false FY 0001559998 P8Y 0 0 0001559998 2023-01-01 2023-12-31 0001559998 2023-06-30 0001559998 2024-04-26 0001559998 2023-10-01 2023-12-31 0001559998 2023-12-31 0001559998 2022-12-31 0001559998 us-gaap:NonrelatedPartyMember 2023-12-31 0001559998 us-gaap:NonrelatedPartyMember 2022-12-31 0001559998 us-gaap:RelatedPartyMember 2023-12-31 0001559998 us-gaap:RelatedPartyMember 2022-12-31 0001559998 2022-01-01 2022-12-31 0001559998 us-gaap:CommonStockMember 2022-12-31 0001559998 srt:CumulativeEffectPeriodOfAdoptionAdjustmentMember 2022-12-31 0001559998 us-gaap:TreasuryStockCommonMember 2022-12-31 0001559998 us-gaap:AdditionalPaidInCapitalMember 2022-12-31 0001559998 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2022-12-31 0001559998 us-gaap:RetainedEarningsMember 2022-12-31 0001559998 VINO:GauchoGroupHoldingsStockholdersDeficiencyMember 2022-12-31 0001559998 us-gaap:NoncontrollingInterestMember 2022-12-31 0001559998 us-gaap:CommonStockMember 2021-12-31 0001559998 us-gaap:TreasuryStockCommonMember 2021-12-31 0001559998 us-gaap:AdditionalPaidInCapitalMember 2021-12-31 0001559998 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2021-12-31 0001559998 us-gaap:RetainedEarningsMember 2021-12-31 0001559998 VINO:GauchoGroupHoldingsStockholdersDeficiencyMember 2021-12-31 0001559998 us-gaap:NoncontrollingInterestMember 2021-12-31 0001559998 2021-12-31 0001559998 us-gaap:CommonStockMember srt:CumulativeEffectPeriodOfAdoptionAdjustmentMember 2023-01-01 2023-12-31 0001559998 srt:CumulativeEffectPeriodOfAdoptionAdjustmentMember 2023-01-01 2023-12-31 0001559998 us-gaap:TreasuryStockCommonMember srt:CumulativeEffectPeriodOfAdoptionAdjustmentMember 2023-01-01 2023-12-31 0001559998 us-gaap:AdditionalPaidInCapitalMember srt:CumulativeEffectPeriodOfAdoptionAdjustmentMember 2023-01-01 2023-12-31 0001559998 us-gaap:AccumulatedOtherComprehensiveIncomeMember srt:CumulativeEffectPeriodOfAdoptionAdjustmentMember 2023-01-01 2023-12-31 0001559998 us-gaap:RetainedEarningsMember srt:CumulativeEffectPeriodOfAdoptionAdjustmentMember 2023-01-01 2023-12-31 0001559998 VINO:GauchoGroupHoldingsStockholdersDeficiencyMember srt:CumulativeEffectPeriodOfAdoptionAdjustmentMember 2023-01-01 2023-12-31 0001559998 us-gaap:NoncontrollingInterestMember srt:CumulativeEffectPeriodOfAdoptionAdjustmentMember 2023-01-01 2023-12-31 0001559998 us-gaap:CommonStockMember 2023-01-01 2023-12-31 0001559998 us-gaap:TreasuryStockCommonMember 2023-01-01 2023-12-31 0001559998 us-gaap:AdditionalPaidInCapitalMember 2023-01-01 2023-12-31 0001559998 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2023-01-01 2023-12-31 0001559998 us-gaap:RetainedEarningsMember 2023-01-01 2023-12-31 0001559998 VINO:GauchoGroupHoldingsStockholdersDeficiencyMember 2023-01-01 2023-12-31 0001559998 us-gaap:NoncontrollingInterestMember 2023-01-01 2023-12-31 0001559998 us-gaap:CommonStockMember 2022-01-01 2022-12-31 0001559998 us-gaap:TreasuryStockCommonMember 2022-01-01 2022-12-31 0001559998 us-gaap:AdditionalPaidInCapitalMember 2022-01-01 2022-12-31 0001559998 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2022-01-01 2022-12-31 0001559998 us-gaap:RetainedEarningsMember 2022-01-01 2022-12-31 0001559998 VINO:GauchoGroupHoldingsStockholdersDeficiencyMember 2022-01-01 2022-12-31 0001559998 us-gaap:NoncontrollingInterestMember 2022-01-01 2022-12-31 0001559998 us-gaap:CommonStockMember 2023-12-31 0001559998 srt:CumulativeEffectPeriodOfAdoptionAdjustmentMember 