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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 September 30, 2023

 

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: 001-40075

 

Gaucho Group Holdings, Inc.

 

 

(Exact name of registrant as specified in its charter)

 

Delaware   52-2158952
(State or other jurisdiction   (I.R.S. Employer
of 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 November 17, 2023, there were 2,462,545 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 September 30, 2023 (unaudited) and December 31, 2022 1
   
Unaudited Condensed Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2023 and 2022 3
   
Unaudited Condensed Consolidated Statements of Comprehensive Loss (Income) for the Three and Nine Months Ended September 30, 2023 and 2022 4
   
Unaudited Condensed Consolidated Statement of Changes in Stockholders’ Equity for the Three and Nine Months Ended September 30, 2023 5
   
Unaudited Condensed Consolidated Statement of Changes in Stockholders’ Equity for the Three and Nine Months Ended September 30, 2022 6
   
Unaudited Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2023 and 2022 7
   
Notes to Unaudited Condensed Consolidated Financial Statements 9
   
ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 31
   
ITEM 3. Quantitative and Qualitative Disclosures About Market Risk 39
   
ITEM 4. Controls and Procedures 39
   
PART II  
   
OTHER INFORMATION  
   
ITEM 1. Legal Proceedings 40
   
ITEM 1A. Risk Factors 40
   
ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds 42
   
ITEM 3. Defaults Upon Senior Securities 43
   
ITEM 4. Mine Safety Disclosures 44
   
ITEM 5. Other Information 44
   
ITEM 6. Exhibits 46
   
Signatures 48

 

i

 

 

PART I – FINANCIAL INFORMATION

 

Item 1. Financial Statements

 

GAUCHO GROUP HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

 

   September 30,   December 31, 
   2023   2022 
   (unaudited)     
Assets          
Current Assets          
Cash  $201,108   $300,185 
Accounts receivable, net of allowance of $20,494 and $21,229 at September 30, 2023 and December 31, 2022, respectively   75,995    106,156 
Accounts receivable - related parties, net of allowance of $470,516 and $339,503 at September 30, 2023 and December 31, 2022, respectively   971,182    1,115,816 
Mortgages receivable, net of allowance $67,587 and $46,424 at September 30, 2023 and December 31, 2022, respectively   1,033,143    586,631 
Inventory   2,329,044    1,888,962 
Real estate lots held for sale   607,932    559,487 
Prepaid expenses and other current assets   264,907    461,637 
Total Current Assets   5,483,311    5,018,874 
Long Term Assets          
Mortgages receivable, non-current portion, net of allowance of $183,904 and $150,126 at September 30, 2023 and December 31, 2022, respectively   2,811,154    3,278,617 
Advances to employees   286,812    282,055 
Property and equipment, net   7,880,174    7,621,257 
Operating lease right-of-use asset   1,277,509    1,449,442 
Prepaid foreign taxes, net   1,010,478    916,823 
Intangible assets, net   103,557    69,787 
Deposits, non-current   54,713    56,130 
Total Assets  $18,907,708   $18,692,985 

 

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

 

   September 30,   December 31, 
   2023   2022 
   (unaudited)     
Liabilities and Stockholders’ Equity          
Current Liabilities          
Accounts payable  $688,419   $917,270 
Accrued expenses, current portion   1,485,033    1,664,816 
Deferred revenue   1,524,765    1,373,906 
Operating lease liabilities, current portion   235,432    202,775 
Loans payable, current portion   208,850    164,656 
Convertible debt obligations, net, current portion   1,541,962    - 
Derivative liability, current portion   846,424    - 
Other current liabilities   81,177    100,331 
Total Current Liabilities   6,612,062    4,423,754 
Long Term Liabilities          
Accrued expenses, non-current portion   52,328    66,018 
Operating lease liabilities, non-current portion   1,145,757    1,328,408 
Loans payable, non-current portion   90,898    91,665 
Convertible debt obligations, net, non-current portion   1,989,234    1,991,459 
Derivative liability, non-current portion   1,128,120    - 
Total Liabilities   11,018,399    7,901,304 
Commitments and Contingencies (Note 15)   -     -  
Stockholders’ Equity          
Preferred stock, 902,670 shares authorized   -    - 
Common stock, par value $0.01 per share; 150,000,000 shares authorized; 1,059,596 and 365,340 shares issued and 1,059,568 and 365,312 shares outstanding as of September 30, 2023 and December 31, 2022, respectively   10,596    3,654 
Additional paid-in capital   146,348,152    139,156,522 
Accumulated other comprehensive loss   (10,856,081)   (10,842,569)
Accumulated deficit   (127,567,003)   (117,479,571)
Treasury stock, at cost, 28 shares at September 30, 2023 and December 31, 2022   (46,355)   (46,355)
Total Stockholders’ Equity   7,889,309    10,791,681 
Total Liabilities and Stockholders’ Equity  $18,907,708   $18,692,985 

