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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

 

OR

 

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 41st 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.

 

1

 

 

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.

 

2

 

 

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.

 

3

 

 

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.

 

4

 

 

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 
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

 

5

 

 

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 
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 

 

[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

 

6

 

 

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)