UNITED
STATES

SECURITIES
AND EXCHANGE COMMISSION

Washington,
D.C. 20549



Form
10-K/A

AMENDMENT
NO. 1



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



For
the fiscal year ended December 30, 2018



[  ]
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.)



|3222
Glendale Galleria Way, Glendale, CA         |  | 91210             
|------------------------------------------------ |  | ------------------
|(Address
        of principal executive offices) |  | (Zip
        Code)



Registrant’s
telephone number, including area code: (818) 956-4847



Copies
of Communications to:

BEVILACQUA
PLLC

1050
Connecticut Avenue, NW, Suite 500

Washington,
DC 20036



Securities
registered pursuant to Section 12(b) of the Act: None



Securities
registered pursuant to Section 12(g) of the Act:



Common
Stock, $0.001 par value

(Title
of class)



Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes
[  ] No [X]



Indicate
by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.

Yes
[  ] No [X]



Indicate
by check mark whether the registrant (1) has 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 Website, 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 if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405) is not contained herein,
and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated
by reference in Part III of this Form 10-K or any amendment to this Form 10-K.

[  ]



Indicate
by check mark whether the registrant a large accelerated filer, an accelerated filer, a non-accelerated filer, or a small reporting
company. See the definitions of “large accelerated filer,” “accelerated filer” and “small 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 Act).

Yes
[  ] No [X]



The
aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at
which the common equity was last sold, or the average bid and asked price of such common equity, as of July 1, 2018 (the last
business day of the registrant’s second quarter) was $10,166,715 based on a share value of

$0.0127.



The
number of shares of Common Stock, $0.001 par value, outstanding on April 15, 2019 was 168,774,080 shares.



DOCUMENTS
INCORPORATED BY REFERENCE: None.


















EXPLANATORY
NOTE

Giggles
N’ Hugs, Inc. (the “Company”) is filing this Amendment No. 1 (the “Amendment No. 1”) to our Form
10-K for the fiscal year ended December 30, 2018 (the “2018 Form 10-K”, originally filed with the Securities Exchange
Commission on April 15, 2019 (the “Original Filing”), for the purpose of clarifying certain information with respect
to the Company’s public right offering which closed on April 19, 2018 in which the Company’s co-Chief Executive Officer,
Joey Parsi, participated.



No
other information included in the 2018 Form 10-K has been modified or updated in any way. This Amendment No. 1 continues to speak
as of the date of the Original Filing date and does not reflect any events that may have occurred subsequent to the date of the
Original Filing.











GIGGLES
N’ HUGS, INC.

FOR
THE YEAR ENDED DECEMBER 30, 2018



Index
to Report on Form 10-K



|                              | Page                                                                                                        
|----------------------------- | ------------------------------------------------------------------------------------------------------------
|PART I                        |                                                                                                             
|                              |                                                                                                             
|Item
    1.                   | Business                                                                                                    
|Item
    1A.                  | Risk Factors                                                                                                
|Item
    1B.                  | Unresolved Staff Comments                                                                                   
|Item
    2.                   | Properties                                                                                                  
|Item
    3.                   | Legal Proceedings                                                                                           
|Item
    4.                   | Mine Safety Disclosures                                                                                     
|                              |                                                                                                             
|PART II                       |                                                                                                             
|                              |                                                                                                             
|Item
    5.                   | Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
|Item
    6.                   | Selected Financial Data                                                                                     
|Item
    7.                   | Management’s Discussion and Analysis of Financial Condition and Results of Operations                       
|Item
    7A.                  | Quantitative and Qualitative Disclosures About Market Risk                                                  
|Item
    8.                   | Financial Statements and Supplementary Data                                                                 
|Item
    9.                   | Changes in and Disagreements With Accountants on Accounting and Financial Disclosure                        
|Item
    9A.                  | Controls and Procedures                                                                                     
|Item
    9B.                  | Other Information                                                                                           
|                              |                                                                                                             
|PART III                      |                                                                                                             
|                              |                                                                                                             
|Item
    10.                  | Directors, Executive Officers and Corporate Governance                                                      
|Item
    11.                  | Executive Compensation                                                                                      
|Item
    12.                  | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters              
|Item
    13.                  | Certain Relationships and Related Transactions, and Director Independence                                   
|Item
    14.                  | Principal Accounting Fees and Services                                                                      
|                              |                                                                                                             
|PART IV                       |                                                                                                             
|                              |                                                                                                             
|Item
    15.                  | Exhibits, Financial Statement Schedules                                                                     
|Item
    16.                  | Not Applicable                                                                                              
|                              |                                                                                                             
|SIGNATURES                    | 27                                                                                                          
|INDEX TO FINANCIAL STATEMENTS | 28                                                                                                          



i







FORWARD-LOOKING
STATEMENTS



This
Annual Report on Form 10-K 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;                                                                                                                                                                                                          
| | ● | our
    ability to incorporate the GNH, Inc. assets into our operations;                                                                                                                                                                        
| | ● | our
    ability to generate sufficient funds to operate the GNH, Inc. operations;                                                                                                                                                               
| | ● | 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. Forward-looking
statements may appear throughout this report, including without limitation, the following sections: Item 1 “Business,”
Item 1A “Risk Factors,” and Item 7 “Management’s Discussion and Analysis of Financial Condition and Results
of Operations.” Forward-looking statements generally can be identified by words such as “anticipates,” “believes,”
“estimates,” “expects,” “intends,” “plans,” “predicts,” “projects,”
“will be,” “will continue,” “will likely result,” and similar expressions. These forward-looking
statements are based on current expectations and assumptions that are subject to risks and uncertainties, which 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 Annual Report on Form 10-K, and in particular, the
risks discussed under the caption “Risk Factors” in Item 1A and those discussed in other documents we file with the
Securities and Exchange Commission (SEC). We undertake no obligation to revise or publicly release the results of any revision
to these forward-looking statements, except as required by law. Given these risks and uncertainties, readers are cautioned not
to place undue reliance on such forward-looking statements.



Throughout
this Annual Report references to “we”, “our”, “us”, “Giggles”, “GIGL”,
and “the Company”, and similar terms refer to Giggles N’ Hugs, Inc. and its subsidiaries, unless the context
indicates otherwise.



1







PART
I



|ITEM 1. | BUSINESS
|------- | --------



Business
Development



Giggles
N’ Hugs, Inc. was formed as a Nevada corporation on September 17, 2004. On August 2010, Giggles changed its name from Teacher’s
Pet, Inc. to Giggles N’ Hugs, Inc. Effective December 30, 2011, Giggles completed the acquisition of GNH, Inc. (“GNH”)
through the acquisition of 100% of the issued and outstanding common stock of GNH.



Giggles
currently owns and operates kid-friendly restaurants named Giggles N’ Hugs in the Westfield Topanga Shopping Center located
in Woodland Hills, California, and the Glendale Galleria located in Glendale, California, and owns the intellectual property rights
for Giggles N’ Hugs facilities.



Business
Overview



Giggles
N’ Hugs is the pioneer restaurant that brings together high-end, organic food with the play elements and entertainment for
children. Giggles N’ Hugs offers an upscale, family-friendly atmosphere with a play area dedicated to children ages 10 and
younger. The restaurant has a high-quality menu made from fresh, organic foods that are enjoyed by both children and adults. With
nightly entertainment, such as magic shows, concerts, puppet shows, face painting and arts and crafts, Giggles N’ Hugs has
become a premier destination for families seeking healthy food in a casual and fun atmosphere.



In
addition to its family-friendly vibe, Giggles N’ Hugs is also known for its own creation called “Mom’s Tricky
Treat Sauce,” which hides pureed vegetables in kids’ favorite meals such as pizza, pastas and macaroni and cheese.



The
founders, Joey Parsi and his wife, Dorsa, conceived the idea when they tried dining out with their own children, but spent the
entire evening attending to quieting their kids and avoiding disapproving stares. From this frustrating experience, they discovered
that there was a significant need for high-quality restaurants where play time, healthy food, and happy parents could converge.
This idea led to the creation of Giggles N’ Hugs. Since its grand opening in February of 2008, it has become a destination
for parents and kids to play and have fun while enjoying a gourmet meal.



Our
restaurant offers a combination of high quality food and beverage with attentive service to ensure a memorable experience. Our
play areas are supervised by staff members who promote positive interaction, fun, and activities in such a way that their presence
often overshadows the presence of the vast number of toys and daily entertainment we offer. Our restaurant features kid-size castles,
giant climbers, a pirate ship, and a walk-on dragon, as well as tricycles, swings, bouncies, and an abundant selection of toys
in each location. The Giggles N’ Hugs team is a group of individuals that have been hired and trained to reflect our core
beliefs of creating an environment for families to bond and interact with one another. We encourage our staff members to be more
than just employees, but instead to become friends with our guests. The family-friendly feel of the restaurant and play space
reflects its image and individuality in the marketplace.



2







Giggles
N’ Hugs was rated among the best family and kid-friendly restaurants by City Search, a division of Interactive Corp., which
is a website where restaurant goers can blog about their experiences and rate restaurants on a scale of one to five, and by Nickelodeon,
a division of Viacom. We have been featured in numerous television news programs and publications, including TV Guide Channel,
Fox Channel 11, Extra TV, Access Hollywood, Entertainment Tonight, Businessweek, People Magazine, The Los Angeles Times, Los Angeles
Family, West-Side Today, US Magazine, OK Magazine, Life and Style Magazine, and the LA Business Journal. Our concept has appealed
to numerous celebrities. Many high-profile actors and entertainers have enjoyed the Giggles N’ Hugs experience.



Restaurant
Concept:



Our
operating restaurants are located in the Westfield Topanga Mall, in Woodland Hills, California and in Glendale Galleria in Glendale,
California. Our restaurants have about 6,000 square feet of space, of which 2,000 square feet are allocated for the play area,
2,500 square feet for the dining area, and 1,500 square feet for the kitchen.



Dining
Area:



Giggles
N’ Hugs has arranged its spacious dining area so that every table has a view of the play area. Parents have the convenience
of watching their children from a distance without having to leave their seats. Parents can sit down and enjoy their meals comfortably
while their kids play. Sleek and modern white chairs and colorful utensils are used to appeal to the kids. All utensils are unbreakable
and kid-friendly.



Menu:



We
pride ourselves in our upscale entrée selections that are both nutritious and appetizing. For children, we offer macaroni
and cheese, turkey dogs, and turkey burgers. We incorporate nutritious vegetables into typical children favorites, such as pureed
butternut squash in the macaroni and cheese, pureed spinach in our pizza and spaghetti sauce, and whole wheat bread buns for our
sandwiches. We also offer delicious salads, such as “Goat Cheese and Beet Salad,” “Chinese Chicken Salad,”
and “Honey Peanut and Apple Salad.” Some of our gourmet entrees include grilled salmon, “Chicken Milanese,”
and fresh panini. For guests who have specific dietary restrictions, we offer a variety of alternative menu items including non-dairy
milk, gluten free pasta, and whole grain breads.



Play
Area:



The
uniqueness of a child’s imagination can run wild in our exceptionally designed play space. In the center of our restaurant
is our exclusive padded 2,000 square foot children’s play area. The magical play space includes a life-size pirate ship
for boys and girls to climb into and slide off of, a fairytale play castle for the princes and princesses to let their imaginations
run wild, and a green dragon for the smaller kids to climb. Along with the signature pieces, the play area also highlights kids’
favorite toys, play kitchens, and cars. Safety is the number one priority when it comes to our guests. Our highly skilled and
inspirational staff understands the importance of each child’s safety and genuine joy while at Giggles N’ Hugs. They
make balloon animals, paint faces, and give temporary tattoos to the kids. They also sing songs, read books, and play games to
keep the fun times rolling. The overall design of the restaurant exudes a magical, whimsical feeling, while maintaining an aura
of sophistication and detail, particularly in the dining area, to appeal to parents. With a small admission fee, children can
play all day and enjoy activities and entertainment in the Giggles N’ Hugs play area.



Activities
and Entertainment:



Entertainment
is a fundamental part of our restaurant. Story-telling, singing, and game sessions conducted by the staff members are just a few
of our options. For a more calm and relaxing experience, we offer movie nights. For those guests looking for a more upbeat experience,
we have “Disco Night” and “Kids Karaoke.” Giggles N’ Hugs also offers magic shows, puppet shows,
arts and crafts, Play-Doh, and contests such as talent shows and “Simon Says,” as well as other impromptu games that
allow our staff and parents to bond with their children.



3







Birthday
parties and other special events:



Each
Giggles N’ Hugs location has the capacity to host up to 500 guests for birthday parties and special events for 2 hours or
more. Packages include food, cake, facility use, party favors, and activities. Giggles N’ Hugs goes to great lengths to
make birthday parties worry-free for parents. This includes sending out invitations, arranging entertainment, providing catering,
and staffing. Giggles N’ Hugs is great for all special events including holiday parties, fundraisers, family get-togethers,
and other celebrations.



History



The
original Giggles N’ Hugs opened its doors in February of 2008 and was located in the posh Brentwood district of Los Angeles.
The unique design and 1,500 square-foot play area was a huge success and solidified our proof of concept. However, due to the
limited size of the location, our ability to offer “drop-off” services, one of our most popular features, was hindered.
Drop-off services allow parents to drop their children off in our play area and go shopping while their children play in a supervised
environment. In addition, other factors such as lack of available parking, the location’s strip mall characteristics, and
isolated location became problematic. As a result, we decided it was in our best interest to close the restaurant and secure a
larger venue elsewhere.



With
the successful launch and proof of concept that was realized at our Brentwood location, the Company decided to expand to the Westfield
Shopping Mall in Century City in December of 2010. This ideal location highlights a play space two times the size of the original
location and includes additional sources of revenue including beer and wine sales, drop off service, private party rentals, and
in-store merchandise. In June 2016, the Century City mall began a $700 million remodeling of the Westfield Shopping Mall, which
closed 90% of the retailers, including the Giggles N’ Hugs store.



Expansion



Our
intent is to expand and open new stores either through the Company-owned approach or using the franchise model, or through both
of these methods, but such expansion will be limited to our ability to raise sufficient capital to meet new store start-up requirements.
In September 2018, we formed GNH Restaurant 3, LLC, a Delaware limited liability company wholly owned by us, for the purpose opening
our third Company-owned restaurant. We initiated a Regulation CF equity crowdfunding campaign on the Wefunder portal to raise
capital for this new location, but we cannot assure you that we will be successful in this fundraising effort or that we will
raise sufficient funds to open our third location through Wefunder or otherwise.



Additionally,
Giggles N’ Hugs intends to introduce a new line of frozen foods, specifically designed for children, and organic baby foods,
both of which we hope will be available at grocery stores. We are in discussions to license our brand for merchandising, publishing,
children’s apparel, entertainment, and more. With sufficient financing, Giggles N’ Hugs plans to expand to other parts
of the country in the future.



