10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

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

For the quarterly period ended September 29, 2013

[  ] 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) 208-1187

Fax (310) 708-1154

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 11, 2013 was 24,139,145 shares.

GIGGLES N HUGS, INC.
THIRTEEN WEEKS ENDED SEPTEMBER 29, 2013

Index to Report on Form 10-Q

		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	3
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	11
Item 4T.	Controls and Procedures	11
	PART II - OTHER INFORMATION
Item 1.	Legal Proceedings	12
Item 1A.	Risk Factors	13
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	13
Item 3.	Defaults Upon Senior Securities	13
Item 4.	Mine Safety Disclosure	13
Item 5.	Exhibits	14
	Signature	15

2

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements.

GIGGLES N HUGS, INC. 
CONSOLIDATED BALANCE SHEETS

(unaudited)

	September 29, 2013			December 31, 2012
Assets
Current assets:
Cash and equivalents	$	67,464		$	156,474
Inventory		31,185			16,755
Prepaid stock-based compensation		-			244,366
Prepaid expenses, other		7,955			2,470
Total current assets		106,604			420,065
Fixed assets:
Total fixed assets, net		2,094,397			1,198,084
Other assets:
Security deposits, other		38,730			32,500
Total other assets		38,730			32,500
Total assets	$	2,239,731		$	1,650,649
Liabilities and Stockholders’ Equity (Deficit)
Current liabilities:
Accounts payable	$	354,341		$	294,919
Incentive from lessor — current portion		63,151			49,910
Note payable from lessor - current portion		21,290			-
Accrued expenses		320,246			72,868
Deferred revenue		55,556			45,770
Due to related party		40,000			-
Convertible note payable, net of debt discount of $7,295 and $44,795, respectively		42,705			5,205
Total current liabilities		897,289			468,672
Long-term liabilities:
Incentive from lessor — long-term		1,160,891			724,917
Note payable - lessor		398,710			-
Total long-term liabilities		1,599,601			724,917
Total liabilities		2,456,890			1,193,589
Stockholders’ equity (Deficit):
Common stock, $0.001 par value, 1,125,000,000 shares authorized, 24,055,812 and 23,149,145 shares issued and outstanding as of September 29, 2013 and December 3 1, 2012, respectively		24,056			23,149
Common stock payable (133,334 shares as of September 29, 2013)		415,500			347,400
Additional paid-in capital		3,566,837			3,357,544
Accumulated deficit		(4,223,552	)		(3,271,033	)
Total stockholders’ equity (Deficit)		(217,159	)		457,060
Total liabilities and stockholders’ equity (Deficit)	$	2,239,731		$	1,650,649

See Accompanying Notes to Consolidated Financial Statements.

F-1

GIGGLES N HUGS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS 

(unaudited)

	Thirteen Weeks Ended September 29, 2013						Nine Months Ended September 30, 2013
	2013			2012			2013			2012
Revenue
Food and beverage sales	$	346,059		$	199,075		$	901,814		$	534,885
Private party rentals		113,638			70,875			368,890			266,824
Other sales		184,978			79,828			442,765			213,718
Allowances, returns and discounts		(30,165	)		(16,741	)		(88,528	)		(40,516	)
Net sales		614,510			333,037			1,624,941			974,911
Costs and operating expenses
Cost of sales including food and beverage		100,548			78,516			264,265			217,321
Labor		230,979			97,109			599,705			329,485
Occupancy cost		153,242			62,323			358,761			181,790
Other		92,516			-			185,697			-
Depreciation and amortization		56,928			26,101			137,039			77,633
Total operating expenses		634,213			264,049			1,545,467			806,229
Other expenses
Executive compensation		94,545			108,783			264,661			318,458
Employee stock-based compensation		-			-			-			1,100,883
Non-employee stock-based compensation		87,600			62,900			272,666			115,380
Professional and consulting expenses		86,794			92,320			345,117			262,349
General and administrative expenses		31,759			19,753			136,454			150,066
Finance and interest expense		31,355			-			58,355			-
Gain on stock issuance for payable settlement		-			-			(50,000)			-
Total costs and operating expenses		966,266			547,805			2,572,720			2,753,365
Loss before provision for income taxes	$	(351,756	)	$	(214,768	)	$	(947,779	)	$	(1,778,454	)
Provision for income taxes	$	4,740		$	-		$	4,740		$	(1600	)
Net loss	$	(356,496	)	$	(214,768	)	$	(952,519	)	$	(1,780,054	)
Net loss per share - basic	$	(0.01	)	$	(0.01	)	$	(0.04	)	$	(0.08	)
Weighted average number of common shares outstanding - basic		23,886,123			22,875,692			23,522,653			22,875,692

See Accompanying Notes to Consolidated Financial Statements.

F-2

GIGGLES N HUGS, INC. 
CONSOLIDATED STATEMENTS OF CASH FLOWS 
(unaudited) 

	Thirteen Weeks ended			Nine Months Ended
	September 29, 2013			September 30, 2013
Cash flows from operating activities
Net loss	$	(952,519	)	$	(1,780,054	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		137,039			77,633
Amortization of debt discount		37,500			-
Non-employee stock-based compensation		272,666			115,380
Gain on stock issuance for payable settlement		(50,000)			-
Employee stock-based compensation		-			1,100,883
Changes in operating assets and liabilities:		-
Increase in prepaid expenses and deposits		(5,485	)		(5,987	)
Increase in security deposits, other		(6,230	)		-
Increase in inventory		(14,430	)		(758	)
Increase in accounts payable		209,422			11,842
Increase in lease incentive liability		449,215			12,927
Increase in accrued expenses		247,378			42,007
Increase in deferred revenue		9,786			188
Net cash provided by (used in) operating activities		334,342			(425,939	)
Cash flows from investing activities
Acquisition of fixed assets		(1,033,352	)		(162,645	)
Net cash used in investing activities		(1,033,352	)		(162,645	)
Cash flows from financing activities
Proceeds from lessor note payable		420,000			-
Proceeds from common stock payable		-			75,000
Proceeds from shares issued		150,000			-
Proceeds from related party		150,000			-
Payments to related party		(110,000)			-
Net cash provided by financing activities		610,000			75,000
NET DECREASE IN CASH		(89,010	)		(513,584	)
CASH AT BEGINNING OF PERIOD		156,474			608,309
CASH AT END OF PERIOD	$	67,464		$	94,725
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid	$	-		$	-
Income taxes paid	$	-		$	-
NON-CASH INVESTING AND FINANCING ACTIVITIES:	$			$
Shares issued for prepaid stock compensation		-			-
Accounts payable settled by share issuance	$	150,000		$	-

See Accompanying Notes to Consolidated Financial Statements. 

F-3

GIGGLES N’ HUGS, INC.

NOTES TO FINANCIAL STATEMENTS

(Unaudited)

NOTE 1 – HISTORY AND ORGANIZATION

Giggles N’ Hugs, Inc. (“GIGL Inc.”) was originally organized on September 17, 2004 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 in exchange for a 100% interest in GNH. 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.

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, 2012 and notes thereto included in the Company’s annual report on Form 10-K. The Company follows the same accounting policies in the preparation of interim reports.

The Company adopted a 52/53 week fiscal year ending on the Sunday closest to December 31^st for financial reporting purposes. 2012 consists of calendar year ending December 31, 2012. The election for fiscal year was made with the 8-K filing in October 2013.

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

NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of consolidation

At September 29, 2013 and September 30, 2012, the consolidated financial statements include the accounts of Giggles N’ Hugs, Inc., GNH CC, 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 and Giggles N Hugs in Westfield Mall in Topanga, 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.

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 locations. 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 was reimbursed to Century City, $488,409 was reimbursed to Topanga, and $284,000 was reimbursed to Glendale by their 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.

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.

At September 29, 2013 and September 30, 2012 we did not record an impairment charge against the carrying value of the restaurants located in Century City and Topanga, 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.

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; and

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.

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, Topanga, and Glendale receive payments from its customers at the start of the subscription period and each record 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 November 2013 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.

NOTES TO FINANCIAL STATEMENTS

(Unaudited)

NOTE 4 – RECLASSIFICATION

Certain amounts in the consolidated balance sheet for the year ended December 31, 2012 have been reclassified to be consistent with the current year presentation. $7,875 previously included in due to related party are now included in the accrued expenses. The reclassification had no material impact on the Company’s financial conditions, results of operations or cash flows.

NOTE 5 – 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 $4,223,552 at September 29, 2013. In addition, the Company has negative working capital of $790,685 at September 29, 2013.

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 6 – INVENTORY

Inventory consisted of the following at:

	September 29, 2013		December 31, 2012
Restaurant food and supplies	$	31,185	$	16,755
Total	$	31,185	$	16,755

NOTE 7 – FIXED ASSETS

Fixed assets consisted of the following at:

	September 29, 2013			December 31, 2012
Leasehold improvements	$	2,303,162		$	1,359,141
Fixtures and equipment		124,753			37,457
Computer software and equipment		13,967			12,910
Property and equipment, total		2,441,882			1,409,508
Less: accumulated depreciation		(347,485	)		(211,424	)
Property and equipment, net	$	2,094,397		$	1,198,084

Repair and maintenance expenses for the thirteen and thirty nine weeks ended September 29, 2013 were $13,407 and $27,092, respectively, for the three and nine months ended September 30, 2012 were $14,292 and $19,451, respectively. Depreciation expenses for the thirteen and thirty nine weeks ended September 29, 2013 were $56,928 and $137,039, respectively, and for the three and nine months ended September 29, 2012 were $26,101 and $77,633, respectively.

F-10

GIGGLES N’ HUGS, INC.

