INC.)

(A Development Stage Company)

NOTES TO FINANCIAL STATEMENTS

(Unaudited)

NOTE 1 – HISTORY AND ORGANIZATION

Giggles N’ Hugs, Inc. (“GIGL Inc”) was originally organized September 17, 2004 (Date of Inception) under the laws of the State of Nevada, as Teacher’s Pet, Inc. GIGL Inc was organized to sell teaching supplies and learning tools. On August 20, 2010, GIGL Inc filed an amendment to its articles of incorporation to change its name to Giggles N’ Hugs, Inc. The Company is authorized to issue 1,125,000,000 shares of its $0.001 par value common stock.

On December 30, 2011, GIGL Inc completed the acquisition of all the issued and outstanding shares of GNH, Inc. (“GNH”), a Nevada corporation, pursuant to a Stock Exchange Agreement (the “SEA”). Under the SEA, GIGL Inc issued 18,289,716 shares of its common stock to in exchange for a 100% interest in GNH, Inc. Additionally under the SEA, the former officer, director and shareholders of GIGL Inc agreed to cancel a total of 47,607,500 shares of its common stock.

For accounting purposes, the acquisition of GNH by GIGL Inc has been recorded as a reverse merger of a public company, with the exception that no goodwill is generated, and followed up with a recapitalization of GNH based on the factors demonstrating that GNH represents the accounting acquirer. As part of closing of the merger between GNH and GIGL Inc, GNH obtained 100% of the restaurant operations of Giggles N Hugs in Westfield mall in Century City, California. The restaurant operations of Giggles N Hugs in Westfield mall in Century City, California was originally formed April 30, 2010 and opened for operation December 3, 2010. Consequently, the historical financial information in the accompanying consolidated financial statements is that of GNH and the restaurant operations of Giggles N Hugs located in Century City, California. As a result of the Merger, GIGL Inc now owns all of the assets, liabilities and operations of a kid friendly restaurant named Giggles N Hugs in Westfield mall in Century City, California. Additionally, GIGL Inc obtained ownership to all intellectual property rights for Giggles N Hugs facilities in the future.

On December 30, 2011, the transactions were completed and resulted in a change in control of the Company. Pursuant to the terms of the Agreement, the Company accepted the resignation of its prior officer and director, Tracie Hadama and appointed Mr. Joey Parsi as President, Chief Executive Officer, Treasurer, and Secretary of the Company.

F-4

GIGGLES N’ HUGS, INC.

(FORMERLY TEACHER’S PET, INC.)

(A Development Stage Company)

NOTES TO FINANCIAL STATEMENTS

(Unaudited)

NOTE 2 – BASIS OF PRESENTATION

The interim financial statements included herein, presented in accordance with United States generally accepted accounting principles and stated in US dollars, have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (SEC). Certain information and footnote disclosures normally included in financial statements prepared in accordance with US generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the disclosures are adequate to make the information presented not misleading.

These statements reflect all adjustments, consisting of normal recurring adjustments, which, in the opinion of management, are necessary for fair presentation of the information contained therein. It is suggested that these interim financial statements be read in conjunction with the financial statements of the Company for the year ended December 31, 2011 and notes thereto included in the Company’s Form 10-K annual report. The Company follows the same accounting policies in the preparation of interim reports.

Results of operations for the interim periods are not indicative of annual results.

NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of consolidation

For the period ended September 30, 2012 and 2011, the consolidated financial statements include the accounts of Giggles N’ Hugs, Inc., GNH, Inc., GNH Topanga, Inc. and restaurant operations of Giggles N Hugs in Westfield mall in Century City, California. All significant intercompany balances and transactions have been eliminated. Giggles N’ Hugs, Inc., GNH, Inc., GNH Topanga, Inc. and restaurant operations of Giggles N Hugs in Westfield mall in Century City, California will be collectively referred herein to as the “Company”.

Use of estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ significantly from those estimates.

Cash and cash equivalents

For the purpose of the statements of cash flows, all highly liquid investments with an original maturity of three months or less are considered to be cash equivalents. The carrying value of these investments approximates fair value.

F-5

GIGGLES N’ HUGS, INC.

(FORMERLY TEACHER’S PET, INC.)

(A Development Stage Company)

NOTES TO FINANCIAL STATEMENTS

(Unaudited)

NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Inventories

Inventories are stated at the lower of cost or market on a first-in, first-out basis and consist of restaurant food and other supplies.

Property and equipment

The Company records all property and equipment at cost less accumulated depreciation. Improvements are capitalized while repairs and maintenance costs are expensed as incurred. Depreciation is calculated using the straight-line method over the estimated useful life of the assets or the lease term, whichever is shorter. Leasehold improvements include the cost of the Company’s internal development and construction department. Depreciation periods are as follows:

Leasehold improvements	10 years
Restaurant fixtures and equipment	10 years
Computer software and equipment	3 to 5 years

Leases

The Company currently leases its restaurant location. The Company evaluates the lease to determine its appropriate classification as an operating or capital lease for financial reporting purposes.

Minimum base rent for the Company’s operating leases, which generally have escalating rentals over the term of the lease, is recorded on a straight-line basis over the lease term. The initial rent term includes the build-out, or rent holiday period, for the Company’s leases, where no rent payments are typically due under the terms of the lease. Deferred rent expense, which is based on a percentage of revenue, is also recorded to the extent it exceeds minimum base rent per the lease agreement.

The Company disburses cash for leasehold improvements and furniture, fixtures and equipment to build out and equip its leased premises. The Company also expends cash for structural additions that it makes to leased premises of which $590,000 were reimbursed to the Century City location by its landlords as construction contributions pursuant to agreed-upon terms in the lease agreements. Landlord construction contributions usually take the form of up-front cash. Depending on the specifics of the leased space and the lease agreement, amounts paid for structural components are recorded during the construction period as leasehold improvements or the landlord construction contributions are recorded as an incentive from lessor.

F-6

GIGGLES N’ HUGS, INC.

(FORMERLY TEACHER’S PET, INC.)

(A Development Stage Company)

NOTES TO FINANCIAL STATEMENTS

(Unaudited)

NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Impairment of long-lived assets

The Company assesses potential impairment of our long-lived assets whenever events or changes in circumstances indicate that the carrying value of the assets or asset group may not be recoverable. Factors considered include, but are not limited to, significant underperformance relative to historical or projected future operating results; significant changes in the manner of use of the acquired assets or the strategy for the overall business; and significant negative industry or economic trends. The Company regularly reviews the restaurant if it is cash flow negative for the previous four quarters to determine if impairment testing is warranted. At any given time, the Company may monitor its operations, and impairment charges could be triggered in the future if the restaurant performance does not improve.

The Company has identified leasehold improvements as the primary asset because it is the most significant component of our restaurant assets, it is the principal asset from which the Company derives cash flow generating capacity and has the longest remaining useful life. The recoverability is assessed in most cases by comparing the carrying value of the assets to the undiscounted cash flows expected to be generated by these assets. Impairment losses are measured as the amount by which the carrying values of the assets exceed their fair values.

During the nine months ended September 30, 2012 and 2011 we did not record an impairment charge against the carrying value of the restaurant located in Century City, California.

Stock-based compensation

The Company records stock based compensation in accordance with the guidance in ASC Topic 505 and 718 which requires the Company to recognize expenses related to the fair value of its employee stock option awards. This eliminates accounting for share-based compensation transactions using the intrinsic value and requires instead that such transactions be accounted for using a fair-value-based method. The Company recognizes the cost of all share-based awards on a graded vesting basis over the vesting period of the award.

The Company accounts for equity instruments issued in exchange for the receipt of goods or services from other than employees in accordance with FASB ASC 718-10 and the conclusions reached by the FASB ASC 505-50. Costs are measured at the estimated fair market value of the consideration received or the estimated fair value of the equity instruments issued, whichever is more reliably measurable. The value of equity instruments issued for consideration other than employee services is determined on the earliest of a performance commitment or completion of performance by the provider of goods or services as defined by FASB ASC 505-50.

F-7

GIGGLES N’ HUGS, INC.

(FORMERLY TEACHER’S PET, INC.)

(A Development Stage Company)

NOTES TO FINANCIAL STATEMENTS

(Unaudited)

NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Loss per common share

Net loss per share is provided in accordance with ASC Subtopic 260-10. We present basic loss per share (“EPS”) and diluted EPS on the face of statements of operations. Basic EPS is computed by dividing reported losses by the weighted average shares outstanding. Except where the result would be anti-dilutive to income from continuing operations, diluted earnings per share has been computed assuming the conversion of the convertible long-term debt and the elimination of the related interest expense, and the exercise of stock warrants. Loss per common share has been computed using the weighted average number of common shares outstanding during the year.

Fair Value of Financial Instruments

The carrying amounts reflected in the balance sheets for cash, accounts payable and accrued expenses approximate the respective fair values due to the short maturities of these items. The Company does not hold any investments that are available-for-sale.

As required by the Fair Value Measurements and Disclosures Topic of the FASB ASC, fair value is measured based on a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows: (Level 1) observable inputs such as quoted prices in active markets; (Level 2) inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and (Level 3) unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.

The three levels of the fair value hierarchy are described below:

Level 1: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;

Level 2: Quoted prices in markets that are not active, or inputs that are observable, either directly or indirectly, for substantially the full term of the asset or liability;

Level 3: Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (supported by little or no market activity).

F-8

GIGGLES N’ HUGS, INC.

(FORMERLY TEACHER’S PET, INC.)

(A Development Stage Company)

NOTES TO FINANCIAL STATEMENTS

(Unaudited)

NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Revenue recognition

Our revenues consist of sales from our restaurant operations and sales of memberships entitling members unlimited access to our play areas for the duration of their membership. As a general principle, revenue is recognized when the following criteria are met: (i) persuasive evidence of an arrangement exists, (ii) delivery has occurred and services have been rendered, (iii) the price to the buyer is fixed or determinable, and (iv) collectability is reasonably assured.

With respect to memberships, access to our play area extends throughout the term of membership. The vast majority of memberships sold are for one month terms. Revenue is recognized on a straight line basis over the membership period. Century City receives payment from its customers at the start of the subscription period and Century City records deferred revenue for the unearned portion of the subscription period.

Revenues from restaurant sales are recognized when payment is tendered at the point of sale. Revenues are presented net of sales taxes. The obligation is included in other accrued expenses until the taxes are remitted to the appropriate taxing authorities.

We recognize a liability upon the sale of our gift cards and recognize revenue when these gift cards are redeemed in our restaurants.

For party rental agreements, we rely upon a signed contract between us and the customer as the persuasive evidence of a sales arrangement. Party rental deposits are recorded as deferred revenue upon receipt and recognized as revenue when the service has been rendered.

Additionally, revenues are recognized net of any discounts, returns, allowances and sales incentives, including coupon redemptions and complimentary meals.

Recent pronouncements

The Company has evaluated the recent accounting pronouncements through August 2012 and believes that none of them will have a material effect on the company’s financial position, results of operations or cash flows.

F-9

GIGGLES N’ HUGS, INC.

(FORMERLY TEACHER’S PET, INC.)

(A Development Stage Company)

NOTES TO FINANCIAL STATEMENTS

NOTE 4 – RESTATEMENT OF FINANCIAL STATEMENT

We have restated our previously issued consolidated financial statements as of and for the three and nine months ended September 30, 2012 to correct errors and reclassifications in the accounting for the following:

● Total stock-based compensation expense in connection with the 225,000 options granted to employees in February 2012 valued at $891,383 was not correctly recognized in the consolidated financial statements for the nine months ended September 30, 2012 in accordance with Accounting Standards Codification (“ASC”) 718 “Compensation - Stock Compensation”).

● 50,000 shares of common stock valued at $209,500 to the Chief Operating Officer upon employment in February 2012 previously included in executive stock-based compensation is now included in the employee stock-based compensation.

The following tables summarize the effect of the restatement on the specific items presented in our historical consolidated financial statements included in our Quarterly Report on Form 10-Q for the nine months ended September 30, 2012:

GIGGLES N HUGS, INC.

CONSOLIDATED BALANCE SHEETS

(unaudited)

	September 30, 2012			Adjustment			September 30, 2012
	(As Filed)						(As Restated)
Assets
Current assets:
Cash and equivalents	$	94,725		$	-		$	94,725
Inventory		15,055			-			15,055
Prepaid stock compensation		328,400			-			328,400
Prepaid expenses		3,487			-			3,487
Total current assets		441,667			-			441,667
Fixed assets:
Total fixed assets, net		966,011			-			966,011
Other assets:
Security deposits		32,500			-			32,500
Total assets	$	1,440,178		$	-		$	1,440,178
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	127,873		$	-		$	127,873
Incentive from less or – current portion		48,530			-			48,530
Accrued expenses		57,895			-			57,895
Deferred revenue		17,130			-			17,130
Total current liabilities		251,428			-			251,428
Long-term liabilities:
Incentive from lessor – long-term		498,862			-			498,862
Total long-term liabilities		498,862			-			498,862
Total liabilities		750,290			-			750,290
Stockholders’ equity:
Common stock, $0.001 par value, 1,125,000,000 shares authorized, 22,894,145 and 22,862,145 shares issued and outstanding as of September 30, 2012 and December 31, 2011, respectively		22,894			-			22,894
Common stock payable		675,800			-			675,800
Additional paid-in capital		2,053,616			891,383			2,944,999
Accumulated deficit		(2,062,422	)		(891,383	)		(2,953,805	)
Total stockholders’ equity		689,888			-			689,888
Total liabilities and stockholders’ equity	$	1,440,178		$	-		$	1,440,178

F-10

GIGGLES N HUGS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)

	For the nine months ended
	September 30, 2012
	As Filed			Adjustment			As Restated
Revenue
Food and beverage sales	$	534,885		$	-		$	534,885
Private party rentals		266,824			-			266,824
Other sales		213,718			-			213,718
Allowances, returns and discounts		(40,516	)		-			(40,516	)
Net sales		974,911			-			974,911
Costs and operating expenses
Cost of sales including food and beverage		217,321			-			217,321
Labor		329,485			-			329,485
Occupancy cost		181,790			-			181,790
Depreciation		77,633			-			77,633
Total operating expenses		806,229			-			806,229
Other expenses
Executive compensation		318,458			-			318,458
Executive stock-based compensation		209,500			(209,500	)		-
Employee stock-based compensation		-			1,100,883			1,100,883
Non-employee stock based compensation		115,380			-			115,380
Consulting expenses		27,000			-			27,000
Professional expenses		235,349			-			235,349
General and administrative expenses		150,066			-			150,066
Total costs and operating expenses		1,861,982			891,383			2,753,365
Loss before provision for income taxes	$	(887,071	)	$	(891,383	)	$	(1,778,454	)
Provision for income taxes	$	(1,600	)	$	-		$	(1,600
Net loss	$	(888,671	)	$	(891,383	)	$	(1,780,054	)
Net loss per share - basic	$	(0.04	)				$	(0.08	)
Weighted average number of common shares outstanding - basic		22,875,692						22,875,692

F-11

GIGGLES N HUGS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

	For the nine months ended September 30,
		2012			Adjustments			201 2
Cash flows from operating activities
Net loss	$	(888,671	)		(891,383	)	$	(1,780,054	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		77,633			-			77,633
Stock based compensation		115,380			-			115,380
Employee stock based compensation		-			1,100,883			1,100,883
Shares issued for executive compensation		209,500			(209,500	)		-
Changes in operating assets and liabilities:
Increase in prepaid expenses and deposits		(5,987	)		-			(5,987	)
Increase in inventory		(758	)		-			(758	)
Increase in accounts payable		11,842			-			11,842
Increase in lease incentive liability		12,927			-			12,927
Increase in accrued expenses		42,007			-			42,007
Increase in deferred revenue		188			-			188
Net cash used in operating activities		(425,939	)		-			(425,939	)
Cash flows from investing activities
Acquisition of fixed assets		(162,645	)		-			(162,645	)
Net cash used in investing activities		(162,645	)		-			(162,645	)
Cash flows from financing activities
Proceeds from common stock payable		75,000			-			75,000
Net cash provided by financing activities		75,000			-			75,000
NET DECREASE IN CASH		(513,584	)		-			(513,584	)
CASH AT BEGINNING OF PERIOD		608,309			-			608,309
CASH AT END OF PERIOD	$	94,725		$	-		$	94,725
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid	$	-		$	-		$	-
Income taxes paid	$	-		$	-		$	-
NON-CASH INVESTING AND FINANCING ACTIVITIES:
Incentive from lessor	$	-		$	-		$	-
Liabilities assumed with the merger	$	-		$	-		$	-

F-12

GIGGLES N’ HUGS, INC.