Company-owned
stores.We estimate that we would have to expend $700,000 - $900,000 (net of any – landlord-tenant improvement allowances)
to construct, staff, and open each new restaurant, excluding rent. Our build- out cost of new restaurants will vary depending
on a number of factors, including the size of the location, whether we are converting an existing restaurant space as we did with
our Brentwood location, or moving into a “build to suit” location constructed from a building shell, typically with
a monetary contribution (also typically referred to as a tenant improvement allowance) from the landlord. While the latter development
model generally involves greater costs (depending on the level of landlord contribution) and time to open (because the permitting
process is typically significantly longer), we believe that positioning our restaurants in popular, “marquee” locations
(which typically operate on the “build to suit” model) will greatly increase public awareness and recognition of the
Giggles brand, which we believe is critical to our continued growth.



4







Marketing
and Advertising



To
date, our marketing and advertising has been extremely limited as we have conserved working capital for operational purposes.
Our primary marketing has been through word-of-mouth from existing customers and some limited print-based advertising.



Once
we have sufficient financing, we plan to market our products and services through a multi-pronged campaign. To this end, Giggles
N’ Hugs will directly engage local preschools, kindergartens, and elementary schools. We believe our cause and community
marketing would better root our presence in the minds of area locals. With additional marketing capital, Giggles N’ Hugs
plans to advertise on television channels such as Disney and Nickelodeon, as well as in additional print publications, radio,
and satellite radio. Our first store has been frequented by numerous celebrities, which provides free and invaluable publicity.
We believe a large scale marketing campaign that increases exposure to Giggles N’ Hugs could result in a significant increase
in our revenue.



We
intend to design an aggressive and creative promotional strategy aimed to maximize our exposure to the target audience. We believe
the following direct and indirect advertising methods could increase exposure and visibility of the “Giggles N’ Hugs”
brand in our community:



| | ● | Viral
    Marketing:Word-of-mouth advertising in conjunction with other secondary advertising methods functions to spread our already-popular
    name. Celebrity patronage is especially useful in this regard.                                                                                                                                                                                                                      
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | ● | Internet
    Advertising:We would allot portions of our marketing budget for strategic Internet marketing, including search engine
    optimization. This tactic involves organically improving the quality and volume of traffic to a website through search engine
    searches. Search engine optimization can also target different kinds of searches, including image, local, and industry- specific
    vertical search engines.
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | ● | Television
    advertising: We recognize that television advertising is an effective means of reaching a large target population. For
    this reason we plan to advertise on local cable channels, such as The Disney Channel and Nickelodeon.                                                                                                                                                                                       
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | ● | Special
    events/sponsorships:We may sponsor local events and organizations in an effort to contribute to surrounding neighborhoods
    and the overall community, which concurrently builds community awareness of our stores.                                                                                                                                                                                                     
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | ● | Print
    media-magazines:Print advertisements will continue to be placed in select magazines and newspapers for weekly and/or
    monthly distribution. These advertisements include a brief description of the Company, comprehensive explanatory images and/or
    text detailing products, and also offer limited time discounts.                                                                                                 



We
have also received free publicity through celebrity-interest magazines, such as People Magazine, mentioning our restaurant in
their articles. We have also attracted coverage from the local print media such as the Los Angeles Times and LA Business Journal
about our concept of a kid-oriented restaurant.



5







Competition



Giggles
N’ Hugs faces competition from other family-oriented establishments, especially businesses that operate under the national
franchise model. This is primarily populated by the industry giant Chuck E. Cheese, which caters to older children and only serves
pizza and related foods. Most play areas have minimal food preparation areas, if any, consisting only of a microwave oven or toaster.



Giggles
N’ Hugs has already begun cementing its reputation in the local marketplace having seen establishments that reflect direct
competition to us suffer a lack of business and/or shut down. We are aware that the quality of the Giggles N’ Hugs brand
and model has influenced and increased the expectations of parents and that our presence has significantly affected the business
of other local establishments.



The
major competitors in the Company’s immediate area are Child’s Play and Under the Sea Indoor Playground. These businesses
operate under the play area model and are mostly used as birthday party venues or weekend playgrounds, as opposed to a food and
entertainment destination like Giggles N’ Hugs. To our knowledge, these businesses are so popular among children that they
are booked for months in advance in most cases for birthday parties and other celebrations. These businesses provide an excellent
insight into the demand for our business model, which improves upon the competition by providing healthy food choices in a true
restaurant environment.



We
enjoy numerous advantages in our target market that other companies fail to deliver. The following list describes each advantage:



| | ● | Delicious,
    but also nutritious, food.                           
| | - | --------------------------------------------------------------------
| |   |                                                                     
| | ● | Sundry,
    novel, child-oriented toys and overall environment.     
| |   |                                                                     
| | ● | Quality
    offerings for adults while waiting.                     
| |   |                                                                     
| | ● | Theme
    nights such as “Disco Night”.                             
| |   |                                                                     
| | ● | Entertainment
    such as puppet shows, magic shows and music shows.
| |   |                                                                     
| | ● | “Aides”
    to assist in the kids’ enjoyment while parents relax.   



We
are aware that many of our competitors and potential competitors have greater financial and other resources, have been in business
longer, have greater name recognition and are better established in the markets where our first restaurant is located and where
our future restaurants will be located. Although we believe that our restaurant concept offers features and advantages not currently
available elsewhere, and we have taken reasonable steps to adequately protect our proprietary concepts and other intellectual
property, we cannot assure you that these companies will not seek to copy aspects of our restaurant concept, or develop similar
or competing features, in the future.



Government
Regulation



Our
restaurant operations will be subject to licensing and regulation by state and local departments and health, sanitation, zoning
and fire, and to periodic review by the state and municipal authorities for areas in which the restaurants are located. In addition,
we will be subject to local land use, zoning, building, planning and traffic ordinances and regulations in the selection and acquisition
of suitable sites for developing new restaurants. Delays in obtaining, or denials of, or revocation or temporary suspension of,
necessary licenses or approvals could have a material adverse impact on our development of restaurants.



6







Our
restaurant operations will also be subject to regulation under the Fair Labor Standards Act, which governs such matters as working
conditions and minimum wages. An increase in the minimum wage rate or the cost of workers’ compensation insurance, or changes
in tip-credit provisions, employee benefit costs (including costs associated with mandated health insurance coverage), or other
costs associated with employees could adversely affect our Company.



In
addition, our restaurant operations will be subject to the Americans with Disabilities Act of 1990. The ADA may require us to
make certain installations in our planned restaurants to meet federally and state mandated requirements.



Intellectual
Property



We
have filed and received a United States federal trademark registration for “GIGGLES N’ HUGS, INC.,” “GIGGLES
N’ HUGS,” and other marks. We have registered the www.gigglesnhugs.com domain name. We consider our trademarks
and other intellectual property rights to be important to our branding strategy and business success.



Personnel



As
of the date of this filing, and as a result of our recent organizational establishment, we have 53 employees .



Available
Information



Our
periodic reports filed with the SEC, which include Form 10-K, Form 10-Q, Form 8-K, and amendments thereto, may be accessed by
the public free of charge from the SEC. Electronic copies of these reports can be accessed at the SEC’s website (http://www.sec.gov).
The public may read or obtain copies of these reports from the SEC at the SEC’s Public Reference Room at 450 Fifth Street
N.W., Washington, D.C. 20549 (1-800-SEC-0330).



|ITEM 1A. | RISK FACTORS
|-------- | ------------



Disclosure
pursuant to this Item 1A is not required as we are smaller reporting company.



|ITEM 1B. | UNRESOLVED STAFF COMMENTS
|-------- | -------------------------



None.



7







|ITEM 2. | PROPERTIES
|------- | ----------



We
currently maintain two locations:



| | ● | Westfield
    Mall Topanga location at 6600 Topanga Canyon Blvd, Canoga Park, CA 91303. Our current monthly rent at this location is $22,933.
    The lease started on March 23, 2013.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                       
| | ● | Glendale
    Galleria location at 3222 Glendale Galleria Way, Glendale, CA 91210. Our current monthly rent at this location is $13,431.
    The lease started in November 2013.       



|ITEM 3. | LEGAL PROCEEDINGS
|------- | -----------------



As
of December 30, 2018, there was no material outstanding litigation.



|ITEM 4. | MINE SAFETY DISCLOSURES
|------- | -----------------------



Not
applicable.



8







PART
II



|ITEM 5. | MARKET
                                                                     FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS AND SMALL BUSINESS ISSUER PURCHASE OF EQUITY SECURITIES
|------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Market
Information



Our
common stock is quoted on the OTC Markets Group Inc. QB tier (OTCQB) under the symbol “GIGL.”



Historically,
there has not been an active trading market for our common stock. We have been eligible to participate in the OTCQB since May
24, 2010 and from that time our common stock has traded on a very sporadic basis.



The
following table sets forth, for the periods indicated, the high and low bid prices of our common stock as reported by a Quarterly
Trade and Quote Summary Report of the OTCQB. These quotations reflect inter-dealer prices, without retail mark-up, markdown or
commission, and may not necessarily represent actual transactions.



|            |  | 2018       |      |  | 2017       |  
|----------- |  | ---------- | ---- |  | ---------- | -
|            |  | BID PRICES |      |  | BID PRICES |  
|            |  | High       |      |  | Low        |  
|1st Quarter |  | $          | 0.02 |  |            | $
|2nd Quarter |  | $          | 0.02 |  |            | $
|3rd Quarter |  | $          | 0.01 |  |            | $
|4th Quarter |  | $          | 0.01 |  |            | $



Holders
of Common Stock



As
of April 15, 2019, we had approximately 88 active stockholders of record of the 168,774,080 shares outstanding. The closing stock
price on April 15, 2019 was $0.02.



Dividends



The
payment of dividends is subject to the discretion of our Board of Directors and will depend, among other things, upon our earnings,
our capital requirements, our financial condition, and other relevant factors. We have not paid or declared any dividends upon
our common stock since our inception and, by reason of our present financial status and our contemplated financial requirements
do not anticipate paying any dividends upon our common stock in the foreseeable future.



9







Issuer
Purchases of Equity Securities



The
Company did not repurchase any of its equity securities during the fourth quarter ended December 30, 2018.



2012
Stock Incentive Plan



We
have reserved for issuance an aggregate of 5,000,000 shares of common stock under our 2012 Stock Incentive Plan (“the Plan”)
that was adopted in February 23, 2012. As of the year ended December 30, 2018 and December 31, 2017, 115,000 stock options are
outstanding.



Purposes
of the Plan



The
purposes of the Plan are (a) to enhance the Company’s ability to attract and retain the services of qualified employees,
officers and directors, contractors and other service providers upon whose judgment, initiative and efforts the successful conduct
and development of the Company’s business largely depends, and (b) to provide additional incentives to such persons or entities
to devote their utmost effort and skill to the advancement and betterment of the Company by providing them an opportunity to participate
in the ownership of the Company and thereby have an interest in the success and increased value of the Company.



Stock
Subject to the 2012 Plan



Shares
that are eligible for grant under the Plan to participants include Incentive Stock Options, Non- Qualified Stock Options and Restricted
Stock. “Incentive Options” are any options designated and qualified as an “incentive stock option” as
defined in Section 422 of the Internal Revenue Code. “Non-Qualified Options” are any options that are not an Incentive
Option. To the extent that any option designated as an Incentive Option fails in whole or in part to qualify as an Incentive Option,
including, without limitation, for failure to meet the limitations applicable to a ten percent stockholder or because it exceeds
the annual limit, it shall to that extent constitute a Non-Qualified Option. “Restricted Stock” are shares of common
stock issued pursuant to any restrictions and conditions as established in the Plan.



The
Plan provides that a maximum of Five Million (5,000,000) shares of common stock are available for grant as awards under the Plan.



10







The
following table sets forth information about the 2012 stock incentive plan as of December 30, 2018.





|         |      |  |             |  |         |          |  |   | Weighted    |  |  |             |      |  |          | 
|-------- | ---- |  | ----------- |  | ------- | -------- |  | - | ----------- |  |  | ----------- | ---- |  | -------- | 
|         |      |  |             |  |         | Weighted |  |   | Average     |  |  |             |      |  | Weighted | 
|Range of |      |  |             |  |         | Average  |  |   | Remaining   |  |  |             |      |  | Average  | 
|Exercise |      |  | Number      |  |         | Exercise |  |   | Contractual |  |  | Number      |      |  | Exercise | 
|Prices   |      |  | Outstanding |  |         | Price    |  |   | Life        |  |  | Exercisable |      |  | Price    | 
|         |      |  |             |  |         |          |  |   |             |  |  |             |      |  |          | 
|$        | 4.50 |  |             |  | 115,000 |          |  | $ | 4.50        |  |  |             | 0.85 |  |          | 
|         |      |  |             |  |         |          |  |   |             |  |  |             |      |  |          | 
|         |      |  |             |  | 115,000 |          |  |   |             |  |  |             | 0.85 |  |          | 



Eligibility



Incentive
Options.Only employees of the Company or of an affiliated company (including officers of the Company and members of the Board
of Directors if they are employees of the Company or of an affiliated company) are eligible to receive Incentive Options under
the Plan.



Non-Qualified
Options and Restricted Stock.Employees of the Company or of an affiliated company, officers of the Company and members of
the Board of Directors (whether or not employed by the Company or an affiliated company), and service providers are eligible to
receive Non-Qualified Options or acquire Restricted Stock under the Plan.



Equity
Compensation Plan Information



We
maintain the Plan to allow the Company to compensate employees, directors, consultants and certain other individuals providing
bona fide services to the Company or to compensate officers, directors and employees for accrual of salary through the award of
common stock.



The
Plan is intended to encourage directors, officers, employees and consultants to acquire ownership of common stock. The opportunity
so provided is intended to foster in participants a strong incentive to put forth maximum effort for its continued success and
growth, to aid in retaining individuals who put forth such effort, and to assist in attracting the best available individuals
to the Company in the future.



Recent
Sales of Unregistered Securities



|ITEM 6. | SELECTED FINANCIAL DATA
|------- | -----------------------



*Not
applicable.



11







|ITEM 7. | MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATION
|------- | ------------------------------------------------------------------------------------



OVERVIEW
AND OUTLOOK



Our
Operations



Giggles
is an upscale, 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.



The
original Giggles N’ Hugs opened its doors in February of 2008 and was located in the posh Brentwood district of Los Angeles.
The unique design and 1,500 square-foot play area was a huge success and solidified our proof of concept. However, due to the
limited size of the location, our ability to offer “drop-off” services, one of our most popular features, was hindered.
Drop-off services allow parents to drop their children off in our play area and go shopping while their children play in a supervised
environment. In addition, other factors such as lack of available parking, the location’s strip mall characteristics, and
isolated location became problematic. As a result, we decided it was in our best interest to close the restaurant and secure a
larger venue elsewhere.



With
the successful launch and proof of concept that was realized at our Brentwood location, the Company decided to expand to the Westfield
Shopping Mall in Century City in December of 2010. The Century City mall began a $700 million remodeling of the Westfield Shopping
Mall, which closed 90% of the retailers, including the Giggles N’ Hugs store. On May 13, 2016, Giggles N’ Hugs, Inc.
entered into a Termination of Lease Agreement with Century City Mall, LLC (“landlord”), accelerating the termination
date of the Lease dated January 13, 2010 for its store located in Westfield Century City, Los Angeles, California. Pursuant to
the agreement, the lease terminated June 30, 2016 and the landlord agreed to a monetary reimbursement of $350,000 which was received
by June 26, 2016. As such, sales from June 30, 2016 and forward only include operations from two stores.