NOTES TO FINANCIAL STATEMENTS

(Unaudited)

NOTE 8 – DEFERRED REVENUE

Deferred revenue consisted of the following at:

	September 29, 2013		December 31, 2012
Membership cards	$	1,278	$	1,463
Gift cards		5,400		3,626
Dining credit program		17,425		32,382
Party deposits		31,453		8,299
Total	$	55,556	$	45,770

NOTE 9 – 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.

As of September 29, 2013, the Company received a total of $488,409 from the landlords as construction contributions related to the Topanga lease.

Amortization of the incentive from lessor was $15,391 and $40,931 for the thirteen and thirty nine weeks ended September 29, 2013, and $11,112 and $35,619 for the three and nine months ended September 30, 2012.

The Company is currently building out its new Glendale, CA location. Through September 29, 2013, the Company received $285,000 from the Company’s landlord as construction contributions pursuant to agreed-upon terms in its lease agreement with Glendale II Mall Associates, LLC to lease approximately 5,900 square feet in the Westfield Glendale Galleria Shopping Center. A total of $118,750 of the $475,000 was received in the current quarter and an additional $118,750 is anticipated in the fourth quarter of 2013.

F-11

GIGGLES N’ HUGS, INC.

NOTES TO FINANCIAL STATEMENTS

(Unaudited)

NOTE 10 – NOTE PAYABLE LESSOR

On February 12, 2013, the Company entered into a $700,000 Promissory Note Payable Agreement with GGP Limited Partnership (“Lender”) to be used by the Company for a portion of the construction work to be performed by the Company under the lease by and between Glendale II Mall Associates, LLC. The Note Payable accrues interest at a rate of 10% through October 15, 2015, 12% through October 31, 2017, and 15% through October 31, 2023 and matures on October 31, 2023. The monthly principal and interest payment will commence upon the earlier of (i) the Rental Commencement Date (as defined in the Lease); or (ii) November 1, 2013 and continuing through and including the Maturity Date, make a fixed monthly installment payment of principal and accrued Interest in an amount equal to the principal and interest commencing from the date of the first advance and continuing through and including the Maturity Date.

The Lender agrees to loan draws to the Company in accordance with the following schedule:

1.	An amount equal to 35% of the Principal Amount upon completion of all the requirements for payment of the Construction Allowance set forth in the Lease.
2.	An amount equal to 25% of the Principal Amount upon completion of all the requirements for payment of the Construction Allowance set forth in the Lease.
3.	An amount equal to 25% of the Principal Amount upon completion of all the requirements for payment of the Construction Allowance set forth in the Lease.
4.	An amount equal to 15% of the Principal Amount upon completion of all the requirements for payment of the Construction Allowance set forth in the Lease.

As of September 29, 2013, the Company had drawn $420,000 from the Promissory Note.

NOTE 11 – CONVERTIBLE NOTE PAYABLE

A summary of convertible debentures payable as of September 29, 2013 and December 31, 2012 is as follows:

	September 29, 2013			December 31, 2012
Convertible note, accrue interest at 8% per annum and mature on
November 23, 2013	$	50,000		$	50,000
Debt discount - beneficial conversion feature		(7,295	)		(44,795	)
Convertible note, net unamortized discount	$	42,705		$	5,205

On November 23, 2012, the Company entered into an unsecured Note Payable Agreement with Gary Schahet (the “Buyer”) pursuant to which the Company issued $50,000 of an unsecured convertible note (the “Note Payable”). The Note Payable accrues interest at a rate of 8% per annum and matures on November 23, 2013. The Lender may also convert all or a portion of the Note at any time at a price equal to the lesser of (i) $0.25, or (ii) ninety percent (90%) of a Subsequent Financing Price (price per share paid by investors in a subsequent financing), or (iii) ninety percent (90%) of a Change of Control price (per share consideration paid in a change of control transaction.

The Company has determined the value associated with the beneficial conversion feature in connection with the notes to be $50,000. The aggregate beneficial conversion feature has been accreted and charged to financing expense in the amount of $12,500 and $37,500 during the thirteen and thirty nine weeks ended September 29, 2013 and $5,205 as of December 31, 2012, respectively. During the thirteen and thirty nine weeks ended September 29, 2013, the Company recorded interest expense of $1,000 and $3,000, respectively.

F-12

GIGGLES N’ HUGS, INC.

NOTES TO FINANCIAL STATEMENTS

(Unaudited)

NOTE 12 – STOCKHOLDERS’ EQUITY

The Company is authorized to issue 1,125,000,000 shares of $0.001 par value common stock. As of September 29, 2013and December 31, 2012, 24,055,812 and 23,149,145 shares were issued and outstanding, respectively.

On February 11, 2013, the Company issued 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 December 31, 2012.

On February 11, 2013, the Company issued 20,000 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 $17,400 which is recorded to common stock payable as of December 31, 2012.

On February 25, 2013, the Company issued 20,000 shares of common stock to a third party entity for strategic management services. The fair value of the shares of common stock was $17,000 which is recorded to common stock payable as of December 31, 2012.

On January 12, 2013, the Company authorized the issuance of 670,000 shares of common stock to an investor for $100,000 cash received. The Company issued the shares on April 19, 2013.

On March 7, 2013, the Company authorized the issuance of 166,667 shares of common stock to an investor for $50,000 cash received. The Company issued the shares on April 19, 2013.

On May 15, 2013, the Company authorized the issuance of 333,333 shares of common stock to a construction contractor for the settlement of outstanding invoices due in the amount of $150,000. The fair value of the shares of common stock on the settlement date was $100,000 which is recorded to common stock payable as of June 30, 2013. The Company recorded a gain on accounts payable settlement of $50,000 during the three months ended June 30, 2013.

On July 11, 2013, the Company issued 15,000 shares of common stock to a third party entity for graphic design services. The fair value of the shares of common stock was $3,300 which is recorded to graphic design expense on July 11, 2013.

On August 19, 2013, the Company authorized the issuance of 83,334 shares of common stock for advisory services for 3 month service. The value of the shares of common stock was $37,500 out of which $25,000 is recorded to common stock payable in the third quarter of 2013. The remaining $12,500 is anticipated in the fourth quarter of 2013.

F-13

GIGGLES N’ HUGS, INC.

NOTES TO FINANCIAL STATEMENTS

(Unaudited)

NOTE 13 – STOCK OPTIONS

Employee Stock Options

The following table summarizes the changes in the options outstanding at September 29, 2013, 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		195,000	$	4.50		3.09		195,000	$	4.50
			195,000				3.09		195,000

A summary of the Company’s stock awards for options as of September 29, 2013 and changes for the thirty nine weeks ended September 29, 2013 is presented below:

	Stock Options			Weighted Average Exercise Price
Outstanding, December 31, 2012		211,000		$	4.50
Granted		—			—
Exercised		—			—
Expired/Cancelled		(16,000	)		—
Outstanding, September 29, 2013		195,000		$	4.50
Exercisable, September 29, 2013		195,000		$	4.50

The weighted-average fair value of stock options granted to employees during the period ended September 29, 2013 and September 30, 2012 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 29, 2013			September 30, 2012
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
Expected forfeiture rate		-	%		0	%
Fair value per share of options granted	$	-		$	3.96

F-14

GIGGLES N’ HUGS, INC.

NOTES TO FINANCIAL STATEMENTS

(Unaudited)

NOTE 13 – STOCK OPTIONS (CONTINUED)

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 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 option valuation model.

There were no options granted during the quarter ended September 29, 2013.

Total stock-based compensation expense in connection with options granted to employees recognized in the consolidated statement of operations for the thirty nine weeks ended September 29, 2013 and nine months ended September 30, 2012 was $0 and $891,383, respectively.

NOTE 14 – RELATED PARTY TRANSACTIONS

From time to time, the Company has received advances from certain of its officers and related parties to meet short term working capital needs. These advances may not have formal repayment terms or arrangements. During the thirty nine weeks ended September 29, 2013, the Company received a total of $150,000 advances from related parties and repaid back $110,000 to the related parties. As of September 29, 2013, the Company recorded due to related party of $40,000. These advances are unsecured, bear no interest, and do not have formal repayment terms or arrangements.

NOTE 15 – COMMITMENTS AND CONTINGENCIES

The Company leases its Century City 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 the Company 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.

F-15

GIGGLES N’ HUGS, INC.

NOTES TO FINANCIAL STATEMENTS

(Unaudited)

NOTE 15 – COMMITMENTS AND CONTINGENCIES (CONTINUED)

As of September 29, 2013, the aggregate minimum annual lease payments under operating leases, including amounts characterized as deemed landlord financing payments are as follows:

2013	$	47,359
2014		194,644
2015		200,483
2016		206,498
2017		212,692
Thereafter		482,983
Total	$	1,344,659

Rent expense for the Company’s Century City operating lease was $34,766 and $34,766 for the thirteen weeks ended September 29, 2013 and three months ended September 30, 2012, respectively, and was $104,299 and $104,299 for the thirty nine weeks ended September 29, 2013 and nine months ended September 30, 2012, respectively.

During the year ended December 31, 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 commenced on March 23, 2013, Topanga’s grand opening, and expires on April 30, 2022. As of September 29, 2013, the aggregate minimum annual lease payments under operating leases, including amounts characterized as deemed landlord financing payments are as follows:

2013	$	55,224
2014		228,996
2015		238,155
2016		247,682
2017		257,589
Thereafter		1,241,388
Total	$	2,269,034

Rent expense for the Company’s Topanga operating lease was $52,048 and $0 for the thirteen weeks ended September 29, 2013 and three months ended September 30, 2012, and was $104,096 and $0 for the thirty nine weeks ended September 29, 2013 and nine months September 30, 2012, respectively.

F-16

GIGGLES N’ HUGS, INC.