(FORMERLY TEACHER’S PET, INC.)

(A Development Stage Company)

NOTES TO FINANCIAL STATEMENTS

NOTE 5 – RECLASSIFICATION OF PRIOR YEAR PRESENTATION

Certain prior year amounts have been reclassified for consistency with the current period presentation. These reclassifications had no effect on the reported results of operations. In second quarter of fiscal 2012, the Company concluded that it was appropriate to classify its incentive from lessor as a long-term liability. Previously, the incentive from lessor had been classified as a current liability. Accordingly, the Company had revised the classification to report the incentive from lessor under the long-term liabilities caption, with the current portion thereof remaining in the current liabilities section. This change in classification does not materially affect the Company’s previously reported balance sheet, cash flows from operations or from financing activities in the Condensed Statement of Cash Flows, and had no effect on the previously reported Condensed Statement of Operations for any period.

As of September 30, 2012 and December 31, 2011, $498,862 and $490,059 of the incentive from lessor previously classified as current liabilities were reclassified as long-term liabilities.

NOTE 6 – GOING CONCERN

The accompanying financial statements have been prepared in conformity with generally accepted accounting principles in the United States of America, which contemplate continuation of the Company as a going concern. The Company has recently sustained operating losses and has an accumulated deficit of $2,95 3 ,805 at September 30, 2012. In addition, the Company has negative working capital of $138,161, excluding non-cash prepaid stock compensation of $328,400, at September 30, 2012.

The Company has and will continue to use significant capital to grow and acquire market share. These factors raise substantial doubt about the ability of the Company to continue as a going concern. In this regard, management is proposing to raise any necessary additional funds not provided by operations through loans or through sales of their common stock. There is no assurance that the Company will be successful in raising this additional capital or in achieving profitable operations. The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or amounts and classification of liabilities that might result from this uncertainty.

NOTE 7 – INVENTORY

Inventory consisted of the following at:

	September 30, 2012		December 31, 2011
Restaurant food and supplies	$	15,055	$	14,297
Total	$	15,055	$	14,297

NOTE 8 – FIXED ASSETS

Fixed assets consisted of the following at:

	September 30, 2012			December 31, 2011
Leasehold improvements	$	1,116,680		$	958,538
Fixtures and equipment		24,137			21,887
Computer software and equipment		12,162			9,909
Property and equipment, total		1,152,980			990,334
Less: accumulated depreciation		(186,969	)		(109,336	)
Property and equipment, net	$	966,011		$	880,999

Repair and maintenance expenses for the nine months ended September 30, 2012 and 2011 were $14,292 and $19,451, respectively. Depreciation expenses for the three and nine months ended September 30, 2012 were $26,101 and $77,633, respectively, and for the three and nine months ended September 30, 2011 were $25,449 and $76,062, respectively.

F-13

GIGGLES N’ HUGS, INC.

(FORMERLY TEACHER’S PET, INC.)

(A Development Stage Company)

NOTES TO FINANCIAL STATEMENTS

(Unaudited)

NOTE 9 – DEFERRED REVENUE

Deferred revenue consisted of the following at:

	September 30, 2012		December 31, 2011
Membership cards	$	2,905	$	2,225
Gift cards		3,626		3,001
Party deposits		10,599		11,716
Total	$	17,130	$	16,942

NOTE 10 – INCENTIVE FROM LESSOR

Landlord construction contributions usually take the form of up-front cash. Depending on the specifics of the leased space and the lease agreement, amounts paid for structural components are recorded during the construction period as leasehold improvements or the landlord construction contributions are recorded as an incentive from lessor. The incentive from lessor is amortized over the life of the lease which is 10 years.

The Company received $590,000 from the Company’s landlords as construction contributions pursuant to agreed-upon terms in its lease agreement with Westfield Century City.

The Company is currently building out its Topanga location. As of September 30, 2012, the Company received a total of $47,500 from the landlords as construction contributions related to the Topanga lease.

Amortization of the incentive from lessor was $30,132 and $29,621 for the nine months ended September 30, 2012 and 2011, respectively.

F-14

GIGGLES N’ HUGS, INC.

(FORMERLY TEACHER’S PET, INC.)

(A Development Stage Company)

NOTES TO FINANCIAL STATEMENTS

(Unaudited)

NOTE 11 – STOCKHOLDERS’ EQUITY

On July 15, 2010, the Company amended its articles of incorporation to increase the authorized capital from 75,000,000 common shares to 1,125,000,000 common shares. The Company has only one class of stock. All rights and privileges normally associated with stock ownership are vested in that single class of stock.

During the three months ended March 31, 2012, the Company authorized the issuance of 50,000 shares of common stock to Sean Richards related to his appointment as Chief Operating Officer of the Company. The fair value of the shares of common stock was $209,500 which is recorded to common stock payable. As of the date of this filing, the shares have not been issued.

On June 11, 2012, the Company authorized the issuance of 25,000 shares of common stock to a third party entity in exchange for consulting services. The fair value of the shares of common stock was $41,000, based upon the closing market price of the Company’s common stock at the date the service was rendered.

On June 11, 2012, the Company authorized the issuance of 7,000 shares of common stock to a third party entity for internet design and consulting services. The fair value of the shares of common stock was $11,480, based upon the closing market price of the Company’s common stock at the date the service was rendered.

During the three months ended September 30, 2012, the Company authorized the issuance of 15,000 shares of common stock to a third party entity for investor relation services. The fair value of the shares of common stock was $22,500 which is recorded to common stock payable. As of the date of this filing, the shares have not been issued.

During the three months ended September 30, 2012, the Company authorized the issuance of 10,000 shares of common stock to a third party entity for financial and governance reporting services, SEC reporting services, and other business related services. The fair value of the shares of common stock was $10,000 which is recorded to common stock payable. As of the date of this filing, the shares have not been issued.

During the three months ended September 30, 2012, the Company authorized the issuance of 25,000 shares of common stock to a third party entity for financial consulting services. The fair value of the shares of common stock was $36,000 which is recorded to common stock payable and the expense is amortized over one-year of service. As of the date of this filing, the shares have not been issued.

During the three months ended September 30, 2012, the Company authorized the issuance of 20,000 shares of common stock to a third party entity for advisory board services. The fair value of the shares of common stock was $6,000 which is recorded to common stock payable and the expense is amortized over one-year of service. As of the date of this filing, the shares have not been issued.

During the three months ended September 30, 2012, the Company authorized the issuance of 220,000 shares of common stock to a third party entity for advisory board services. The fair value of the shares of common stock was $316,800 which is recorded to common stock payable and the expense is amortized over one-year of service. As of the date of this filing, the shares have not been issued.

During the three months ended September 30, 2012, the Company authorized the issuance of 75,000 shares of common stock to an investor for $75,000 which is recorded to common stock payable. As of the date of this filing, the shares have not been issued.

As of September 30, 2012, there have been no other issuances of common stock.

NOTE 12 – STOCK OPTIONS

Employee Stock Options

The following table summarizes the changes in the options outstanding at September 30, 2012, and the related prices for the shares of the Company’s common stock issued to employees of the Company under a non-qualified employee stock option plan.

Range of Exercise Prices		Number Outstanding		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life		Number Exercisable		Weighted Average Exercise Price
$	4.50		211,000	$	4.34		4.09		211,000	$	4.50
			211,000				4.09		211,000

F-15

GIGGLES N’ HUGS, INC.

(FORMERLY TEACHER’S PET, INC.)

(A Development Stage Company)

NOTES TO FINANCIAL STATEMENTS

(Unaudited)

A summary of the Company’s stock awards for options as of September 30, 2012 and changes for the nine months ended September 30, 2012 is presented below:

	Stock Options			Weighted Average Exercise Price
Outstanding, December 31, 2011		-		$	-
Granted		225,000			4.50
Exercised		-			-
Expired/Cancelled		(14,000	)		-
Outstanding, September 30, 2012		211,000		$	4.50
Exercisable, September 30, 2012		211,000		$	4.50

The weighted-average fair value of stock options granted to employees during the periods ended September 30, 2012 and 2011 and the weighted-average significant assumptions used to determine those fair values, using a Black-Scholes-Merton (“Black-Scholes”) option pricing model are as follows:

	September 30,, 2012			September 30, 2011
Significant assumptions (weighted-average):
Risk-free interest rate at grant date		0.78	%		-	%
Expected stock price volatility		139	%		-	%
Expected dividend payout		-			-
Expected option life (in years)		5.00			-
Expected forfeiture rate		0	%		-	%
Fair value per share of options granted	$	3.96		$	-

The expected life of awards granted represents the period of time that they are expected to be outstanding. The Company has no historical experience with which to establish a basis for determining an expected life of these awards. Therefore, the Company only gave consideration to the contractual terms and did not consider the vesting schedules, exercise patterns and pre-vesting and post-vesting forfeitures significant to the expected life of the option award.

We estimate the volatility of our common stock based on the calculated historical volatility of similar entities in industry, in size and in financial leverage whose share prices are publicly available. We base the risk-free interest rate used in the Black-Scholes-Merton option valuation model on the implied yield currently available on U.S. Treasury zero-coupon issues with an equivalent remaining term equal to the expected life of the award. We have not paid any cash dividends on our common stock and do not anticipate paying any cash dividends in the foreseeable future. Consequently, we use an expected dividend yield of zero in the Black-Scholes-Merton option valuation model.

There were no options granted during the quarters ended September 30, 2011.

Total stock-based compensation expense in connection with options granted to employees recognized in the consolidated statement of operations for the nine months ended September 30, 2012 and 2011 was $891,383 and $0, respectively.

F-16

GIGGLES N’ HUGS, INC.

(FORMERLY TEACHER’S PET, INC.)

(A Development Stage Company)

NOTES TO FINANCIAL STATEMENTS

(Unaudited)

NOTE 13 – COMMITMENTS AND CONTINGENCIES

The Company leases its restaurant location under an operating lease, with the remaining term being 10 years. Restaurant leases typically include land and building shells, require contingent rent above the minimum base rent payments based on a percentage of sales ranging from 7% to 10%, have escalating minimum rent requirements over the term of the lease and require various expenses incidental to the use of the property. The lease also has a renewal option, which Century City may exercise in the future. The Company’s current lease provides early termination rights, permitting the Company and its landlord to mutually terminate the lease prior to expiration if the Company does not achieve specified sales levels in certain years.

As of September 30, 2012, the aggregate minimum annual lease payments under operating leases, including amounts characterized as deemed landlord financing payments are as follows:

2012	$	45,979
2013		188,975
2014		194,644
2015		200,483
2016		206,498
2017		212,692
Thereafter		482,983
Total	$	1,532,254

Rent expense for the Company’s operating lease was $46,181 and $37,246 for the periods during the three months ended September 30, 2012 and 2011, respectively. Rent expense for the Company was $104,299 and $98,598 for the periods during the nine months ended September 30, 2012 and 2011, respectively.

On March 23, 2012, GNH Topanga entered into a Lease Agreement with Westfield Topanga Owner, LP, a Delaware limited partnership, to lease approximately 5,900 square feet in the Westfield Topanga Shopping Center. The lease includes land and building shells, provides a construction reimbursement allowance of up to $475,000, requires contingent rent above the minimum base rent payments based on a percentage of sales ranging from 7% to 10% and require other expenses incidental to the use of the property. The lease also has a renewal option, which GNH Topanga may exercise in the future. The Company’s current lease provides early termination rights, permitting the Company and its landlord to mutually terminate the lease prior to expiration if the Company does not achieve specified sales levels in certain years. The lease is expected to commence on March 1, 2013 and expire on April 30, 2022. Upon commencement, the aggregate minimum annual lease payments under operating leases, including amounts characterized as deemed landlord financing payments are as follows:

2013	$	212,400
2014		220,896
2015		229,732
2016		238,921
2017		248,478
Thereafter		1,714,073
Total	$	2,864,500

Rent expense for the Company’s operating lease was $0 and $0 for the periods during the three and nine months ended September 30, 2012 and 2011, respectively.

Litigation

The Company, the Company’s CEO, Joey Parsi, and a third party, were named in a complaint filed on July 19, 2012 in the Los Angeles Superior Court by Alex Nerush and Preferred Scan, Inc., that alleges fraud, negligent misrepresentation, sale of securities by unlicensed broker, sale of securities by means of false and misleading statements, and money had and received.

The Company does not believe there is any merit to the allegations and will vigorously defend this action. Furthermore, on September 24, 2012 the Company and the Company’s CEO, Joey Parsi counter-sued Richard Steele, Jr., Donald Stoecklein, Anthony Risas for breach of fiduciary duty, breach of contract, negligence and negligent misrepresentation, fraud and indemnity.

The Company does not believe there is any merit to the allegations and will vigorously defend this action.

F-17

GIGGLES N’ HUGS, INC.

(FORMERLY TEACHER’S PET, INC.)

(A Development Stage Company)

NOTES TO FINANCIAL STATEMENTS

(Unaudited)

NOTE 14 – SUBSEQUENT EVENTS

The Company’s Management has reviewed all material events through the date of this report in accordance with ASC 855-10, and believes there are no material subsequent events to report.

F-18

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

This Quarterly Report on Form 10-Q/A contains forward-looking statements and involves risks and uncertainties that could materially affect expected results of operations, liquidity, cash flows, and business prospects. These statements include, among other things, statements regarding:

● our ability to diversify our operations;

● inability to raise additional financing for working capital;

● the fact that our accounting policies and methods are fundamental to how we report our financial condition and results of operations, and they may require our management to make estimates about matters that are inherently uncertain;

● our ability to attract key personnel;

● our ability to operate profitably;

● deterioration in general or regional economic conditions;

● adverse state or federal legislation or regulation that increases the costs of compliance, or adverse findings by a regulator with respect to existing operations;

● changes in U.S. GAAP or in the legal, regulatory and legislative environments in the markets in which we operate;

● the inability of management to effectively implement our strategies and business plan;

● inability to achieve future sales levels or other operating results;

● the unavailability of funds for capital expenditures;

● other risks and uncertainties detailed in this report;

as well as other statements regarding our future operations, financial condition and prospects, and business strategies. These forward-looking statements are subject to certain risks and uncertainties that could cause our actual results to differ materially from those reflected in the forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed in this Quarterly Report on Form 10-Q/A, and in particular, the risks discussed under the heading “Risk Factors” in Part II, Item 1A and those discussed in other documents we file with the Securities and Exchange Commission. We undertake no obligation to revise or publicly release the results of any revision to these forward-looking statements. Given these risks and uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements.

References in the following discussion and throughout this quarterly report to “we”, “our”, “us”, “Giggles”, “the Company”, and similar terms refer to Giggles N’ Hugs, Inc. unless otherwise expressly stated or the context otherwise requires.

