Giggles N’ Hugs (OTCQB: GIGL) is
going places with its fine-dining rooms, organic-food menus and
adventure-filled play spaces for kids. The company is presently negotiating
with the top four U.S. mall owners, who are ‘yearning’ to have Giggles N’ Hugs
in their malls and are prepared to offer cash upfront to fund between 60 and 70
percent of opening costs. As consumers have increasingly been purchasing
online, traffic by shoppers to malls has slowed. Mall owners want businesses
that can generate excitement and foot traffic, and Giggles N’ Hugs fits that
bill. Its three establishments, at Westfield Mall in Century City, Westfield
Topanga Shopping Center, and the Glendale Galleria, have attracted the
attention of People magazine, E! Online, Hollywood Life, Bloomberg
Businessweek, the New York Post and many other print and online publications.
As CEO Joey Parsi explained
recently, just as in other retail operations, location is, perhaps, the most
important factor in the restaurant business. Giggles N’ Hugs is in the enviable
position of having an extensive choice of locations, since it is such a magnet
for mall foot traffic. Together, the major four mall owners present a
wide-ranging, appetizing menu of over 550 domestic and international locations.
The largest player, the Simon Property Group (NYSE: SPG), operates over 350
malls, including 17 overseas. The no. 2, General Growth Properties (NYSE: GGP),
has over 120 properties. Westfield (OTC: WEFIF), the no. 3, has 32 shopping
centers in the U.S., and Macerich (NYSE: MAC), the no. 4, has over 50
properties.
The company is beefing up its
capital as it considers these invitations. It recently engaged investment bank
Chardan Capital Markets, and it aims to raise $5 million through a 506(c)
offering. Rule 506(c) under Regulation D is one of several ways an offering of
securities may qualify for an exemption from the registration requirements of
the Securities Act of 1933. It was created to implement Section 201(a) of the
JOBS Act with the object of eliminating the prohibition on using general
solicitation under, what is now, Rule 506(b). Rule 506(b) provides a “safe
harbor” for a private offering under the Securities Act, i.e., it provides
specific requirements that, if followed, establish that a transaction falls within
the Section 4(a)(2) registration exemption.
However, under Rule 506(b), an
issuer must not use general solicitation or advertising to market the
securities nor sell securities to more than 35 non-accredited investors, among
other stipulations. Rule 506(c) changes those two limbs of the rule by allowing
general advertising but stipulates that only accredited investors must be
contracted with. It also imposes a stricter standard to ensure that only
accredited investors are contracted with. For a natural person to qualify as an
accredited investor, he and his spouse must together have a net worth exceeding
$1,000,000, excluding the value of the primary residence. Alternatively, he
must have an annual income of over $200,000 in each of the two most recent years
or joint income with his spouse in excess of $300,000 in each of those years
and have a reasonable expectation of reaching the same income level in the
current year.
With some cash to spend and so
many invitations to dance, Joey Parsi’s biggest problem in the coming months
may be deciding who is the most attractive partner.
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