2023-12-31 0001559998 us-gaap:TreasuryStockCommonMember 2023-12-31 0001559998 us-gaap:AdditionalPaidInCapitalMember 2023-12-31 0001559998 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2023-12-31 0001559998 us-gaap:RetainedEarningsMember 2023-12-31 0001559998 VINO:GauchoGroupHoldingsStockholdersDeficiencyMember 2023-12-31 0001559998 us-gaap:NoncontrollingInterestMember 2023-12-31 0001559998 VINO:GauchoDevelopmentSRLMember 2022-02-03 0001559998 VINO:GauchoGroupIncMember 2022-02-03 0001559998 VINO:GauchoGroupIncMember 2022-03-28 0001559998 us-gaap:SubsequentEventMember us-gaap:PrivatePlacementMember 2024-01-01 2024-04-11 0001559998 us-gaap:SubsequentEventMember us-gaap:PrivatePlacementMember 2024-04-11 0001559998 2022-11-04 2022-11-04 0001559998 2023-09-25 2023-09-25 0001559998 VINO:GauchoGroupIncMember 2022-03-25 2022-03-28 0001559998 VINO:GauchoGroupIncMember 2022-03-28 0001559998 country:AR 2018-05-15 2018-05-16 0001559998 currency:ARS 2018-06-30 0001559998 VINO:WineInventoryMember 2023-01-01 2023-12-31 0001559998 VINO:WineInventoryMember 2022-01-01 2022-12-31 0001559998 VINO:LVHHoldingsMember 2021-12-31 0001559998 VINO:LVHHoldingsMember 2022-01-01 2022-12-31 0001559998 srt:RevisionOfPriorPeriodAccountingStandardsUpdateAdjustmentMember us-gaap:AccountingStandardsUpdate201613Member 2023-01-01 0001559998 us-gaap:BuildingMember srt:MinimumMember 2023-12-31 0001559998 us-gaap:BuildingMember srt:MaximumMember 2023-12-31 0001559998 us-gaap:FurnitureAndFixturesMember srt:MinimumMember 2023-12-31 0001559998 us-gaap:FurnitureAndFixturesMember srt:MaximumMember 2023-12-31 0001559998 VINO:VineyardsMember srt:MinimumMember 2023-12-31 0001559998 VINO:VineyardsMember srt:MaximumMember 2023-12-31 0001559998 us-gaap:MachineryAndEquipmentMember srt:MinimumMember 2023-12-31 0001559998 us-gaap:MachineryAndEquipmentMember srt:MaximumMember 2023-12-31 0001559998 us-gaap:LeaseholdImprovementsMember srt:MinimumMember 2023-12-31 0001559998 us-gaap:LeaseholdImprovementsMember srt:MaximumMember 2023-12-31 0001559998 us-gaap:ComputerEquipmentMember srt:MinimumMember 2023-12-31 0001559998 us-gaap:ComputerEquipmentMember srt:MaximumMember 2023-12-31 0001559998 srt:ReportableGeographicalComponentsMember country:AR 2023-12-31 0001559998 srt:ReportableGeographicalComponentsMember country:AR 2022-12-31 0001559998 srt:ReportableGeographicalComponentsMember country:US 2023-12-31 0001559998 srt:ReportableGeographicalComponentsMember country:US 2022-12-31 0001559998 srt:ReportableGeographicalComponentsMember 2023-12-31 0001559998 srt:ReportableGeographicalComponentsMember 2022-12-31 0001559998 srt:ReportableGeographicalComponentsMember country:AR 2023-01-01 2023-12-31 0001559998 srt:ReportableGeographicalComponentsMember country:AR 2022-01-01 2022-12-31 0001559998 srt:ReportableGeographicalComponentsMember country:US 2023-01-01 2023-12-31 0001559998 srt:ReportableGeographicalComponentsMember country:US 2022-01-01 2022-12-31 0001559998 srt:ReportableGeographicalComponentsMember 2023-01-01 2023-12-31 0001559998 srt:ReportableGeographicalComponentsMember 2022-01-01 2022-12-31 0001559998 VINO:HotelRoomsAndEventsMember 2023-01-01 2023-12-31 0001559998 VINO:HotelRoomsAndEventsMember 2022-01-01 2022-12-31 0001559998 VINO:ClothesAndAccessoriesMember 2023-01-01 2023-12-31 0001559998 VINO:ClothesAndAccessoriesMember 2022-01-01 2022-12-31 0001559998 VINO:RestaurantsMember 2023-01-01 2023-12-31 0001559998 VINO:RestaurantsMember 