RESTATEMENT OF PREVIOUSLY-ISSUED CONSOLIDATED FINANCIAL STATEMENTS

As previously described in the “Explanation of our Restatement” preface to this amendment, we have restated our consolidated financial statements for the quarterly period ended September 30, 2012 and 2011, to correctly recognized employee options issued in February 2012 in share-based compensation expense for the periods ended September 30, 2012. The following Management’s Discussion and Analysis of Financial Condition and Results of Operations has been updated to reflect the restatements and which is more fully described in Note 4 to our consolidated financial statements. Except as amended to reflect the restatements previously described, the information in this Item 2 has not been updated and continues to speak as of the date of the original filing.

Overview

Giggles is a family-friendly restaurant with play areas for children 10 years and younger. The restaurant also features daily live entertainment and shows. The restaurant design is intended to create a fun, casual, family atmosphere where children can interact with parents and each other and where everyone enjoys freshly prepared, organic, nutritious and reasonably priced meals.

Currently, Giggles owns and operates one restaurant in the Westfield mall in Century City, California, and our second restaurant which is currently in development in the Westfield mall in Topanga, California. In the future, we plan to open a number of our Giggles N Hugs themed restaurants in high end malls throughout the country.

4

RESULTS OF OPERATIONS

Results of Operations for the Three Months Ended September 30, 2012 and September 30, 2011:

REVENUE

	Three Months Ended September 30,						Increase (Decrease)
	2012			2011			$			%
Revenue:
Food and beverage sales	$	199,075		$	175,242		$	23,833			13.60	%
Private party rentals		70,875			81,791			(10,916	)		(13.35	)%
Other sales		79,828			62,843			16,985			27.03	%
Allowances, returns and discounts		(16,741	)		(28,686	)		(11,945	)		(41.64	)%
Net sales	$	333,037		$	291,190		$	41,243			14.37	%

Our food and beverage sales for the three months ended September 30, 2012 were $199,075 compared to $175,242 in the three months ended September 30, 2011. This resulted in an increase in food and beverage sales of $23,833, or 13.60%, from the same period a year ago. We offer a healthy alternative to typical child friendly restaurants, offering appetizing menu options that incorporate nutritious ingredients some children would normally shy away from. We are continuously evaluating and modifying our menu to accommodate guest requests. During July 2011, we obtained our liquor license and began to offer alcoholic beverages. To date, we have realized modest sales volumes related to the purchases of alcoholic beverages by our customers.

Our private party rentals for the three months ended September 30, 2012 were $70,875 compared to $81,791 in the three months ended September 30, 2011. This resulted in a decrease in private party rentals of $10,916, or 13.35%, from the same period a year ago. Party rentals range from as few as 15 guests up to 200 and contribute significantly to our revenues. Private party rentals accounted for over 21% of net sales during the three months ended September 30, 2012 and over 28% in the three months ended September 30, 2011. We believe that party revenue will continue to be a significant contributor to net sales and we plan to work diligently to advertise the availability of and attract future parties. Management believes that party revenue will tend to be cyclical; the first fiscal quarter of the year is a typically slower period for parties, as there are fewer major holidays compared to the fourth quarter, for example. As a result, management expects revenues from parties to increase during the summer months and winter, while the first and third quarters may experience some weakness.

Sales from other sources include the fee we charge for guests to access our over 2,000 square-foot children’s play area, sales of our one-, three- or six-month membership cards entitling entrance to the play area at a discounted price and sales from Giggles N Hugs-branded merchandise. Other sales for the three months ended September 30, 2012 were $79,828 compared to $62,843 in the three months ended September 30, 2011. This resulted in an increase in sales of $16,985, or 27.03%, from the same period a year ago. Management attributes this to our own internal marketing efforts, as well as the Westfield Century City Mall holding periodic events to boost traffic to the mall, in general.

5

Allowances, returns and discounts for the three months ended September 30, 2012 were $16,741 compared to $28,686 in the three months ended September 30, 2011. This resulted in an decrease in allowances, returns and discounts of $11,945, or (41.64)%, from the same period a year ago. We believe 2011 allowances were higher primarily because we offered a greater number of coupons and discounts to attract customers to our location, which had only opened its doors in December 2010. We hope to reduce our reliance on the use of coupons and discounts to attract customers in future periods.

COSTS AND OPERATING EXPENSES

	Three Months Ended September 30,						Increase (Decrease)
	2012			2011			$			%
Costs and operating expenses:
Cost of sales including food and beverage	$	78,516		$	69,427		$	9,089			13.09	%
Labor		97,109			130,986			(33,877	)		(25.86	)%
Occupancy cost		62,323			56,014			6,309			11.26	%
Depreciation		26,101			25,449			652			2.56	%
Total operating expenses	$	264,049		$	281,876		$	(17,826	)		(6.32	)%
Other Expenses
Executive compensation		108,783			-			108,783			*
Non-employee stock based compensation		62,900			-			62,900			*
Consulting expenses		12,000			26,306			(14,306	)		(54.38	)%
Professional expenses		80,320			71,412			8,908			12.47	%
General and administrative expenses		19,753			109,746			(89,993	)		(82.00	)%
Total other expenses		283,756			207,464			76,292			36.77	%
Total costs and operating expenses		547,805			489,338			58,467			11.95	%
Net Loss	$	(214,768	)	$	(198,148	)	$	(16,620	)		(8.39	)%

* Not divisible by zero.

Notes to Costs and Operating Expenses table:

Cost of sales. Costs related to food purchases, supplies and general restaurant operations totaled $78,516 during the three months ended September 30, 2012, which was 13.09% higher than cost of sales of $69,427 in the three months ended September 30, 2011. Food costs fluctuate regularly and are difficult to offset or minimize. Any increase in costs of certain commodities could adversely impact our operations unless we pass any such price increases to our guests.

Labor. Labor expenses for the three months ended September 30, 2012 was $97,109, a decrease of 25.86%, from the three months ended September 30, 2011. We are a customer service company and our primary variable cost is related to providing such services. As a result, labor costs comprised 36.8% of our total expenses during the three months ended September 30, 2012, compared to 46.5% in the comparable period ended September 30, 2011. Labor costs are constantly fluctuating and any changes to minimum wages payable could adversely impact our operations.

Occupancy Cost. Occupancy cost for the three months ended September 30, 2012 was $62,323, an increase of 11.26%, from the three months ended September 30, 2011. Rent and other related items should not materially vary from period to period.

6

Depreciation. Depreciation for the three months ended September 30, 2012 was $26,101, an increase of 2.56%, from the three months ended September 30, 2011. We depreciate and amortize purchases of our ongoing capital investments and the construction and leasehold improvements related to the development of our Century City store. On March 23, 2012, we entered into a lease to develop a new location in Topanga, California, for which we expect to incur further construction costs that will be depreciated and amortized in future periods.

Executive Compensation. During the three months ended September 30, 2012, executive compensation increased $108,783 from $0 for the three months ended September 30, 2011.

Non-Employee Stock Based Compensation. During the three ended September 30, 2012 we incurred non-cash non-employee stock based compensation charges of $62,900. In the three month period ending September 30, 2012, the Company issued 340,000 shares of common stock shares for stock issuances for professional and advisory services.

Consulting Expenses. In the three months ended September 30, 2012, we incurred consulting expense of $12,000, compared to $26,306 in the comparable period ended September 30, 2011. Our management expects consulting fees to continue to decline during the fiscal year 2012. Unfortunately, there can be no assurance we will experience any such decline in consulting expenses.

Professional Expenses. Professional fees for the three months ended September 30, 2012 was $80,320, an increase of 12.47%, from the three months ended September 30, 2011, in which we incurred $71,412 in professional fees. These fees primarily include accounting fees, fees related to the audit of our financial statements, legal fees and fees incurred from other professional service firms. We expect to continue to incur professional fees in relation to maintaining our public reporting status with the Securities and Exchange Commission.

General and Administrative. In the normal course of our operations, we incur various expenses, including, but not limited to, legal fees, accounting fees, advertising and promotion, utilities, office supplies and postage and shipping expenses. During the three months ended September 30, 2012, general and administrative expenses were $19,753, compared to $109,745 in the three months ended September 30, 2011.

Net Loss

Our net loss before tax for the three months ended September 30, 2012 was $214,768, an increase of $16,619, or 8.39%, from $198,149 for the three months ended September 30, 2011. We continue to have a net loss and believe the loss will be reduced and profitability will be attained in future quarters as the popularity of our restaurants increase.

Results of Operations for the Nine Months Ended September 30, 2012 and September 30, 2011:

REVENUE

	Nine Months Ended September 30,						Increase (Decrease)
	2012			2011			$		%
Revenue:
Food and beverage sales	$	534,885		$	503,939		$	30,946		6.14	%
Private party rentals		266,824			228,214			38,610		16.92	%
Other sales		213,718			176,661			37,057		20.98	%
Allowances, returns and discounts		(40,516	)		(83,854	)		43,338		(51.68	)%
Net sales	$	974,911		$	824,960		$	149,951		18.18	%

7

Our food and beverage sales for the nine months ended September 30, 2012 were $534,885 compared to $503,939 in the nine months ended September 30, 2011. This resulted in an increase in food and beverage sales of $30,946, or 6.14%, from the same period a year ago. We offer a healthy alternative to typical child friendly restaurants, offering appetizing menu options that incorporate nutritious ingredients some children would normally shy away from. We are continuously evaluating and modifying our menu to accommodate guest requests. During July 2011, we obtained our liquor license and began to offer alcoholic beverages. To date, we have realized modest sales volumes related to the purchases of alcoholic beverages by our customers.

Our private party rentals for the nine months ended September 30, 2012 were $266,824 compared to $228,214 in the nine months ended September 30, 2011. This resulted in an increase in private party rentals of $38,610, or 16.92%, from the same period a year ago. Party rentals range from as few as 15 guests up to 200 and contribute significantly to our revenues. Private party rentals accounted for over 27.4% of net sales during the nine months ended September 30, 2012 and 27.7% in the nine months ended September 30, 2011. We believe that party revenue will continue to be a significant contributor to net sales and we plan to work diligently to advertise the availability of and attract future parties. Management believes that party revenue will tend to be cyclical; the first fiscal quarter of the year is a typically slower period for parties, as there are fewer major holidays compared to the fourth quarter, for example. As a result, management expects revenues from parties to increase during the summer months and winter, while the first and third quarters may experience some weakness.

Sales from other sources include the fee we charge for guests to access our over 2,000 square-foot children’s play area, sales of our one-, three- or six-month membership cards entitling entrance to the play area at a discounted price and sales from Giggles N Hugs-branded merchandise. Other sales for the nine months ended September 30, 2012 were $213,718 compared to $176,661 in the nine months ended September 30, 2011. This resulted in an increase in sales of $37,057, or 20.98%, from the same period a year ago. Management attributes this to our own internal marketing efforts, as well as the Westfield Century City Mall holding periodic events to boost traffic to the mall, in general.

Allowances, returns and discounts for the nine months ended September 30, 2012 were $40,516 compared to $83,854 in the nine months ended September 30, 2011. This resulted in a decrease in allowances, returns and discounts of $43,338, or 51.68%, from the same period a year ago. We believe 2011 allowances were higher primarily because we offered a greater number of coupons and discounts to attract customers to our location, which had only opened its doors in December 2010. We hope to reduce our reliance on the use of coupons and discounts to attract customers in future periods.

COSTS AND OPERATING EXPENSES

	Nine Months Ended September 30,						Increase (Decrease)
	2012			2011			$			%
Costs and operating expenses:
Cost of sales including food and beverage	$	217,321		$	204,742		$	12,579			6.14	%
Labor		329,485			388,573			(59,088	)		(15.21	)%
Occupancy cost		181,790			182,277			(487	)		(0.27	)%
Depreciation		77,633			76,062			1,571			2.07	%
Total operating expenses	$	806,229		$	851,653		$	(45,424	)		(5.33	)%
Other Expenses
Executive compensation		318,458			38,269			280,189			732.16	%
Employee stock based compensation		1,100,883			-			1,100,883			*
Non-employee stock compensation		115,380			-			115,380			*
Consulting expenses		27,000			417,895			(390,895	)		(93.54	)%
Professional expenses		235,349			202,182			33,167			16.40	%
General and administrative expenses		150,066			214,693			(64,627	)		(30.10	)%
Total other expenses		1,947,136			873,039			1,074,097			123.03	%
Total costs and operating expenses		2,753,365			1,724,692			1,029,672			59.64	%
Net Loss before tax	$	(1,778,454	)	$	(899,732	)	$	(878,722	)		97.66	%

Notes to Costs and Operating Expenses table:

* Not divisible by zero.

8

Cost of sales. Costs related to food purchases, supplies and general restaurant operations totaled $217,321 during the nine months ended September 30, 2012, which was 6.14% higher than cost of sales of $204,742 in the nine months ended September 30, 2011. Food costs fluctuate regularly and are difficult to offset or minimize. Any increase in costs of certain commodities could adversely impact our operations unless we pass any such price increases to our guests.

Labor. Labor expenses for the nine months ended September 30, 2012 was $329,485, a decrease of 15.21%, from the nine months ended September 30, 2011. We are a customer service company and our primary variable cost is related to providing such services. As a result, labor costs comprised 40.8% of our total expenses during the nine months ended September 30, 2012, compared to 45.6% in the comparable period ended September 30, 2011. Labor costs are constantly fluctuating and any changes to minimum wages payable could adversely impact our operations.

Occupancy Cost. Occupancy cost for the nine months ended September 30, 2012 was $181,790, a decrease of 0.27%, from the nine months ended September 30, 2011. Rent and other related items should not materially vary from period to period.

Depreciation. Depreciation for the nine months ended September 30, 2012 was $77,633, an increase of 2.07%, from the nine months ended September 30, 2011. We depreciate and amortize purchases of our ongoing capital investments and the construction and leasehold improvements related to the development of our Century City store. On March 23, 2012, we entered into a lease to develop a new location in Topanga, California, for which we expect to incur further construction costs that will be depreciated and amortized in future periods.

Executive Compensation. During the nine months ended September 30, 2012, executive compensation increased $280,189 or 732.16%, to $318,458 from $38,269 for the nine months ended September 30, 2011. The comparative increase in executive compensation is primarily attributable to the addition of our chief operating officer in the first quarter of 2012 and the compensation of our chief executive officer beginning in the current year.

Employee Stock-Based Compensation. During the period ended September 30, 2012, we incurred employee stock-based compensation expenses of $891,383 from the issuances of employee incentive stock options. The incentive stock options were valued using the Black Scholes method, with 225,000 options becoming exercisable immediately. There were no stock option issuances in the prior year period. Furthermore, the Company authorized 50,000 shares of common stock valued at $209,500 to the Chief Operating Officer upon employment in February 2012.

Non-Employee Stock Based Compensation. During the nine months ended September 30, 2012 we incurred non-cash non-employee stock based compensation charges of $115,380. In the nine month period ending September 30, 2012, the Company issued 372,000 shares of common stock shares for stock issuances for professional and advisory services.

Consulting Expenses. In the nine months ended September 30, 2012, we incurred consulting expense of $27,000, compared to $417,895 in the comparable period ended September 30, 2011. The consulting expense primarily related to the preparation for the December 2011 reverse merger, and we expect the majority of fees paid to consultants in 2011 were non-recurring. Our management expects consulting fees to continue to decline during the fiscal year 2012. Unfortunately, there can be no assurance we will experience any such decline in consulting expenses.

Professional Expenses. Professional fees for the nine months ended September 30, 2012 was $235,349, an increase of 16.40%, from the nine months ended September 30, 2011, in which we incurred $202,182 in professional fees. These fees primarily include accounting fees, fees related to the audit of our financial statements, legal fees and fees incurred from other professional service firms. We expect to continue to incur professional fees in relation to maintaining our public reporting status with the Securities and Exchange Commission.