 

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)

 

   2023   2022   2023   2022 
   For the Three Months Ended   For the Nine Months Ended 
   September 30,   September 30, 
   2023   2022   2023   2022 
                 
Sales  $464,004   $440,939   $1,622,746   $1,271,871 
Cost of sales   (321,054)   (433,941)   (1,282,972)   (1,205,534)
Gross profit   142,950    6,998    339,774    66,337 
Operating Expenses                    
Selling and marketing   204,938    109,299    652,674    614,529 
General and administrative   1,267,399    1,729,283    4,734,592    5,403,409 
Depreciation and amortization   114,370    83,677    327,857    178,896 
Total operating expenses   1,586,707    1,922,259    5,715,123    6,196,834 
Loss from Operations   (1,443,757)   (1,915,261)   (5,375,349)   (6,130,497)
                     
Other Expense (Income)                    
Interest income   (52,810)   (65,377)   (167,529)   (95,781)
Interest expense   1,156,616    170,888    2,824,528    1,623,668 
Other income, related party   (212,222)   (75,000)   (362,222)   (225,000)
Loss on extinguishment of debt   -    -    416,081    2,105,119 
Gains from foreign currency translation   (132,493)   (185,251)   (347,201)   (411,178)
Change in fair value of derivative liability   95,727    -    2,236,844    - 
Inducement expense   -    2,965,222    -    3,163,318 
Total other expense   854,818    2,810,482    4,600,501    6,160,146 
Net Loss   (2,298,575)   (4,725,743)   (9,975,850)   (12,290,643)
Net loss attributable to non-controlling interest   -    -    -    72,261 
Net Loss Attributable to Common Stockholders  $(2,298,575)  $(4,725,743)  $(9,975,850)  $(12,218,382)
                     
Net Loss per Common Share                    
Basic and Diluted  $(3.04)  $(21.94)  $(10.72)  $(88.52)
                     
Weighted Average Number of Common Shares Outstanding:                    
Basic and Diluted   757,036    215,383    930,160    138,029 

 

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 (LOSS) INCOME

(unaudited)

 

   2023   2022   2023   2022 
   For the Three Months Ended   For the Nine Months Ended 
   September 30,   September 30, 
   2023   2022   2023   2022 
Net loss  $(2,298,575)  $(4,725,743)  $(9,975,850)  $(12,290,643)
Other comprehensive (loss) income :                    
Foreign currency translation adjustments   64,280    282,337    (13,512)   903,799 
Comprehensive loss   (2,234,295)   (4,443,406)   (9,989,362)   (11,386,844)
Comprehensive loss attributable to non-controlling interests   -    -    -    72,261 
Comprehensive loss attributable to controlling interests  $(2,234,295)  $(4,443,406)  $(9,989,362)  $(11,314,583)

 

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

 

4

 

 

GAUCHO GROUP HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDER’S EQUITY

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2023

(unaudited)

 

                                         
   Common Stock   Treasury Stock   Additional
Paid-In
  

Accumulated
Other

Comprehensive

   Accumulated     Total
Stockholders’
 