2022-01-01 2022-12-31 0001559998 VINO:WinemakingMember 2023-01-01 2023-12-31 0001559998 VINO:WinemakingMember 2022-01-01 2022-12-31 0001559998 VINO:AgriculturalMember 2023-01-01 2023-12-31 0001559998 VINO:AgriculturalMember 2022-01-01 2022-12-31 0001559998 us-gaap:RealEstateMember 2023-01-01 2023-12-31 0001559998 us-gaap:RealEstateMember 2022-01-01 2022-12-31 0001559998 VINO:GolfTennisAndOtherMember 2023-01-01 2023-12-31 0001559998 VINO:GolfTennisAndOtherMember 2022-01-01 2022-12-31 0001559998 us-gaap:EmployeeStockOptionMember 2023-01-01 2023-12-31 0001559998 us-gaap:EmployeeStockOptionMember 2022-01-01 2022-12-31 0001559998 us-gaap:WarrantMember 2023-01-01 2023-12-31 0001559998 us-gaap:WarrantMember 2022-01-01 2022-12-31 0001559998 us-gaap:RestrictedStockUnitsRSUMember 2023-01-01 2023-12-31 0001559998 us-gaap:RestrictedStockUnitsRSUMember 2022-01-01 2022-12-31 0001559998 us-gaap:ConvertibleDebtMember 2023-01-01 2023-12-31 0001559998 us-gaap:ConvertibleDebtMember 2022-01-01 2022-12-31 0001559998 us-gaap:ConvertibleDebtMember 2023-12-31 0001559998 us-gaap:ConvertibleDebtMember 2022-12-31 0001559998 VINO:HollywoodBurgerArgentinaSRLMember 2022-02-03 0001559998 VINO:HollywoodBurgerArgentinaSRLMember 2022-02-03 2022-02-03 0001559998 2022-02-03 0001559998 VINO:MortgagesLoanMember 2023-12-31 0001559998 VINO:MortgagesLoanMember srt:MinimumMember 2023-01-01 2023-12-31 0001559998 VINO:MortgagesLoanMember srt:MaximumMember 2023-01-01 2023-12-31 0001559998 VINO:MortgagesLoanMember 2023-01-01 2023-12-31 0001559998 VINO:MortgagesLoanMember 2022-01-01 2022-12-31 0001559998 us-gaap:MortgageReceivablesMember 2023-12-31 0001559998 us-gaap:MortgageReceivablesMember 2022-12-31 0001559998 us-gaap:MortgageReceivablesMember 2023-01-01 2023-12-31 0001559998 us-gaap:MortgageReceivablesMember 2022-01-01 2022-12-31 0001559998 us-gaap:PropertyPlantAndEquipmentMember 2023-01-01 2023-12-31 0001559998 us-gaap:PropertyPlantAndEquipmentMember 2022-01-01 2022-12-31 0001559998 us-gaap:PropertyPlantAndEquipmentMember us-gaap:CostOfSalesMember 2023-01-01 2023-12-31 0001559998 us-gaap:PropertyPlantAndEquipmentMember us-gaap:CostOfSalesMember 2022-01-01 2022-12-31 0001559998 us-gaap:PropertyPlantAndEquipmentMember us-gaap:OperatingExpenseMember 2023-01-01 2023-12-31 0001559998 us-gaap:PropertyPlantAndEquipmentMember us-gaap:OperatingExpenseMember 2022-01-01 2022-12-31 0001559998 us-gaap:InternetDomainNamesMember 2022-02-03 2022-02-03 0001559998 us-gaap:InternetDomainNamesMember 2022-02-03 0001559998 VINO:MusicVideoMember 2023-06-14 2023-06-15 0001559998 VINO:MusicVideoMember 2023-06-15 0001559998 VINO:MinimumPresumedIncomeTaxMember 2023-12-31 0001559998 VINO:MinimumPresumedIncomeTaxMember 2022-12-31 0001559998 srt:MinimumMember 2020-11-26 2020-11-27 0001559998 srt:MaximumMember 2020-11-26 2020-11-27 0001559998 country:AR 2023-12-31 0001559998 country:AR 2022-12-31 0001559998 country:AR 2023-01-01 2023-12-31 0001559998 country:AR 2022-01-01 2022-12-31 0001559998 us-gaap:RealEstateMember 2023-12-31 0001559998 us-gaap:RealEstateMember 2022-12-31 0001559998 srt:HotelMember 2023-12-31 0001559998 srt:HotelMember 2022-12-31 0001559998 VINO:ManagementFeeMember 2023-12-31 0001559998 VINO:ManagementFeeMember 2022-12-31 0001559998 VINO:OtherDeferredRevenueMember 2023-12-31 0001559998 VINO:OtherDeferredRevenueMember 2022-12-31 0001559998 us-gaap:RealEstateMember us-gaap:RelatedPartyMember 2023-12-31 0001559998 VINO:LotSaleObligationsMember 