NOTES TO FINANCIAL STATEMENTS

(Unaudited)

NOTE 15 – COMMITMENTS AND CONTINGENCIES (CONTINUED)

On April 1, 2013, the Company entered into a Lease Agreement with II MALL ASSOCIATES, LLC, a Delaware limited liability company, to lease approximately 6,000 square feet in the Glendale Galleria in the City of Glendale, County of Los Angeles, and State of California. 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 4% to 7% and require other expenses incidental to the use of the property. The lease is expected to commence on October 1, 2013 and expire on September 30, 2023. Upon commencement, the aggregate minimum annual lease payments under operating leases, including amounts characterized as deemed landlord financing payments are as follows:

2013	$	31,070
2014		187,663
2015		195,169
2016		202,976
2017		211,095
Thereafter		1,410,205
Total	$	2,238,178

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. and Donald Stoecklein, Anthony Risas for breach of fiduciary duty, breach of contract, negligence and negligent misrepresentation, fraud and indemnity. On October 13, 2012, Stoecklein Law Group, LLP (“Law Group”) which acted as our securities counsel from September 2010 until September 2012, filed an Interpleader action in the United States District Court for the Southern District of California to determine the proper ownership of 16 stock certificates representing an aggregate of 2,364,000 shares of our stock (the “Disputed Certificates”) held by the Law Group. Joey Parsi, Balata Partners, Inc., and Patrick Deparini were each named as defendants (the “Defendants”). Law Group claims that they entered into an oral agreement to hold the Disputed Certificates unless and until each of the Defendants agreed otherwise. The Company maintains that no such oral agreement was entered into and plans to vigorously argue for the release of the Disputed Certificates into the custody of our current securities counsel. The Company does not believe there is any merit to the allegations and will vigorously defend this action.

NOTE 16 – SUBSEQUENT EVENTS

On October 29, 2013, the Company issued 83,333 shares of common stock to a third party entity for advisory services. The value of the shares of common stock was $37,500 which $25,000 was recorded as common stock payable as of September 29, 2013.

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 other material subsequent events to report.

F-17

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

This Thirteen Week Report on Form 10-Q 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, 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.

In October 2013, The Company filed an 8K to convert to a fiscal calendar closing on the Sunday closest to December 31^st.

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 a second restaurant 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, including an upcoming location in Glendale, California.

3

RESULTS OF OPERATIONS

Results of Operations for the Thirteen Weeks Ended September 29, 2013 and Three Months Ended September 30, 2012:

REVENUE

	For Thirteen Weeks Ended			For the three months ended			Increase (Decrease)
	September 29, 2013			September 30, 2012			$			%
Revenue:
Food and beverage sales	$	346,059		$	199,075		$	146,984			73.8	%
Private party rentals		113,638			70,875			42,763			60.3	%
Other sales		184,978			79,828			105,150			131.7	%
Allowances, returns and discounts		(30,165	)		(16,741	)		(13,424	)		80.2	%
Net sales	$	614,510		$	333,037		$	281,473			84.5	%

Our food and beverage sales for the thirteen weeks ended September 29, 2013 were $346,059 compared to $199,075 in the three months ended September 30, 2012 including revenue from the Westfield Topanga location which opened March 23, 2013. This resulted in an increase in food and beverage sales of $146,984, or 73.8%, 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.

Our private party rentals for the thirteen weeks ended September 29, 2013 were $113,638, including revenue from the Westfield Topanga location, compared to $70,875 in three months ended September 30, 2012. This resulted in an increase in private party rentals of $42,763, or 60.3%, from the same period a year ago. Topanga private party rentals for Party rentals range from as few as 15 guests up to 200 and contribute significantly to our revenues. Private party rentals accounted for 18% of net sales during the thirteen weeks ended September 29, 2013 and 21% in the thirteen weeks ended September 30, 2012. 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 thirteen weeks ended September 29, 2013 were $184,978, including revenue from the Westfield Topanga location, compared to $79,828 in the three months ended September 30, 2012. This resulted in an increase in sales of $105,150, or 131.7%, from the same period a year ago. Management attributes this to our own internal marketing efforts, as well as the Westfield Century City Mall and Westfield Topanga Mall holding periodic events to boost traffic to the mall, in general.

Allowances, returns and discounts for the thirteen weeks ended September 29, 2013 were $30,165 compared to $16,741 in the three months ended September 30, 2012 primarily from the Westfield Topanga location grand opening promotional discounts. This resulted in increases in allowances, returns and discounts of $13,424, or 80.2%, from the same period a year ago.

4

COSTS AND OPERATING EXPENSES

	For Thirteen Weeks Ended			For the three months ended			Increase (Decrease)
	September 29, 2013			September 30, 2012			$			%
Costs and operating expenses:
Cost of sales including food and beverage	$	100,548		$	78,516		$	22,032			28.1	%
Labor		230,979			97,109			133,870			137.9	%
Occupancy cost		153,242			62,323			90,919			145.9	%
Other		92,516			-			92,516			*
Depreciation		56,928			26,101			30,827			118.1	%
Total operating expenses	$	634,213		$	264,049		$	370,164			140.2	%
Other expenses:
Executive compensation		94,545			108,783			(14,238	)		-13.1	%
Non-employee stock-based compensation		87,600			62,900			24,700			39.3	%
Professional and consulting expenses		86,794			92,320			(5,526	)		-6.0	%
General and administrative expenses		31,759			19,753			12,006			60.8	%
Finance and interest expenses		31,355			-			31,355			*
Total other expenses		332,053			283,756			48,297			17.0	%
Total costs and operating expenses		966,266			547,805			418,461			76.4	%
Provision for income taxes		4,740			-			4,740			*
Net loss	$	(356,496	)	$	(214,768	)	$	(141,728	)		66.0	%

Notes to Costs and Operating Expenses table:

Cost of sales. Costs related to food purchases, supplies and general restaurant operations totaled $100,548 during the thirteen weeks ended September 29, 2013 including costs from the Westfield Topanga location, as a result was 28.1% higher than cost of sales of $78,516 in the three months ended September 30, 2012. 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. Cost of sales is high due to the inefficiencies of opening the new Glendale location.

Labor. Labor expenses for the thirteen weeks ended September 29, 2013 was $230,979, including cost from the Westfield Topanga location, an increase of 137.9%, from the three months ended September 30, 2012, which was $97,109. We are a customer service company and our primary variable cost is related to providing such services. As a result, labor costs comprised 36% of our total operating expenses during the thirteen weeks ended September 29, compared to 37% in the comparable three months ended September 30, 2012. Labor costs are constantly fluctuating and any changes to minimum wages payable could adversely impact our operations. Cost of sales is high due to the inefficiencies of opening the new Glendale location.

Occupancy Cost. Occupancy cost for the thirteen weeks ended September 29, 2013 was $153,242, including the lease costs of the Westfield Topanga location, an increase of 145.9%, from the three months September 30, 2012. Facility and other related items should not materially vary from period to period.

5

Depreciation. Depreciation for the thirteen weeks ended September 29, 2013 was $56,928 including the Westfield Topanga location depreciation expense, an increase of 118.1%, from the three months ended September 30, 2012, which was $26,101. We depreciate and amortize purchases of our ongoing capital investments and the construction and leasehold improvements related to the development of our stores. On March 23, 2013 we opened 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 thirteen weeks ended September 29, 2013, executive compensation decreased $14,238 or 13.1%, to $94,545, from $108,783 for the three months ended September 30, 2012.

Non-Employee Stock Based Compensation. During the thirteen weeks ended September 29, 2013, we incurred $87,600 in non-cash non-employee stock based compensation charges. The Company amortized shares of common stock shares for stock issuances for professional and advisory services.

Professional and Consulting Expenses. For the thirteen weeks ended September 29, 2013 was $86,794, a decrease of 6.0%, from the three months ended September 30, 2012, in which we incurred $92,320 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 thirteen weeks ended September 29, 2013, general and administrative expenses were $31,759, compared to $19,753 in the three months ended September 30, 2012.

Net Loss

Our net loss for the thirteen weeks ended September 29, 2013 was $356,498, an increase of $141,728, or 66.0%, from $214,768 for the three 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.

Results of Operations for the Thirty Nine Weeks Ended September 29, 2013 and Nine Months Ended September 30, 2012:

REVENUE

	For Thirty Nine Weeks Ended			For the Nine Months Ended			Increase (Decrease)
	September 29, 2013			September 30, 2012			$			%
Revenue:
Food and beverage sales	$	901,814		$	534,885	$		366,929			68.6	%
Private party rentals		368,890			266,824			102,066			38.3	%
Other sales		442,765			213,718			229,047			107.2	%
Allowances, returns and discounts		(88,528	)		(40,516	)		(48,012	)		118.5	%
Net sales	$	1,624,941		$	974,911	$		650,030			66.7	%

Our food and beverage sales for the thirty nine weeks ended September 29, 2013 were $901,814 compared to $534,885 in the nine months ended September 30, 2012 including revenue from the Westfield Topanga location which opened March 23, 2013. This resulted in an increase in food and beverage sales of $366,929, or 68.6%, 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.

6

Our private party rentals for the thirty nine weeks ended September 29, 2013 were $368,890, including revenue from the Westfield Topanga location, compared to $266,824 in the nine months ended September 30, 2012. This resulted in an increase in private party rentals of $102,066, or 38.3%, 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 23% of net sales during the thirty nine weeks ended September 29, 2013 and over 27% in the nine months ended September 30, 2012. 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 thirty nine weeks ended September 29, 2013 were $442,765, including revenue from the Westfield Topanga location, compared to $213,718 in the nine months ended September 30, 2012. This resulted in an increase in sales of $229,047, or 107.2%, from the same period a year ago. Management attributes this to our own internal marketing efforts, as well as the Westfield Century City Mall and Westfield Topanga Mall holding periodic events to boost traffic to the mall, in general.