The
Company continues to operate its restaurants in Westfield Mall in Topanga, California and in the Glendale Galleria Mall in Glendale,
California.



12







RESULTS
OF OPERATIONS





|                                                     |  | Fiscal
    Year Ended |           |   | Fiscal
    Year Ended |   |            |                     |  |   |          |  
|---------------------------------------------------- |  | --------------------- | --------- | - | --------------------- | - | ---------- | ------------------- |  | - | -------- | -
|                                                     |  | December
    30,      |           |   | December
    31,      |   |            | Increase (Decrease) | 
|                                                     |  | 2018                  |           |   | 2017                  |   |            | $                   |  |   | %        |  
|Revenue:                                             |  |                       |           |   |                       |   |            |                     |  |   |          |  
|Net
    sales                                        |  | $                     | 2,431,903 |   |                       | $ | 2,454,125  |                     |  | $ | (22,222  | )
|Costs
    and operating expenses:                    |  |                       |           |   |                       |   |            |                     |  |   |          |  
|Cost
    of operations                               |  | $                     | 1,920,493 |   |                       | $ | 1,883,816  |                     |  | $ | 36,677   |  
|General
    and administrative expenses              |  |                       | 907,224   |   |                       |   | 1,791,190  |                     |  |   | (883,966 | )
|Depreciation                                         |  |                       | 232,344   |   |                       |   | 256,421    |                     |  |   | (24,077  | )
|Total
    costs and operating expenses               |  |                       | 3,060,061 |   |                       |   | 3,931,427  |                     |  |   | (871,366 | )
|                                                     |  |                       |           |   |                       |   |            |                     |  |   |          |  
|Loss
    from Operations                             |  |                       | (628,158  | ) |                       |   | (1,477,302 | )                   |  |   | 849,144  |  
|Other
    Expenses                                   |  |                       |           |   |                       |   |            |                     |  |   |          |  
|Finance
    and interest expense                     |  |                       | (61,811   | ) |                       |   | (90,546    | )                   |  |   | 28,735   |  
|Gain
    on lease termination                        |  |                       | (1,400    | ) |                       |   | -          |                     |  |   | (1,400   | )
|Change
    in fair value of derivatives              |  |                       | -         |   |                       |   | 11,567     |                     |  |   | (11,567  | )
|Gain
    on extinguishment of derivatives            |  |                       | -         |   |                       |   | 185,604    |                     |  |   | (185,604 | )
|Loss
    on extiguishment of debt                    |  |                       | -         |   |                       |   | (249,014   | )                   |  |   | 249,014  |  
|Loss
    before provision for income taxes liability |  |                       | (691,369  | ) |                       |   | (1,619,691 | )                   |  |   | 928,322  |  
|                                                     |  |                       | .         |   |                       |   |            |                     |  |   |          |  
|Provision
    (benefit) for income taxes             |  |                       | -         |   |                       |   | 2,719      |                     |  |   | (2,719   | )
|Net
    Loss                                         |  | $                     | (691,369  | ) |                       | $ | (1,622,410 | )                   |  | $ | 931,041  |  



*Not
divisible by zero



Net
Sales. During the fiscal year ended December 30, 2018, net sales reflected a drop of $22,222. A decline of 1%, from the year
ended December 31, 2017 was attributable to decreased party sales.



Cost
of Operations. Cost of operations consist of cost of goods sold, restaurant utilities, supplies, administrative and other
operating expense, labor costs, and occupancy cost. During the year ended December 30, 2018, cost of operations was $1,920,493,
the increase of $36,677, or 2% in comparison to the prior year due to the major factor of increased food costs and occupancy expenses.



General
and Administrative costs. Total general and administrative costs decreased by $883,966 (49%) from comparison in prior year.
The significant decrease is mainly attributable to the fair value of $531,000 for warrants issued as payment for professional
services rendered occurred in 2017. For which there was no corresponding cost in 2018. Additionally, the reduction of legal fees
and other non-employee stock compensation also the factor.



Depreciation
expenses. Depreciation expenses declined by $24,077 (9%) compared to the same period in the previous year. The decrease was
due to some assets have been fully depreciated.



Loss
from Operations.The loss from operations during the year ended December 30, 2018 decreased by $849,144 (57%) as compared
to the prior period mainly was attributable to substantial decreased general and administrative expenses.



Net
Loss. The net loss decreased by $931,041 (57%) due to the factors noted above.



13







LIQUIDITY
AND CAPITAL RESOURCES



As
of December 30, 2018, we had $57,642 in cash and cash equivalents. The following table provides detailed information about our
net cash flow for all financial statement periods presented in this Annual Report. To date, we have financed our operations through
the issuance of stock and borrowings, in addition to store revenue.





|                                          |  | Fiscal Year Ended |          |   | Fiscal Year Ended |  
|----------------------------------------- |  | ----------------- | -------- | - | ----------------- | -
|                                          |  | December 30,      |          |   | December 31,      |  
|                                          |  | 2018              |          |   | 2017              |  
|Net cash used in operating activities     |  | $                 | (610,874 | ) |                   | $
|Net cash used in investing activities     |  |                   | -        |   |                   |  
|Net cash provided by financing activities |  |                   | 537,180  |   |                   |  
|Net decrease in Cash                      |  |                   | (73,694  | ) |                   |  
|Cash, beginning of year                   |  |                   | 131,336  |   |                   |  
|Cash, end of year                         |  | $                 | 57,642   |   |                   | $



Operating
activities



Net cash used in operating activities was $610,874 for the year ended December 30, 2018 compared to $173,848 used in operating
activities for year ended December 31, 2017. This significant increase of cash used is mostly due to decreased liabilities.



Investing
activities



No
net cash was used in investing activities during the year ended December 30, 2018, compared to $2,482 cash was used for year ended
December 31, 2017.



Financing
activities



Net
cash provided by financing activities for the year ended December 30, 2018 and December 31, 2017 was $537,180 and $163,146, respectively.
The substantial increase was due to a public equity rights offering in April 2018 (the “Rights Offering”).
In the Rights Offering, the Company sold 19,791,829 units (the “Units”) at a price of $.03 per unit. Each unit
consisted of one share of common stock and 0.70 of a warrant. Each whole warrant will be exercisable for one share of common stock
at a price of $.06. per share. Joey Parsi, the Company’s Co-Executive Officer, participated in the Rights Offering and purchased
333,334 Units.



Going
Concern and Liquidity



The
accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization
of assets and the settlement of liabilities and commitments in the normal course of business. As reflected in the accompanying
consolidated financial statements, during the year ended December 30, 2018, the Company incurred a net loss of $691,369 used cash
in operations of $610,874 and had a stockholders’ deficit of $2,002,101 as of that date. In addition, the Company is in
default of a note payable to one of its landlords.  These factors raise substantial doubt about the Company’s ability
to continue as a going concern within one year after the date that the financial statements are issued. The ability of the Company
to continue as a going concern is dependent upon the Company’s ability to raise additional funds and implement its business
plan. The financial statements do not include any adjustments that might be necessary if the Company is unable to continue as
a going concern.



14







The
Company has and will continue to use significant capital to grow and acquire market share. At December 30, 2018, the Company had
cash on hand in the amount of $57,642. Management estimates that the current funds on hand will be sufficient to continue operations
through May 2019. Management is currently seeking additional funds, primarily through the issuance of debt and equity securities
for cash to operate its business. No assurance can be given that any future financing will be available or, if available, that
it will be on terms satisfactory to the Company. Even if the Company is able to obtain additional financing, it may contain undue
restrictions on its operations, in the case of debt financing or cause substantial dilution for our stockholders, in the case
of equity financing.



Note
Payables





GGP
Limited Partnership - On February 12, 2013, the Company entered into a Promissory Note Payable Agreement (the “Note
Agreement”) with GGP Limited Partnership (“GGP” or, the “Lender”) pursuant to which the Company
issued to the Lender a $700,000 promissory note (the “Promissory Note”) in exchange for a loan of $700,000 to be used
by the Company for a portion of the construction work to be performed by the Company under the lease (the “Lease”)
by and between the Company and Glendale II Mall Associates, LLC for its restaurant space at The Glendale Galleria. The Promissory
Note, as originally issued 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.



On
August 12, 2016, the Company entered into a third amendment to the Lease and a related amendment to the Note Agreement. The amendments
covered several matters, including an adjustment to percentage rent payable, a reduction to the minimum rent payable, and certain
changes with respect to the payment and principal and interest on the Promissory Note. The Promissory Note was adjusted to a balance
due of $763,261.57 from $683,316, with zero percent interest, payable in equal monthly instalments of $5,300 through the maturity
of the Promissory Note on the revised maturity date, May 31, 2028. The Company imputed interest using a discount rate of 10% to
determine a fair value of the Promissory Note of $433,521. The balance of notes payable at December 30, 2018 and December 31,
2017 was $420,881 and $422,361, respectively.



GGP,
the Lender, is an affiliate of Glendale II Mall Associates, LLC, the lessor of the Company’s Glendale Mall restaurant location.
In accordance with the Note Agreement, an event of default would occur if the Company defaults under the Lease. Upon the occurrence
of an event of default, the entire balance of the Promissory Note and accrued but unpaid interest would become due and payable,
and the balance due would become subject to a default interest rate (which is 5% higher than the defined interest rate). As of
December 30, 2018, the Company is in default of its monthly payments under the Promissory Note.



Convertible
Note Payable



J&N
Invest LLC- 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. By oral agreement with the lender, the maturity date was extended, and the note is now considered to be
due on demand.



Off-Balance
Sheet Arrangements



We
do 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.



15







Operation
Plan



Our
overall business plan is to expand and grow our restaurants and increase revenues. Our business and strategy will be directed
toward the following approaches.



Company-Owned
Restaurants. One-year term strategy is to explore new opening company-owned and/or managed restaurants within the next twelve
months. During 2013, we opened two new Southern California locations in Westfield Topanga Mall and Glendale Galleria. In addition,
we are considering The Westfield Valencia Mall and The Westfield Santa Anita Mall as potential locations.



Existing
Services. We believe that we provide some of the best overall dining experiences for parents and their young children. We
plan to further market and promote our existing products and designs directly to consumers. In addition, we plan to constantly
refine and improve our food products.



|ITEM 7A. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK
|-------- | ----------------------------------------------------------



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



|ITEM 8. | FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
|------- | -------------------------------------------



See
Index to Financial Statements and Financial Statement Schedules appearing on page F-1 through F-25 of this Form 10-K.



|ITEM 9. | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE
|------- | ------------------------------------------------------------------------------------



We
have had no disagreements with our independent auditors on accounting or financial disclosures.



|ITEM 9A. | 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 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.
Management is in the process of determining how to most effectively improve our disclosure controls and procedures.



Management’s
Report on Internal Control over Financial Reporting



Our
management is responsible for establishing and maintaining adequate internal control, as is defined in the Securities Exchange
Act of 1934, as amended. These internal controls are designed to provide reasonable assurance that the reported financial information
is presented fairly, that disclosures are adequate and that the judgments inherent in the preparation of financial statements
are reasonable. There are inherent limitations in the effectiveness of any system of internal controls, including the possibility
of human error and overriding of controls. Consequently, an effective internal control system can only provide reasonable, not
absolute, assurance with respect to reporting financial information.



16







Our
internal control over financial reporting includes policies and procedures that: (i) pertain to maintaining records that in reasonable
detail accurately and fairly reflect our transactions; (ii) provide reasonable assurance that transactions are recorded as necessary
for preparation of our financial statements in accordance with generally accepted accounting principles and the receipts and expenditures
of company assets are made and in accordance with our management and directors authorization; and (iii) provide reasonable assurance
regarding the prevention or timely detection of unauthorized acquisition, use or disposition of assets that could have a material
effect on our financial statements.



Management
has undertaken an assessment of the effectiveness of our internal control over financial reporting based on the framework and
criteria established in the Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations
of the Treadway Commission (“COSO”). Based upon this evaluation, management concluded that our internal control over
financial reporting was not effective as of December 30, 2018. The material weaknesses noted were as follows:



●
Lack of independent audit committee and Board Members;

●
Lack of formal approval policies of the Board of Directors;

●
Insufficient personnel appropriately qualified to perform control monitoring activities, including the recognition of risks
and complexities of its business operations; and,

●
Insufficient monitoring and review controls over the financial reporting closing process.



The
Company has resourced outside consultants to assist in implementing the necessary financial controls over the financial reporting
and the utilization of internal management and staff to effectuate these controls.



This
annual report does not include an attestation report of our registered public accounting firm regarding internal control over
financial reporting. Management’s report was not subject to attestation by our registered public accounting firm pursuant
to the temporary rules of the Securities and Exchange Commission that permit us to provide only management’s report in this
annual report.



Changes
in Internal Control over Financial Reporting



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



|ITEM 9B. | OTHER INFORMATION
|-------- | -----------------



None.



17







PART
III



|ITEM 10. | DIRECTORS, EXECUTIVE OFFICERS
    AND CORPORATE GOVERNANCE
|-------- | ----------------------------------------------------------



The
members of our board of directors serve for one-year terms and are elected at the next annual meeting of stockholders, or until
their successors have been elected. The officers serve at the pleasure of the board of directors.



The
following sets forth information about our directors and executive officers as of the date of this report:





|Name          |  | Age |  | Position                                                       |  | Term Commencing  
|------------- |  | --- |  | -------------------------------------------------------------- |  | -----------------
|Joey Parsi    |  | 50  |  | Co-Chief Executive Officer, President, Treasurer, and Director |  | December 30, 2011
|Philip Gay    |  | 61  |  | Co-Chief Executive Officer                                     |  | April 1, 2018    
|Sean Richards |  | 49  |  | Chief Officer of Operations and Secretary                      |  | February 23, 2012





Joey
Parsi, Co-Chief Executive Officer, President, Treasurer and Director– Mr. Joey Parsi is a founder of Giggles N’
Hugs Restaurant, a children’s themed restaurant with play areas for children 10 years and younger and serve healthy, gourmet
food. Mr. Parsi and his wife founded the Giggles N’ Hugs Restaurant in 2007 after experiencing the same issues as all parents
while dining out with their daughter. Mr. Parsi and his wife decided to open a children’s restaurant (Giggles N’ Hugs)
that served healthy, gourmet food, with an area that allowed kids to play with toys, be entertained, play games, and various other
family friendly activities. By having a restaurant with a play area, parents are able to enjoy a relaxing healthy gourmet meal,
while their kids are entertained. Since the launch of Giggles N’ Hugs, Mr. Parsi and the restaurant have been praised by
parents from all over the world. Mr. Parsi has been featured in Businessweek Magazine, the Los Angeles Business Journal, Los Angeles
Times, People Magazine, US Weekly, OK Magazine, and many TV shows, including FOX News, Extra TV, Entertainment Tonight, TV Guide
Channel, and most recently, The Talk on CBS among others. Mr. Parsi became our Co-Chief Executive Officer May 1, 2018.