   Shares   Amount   Shares   Amount   Capital   Loss   Deficit     Equity 
Balance - January 1, 2023   365,340   $3,654    28   $(46,355)   139,156,522   $(10,842,569)  $(117,479,571) - - $  10,791,681 
Cumulative effect of change upon adoption of ASU 2016-13   -    -    -    -    -    -    (111,582) - -  (111,582)
Stock-based compensation:   -    -              -                  
Options   -    -    -    -    38,834    -    -      38,834 
Restricted stock units   389    4    -    -    79,418    -    -      79,422 
Common stock issued for 401(k) employer matching   2,416    24    -    -    32,593    -    -      32,617 
Shares issued under the New ELOC, net of offering costs [1]   36,443    365    -    -    441,044    -    -      441,409 
Relative fair value of warrants issued with 2023 Notes, net of issuance costs [2]   -    -    -    -    1,506,319    -    -      1,506,319 
Warrants issued for modification of GGH Notes   -    -    -    -    134,779    -    -      134,779 
Reduction of warrant exercise price on new debt issuance   -    -    -    -    63,502    -    -      63,502 
Shares issued upon conversion of debt and interest   83,333    833    -    -    1,570,720    -    -      1,571,553 
Common stock issued for cash in private placement   59,100    591    -    -    590,409    -    -      591,000 
Cashless warrant exercise   5,131    51    -    -    (51)   -    -      - 
True-up adjustment   28    -    -    -    -    -    -      - 
Net loss   -    -    -    -    -    -    (2,695,148) - -  (2,695,148)
Other comprehensive loss   -    -    -    -    -    (39,799)   -      (39,799)
Balance - March 31, 2023   552,180    5,522    28    (46,355)   143,614,089    (10,882,368)   (120,286,301) - -  12,404,587 
Stock-based compensation:                                          
Options   -    -    -    -    38,834    -    -      38,834 
Restricted stock units   -    -    -    -    74,978    -    -      74,978 
Shares issued under the New ELOC, net of offering costs [3]   45,877    459    -    -    291,138    -    -      291,597 
Shares issued upon conversion of debt and interest   82,878    829    -    -    574,427    -    -      575,256 
Net loss   -    -    -    -    -    -    (4,982,127) - -  (4,982,127)
Other comprehensive loss   -    -    -    -    -    (37,993)   -      (37,993)
Balance - June 30, 2023   680,935    6,810    28    (46,355)   144,593,466    (10,920,361)   (125,268,428) - -  8,365,132 
Stock-based compensation:                                          
Options   -    -    -    -    17,910    -    -      17,910 
Restricted stock units   -    -    -    -    75,645    -    -      75,645 
Common stock   27,027    270    -    -    149,730    -    -      150,000 
Shares issued under the New ELOC [4]   29,364    294    -    -    42,339    -    -      42,633 
Warrant modification   -    -    -    -    392,273    -    -      392,273 
Shares issued upon conversion of debt and interest   231,912    2,319    -    -    672,692    -    -      675,011 
Common stock issued for cash in private placement   90,000    900    -    -    404,100    -    -      405,000 
Effect of reverse stock spit   358    3    -    -    (3)   -    -      - 
Net loss   -    -    -    -    -    -    (2,298,575) - -  (2,298,575)
Other comprehensive loss   -    -    -    -    -    64,280    -      64,280 
Balance - September 30, 2023   1,059,596   $10,596    28   $(46,355)  $146,348,152   $(10,856,081)  $(127,567,003) - - $7,889,309 

 

[1]Includes gross proceeds of $480,670, less $39,261 of offering costs
[2]Represents $1,609,935 relative fair value of warrants, less $103,616 of allocable issuance costs
[3]Includes gross proceeds of $316,953, less $25,356 of offering costs
[4]Includes gross proceeds of $52,988, less $10,355 of offering costs

 

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

 

5

 

 

GAUCHO GROUP HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDER’S EQUITY

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2022

(unaudited)

 

                                                   
   Common Stock   Treasury Stock   Additional
Paid-In
  

Accumulated

Other

Comprehensive

   Accumulated  

Gaucho Group

Holdings

Stockholders’

  

Non-

controlling

   Total
Stockholders’
 
   Shares   Amount   Shares   Amount   Capital   Loss   Deficit   Deficiency   Interest   Equity 
Balance - January 1, 2022   82,350    823    28   $(46,355)  $121,641,238   $(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   104    1    -    -    27,820    -    -    27,821    -    27,821 
Common stock issued for purchase of minority interest   8,690    87    -    -    (231,876)   -    -    (231,789)   231,789    - 
Common stock issued for acquisition of GDS   10,695    107    -    -    2,194,546    -    -    2,194,653    -    2,194,653 
Common stock issued for purchase of domain name   125    1    -    -    39,599    -    -    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 income   -    -    -    -    -    263,406    -    263,406    -    263,406 
Balance - March 31, 2022   101,964    1,019    28    (46,355)   124,475,883    (11,344,040)   (97,926,374)   15,160,133    -    15,160,133 
Stock-based compensation:   -    -              -                          
Options   -    -    -    -    87,134    -    -    87,134    -    87,134 
Common stock   5,421    54    -    -    524,946    -    -    525,000    -    525,000 
Shares issued upon conversion of debt and interest   7,459    75    -    -    1,522,522    -    -    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   5,005    50    -    -    511,296    -    -    511,346    -    511,346 
Common stock issued upon exchange of subsidiary stock options   18,394    184    -    -    (184)   -    -    -    -    - 
True up adjustment   4    -    -    -    -    -    -    -    -    - 
Net loss   -    -    -    -    -    -    (5,292,799)   (5,292,799)   -    (5,292,799)
Other comprehensive income   -    -    -    -    -    358,056    -    358,056    -    358,056 
Balance - June 30, 2022   138,247    1,382    28    (46,355)   129,003,540    (10,985,984)   (103,219,173)   14,753,410    -