Allowances, returns and discounts for the thirty nine weeks ended September 29, 2013 were $88,528, compared to $40,516 in the nine months ended September 30, 2012. This resulted in an increase in allowances, returns and discounts of $48,012, or 118.5%, from the same period a year ago primarily from the Westfield Topanga location grand opening promotional discounts. We hope to reduce our reliance on the use of coupons and discounts to attract customers in future periods.

7

COSTS AND OPERATING EXPENSES

	For Thirty Nine Weeks Ended			For the Nine Months Ended			Increase (Decrease)
	September 29, 2013			September 30, 2012			$			%
Costs and operating expenses:
Cost of sales including food and beverage	$	264,265		$	217,321		$	46,944			21.6	%
Labor		599,705			329,485			270,220			82.0	%
Occupancy cost		358,761			181,790			176,971			97.3	%
Other		185,697			-			185,697			*
Depreciation		137,039			77,633			59,406			76.5	%
Total operating expenses	$	1,545,467		$	806,229		$	739,238			91.7	%
Other expenses:
Executive compensation		264,661			318,458			(53,797	)		-16.9	%
Employee stock-based compensation		-			1,100,883			(1,100,883	)		*
Non-employee stock-based compensation		272,666			115,380			157,286			136.3	%
Professional expenses and consulting expenses		345,117			262,349			82,768			31.5	%
General and administrative expenses		136,454			150,066			(13,612	)		-9.1	%
Finance and interest expense		58,355			-			58,355			*
Gain on stock issuance for payable settlement		(50,000	)		-			(50,000	)		*
Total other expenses		1,027,253			1,947,136			(919,883	)		47.2	%
Total costs and operating expenses		2,572,720			2,753,365			(180,645	)		-6.6	%
Provision for income taxes		4,740			(1,600	)		6,340			-396.3	%
Net loss before taxes	$	(952,519	)	$	(1,776,854	)	$	824,335			46.4	%

Notes to Costs and Operating Expenses table:

* Not divisible by zero.

Cost of sales. Costs related to food purchases, supplies and general restaurant operations totaled $264,265 during the thirty nine weeks ended September 29, 2013, including costs from the Westfield Topanga location, which was 21.6% higher than cost of sales of $217,321 in the nine months ended September 30, 2012. 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 thirty nine weeks ended September 29, 2013 was $599,705, including cost from the Westfield Topanga location, an increase of 82.0%, from the nine months ended September 30, 2012. We are a customer service company and our primary variable cost is related to providing such services. As a result, labor costs comprised 39% of our total expenses during the thirty nine weeks ended September 29, 2013, compared to 41% in the comparable period ended September 30, 2012. Labor costs are constantly fluctuating and any changes to minimum wages payable could adversely impact our operations.

Occupancy Cost. Occupancy cost for the thirty nine weeks ended September 29, 2013 was $358,761, including the lease costs Westfield Topanga location, an increase of 97.3%, from the nine months ended September 30, 2012. Facility and other related items should not materially vary from period to period.

8

Depreciation. Depreciation for the thirty nine weeks ended September 29, 2013 was $137,039, including the Westfield Topanga location depreciation expense, an increase of 76.5%, from the nine months ended September 30, 2012. We depreciate and amortize purchases of our ongoing capital investments and the construction and leasehold improvements related to the development of our stores. In May 2013, we began construction on a new location in Glendale, California, for which we expect to incur further construction costs that will be depreciated and amortized in future periods.

Executive Compensation. During the thirty nine weeks ended September 29, 2013, executive compensation decreased $53,797 or 16.9%, to $264,661 from $318,458 for the nine months ended September 30, 2012.

Employee Stock-Based Compensation. During the nine months ended September 30, 2012, we incurred employee stock-based compensation expenses of $1,100,883 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. Furthermore, the Company authorized 50,000 shares of common stock valued at $209,500 to the Chief Operating Officer upon employment in February 2012. There were no stock option issuances in the current year period.

Non-Employee Stock Based Compensation. During the thirty nine weeks ended September 29, 2013, we incurred non-cash non-employee stock based compensation charges of $272,666. The Company amortized shares of common stock shares for stock issuances for professional and advisory services.

Professional Expenses and Consulting Expenses. Professional and consulting fees for the thirty nine weeks ended September 29, 2013 was $345,117, an increase of 31.5%, from the nine months ended September 30, 2012, in which we incurred $262,349 in 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 thirty nine weeks ended September 29, 2013, general and administrative expenses were $136,454 compared to $150,066 in the nine months ended September 30, 2012.

Net Loss

Our net loss for the thirty nine weeks ended September 29, 2013 was $952,519, a decrease of $825,935 or 46.4%, from $1,778,454 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.

9

LIQUIDITY AND CAPITAL RESOURCES

As of September 29, 2013, we had $67,464 in cash and equivalents, $31,185 in inventory, and $7,955 in prepaid expenses and other. 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 thirty nine weeks ended September 29, 2013 and September 30, 2012:

	For Thirty Nine Weeks Ended			For Nine Months Ended
	September 29, 2013			September 30, 2012
Net cash provided by (used in) operating activities	$	206,042		$	(425,939	)
Net cash used in investing activities		(1,033,352	)		(162,645	)
Net cash provided by financing activities		738,300			75,000
Net decrease in Cash		(89,010	)		(513,584	)
Cash, beginning of period		156,474			608,309
Cash, end of period	$	67,464		$	94,725

Operating activities

Net cash provided by operating activities was $206,042 for the thirty nine weeks ended September 29, 2013, as compared to ($425,939) used in operating activities for the same period in 2012.

Investing activities

Net cash used in investing activities was $1,033,352, for the thirty nine weeks ended September 29, 2013, as compared to $162,645 used in investing activities for the same period in 2012.

Financing activities

Net cash provided by financing activities for the thirty nine weeks ended September 29, 2013, was $738,300, as compared to $75,000 for the same period of 2012.

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 2013 are expected to consist primarily of capital expenditures for the build out of our Glendale, California store 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.

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.

11

Changes in Internal Control Over Financial Reporting

On March 14, 2013, the Company received notice from Carrolton Partners, LLC, the Company’s outside financial advisor (the “Advisor”), that the Company’s previously issued financial statements, as presented in the Company’s quarterly reports on Form 10-Q for the periods ended March 31, 2012, June 30, 2012, and September 30, 2012, should no longer be relied upon.

While Joey Parsi, the Company’s Chief Executive Officer and a member of its Board of Directors, is also the Company’s Principal Financial Officer, the Company has effectively outsourced its internal accounting function to the Advisor.

Mr. Parsi and the Advisor discussed the matters disclosed in the Original 8-K with DeJoya Griffith LLC, the Company’s certified independent auditor. The Company filed revised financial statements as restated 10-Q/A filings on May 3, 2013.

This event is 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, and Anthony Risas for breach of fiduciary duty, breach of contract, negligence and negligent misrepresentation, fraud and indemnity. On October 13, 2012, Stoecklein Law Group, LLP (“Law Group”) which acted as our securities counsel from September 2010 until September 2012, filed an Interpleader action in the United States District Court for the Southern District of California to determine the proper ownership of 16 stock certificates representing an aggregate of 2,364,000 shares of our stock (the “Disputed Certificates”) held by the Law Group. Joey Parsi, Balata Partners, Inc., and Patrick Deparini were each named as defendants (the “Defendants”). Law Group claims that they entered into an oral agreement to hold the Disputed Certificates unless and until each of the Defendants agreed otherwise. The Company maintains that no such oral agreement was entered into and plans to vigorously argue for the release of the Disputed Certificates into the custody of our current securities counsel.

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.

12

Item 1A. Risk Factors

Our significant business risks are described in Item 1A to Form 10-K for the year ended December 31, 2012 to which reference is made herein.

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

Stock Issuances

On April 19, 2013, the Company issued 670,000 shares of common stock to an investor in conjunction with a $100,000 private placement.

On April 19, 2013, the Company issued 166,667 shares of common stock to an investor in conjunction with a $50,000 private placement.

On May 15, 2013, the Company authorized the issuance of 333,333 shares of common stock to a construction contractor for the reduction in outstanding invoices due in the amount of $150,000. The fair value of the shares of common stock was $100,000 which is recorded to common stock payable as of June 30, 2013.

On August 19, 2013, the Company authorized the issuance of 83,334 shares of common stock in exchange for advisory services.

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 29, 2013.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

Not applicable.

13

Item 5. 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

*	Filed herewith.
**	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.

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: November 14, 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 this Thirteen Week Report on Form 10-Q 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: November 14, 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 Thirteen Week Report of Giggles N’ Hugs, Inc. (the “Company”) on Form 10-Q for the period ended September 29, 2013, 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: November 14, 2013
	/s/ Joey Parsi
	Joey Parsi
	Principal Executive Officer
	and Principal Financial Officer

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Stockholders' Equity

9 Months Ended

Sep. 29, 2013

Equity [Abstract]

Stockholders' Equity

NOTE 12 – STOCKHOLDERS’ EQUITY

The Company is authorized to issue 1,125,000,000 shares of $0.001 par value common stock. As of September 29, 2013and December 31, 2012, 24,055,812 and 23,149,145 shares were issued and outstanding, respectively.

On February 11, 2013, the Company issued 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 December 31, 2012.

On February 11, 2013, the Company issued 20,000 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 $17,400 which is recorded to common stock payable as of December 31, 2012.

On February 25, 2013, the Company issued 20,000 shares of common stock to a third party entity for strategic management services. The fair value of the shares of common stock was $17,000 which is recorded to common stock payable as of December 31, 2012.

On January 12, 2013, the Company authorized the issuance of 670,000 shares of common stock to an investor for $100,000 cash received. The Company issued the shares on April 19, 2013.

On March 7, 2013, the Company authorized the issuance of 166,667 shares of common stock to an investor for $50,000 cash received. The Company issued the shares on April 19, 2013.