General and Administrative. In the normal course of our operations, we incur various expenses, including, but not limited to, legal fees, accounting fees, advertising and promotion, utilities, office supplies and postage and shipping expenses. During the nine months ended September 30, 2012, general and administrative expenses were $150,066, compared to $214,693 in the nine months ended September 30, 2011.

9

Net Loss

Our net loss before tax for the nine months ended September 30, 2012 was $1,778,454 an increase of $878,722, or 97.66%, from $899,732 for the nine months ended September 30, 2011. Included in the loss was stock-based compensation of $1,100,883 for the nine months ended September 30, 2012. We continue to have a net loss and believe the loss will be reduced and profitability will be attained in future quarters as the popularity of our restaurants increase.

LIQUIDITY AND CAPITAL RESOURCES

As of September 30, 2012, we had $94,725 in cash and equivalents, $15,055 in inventory and $3,487 in prepaid expenses. The following table provides detailed information about our net cash flow for all financial statement periods presented in this Report. To date, we have financed our operations through the issuance of stock and borrowings, in addition to sales-generated revenue.

The following table sets forth a summary of our cash flows for the nine months ended September 30, 2012 and 2011:

	Nine Months Ended September 30,
	2012			2011
Net cash used in operating activities	$	(425,939	)	$	(923,331	)
Net cash used in investing activities		(162,645	)		(40,324	)
Net cash provided by financing activities		75,000			1,980,433
Net (decrease) increase in Cash		(513,584	)		1,016,778
Cash, beginning of period		608,309			15,584
Cash, end of period	$	94,725		$	1,032,362

Operating activities

Net cash used in operating activities was $425,939 for the nine months ended September 30, 2012, as compared to $923,331 used in operating activities for the same period in 2011.

Investing activities

Net cash used in investing activities for acquisition of fixed assets was $162,645 for the nine months ended September 30, 2012, as compared to $40,324 used in investing activities for the same period in 2011.

Financing activities

Net cash provided by financing activities for the nine months ended September 30, 2012 was $75,000, as compared to $1,980,433 for the same period of 2011.

We expect to use our cash to invest in our core businesses, including new product innovations, advertising and marketing, as well as the construction and build-out of additional restaurant locations. Other than normal operating expenses, cash requirements for fiscal 2012 are expected to consist primarily of capital expenditures for the build out of our Topanga, California stores and additional investments in advertising and marketing efforts.

10

Off-Balance Sheet Arrangements

We did not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.

Operation Plan

Our overall business plan is to expand and grow our restaurants and increase revenues. Subject to availability of sufficient capital, our business and strategy will be directed toward the following approaches.

Company-Owned Restaurants. One near term strategy is to explore opening company-owned and/or managed restaurants within the next twelve months. Currently, we are in discussions with The Westfield Group to potentially open new Giggles N Hugs restaurants in suitable markets within their West Coast locations. In March 2012, we signed a 10-year commercial lease for 5,900 square feet of space at The Westfield Topanga Shopping Center in the San Fernando Valley. We anticipate each location costing a total of $1.1 million to open.

Franchising. In addition to, or in lieu of our company-owned restaurants, we believe we can efficiently grow our operations by franchising our stores to a well-qualified and financed franchising group for large scale development. Currently, we have no plans to franchise our stores unless we get an experienced franchisor to do multiple locations and that will maintain the quality, atmosphere, and reputation of our brand.

Existing Services. We plan to further market and promote our existing products and designs directly to consumers. In addition, we plan to constantly refine and improve our food products. This is ongoing. This initiative includes new menu items, new activities, and expanding our marketing through social networks like Facebook and Twitter.

New Products and Services. We are currently expanding, and intend to further expand, our product and service offerings. Some of the new products and services include:

● Curb-side take-out. As with many restaurants with no drive-thru, we have established a curb-side, take-out service for our customers. Since the majority of our patrons are parents, convenient take-out is a significant factor. The ease of not having to remove kids from their car-seats when purchasing food is a significant factor for return patronage. This service is now available at our Century City location.

● Drop-off service. We offer “drop-off” service where parents can drop off their kids at our unique restaurant to play while they go shopping in the mall. Parents must agree to remain on the premises of the mall, while we supervise their children. Our play aides supervise and interact with up to four children at a time and the service costs $14.00 per hour. This service is now available at our Century City location.

11

● Beer/Wine license. Parents have enquired about beer and/or wine to accompany their meals. Since margins from alcoholic beverages are often high, we believe this would increase our revenues without a proportional increase in costs. We recently acquired our beer and wine license for the Century City location. This service is now available at out Century City location.

● Furniture and Equipment Referrals. Parents frequently ask us where to purchase various furniture, fixtures, toys, and equipment inside our play area. We are in discussions with a baby products supplier to potentially receive commissions for each referral. We have been in active discussions with manufacturers but have not come to any definitive agreement.

● Baby food. As part of our branding, we may add Giggles N Hugs baby foods for toddlers too young for solid foods. We already offer mashed bananas, and pureed butternut squash. Currently, we are not planning on the branding initiative at this time.

● Merchandising. We intend to sell books, stuffed animals, toys, cups, t-shirts, and balls all with the Giggles N Hugs logo. We are in active discussions with potential manufacturers and licensing agencies but we are 6 to 12 months away from any products.

● Gift Certificates. We offer gift certificates of different denominations for people of all ages.

Without sufficient cash flow from operations we will require additional cash resources, including the sale of equity or debt securities, to meet our planned capital expenditures and working capital requirements for the next 12 months. We will require additional cash resources due to changed business conditions, implementation of our strategy to successfully expand our operations. If our own financial resources and then current cash-flows from operations are insufficient to satisfy our capital requirements, we may seek to sell additional equity or debt securities or obtain additional credit facilities. The sale of additional equity securities will result in dilution to our stockholders. The incurrence of indebtedness will result in increased debt service obligations and could require us to agree to operating and financial covenants that could restrict our operations or modify our plans to grow the business. Financing may not be available in amounts or on terms acceptable to us, if at all. Any failure by us to raise additional funds on terms favorable to us, or at all, will limit our ability to expand our business operations and could harm our overall business prospects.

Item 3. Quantitative and Qualitative Disclosure About Market Risk

This item is not applicable as we are currently considered a smaller reporting company.

Item 4T. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Our Principal Executive Officer and Principal Financial Officer, Joey Parsi, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended) as of the end of the period covered by this Report. Based on his evaluation, he concluded that our disclosure controls and procedures are not designed at a reasonable assurance level and are not effective to provide reasonable assurance that information we are required to disclose in the reports that we file or submit under the Exchange Act 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 our management, including our principal executive officer and principal financial officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

12

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting that occurred during our most recent fiscal quarter that have materially affected, or reasonably likely to materially affect, our internal control over financial reporting.

Limitations on Effectiveness of Controls and Procedures

In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply its judgment in evaluating the benefits of possible controls and procedures relative to their costs.

PART II—OTHER INFORMATION

Item 1. Legal Proceedings.

The Company, the Company’s CEO, Joey Parsi, and a third party, were named in a complaint filed on July 19, 2012 in the Los Angeles Superior Court by Alex Nerush and Preferred Scan, Inc., that alleges fraud, negligent misrepresentation, sale of securities by unlicensed broker, sale of securities by means of false and misleading statements, and money had and received.

The Company does not believe there is any merit to the allegations and will vigorously defend this action. Furthermore, on September 24, 2012 the Company and the Company’s CEO, Joey Parsi counter-sued Richard Steele, Jr., Donald Stoecklein, Anthony Risas for breach of fiduciary duty, breach of contract, negligence and negligent misrepresentation, fraud and indemnity.

As of the date of this Report, the Company was not subject to any other material legal proceedings. From time to time, however, the Company is named as a defendant in legal actions arising from normal business activities. Although the Company cannot accurately predict the amount of its liability, if any, that could arise with respect to currently pending legal actions, it is not expected that any such liability will have a material adverse effect on the Company’s financial position, operating results or cash flows.

Item 1A. Risk Factors

Our significant business risks are described in Item 1A to Form 10-K for the year ended December 31, 2011 to which reference is made herein.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

Stock Issuances

On August 22, 2012, we authorized the issuance of 75,000 shares of common stock to an investor in conjunction with a $75,000 private placement. As of the date of this filing, the shares have not been issued.

13

We believe that the issuance and sale of the above securities was exempt from the registration and prospectus delivery requirements of the Securities Act of 1933 by virtue of Section 4(2) and Regulation D Rule. The securities were sold directly by us and did not involve a public offering or general solicitation. The recipients of the securities were afforded an opportunity for effective access to files and records of the Company that contained the relevant information needed to make their investment decision, including the financial statements and 34 Act reports . We reasonably believed that the recipients, immediately prior to the sale of the securities, were accredited investors and had such knowledge and experience in our financial and business matters that they were capable of evaluating the merits and risks of their investment. The management of the recipients had the opportunity to speak with our management on several occasions prior to their investment decision. There were no commissions paid on the issuance and sale of the securities.

Issuer Purchases of Equity Securities

We did not repurchase any of our equity securities from the time of our inception through the period ended September 30, 2012.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information.

Item 6. Exhibits.

Exhibit No.	Description
31.1**	Certification of Principal Executive Officer & Principal Financial Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1**	Certifications of Principal Executive Officer & Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS*	XBRL Instance Document
101.SCH*	XBRL Taxonomy Extension Schema
101.CAL*	XBRL Taxonomy Extension Calculation Linkbase
101.DEF*	XBRL Taxonomy Extension Definition Linkbase
101.LAB*	XBRL Taxonomy Extension Label Linkbase
101.PRE*	XBRL Taxonomy Extension Presentation Linkbase

* XBRL (Extensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.

** Filed herewith

14

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	GIGGLES N’ HUGS, INC.
Date: May 03, 2013	By:	/s/ Joey Parsi
		Joey Parsi
		Chief Executive Officer
		(Principal Executive Officer and duly authorized signatory)

15

EX-31.1

EXHIBIT 31.1

CERTIFICATION

I, Joey Parsi, certify that:

1. I have reviewed the amendment no. 2 to the Quarterly Report on Form 10-Q/A of Giggles N’ Hugs, Inc. (the “Company”);

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 Company as of, and for, the periods presented ire this report;

4. The Company’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)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Company 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 Company, 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. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. Evaluated the effectiveness of the Company’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

d. Disclosed in this report any change in the Company’s internal control over financial reporting that occurred during the Company’s most recent fiscal quarter (the Company’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting; and

5. The Company’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Company’s auditors and the audit committee of the Company’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 Company’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 Company’s internal control over financial reporting.

Date: May 03, 2013

/s/ Joey Parsi 

Joey Parsi

Principal Executive Officer

and Principal Financial Officer

EX-32.1

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 amendment no. 2 to the Quarterly Report of Giggles N’ Hugs, Inc. (the “Company”) on Form 10-Q/A for the period ended September 30, 2012, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Joey Parsi, Principal Executive Officer and Principal Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

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

Date: May 03, 2013
	/s/ Joey Parsi
	Joey Parsi
	Principal Executive Officer
	and Principal Financial Officer

XML

Schedule of Fixed Assets (Details) (USD $)	Sep. 30, 2012	Dec. 31, 2011
Fixed assets:
Leasehold improvements	$ 1,116,680	$ 958,538
Fixtures and equipment	24,137	21,887
Computer software and equipment	12,162	9,909
Property and equipment, total	1,152,980	990,334
Less: accumulated depreciation	(186,969)	(109,336)
Property and equipment, net	$ 966,011	$ 880,999

XML

Commitments And Contingencies - Aggregate Minimum Annual Lease Payments Under Operating Leases (Details) (USD $)	Sep. 30, 2012
2012	$ 45,979
2013	188,975
2014	194,644
2015	200,483
2016	206,498
2017	212,692
Thereafter	482,983
Total	1,532,254
Westfield Topanga Owner, LP [Member]
2013	212,400
2014	220,896
2015	229,732
2016	238,921
2017	248,478
Thereafter	1,714,073
Total	$ 2,864,500

XML

Stock Options - Weighted-Average Fair Value of Stock Options Granted to Employees (Details) (USD $)	9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]
Risk-free interest rate at grant date	0.78%	0.00%
Expected stock price volatility	139.00%	0.00%
Expected dividend payout	0.00%	0.00%
Expected option life (in years)	5 years
Expected forfeiture rate	$ 0.00	$ 0.00
Fair value per share of options granted	$ 3.96	$ 0

XML

Restatement of Financial Statement - Schedule of Retatement of Consolidated Statements of Operations (Details) (USD $)	1 Months Ended	3 Months Ended		9 Months Ended
	Feb. 28, 2012	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011
Food and beverage sales		$ 199,075	$ 175,242	$ 534,885	$ 503,939
Private party rentals		70,875	81,791	266,824	228,214
Other sales		79,828	62,843	213,718	176,661
Allowances, returns and discounts		(16,741)	(28,686)	(40,516)	(83,854)
Net sales		333,037	291,190	974,911	824,960
Cost of sales including food and beverage		78,516	69,427	217,321	204,742
Labor		97,109	130,986	329,485	388,573
Occupancy cost		62,323	56,014	181,790	182,277
Depreciation		26,101	25,449	77,633	76,062
Total operating expenses		264,049	281,875	806,229	851,653
Executive compensation		108,783		318,458	38,269
Executive stock-based compensation	209,500
Employee sstock-based compensation				1,100,883
Non-employee stock based compensation		62,900		115,380
Consulting expenses		12,000	26,306	27,000	417,895
Professional expenses		80,320	71,412	235,349	202,182
General and administrative expenses		19,753	109,746	150,066	214,693
Total costs and operating expenses		547,805	489,338	2,753,365	1,724,692
Loss before provision for income taxes		(214,768)	(198,148)	(1,778,454)	(899,732)
Provision for income taxes				(1,600)
Net loss		(214,768)	(198,148)	(1,780,054)	(899,732)
Net loss per share - basic		$ (0.01)	$ (0.01)	$ (0.08)	$ (0.05)
Weighted average number of common shares outstanding - basic		22,875,692	18,854,020	22,875,692	18,709,590
As Filed [Member]
Food and beverage sales				534,885
Private party rentals				266,824
Other sales				213,718
Allowances, returns and discounts				(40,516)
Net sales				974,911
Cost of sales including food and beverage				217,321
Labor				329,485
Occupancy cost				181,790
Depreciation				77,633
Total operating expenses				806,229
Executive compensation				318,458
Executive stock-based compensation				209,500
Employee sstock-based compensation
Non-employee stock based compensation				115,380
Consulting expenses				27,000
Professional expenses				235,349
General and administrative expenses				150,066
Total costs and operating expenses				1,861,982
Loss before provision for income taxes				(887,071)
Provision for income taxes				(1,600)
Net loss				(888,671)
Net loss per share - basic				$ (0.04)
Weighted average number of common shares outstanding - basic				22,875,692
Adjustment [Member]
Executive stock-based compensation				(209,500)
Employee sstock-based compensation				1,100,883
Total costs and operating expenses				891,383
Loss before provision for income taxes				(891,383)
Net loss				$ (891,383)

XML

Deferred Revenue (Tables)

9 Months Ended

Sep. 30, 2012

Deferred Revenue [Abstract]

Schedule of Deferred Revenue

Deferred revenue consisted of the following at:

	September 30, 2012		December 31, 2011
Membership cards	$	2,905	$	2,225
Gift cards		3,626		3,001
Party deposits		10,599		11,716
Total	$	17,130	$	16,942

