UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

FORM 10-Q

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

For the quarterly period ended June 30, 2022

☐ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _____________ to ___________________.

Commission file number: 000-55209

Gaucho Group Holdings, Inc.

(Exact name of registrant as specified in its charter)

Delaware		52-2158952
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification No.)

112 NE 41^st Street, Suite 106‌

Miami, FL 33137

(Address of principal executive offices)

212-739-7700

(Registrant’s telephone number, including area code)

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

Title of each class		Trading Symbol		Name of each exchange on which registered
Common Stock		VINO		The Nasdaq Stock Market LLC

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 ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically 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 such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
		Emerging growth company	☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☒

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of August 12, 2022, there were 25,145,125 shares of common stock outstanding.

GAUCHO GROUP HOLDINGS, INC. AND SUBSIDIARIES

TABLE OF CONTENTS

PART I
FINANCIAL INFORMATION
ITEM 1. Financial Statements
Condensed Consolidated Balance Sheets as of June 30, 2022 (unaudited) and December 31, 2021	1
Unaudited Condensed Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2022 and 2021	3
Unaudited Condensed Consolidated Statements of Comprehensive Loss for the Three and Six Months Ended June 30, 2022 and 2021	4
Unaudited Condensed Consolidated Statement of Changes in Stockholders’ Equity for the Three and Six Months Ended June 30, 2022	5
Unaudited Condensed Consolidated Statement of Changes in Stockholders’ Equity for the Three and Six Months Ended June 30, 2021	6
Unaudited Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2022 and 2021	7
Notes to Unaudited Condensed Consolidated Financial Statements	9
ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	26
ITEM 3. Quantitative and Qualitative Disclosures About Market Risk	32
ITEM 4. Controls and Procedures	32
PART II
OTHER INFORMATION
ITEM 1. Legal Proceedings	33
ITEM 1A. Risk Factors	33
ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds	35
ITEM 3. Defaults Upon Senior Securities	37
ITEM 4. Mine Safety Disclosures	37
ITEM 5. Other Information	37
ITEM 6. Exhibits	39
Signatures	41

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

GAUCHO GROUP HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

	June 30,		December 31,
	2022		2021
	(unaudited)
Assets
Current Assets
Cash	$	254,685	$	3,649,407
Accounts receivable, net of allowance of $237,161 and $229,768 at June 30, 2022 and December 31, 2021, respectively		507,082		658,091
Accounts receivable - related parties, net of allowance of $339,503 at June 30, 2022 and December 31, 2021		675,366		927,874
Advances to employees, current		-		290,915
Inventory		1,571,853		1,490,639
Real estate lots held for sale		546,588		542,885
Prepaid expenses and other current assets		590,820		422,129
Total Current Assets		4,146,394		7,981,940
Long Term Assets
Accounts receivable, non-current portion, net		3,440,283		3,027,247
Advances to employees, non-current		282,022		-
Property and equipment, net		7,524,311		3,776,941
Operating lease right-of-use asset		1,559,866		1,667,209
Prepaid foreign taxes, net		925,820		804,265
Intangible assets		72,527		-
Investment - related parties		7,000,000		7,000,000
Deposits		56,130		56,130
Total Assets	$	25,007,353	$	24,313,732

The accompanying notes are an integral part of these condensed consolidated financial statements.

GAUCHO GROUP HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS, continued

	June 30,			December 31,
	2022			2021
	(unaudited)
Liabilities and Stockholders’ Equity
Current Liabilities
Accounts payable	$	879,213		$	507,734
Accrued expenses, current portion		1,016,299			965,411
Deferred revenue		1,237,382			713,616
Operating lease liabilities, current portion		184,618			175,316
Loans payable, current portion		170,255			223,356
Debt obligations		7,000			7,000
Convertible debt obligations, net		5,032,486			5,728,348
Other current liabilities		91,945			160,578
Total Current Liabilities		8,619,198			8,481,359
Long Term Liabilities
Accrued expenses, non-current portion		102,679			115,346
Operating lease liabilities, non-current portion		1,439,585			1,531,183
Loans payable, non-current portion		92,481			94,000
Total Liabilities		10,253,943			10,221,888
Commitments and Contingencies (Note 16)		-
Stockholders’ Equity
Preferred stock, 11,000,000 shares authorized, none issued and outstanding		-			-
Common stock, par value $0.01 per share; 150,000,000 shares authorized; 16,589,668 and 9,881,955 shares issued and 16,586,299 and 9,878,586 shares outstanding as of June 30, 2022 and December 31, 2021, respectively		165,897			98,820
Additional paid-in capital		128,839,025			121,543,241
Accumulated other comprehensive loss		(10,985,984	)		(11,607,446	)
Accumulated deficit		(103,219,173	)		(95,726,534	)
Treasury stock, at cost, 3,369 shares at June 30, 2022 and December 31, 2021		(46,355	)		(46,355	)
Total Gaucho Group Holdings, Inc. Stockholders’ Equity		14,753,410			14,261,726
Non-controlling interest		-			(169,882	)
Total Stockholders’ Equity		14,753,410			14,091,844
Total Liabilities and Stockholders’ Equity	$	25,007,353		$	24,313,732

The accompanying notes are an integral part of these condensed consolidated financial statements.