On May 15, 2013, the Company authorized the issuance of 333,333 shares of common stock to a construction contractor for the settlement of outstanding invoices due in the amount of $150,000. The fair value of the shares of common stock on the settlement date was $100,000 which is recorded to common stock payable as of June 30, 2013. The Company recorded a gain on accounts payable settlement of $50,000 during the three months ended June 30, 2013.

On July 11, 2013, the Company issued 15,000 shares of common stock to a third party entity for graphic design services. The fair value of the shares of common stock was $3,300 which is recorded to graphic design expense on July 11, 2013.

On August 19, 2013, the Company authorized the issuance of 83,334 shares of common stock for advisory services for 3 month service. The value of the shares of common stock was $37,500 out of which $25,000 is recorded to common stock payable in the third quarter of 2013. The remaining $12,500 is anticipated in the fourth quarter of 2013.

XML

Consolidated Statements of Operations (Unaudited) (USD $)	3 Months Ended		9 Months Ended
	Sep. 29, 2013	Sep. 30, 2012	Sep. 29, 2013	Sep. 30, 2012
Revenue
Food and beverage sales	$ 346,059	$ 199,075	$ 901,814	$ 534,885
Private party rentals	113,638	70,875	368,890	266,824
Other sales	184,978	79,828	442,765	213,718
Allowances, returns and discounts	(30,165)	(16,741)	(88,528)	(40,516)
Net sales	614,510	333,037	1,624,941	974,911
Costs and operating expenses
Cost of sales including food and beverage	100,548	78,516	264,265	217,321
Labor	230,979	97,109	599,705	329,485
Occupancy cost	153,242	62,323	358,761	181,790
Other	92,516		185,697
Depreciation and amortization	56,928	26,101	137,039	77,633
Total operating expenses	634,213	264,049	1,545,467	806,229
Other expenses
Executive compensation	94,545	108,783	264,661	318,458
Employee stock-based compensation				1,100,883
Non-Employee stock-based compensation	87,600	62,900	272,666	115,380
Professional and consulting expenses	86,794	92,320	345,117	262,349
General and administrative expenses	31,759	19,753	136,454	150,066
Finance and interest expense	31,355		58,355
Gain on stock issuance for payable settlement			(50,000)
Total costs and operating expenses	966,266	547,805	2,572,720	2,753,365
Loss before provision for income taxes	(351,756)	(214,768)	(947,779)	(1,778,454)
Provision for income taxes	4,740		4,740	(1,600)
Net loss	$ (356,496)	$ (214,768)	$ (952,519)	$ (1,780,054)
Net loss per share - basic	$ (0.01)	$ (0.01)	$ (0.04)	$ (0.08)
Weighted average number of common shares outstanding - basic	23,886,123	22,875,692	23,522,653	22,875,692

XML

Going Concern

9 Months Ended

Sep. 29, 2013

Going Concern

Going Concern

NOTE 5 – 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 $4,223,552 at September 29, 2013. In addition, the Company has negative working capital of $790,685 at September 29, 2013.

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. 29, 2013

Inventory Tables

Schedule of Inventory

Inventory consisted of the following at:

	September 29, 2013		December 31, 2012
Restaurant food and supplies	$	31,185	$	16,755
Total	$	31,185	$	16,755

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Stock Options

9 Months Ended

Sep. 29, 2013

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

Stock Options

NOTE 13 – STOCK OPTIONS

Employee Stock Options

The following table summarizes the changes in the options outstanding at September 29, 2013, 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		195,000	$	4.50		3.09		195,000	$	4.50
			195,000				3.09		195,000

A summary of the Company’s stock awards for options as of September 29, 2013 and changes for the thirty nine weeks ended September 29, 2013 is presented below:

	Stock Options			Weighted Average Exercise Price
Outstanding, December 31, 2012		211,000		$	4.50
Granted		—			—
Exercised		—			—
Expired/Cancelled		(16,000	)		—
Outstanding, September 29, 2013		195,000		$	4.50
Exercisable, September 29, 2013		195,000		$	4.50

The weighted-average fair value of stock options granted to employees during the period ended September 29, 2013 and September 30, 2012 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 29, 2013			September 30, 2012
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
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 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 option valuation model.

There were no options granted during the quarter ended September 29, 2013.

Total stock-based compensation expense in connection with options granted to employees recognized in the consolidated statement of operations for the thirty nine weeks ended September 29, 2013 and nine months ended September 30, 2012 was $0 and $891,383, respectively.

XML

Stock Options - Weighted-Average Fair Value of Stock Options Granted to Employees (Details) (USD $)	9 Months Ended
	Sep. 29, 2013	Sep. 30, 2012
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]
Risk-free interest rate at grant date	0.00%	0.78%
Expected stock price volatility	0.00%	139.00%
Expected dividend payout	0.00%	0.00%
Expected option life (in years)	0 years	5 years
Expected forfeiture rate	$ 0.00	$ 0.00
Fair value per share of options granted	$ 0.00	$ 3.96

XML

Deferred Revenue - Schedule of Deferred Revenue (Details) (USD $)	Sep. 29, 2013	Dec. 31, 2012
Deferred Revenue [Abstract]
Membership cards	$ 1,278	$ 1,463
Gift cards	5,400	3,626
Dining credit program	17,425	32,382
Party deposits	31,453	8,299
Total	$ 55,556	$ 45,770

XML

Convertible Note Payable (Tables)

9 Months Ended

Sep. 29, 2013

Debt Disclosure [Abstract]

Summary of Convertible Debentures Payable

A summary of convertible debentures payable as of September 29, 2013 and December 31, 2012 is as follows:

	September 29, 2013			December 31, 2012
Convertible note, accrue interest at 8% per annum and mature on
November 23, 2013	$	50,000		$	50,000
Debt discount - beneficial conversion feature		(7,295	)		(44,795	)
Convertible note, net unamortized discount	$	42,705		$	5,205

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Deferred Revenue (Tables)

9 Months Ended

Sep. 29, 2013

Deferred Revenue [Abstract]

Schedule of Deferred Revenue

Deferred revenue consisted of the following at:

	September 29, 2013		December 31, 2012
Membership cards	$	1,278	$	1,463
Gift cards		5,400		3,626
Dining credit program		17,425		32,382
Party deposits		31,453		8,299
Total	$	55,556	$	45,770

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Stock Options - Summary of Changes in Options Outstanding (Details) (USD $)	9 Months Ended
	Sep. 29, 2013	Dec. 31, 2012
Number of Options Outstanding	195,000	211,000
Weighted Average Exercise Price, Outstanding	$ 4.50	$ 4.50
Weighted Average Remaining Contractual Life	3 years 1 month 2 days
Number of Options Exercisable	195,000
Weighted Average Exercise Price, Exercisable	$ 4.50
Range 1 [Member]
Range of Exercise Prices	$ 4.50
Number of Options Outstanding	195,000
Weighted Average Exercise Price, Outstanding	$ 4.50
Weighted Average Remaining Contractual Life	3 years 1 month 2 days
Number of Options Exercisable	195,000
Weighted Average Exercise Price, Exercisable	$ 4.50

XML

Going Concern (Details Narrative) (USD $)	Sep. 29, 2013	Dec. 31, 2012
Going Concern
Accumulated deficit	$ 4,223,552	$ 3,271,033
Working capital negative	$ 790,685

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Note Payable Lessor (Details Narrative) (USD $)	0 Months Ended		9 Months Ended
	Feb. 12, 2013	Nov. 23, 2012	Sep. 29, 2013	Dec. 31, 2012
Proceeds from promissory notes payable	$ 700,000
Notes payable accures interest rate			8.00%	8.00%
Notes payable, maturity date	Oct. 31, 2023	Nov. 23, 2013	Nov. 23, 2013
Amount of promissory note drawn			398,710
Promissory notes drawn			$ 420,000
Completion Of Scheduled Process 1 [Member]
Percentage of loan draw from principal amount on completion of schedule process			35.00%
Completion Of Scheduled Process 2 [Member]
Percentage of loan draw from principal amount on completion of schedule process			25.00%
Completion Of Scheduled Process 3 [Member]
Percentage of loan draw from principal amount on completion of schedule process			25.00%
Completion Of Scheduled Process 4 [Member]
Percentage of loan draw from principal amount on completion of schedule process			15.00%
Through October 15, 2015 [Member]
Notes payable accures interest rate	10.00%
Through October 31, 2017 [Member]
Notes payable accures interest rate	12.00%
Through October 31, 2023 [Member]
Notes payable accures interest rate	15.00%

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Related Party Transactions (Details Narrative) (USD $)	3 Months Ended	9 Months Ended
	Sep. 29, 2013	Sep. 29, 2013	Sep. 30, 2012	Dec. 31, 2012
Related Party Transactions [Abstract]
Advances from related parties	$ 150,000	$ 150,000
Repayments of related parties	110,000	110,000
Due to related party	$ 40,000	$ 40,000

XML

Summary of Significant Accounting Policies (Details Narrative) (USD $)	9 Months Ended
	Sep. 29, 2013
Construction contributions	$ 590,000
Topanga [Member]
Construction contributions	488,409
Century City [Member]
Construction contributions	$ 284,000

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Convertible Note Payable - Summary of Convertible Debentures Payable (Details) (Parenthetical)	0 Months Ended		9 Months Ended
	Feb. 12, 2013	Nov. 23, 2012	Sep. 29, 2013	Dec. 31, 2012
Debt Disclosure [Abstract]
Note payable accrues interest rate			8.00%	8.00%
Note Payable, maturitry date	Oct. 31, 2023	Nov. 23, 2013	Nov. 23, 2013

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Fixed Assets (Tables)

9 Months Ended

Sep. 30, 2013

Fixed assets:

Schedule of Fixed Assets

Fixed assets consisted of the following at:

	September 29, 2013			December 31, 2012
Leasehold improvements	$	2,303,162		$	1,359,141
Fixtures and equipment		124,753			37,457
Computer software and equipment		13,967			12,910
Property and equipment, total		2,441,882			1,409,508
Less: accumulated depreciation		(347,485	)		(211,424	)
Property and equipment, net	$	2,094,397		$	1,198,084

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History and Organization

9 Months Ended

Sep. 29, 2013

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 on September 17, 2004 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 in exchange for a 100% interest in GNH. 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.