XML

Stockholders' Equity (Details Narrative) (USD $)			0 Months Ended		3 Months Ended
	Sep. 30, 2012	Dec. 31, 2011	Jun. 11, 2012 Consulting Services [Member]	Jun. 11, 2012 Internet Design And Consulting Services [Member]	Sep. 30, 2012 Investor Relation Services [Member]	Sep. 30, 2012 Financial And Governance Reporting Services [Member]	Sep. 30, 2012 Financial Consulting Services [Member]	Sep. 30, 2012 Advisory Board Services [Member]	Sep. 30, 2012 Advisory Board Services One[Member]	Mar. 31, 2012 Sean Richards [Member]	Sep. 30, 2012 Investor [Member]	Jul. 15, 2010 Minimum [Member]	Jul. 15, 2010 Maximum [Member]
Common stock, shares authorized	1,125,000,000	1,125,000,000										75,000,000	1,125,000,000
Stock issued during period for services, shares			25,000	7,000	15,000	10,000	25,000	20,000	220,000	50,000	75,000
Stock issued during period for services			$ 41,000	$ 11,480	$ 22,500	$ 10,000	$ 36,000	$ 6,000	$ 316,800	$ 209,500	$ 75,000

XML

Schedule of Inventory (Details) (USD $)	Sep. 30, 2012	Dec. 31, 2011
Inventory Tables
Restaurant and food and supplies	$ 15,055	$ 14,297
Inventory net	$ 15,055	$ 14,297

XML

Commitments and Contingencies (Details Narrative) (USD $)	3 Months Ended		9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011	Mar. 23, 2012 sqft
Remaining restaurant operating lease, term			10 years
Rent expense	$ 46,181	$ 37,246	$ 104,299	$ 98,598
Minimum [Member]
Percentage of sales range			7.00%
Maximum [Member]
Percentage of sales range			10.00%
Westfield Topanga Owner, LP [Member]
Rent expense	0	0	0	0
Construction reimbursement allowance			$ 475,000
Number of square feet for operating lease					5,900
Expiration date of Lease			Apr. 30, 2022
Westfield Topanga Owner, LP [Member] | Minimum [Member]
Percentage of sales range			7.00%
Westfield Topanga Owner, LP [Member] | Maximum [Member]
Percentage of sales range			10.00%

XML

Restatement of Financial Statement

9 Months Ended

Sep. 30, 2012

Restatement Of Financial Statement

Restatement of Financial Statement

NOTE 4 – RESTATEMENT OF FINANCIAL STATEMENT

We have restated our previously issued consolidated financial statements as of and for the three and nine months ended September 30, 2012 to correct errors and reclassifications in the accounting for the following:

● Total stock-based compensation expense in connection with the 225,000 options granted to employees in February 2012 valued at $891,383 was not correctly recognized in the consolidated financial statements for the nine months ended September 30, 2012 in accordance with Accounting Standards Codification (“ASC”) 718 “Compensation - Stock Compensation”).

● 50,000 shares of common stock valued at $209,500 to the Chief Operating Officer upon employment in February 2012 previously included in executive stock-based compensation is now included in the employee stock-based compensation.

The following tables summarize the effect of the restatement on the specific items presented in our historical consolidated financial statements included in our Quarterly Report on Form 10-Q for the nine months ended September 30, 2012:

GIGGLES N HUGS, INC.

CONSOLIDATED BALANCE SHEETS

(unaudited)

	September 30, 2012			Adjustment			September 30, 2012
	(As Filed)						(As Restated)
Assets
Current assets:
Cash and equivalents	$	94,725		$	-		$	94,725
Inventory		15,055			-			15,055
Prepaid stock compensation		328,400			-			328,400
Prepaid expenses		3,487			-			3,487
Total current assets		441,667			-			441,667
Fixed assets:
Total fixed assets, net		966,011			-			966,011
Other assets:
Security deposits		32,500			-			32,500
Total assets	$	1,440,178		$	-		$	1,440,178
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	127,873		$	-		$	127,873
Incentive from less or – current portion		48,530			-			48,530
Accrued expenses		57,895			-			57,895
Deferred revenue		17,130			-			17,130
Total current liabilities		251,428			-			251,428
Long-term liabilities:
Incentive from lessor – long-term		498,862			-			498,862
Total long-term liabilities		498,862			-			498,862
Total liabilities		750,290			-			750,290
Stockholders’ equity:
Common stock, $0.001 par value, 1,125,000,000 shares authorized, 22,894,145 and 22,862,145 shares issued and outstanding as of September 30, 2012 and December 31, 2011, respectively		22,894			-			22,894
Common stock payable		675,800			-			675,800
Additional paid-in capital		2,053,616			891,383			2,944,999
Accumulated deficit		(2,062,422	)		(891,383	)		(2,953,805	)
Total stockholders’ equity		689,888			-			689,888
Total liabilities and stockholders’ equity	$	1,440,178		$	-		$	1,440,178

GIGGLES N HUGS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)

	For the nine months ended
	September 30, 2012
	As Filed			Adjustment			As Restated
Revenue
Food and beverage sales	$	534,885		$	-		$	534,885
Private party rentals		266,824			-			266,824
Other sales		213,718			-			213,718
Allowances, returns and discounts		(40,516	)		-			(40,516	)
Net sales		974,911			-			974,911
Costs and operating expenses
Cost of sales including food and beverage		217,321			-			217,321
Labor		329,485			-			329,485
Occupancy cost		181,790			-			181,790
Depreciation		77,633			-			77,633
Total operating expenses		806,229			-			806,229
Other expenses
Executive compensation		318,458			-			318,458
Executive stock-based compensation		209,500			(209,500	)		-
Employee stock-based compensation		-			1,100,883			1,100,883
Non-employee stock based compensation		115,380			-			115,380
Consulting expenses		27,000			-			27,000
Professional expenses		235,349			-			235,349
General and administrative expenses		150,066			-			150,066
Total costs and operating expenses		1,861,982			891,383			2,753,365
Loss before provision for income taxes	$	(887,071	)	$	(891,383	)	$	(1,778,454	)
Provision for income taxes	$	(1,600	)	$	-		$	(1,600
Net loss	$	(888,671	)	$	(891,383	)	$	(1,780,054	)
Net loss per share - basic	$	(0.04	)				$	(0.08	)
Weighted average number of common shares outstanding - basic		22,875,692						22,875,692

GIGGLES N HUGS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

	For the nine months ended September 30,
		2012			Adjustments			2012
Cash flows from operating activities
Net loss	$	(888,671	)		(891,383	)	$	(1,780,054	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		77,633			-			77,633
Stock based compensation		115,380			-			115,380
Employee stock based compensation		-			1,100,883			1,100,883
Shares issued for executive compensation		209,500			(209,500	)		-
Changes in operating assets and liabilities:
Increase in prepaid expenses and deposits		(5,987	)		-			(5,987	)
Increase in inventory		(758	)		-			(758	)
Increase in accounts payable		11,842			-			11,842
Increase in lease incentive liability		12,927			-			12,927
Increase in accrued expenses		42,007			-			42,007
Increase in deferred revenue		188			-			188
Net cash used in operating activities		(425,939	)		-			(425,939	)
Cash flows from investing activities
Acquisition of fixed assets		(162,645	)		-			(162,645	)
Net cash used in investing activities		(162,645	)		-			(162,645	)
Cash flows from financing activities
Proceeds from common stock payable		75,000			-			75,000
Net cash provided by financing activities		75,000			-			75,000
NET DECREASE IN CASH		(513,584	)		-			(513,584	)
CASH AT BEGINNING OF PERIOD		608,309			-			608,309
CASH AT END OF PERIOD	$	94,725		$	-		$	94,725
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid	$	-		$	-		$	-
Income taxes paid	$	-		$	-		$	-
NON-CASH INVESTING AND FINANCING ACTIVITIES:
Incentive from lessor	$	-		$	-		$	-
Liabilities assumed with the merger	$	-		$	-		$	-

XML

Stock Options (Detail Narratives) (USD $)	9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]
Stock-based compensation related to employee stock options	$ 891,383	$ 0

XML

Summary of Significant Accounting Policies (Details Narrative) (USD $)	9 Months Ended
	Sep. 30, 2012
Accounting Policies [Abstract]
Construction contributions	$ 590,000

XML

History and Organization (Details Narrative) (USD $)	0 Months Ended
	Dec. 30, 2011	Sep. 30, 2012	Dec. 31, 2011
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Common stock, shares authorized		1,125,000,000	1,125,000,000
Common stock, par value		$ 0.001	$ 0.001
Shares issued for acquisition	18,289,716
Cancellation of common stock, shares	47,607,500
Percentage of interest acquired	100.00%

XML

Stock Options - Schedule of Changes in Options Outstanding (Details) (USD $)	9 Months Ended
	Sep. 30, 2012	Dec. 31, 2011
Number of Options Outstanding	211,000
Weighted Average Exercise Price, Outstanding	$ 4.50
Weighted Average Remaining Contractual Life	4 years 1 month 2 days
Number of Options Exercisable	211,000
Weighted Average Exercise Price, Exercisable	$ 4.50
Range 1 [Member]
Range of Exercise Prices	$ 4.50
Number of Options Outstanding	211,000
Weighted Average Exercise Price, Outstanding	$ 4.34
Weighted Average Remaining Contractual Life	4 years 1 month 2 days
Number of Options Exercisable	211,000
Weighted Average Exercise Price, Exercisable	$ 4.50

XML

Summary of Significant Accounting Policies - Property and Equipment Estimated Useful Lives (Details)	9 Months Ended
	Sep. 30, 2012
Leasehold Improvements [Member]
Estimated useful lives	10 years
Restaurant Fixtures And Equipment [Member]
Estimated useful lives	10 years
Computer Software And Equipment [Member] | Minimum [Member]
Estimated useful lives	3 years
Computer Software And Equipment [Member] | Maximum [Member]
Estimated useful lives	5 years

XML

Restatement of Financial Statement (Details Narrative) (USD $)	1 Months Ended	9 Months Ended
	Feb. 28, 2012	Sep. 30, 2012
Restatement Of Financial Statement
Options granted to employees	225,000	225,000
Total stock-based compensation expense unrecognized		$ 891,383
Executive stock-based compensation, common stock shares	50,000
Executive stock-based compensation	$ 209,500

XML

Summary of Significant Accounting Policies

9 Months Ended

Sep. 30, 2012

Accounting Policies [Abstract]

Summary of Significant Accounting Policies

NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of consolidation

For the period ended September 30, 2012 and 2011, the consolidated financial statements include the accounts of Giggles N’ Hugs, Inc., GNH, Inc., GNH Topanga, Inc. and restaurant operations of Giggles N Hugs in Westfield mall in Century City, California. All significant intercompany balances and transactions have been eliminated. Giggles N’ Hugs, Inc., GNH, Inc., GNH Topanga, Inc. and restaurant operations of Giggles N Hugs in Westfield mall in Century City, California will be collectively referred herein to as the “Company”.

Use of estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ significantly from those estimates.

Cash and cash equivalents

For the purpose of the statements of cash flows, all highly liquid investments with an original maturity of three months or less are considered to be cash equivalents. The carrying value of these investments approximates fair value.

Inventories

Inventories are stated at the lower of cost or market on a first-in, first-out basis and consist of restaurant food and other supplies.

Property and equipment

The Company records all property and equipment at cost less accumulated depreciation. Improvements are capitalized while repairs and maintenance costs are expensed as incurred. Depreciation is calculated using the straight-line method over the estimated useful life of the assets or the lease term, whichever is shorter. Leasehold improvements include the cost of the Company’s internal development and construction department. Depreciation periods are as follows:

Leasehold improvements	10 years
Restaurant fixtures and equipment	10 years
Computer software and equipment	3 to 5 years

Leases

The Company currently leases its restaurant location. The Company evaluates the lease to determine its appropriate classification as an operating or capital lease for financial reporting purposes.

Minimum base rent for the Company’s operating leases, which generally have escalating rentals over the term of the lease, is recorded on a straight-line basis over the lease term. The initial rent term includes the build-out, or rent holiday period, for the Company’s leases, where no rent payments are typically due under the terms of the lease. Deferred rent expense, which is based on a percentage of revenue, is also recorded to the extent it exceeds minimum base rent per the lease agreement.

The Company disburses cash for leasehold improvements and furniture, fixtures and equipment to build out and equip its leased premises. The Company also expends cash for structural additions that it makes to leased premises of which $590,000 were reimbursed to the Century City location by its landlords as construction contributions pursuant to agreed-upon terms in the lease agreements. Landlord construction contributions usually take the form of up-front cash. Depending on the specifics of the leased space and the lease agreement, amounts paid for structural components are recorded during the construction period as leasehold improvements or the landlord construction contributions are recorded as an incentive from lessor.

Impairment of long-lived assets

The Company assesses potential impairment of our long-lived assets whenever events or changes in circumstances indicate that the carrying value of the assets or asset group may not be recoverable. Factors considered include, but are not limited to, significant underperformance relative to historical or projected future operating results; significant changes in the manner of use of the acquired assets or the strategy for the overall business; and significant negative industry or economic trends. The Company regularly reviews the restaurant if it is cash flow negative for the previous four quarters to determine if impairment testing is warranted. At any given time, the Company may monitor its operations, and impairment charges could be triggered in the future if the restaurant performance does not improve.

The Company has identified leasehold improvements as the primary asset because it is the most significant component of our restaurant assets, it is the principal asset from which the Company derives cash flow generating capacity and has the longest remaining useful life. The recoverability is assessed in most cases by comparing the carrying value of the assets to the undiscounted cash flows expected to be generated by these assets. Impairment losses are measured as the amount by which the carrying values of the assets exceed their fair values.

During the nine months ended September 30, 2012 and 2011 we did not record an impairment charge against the carrying value of the restaurant located in Century City, California.

Stock-based compensation

The Company records stock based compensation in accordance with the guidance in ASC Topic 505 and 718 which requires the Company to recognize expenses related to the fair value of its employee stock option awards. This eliminates accounting for share-based compensation transactions using the intrinsic value and requires instead that such transactions be accounted for using a fair-value-based method. The Company recognizes the cost of all share-based awards on a graded vesting basis over the vesting period of the award.

The Company accounts for equity instruments issued in exchange for the receipt of goods or services from other than employees in accordance with FASB ASC 718-10 and the conclusions reached by the FASB ASC 505-50. Costs are measured at the estimated fair market value of the consideration received or the estimated fair value of the equity instruments issued, whichever is more reliably measurable. The value of equity instruments issued for consideration other than employee services is determined on the earliest of a performance commitment or completion of performance by the provider of goods or services as defined by FASB ASC 505-50.

Loss per common share

Net loss per share is provided in accordance with ASC Subtopic 260-10. We present basic loss per share (“EPS”) and diluted EPS on the face of statements of operations. Basic EPS is computed by dividing reported losses by the weighted average shares outstanding. Except where the result would be anti-dilutive to income from continuing operations, diluted earnings per share has been computed assuming the conversion of the convertible long-term debt and the elimination of the related interest expense, and the exercise of stock warrants. Loss per common share has been computed using the weighted average number of common shares outstanding during the year.

Fair Value of Financial Instruments

The carrying amounts reflected in the balance sheets for cash, accounts payable and accrued expenses approximate the respective fair values due to the short maturities of these items. The Company does not hold any investments that are available-for-sale.

As required by the Fair Value Measurements and Disclosures Topic of the FASB ASC, fair value is measured based on a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows: (Level 1) observable inputs such as quoted prices in active markets; (Level 2) inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and (Level 3) unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.

The three levels of the fair value hierarchy are described below:

Level 1: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;

Level 2: Quoted prices in markets that are not active, or inputs that are observable, either directly or indirectly, for substantially the full term of the asset or liability;

Level 3: Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (supported by little or no market activity).

