Los Angeles, Nov. 01, 2017 (GLOBE NEWSWIRE) --
Giggles N’ Hugs Inc. (OTCQB:GIGL) (the “Company”) addresses recent share price volatility and provides an update on its previously announced rights offering and current business.
“It’s been a rough several weeks for our stock,” said Joey Parsi, founder and CEO. “I hope to shed some light on what we believe are the reasons for the decline in share price, as well as provide an update on various opportunities we continue to pursue.”
Parsi continued, “As previously announced, a convertible note sold to St. George Investments, LLC early in 2016 resulted in arbitration over a disagreement as to the conversion price of the note. The parties resolved the matter during a mandatory mediation, which we believe was beneficial to both parties, but did result in the issuance of 7.9 million free trading shares. At the same time, while we did agree to the issuance of shares, it was primarily based on St. George purchasing 1.1 million restricted shares of the company's common stock at a purchse price of $0.10 per share for a total of $110,000 in proceeds to the company.
Although we believed that St George would not sell their shares given that they also purchased restricted shares, we suspect that most, if not all, of the shares given to St George in the settlement have hit the market putting downward pressure on the price of the securities causing what we believe to be the main reasons for the decline in our stock price in recent weeks.
“Lets take a moment to discuss the rights offering that we announced over the summer. Given the lessons learned with St George, the rights offering is one way we can avoid any further excessively dilutive financings,” stated Parsi. “While we would have preferred better timing and pricing for the offering, the offering has been in the works for over a year and until the offering is effective, nothing has been finalized in this regard. We want to assure our shareholders that we are dedicated to creating and improving shareholder value over the long term and we believe the rights offering is the ideal vehicle to utilize for our funding needs. ” Giggles N’ Hugs intends to raise up to $5 million through the offering, however this does not mean that we will raise the entire amount.
The Company intends to use the proceeds of the rights offering for general corporate purposes, to supplement operating cash flows, to fund new company and franchise location expansion and to support its acquisition growth plan. The Company also plans to use a portion of the proceeds to further strengthen the company's balance sheet.
Regarding potential acquisition targets, although our focus will remain with growing the company’s location footprint, in recent months, Pacific Shore has introduced the Company to multiple potential partners to help build-out its product and merchandise business segment. Discussions include potential acquisitions of a clothing company that could lead to the launch of the Giggles N’ Hugs branded clothing line. The Company has also spoken to a number of other companies in different industries that would complement and be synergistic with expansion goals. As is the case with expansion of new locations, product line expansion also requires an incredible amount of time and capital to execute.
In reference to expanding our locations, Giggles N’ Hugs continues to maintain discussions with several major mall operators. As has been the case in the past, due to what we believe to be our concepts appeal in bringing foot traffic to the mall owners, it is believed the Company will receive significant upfront payments from the property owners for build-out costs at each new location, but the Company will still incur upfront costs such as legal, engineering, permitting, and other fees which is one of the reasons for the need to raise capital. Also, to move forward with proposed opportunities with mall operators, the Company must provide proof of financial stability prior to signing any new leases which is one of the main reasons for the lack of any new announcements in this regard in recent months and is one of the reasons for the offering. The mall owners want to be sure that we are financially stable and will be around for the long term in order to provide a return on their up front investment.
The Company no longer anticipates moving forward with its international franchise in Bahrain. Under the terms of the proposed agreement, the potential franchisee was required to open the first location within 12 months. As such, the franchisee opted to secure a proper location before moving forward with the agreement; however, after waiting for months, we could no longer wait and advised them as such. Given Bahrain is a very small country, we believe we can do better starting deals elswhere in the middle east. The company is in discussions with other parties for franchise locations and will provide an update as warranted.
“In summary, based on our last quarterly results, with sales up year over year, and unit level cashflow at historical highs, we don’t believe that there have been any material changes to warrant such a dramatic decline in our stock price,” stated Parsi. “Our incredibly experienced management team is still working hard on all our initiatives, we still have multiple franchising opportunities around the world that we are exploring, we are still working with Jillian Michaels and Tia Mowry and speaking to other celebrities, we are still looking at opening multiple new company locations, and we are still looking at and speaking to many companies for acquisition purposes, but all of this takes time and capital, hence the rights offering.
Parsi continued, “The company has raised over $9 million dollars to date, which includes more than $2 million from me; with our market cap in recent days at less than a third of the cash raised, and given everything that we have built over the years, we think we are trading at a deep discount to where we believe we should be. If you believe in the unique concept we have established in the market, the incredible management team we now have in place, and the enormous opportunities that lie ahead for the company, then now may be the best time to become a shareholder or a even larger shareholder”. Parsi concluded, "we believe the worst is behind us, and we are very excited about the future, and with funding coming into place , we think our best days lie ahead".
A registration statement relating to the rights offering has been filed with the SEC but has not yet become effective. The securities may not be sold nor may offers to buy be accepted prior to the time the registration statement becomes effective. The rights will be issued to all shareholders as of a record date, which has yet to be determined. The Company will provide notice of the record date in the future at such time as it is determined. This press release shall not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of these securities in any state in which such offer, solicitation or sale would be unlawful prior to the registration or qualification under the securities laws of any such state. The completion of the rights offering remains subject to the satisfaction of certain conditions, and Giggles N’ Hugs reserves the right to terminate the rights offering at any time prior to the expiration date of the rights offering, including prior to the rights distribution or the commencement of the rights offering. Details of the rights offering will be set out in the S-1 registration statement filed with the SEC, which is available on the SEC’s web site at http://www.sec.gov.
About Giggles N’ Hugs
Giggles N' Hugs is the first and only restaurant that brings together high-end, organic food with active, cutting-edge play and entertainment for children. Every Giggles N' Hugs location offers an upscale, family-friendly atmosphere with a dedicated play area that children 10 and younger absolutely love. The locations feature high-quality menus made from fresh and local foods, nightly entertainment such as magic shows, concerts, puppet shows and face painting, and hugely popular party packages for families that want to do something special.
Forward Looking Statements:
Certain statements in this press release constitute "forward-looking statements" within the meaning of the federal securities laws. Words such as "may," "might," "will," "should," "believe," "expect," "anticipate," "estimate," "continue," "predict," "forecast," "project," "plan," "intend" or similar expressions, or statements regarding intent, belief, or current expectations, are forward-looking statements. While the Company believes these forward-looking statements are reasonable, undue reliance should not be placed on any such forward-looking statements, which are based on information available to us on the date of this release. These forward looking statements are based upon current estimates and assumptions and are subject to various risks and uncertainties, including without limitation those set forth in the Company's filings with the Securities and Exchange Commission (the "SEC"). Thus, actual results could be materially different. The Company expressly disclaims any obligation to update or alter statements whether as a result of new information, future events or otherwise, except as required by law.