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Summary of Significant Accounting Policies

9 Months Ended

Sep. 29, 2013

Accounting Policies [Abstract]

Summary of Significant Accounting Policies

NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of consolidation

At September 29, 2013 and September 30, 2012, the consolidated financial statements include the accounts of Giggles N’ Hugs, Inc., GNH CC, 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 and Giggles N Hugs in Westfield Mall in Topanga, 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 locations. 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 was reimbursed to Century City, $488,409 was reimbursed to Topanga, and $284,000 was reimbursed to Glendale by their 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.

At September 29, 2013 and September 30, 2012 we did not record an impairment charge against the carrying value of the restaurants located in Century City and Topanga, 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; and

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, Topanga, and Glendale receive payments from its customers at the start of the subscription period and each record 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 November 2013 and believes that none of them will have a material effect on the Company’s financial position, results of operations or cash flows.

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Inventory

9 Months Ended

Sep. 29, 2013

Inventory Disclosure [Abstract]

Inventory

NOTE 6 – INVENTORY

Inventory consisted of the following at:

	September 29, 2013		December 31, 2012
Restaurant food and supplies	$	31,185	$	16,755
Total	$	31,185	$	16,755

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Reclassification

9 Months Ended

Sep. 29, 2013

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Reclassification

NOTE 4 – RECLASSIFICATION

Certain amounts in the consolidated balance sheet for the year ended December 31, 2012 have been reclassified to be consistent with the current year presentation. $7,875 previously included in due to related party are now included in the accrued expenses. The reclassification had no material impact on the Company’s financial conditions, results of operations or cash flows.

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Convertible Note Payable (Details Narrative) (USD $)

0 Months Ended

3 Months Ended

9 Months Ended

Feb. 12, 2013

Nov. 23, 2012

Sep. 29, 2013

Dec. 31, 2012

Sep. 29, 2013

Debt Disclosure [Abstract]

Proceeds from unsecured convertible note

$ 50,000

Note payable accrues interest rate

8.00%

Note payable, maturitry date

Oct. 31, 2023

Nov. 23, 2013

Nov. 23, 2013

Conversion feature of the buyer

The Lender may also convert all or a portion of the Note at any time at a price equal to the lesser of (i) $0.25, or (ii) ninety percent (90%) of a Subsequent Financing Price (price per share paid by investors in a subsequent financing), or (iii) ninety percent (90%) of a the Change of Control price (per share consideration paid in a change of control transaction.

Beneficial conversion feature, amount

50,000

12,500

5,205

37,500

Interest expense

$ 1,000

$ 3,000

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Stock Options (Tables)

9 Months Ended

Sep. 29, 2013

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

Summary of Changes in Options Outstanding

The following table summarizes the changes in the options outstanding at September 29, 2013, 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		195,000	$	4.50		3.09		195,000	$	4.50
			195,000				3.09		195,000

Summary of Stock Awards for Options

A summary of the Company’s stock awards for options as of September 29, 2013 and changes for the thirty nine weeks ended September 29, 2013 is presented below:

	Stock Options			Weighted Average Exercise Price
Outstanding, December 31, 2012		211,000		$	4.50
Granted		—			—
Exercised		—			—
Expired/Cancelled		(16,000	)		—
Outstanding, September 29, 2013		195,000		$	4.50
Exercisable, September 29, 2013		195,000		$	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 period ended September 29, 2013 and September 30, 2012 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 29, 2013			September 30, 2012
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
Expected forfeiture rate		-	%		0	%
Fair value per share of options granted	$	-		$	3.96

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Summary of Significant Accounting Policies - Schedule of Property and Equipment Estimated Useful Lives (Details)	9 Months Ended
	Sep. 29, 2013
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

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Fixed Assets - Schedule of Fixed Assets (Details) (USD $)	Sep. 29, 2013	Dec. 31, 2012
Fixed assets:
Leasehold improvements	$ 2,303,162	$ 1,359,141
Fixtures and equipment	124,753	37,457
Computer software and equipment	13,967	12,910
Property and equipment, total	2,441,882	1,409,508
Less: accumulated depreciation	(347,485)	(211,424)
Property and equipment, net	$ 2,094,397	$ 1,198,084

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Commitments and Contingencies (Details Narrative) (USD $)

9 Months Ended

25 Months Ended

3 Months Ended

9 Months Ended

3 Months Ended

9 Months Ended

9 Months Ended

9 Months Ended

Sep. 29, 2013

Sep. 30, 2012

Sep. 29, 2013

Century City [Member]

Sep. 30, 2012

Century City [Member]

Sep. 29, 2013

Century City [Member]

Sep. 30, 2012

Century City [Member]

Sep. 29, 2013

Century City [Member]

Minimum [Member]

Sep. 29, 2013

Century City [Member]

Maximum [Member]

Sep. 29, 2013

Westfield Topanga Owner, LP [Member]

Sep. 30, 2012

Westfield Topanga Owner, LP [Member]

Sep. 29, 2013

Westfield Topanga Owner, LP [Member]

Sep. 30, 2012

Westfield Topanga Owner, LP [Member]

Dec. 31, 2012

Westfield Topanga Owner, LP [Member]

acre

Sep. 29, 2013

Glendale II Mall Associates, LLC [Member]

acre

Apr. 02, 2013

Glendale II Mall Associates, LLC [Member]

acre

Sep. 29, 2013

Glendale II Mall Associates, LLC [Member]

Minimum [Member]

Sep. 29, 2013

Glendale II Mall Associates, LLC [Member]

Maximum [Member]

Sep. 29, 2013

Westfield Topanga Owner, LP [Member]

Minimum [Member]

Sep. 29, 2013

Westfield Topanga Owner, LP [Member]

Maximum [Member]

Remaining restaurant operating lease, term

10 years

Percentage of sales range

7.00%

10.00%

4.00%

70.00%

7.00%

10.00%

Rent expense

$ 34,766

$ 34,766

$ 104,299

$ 104,299

$ 52,048

$ 0

$ 104,096

$ 0

Number of square feet for operating lease

5,900

5,900

6,000

Construction reimbursement allowance

$ 475,000

$ 475,000

Expiration date of Lease

Apr. 30, 2022

Sep. 30, 2023

Disputed for stock certificate ownership description

On October 13, 2012, Stoecklein Law Group, LLP (“Law Group”) which acted as our securities counsel from September 2010 until September 2012, filed an Interpleader action in the United States District Court for the Southern District of California to determine the proper ownership of 16 stock certificates representing an aggregate of 2,364,000 shares of our stock (the “Disputed Certificates”) held by the Law Group.

Number of disputed stock, held

2,364,000

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Stock Options (Detail Narratives) (USD $)	3 Months Ended	9 Months Ended
	Sep. 29, 2013	Sep. 29, 2013	Sep. 30, 2012
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]
Stock Options, Granted	0
Stock-based compensation related to employee stock options		$ 0	$ 891,383

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Consolidated Balance Sheets (Unaudited) (Parenthetical) (USD $)	Sep. 29, 2013	Dec. 31, 2012
Statement of Financial Position [Abstract]
Net of debt discount	$ 7,295	$ 44,795
Common stock, par value	$ 0.001	$ 0.001
Common stock, shares authorized	1,125,000,000	1,125,000,000
Common stock, shares issued	24,055,812	23,149,145
Common stock, shares outstanding	24,055,812	23,149,145
Common stock payable, shares	133,334

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Incentive From Lessor

9 Months Ended

Sep. 29, 2013

Leases [Abstract]

Incentive From Lessor

NOTE 9 – 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.

As of September 29, 2013, the Company received a total of $488,409 from the landlords as construction contributions related to the Topanga lease.

Amortization of the incentive from lessor was $15,391 and $40,931 for the thirteen and thirty nine weeks ended September 29, 2013, and $11,112 and $35,619 for the three and nine months ended September 30, 2012.

The Company is currently building out its new Glendale, CA location. Through September 29, 2013, the Company received $285,000 from the Company’s landlord as construction contributions pursuant to agreed-upon terms in its lease agreement with Glendale II Mall Associates, LLC to lease approximately 5,900 square feet in the Westfield Glendale Galleria Shopping Center. A total of $118,750 of the $475,000 was received in the current quarter and an additional $118,750 is anticipated in the fourth quarter of 2013.