Revenue recognition

Our revenues consist of sales from our restaurant operations and sales of memberships entitling members unlimited access to our play areas for the duration of their membership. As a general principle, revenue is recognized when the following criteria are met: (i) persuasive evidence of an arrangement exists, (ii) delivery has occurred and services have been rendered, (iii) the price to the buyer is fixed or determinable, and (iv) collectability is reasonably assured.

With respect to memberships, access to our play area extends throughout the term of membership. The vast majority of memberships sold are for one month terms. Revenue is recognized on a straight line basis over the membership period. Century City receives payment from its customers at the start of the subscription period and Century City records deferred revenue for the unearned portion of the subscription period.

Revenues from restaurant sales are recognized when payment is tendered at the point of sale. Revenues are presented net of sales taxes. The obligation is included in other accrued expenses until the taxes are remitted to the appropriate taxing authorities.

We recognize a liability upon the sale of our gift cards and recognize revenue when these gift cards are redeemed in our restaurants.

For party rental agreements, we rely upon a signed contract between us and the customer as the persuasive evidence of a sales arrangement. Party rental deposits are recorded as deferred revenue upon receipt and recognized as revenue when the service has been rendered.

Additionally, revenues are recognized net of any discounts, returns, allowances and sales incentives, including coupon redemptions and complimentary meals.

Recent pronouncements

The Company has evaluated the recent accounting pronouncements through August 2012 and believes that none of them will have a material effect on the company’s financial position, results of operations or cash flows.

XML

Restatement of Financial Statement - Schedule of Retatement of Consolidated Balance Sheet (Details) (USD $)	Sep. 30, 2012	Dec. 31, 2011	Sep. 30, 2011	Dec. 31, 2010
Cash and equivalents	$ 94,725	$ 608,309	$ 1,032,362	$ 15,584
Inventory	15,055	14,297
Prepaid stock compensation	328,400
Prepaid expenses	3,487
Total current assets	441,667	622,606
Total fixed assets, net	966,011	880,999
Security deposits	32,500	30,000
Total assets	1,440,178	1,533,605
Accounts payable	127,873	116,031
Incentive from lessor- current portion	48,530	44,406
Accrued expenses	57,895	15,888
Deferred revenue	17,130	16,942
Total current liabilities	251,428	193,267
Incentive from lessor - long-term	498,862	490,059
Total long-term liabilities	498,862	490,059
Total liabilities	750,290	683,326
Common stock, $0.001 par value, 1,125,000,000 shares authorized, 22,894,145 and 22,862,145 shares issued and outstanding as of September 30, 2012 and December 31, 2011, respectively	22,894	22,862
Common stock payable	675,800
Additional paid-in capital	2,944,999	2,001,168
Accumulated deficit	(2,953,805)	(1,173,751)
Total stockholders' equity	689,888	850,279
Total liabilities and stockholders' equity	1,440,178	1,533,605
As Filed [Member]
Cash and equivalents	94,725	608,309
Inventory	15,055
Prepaid stock compensation	328,400
Prepaid expenses	3,487
Total current assets	441,667
Total fixed assets, net	966,011
Security deposits	32,500
Total assets	1,440,178
Accounts payable	127,873
Incentive from lessor- current portion	48,530
Accrued expenses	57,895
Deferred revenue	17,130
Total current liabilities	251,428
Incentive from lessor - long-term	498,862
Total long-term liabilities	498,862
Total liabilities	750,290
Common stock, $0.001 par value, 1,125,000,000 shares authorized, 22,894,145 and 22,862,145 shares issued and outstanding as of September 30, 2012 and December 31, 2011, respectively	22,894
Common stock payable	675,800
Additional paid-in capital	2,053,616
Accumulated deficit	(2,062,422)
Total stockholders' equity	689,888
Total liabilities and stockholders' equity	1,440,178
Adjustment [Member]
Additional paid-in capital	891,383
Accumulated deficit	(891,383)
Total liabilities and stockholders' equity

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Deferred Revenue - Schedule of Deferred Revenue (Details) (USD $)	Sep. 30, 2012	Dec. 31, 2011
Deferred Revenue [Abstract]
Membership cards	$ 2,905	$ 2,225
Gift cards	3,626	3,001
Party deposits	10,599	11,716
Total	$ 17,130	$ 16,942

XML

Consolidated Balance Sheets (Unaudited) (USD $)	Sep. 30, 2012	Dec. 31, 2011	Sep. 30, 2011	Dec. 31, 2010
Current assets:
Cash and equivalents	$ 94,725	$ 608,309	$ 1,032,362	$ 15,584
Inventory	15,055	14,297
Prepaid stock compensation	328,400
Prepaid expenses	3,487
Total current assets	441,667	622,606
Fixed assets:
Total fixed assets, net	966,011	880,999
Other assets:
Security deposits	32,500	30,000
Total assets	1,440,178	1,533,605
Current liabilities:
Accounts payable	127,873	116,031
Incentive from lessor- current portion	48,530	44,406
Accrued expenses	57,895	15,888
Deferred revenue	17,130	16,942
Total current liabilities	251,428	193,267
Long-term liabilities:
Incentive from lessor - long-term	498,862	490,059
Total long-term liabilities	498,862	490,059
Total liabilities	750,290	683,326
Stockholders' equity:
Common stock, $0.001 par value, 1,125,000,000 shares authorized, 22,894,145 and 22,862,145 shares issued and outstanding as of September 30, 2012 and December 31, 2011, respectively	22,894	22,862
Common stock payable	675,800
Additional paid-in capital	2,944,999	2,001,168
Accumulated deficit	(2,953,805)	(1,173,751)
Total stockholders' equity	689,888	850,279
Total liabilities and stockholders' equity	$ 1,440,178	$ 1,533,605

XML

Stock Options - Summary of Stock Awards for Options (Details) (USD $)	1 Months Ended	9 Months Ended
	Feb. 28, 2012	Sep. 30, 2012
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]
Stock Options, Outstanding, Beginning balance
Stock Options, Granted	225,000	225,000
Stock Options, Exercised
Stock Options, Expired/Cancelled		14,000
Stock Options, Outstanding, Ending balance		211,000
Stock Options, Exercisable		211,000
Weighted Average Exercise Price, Outstanding, Beginning balance
Weighted Average Exercise Price, Granted		$ 4.50
Weighted Average Exercise Price, Exercised
Weighted Average Exercise Price, Expired/Cancelled
Weighted Average Exercise Price, Outstanding, Ending balance		$ 4.50
Weighted Average Exercise Price, Exercisable		$ 4.50

XML

History and Organization

9 Months Ended

Sep. 30, 2012

Organization, Consolidation and Presentation of Financial Statements [Abstract]

History and Organization

NOTE 1 – HISTORY AND ORGANIZATION

Giggles N’ Hugs, Inc. (“GIGL Inc”) was originally organized September 17, 2004 (Date of Inception) under the laws of the State of Nevada, as Teacher’s Pet, Inc. GIGL Inc was organized to sell teaching supplies and learning tools. On August 20, 2010, GIGL Inc filed an amendment to its articles of incorporation to change its name to Giggles N’ Hugs, Inc. The Company is authorized to issue 1,125,000,000 shares of its $0.001 par value common stock.

On December 30, 2011, GIGL Inc completed the acquisition of all the issued and outstanding shares of GNH, Inc. (“GNH”), a Nevada corporation, pursuant to a Stock Exchange Agreement (the “SEA”). Under the SEA, GIGL Inc issued 18,289,716 shares of its common stock to in exchange for a 100% interest in GNH, Inc. Additionally under the SEA, the former officer, director and shareholders of GIGL Inc agreed to cancel a total of 47,607,500 shares of its common stock.

For accounting purposes, the acquisition of GNH by GIGL Inc has been recorded as a reverse merger of a public company, with the exception that no goodwill is generated, and followed up with a recapitalization of GNH based on the factors demonstrating that GNH represents the accounting acquirer. As part of closing of the merger between GNH and GIGL Inc, GNH obtained 100% of the restaurant operations of Giggles N Hugs in Westfield mall in Century City, California. The restaurant operations of Giggles N Hugs in Westfield mall in Century City, California was originally formed April 30, 2010 and opened for operation December 3, 2010. Consequently, the historical financial information in the accompanying consolidated financial statements is that of GNH and the restaurant operations of Giggles N Hugs located in Century City, California. As a result of the Merger, GIGL Inc now owns all of the assets, liabilities and operations of a kid friendly restaurant named Giggles N Hugs in Westfield mall in Century City, California. Additionally, GIGL Inc obtained ownership to all intellectual property rights for Giggles N Hugs facilities in the future.

On December 30, 2011, the transactions were completed and resulted in a change in control of the Company. Pursuant to the terms of the Agreement, the Company accepted the resignation of its prior officer and director, Tracie Hadama and appointed Mr. Joey Parsi as President, Chief Executive Officer, Treasurer, and Secretary of the Company.

XML

Reclassification of Prior Year Presentation (Details Narrative) (USD $)	Sep. 30, 2012	Dec. 31, 2011
Reclassification Of Prior Year Presentation
Incentive from lessor	$ 498,862	$ 490,059

XML

Restatement of Financial Statement (Tables)

9 Months Ended

Sep. 30, 2012

Restatement Of Financial Statement

Schedule of Retatement of Consolidated Balance Sheet

GIGGLES N HUGS, INC.

CONSOLIDATED BALANCE SHEETS

(unaudited)

	September 30, 2012			Adjustment			September 30, 2012
	(As Filed)						(As Restated)
Assets
Current assets:
Cash and equivalents	$	94,725		$	-		$	94,725
Inventory		15,055			-			15,055
Prepaid stock compensation		328,400			-			328,400
Prepaid expenses		3,487			-			3,487
Total current assets		441,667			-			441,667
Fixed assets:
Total fixed assets, net		966,011			-			966,011
Other assets:
Security deposits		32,500			-			32,500
Total assets	$	1,440,178		$	-		$	1,440,178
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	127,873		$	-		$	127,873
Incentive from less or – current portion		48,530			-			48,530
Accrued expenses		57,895			-			57,895
Deferred revenue		17,130			-			17,130
Total current liabilities		251,428			-			251,428
Long-term liabilities:
Incentive from lessor – long-term		498,862			-			498,862
Total long-term liabilities		498,862			-			498,862
Total liabilities		750,290			-			750,290
Stockholders’ equity:
Common stock, $0.001 par value, 1,125,000,000 shares authorized, 22,894,145 and 22,862,145 shares issued and outstanding as of September 30, 2012 and December 31, 2011, respectively		22,894			-			22,894
Common stock payable		675,800			-			675,800
Additional paid-in capital		2,053,616			891,383			2,944,999
Accumulated deficit		(2,062,422	)		(891,383	)		(2,953,805	)
Total stockholders’ equity		689,888			-			689,888
Total liabilities and stockholders’ equity	$	1,440,178		$	-		$	1,440,178

Schedule of Retatement of Consolidated Statements of Operations

GIGGLES N HUGS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)

	For the nine months ended
	September 30, 2012
	As Filed			Adjustment			As Restated
Revenue
Food and beverage sales	$	534,885		$	-		$	534,885
Private party rentals		266,824			-			266,824
Other sales		213,718			-			213,718
Allowances, returns and discounts		(40,516	)		-			(40,516	)
Net sales		974,911			-			974,911
Costs and operating expenses
Cost of sales including food and beverage		217,321			-			217,321
Labor		329,485			-			329,485
Occupancy cost		181,790			-			181,790
Depreciation		77,633			-			77,633
Total operating expenses		806,229			-			806,229
Other expenses
Executive compensation		318,458			-			318,458
Executive stock-based compensation		209,500			(209,500	)		-
Employee stock-based compensation		-			1,100,883			1,100,883
Non-employee stock based compensation		115,380			-			115,380
Consulting expenses		27,000			-			27,000
Professional expenses		235,349			-			235,349
General and administrative expenses		150,066			-			150,066
Total costs and operating expenses		1,861,982			891,383			2,753,365
Loss before provision for income taxes	$	(887,071	)	$	(891,383	)	$	(1,778,454	)
Provision for income taxes	$	(1,600	)	$	-		$	(1,600
Net loss	$	(888,671	)	$	(891,383	)	$	(1,780,054	)
Net loss per share - basic	$	(0.04	)				$	(0.08	)
Weighted average number of common shares outstanding - basic		22,875,692						22,875,692

Schedule of Retatement of Consolidated Statements of Cash Flows

GIGGLES N HUGS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

	For the nine months ended September 30,
		2012			Adjustments			2011
Cash flows from operating activities
Net loss	$	(888,671	)		(891,383	)	$	(1,780,054	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		77,633			-			77,633
Stock based compensation		115,380			-			115,380
Employee stock based compensation		-			1,100,883			1,100,883
Shares issued for executive compensation		209,500			(209,500	)		-
Changes in operating assets and liabilities:
Increase in prepaid expenses and deposits		(5,987	)		-			(5,987	)
Increase in inventory		(758	)		-			(758	)
Increase in accounts payable		11,842			-			11,842
Increase in lease incentive liability		12,927			-			12,927
Increase in accrued expenses		42,007			-			42,007
Increase in deferred revenue		188			-			188
Net cash used in operating activities		(425,939	)		-			(425,939	)
Cash flows from investing activities
Acquisition of fixed assets		(162,645	)		-			(162,645	)
Net cash used in investing activities		(162,645	)		-			(162,645	)
Cash flows from financing activities
Proceeds from common stock payable		75,000			-			75,000
Net cash provided by financing activities		75,000			-			75,000
NET DECREASE IN CASH		(513,584	)		-			(513,584	)
CASH AT BEGINNING OF PERIOD		608,309			-			608,309
CASH AT END OF PERIOD	$	94,725		$	-		$	94,725
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid	$	-		$	-		$	-
Income taxes paid	$	-		$	-		$	-
NON-CASH INVESTING AND FINANCING ACTIVITIES:
Incentive from lessor	$	-		$	-		$	-
Liabilities assumed with the merger	$	-		$	-		$	-

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Going Concern (Details Narrative) (USD $)	9 Months Ended
	Sep. 30, 2012	Dec. 31, 2011
Going Concern
Accumulated deficit	$ 2,953,805	$ 1,173,751
Working capital deficit	138,161
Non-cash prepaid stock compensation	$ 328,400

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Fixed Assets (Tables)

9 Months Ended

Sep. 30, 2012

Fixed assets:

Schedule of Fixed Assets

Fixed assets consisted of the following at:

	September 30, 2012			December 31, 2011
Leasehold improvements	$	1,116,680		$	958,538
Fixtures and equipment		24,137			21,887
Computer software and equipment		12,162			9,909
Property and equipment, total		1,152,980			990,334
Less: accumulated depreciation		(186,969	)		(109,336	)
Property and equipment, net	$	966,011		$	880,999

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Basis of Presentation

9 Months Ended

Sep. 30, 2012

Basis Of Presentation

Basis of Presentation

NOTE 2 – BASIS OF PRESENTATION

The interim financial statements included herein, presented in accordance with United States generally accepted accounting principles and stated in US dollars, have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (SEC). Certain information and footnote disclosures normally included in financial statements prepared in accordance with US generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the disclosures are adequate to make the information presented not misleading.

These statements reflect all adjustments, consisting of normal recurring adjustments, which, in the opinion of management, are necessary for fair presentation of the information contained therein. It is suggested that these interim financial statements be read in conjunction with the financial statements of the Company for the year ended December 31, 2011 and notes thereto included in the Company’s Form 10-K annual report. The Company follows the same accounting policies in the preparation of interim reports.

Results of operations for the interim periods are not indicative of annual results.