Between
1991 and 1994, Mr. Parsi served as an Investment Advisor for Lehman Brothers. From 1994 to 1996, Mr. Parsi served as Senior Vice
President at Sutro and Company, where he managed and oversaw millions of dollars for individual and institutional investors specializing
in IPOs and technology equities. Between 1996 and 1998, Mr. Parsi worked at Prudential Securities, where he oversaw client assets
in a number of investments, including fixed income assets, equities, and mutual funds. In 1998, Mr. Parsi opened Barron Chase
and was able to expand the company to more than 30 employees. In total, Mr. Parsi and his team raised more than $30 million in
funding for nine separate companies, many of which are now publicly traded on the NASDAQ markets. In 2001, he liquidated the business
and joined TD Waterhouse.



At
TD Waterhouse, between 2001 and 2006, Mr. Parsi personally managed more than $350 million in assets for clients, and oversaw more
than $1 billion in assets in his region. From 2006 to 2010, Mr. Parsi served as the Senior Vice President at Stockcross Financial
Services. There, he advised high net worth clients on investment matters.



Philip
Gay, Co-Chief Executive Officer -Philip Gay was appointed as our Chief Executive Officer on April 1, 2018 and then became
our Co-Chief Executive Officer, along with Joey Parsi, May 1, 2018. Mr. Gay currently serves as Managing Director of Triple Enterprises,
a business advisory service firm that assists mid-cap sized companies with financing, mergers and acquisitions and strategic financing,
which he had previously managed from March 2000 until June 2004. From March 2015 to May 2015 Mr. Gay served as a director and
chief executive officer at Diego Pellicer Worldwide Inc. From July 2006 until June 2010, Mr. Gay served as President, Chief Executive
Officer and a Director of Grill Concepts, Inc., a company that operates a chain of upscale casual restaurants throughout the United
States. From March 2000 to November 2001, Mr. Gay served as an independent consultant with El Paso Energy from time to time and
assisted El Paso Energy with its efforts to reduce overall operating and manufacturing overhead costs. Previously he has served
as chief financial officer for California Pizza Kitchen (1987 to 1994) and Wolfgang Puck Food Company (1994 to 1996), and he has
held various Chief Operating Officer and Chief Executive Officer positions at Color Me Mine and Diversified Food Group from 1996
to 2000. Mr. Gay is also a retired Certified Public Accountant, a former audit manager at Laventhol and Horwath and a graduate
of the London School of Economics.



18







Sean
Richards, Secretary, Chief Officer of Operations- Sean Richards has worked as Chief Officer of Operations (“COO”)
of Giggle N’ Hugs., a children’s themed restaurant with play areas for children 10 years and younger that serves healthy,
gourmet food since February 2012. As the COO of Giggles N’ Hugs, Mr. Richards is responsible for the day-to-day operations
of the restaurant, including all marketing, HR, service standards, facility management, training, financial performance and strategic
growth planning. Between March 2010 and March 2011, Mr. Richards served as a Sales Associate with Sysco, where he provided sales
and consulting services to a multitude of restaurant groups. From January 2008 to February 2010, Mr. Richards served as a General
Manager of the Pink Taco and the Viper Room of Larry Morton Holdings, LLC, where he was responsible for overseeing the operations
of 400+ seat hi-energy Mexican restaurant/bar with annual sales of over $9.4 million and a 300 person live music venue on the
Sunset Strip. From June 2003 to January 2008, Mr. Richards served as a Regional Director of Hootwinc, LLC where he was responsible
for overseeing the operations of 7 Hooters Restaurants, 1 Casino and 2 bars in Washington and Oregon.



Family
Relationships



There
are no family relationships among any of our officers or directors.



Indemnification
of Directors and Officers



Our
Articles of Incorporation and Bylaws both provide for the indemnification of our officers and directors to the fullest extent
permitted by Nevada law.



Limitation
of Liability of Directors



Pursuant
to the Nevada General Corporation Law, our Articles of Incorporation exclude personal liability for our Directors for monetary
damages based upon any violation of their fiduciary duties as Directors, except as to liability for any breach of the duty of
loyalty, acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, or any transaction
from which a Director receives an improper personal benefit. This exclusion of liability does not limit any right which a Director
may have to be indemnified and does not affect any Director’s liability under federal or applicable state securities laws.
We have agreed to indemnify our directors against expenses, judgments, and amounts paid in settlement in connection with any claim
against a Director if he acted in good faith and in a manner he believed to be in our best interests.



Election
of Directors and Officers



Directors
are elected to serve until the next annual meeting of stockholders and until their successors have been elected and qualified.
Officers are appointed to serve until the meeting of the Board of Directors following the next annual meeting of stockholders
and until their successors have been elected and qualified.



Section
16(a) Beneficial Ownership Reporting Compliance



Section
16(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), requires our executive officers and
directors, and persons who beneficially own more than ten percent of our common stock, to file initial reports of ownership and
reports of changes in ownership with the SEC. Executive officers, directors and greater-than-ten-percent beneficial owners are
required by SEC regulations to furnish us with copies of all Section 16(a) forms they file. Based upon a review of the copies
of such forms furnished to us and written representations from our executive officers and directors, we believe that as of the
date of this filing they were all current in their filings.



19







Code
of Ethics



A
code of ethics relates to written standards that are reasonably designed to deter wrongdoing and to

promote:



| | 1) | Honest
    and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional
    relationships;                                       
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                       
| | 2) | Full,
    fair, accurate, timely and understandable disclosure in reports and documents that are filed with, or submitted to, the Commission
    and in other public communications made by an issuer;
| |    |                                                                                                                                                                                                       
| | 3) | Compliance
    with applicable governmental laws, rules and regulations;                                                                                                                              
| |    |                                                                                                                                                                                                       
| | 4) | The
    prompt internal reporting of violations of the code to an appropriate person or persons identified in the code; and                                                                           
| |    |                                                                                                                                                                                                       
| | 5) | Accountability
    for adherence to the code.                                                                                                                                                         



We
have not adopted a corporate code of ethics that applies to our principal executive officer, principal financial officer, principal
accounting officer or controller, or persons performing similar functions.



Our
decision to not adopt such a code of ethics results from our having a small management structure for the Company. We believe that
the limited interaction which occurs having such a small management structure for the Company eliminates the current need for
such a code, in that violations of such a code would be reported to the party generating the violation.



Corporate
Governance



We
currently do not have standing audit, nominating and compensation committees of the board of directors, or committees performing
similar functions. Until formal committees are established, our entire board of directors will perform the same functions as an
audit, nominating and compensation committee.



Involvement
in Certain Legal Proceedings



To
the best of our knowledge, none of our directors or executive officers has, during the past five years:



| | ● | been
    convicted in a criminal proceeding or been subject to a pending criminal proceeding (excluding traffic violations and other
    minor offences);                                                                                                                                                                                                                                                                                                                        
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | ● | had
    any bankruptcy petition filed by or against the business or property of the person, or of any partnership, corporation or
    business association of which he was a general partner or executive officer, either at the time of the bankruptcy filing or
    within two years prior to that time;                                                                                                                                                                       
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | ● | been
    subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction
    or federal or state authority, permanently or temporarily enjoining, barring, suspending or otherwise limiting, his involvement
    in any type of business, securities, futures, commodities, investment, banking, savings and loan, or insurance activities,
    or to be associated with persons engaged in any such activity;
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | ● | been
    found by a court of competent jurisdiction in a civil action or by the SEC or the Commodity Futures Trading Commission to
    have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated;                                                                                                                                                                                                            



20







| | ● | been
    the subject of, or a party to, any federal or state judicial or administrative order, judgment, decree, or finding, not subsequently
    reversed, suspended or vacated (not including any settlement of a civil proceeding among private litigants), relating to an
    alleged violation of any federal or state securities or commodities law or regulation, any law or regulation respecting financial
    institutions or insurance companies including, but not limited to, a temporary or permanent injunction, order of disgorgement
    or restitution, civil money penalty or temporary or permanent cease-and-desist order, or removal or prohibition order, or
    any law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity; or
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | ● | been
    the subject of, or a party to, any sanction or order, not subsequently reversed, suspended or vacated, of any self-regulatory
    organization (as defined in Section 3(a)(26) of the Exchange Act (15 U.S.C. 78c(a)(26))), any registered entity (as defined
    in Section 1(a)(29) of the Commodity Exchange Act (7 U.S.C. 1(a)(29))), or any equivalent exchange, association, entity or
    organization that has disciplinary authority over its members or persons associated with a member.                                                                                                                                                                                                                                                                                    



|ITEM 11. | EXECUTIVE COMPENSATION
|-------- | ----------------------



Overview
of Compensation Program



We
currently have not appointed members to serve on a Compensation Committee of the Board of Directors. Until a formal committee
is established, our entire Board of Directors, which is currently composed of one member, has responsibility for establishing,
implementing and continually monitoring adherence with the Company’s compensation philosophy. The Board of Directors ensures
that the total compensation paid to the executives is fair, reasonable and competitive.



Compensation
Philosophy and Objectives



The
Board of Directors believes that the most effective executive compensation program is one that is designed to reward the achievement
of specific annual, long-term and strategic goals by the Company, and which aligns executives’ interests with those of the
stockholders by rewarding performance above established goals, with the ultimate objective of improving stockholder value. As
a result of the size of the Company and only having three executive officers, the Board evaluates both performance and compensation
on an informal basis. Upon hiring additional executives, the Board intends to establish a Compensation Committee to evaluate both
performance and compensation to ensure that the Company maintains its ability to attract and retain superior employees in key
positions and that compensation provided to key employees remains competitive relative to the compensation paid to similarly-
situated executives of our peer companies. To that end, the Board believes executive compensation packages provided by the Company
to its executives, including the named executive officers, should include both cash and stock-based compensation that reward performance
as measured against established goals.



21







Role
of Executive Officers in Compensation Decisions



The
Board of Directors makes all compensation decisions for, and approves recommendations regarding equity awards to, the executive
officers and Directors of the Company. Decisions regarding the non-equity compensation of other employees of the Company are made
by management.



Summary
Compensation Table



The
following table sets forth information with respect to compensation earned by our Chief Executive Officer, President, and Chief
Operations Officer for the years ended December 30, 2018 and December 31, 2017.



|                        |  |      |      |  |        |  |         |       |  |  |        |  |  |        |        |  | Non-Equity     |  |     | Nonqualified |  |  |              |  |  |       |    
|----------------------- |  | ---- | ---- |  | ------ |  | ------- | ----- |  |  | ------ |  |  | ------ | ------ |  | -------------- |  | --- | ------------ |  |  | ------------ |  |  | ----- | ---
|                        |  |      |      |  |        |  |         |       |  |  | Stock  |  |  | Option |        |  | Incentive Plan |  |     | Deferred     |  |  | All Other    |  |  |       |    
|Name and                |  |      |      |  | Salary |  |         | Bonus |  |  | Awards |  |  | Awards |        |  | Compensation   |  |     | Compensation |  |  | Compensation |  |  | Total |    
|Principal Position      |  | Year |      |  | ($)    |  |         | ($)   |  |  | ($)    |  |  | ($)    |        |  | ($)            |  |     | ($)          |  |  | ($)          |  |  | ($)   |    
|                        |  |      |      |  |        |  |         |       |  |  |        |  |  |        |        |  |                |  |     |              |  |  |              |  |  |       |    
|Joey Parsi(1)           |  |      | 2018 |  |        |  | 250,000 |       |  |  | -0-    |  |  |        | -0-    |  |                |  | -0- |              |  |  | -0-          |  |  |       | -0-
|President and Treasurer |  |      | 2017 |  |        |  | 300,000 |       |  |  | -0-    |  |  |        | -0-    |  |                |  | -0- |              |  |  | -0-          |  |  |       | -0-
|                        |  |      |      |  |        |  |         |       |  |  |        |  |  |        |        |  |                |  |     |              |  |  |              |  |  |       |    
|Philip Gay (2)          |  |      | 2018 |  |        |  | -0-     |       |  |  | -0-    |  |  |        | 31,500 |  |                |  | -0- |              |  |  | -0-          |  |  |       | -0-
|CO-CEO                  |  |      | 2017 |  |        |  | -0-     |       |  |  | -0-    |  |  |        | -0-    |  |                |  | -0- |              |  |  | -0-          |  |  |       | -0-
|                        |  |      |      |  |        |  |         |       |  |  |        |  |  |        |        |  |                |  |     |              |  |  |              |  |  |       |    
|Sean Richards (3)       |  |      | 2018 |  |        |  | 95,000  |       |  |  | -0-    |  |  |        | 980    |  |                |  | -0- |              |  |  | -0-          |  |  |       | -0-
|COO and Secretary       |  |      | 2017 |  |        |  | 95,000  |       |  |  | -0-    |  |  |        | -0-    |  |                |  | -0- |              |  |  | -0-          |  |  |       | -0-



| | (1) | Mr.
    Parsi became our President and Treasurer effective December 30, 2011, and our Co-Chief Executive Office on May 1, 2018.                                     
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                     
| | (2) | Mr. Gay became our Chief Executive Office effective
                                         April 1, 2018, and our Co-Chief Executive Office effective May 1, 2018.
| |     |                                                                                                                                                                     
| | (3) | Mr.
    Richards became our Chief Operating Officer and Secretary effective February 23, 2012.                                                                      



Summary
Compensation



In
connection with Mr. Sean Richards appointment as Secretary and Chief Operations Officer on February 23, 2012, Mr. Richards was
granted an initial equity award of 50,000 shares of the Company’s restricted common stock and 100,000 stock options were
granted at a strike price of $4.50 per share with the immediate vesting. Additionally, in 2018, he received a base annual salary
of $95,000 and was granted a stock award of 200,000 shares of common stock with a fair value of $4,600. Mr. Gay’s compensation
is a base salary of 6,000,000 warrants of the Company common share, issued for a 10 year period at strike price of $0.0001 per
annum to be paid on each anniversary date.



Executive
Employment Agreements



Sean
Richards: On January 1, 2019, we entered into an employment agreement with Sean Richards, pursuant to which Mr. Richards
agreed to devote all of his working time to our business as our Chief Operating Officer and we agreed to pay Mr. Richards an
annual base salary of $101,500, plus a onetime bonus of warrants exercisable for 1,000,000 shares of our common stock issued
for a ten-year period with an exercise price of $0.0001 per share. In addition, we also agreed to pay the monthly premiums
for health care coverage for Mr. Richards and the other members of his immediate family up to a maximum of $15,000 per year.
Mr. Richards will receive an annual bonus in cash of up to $10,000, in our sole discretion and based on mutually agreed upon
financial performance goals.



22







The
employment agreement also contains covenants prohibiting Mr. Richards from competing with us during his employment, and from (i)
competing with us in California and in any other states where we provide management services relating to our business, (ii) soliciting
any of our employees or consultants and (iii) disparaging the Company or any of our officers, directors, employees or agents for
a period of two years after his employment ends. The employment agreement also contains customary confidentiality provisions.
The employment agreement may be terminated by either party for any reason at any time.