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Consolidated Statements of Cash Flows (Unaudited) (USD $)	9 Months Ended
	Sep. 29, 2013	Sep. 30, 2012
Cash flows from operating activities
Net Loss	$ (952,519)	$ (1,780,054)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	137,039	77,633
Amortization of debt discount	37,500
Non-Employee stock-based compensation	272,666	115,380
Gain on stock issuance for payable settlement	(50,000)
Employee stock-based compensation		1,100,883
Changes in operating assets and liabilities:
Increase in prepaid expenses and deposits	(5,485)	(5,987)
Increase in security deposit, other	(6,230)
Increase in inventory	(14,430)	(758)
Increase in accounts payable	209,422	11,842
Increase in lease incentive liability	449,215	12,927
Increase in accrued expenses	247,378	42,007
Increase in deferred revenue	9,786	188
Net cash provided by (used in) operating activities	334,342	(425,939)
Cash flows from investing activities
Acquisition of fixed assets	(1,033,352)	(162,645)
Net cash used in investing activities	(1,033,352)	(162,645)
Cash flows from financing activities
Proceeds from lessor note payable	420,000
Proceeds from common stock payable		75,000
Proceeds from shares issued	150,000
Proceeds from related party	150,000
Payments to related party	(110,000)
Net cash provided by financing activities	610,000	75,000
NET DECREASE IN CASH	(89,010)	(513,584)
CASH AT BEGINNING OF PERIOD	156,474	608,309
CASH AT END OF PERIOD	67,464	94,725
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid
Income taxes paid
NON-CASH INVESTING AND FINANCING ACTIVITIES:
Shares issued for prepaid stock compensation
Accounts payable settled by share issuance	$ 150,000

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Consolidated Balance Sheets (Unaudited) (USD $)	Sep. 29, 2013	Dec. 31, 2012
Current assets:
Cash and equivalents	$ 67,464	$ 156,474
Inventory	31,185	16,755
Prepaid stock-based compensation		244,366
Prepaid expenses, other	7,955	2,470
Total current assets	106,604	420,065
Fixed assets:
Total fixed assets, net	2,094,397	1,198,084
Other assets:
Security deposits, other	38,730	32,500
Total other assets	38,730	32,500
Total assets	2,239,731	1,650,649
Current liabilities:
Accounts payable	354,341	294,919
Incentive from lessor — current portion	63,151	49,910
Note payable from lessor - current portion	21,290
Accrued expenses	320,246	72,868
Deferred revenue	55,556	45,770
Due to related party	40,000
Convertible note payable, net of debt discount of $7,295 and $44,795, respectively	42,705	5,205
Total current liabilities	897,289	468,672
Long-term liabilities:
Incentive from lessor — long-term	1,160,891	724,917
Note payable - lessor	398,710
Total long-term liabilities	1,599,601	724,917
Total liabilities	2,456,890	1,193,589
Stockholders' equity:
Common stock, $0.001 par value, 1,125,000,000 shares authorized, 24,055,812 and 23,149,145 shares issued and outstanding as of September 29, 2013 and December 31, 2012, respectively	24,056	23,149
Common stock payable (133,334 shares as of September 29, 2013)	415,500	347,400
Additional paid-in capital	3,566,837	3,357,544
Accumulated deficit	(4,223,552)	(3,271,033)
Total stockholders' equity	(217,159)	457,060
Total liabilities and stockholders' equity	$ 2,239,731	$ 1,650,649

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Commitments and Contingencies - Schedule of Aggregate Minimum Annual Lease Payments Under Operating Leases (Details) (USD $)	Sep. 29, 2013
Century City [Member]
2013	$ 47,359
2014	194,644
2015	200,483
2016	206,498
2017	212,692
Thereafter	482,983
Total	1,344,659
Westfield Topanga Owner, LP [Member]
2013	55,224
2014	228,996
2015	238,155
2016	247,682
2017	257,589
Thereafter	1,241,388
Total	2,269,034
Glendale II Mall Associates, LLC [Member]
2013	31,070
2014	187,663
2015	195,169
2016	202,976
2017	211,095
Thereafter	1,410,205
Total	$ 2,238,178

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Commitments and Contingencies (Tables)

9 Months Ended

Sep. 29, 2013

Century City [Member]

Schedule of Aggregate Minimum Annual Lease Payments Under Operating Leases

As of September 29, 2013, the aggregate minimum annual lease payments under operating leases, including amounts characterized as deemed landlord financing payments are as follows:

2013	$	47,359
2014		194,644
2015		200,483
2016		206,498
2017		212,692
Thereafter		482,983
Total	$	1,344,659

Westfield Topanga Owner, LP [Member]

Schedule of Aggregate Minimum Annual Lease Payments Under Operating Leases

As of September 29, 2013, the aggregate minimum annual lease payments under operating leases, including amounts characterized as deemed landlord financing payments are as follows:

2013	$	55,224
2014		228,996
2015		238,155
2016		247,682
2017		257,589
Thereafter		1,241,388
Total	$	2,269,034

Glendale II Mall Associates, LLC [Member]

Schedule of 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	$	31,070
2014		187,663
2015		195,169
2016		202,976
2017		211,095
Thereafter		1,410,205
Total	$	2,238,178

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Summary of Significant Accounting Policies (Tables)

9 Months Ended

Sep. 29, 2013

Accounting Policies [Abstract]

Schedule of Property and Equipment Estimated Useful Lives

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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Stockholders' Equity (Details Narrative) (USD $)	0 Months Ended		3 Months Ended			9 Months Ended			0 Months Ended							9 Months Ended
	Oct. 29, 2013	May 15, 2013	Sep. 29, 2013	Jun. 30, 2013	Sep. 30, 2012	Sep. 29, 2013	Sep. 30, 2012	Dec. 31, 2012	Mar. 07, 2013 Investor [Member]	Jan. 12, 2013 Investor [Member]	Feb. 11, 2013 Investor Relation Services [Member]	Feb. 11, 2013 Financial And Governance Reporting Services [Member]	Feb. 25, 2013 Strategic Management Services [Member]	Jul. 11, 2013 Graphic Design Services [Memeber]	Aug. 19, 2013 Advisory Services [Member]	Sep. 29, 2013 Advisory Services [Member]
Common stock, shares authorized			1,125,000,000			1,125,000,000		1,125,000,000
Common stock, shares issued			24,055,812			24,055,812		23,149,145
Common stock, shares outstanding			24,055,812			24,055,812		23,149,145
Common stock, par value			$ 0.001			$ 0.001		$ 0.001
Stock issued during period for services, shares	83,333								166,667		15,000	20,000	20,000	15,000	83,334
Stock issued during period for services									$ 50,000		$ 22,500	$ 17,400	$ 17,000	$ 3,300	$ 37,500	$ 37,500
Stock issued during period for consideration of cash										670,000
Stock issued during period for consideration of cash, shares										100,000
Stock issued during period for settlement of invoices, shares		333,333
Stock issued during period for settlement of invoices		150,000
Fair value of common stock payable			25,000	100,000		25,000										25,000
Gain on accounts payable settlement				50,000		50,000
Expected to account payable						$ 12,500

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Incentive From Lessor (Details Narrative) (USD $)	3 Months Ended		9 Months Ended				9 Months Ended
	Sep. 29, 2013	Sep. 30, 2012	Sep. 29, 2013	Sep. 30, 2012	Sep. 29, 2013 Glendale II Mall Associates, LLC [Member] acre	Apr. 02, 2013 Glendale II Mall Associates, LLC [Member] acre	Sep. 29, 2013 Topanga [Member]
Amortized life period of lease			10 years
Construction contributions			$ 590,000		$ 285,000		$ 488,409
Amortization of incentive from lessor	15,391	11,112	40,931	35,619
Lease area					5,900	6,000
Current construction contributions					475,000
Remaining construction contributions					$ 118,750

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Inventory - Schedule of Inventory (Details) (USD $)	Sep. 29, 2013	Dec. 31, 2012
Inventory - Schedule Of Inventory Details
Restaurant food and supplies	$ 31,185	$ 16,755
Total	$ 31,185	$ 16,755

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Fixed Assets (Details Narrative) (USD $)	3 Months Ended		9 Months Ended
	Sep. 29, 2013	Sep. 30, 2012	Sep. 29, 2013	Sep. 30, 2012
Fixed assets:
Repair and maintenance expenses	$ 13,407	$ 14,292	$ 27,092	$ 19,451
Depreciation expenses	$ 56,928	$ 26,101	$ 137,039	$ 77,633

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Deferred Revenue

9 Months Ended

Sep. 29, 2013

Deferred Revenue [Abstract]

Deferred Revenue

NOTE 8 – DEFERRED REVENUE

Deferred revenue consisted of the following at:

	September 29, 2013		December 31, 2012
Membership cards	$	1,278	$	1,463
Gift cards		5,400		3,626
Dining credit program		17,425		32,382
Party deposits		31,453		8,299
Total	$	55,556	$	45,770

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History and Organization (Details Narrative) (USD $)			0 Months Ended
	Sep. 29, 2013	Dec. 31, 2012	Dec. 30, 2011 GNH, Inc. [Member]
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%

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Convertible Note Payable - Summary of Convertible Debentures Payable (Details) (USD $)	Sep. 29, 2013	Dec. 31, 2012
Debt Disclosure [Abstract]
Convertible note, accrue interest at 8% per annum and matures on November 23, 2013	$ 50,000	$ 50,000
Debt discount - beneficial conversion feature	(7,295)	(44,795)
Convertible note, net unamortized discount	$ 42,705	$ 5,205

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Convertible Note Payable

9 Months Ended

Sep. 29, 2013

Debt Disclosure [Abstract]

Convertible Note Payable

NOTE 11 – CONVERTIBLE NOTE PAYABLE

A summary of convertible debentures payable as of September 29, 2013 and December 31, 2012 is as follows:

	September 29, 2013			December 31, 2012
Convertible note, accrue interest at 8% per annum and mature on
November 23, 2013	$	50,000		$	50,000
Debt discount - beneficial conversion feature		(7,295	)		(44,795	)
Convertible note, net unamortized discount	$	42,705		$	5,205

On November 23, 2012, the Company entered into an unsecured Note Payable Agreement with Gary Schahet (the “Buyer”) pursuant to which the Company issued $50,000 of an unsecured convertible note (the “Note Payable”). The Note Payable accrues interest at a rate of 8% per annum and matures on November 23, 2013. The Lender may also convert all or a portion of the Note at any time at a price equal to the lesser of (i) $0.25, or (ii) ninety percent (90%) of a Subsequent Financing Price (price per share paid by investors in a subsequent financing), or (iii) ninety percent (90%) of a Change of Control price (per share consideration paid in a change of control transaction.

The Company has determined the value associated with the beneficial conversion feature in connection with the notes to be $50,000. The aggregate beneficial conversion feature has been accreted and charged to financing expense in the amount of $12,500 and $37,500 during the thirteen and thirty nine weeks ended September 29, 2013 and $5,205 as of December 31, 2012, respectively. During the thirteen and thirty nine weeks ended September 29, 2013, the Company recorded interest expense of $1,000 and $3,000, respectively.