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Consolidated Balance Sheets (Parenthetical) (USD $)	Sep. 30, 2012	Dec. 31, 2011
Statement of Financial Position [Abstract]
Common stock, par value	$ 0.001	$ 0.001
Common stock, shares authorized	1,125,000,000	1,125,000,000
Common stock, shares issued	22,894,145	22,862,145
Common stock, shares outstanding	22,894,145	22,862,145

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Stock Options

9 Months Ended

Sep. 30, 2012

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Stock Options

NOTE 12 – STOCK OPTIONS

Employee Stock Options

The following table summarizes the changes in the options outstanding at September 30, 2012, and the related prices for the shares of the Company’s common stock issued to employees of the Company under a non-qualified employee stock option plan.

Range of Exercise Prices		Number Outstanding		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life		Number Exercisable		Weighted Average Exercise Price
$	4.50		211,000	$	4.34		4.09		211,000	$	4.50
			211,000				4.09		211,000

A summary of the Company’s stock awards for options as of September 30, 2012 and changes for the nine months ended September 30, 2012 is presented below:

	Stock Options			Weighted Average Exercise Price
Outstanding, December 31, 2011		-		$	-
Granted		225,000			4.50
Exercised		-			-
Expired/Cancelled		(14,000	)		-
Outstanding, September 30, 2012		211,000		$	4.50
Exercisable, September 30, 2012		211,000		$	4.50

The weighted-average fair value of stock options granted to employees during the periods ended September 30, 2012 and 2011 and the weighted-average significant assumptions used to determine those fair values, using a Black-Scholes-Merton (“Black-Scholes”) option pricing model are as follows:

	September 30,, 2012			September 30, 2011
Significant assumptions (weighted-average):
Risk-free interest rate at grant date		0.78	%		-	%
Expected stock price volatility		139	%		-	%
Expected dividend payout		-			-
Expected option life (in years)		5.00			-
Expected forfeiture rate		0	%		-	%
Fair value per share of options granted	$	3.96		$	-

The expected life of awards granted represents the period of time that they are expected to be outstanding. The Company has no historical experience with which to establish a basis for determining an expected life of these awards. Therefore, the Company only gave consideration to the contractual terms and did not consider the vesting schedules, exercise patterns and pre-vesting and post-vesting forfeitures significant to the expected life of the option award.

We estimate the volatility of our common stock based on the calculated historical volatility of similar entities in industry, in size and in financial leverage whose share prices are publicly available. We base the risk-free interest rate used in the Black-Scholes-Merton option valuation model on the implied yield currently available on U.S. Treasury zero-coupon issues with an equivalent remaining term equal to the expected life of the award. We have not paid any cash dividends on our common stock and do not anticipate paying any cash dividends in the foreseeable future. Consequently, we use an expected dividend yield of zero in the Black-Scholes-Merton option valuation model.

There were no options granted during the quarters ended September 30, 2011.

Total stock-based compensation expense in connection with options granted to employees recognized in the consolidated statement of operations for the nine months ended September 30, 2012 and 2011 was $891,383 and $0, respectively.

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Document and Entity Information

9 Months Ended

Sep. 30, 2012

Nov. 14, 2012

Document And Entity Information

Entity Registrant Name

Giggles N' Hugs, Inc.

Entity Central Index Key

0001381435

Document Type

10-Q

Document Period End Date

Sep. 30, 2012

Amendment Flag

true

Amendment Description

Restatement

Giggles N Hugs, Inc. (hereinafter referred to as “us,” “we,” or the “Company”) is filing this Amendment No. 2 on Form 10-Q/A (the “Second Amendment”) to its Quarterly Report for the quarterly period ended September 30, 2012, which was filed with the Securities and Exchange Commission (“SEC”) on November 19, 2012 (the “Original Report”) in response to certain issues set forth in our Current Report on Form 8-K filed with the SEC on March 20, 2013 (the “Form 8-K”). As previously reported in the Form 8-K, we announced that the consolidated financial statements contained in our Quarterly Report on Form 10-Q for the three months ended March 31, 2012, the three and six months ended June 30, 2012 and the three and nine months ended September 30, 2012 required restatement in order to correct an error related to the following:

● Total stock-based compensation expense in connection with options granted to employees was not correctly recognized for employee options issued in February 2012 in the consolidated statement of operations for and nine months ended September 30, 2012 in accordance with Accounting Standards Codification (“ASC”) 718 “Compensation - Stock Compensation”).

This Second Amendment reflects the restatement of our previously issued consolidated financial statements contained in the Original Report for the three and nine months ended September 30, 2012. The adjustment is fully discussed in Note 4 to the consolidated financial statements contained in this Second Amendment.

This Second Amendment speaks only of the original filing date of the Original Report and, except for those Items disclosed in this Explanatory Note, is unchanged from the Original Report. You should read this Second Amendment together with our other reports that update and supersede the information contained in this Second Amendment.

Current Fiscal Year End Date

--12-31

Is Entity's Reporting Status Current?

Yes

Entity Filer Category

Smaller Reporting Company

Entity Common Stock, Shares Outstanding

22,894,145

Document Fiscal Period Focus

Q3

Document Fiscal Year Focus

2012

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Commitments and Contingencies

9 Months Ended

Sep. 30, 2012

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

NOTE 13 – COMMITMENTS AND CONTINGENCIES

The Company leases its restaurant location under an operating lease, with the remaining term being 10 years. Restaurant leases typically include land and building shells, require contingent rent above the minimum base rent payments based on a percentage of sales ranging from 7% to 10%, have escalating minimum rent requirements over the term of the lease and require various expenses incidental to the use of the property. The lease also has a renewal option, which Century City may exercise in the future. The Company’s current lease provides early termination rights, permitting the Company and its landlord to mutually terminate the lease prior to expiration if the Company does not achieve specified sales levels in certain years.

As of September 30, 2012, the aggregate minimum annual lease payments under operating leases, including amounts characterized as deemed landlord financing payments are as follows:

2012	$	45,979
2013		188,975
2014		194,644
2015		200,483
2016		206,498
2017		212,692
Thereafter		482,983
Total	$	1,532,254

Rent expense for the Company’s operating lease was $46,181 and $37,246 for the periods during the three months ended September 30, 2012 and 2011, respectively. Rent expense for the Company was $104,299 and $98,598 for the periods during the nine months ended September 30, 2012 and 2011, respectively.

On March 23, 2012, GNH Topanga entered into a Lease Agreement with Westfield Topanga Owner, LP, a Delaware limited partnership, to lease approximately 5,900 square feet in the Westfield Topanga Shopping Center. The lease includes land and building shells, provides a construction reimbursement allowance of up to $475,000, requires contingent rent above the minimum base rent payments based on a percentage of sales ranging from 7% to 10% and require other expenses incidental to the use of the property. The lease also has a renewal option, which GNH Topanga may exercise in the future. The Company’s current lease provides early termination rights, permitting the Company and its landlord to mutually terminate the lease prior to expiration if the Company does not achieve specified sales levels in certain years. The lease is expected to commence on March 1, 2013 and expire on April 30, 2022. Upon commencement, the aggregate minimum annual lease payments under operating leases, including amounts characterized as deemed landlord financing payments are as follows:

2013	$	212,400
2014		220,896
2015		229,732
2016		238,921
2017		248,478
Thereafter		1,714,073
Total	$	2,864,500

Rent expense for the Company’s operating lease was $0 and $0 for the periods during the three and nine months ended September 30, 2012 and 2011, respectively.

Litigation

The Company, the Company’s CEO, Joey Parsi, and a third party, were named in a complaint filed on July 19, 2012 in the Los Angeles Superior Court by Alex Nerush and Preferred Scan, Inc., that alleges fraud, negligent misrepresentation, sale of securities by unlicensed broker, sale of securities by means of false and misleading statements, and money had and received.

The Company does not believe there is any merit to the allegations and will vigorously defend this action. Furthermore, on September 24, 2012 the Company and the Company’s CEO, Joey Parsi counter-sued Richard Steele, Jr., Donald Stoecklein, Anthony Risas for breach of fiduciary duty, breach of contract, negligence and negligent misrepresentation, fraud and indemnity.

The Company does not believe there is any merit to the allegations and will vigorously defend this action.

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Consolidated Statements of Operations (Unaudited) (USD $)	3 Months Ended		9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011
Revenue
Food and beverage sales	$ 199,075	$ 175,242	$ 534,885	$ 503,939
Private party rentals	70,875	81,791	266,824	228,214
Other sales	79,828	62,843	213,718	176,661
Allowances, returns and discounts	(16,741)	(28,686)	(40,516)	(83,854)
Net sales	333,037	291,190	974,911	824,960
Costs and operating expenses
Cost of sales including food and beverage	78,516	69,427	217,321	204,742
Labor	97,109	130,986	329,485	388,573
Occupancy cost	62,323	56,014	181,790	182,277
Depreciation	26,101	25,449	77,633	76,062
Total operating expenses	264,049	281,875	806,229	851,653
Other expenses
Executive compensation	108,783		318,458	38,269
Employee sstock-based compensation			1,100,883
Non-employee stock based compensation	62,900		115,380
Consulting expenses	12,000	26,306	27,000	417,895
Professional expenses	80,320	71,412	235,349	202,182
General and administrative expenses	19,753	109,746	150,066	214,693
Total costs and operating expenses	547,805	489,338	2,753,365	1,724,692
Loss before provision for income taxes	(214,768)	(198,148)	(1,778,454)	(899,732)
Provision for income taxes			(1,600)
Net loss	$ (214,768)	$ (198,148)	$ (1,780,054)	$ (899,732)
Net loss per share - basic	$ (0.01)	$ (0.01)	$ (0.08)	$ (0.05)
Weighted average number of common shares outstanding - basic	22,875,692	18,854,020	22,875,692	18,709,590

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Inventory

9 Months Ended

Sep. 30, 2012

Inventory Disclosure [Abstract]

Inventory

NOTE 7 – INVENTORY

Inventory consisted of the following at:

	September 30, 2012		December 31, 2011
Restaurant food and supplies	$	15,055	$	14,297
Total	$	15,055	$	14,297

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Going Concern

9 Months Ended

Sep. 30, 2012

Going Concern

Going Concern

NOTE 6 – GOING CONCERN

The accompanying financial statements have been prepared in conformity with generally accepted accounting principles in the United States of America, which contemplate continuation of the Company as a going concern. The Company has recently sustained operating losses and has an accumulated deficit of $2,953,805 at September 30, 2012. In addition, the Company has negative working capital of $138,161, excluding non-cash prepaid stock compensation of $328,400, at September 30, 2012.

The Company has and will continue to use significant capital to grow and acquire market share. These factors raise substantial doubt about the ability of the Company to continue as a going concern. In this regard, management is proposing to raise any necessary additional funds not provided by operations through loans or through sales of their common stock. There is no assurance that the Company will be successful in raising this additional capital or in achieving profitable operations. The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or amounts and classification of liabilities that might result from this uncertainty.

XML

Inventory (Tables)

9 Months Ended

Sep. 30, 2012

Inventory Tables

Schedule of Inventory

Inventory consisted of the following at:

	September 30, 2012		December 31, 2011
Restaurant food and supplies	$	15,055	$	14,297
Total	$	15,055	$	14,297

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Subsequent Events

9 Months Ended

Sep. 30, 2012

Subsequent Events [Abstract]

Subsequent Events

NOTE 14 – SUBSEQUENT EVENTS

The Company’s Management has reviewed all material events through the date of this report in accordance with ASC 855-10, and believes there are no material subsequent events to report.

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Incentive From Lessor

9 Months Ended

Sep. 30, 2012

Leases [Abstract]

Incentive From Lessor

NOTE 10 – INCENTIVE FROM LESSOR

Landlord construction contributions usually take the form of up-front cash. Depending on the specifics of the leased space and the lease agreement, amounts paid for structural components are recorded during the construction period as leasehold improvements or the landlord construction contributions are recorded as an incentive from lessor. The incentive from lessor is amortized over the life of the lease which is 10 years.

The Company received $590,000 from the Company’s landlords as construction contributions pursuant to agreed-upon terms in its lease agreement with Westfield Century City.

The Company is currently building out its Topanga location. As of September 30, 2012, the Company received a total of $47,500 from the landlords as construction contributions related to the Topanga lease.

Amortization of the incentive from lessor was $30,132 and $29,621 for the nine months ended September 30, 2012 and 2011, respectively.

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Fixed Assets

9 Months Ended

Sep. 30, 2012

Fixed assets:

Fixed Assets

NOTE 8 – FIXED ASSETS

Fixed assets consisted of the following at:

	September 30, 2012			December 31, 2011
Leasehold improvements	$	1,116,680		$	958,538
Fixtures and equipment		24,137			21,887
Computer software and equipment		12,162			9,909
Property and equipment, total		1,152,980			990,334
Less: accumulated depreciation		(186,969	)		(109,336	)
Property and equipment, net	$	966,011		$	880,999

Repair and maintenance expenses for the nine months ended September 30, 2012 and 2011 were $14,292 and $19,451, respectively. Depreciation expenses for the three and nine months ended September 30, 2012 were $26,101 and $77,633, respectively, and for the three and nine months ended September 30, 2011 were $25,449 and $76,062, respectively.

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Deferred Revenue

9 Months Ended

Sep. 30, 2012

Deferred Revenue [Abstract]

Deferred Revenue

NOTE 9 – DEFERRED REVENUE

Deferred revenue consisted of the following at:

	September 30, 2012		December 31, 2011
Membership cards	$	2,905	$	2,225
Gift cards		3,626		3,001
Party deposits		10,599		11,716
Total	$	17,130	$	16,942

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Stockholders' Equity

9 Months Ended

Sep. 30, 2012

Stockholders' equity:

Stockholders' Equity

NOTE 11 – STOCKHOLDERS’ EQUITY

On July 15, 2010, the Company amended its articles of incorporation to increase the authorized capital from 75,000,000 common shares to 1,125,000,000 common shares. The Company has only one class of stock. All rights and privileges normally associated with stock ownership are vested in that single class of stock.

During the three months ended March 31, 2012, the Company authorized the issuance of 50,000 shares of common stock to Sean Richards related to his appointment as Chief Operating Officer of the Company. The fair value of the shares of common stock was $209,500 which is recorded to common stock payable. As of the date of this filing, the shares have not been issued.

On June 11, 2012, the Company authorized the issuance of 25,000 shares of common stock to a third party entity in exchange for consulting services. The fair value of the shares of common stock was $41,000, based upon the closing market price of the Company’s common stock at the date the service was rendered.

On June 11, 2012, the Company authorized the issuance of 7,000 shares of common stock to a third party entity for internet design and consulting services. The fair value of the shares of common stock was $11,480, based upon the closing market price of the Company’s common stock at the date the service was rendered.

During the three months ended September 30, 2012, the Company authorized the issuance of 15,000 shares of common stock to a third party entity for investor relation services. The fair value of the shares of common stock was $22,500 which is recorded to common stock payable. As of the date of this filing, the shares have not been issued.

During the three months ended September 30, 2012, the Company authorized the issuance of 10,000 shares of common stock to a third party entity for financial and governance reporting services, SEC reporting services, and other business related services. The fair value of the shares of common stock was $10,000 which is recorded to common stock payable. As of the date of this filing, the shares have not been issued.

During the three months ended September 30, 2012, the Company authorized the issuance of 25,000 shares of common stock to a third party entity for financial consulting services. The fair value of the shares of common stock was $36,000 which is recorded to common stock payable and the expense is amortized over one-year of service. As of the date of this filing, the shares have not been issued.

During the three months ended September 30, 2012, the Company authorized the issuance of 20,000 shares of common stock to a third party entity for advisory board services. The fair value of the shares of common stock was $6,000 which is recorded to common stock payable and the expense is amortized over one-year of service. As of the date of this filing, the shares have not been issued.

During the three months ended September 30, 2012, the Company authorized the issuance of 220,000 shares of common stock to a third party entity for advisory board services. The fair value of the shares of common stock was $316,800 which is recorded to common stock payable and the expense is amortized over one-year of service. As of the date of this filing, the shares have not been issued.