Joey
Parsi: On January 1, 2019, we entered into an employment agreement with Joey Parsi, pursuant to which Mr. Parsi agreed to
devote a majority of his working time to our business as our Co-Chief Executive Officer and we agreed to pay Mr. Parsi an annual
base salary of $225,000, plus a onetime bonus of warrants exercisable for 25,997,000 shares of our common stock issued for a ten-year
period with an exercise price of $0.0001 per share. In addition, we also agreed to pay the monthly premiums for health care coverage
for Mr. Parsi and the other members of his immediate family. Mr. Parsi will receive an annual bonus in cash of up to $175,000,
in our sole discretion and based on mutually agreed upon financial performance goals. Mr. Parsi will also be entitled to reimbursement
for all ordinary and reasonable expenses incurred in the performance of his duties for the Company, including for a company car,
lap top computer and cell phone. Mr. Parsi will also be entitled to six weeks of vacation annually.



The
employment agreement may be terminated by either party for any reason at any time. If Mr. Parsi’s employment is terminated
by the Company with or without cause, Mr. Parsi will be entitled to receive a severance payment in the amount of 12 months of
his base salary plus all unvested options, warrants and shares.



The
employment agreement also contains covenants prohibiting Mr. Parsi from disparaging the Company or any of our officers, directors,
employees or agents for a period of two years after his employment ends. The employment agreement also contains customary confidentiality
provisions.



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.



The
employment agreement with Mr. Gay also contains customary confidentiality provisions and may be terminated by either party for
any reason at any time.



Termination
of Employment





Other than severance
payments that Mr. Parsi would be entitled to as described above, there are no compensatory plans or arrangements, including
payments to be received from the Company, with respect to any person which would in any way result in payments to any such person
because of his/her resignation, retirement, or other termination of such persons employment with the Company or its subsidiaries,
or any change in control of the Company, or a change in the persons responsibilities following a change in control of the Company,
except with respect to a breach of contract on the part of the Company.



Option
Grants in Last Fiscal Year



During
the fiscal year ended December 30, 2018, no additional options were granted. There are 115,000 exercisable shares that remain
outstanding as of December 30, 2018.



Director
Compensation



As
a result of having limited resources we do not currently have an established compensation package for board members.



23







|ITEM 12. | SECURITY
    OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
|-------- | --------------------------------------------------------------------------------------------------



The
following table presents information, to the best of our knowledge, about the beneficial ownership of our common stock on April
15, 2019, by those persons known to beneficially own more than 5% of our capital stock and by our directors and executive officers.
The percentage of beneficial ownership for the following table is based on 168,774,080 shares of common stock outstanding.



Beneficial
ownership is determined in accordance with the rules of the Securities and Exchange Commission and does not necessarily indicate
beneficial ownership for any other purpose. Under these rules, beneficial ownership includes those shares of common stock over
which the stockholder has sole or shared voting or investment power. It also includes shares of common stock that the stockholder
has a right to acquire within 60 days after April 15, 2019, pursuant to options, warrants, conversion privileges or other rights.
The percentage of ownership of the outstanding common stock, however, is based on the assumption, expressly required by the rules
of the Securities and Exchange Commission, that only the person or entity whose ownership is being reported has converted options
or warrants into shares of our common stock.



Security
Ownership of Management



|Name and Address of BeneficialOwner (1)                       |  | Title of Class |  | Amount and
    Nature of Beneficial Ownership |            |     | Percentage
    of Class | 
|------------------------------------------------------------- |  | -------------- |  | --------------------------------------------- | ---------- | --- | ----------------------- | 
|                                                              |  |                |  |                                               |            |     |                         | 
|Joey Parsi                                                    |  | Common Stock   |  |                                               | 26,637,580 | (2) |                         | 
|Philip Gay                                                    |  | Common Stock   |  |                                               | 1,240,000  | (3) |                         | 
|Sean Richards                                                 |  | Common Stock   |  |                                               | 700,000    | (4) |                         | 
|All officers and directors as a group (3 persons named above) |  |                |  |                                               | 28,577,580 |     |                         | 



| | (1) | As
    used in this table, “beneficial ownership” means the sole or united power to vote, or to direct the voting of,
    a security, or the sole or united investment power with respect to a security (i.e., the power to dispose of, or to direct
    the disposition of a security). Each party’s address is in care of the Company at 3222 Galleria Way, Glendale, CA 91210.                                                                                                                                                  
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | (2) | Of
    the 26,637,580 shares, Mr. Parsi may be deemed to have indirect control over 8,811,913 shares of common stock held by his
    wife Dorsa Foroughi. In fact, Mr. Parsi and Ms. Foroughi may be deemed a group for reporting purposes. Additionally, Mr. Parsi
    has direct control over 17,825,667 shares of common stock, that includes (i) 333,334 as common stock and (ii) warrants exercisable
    within 60 days for 233,333 shares of common stock, both of which were issued in connection with the Rights Offering.
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | (3) | 1,240,000 shares to Philip Gay was for consulting
    service rendered over the year.                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | (4) | This
    amount includes an option to purchase 100,000 shares of common stock at a price per share of $4.50 granted to Mr. Richards
    on February 2012, and 250,000 shares issued to Mr. Richards in March 2014. There were 350,000 shares and 200,000 shares granted
    and issued to Mr. Richards in January 2017 and January 2018, respectively.                                                                                                                                                                             



Changes
in Control



There
are no arrangements, known to the Company, including any pledge by any person of securities of the Company, the operation of which
may at a subsequent date result in a change in control of the Company.



24







|ITEM
                                         13. | CERTAIN
                                         RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPNDENCE
|------------------------------------------------- | -----------------------------------------------------------------------------------------------------------------



Transactions
with Related Persons



From
time to time, the Company has received advances from certain of its officers to meet short term working capital needs. These advances
may not have formal repayment terms or arrangements. As of December 30, 2018, there were no advances from related persons



Promoters
and Certain Control Persons



We
did not have any promoters at any time since our inception.



Director
Independence



We
currently do not have any independent directors, as the term “independent” is defined in Section 803A of the NYSE
Amex LLC Company Guide. Since the Over the Counter Quotation Board (“OTCQB”) does not have rules regarding director
independence, the Board makes its determination as to director independence based on the definition of “independence”
as defined under the rules of the New York Stock Exchange (“NYSE”) and American Stock Exchange (“Amex”).



|ITEM
                                         14. | PRINCIPAL
                                         ACCOUNTING FEES AND SERVICES
|------------------------------------------------- | -------------------------------------------------------------------------------



(1)
AUDIT FEES



Audit
and Non-Audit Fees



Fiscal
Year Ended December 30, 2018 and December 31, 2017:



The
following table sets forth the fees paid or accrued by us for the audit and other services provided by Weinberg & Company
for the audit of our annual financial statements for the years ended December 30, 2018 and December 31, 2017.



|              |  | Fiscal Years Ended December 30, |        |  | Fiscal Years Ended December 31, |  
|------------- |  | ------------------------------- | ------ |  | ------------------------------- | -
|              |  | 2018                            |        |  | 2017                            |  
|              |  |                                 |        |  |                                 |  
|Audit Fees(1) |  | $                               | 32,550 |  |                                 | $
|Total         |  | $                               | 32,550 |  |                                 | $



| | 1. | AUDIT
                                         FEES: This category represents fees for professional services provided in connection
                                         with the audit of our financial statements and review of our quarterly financial statements.
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                          
| | 2. | AUDIT
                                         COMMITTEE POLICIES AND PROCEDURES                                                                                                                                                                                         



| | a. | We
                                         do not have an audit committee.
| | -- | ---------------------------------------------------------------------------



| | 3. | If
                                         greater than 50 percent, disclose the percentage of hours expended on the principal accountant’s
                                         engagement to audit the registrant’s financial statements for the most recent fiscal
                                         year that were attributed to work performed by persons other than the principal accountant’s
                                         full-time, permanent employees.
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | a. | Not
                                         applicable.
| | -- | --------------------------------------------------------



25







PART
IV



|ITEM
                          15. | EXHIBITS,
                                         FINANCIAL STATEMENT SCHEDULES
|---------------------------------- | --------------------------------------------------------------------------------



| | a) | We
                                         have filed the following documents as part of this Annual Report on Form 10-K:
| | -- | --------------------------------------------------------------------------------------------------------------------------



| | 1. | The
                                         financial statements listed in the “Index to Financial Statements” at page
                                         34 are filed as part of this report.                                          
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                
| | 2. | Financial
                                         statement schedules are omitted because they are not applicable, or the required information
                                         is shown in the financial statements or notes thereto.
| |    |                                                                                                                                                                                                                                                
| | 3. | Exhibits
                                         included or incorporated herein: See index to Exhibits.                                                                                                                                      



Exhibit
Index



|               |                                                                                                                   |  | Incorporated by reference
|-------------- | ----------------------------------------------------------------------------------------------------------------- |  | -------------------------
|Exhibit Number | Exhibit
    Description                                                                                           |  | Filed herewith           
|2.1            | Acquisition Agreement and Plan of Merger by and among Giggles N’ Hugs Inc., Giggles N’ Hugs Sub Co and GNH, Inc.  |  |                          
|3(i)(a)        | Articles of Incorporation                                                                                         |  |                          
|3(i)(b)        | Certificate of Amendment to Articles of Incorporation dated August 20, 2010 (Name Change to Giggles N’ Hugs Inc.) |  |                          
|3(ii)(a)       | Bylaws                                                                                                            |  |                          
|10.1           | Employment Agreement with Sean Richards                                                                           |  |                          
|10.2           | Employment Agreement with Joey Parsi                                                                              |  |                          
|10.3           | Employment Agreement with Philip Gay                                                                              |  |                          
|21.1           | Subsidiaries of Registrant                                                                                        |  |                          
|31.1/31.2      | Certification pursuant to Section 302 of the Sarbanes-Oxley Act.                                                  |  | X                        
|32.1/32.2      | Certification pursuant to Section 906 of the Sarbanes-Oxley Act.                                                  |  | X                        
|99.4           | 2012 Stock Option Plan-Dated February 2, 2012                                                                     |  |                          
|101.INS        | XBRL
    Instance Document                                                                                        |  |                          
|101.SCG        | 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                                                                 |  |                          



|ITEM 16. | NOT APPLICABLE
|-------- | --------------



26







SIGNATURES



Pursuant
to the requirements of Section 13 or 15(d) 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
    April 22, 2019 | By:                  
|                        |                      
|                        |                      
|                        |                      
|                        |                      
|                        | By:                  
|                        |                      
|                        |                      



Pursuant
to the requirements of the Exchange Act of 1934, this registration statement has been signed by the following persons in the capacities.



|Signature      |  | Title                                                                                      |  | Date              
|-------------- |  | ------------------------------------------------------------------------------------------ |  | ------------------
|               |  |                                                                                            |  |                   
|/s/ Joey Parsi |  | Chairman
of the Board of Directors, Co-Chief Executive Officer,                            |  | April
    22, 2019
|Joey
    Parsi |  | President
        and Treasurer (Principal Executive Officer, Principal Financial Officer) |  |                   



27









GIGGLES
N’ HUGS, INC.



INDEX
TO CONSOLIDATED FINANCIAL STATEMENTS



FOR
THE FISCAL YEARS ENDED DECEMBER 30, 2018 AND DECEMBER 31, 2017



|                                                        | PAGES         
|------------------------------------------------------- | --------------
|REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM | F-1           
|                                                        |               
|CONSOLIDATED BALANCE SHEETS                             | F-2           
|                                                        |               
|CONSOLIDATED STATEMENTS OF OPERATIONS                   | F-3           
|                                                        |               
|CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT        | F-4           
|                                                        |               
|CONSOLIDATED STATEMENTS OF CASH FLOWS                   | F-5           
|                                                        |               
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS              | F-6
    – F-23



28









REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM



To
the Stockholders and the Board of Directors

Giggles
N’ Hugs, Inc.

Glendale,
California



Opinion
on the Financial Statements



We
have audited the accompanying consolidated balance sheets of Giggles N’ Hugs, Inc. (the “Company”) as of December
30, 2018 and December 31, 2017, the related consolidated statements of operations, changes in stockholders’ deficit, and
cash flows for the years then ended, and the related notes (collectively referred to as the “consolidated financial statements”).
In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the
Company as of December 30, 2018 and December 31, 2017, and the results of their operations and their cash flows for the years
then ended, in conformity with accounting principles generally accepted in the United States of America.



Going
concern



The
accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern.
As discussed in Note 1, the Company has a stockholders’ deficit at December 30, 2018, and incurred a net loss and utilized
cash in operation during the year ended December 30, 2018. These matters raise substantial doubt about the Company’s ability
to continue as a going concern. Management’s plans in regard to these matters are also described in Note 1 to the financial
statements. These consolidated financial statements do not include any adjustments that might result from the outcome of this
uncertainty.



Basis
for Opinion



These
consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an
opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered
with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with
respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities
and Exchange Commission and the PCAOB.



We
conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether
due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over
financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting
but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.
Accordingly, we express no such opinion.



Our
audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether
due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis,
evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting
principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial
statements. We believe that our audits provide a reasonable basis for our opinion.



We
have served as the Company’s auditor since 2016.



Weinberg
& Company, P.A.



Los
Angeles, CA

April
15, 2019



F-1







GIGGLES
N’ HUGS, INC.