GAUCHO GROUP HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)

	2022			2021			2022			2021
	For the Three Months Ended						For the Six Months Ended
	June 30,						June 30,
	2022			2021			2022			2021

Sales	$	405,335		$	340,360		$	830,932		$	615,399
Cost of sales		(533,466	)		(280,100	)		(771,593	)		(439,566	)
Gross (loss) profit		(128,131	)		60,260			59,339			175,833
Operating Expenses
Selling and marketing		333,410			118,695			505,230			235,211
General and administrative		1,928,892			1,205,633			3,674,126			2,563,630
Depreciation and amortization		49,000			30,992			95,219			67,922
Total operating expenses		2,311,302			1,355,320			4,274,575			2,866,763
Loss from Operations		(2,439,433	)		(1,295,060	)		(4,215,236	)		(2,690,930	)

Other Expense (Income)
Interest expense, net		668,156			32,584			1,422,376			38,563
Forgiveness of PPP Loan		-			-			-			(242,486	)
Other income		(75,000	)		-			(150,000	)		-
Losses (gains) from foreign currency translation		(43,005	)		(9,858	)		(225,927	)		(28,861	)
Loss on extinguishment of debt		2,105,119			-			2,105,119			-
Inducement expense		198,096			-			198,096			-
Total other expense (income)		2,853,366			22,726			3,349,664			(232,784	)
Net Loss		(5,292,799	)		(1,317,786	)		(7,564,900	)		(2,458,146	)
Net loss attributable to non-controlling interest		-			70,052			72,261			97,561
Net Loss Attributable to Common Stockholders	$	(5,292,799	)	$	(1,247,734	)	$	(7,492,639	)	$	(2,360,585	)

Net Loss per Common Share	$	(0.40	)	$	(0.16	)	$	(0.63	)	$	(0.34	)

Weighted Average Number of Common Shares Outstanding:
Basic and Diluted		13,237,562			7,565,530			11,845,307			6,957,709

The accompanying notes are an integral part of these condensed consolidated financial statements.

GAUCHO GROUP HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(unaudited)

	2022			2021			2022			2021
	For the Three Months Ended						For the Six Months Ended
	June 30,						June 30,
	2022			2021			2022			2021
Net loss	$	(5,292,799	)	$	(1,317,786	)	$	(7,564,900	)	$	(2,458,146	)
Other comprehensive income :
Foreign currency translation adjustments		358,056			136,660			621,462			235,640
Comprehensive loss		(4,934,743	)		(1,181,126	)		(6,943,438	)		(2,222,506	)
Comprehensive loss attributable to non-controlling interests		-			70,052			-			97,561
Comprehensive loss attributable to controlling interests	$	(4,934,743	)	$	(1,111,074	)	$	(6,943,438	)	$	(2,124,945	)

The accompanying notes are an integral part of these condensed consolidated financial statements.

GAUCHO GROUP HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

FOR THE THREE AMD SIX MONTHS ENDED JUNE 30, 2022

(unaudited)