During the three months ended September 30, 2012, the Company authorized the issuance of 75,000 shares of common stock to an investor for $75,000 which is recorded to common stock payable. As of the date of this filing, the shares have not been issued.

As of September 30, 2012, there have been no other issuances of common stock.

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Restatement of Financial Statement - Schedule of Retatement of Consolidated Statements of Cash Flows (Details) (USD $)	9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011
Net Loss	$ (1,780,054)	$ (899,732)
Depreciation and amortization	77,633	76,062
Share based compensation	115,380
Employee stock based compensation	1,100,883
Shares issued for executive compensation
Increase in prepaid expenses and deposits	(5,987)
Increase in inventory	(758)	(6,214)
Increase (decrease) in accounts payable	11,842	(80,631)
Increase (decrease) in lease incentive liability	12,927	(29,621)
Increase in accrued expenses	42,007	8,928
Increase in deferred revenue	188	7,878
Net cash used in operating activities	(425,939)	(923,331)
Acquisition of fixed assets	(162,645)	(40,324)
Net cash used in investing activities	(162,645)	(40,324)
Proceeds from common stock payable	75,000
Net cash provided by financing activities	75,000	1,980,433
NET INCREASE (DECREASE) IN CASH	(513,584)	1,016,778
CASH AT BEGINNING OF PERIOD	608,309	15,584
CASH AT END OF PERIOD	94,725	1,032,362
Interest paid
Income taxes paid
Incentive from lessor		590,000
Liabilities assumed with the merger		79,725
As Filed [Member]
Net Loss	(888,671)
Depreciation and amortization	77,633
Share based compensation	115,380
Employee stock based compensation
Shares issued for executive compensation	209,500
Increase in prepaid expenses and deposits	(5,987)
Increase in inventory	(758)
Increase (decrease) in accounts payable	11,842
Increase (decrease) in lease incentive liability	12,927
Increase in accrued expenses	42,007
Increase in deferred revenue	188
Net cash used in operating activities	(425,939)
Acquisition of fixed assets	(162,645)
Net cash used in investing activities	(162,645)
Proceeds from common stock payable	75,000
Net cash provided by financing activities	75,000
NET INCREASE (DECREASE) IN CASH	(513,584)
CASH AT BEGINNING OF PERIOD	608,309
CASH AT END OF PERIOD	94,725
Interest paid
Income taxes paid
Incentive from lessor
Liabilities assumed with the merger
Adjustment [Member]
Net Loss	(891,383)
Employee stock based compensation	1,100,883
Shares issued for executive compensation	$ (209,500)

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Summary of Significant Accounting Policies (Tables)

9 Months Ended

Sep. 30, 2012

Accounting Policies [Abstract]

Property and Equipment Estimated Useful Lives

Leasehold improvements include the cost of the Company’s internal development and construction department. Depreciation periods are as follows:

Leasehold improvements	10 years
Restaurant fixtures and equipment	10 years
Computer software and equipment	3 to 5 years

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Stock Options (Tables)

9 Months Ended

Sep. 30, 2012

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Schedule of Changes in Options Outstanding

The following table summarizes the changes in the options outstanding at September 30, 2012, and the related prices for the shares of the Company’s common stock issued to employees of the Company under a non-qualified employee stock option plan.

Range of Exercise Prices		Number Outstanding		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life		Number Exercisable		Weighted Average Exercise Price
$	4.50		211,000	$	4.34		4.09		211,000	$	4.50
			211,000				4.09		211,000

Summary of Stock Awards for Options

A summary of the Company’s stock awards for options as of September 30, 2012 and changes for the nine months ended September 30, 2012 is presented below:

	Stock Options			Weighted Average Exercise Price
Outstanding, December 31, 2011		-		$	-
Granted		225,000			4.50
Exercised		-			-
Expired/Cancelled		(14,000	)		-
Outstanding, September 30, 2012		211,000		$	4.50
Exercisable, September 30, 2012		211,000		$	4.50

Weighted-Average Fair Value of Stock Options Granted to Employees

The weighted-average fair value of stock options granted to employees during the periods ended September 30, 2012 and 2011 and the weighted-average significant assumptions used to determine those fair values, using a Black-Scholes-Merton (“Black-Scholes”) option pricing model are as follows:

	September 30,, 2012			September 30, 2011
Significant assumptions (weighted-average):
Risk-free interest rate at grant date		0.78	%		-	%
Expected stock price volatility		139	%		-	%
Expected dividend payout		-			-
Expected option life (in years)		5.00			-
Expected forfeiture rate		0	%		-	%
Fair value per share of options granted	$	3.96		$	-

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Incentive From Lessor (Details Narrative) (USD $)	9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011
Leases [Abstract]
Amortized life period of lease	10 years
Construction contributions	$ 590,000
Current construction contributions	47,500
Amortization of the incentive from lessor	$ 30,132	$ 29,621

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Consolidated Statements of Cash Flows (Unaudited) (USD $)	9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011
Cash flows from operating activities
Net Loss	$ (1,780,054)	$ (899,732)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	77,633	76,062
Share based compensation	115,380
Employee stock based compensation	1,100,883
Changes in operating assets and liabilities:
Increase in prepaid expenses and deposits	(5,987)
Increase in inventory	(758)	(6,214)
Increase (decrease) in accounts payable	11,842	(80,631)
Increase (decrease) in lease incentive liability	12,927	(29,621)
Increase in accrued expenses	42,007	8,928
Increase in deferred revenue	188	7,878
Net cash used in operating activities	(425,939)	(923,331)
Cash flows from investing activities
Acquisition of fixed assets	(162,645)	(40,324)
Net cash used in investing activities	(162,645)	(40,324)
Cash flows from financing activities
Proceeds from note payable		(3,000)
Members' distribution		(20,836)
Proceeds from reverse merger		769
Proceeds from shares issued		2,003,500
Proceeds from common stock payable	75,000
Net cash provided by financing activities	75,000	1,980,433
NET INCREASE (DECREASE) IN CASH	(513,584)	1,016,778
CASH AT BEGINNING OF PERIOD	608,309	15,584
CASH AT END OF PERIOD	94,725	1,032,362
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid
Income taxes paid
NON-CASH INVESTING AND FINANCING ACTIVITIES:
Incentive from lessor		590,000
Liabilities assumed with the merger		$ 79,725

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Reclassification of Prior Year Presentation

9 Months Ended

Sep. 30, 2012

Reclassification Of Prior Year Presentation

Reclassification of Prior Year Presentation

NOTE 5 – RECLASSIFICATION OF PRIOR YEAR PRESENTATION

Certain prior year amounts have been reclassified for consistency with the current period presentation. These reclassifications had no effect on the reported results of operations. In second quarter of fiscal 2012, the Company concluded that it was appropriate to classify its incentive from lessor as a long-term liability. Previously, the incentive from lessor had been classified as a current liability. Accordingly, the Company had revised the classification to report the incentive from lessor under the long-term liabilities caption, with the current portion thereof remaining in the current liabilities section. This change in classification does not materially affect the Company’s previously reported balance sheet, cash flows from operations or from financing activities in the Condensed Statement of Cash Flows, and had no effect on the previously reported Condensed Statement of Operations for any period.

As of September 30, 2012 and December 31, 2011, $498,862 and $490,059 of the incentive from lessor previously classified as current liabilities were reclassified as long-term liabilities.

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Commitments and Contingencies (Tables)

9 Months Ended

Sep. 30, 2012

Aggregate Minimum Annual Lease Payments Under Operating Leases

As of September 30, 2012, the aggregate minimum annual lease payments under operating leases, including amounts characterized as deemed landlord financing payments are as follows:

2012	$	45,979
2013		188,975
2014		194,644
2015		200,483
2016		206,498
2017		212,692
Thereafter		482,983
Total	$	1,532,254

Westfield Topanga Owner, LP [Member]

Aggregate Minimum Annual Lease Payments Under Operating Leases

Upon commencement, the aggregate minimum annual lease payments under operating leases, including amounts characterized as deemed landlord financing payments are as follows:

2013	$	212,400
2014		220,896
2015		229,732
2016		238,921
2017		248,478
Thereafter		1,714,073
Total	$	2,864,500

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Fixed Assets (Details Narrative) (USD $)	3 Months Ended		9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011
Fixed assets:
Repair and maintenance expenses			$ 14,292	$ 19,451
Depreciation expenses	$ 26,101	$ 25,449	$ 77,633	$ 76,062

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Summary of Significant Accounting Policies (Policies)

9 Months Ended

Sep. 30, 2012

Accounting Policies [Abstract]

Principles of Consolidation

Principles of consolidation

For the period ended September 30, 2012 and 2011, the consolidated financial statements include the accounts of Giggles N’ Hugs, Inc., GNH, Inc., GNH Topanga, Inc. and restaurant operations of Giggles N Hugs in Westfield mall in Century City, California. All significant intercompany balances and transactions have been eliminated. Giggles N’ Hugs, Inc., GNH, Inc., GNH Topanga, Inc. and restaurant operations of Giggles N Hugs in Westfield mall in Century City, California will be collectively referred herein to as the “Company”.

Use of Estimates

Use of estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ significantly from those estimates.

Cash and Cash Equivalents

Cash and cash equivalents

For the purpose of the statements of cash flows, all highly liquid investments with an original maturity of three months or less are considered to be cash equivalents. The carrying value of these investments approximates fair value.

Inventories

Inventories

Inventories are stated at the lower of cost or market on a first-in, first-out basis and consist of restaurant food and other supplies.

Property and Equipment

Property and equipment

The Company records all property and equipment at cost less accumulated depreciation. Improvements are capitalized while repairs and maintenance costs are expensed as incurred. Depreciation is calculated using the straight-line method over the estimated useful life of the assets or the lease term, whichever is shorter. Leasehold improvements include the cost of the Company’s internal development and construction department. Depreciation periods are as follows:

Leasehold improvements	10 years
Restaurant fixtures and equipment	10 years
Computer software and equipment	3 to 5 years

Leases

Leases

The Company currently leases its restaurant location. The Company evaluates the lease to determine its appropriate classification as an operating or capital lease for financial reporting purposes.

Minimum base rent for the Company’s operating leases, which generally have escalating rentals over the term of the lease, is recorded on a straight-line basis over the lease term. The initial rent term includes the build-out, or rent holiday period, for the Company’s leases, where no rent payments are typically due under the terms of the lease. Deferred rent expense, which is based on a percentage of revenue, is also recorded to the extent it exceeds minimum base rent per the lease agreement.

The Company disburses cash for leasehold improvements and furniture, fixtures and equipment to build out and equip its leased premises. The Company also expends cash for structural additions that it makes to leased premises of which $590,000 were reimbursed to the Century City location by its landlords as construction contributions pursuant to agreed-upon terms in the lease agreements. Landlord construction contributions usually take the form of up-front cash. Depending on the specifics of the leased space and the lease agreement, amounts paid for structural components are recorded during the construction period as leasehold improvements or the landlord construction contributions are recorded as an incentive from lessor.

Impairment of Long-Lived Assets

Impairment of long-lived assets

The Company assesses potential impairment of our long-lived assets whenever events or changes in circumstances indicate that the carrying value of the assets or asset group may not be recoverable. Factors considered include, but are not limited to, significant underperformance relative to historical or projected future operating results; significant changes in the manner of use of the acquired assets or the strategy for the overall business; and significant negative industry or economic trends. The Company regularly reviews the restaurant if it is cash flow negative for the previous four quarters to determine if impairment testing is warranted. At any given time, the Company may monitor its operations, and impairment charges could be triggered in the future if the restaurant performance does not improve.

The Company has identified leasehold improvements as the primary asset because it is the most significant component of our restaurant assets, it is the principal asset from which the Company derives cash flow generating capacity and has the longest remaining useful life. The recoverability is assessed in most cases by comparing the carrying value of the assets to the undiscounted cash flows expected to be generated by these assets. Impairment losses are measured as the amount by which the carrying values of the assets exceed their fair values.

During the nine months ended September 30, 2012 and 2011 we did not record an impairment charge against the carrying value of the restaurant located in Century City, California

Stock-Based Compensation

Stock-based compensation

The Company records stock based compensation in accordance with the guidance in ASC Topic 505 and 718 which requires the Company to recognize expenses related to the fair value of its employee stock option awards. This eliminates accounting for share-based compensation transactions using the intrinsic value and requires instead that such transactions be accounted for using a fair-value-based method. The Company recognizes the cost of all share-based awards on a graded vesting basis over the vesting period of the award.

The Company accounts for equity instruments issued in exchange for the receipt of goods or services from other than employees in accordance with FASB ASC 718-10 and the conclusions reached by the FASB ASC 505-50. Costs are measured at the estimated fair market value of the consideration received or the estimated fair value of the equity instruments issued, whichever is more reliably measurable. The value of equity instruments issued for consideration other than employee services is determined on the earliest of a performance commitment or completion of performance by the provider of goods or services as defined by FASB ASC 505-50.

Loss Per Common Share

Loss per common share

Net loss per share is provided in accordance with ASC Subtopic 260-10. We present basic loss per share (“EPS”) and diluted EPS on the face of statements of operations. Basic EPS is computed by dividing reported losses by the weighted average shares outstanding. Except where the result would be anti-dilutive to income from continuing operations, diluted earnings per share has been computed assuming the conversion of the convertible long-term debt and the elimination of the related interest expense, and the exercise of stock warrants. Loss per common share has been computed using the weighted average number of common shares outstanding during the year.

Fair Value of Financial Instruments

Fair Value of Financial Instruments

The carrying amounts reflected in the balance sheets for cash, accounts payable and accrued expenses approximate the respective fair values due to the short maturities of these items. The Company does not hold any investments that are available-for-sale.

As required by the Fair Value Measurements and Disclosures Topic of the FASB ASC, fair value is measured based on a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows: (Level 1) observable inputs such as quoted prices in active markets; (Level 2) inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and (Level 3) unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.

The three levels of the fair value hierarchy are described below:

Level 1: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;

Level 2: Quoted prices in markets that are not active, or inputs that are observable, either directly or indirectly, for substantially the full term of the asset or liability;

Level 3: Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (supported by little or no market activity).

Revenue Recognition

Revenue recognition

Our revenues consist of sales from our restaurant operations and sales of memberships entitling members unlimited access to our play areas for the duration of their membership. As a general principle, revenue is recognized when the following criteria are met: (i) persuasive evidence of an arrangement exists, (ii) delivery has occurred and services have been rendered, (iii) the price to the buyer is fixed or determinable, and (iv) collectability is reasonably assured.

With respect to memberships, access to our play area extends throughout the term of membership. The vast majority of memberships sold are for one month terms. Revenue is recognized on a straight line basis over the membership period. Century City receives payment from its customers at the start of the subscription period and Century City records deferred revenue for the unearned portion of the subscription period.

Revenues from restaurant sales are recognized when payment is tendered at the point of sale. Revenues are presented net of sales taxes. The obligation is included in other accrued expenses until the taxes are remitted to the appropriate taxing authorities.

We recognize a liability upon the sale of our gift cards and recognize revenue when these gift cards are redeemed in our restaurants.

For party rental agreements, we rely upon a signed contract between us and the customer as the persuasive evidence of a sales arrangement. Party rental deposits are recorded as deferred revenue upon receipt and recognized as revenue when the service has been rendered.

Additionally, revenues are recognized net of any discounts, returns, allowances and sales incentives, including coupon redemptions and complimentary meals.

Recent Pronouncements

Recent pronouncements

The Company has evaluated the recent accounting pronouncements through August 2012 and believes that none of them will have a material effect on the company’s financial position, results of operations or cash flows.