CONSOLIDATED
BALANCE SHEETS



|                                                                                                                                                                                       |  | December 30, 2018 |             |   | December 31, 2017 |  
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------- | ----------- | - | ----------------- | -
|Assets                                                                                                                                                                                 |  |                   |             |   |                   |  
|                                                                                                                                                                                       |  |                   |             |   |                   |  
|Current assets:                                                                                                                                                                        |  |                   |             |   |                   |  
|Cash and equivalents                                                                                                                                                                   |  | $                 | 57,642      |   |                   | $
|Inventory                                                                                                                                                                              |  |                   | 23,860      |   |                   |  
|Prepaid expenses and other                                                                                                                                                             |  |                   | 22,458      |   |                   |  
|Total current assets                                                                                                                                                                   |  |                   | 103,960     |   |                   |  
|                                                                                                                                                                                       |  |                   |             |   |                   |  
|Property, and equipment, net of accumulated depreciation and amortization of $1,708,865 and $1,476,520                                                                                 |  |                   | 507,844     |   |                   |  
|                                                                                                                                                                                       |  |                   |             |   |                   |  
|Other assets                                                                                                                                                                           |  |                   | 2,620       |   |                   |  
|                                                                                                                                                                                       |  |                   |             |   |                   |  
|Total assets                                                                                                                                                                           |  | $                 | 614,424     |   |                   | $
|                                                                                                                                                                                       |  |                   |             |   |                   |  
|Liabilities and Stockholders’ Deficit                                                                                                                                                  |  |                   |             |   |                   |  
|                                                                                                                                                                                       |  |                   |             |   |                   |  
|Current liabilities:                                                                                                                                                                   |  |                   |             |   |                   |  
|Accounts payable                                                                                                                                                                       |  | $                 | 621,454     |   |                   | $
|Incentive from lessor – current portion                                                                                                                                                |  |                   | 117,460     |   |                   |  
|Note payable from lessor- in default                                                                                                                                                   |  |                   | 420,881     |   |                   |  
|Accrued expenses                                                                                                                                                                       |  |                   | 157,368     |   |                   |  
|Accrued officers salary                                                                                                                                                                |  |                   | 466,541     |   |                   |  
|Deferred revenue                                                                                                                                                                       |  |                   | 16,964      |   |                   |  
|Convertible note payable and accrued interest                                                                                                                                          |  |                   | 50,000      |   |                   |  
|Total current liabilities                                                                                                                                                              |  |                   | 1,850,668   |   |                   |  
|                                                                                                                                                                                       |  |                   |             |   |                   |  
|Long-term liabilities:                                                                                                                                                                 |  |                   |             |   |                   |  
|Incentive from lessor – long-term                                                                                                                                                      |  |                   | 433,379     |   |                   |  
|Deferred gain                                                                                                                                                                          |  |                   | 332,478     |   |                   |  
|Total long-term liabilities                                                                                                                                                            |  |                   | 765,857     |   |                   |  
|                                                                                                                                                                                       |  |                   |             |   |                   |  
|Total liabilities                                                                                                                                                                      |  |                   | 2,616,525   |   |                   |  
|                                                                                                                                                                                       |  |                   |             |   |                   |  
|Stockholders’ deficit:                                                                                                                                                                 |  |                   |             |   |                   |  
|Common stock, $0.001 par value, 1,125,000,000 shares authorized, 168,424,080 and 145,602,251 shares issued and outstanding as of December 30, 2018 and December 31, 2017, respectively |  |                   | 168,424     |   |                   |  
|Common stock issuable (1,397,619 and 1,397,619 shares as of December 30, 2018 and December 31, 2017, respectively)                                                                     |  |                   | 293,535     |   |                   |  
|Additional paid-in capital                                                                                                                                                             |  |                   | 10,458,959  |   |                   |  
|Accumulated deficit                                                                                                                                                                    |  |                   | (12,923,019 | ) |                   |  
|Total stockholders’ decifit                                                                                                                                                            |  |                   | (2,002,101  | ) |                   |  
|                                                                                                                                                                                       |  |                   |             |   |                   |  
|Total liabilities and stockholders’ deficit                                                                                                                                            |  | $                 | 614,424     |   |                   | $



See
Accompanying Notes to Consolidated Financial Statements.



F-2







GIGGLES
N’ HUGS, INC.

CONSOLIDATED
STATEMENTS OF OPERATIONS



|                                                                         |  | Fiscal Year Ended |             |   | Fiscal Year Ended |  
|------------------------------------------------------------------------ |  | ----------------- | ----------- | - | ----------------- | -
|                                                                         |  | December 30 2018  |             |   | December 31 2017  |  
|Revenue                                                                  |  |                   |             |   |                   |  
|Net sales                                                                |  | $                 | 2,431,903   |   |                   | $
|                                                                         |  |                   |             |   |                   |  
|Costs and operating expenses                                             |  |                   |             |   |                   |  
|Cost of operations                                                       |  |                   | 1,920,493   |   |                   |  
|General and administrative expenses                                      |  |                   | 907,224     |   |                   |  
|Depreciation and amortization                                            |  |                   | 232,344     |   |                   |  
|Total costs and operating expenses                                       |  |                   | 3,060,061   |   |                   |  
|                                                                         |  |                   |             |   |                   |  
|Loss from Operations                                                     |  |                   | (628,158    | ) |                   |  
|                                                                         |  |                   |             |   |                   |  
|Other Income (Expenses):                                                 |  |                   |             |   |                   |  
|Finance and interest expense                                             |  |                   | (61,811     | ) |                   |  
|Loss on settlement                                                       |  |                   | (1,400      | ) |                   |  
|Change in fair value of derivatives                                      |  |                   | -           |   |                   |  
|Gain on extinguishment of derivatives                                    |  |                   | -           |   |                   |  
|Loss on extiguishment of debt                                            |  |                   | -           |   |                   |  
|Loss before provision for income taxes                                   |  |                   | (691,369    | ) |                   |  
|Provision (benefit) for income taxes                                     |  |                   | -           |   |                   |  
|                                                                         |  |                   |             |   |                   |  
|Net loss                                                                 |  | $                 | (691,369    | ) |                   | $
|                                                                         |  |                   |             |   |                   |  
|Net loss per share – basic and diluted                                   |  | $                 | 0.00        |   |                   | $
|                                                                         |  |                   |             |   |                   |  
|Weighted average number of common shares outstanding – basic and diluted |  |                   | 162,505,289 |   |                   |  



See
Accompanying Notes to Consolidated Financial Statements.



F-3







GIGGLES
N’ HUGS, INC.

CONSOLIDATED
STATEMENTS OF STOCKHOLDERS’ DEFICIT



|                                                       |  |              |             |  | Additional |   |         | Common  |  |   |             |   |  | Total         |        
|------------------------------------------------------ |  | ------------ | ----------- |  | ---------- | - | ------- | ------- |  | - | ----------- | - |  | ------------- | -------
|                                                       |  | Common Stock |             |  | Paid in    |   |         | Stock   |  |   | Accumulated |   |  | Stockholders’ |        
|                                                       |  | Shares       |             |  | Amount     |   |         | Capital |  |   | Issuable    |   |  | Deficit       |        
|Balance January 1, 2017                                |  |              | 67,934,205  |  |            | $ | 67,933  |         |  | $ | 8,229,747   |   |  | $             | 218,535
|                                                       |  |              |             |  |            |   |         |         |  |   |             |   |  |               |        
|Shares issued for employees compensation               |  |              | 10,170,000  |  |            |   | 10,170  |         |  |   | 18,300      |   |  |               |        
|Shares issued for settle accounts payable              |  |              | 2,884,226   |  |            |   | 2,884   |         |  |   | 273,012     |   |  |               |        
|Shares issued for convertible notes and settlement     |  |              | 62,018,046  |  |            |   | 62,019  |         |  |   | 663,828     |   |  |               |        
|Shares issued for cash as part of settlement agreement |  |              | 1,100,000   |  |            |   | 1,100   |         |  |   | 108,900     |   |  |               |        
|Cash received for stock issuable                       |  |              |             |  |            |   |         |         |  |   |             |   |  |               | 75,000 
|Shares issued for professional services                |  |              | 1,495,774   |  |            |   | 1,496   |         |  |   | 50,149      |   |  |               |        
|Fair value of warrants grated for services             |  |              |             |  |            |   |         |         |  |   | 531,000     |   |  |               |        
|Net loss                                               |  |              |             |  |            |   |         |         |  |   |             |   |  |               |        
|Balance December 31, 2017                              |  |              | 145,602,251 |  |            |   | 145,602 |         |  |   | 9,874,936   |   |  |               | 293,535
|                                                       |  |              |             |  |            |   |         |         |  |   |             |   |  |               |        
|Shares issued for cash proceeds                        |  |              | 19,791,829  |  |            |   | 19,792  |         |  |   | 573,963     |   |  |               |        
|Offering costs                                         |  |              |             |  |            |   |         |         |  |   | (51,575     | ) |  |               |        
|Shares issued for employees compensation               |  |              | 200,000     |  |            |   | 200     |         |  |   | 4,400       |   |  |               |        
|Shares issued to settle accounts payable               |  |              | 1,500,000   |  |            |   | 1,500   |         |  |   | 39,150      |   |  |               |        
|Shares issued for professional services                |  |              | 1,330,000   |  |            |   | 1,330   |         |  |   | 18,085      |   |  |               |        
|Net Loss                                               |  |              |             |  |            |   |         |         |  |   |             |   |  |               |        
|Balance December 30, 2018                              |  |              | 168,424,080 |  |            | $ | 168,424 |         |  | $ | 10,458,959  |   |  | $             | 293,535



See
Accompanying Notes to Consolidated Financial Statements.



F-4







GIGGLES
N’ HUGS, INC.

CONSOLIDATED
STATEMENTS OF CASH FLOWS



|                                                                            |  | Fiscal Year Ended |          |   | Fiscal Year Ended |  
|--------------------------------------------------------------------------- |  | ----------------- | -------- | - | ----------------- | -
|                                                                            |  | December 30, 2018 |          |   | December 31, 2017 |  
|                                                                            |  |                   |          |   |                   |  
|Cash flows from operating activities                                        |  |                   |          |   |                   |  
|Net loss                                                                    |  | $                 | (691,369 | ) |                   | $
|Adjustments to reconcile net loss to net cash used in operating activities: |  |                   |          |   |                   |  
|Depreciation and amortization                                               |  |                   | 232,345  |   |                   |  
|Shares issued for services                                                  |  |                   | 19,415   |   |                   |  
|Stock-based compesation                                                     |  |                   | 4,600    |   |                   |  
|Loss on stock issuance for payable settlement                               |  |                   | 1,400    |   |                   |  
|Warrants vested for service                                                 |  |                   | -        |   |                   |  
|Interest and fees included in promissory note payable                       |  |                   | 3,520    |   |                   |  
|Amortization of deferred gain                                               |  |                   | (68,784  | ) |                   |  
|Gain on extinguishment of derivative liability                              |  |                   | -        |   |                   |  
|Change in fair value of derivative liability                                |  |                   | -        |   |                   |  
|Promissory note settlement                                                  |  |                   | -        |   |                   |  
|                                                                            |  |                   |          |   |                   |  
|Changes in operating assets and liabilities:                                |  |                   |          |   |                   |  
|(Increase) decrease in prepaid expenses and other                           |  |                   | (1,262   | ) |                   |  
|(Increase) decrease in inventory                                            |  |                   | 850      |   |                   |  
|(Decrease) increase in accounts payable                                     |  |                   | (16,988  | ) |                   |  
|Decrease in incentive from lessor                                           |  |                   | (102,168 | ) |                   |  
|(Decrease) increase in accrued expenses                                     |  |                   | (2,867   | ) |                   |  
|Decrease in deferred revenue                                                |  |                   | 10,434   |   |                   |  
|Net cash used in operating activities                                       |  |                   | (610,874 | ) |                   |  
|                                                                            |  |                   |          |   |                   |  
|Cash flows from investing activities                                        |  |                   |          |   |                   |  
|Acquisition of fixed assets                                                 |  |                   | -        |   |                   |  
|Net cash used in investing activities                                       |  |                   | -        |   |                   |  
|                                                                            |  |                   |          |   |                   |  
|Cash flows from financing activities                                        |  |                   |          |   |                   |  
|Proceeds from sale common stock                                             |  |                   | 593,755  |   |                   |  
|Proceeds from sale of stock upon note settlement                            |  |                   | -        |   |                   |  
|Payments to promissory note payable                                         |  |                   | -        |   |                   |  
|Payments to note payable-lessor                                             |  |                   | (5,000   | ) |                   |  
|Offering costs                                                              |  |                   | (51,575  | ) |                   |  
|Net cash provided by financing activities                                   |  |                   | 537,180  |   |                   |  
|                                                                            |  |                   |          |   |                   |  
|NET DECREASE IN CASH                                                        |  |                   | (73,694  | ) |                   |  
|                                                                            |  |                   |          |   |                   |  
|CASH AT BEGINNING OF THE YEAR                                               |  |                   | 131,336  |   |                   |  
|                                                                            |  |                   |          |   |                   |  
|CASH AT END OF YEAR                                                         |  | $                 | 57,642   |   |                   | $
|                                                                            |  |                   |          |   |                   |  
|SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:                           |  |                   |          |   |                   |  
|Interest paid                                                               |  | $                 | -        |   |                   | $
|Income taxes paid                                                           |  | $                 | -        |   |                   | $
|                                                                            |  |                   |          |   |                   |  
|NON-CASH INVESTING AND FINANCING ACTIVITIES:                                |  |                   |          |   |                   |  
|Shares issued to settle convertible notes payable                           |  | $                 | -        |   |                   | $
|Accounts payable settled by share issuance                                  |  | $                 | 40,650   |   |                   | $
|Relcass of notes payable to accrued interest                                |  | $                 | -        |   |                   | $



See
Accompanying Notes to Consolidated Financial Statements.



F-5







GIGGLES
N’ HUGS, INC.

NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS



NOTE
1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES



Organization



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



The
Company adopted a 52/53 week fiscal year ending on the Sunday closest to December 31st for financial reporting purposes. Fiscal
year 2018 consists of a year ending December 30, 2018. Fiscal year 2017 consists of a year ending December 31, 2017.



Going
Concern



The
accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization
of assets and the settlement of liabilities and commitments in the normal course of business. As reflected in the accompanying
consolidated financial statements, during the year ended December 30, 2018, the Company incurred a net loss of $691,369, used
cash in operations of $610,874 and had a stockholders’ deficit of $2,002,101 as of that date. In addition, the Company was
in default of a note payable to one of its landlords. These factors raise substantial doubt about the Company’s ability
to continue as a going concern within one year after the date that the financial statements are issued. The ability of the Company
to continue as a going concern is dependent upon the Company’s ability to raise additional funds and implement its business
plan. The financial statements do not include any adjustments that might be necessary if the Company is unable to continue as
a going concern.



The
Company has and will continue to use significant capital to grow and acquire market share At December 30, 2018,

the
Company had cash on hand in the amount of $57,642. Management estimates that the current funds on hand will be sufficient to continue
operations through May 2019. Management continues to seek additional funds, primarily through the issuance of debt and equity
securities for cash to operate our business. No assurance can be given that any future financing will be available or, if available,
that it will be on terms that are satisfactory to the Company. Even if the Company is able to obtain additional financing, it
may contain undue restrictions on our operations, in the case of debt financing or cause substantial dilution for our stock holders,
in case or equity financing.



Principles
of consolidation



For
the years ended December 30, 2018 and December 31, 2017, the consolidated financial statements include the accounts of Giggles
N’ Hugs, Inc., GNH, Inc., GNH Topanga, Inc. for restaurant operations in Westfield Topanga Shopping Center in Woodland Hills,
California, and Glendale Giggles N’ Hugs, Inc. for restaurant operations in Glendale Galleria in Glendale, California. Intercompany
balances and transactions have been eliminated. Giggles N’ Hugs, Inc., GNH, Inc., GNH Topanga, Inc., and Glendale Giggles
N’ Hugs, Inc. 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 revenues and expenses during the reporting period. Estimates
and assumptions used by management include estimates made for impairment analysis for fixed assets and other long term assets,
estimates of potential liabilities and, assumptions made in valuing derivative liabilities, the valuation of issuance of debt
and equity securities, and realization of deferred tax assets. Actual results could differ from those estimates.



F-6







GIGGLES
N’ HUGS, INC.

NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS



NOTE
1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)



Concentration
of Credit Risk



The
Company has no significant off-balance-sheet concentrations of credit risk such as foreign exchange contracts, options contracts
or other foreign hedging arrangements. The Company maintains the majority of its cash balances with financial institutions, in
the form of demand deposits. The Company believes that no significant concentration of credit risk exists with respect to these
cash balances because of its assessment of the creditworthiness and financial viability of these two financial institutions.