		Shares		Amount		Shares		Amount			Capital			Comprehensive			Deficit			Stockholders’			Interest			Equity
		Common Stock				Treasury Stock					Additional Paid-In			Accumulated Other			Accumulated			Gaucho Group Holdings			Non-controlling			Total Stockholders’
		Shares		Amount		Shares		Amount			Capital			Comprehensive			Deficit			Stockholders’			Interest			Equity
Balance - January 1, 2022	-		9,881,955	$	98,820		3,369	$	(46,355	)	$	121,543,241		$	(11,607,446	)	$	(95,726,534	)	$	14,261,726		$	(169,882	)	$	14,091,844
Stock-based compensation:	-
Options			-		-		-		-			72,700			-			-			72,700			10,354			83,054
Common stock issued for 401(k) employer matching			12,476		125		-		-			27,696			-			-			27,821			-			27,821
Common stock issued for purchase of minority interest			1,042,788		10,427		-		-			(242,216	)		-			-			(231,789	)		231,789			-
Common stock issued for acquisition of GDS			1,283,423		12,834		-		-			2,181,819			-			-			2,194,653			-			2,194,653
Common stock issued for purchase of domain name	-		15,000		150		-		-			39,450			-			-			39,600			-			39,600
Warrants issued for modification of convertible debt principal			-		-		-		-			731,856			-			-			731,856			-			731,856
Comprehensive loss:
Net loss			-		-		-		-			-			-			(2,199,840	)		(2,199,840	)		(72,261	)		(2,272,101	)
Other comprehensive loss			-		-		-		-			-			263,406			-			263,406			-			263,406
Balance - March 31, 2022	-		12,235,642	$	122,356		3,369	$	(46,355	)	$	124,354,546		$	(11,344,040	)	$	(97,926,374	)	$	15,160,133		$	-		$	15,160,133
Stock-based compensation:	-
Options			-		-		-		-			87,134			-			-			87,134			-			87,134
Common stock			650,562		6,506		-		-			518,494			-			-			525,000			-			525,000
Shares issued upon conversion of debt and interest			895,068		8,951		-		-			1,513,646			-			-			1,522,597			-			1,522,597
Inducement loss on debt conversions			-		-		-		-			198,096			-			-			198,096			-			198,096
Substantial premium on convertible debt			-		-		-		-			1,683,847			-			-			1,683,847			-			1,683,847
Common stock issued for cash, net of offering costs			600,592		6,006		-		-			505,340			-			-			511,346			-			511,346
Common stock issued upon exchange of subsidiary stock options			2,207,309		22,073		-		-			(22,073	)		-			-			-			-			-
True up adjustment			495		5		-		-			(5	)		-			-			-			-			-
Net loss			-		-		-		-			-			-			(5,292,799	)		(5,292,799	)		-			(5,292,799	)
Other comprehensive loss	-		-		-		-		-			-			358,056			-			358,056			-			358,056
Balance - June 30, 2022	-		16,589,668	$	165,897		3,369	$	(46,355	)	$	128,839,025		$	(10,985,984	)	$	(103,219,173	)	$	14,753,410		$	-		$	14,753,410

The accompanying notes are an integral part of these condensed consolidated financial statements

GAUCHO GROUP HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ (DEFICIENCY) EQUITY

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2021

(unaudited)

	Shares			Amount			Shares		Amount		Shares		Amount			Capital		Loss			Deficit			Equity			Interest			Equity
	Series B Convertible Redeemable Preferred Stock						Common Stock				Treasury Stock					Additional Paid-In		Accumulated Other Comprehensive			Accumulated			Gaucho Group Holdings Stockholders’ (Deficiency)			Non- controlling			Total Stockholders’ (Deficiency)
	Shares			Amount			Shares		Amount		Shares		Amount			Capital		Loss			Deficit			Equity			Interest			Equity
Balance - January 1, 2021		901,070		$	9,010,824			5,234,406	$	52,344		3,369	$	(46,355	)	$	96,951,440	$	(11,932,801	)	$	(93,534,828	)	$	(8,510,200	)	$	(106,798	)	$	(8,616,998	)
Stock-based compensation:		-
Options and warrants		-			-			-		-		-		-			101,453		-			-			101,453			67,196			168,649
Common stock and warrants issued for cash, in public offering, net of offering costs ^[1]		-			-			1,333,334		13,333		-		-			6,589,008		-			-			6,602,341			-			6,602,341
Common stock and warrants issued for cash		-			-			73,167		732		-		-			438,268		-			-			439,000			-			439,000
Common stock and warrants issued to underwriter in public offering		-			-			-		-		-		-			297,963		-			-			297,963			-			297,963
Common stock and warrants issued upon exchange of debt and accrued interest		-			-			237,012		2,370		-		-			1,419,698		-			-			1,422,068			-			1,422,068
Common stock issued upon conversion of Series B Convertible Preferred Stock		(901,070	)		(9,010,824	)		600,713		6,007		-		-			9,004,817		-			-			9,010,824			-			9,010,824
Effect of reverse stocksplit		-			-			495		-		-		-			-		-			-			-			-			-
Comprehensive loss:
Net loss		-			-			-		-		-		-			-		-			(1,112,851	)		(1,112,851	)		(27,509	)		(1,140,360	)
Other comprehensive income		-			-			-		-		-		-			-		98,980			-			98,980			-			98,980
Balance - March 31, 2021		-		$	-			7,479,127	$	74,786		3,369	$	(46,355	)	$	114,802,647	$	(11,833,821	)	$	(94,647,679	)	$	8,349,578		$	(67,111	)	$	8,282,467
Balance, value		-		$	-			7,479,127	$	74,786		3,369	$	(46,355	)	$	114,802,647	$	(11,833,821	)	$	(94,647,679	)	$	8,349,578		$	(67,111	)	$	8,282,467
Stock-based compensation:		-
Options and warrants		-			-			-		-		-		-			101,453		-			-			101,453			44,610			146,063
Common stock issued to placement agent as commitment fees		-			-			120,337		1,208		-		-			498,792		-			-			500,000			-			500,000
Common stock issued for cash, net of offering costs ^[2]		-			-			489,400		4,894		-		-			1,582,066		-			-			1,586,960			-			1,586,960
Comprehensive loss:
Net loss		-			-			-		-		-		-			-		-			(1,247,734	)		(1,247,734	)		(70,052	)		(1,317,786	)
Other comprehensive income		-			-			-		-		-		-			-		136,660			-			136,660			-			136,660
Balance - June 30, 2021		-		$	-			8,088,864	$	80,888		3,369	$	(46,355	)	$	116,984,958	$	(11,697,161	)	$	(95,895,413	)	$	9,426,917		$	(92,553	)	$	9,334,364
Balance, value		-		$	-			8,088,864	$	80,888		3,369	$	(46,355	)	$	116,984,958	$	(11,697,161	)	$	(95,895,413	)	$	9,426,917		$	(92,553	)	$	9,334,364

