Giggles N' Hugs, Inc. filed on August 15 10-Q/A Form

Giggles N' Hugs, Inc. filed 10-Q/A with SEC. Read ‘s full filing at 000149315219012808.

On August 12, 2016 the Company entered into a third amendment on its lease at The Glendale Galleria. The amendment covered several areas, including adjustment to percentage rent payable, reduced the minimum rent payable, along with the payment and principal of Promissory Note. The Promissory Note was adjusted to a balance due of $763,261 from $683,316, with no interest, payable in equal monthly instalments of $5,300 through maturity of Note on May 31, 2028. The Company imputed interest using a discount rate of 10% to determine a fair value of the note of $443,521. As of June 30, 2019, and December 30, 2018 the balance of note payable net of unamortized note discount was $420,881 and $420,881 respectively.

The lender under the Note is GGP Limited Partnership (GGP). GGP is an affiliate of Glendale II Mall Associates, the lessor of the Company’s Glendale Mall restaurant location. In accordance with the note agreement, an event of default would occur if the Borrower defaults under the lease between the Company and Glendale II Mall Associates. Upon the occurrence of an event of default, the entire balance of the Note payable and accrued interest would become due and payable, and the balance due becomes subject to a default interest rate (which is 5% higher than the defined interest rate). As of June 30, 2019, the Company was delinquent in its payments to GGP under the note, and as such, the Note has been reflected as currently due and disclosed as in default.

On August 24, 2015, the Company entered into an unsecured Note Payable Agreement with an investor for which the Company issued a $50,000 Convertible Note Payable, which accrues interest at a rate of 5% per annum and matured on August 31, 2016. The Lender may also convert all or a portion of the Note Payable at any time into shares of common stock at a price of $0.10 per share. By oral agreement with the lender, the maturity date was extended, and the note is now considered to be due on demand.

Philip Gay: On January 1, 2019, we entered into an employment agreement with Philip Gay effective as of April 1, 2018, pursuant to which Mr. Gay agreed to serve as our Co-Chief Executive Officer and we agreed to pay Mr. Gay an annual base salary consisting of warrants exercisable for 6,000,000 shares of our common stock issued for a ten-year period with an exercise price of $0.0001 per share. These warrants will be paid on each anniversary date of Mr. Gay’s employment and each annually grant will vest at the rate of twenty-five percent (25%) per calendar quarter. Mr. Gay will also be entitled to reimbursement for all ordinary and reasonable expenses incurred in the performance of his duties for the Company, and he will receive an annual bonus in cash of up to $75,000, in our sole discretion and based on mutually agreed upon financial performance goals. If Mr. Gay’s employment is terminated by the Company with or without cause, all unvested equity, options and equity grants will be cancelled.

Net sales. Net sales for the thirteen weeks ended June 30, 2019 and July 1, 2018 were $554,062 and $579,937 respectively. The decrease of $25,875 (4.5%) was mostly attributable to reduced food sales and play area fees.

The net sales for the twenty-six weeks ended June 30, 2019 and July 1, 2018 were $1,253,288 and $1,193,300, respectively. The 5% increase was mostly attributable to the rainy winter we experienced during the first quarter.

Cost of operations. Costs of operations consist of cost of goods sold, restaurant utilities, supplies, administrative and other operating expenses, labor cost, and occupancy cost. For the twenty-six weeks ended June 30, 2019 and July 1, 2018, cost of operations were $904,290 and $966,463, respectively. The decrease of $62,173 (6.4%) was mostly attributable to reduced food costs, labor cost, and implementing the new lease accounting standards that amortization of tenant allowance netted to the rent expenses.

General and administrative expenses. General and administrative expenses for the twenty-six weeks ended June 30, 2019 and July 1, 2018 were $502,504 and $581,742, respectively. The reduction of $79,238 (13.6%) was mostly due to reduced legal fee, professional fee, and CEO salary, to offset increase stock-based compensation.

Net Loss. The overall net losses of $279,930 and $502,192 for the twenty-sis weeks ended June 30, 2019 and July 1, 2018, respectively, reflects a decrease of $44.3% was mostly attributable to increased revenue and decreased operating expenses.

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 the Company and Glendale II Mall Associates, LLC. The Note Payable accrued 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 lender under the Note is GGP Limited Partnership (GGP). GGP is an affiliate of Glendale II Mall Associates, the lessor of the Company’s Glendale Mall restaurant location. In accordance with the note agreement, an event of default would occur if the Borrower defaults under the lease between the Company and Glendale II Mall Associates. Upon the occurrence of an event of default, the entire balance of the Note payable and accrued interest would become due and payable, and the balance due becomes subject to a default interest rate (which is 5% higher than the defined interest rate). As of June 30, 2019, the Company was delinquent in its payments to GGP under the note, and as such, the Note has been reflected as currently due and disclosed as in default.

On August 24, 2015, the Company entered into an unsecured Note Payable Agreement with an investor for which the Company issued a $50,000 Convertible Note Payable, which accrues interest at a rate of 5% per annum and matures on August 31, 2016. The Lender may also convert all or a portion of the Note Payable at any time into shares of common stock at a price of $0.10 per share.

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