Fair
value of financial instruments



The
Company follows paragraph 825-10-50-10 of the FASB Accounting Standards Codification for disclosures about fair value of its financial
instruments and paragraph 820-10-35-37 of the FASB Accounting Standards Codification (“Paragraph 820-10-35-37”) to
measure the fair value of its financial instruments. Paragraph 820-10-35-37 establishes a framework for measuring fair value in
accounting principles generally accepted in the United States of America (U.S. GAAP), and expands disclosures about fair value
measurements. To increase consistency and comparability in fair value measurements and related disclosures, Paragraph 820-10-35-37
establishes a fair value hierarchy which prioritizes the inputs to valuation techniques used to measure fair value into three
(3) broad levels. The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical
assets or liabilities and the lowest priority to unobservable inputs.



The
three (3) levels of fair value hierarchy defined by Paragraph 820-10-35-37 are described below:



Level
1: Quoted market prices available in active markets for identical assets or liabilities as of the reporting date.

Level
2: Pricing inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable
as of the reporting date.

Level
3: Pricing inputs that are generally observable inputs and not corroborated by market data.



The
carrying amount of the Company’s financial assets and liabilities, such as cash and cash equivalents, inventory, prepaid
expenses, and accounts payable and accrued expenses approximate their fair value due to their short term nature. The carrying
values financing obligations approximate their fair values due to the fact that the interest rates on these obligations are based
on prevailing market interest rates.



F-7







GIGGLES
N’ HUGS, INC.

NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS



NOTE
1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)



Income
taxes



The
Company accounts for income taxes under the provisions of ASC 740 “Accounting for Income Taxes,” which requires a
company to first determine whether it is more likely than not (which is defined as a likelihood of more than fifty percent) that
a tax position will be sustained based on its technical merits as of the reporting date, assuming that taxing authorities will
examine the position and have full knowledge of all relevant information. A tax position that meets this more likely than not
threshold is then measured and recognized at the largest amount of benefit that is greater than fifty percent likely to be realized
upon effective settlement with a taxing authority.



Deferred
income taxes are recognized for the tax consequences related to temporary differences between the carrying amount of assets and
liabilities for financial reporting purposes and the amounts used for tax purposes at each year end, based on enacted tax laws
and statutory tax rates applicable to the periods in which the differences are expected to affect taxable income. A valuation
allowance is recognized when, based on the weight of all available evidence, it is considered more likely than not that all, or
some portion, of the deferred tax assets will not be realized. The Company evaluates its valuation allowance requirements based
on projected future operations. When circumstances change and cause a change in management’s judgment about the recoverability
of deferred tax assets, the impact of the change on the valuation is reflected in current income. Income tax expense is the sum
of current income tax plus the change in deferred tax assets and liabilities.



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. Depreciation periods are as follows:



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



Management
assesses the carrying value of property and equipment whenever events or changes in circumstances indicate that the carrying value
may not be recoverable. If there is indication of impairment, management prepares an estimate of future cash flows expected to
result from the use of the asset and its eventual disposition. If these cash flows are less than the carrying amount of the asset,
an impairment loss is recognized to write down the asset to its estimated fair value. For the years ended December 30, 2018 and
December 31, 2017 there were no indications of impairment based on management’s assessment of these assets.



F-8







GIGGLES
N’ HUGS, INC.

NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS



NOTE
1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)



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. The Company currently has two leases, which are classified
as operating leases.



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 its leased premises which are reimbursed to
the Company by its landlords, as construction contributions pursuant to agreed-upon terms in the lease agreements. Landlord
construction contributions usually take the form of up-front cash. Depending on the specifics of the leased space and the
lease agreement, amounts paid for structural components are recorded during the construction period as leasehold improvements
or the landlord construction contributions are recorded as an incentive from lessor.



F-9







GIGGLES
N’ HUGS, INC.

NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS



NOTE
1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)



Stock-based
compensation



The
Company periodically issues stock options and warrants to employees and non-employees in non-capital raising transactions for
services and for financing costs. The Company accounts for stock option and warrant grants issued and vesting to employees based
on the authoritative guidance provided by the Financial Accounting Standards Board whereas the value of the award is measured
on the date of grant and recognized over the vesting period. The Company accounts for stock option and warrant grants issued and
vesting to non-employees in accordance with the authoritative guidance of the Financial Accounting Standards Board (FASB) whereas
the value of the stock compensation is based upon the measurement date as determined at either a) the date at which a performance
commitment is reached, or b) at the date at which the necessary performance to earn the equity instruments is complete. Non-employee
stock-based compensation charges generally are amortized over the vesting period on a straight-line basis. In certain circumstances
where there are no future performance requirements by the non-employee, option grants are immediately vested and the total stock-based
compensation charge is recorded in the period of the measurement date.



The
fair value of the Company’s stock option and warrant grants is estimated using the Black-Scholes Option Pricing model, which
uses certain assumptions related to risk-free interest rates, expected volatility, expected life of the stock options or warrants,
and future dividends. Compensation expense is recorded based upon the value derived from the Black-Scholes Option Pricing model
and based on actual experience. The assumptions used in the Black-Scholes Option Pricing model could materially affect compensation
expense recorded in future periods.



The
Company also issues restricted shares of its common stock for share-based compensation programs to employees and non-employees.
The Company measures the compensation cost with respect to restricted shares to employees based upon the estimated fair value
at the date of the grant, and is recognized as expense over the period, which an employee is required to provide services in exchange
for the award. For non-employees, the Company measures the compensation cost with respect to restricted shares based upon the
estimated fair value at measurement date which is either a) the date at which a performance commitment is reached, or b) at the
date at which the necessary performance to earn the equity instruments is complete.



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 options and warrants. Loss per common share has been computed using the weighted average number of common
shares outstanding during the year. For the years ended December 30, 2018 and December 31, 2017, warrants to acquire 19,967,917
and 6,113,643 shares of common stock, respectively , and options to acquire 115,000 shares of common stock are anti-dilutive due
to the Company’s net losses and are excluded in determining diluted loss per share.



F-10







GIGGLES
N’ HUGS, INC.

NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS



NOTE
1 – 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.



Through
December 31, 2017, the Company recognized revenue from restaurant sales when payment was 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



On
January 1, 2018, the Company adopted ASC 606 using the modified retrospective method. This standard provides that revenues are
to be recognized when control of promised goods or services is transferred to a customer in an amount that reflects the consideration
expected to be received for those goods or services. This standard does not impact the Company’s recognition of revenue
from Company-operated restaurants as those sales are recognized on a cash basis at the time of the underlying sale and are presented
net of sales tax and other sales-related taxes.



The
standard also does not change the recognition of revenue from restaurant membership fees. 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. The company receives payment from its customers at the start
of the subscription period and the company records deferred revenue for the unearned portion of the subscription period.



The
adoption of ASC 606 had no effect on previously reported amounts



We
recognize a liability upon the sale of our gift cards and recognize revenue when these gift cards are redeemed in our restaurants.
As of December 30, 2018 and December 31, 2017, the amount of gift cards sales were $1,647 and ($2,338) respectively, and were
recorded as deferred revenue.



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.



Advertising
costs



Advertising
costs are expensed as incurred. During the fiscal years ended December 30, 2018 and December 31, 2017, there were $34,539 and
$29,939, respectively in advertising costs included in general and administrative expenses.



F-11







GIGGLES
N’ HUGS, INC.

NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS



NOTE
1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)



Recent
Accounting Standards



In
June 2014, the FASB issued Accounting Standards Update No. 2014-12, Compensation – Stock Compensation (Topic 718). The pronouncement
was issued to clarify the accounting for share-based payments when the terms of an award provide that a performance target could
be achieved after the requisite service period. The pronouncement is effective for reporting periods beginning after December
15, 2015. The adoption of ASU 2014-12 is not expected to have a significant impact on the Company’s consolidated financial
position or results of operations.



In
February 2016, the FASB issued Accounting Standards Update (ASU) No. 2016-02, Leases. ASU 2016-02 requires a lessee to record
a right of use asset and a corresponding lease liability on the balance sheet for all leases with terms longer than 12 months.
ASU 2016-02 is effective for all interim and annual reporting periods beginning after December 15, 2018. Early adoption is permitted.
A modified retrospective transition approach is required for lessees for capital and operating leases existing at, or entered
into after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients
available. The Company is in the process of evaluating the impact of ASU 2016-02 on the Company’s financial statements and
disclosures, and believes the adoption of the pronouncement will result in the recording of lease assets and lease liabilities
of approximately $1,500,000 to our balance sheet upon adoption.



Other
recent accounting pronouncements issued by the FASB, including its Emerging Issues Task Force, the American Institute of Certified
Public Accountants, and the Securities and Exchange Commission did not or are not believed by management to have a material impact
on the Company’s present or future consolidated financial statements.



F-12







GIGGLES
N’ HUGS, INC.

NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS



NOTE
2 – PROPERTY AND EQUIPMENTS



Property
and equipment consisted of the following at:



|                                |  | December 30, 2018 |            |   | December 31, 2017 |  
|------------------------------- |  | ----------------- | ---------- | - | ----------------- | -
|Leasehold improvements          |  | $                 | 1,889,027  |   |                   | $
|Fixtures and equipment          |  |                   | 60,310     |   |                   |  
|Computer software and equipment |  |                   | 267,372    |   |                   |  
|Property and equipment, total   |  |                   | 2,216,709  |   |                   |  
|Less: accumulated depreciation  |  |                   | (1,708,865 | ) |                   |  
|Property and equipment, net     |  | $                 | 507,844    |   |                   | $



Depreciation
expense was $232,345 and $256,421 for the fiscal years ended December 30, 2018 and December 31, 2017, respectively. Repair and
maintenance expenses for the years ended December 30, 2018 and December 31, 2017 were $59,684 and $58,724, respectively.



NOTE
3 – INCENTIVE FROM LESSOR



The
Company previously received $506,271 for Topanga and $475,000 for Glendale restaurant locations from the Company’s landlords
as construction contributions pursuant to agreed-upon terms in the lease agreements as of December 27, 2015.



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 and netted against occupancy cost.



The
balance of the incentive from lessor as of December 30, 2018 and December 31, 2017 was $550,839 and $653,007 respectively, and
included deferred rent of $133,832 and $132,818, respectively. As of December 30, 2018, $117,460 of the incentive from lessor
was current and $433,379 was long term. Amortization of the incentive from lessor was

$102,168
and $87,420 for the fiscal years ended December 30, 2018 and December 31, 2017, respectively.



F-13







GIGGLES
N’ HUGS, INC.

NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS



NOTE
4 – NOTE PAYABLE LESSOR – IN DEFAULT



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. On March 1, 2015, the Company and the lender renegotiated the terms of the Promissory
Note and agreed t a new note with a principal balance due of $683,316. As part of the new agreement, the Lender waived principal
and interest payment for two years beginning March 1, 2015.



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 $763,262 from $683,316, with zero percent 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 December 30, 2018 and December 31, 2017, the balance of the
note payable net of unamortized note discount were $420,881 and $422,361, respectively.



The
exchange of the notes was treated as a debt extinguishment as the change in terms constituted more than a 10% change in the fair
value of the original note, and the difference between the fair value of the new note and the old note (including eliminating
all remaining unamortized discount) of $220,668 was treated as a gain on debt extinguishment. The Company determined that since
the GGP Promissory Note and the related revision of the lease (see Note 8) were agreed to at the same time, that the change in
the lease payment terms of lease caused a change in the previously calculated deferred rent of $69,614. For reporting purposes,
the Company determined that since the GGP Promissory Note and related revision of lease were agreed to at the same time, that
the change in the lease payment terms and reduced rent, and the issuance of the new note are directly related. In addition, past
due rent of $164,987 was forgiven. As such the gain on the termination of the note of $220,686, the adjustment to the deferred
rent in the aggregated amount of $69,614, and the forgiveness of past due rent of $164,987, resulting in an aggregate gain of
$455,287 had been deferred, and is being amortized on the straight-line basis over the remaining life of the lease as an adjustment
to rent expense. The balance of the deferred gain was $332,478 as of, December 30, 2018.



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 December 30, 2018, the Company was delinquent
in its payments to GGP under the note, accordingly, the full amount is in current.



F-14







GIGGLES
N’ HUGS, INC.

NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS



NOTE
5 – CONVERTIBLE NOTE PAYABLE – PAST DUE



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. The
balance of the Note was $50,000 as of December 30, 2018 and December 31, 2017 and was past due.



NOTE
6 – SETTLED NOTES



St.
George Investments



On
December 18, 2015, the Company issued a six-month unsecured promissory note in the principal sum of $265,000 in favor of St. George
Investments, LLC, pursuant to the terms of a securities purchase agreement of the same date. The Note went into default when the
Company failed to make payment on the due date. Consequently, on July 8, 2016, the Company entered into an Exchange Agreement
with St. George Investments, LLC, to replace the original Promissory Note with a new Convertible Promissory Note (“Note”).
The Note carries a Conversion clause that allows the Holder to have a cashless conversion into shares of Common Stock for all
or part of the principal, at a price equal to the average market price for 20 days prior to the conversion.. As of January 1,
2017, the amount due under the promissory note was $193,450.



During
January and February of 2017. the Holder converted $48,914 of its debt into 15,660,611 shares of Common Stock with a fair value
of $48,914. In addition, the Company paid $7,517 of the principal balance. On March 23, 2017, St. George Investments, LLC (“St.
George”) served an arbitration demand and summons claiming that the Company had breached its obligations under a convertible
note by preventing St. George from converting the remaining balance of the note to common stock. The parties disagreed as to the
conversion price set in the note agreement due to execution by the parties of different versions of the document. St. George claimed
for additional damages. The Company believed these claims lacked merit and the Company retained counsel to vigorously defend this
action. Effective May 3, 2017, the Company counter-sued for full damages for breaching the contract, claiming mistakes, rescission,
breach of the covenant of good faith and fair dealing and unjust enrichment. On August 14, 2017, the Company and St. George entered
into a settlement agreement whereby the Company agreed to deliver 7,900,000 unrestricted free-trading shares to St. George upon
signing a final settlement agreement. The fair value of shares issued was determined to be $553,000 based on the trading price
of the shares at the date of the settlement. The company considered the settlement as a debt extinguishment and accounted for
the issuance of the 7,900,000 shares valued at $553,000 offset by the extinguishment of the aggregate face value of the note and
accrued interest of $143,740, and the remaining value of the derivative liability of $160,240, resulting in a loss on extinguishment
of $249,014.



As
part of the settlement agreement, St. George agreed to purchase an additional 1,100,000 shares of common stock for a purchase
price of $110,000 at $0.10 per share.



As
of fiscal year ended December 31, 2017, all the terms and conditions of the settlement have been completed.



Iconic
Holdings



As
of January 1, 2017, the balance of a convertible note payable to Iconic Holdings was $84,191. During the year ended December 31,
2017, the entire note principal and accrued interest aggregating $121,232 was converted to 38,457,435 shares of common stock.





F-15







GIGGLES
N’ HUGS, INC.

NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS



NOTE
7 – COMMON STOCK



Issuance
of Common Stock



During
the fiscal year ended December 30, 2018,



|● | On April
    19, 2018, Giggles N’ Hugs Inc. closed a public rights offering. The Company sold 19,791,829 units at a price of $.03
    per unit. Each unit consists of one share of common stock and 0.70 of a warrant. Each whole warrant will be exercisable for
    one share of common stock at a price of $.06. per share. In the aggregate 19,791,829 shares of common stock and 13,854,274
    warrants were issued for gross proceeds, before expenses and dealer-manager fees, of $593,755. Direct costs of the offering
    were $51,575 and were charged to paid in capital.
|- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|● | The Company granted
    and issued 200,000 shares of restricted common stock with a fair value of $4,600 for an employee compensation.                                                                                                                                                                                                                                                                                                                                                                                                                                                
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|● | The Company issued
    1,500,000 shares of common stock in settlement of an accounts payable amounting to $39,250. The fair value of the shares issued
    was $40,650 based on the fair value of the shares on the date of settlement resulting in an additional cost to the Company
    of $1,400.                                                                                                                                                                                                                                                                                  
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|● | The Company issued
    1,330,000 shares of common stock at fair value of $19,415 for services rendered.                                                                                                                                                                                                                                                                                                                                                                                                                                                                               



During
the fiscal year ended December 31, 2017, the Company issued



|● | The
    Company granted and issued to officers and employees 10,170,000 shares of restricted common stock with a fair value of $28,470.
    The shares were valued based on the closing price of the stock on the date of agreement.                                                                                                                                                                                                                 
|- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|● | The
    Company issued 2,384,226 shares of common stock in settlement of an accounts payable amounting to $156,800. The fair value
    of the shares issued was $265,896 based on the fair value of the shares on the date of settlement resulting in an additional
    cost to the Company of $109,096. In addition, The Company issued 500,000 shares of common stock at fair value of $10,000 in
    settlement of an additional accounts payable.
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|● | The
    Company received $75,000 from the sale of 992,602 shares of common stock and warrants to acquire 357,142 shares of common
    stock at an excise price of $0.12 per share that expire in June 2020. The shares have not yet been issued and are included
    in common stock issuable.                                                                                                                                                       
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|● | the
    Company issued 1,495,774 shares of common stock at fair value of $51,645 for services rendered. The shares were valued based
    on the closing price of the stock on the date of agreement.                                                                                                                                                                                                                                                 



F-16







GIGGLES
N’ HUGS, INC.

NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS



NOTE
7 – COMMON STOCK (CONTINUED)



Employee
Stock Options



The
following table summarizes the changes in the options outstanding at December 30, 2018, 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.



A
summary of the Company’s stock awards for options as of December 30, 2018 and changes for the fiscal year ended December
31, 2017 is presented below:



|                               |  | Stock   |         |  | Weighted Average |  
|------------------------------ |  | ------- | ------- |  | ---------------- | -
|                               |  | Options |         |  | Exercise Price   |  
|Outstanding, January 1, 2017   |  |         | 115,000 |  |                  | $
|Granted                        |  |         | —       |  |                  |  
|Exercised                      |  |         | —       |  |                  |  
|Expired/Cancelled              |  |         | —       |  |                  |  
|Outstanding, December 31, 2017 |  |         | 115,000 |  |                  | $
|Granted                        |  |         | —       |  |                  |  
|Exercised                      |  |         | —       |  |                  |  
|Expired/Cancelled              |  |         | —       |  |                  |  
|Outstanding, December 30, 2018 |  |         | 115,000 |  |                  | $
|Exercisable, December 30, 2018 |  |         | 115,000 |  |                  | $



As
of December 30, 2018, the stock options had no intrinsic value.



There
were no options granted during the fiscal year ended December 30, 2018.



There
was no stock-based compensation expense in connection with options granted to employees recognized in the consolidated statement
of operations for the fiscal years ended December 30, 2018 and December 31, 2017.



F-17







GIGGLES
N’ HUGS, INC.

NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS



NOTE
7 – COMMON STOCK (CONTINUED)



Warrants



The
following table summarizes the changes in the warrants outstanding at December 30, 2018, and the related prices.



A
summary of the Company’s warrant as of December 30, 2018 is presented below:



|                               |  |          |            |  | Weighted |  
|------------------------------ |  | -------- | ---------- |  | -------- | -
|                               |  |          |            |  | Average  |  
|                               |  |          |            |  | Exercise |  
|                               |  | Warrants |            |  | Price    |  
|Outstanding, January 1, 2017   |  |          | 606,500    |  |          | $
|Granted                        |  |          | 5,507,143  |  |          |  
|Exercised                      |  |          | -          |  |          |  
|Outstanding, December 31, 2017 |  |          | 6,113,643  |  |          | $
|Granted                        |  |          | 13,854,274 |  |          |  
|Exercised                      |  |          | -          |  |          |  
|Outstanding, December 30, 2018 |  |          | 13,854,274 |  |          | $
|Exercisable, December 30, 2018 |  |          | 13,854,274 |  |          | $



As
of December 30, 2018, the stock warrants had no intrinsic value.



|         |              |  |             |  |            |          |  |   | Weighted    |  |  |             |      |  |          | 
|-------- | ------------ |  | ----------- |  | ---------- | -------- |  | - | ----------- |  |  | ----------- | ---- |  | -------- | 
|         |              |  |             |  |            | Weighted |  |   | Average     |  |  |             |      |  | Weighted | 
|Range of |              |  |             |  |            | Average  |  |   | Remaining   |  |  |             |      |  | Average  | 
|Exercise |              |  | Number      |  |            | Exercise |  |   | Contractual |  |  | Number      |      |  | Exercise | 
|Prices   |              |  | Outstanding |  |            | Price    |  |   | Life        |  |  | Exercisable |      |  | Price    | 
|         | $0.01  $0.37 |  |             |  | 6,113,643  |          |  | $ | 0.07        |  |  |             | 2.31 |  |          | 
|         | $0.06        |  |             |  | 13,854,274 |          |  |   | 0.06        |  |  |             | 4.50 |  |          | 
|         |              |  |             |  | 19,967,917 |          |  |   |             |  |  |             | 6.81 |  |          | 



On
May 17, 2016, GIGL entered into a Strategic Alliance Agreement with Kiddo, Inc., a Florida corporation (“consultant”)
whereby consultant will provide marketing and branding services as well as introductions to potential strategic partners and investors.
As consideration for consultant’s services pursuant to the Strategic Alliance Agreement, GIGL agreed to issue to consultant
a warrant to purchase up to 4,400,000 shares of GIGL’s common stock at an exercise price of $0.075 per share, which warrant
vests in increments based upon the achievement of certain milestones. As of January 1, 2017, 440,000 of these warrants with a
fair value of $31,000 were deemed have been achieved and are included in the table of outstanding warrants above. At December
30, 2018, the achievement of the corresponding milestones for the remaining warrants to acquire 3,960,000 has been determined
to be remote or undeterminable, as such, the warrants have not been included as outstanding in the table above.



F-18







GIGGLES
N’ HUGS, INC.

NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS



NOTE
7 – COMMON STOCK (CONTINUED)



During
the year ended December 31, 2017, the Company entered into agreements to issue warrants to acquire 5,150,000 shares of common
stock for celebrity services to promote the Company’s business. The warrants were fully vested upon issuance, expire 5 years
from the date of issuance, and 5,000,000 of the warrants are exercisable at $0.10 per share and 150,000 of the warrants are exercisable
at $0.20 per share. The total fair value of these warrants at grant date was $531,000 and was recognized a compensation costs
during the year ended December 31, 2017. The fair value was calculated using a Black-Scholes Option Pricing model with the following
assumptions: life of 5 years; risk free interest rate of 1.73%; volatility of 350% and dividend yield of 0%.



During
the year ended December 31, 2017, the Company issued a warrant to acquire 357,142 shares of common stock at an exercise price
of $.12 per share and expiring 2020 to an investor who acquired 714,285 shares of common stock for aggregate proceeds of $50,000
(the shares are reflected as common stock issuable on accompanying balance sheet.)



F-19







GIGGLES
N’ HUGS, INC.

NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS



NOTE
8 – COMMITMENTS AND CONTINGENCIES



Westfield
Topanga. 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 and
expires on April 30, 2022.



Glendale
Mall Associates. On April 1, 2013, the Company entered into a Lease Agreement with GLENDALE 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 commenced on November 21, 2013 and expires on
October 31, 2023



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 and payment and principal of the Promissory
Note payable to GGP. The Promissory Note was adjusted to a balance due of $763,262 from $683,316, with zero percent interest,
payable in equal monthly instalments of $5,300 through maturity of Note on May 31, 2028, creating a gain on extinguishment of
the old note of $220,686. (see Note 4) were agreed to at the same time, that the change in the lease payment terms of lease caused
a change in the previously calculated deferred rent of $69,614. For reporting purposes, the Company determined that since the
GGP Promissory Note and related revision of lease were agreed to at the same time, that the change in the lease payment terms
and reduced rent, and the issuance of the new note are directly related. In addition, past due rent of $164,987 was forgiven.
As such the gain on the termination of the note of $220,686, the adjustment to the deferred rent in the aggregated amount of $69,614,
and the forgiveness of past due rent of $164,987, resulting in an aggregate gain of $455,287 had been deferred, and is being amortized
on the straight-line basis over the remaining life of the lease as an adjustment to rent expense. The balance of the deferred
gain was $332,472 as of, December 30, 2018.



Rent
expense for the Company’s restaurant operating leases for the year ended December 30, 2018 and December 31, 2017 was $353,024
and $341,270, respectively



F-20







GIGGLES
N’ HUGS, INC.

NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS



NOTE
8 – COMMITMENTS AND CONTINGENCIES (CONTINUED)



As
of December 30, 2018, the aggregate minimum annual lease payments under operating lease as follows:



|2019       |  | $ | 437,100   | 
|---------- |  | - | --------- | 
|2020       |  |   | 452,956   | 
|2021       |  |   | 469,398   | 
|2022       |  |   | 279,077   | 
|Thereafter |  |   | 151,172   | 
|Total      |  | $ | 1,789,703 | 



Litigation



As
of December 30, 2018, there was no material outstanding litigation.



F-21







GIGGLES
N’ HUGS, INC.

NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS



NOTE
9 – RELATED PARTY TRANSACTIONS



During
the years ended December 30, 2018 and December 31, 2017, the Company incurred salary costs of $250,000 and $300,000 for Mr. Joey
Parsi, our Co-Chief Executive Officer. As of December 30, 2018 and December 31, 2017, Mr. Parsi was owed $466,541 and $375,900,
respectively, for accrued salary.



During
the years ended December 30, 2018 and December 31, 2017, the Company incurred $66,840 and $66,839 of costs for management and
accounting services from a company controlled by Phillip Gay, our Co-Chief Executive Officer. As of December 30, 2018 and December
31, 2017, this company was owed $10,720 and $10,380 for such costs.



NOTE
10 – INCOME TAXES



For
the fiscal years ended December 30, 2018 and December 31, 2017 GNH, Inc. incurred net operating losses and, accordingly, no provision
for income taxes has been recorded. In addition, no benefit for income taxes has been recorded due to the uncertainty of the realization
of any tax assets. At December 30, 2018 the Company had $8,103,000 of federal and state net operating losses. The net operating
loss carryforwards, if not utilized, will begin to expire in 2023.



A
reconciliation of tax expense computed at the statutory federal tax rate income (loss) from operations before income taxes to
the actual income tax expense is as follows:



|                                                                      |  | December 30, 2018 |          |   | December 31, 2017 |  
|--------------------------------------------------------------------- |  | ----------------- | -------- | - | ----------------- | -
|Tax provision (benefits) computed at the statutory rate (21% and 34%) |  | $                 | (145,000 | ) |                   | $
|State income tax, net of federal benefit                              |  |                   | (30,000  | ) |                   |  
|Change in valuation allowance                                         |  |                   | 175,800  |   |                   |  
|Provision for income tax                                              |  | $                 | 800      |   |                   | $





Deferred
tax liabilities and assets are recognized for the expected future tax consequences of events that have been included in the financial
statement or tax returns. Under this method, deferred tax liabilities and assets are determined based on the difference between
financial statements and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences
are expected to reverse



Deferred
income taxes include the net tax effects of net operating loss (NOL) carryforwards and the temporary differences between the carrying
amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components
of the Company’s deferred tax assets are as follows:



|                             |  | December 30, 2018 |            |   | December 31, 2017 |  
|---------------------------- |  | ----------------- | ---------- | - | ----------------- | -
|Net operating loss carryover |  | $                 | 2,250,000  |   |                   | $
|Depreciation and other       |  |                   | 174,000    |   |                   |  
|Total deferred tax assets    |  |                   | 2,424,000  |   |                   |  
|Valuation allowance          |  |                   | (2,424,000 | ) |                   |  
|Net deferred tax asset       |  | $                 | -          |   |                   | $



F-22







GIGGLES
N’ HUGS, INC.

NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS



NOTE
10 – INCOME TAXES (CONTINUED)



The
Company has provided a valuation reserve against the full amount of the net deferred tax assets, because in the opinion of management,
it is more likely than not that these tax assets will not be realized.



The
Company’s NOL and tax credit carryovers may be significantly limited under the Internal Revenue Code (IRC). NOL and tax
credit carryovers are limited under Section 382 when there is a significant “ownership change” as defined in the IRC.
During the fiscal year December 30, 2018 and in prior years, the Company may have experienced such ownership changes, which could
impose such limitations.



The
limitation imposed by the IRC would place an annual limitation on the amount of NOL and tax credit carryovers that can be utilized.
When the Company completes the necessary studies, the amount of NOL carryovers available may be reduced significantly. However,
since the valuation allowance fully reserves for all available carryovers, the effect of the reduction would be offset by a reduction
in the valuation allowance.



The
Company files income tax returns in the U.S. federal jurisdiction, and the State of Nevada.



NOTE
11 – SUBSEQUENT EVENTS



In
January 2019, the Company issued total of 350,000 shares of common stock for services, with a fair value of $2,800.



On
January 1, 2019, the Company entered into an employment agreement with Joey Parsi, pursuant to which Mr. Parsi agreed to devote
a majority of his working time to our business as our Co-Chief Executive Officer and we agreed to pay Mr. Parsi an annual base
salary of $225,000, plus a onetime bonus of warrants exercisable for 25,997,000 shares of our common stock issued for a ten-year
period with an exercise price of $0.0001 per share. In addition, we also agreed to pay the monthly premiums for health care coverage
for Mr. Parsi and the other members of his immediate family. Mr. Parsi will receive an annual bonus in cash of up to $175,000,
in our sole discretion and based on mutually agreed upon financial performance goals. Mr. Parsi will also be entitled to reimbursement
for all ordinary and reasonable expenses incurred in the performance of his duties for the Company, including for a company car,
lap top computer and cell phone. Mr. Parsi will also be entitled to six weeks of vacation annually.



The
employment agreement may be terminated by either party for any reason at any time. If Mr. Parsi’s employment is terminated
by the Company with or without cause, Mr. Parsi will be entitled to receive a severance payment in the amount of 12 months of
his base salary plus all unvested options, warrants and shares.



The
employment agreement also contains covenants prohibiting Mr. Parsi from disparaging the Company or any of our officers, directors,
employees or agents for a period of two years after his employment ends. The employment agreement also contains customary confidentiality
provisions.



On
January 1, 2019, the Company 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.



The
employment agreement with Mr. Gay also contains customary confidentiality provisions and may be terminated by either party for
any reason at any time.



F-23