[1]

Includes gross proceeds of $8,002,004, less offering costs of $1,399,663 ($1,034,684 of cash and $364,979 of non-cash).

[2]

Includes gross proceeds of $2,303,211, less offering costs of $716,251 ($216,251 of cash and $500,000 of non-cash). As of June 30, 2021, the Company had not received gross proceeds of $1,377,150 related to the sale of 300,000 shares of common stock and, accordingly, such amount was included in subscription receivable on the condensed consolidated balance sheet.

The accompanying notes are an integral part of these condensed consolidated financial statements

GAUCHO GROUP HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

	2022			2021
	For the Six Months Ended
	June 30,
	2022			2021
Cash Flows from Operating Activities
Net loss	$	(7,564,900	)	$	(2,458,146	)
Adjustments to reconcile net loss to net cash used in operating activities:
Stock-based compensation:
401(k) stock		22,384			20,437
Options and warrants		170,188			314,712
Common stock		525,000			-
Noncash lease expense		107,343			53,704
Gain on foreign currency translation		(225,927	)		(28,861	)
Unrealized investment losses		-			457
Depreciation and amortization		95,219			67,922
Amortization of debt discount		1,061,936			-
Provision for (recovery of) uncollectible assets		28,848			9,338
Forgiveness of PPP Loan		-			(242,486	)
Loss on extinguishment of debt		2,105,119			-
Inducement expense		198,096			-
Decrease (increase) in assets:
Accounts receivable		(137,652	)		(420,996	)
Employee advances		4,964
Inventory		(84,917	)		(10,107	)
Deposits		-			(35,545	)
Prepaid expenses and other current assets		(201,778	)		(206,396	)
Increase (decrease) in liabilities:
Accounts payable and accrued expenses		774,709			(1,017,085	)
Operating lease liabilities		(82,296	)		(43,882	)
Deferred revenue		517,741			33,492
Other liabilities		(68,633	)		(1,261	)
Total Adjustments		4,810,344			(1,506,557	)
Net Cash Used in Operating Activities		(2,754,556	)		(3,964,703	)
Cash Used in Investing Activities
Cash paid to acquire GDS, net of cash acquired		(7,560	)		-
Purchase of property and equipment		(1,677,082	)		(223,651	)
Purchase of intangible asset		(34,999	)		-
Purchase of investment - related parties		-			(1,000,000	)
Net Cash Used in Investing Activities		(1,719,641	)		(1,223,651	)
Cash Provided by Financing Activities
Repayments of loans payable		(53,333	)		(127,573	)
Proceeds from common stock issued for cash		511,346			-
Repayments of debt obligations		-			(100,000	)
Proceeds from underwritten public offering, net of offering costs ⁽¹⁾		-			7,287,004
Cash offering costs paid for underwritten public offering		-			(390,684	)
Proceeds from common stock issued for cash		-			926,061
Proceeds from sale of common stock and warrants		-			439,000
Net Cash Provided by Financing Activities		458,013			8,033,808
Effect of Exchange Rate Changes on Cash		621,462			235,590
Net (Decrease) Increase in Cash		(3,394,722	)		3,081,044
Cash - Beginning of Period		3,649,407			134,536
Cash - End of Period	$	254,685		$	3,215,580

(1)