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Fixed Assets

9 Months Ended

Sep. 29, 2013

Fixed assets:

Fixed Assets

NOTE 7 – FIXED ASSETS

Fixed assets consisted of the following at:

	September 29, 2013			December 31, 2012
Leasehold improvements	$	2,303,162		$	1,359,141
Fixtures and equipment		124,753			37,457
Computer software and equipment		13,967			12,910
Property and equipment, total		2,441,882			1,409,508
Less: accumulated depreciation		(347,485	)		(211,424	)
Property and equipment, net	$	2,094,397		$	1,198,084

Repair and maintenance expenses for the thirteen and thirty nine weeks ended September 29, 2013 were $13,407 and $27,092, respectively, for the three and nine months ended September 30, 2012 were $14,292 and $19,451, respectively. Depreciation expenses for the thirteen and thirty nine weeks ended September 29, 2013 were $56,928 and $137,039, respectively, and for the three and nine months ended September 29, 2012 were $26,101 and $77,633, respectively.

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Basis of Presentation

9 Months Ended

Sep. 29, 2013

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, 2012 and notes thereto included in the Company’s annual report on Form 10-K. The Company follows the same accounting policies in the preparation of interim reports.

The Company adopted a 52/53 week fiscal year ending on the Sunday closest to December 31^st for financial reporting purposes. 2012 consists of calendar year ending December 31, 2012. The election for fiscal year was made with the 8-K filing in October 2013.

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

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Subsequent Events (Details Narrative) (USD $)	0 Months Ended			0 Months Ended	9 Months Ended
	Oct. 29, 2013	Sep. 29, 2013	Jun. 30, 2013	Aug. 19, 2013 Advisory Services [Member]	Sep. 29, 2013 Advisory Services [Member]
Common stock shares issued for professional services rendered	83,333			83,334
Stock issued during period for services				$ 37,500	$ 37,500
Common stock payable		$ 25,000	$ 100,000		$ 25,000

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Stock Options - Summary of Stock Awards for Options (Details) (USD $)	3 Months Ended	9 Months Ended
	Sep. 29, 2013	Sep. 29, 2013
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]
Stock Options, Outstanding, Beginning balance		211,000
Stock Options, Granted	0
Stock Options, Exercised
Stock Options, Expired/Cancelled		(16,000)
Stock Options, Outstanding, Ending balance	195,000	195,000
Stock Options, Exercisable	195,000	195,000
Weighted Average Exercise Price, Outstanding, Beginning balance		$ 4.50
Weighted Average Exercise Price, Granted
Weighted Average Exercise Price, Exercised
Weighted Average Exercise Price, Expired/Cancelled
Weighted Average Exercise Price, Outstanding, Ending balance	$ 4.50	$ 4.50
Weighted Average Exercise Price, Exercisable	$ 4.50	$ 4.50

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Reclassification (Details Narrative) (USD $)	9 Months Ended
	Sep. 29, 2013
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Reclassified accrued expenses	$ 7,875

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Related Party Transactions

9 Months Ended

Sep. 29, 2013

Related Party Transactions [Abstract]

Related Party Transactions

NOTE 14 – RELATED PARTY TRANSACTIONS

From time to time, the Company has received advances from certain of its officers and related parties to meet short term working capital needs. These advances may not have formal repayment terms or arrangements. During the thirty nine weeks ended September 29, 2013, the Company received a total of $150,000 advances from related parties and repaid back $110,000 to the related parties. As of September 29, 2013, the Company recorded due to related party of $40,000. These advances are unsecured, bear no interest, and do not have formal repayment terms or arrangements.

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Note Payable Lessor

9 Months Ended

Sep. 29, 2013

Note Payable Lessor

Note Payable Lessor

NOTE 10 – NOTE PAYABLE LESSOR

On February 12, 2013, the Company entered into a $700,000 Promissory Note Payable Agreement with GGP Limited Partnership (“Lender”) to be used by the Company for a portion of the construction work to be performed by the Company under the lease by and between Glendale II Mall Associates, LLC. The Note Payable accrues interest at a rate of 10% through October 15, 2015, 12% through October 31, 2017, and 15% through October 31, 2023 and matures on October 31, 2023. The monthly principal and interest payment will commence upon the earlier of (i) the Rental Commencement Date (as defined in the Lease); or (ii) November 1, 2013 and continuing through and including the Maturity Date, make a fixed monthly installment payment of principal and accrued Interest in an amount equal to the principal and interest commencing from the date of the first advance and continuing through and including the Maturity Date.

The Lender agrees to loan draws to the Company in accordance with the following schedule:

1.	An amount equal to 35% of the Principal Amount upon completion of all the requirements for payment of the Construction Allowance set forth in the Lease.
2.	An amount equal to 25% of the Principal Amount upon completion of all the requirements for payment of the Construction Allowance set forth in the Lease.
3.	An amount equal to 25% of the Principal Amount upon completion of all the requirements for payment of the Construction Allowance set forth in the Lease.
4.	An amount equal to 15% of the Principal Amount upon completion of all the requirements for payment of the Construction Allowance set forth in the Lease.

As of September 29, 2013, the Company had drawn $420,000 from the Promissory Note.

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Summary of Significant Accounting Policies (Policies)

9 Months Ended

Sep. 29, 2013

Accounting Policies [Abstract]

Principles of Consolidation

Principles of consolidation

At September 29, 2013 and September 30, 2012, the consolidated financial statements include the accounts of Giggles N’ Hugs, Inc., GNH CC, 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 and Giggles N Hugs in Westfield Mall in Topanga, 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 locations. 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 was reimbursed to Century City, $488,409 was reimbursed to Topanga, and $284,000 was reimbursed to Glendale by their 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.

At September 29, 2013 and September 30, 2012 we did not record an impairment charge against the carrying value of the restaurants located in Century City and Topanga, 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; and

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, Topanga, and Glendale receive payments from its customers at the start of the subscription period and each record 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 November 2013 and believes that none of them will have a material effect on the Company’s financial position, results of operations or cash flows.

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Commitments and Contingencies

9 Months Ended

Sep. 29, 2013

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

NOTE 15 – COMMITMENTS AND CONTINGENCIES

The Company leases its Century City 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 the Company 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 29, 2013, the aggregate minimum annual lease payments under operating leases, including amounts characterized as deemed landlord financing payments are as follows:

2013	$	47,359
2014		194,644
2015		200,483
2016		206,498
2017		212,692
Thereafter		482,983
Total	$	1,344,659

Rent expense for the Company’s Century City operating lease was $34,766 and $34,766 for the thirteen weeks ended September 29, 2013 and three months ended September 30, 2012, respectively, and was $104,299 and $104,299 for the thirty nine weeks ended September 29, 2013 and nine months ended September 30, 2012, respectively.

During the year ended December 31, 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 commenced on March 23, 2013, Topanga’s grand opening, and expires on April 30, 2022. As of September 29, 2013, the aggregate minimum annual lease payments under operating leases, including amounts characterized as deemed landlord financing payments are as follows:

2013	$	55,224
2014		228,996
2015		238,155
2016		247,682
2017		257,589
Thereafter		1,241,388
Total	$	2,269,034

Rent expense for the Company’s Topanga operating lease was $52,048 and $0 for the thirteen weeks ended September 29, 2013 and three months ended September 30, 2012, and was $104,096 and $0 for the thirty nine weeks ended September 29, 2013 and nine months September 30, 2012, respectively.

On April 1, 2013, the Company entered into a Lease Agreement with II MALL ASSOCIATES, LLC, a Delaware limited liability company, to lease approximately 6,000 square feet in the Glendale Galleria in the City of Glendale, County of Los Angeles, and State of California. 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 4% to 7% and require other expenses incidental to the use of the property. The lease is expected to commence on October 1, 2013 and expire on September 30, 2023. Upon commencement, the aggregate minimum annual lease payments under operating leases, including amounts characterized as deemed landlord financing payments are as follows:

2013	$	31,070
2014		187,663
2015		195,169
2016		202,976
2017		211,095
Thereafter		1,410,205
Total	$	2,238,178

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. and Donald Stoecklein, Anthony Risas for breach of fiduciary duty, breach of contract, negligence and negligent misrepresentation, fraud and indemnity. On October 13, 2012, Stoecklein Law Group, LLP (“Law Group”) which acted as our securities counsel from September 2010 until September 2012, filed an Interpleader action in the United States District Court for the Southern District of California to determine the proper ownership of 16 stock certificates representing an aggregate of 2,364,000 shares of our stock (the “Disputed Certificates”) held by the Law Group. Joey Parsi, Balata Partners, Inc., and Patrick Deparini were each named as defendants (the “Defendants”). Law Group claims that they entered into an oral agreement to hold the Disputed Certificates unless and until each of the Defendants agreed otherwise. The Company maintains that no such oral agreement was entered into and plans to vigorously argue for the release of the Disputed Certificates into the custody of our current securities counsel. The Company does not believe there is any merit to the allegations and will vigorously defend this action.

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Document and Entity Information	9 Months Ended
	Sep. 29, 2013	Nov. 11, 2013
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. 29, 2013
Amendment Flag	false
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		24,139,145
Document Fiscal Period Focus	Q3
Document Fiscal Year Focus	2013

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Subsequent Events

9 Months Ended

Sep. 29, 2013

Subsequent Events [Abstract]

Subsequent Events

NOTE 16 – SUBSEQUENT EVENTS

On October 29, 2013, the Company issued 83,333 shares of common stock to a third party entity for advisory services. The value of the shares of common stock was $37,500 which $25,000 was recorded as common stock payable as of September 29, 2013.

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 other material subsequent events to report.