2022-12-31 0001559998 VINO:DebtDiscountMember 2022-12-31 0001559998 VINO:LotSaleObligationsNetOfDiscountMember 2022-12-31 0001559998 VINO:LotSaleObligationsMember 2023-01-01 2023-12-31 0001559998 VINO:DebtDiscountMember 2023-01-01 2023-12-31 0001559998 VINO:LotSaleObligationsNetOfDiscountMember 2023-01-01 2023-12-31 0001559998 VINO:LotSaleObligationsMember 2023-12-31 0001559998 VINO:DebtDiscountMember 2023-12-31 0001559998 VINO:LotSaleObligationsNetOfDiscountMember 2023-12-31 0001559998 VINO:LotDepositAgreementMember 2023-01-01 2023-12-31 0001559998 VINO:LotSaleObligationsMember VINO:LotDepositAgreementsMember 2023-01-01 2023-12-31 0001559998 VINO:LotDepositAgreementsMember 2023-01-01 2023-12-31 0001559998 VINO:DebtDiscountMember VINO:LotDepositAgreementsMember 2023-01-01 2023-12-31 0001559998 VINO:RelatedPartyPurchaserMember 2023-01-01 2023-12-31 0001559998 VINO:RelatedPartyPurchaserMember VINO:LotSaleObligationsMember 2023-01-01 2023-12-31 0001559998 VINO:EconomicInjuryDisasterLoanMember 2023-12-31 0001559998 VINO:EconomicInjuryDisasterLoanMember 2022-12-31 0001559998 VINO:TwoThousandEighteenLoanMember 2023-12-31 0001559998 VINO:TwoThousandEighteenLoanMember 2022-12-31 0001559998 VINO:TwoThousandTwentyTwoLoanMember 2023-12-31 0001559998 VINO:TwoThousandTwentyTwoLoanMember 2022-12-31 0001559998 VINO:TwoThousandTwentyThreeLoanMember 2023-12-31 0001559998 VINO:TwoThousandTwentyThreeLoanMember 2022-12-31 0001559998 VINO:NonConvertiblePromissoryNoteMember 2023-01-08 2023-01-09 0001559998 VINO:NonConvertiblePromissoryNoteMember 2023-01-09 0001559998 VINO:NonConvertiblePromissoryNoteMember 2024-02-22 2024-02-22 0001559998 VINO:EconomicInjuryDisasterLoanMember 2020-05-21 2020-05-22 0001559998 VINO:EconomicInjuryDisasterLoanMember 2020-05-22 0001559998 VINO:EconomicInjuryDisasterLoanMember 2022-10-03 2022-10-03 0001559998 VINO:TwoThousandEighteenLoanMember 2018-01-24 2018-01-25 0001559998 VINO:TwoThousandEighteenLoanMember 2018-01-25 0001559998 VINO:TwoThousandEighteenLoanMember 2023-01-01 2023-12-31 0001559998 VINO:TwoThousandTwentyTwoLoanMember 2022-12-22 2022-12-23 0001559998 VINO:TwoThousandTwentyTwoLoanMember 2022-12-23 0001559998 VINO:TwoThousandTwentyTwoLoanMember 2023-01-01 2023-12-31 0001559998 VINO:TwoThousandTwentyTwoLoanMember VINO:GainsFromForeignCurrencyTranslationMember 2023-01-01 2023-12-31 0001559998 VINO:GGHConvertibleNotesPayableMember 2021-12-31 0001559998 VINO:InvestorConvertibleNotesPayableMember 2021-12-31 0001559998 VINO:OctoberConvertibleNotesPayableMember 2021-12-31 0001559998 VINO:TwentyTwentyThreeConvertibleNotesPayableMember 2021-12-31 0001559998 VINO:GGHConvertibleNotesPayableMember 2022-01-01 2022-12-31 0001559998 VINO:InvestorConvertibleNotesPayableMember 2022-01-01 2022-12-31 0001559998 VINO:OctoberConvertibleNotesPayableMember 2022-01-01 2022-12-31 0001559998 VINO:TwentyTwentyThreeConvertibleNotesPayableMember 2022-01-01 2022-12-31 0001559998 VINO:GGHConvertibleNotesPayableMember 2022-12-31 0001559998 VINO:InvestorConvertibleNotesPayableMember 2022-12-31 0001559998 VINO:OctoberConvertibleNotesPayableMember 2022-12-31 0001559998 VINO:TwentyTwentyThreeConvertibleNotesPayableMember 2022-12-31 0001559998 VINO:GGHConvertibleNotesPayableMember 2023-01-01 2023-12-31 0001559998 VINO:InvestorConvertibleNotesPayableMember 2023-01-01 2023-12-31 0001559998 VINO:OctoberConvertibleNotesPayableMember 2023-01-01 2023-12-31 0001559998 VINO:TwentyTwentyThreeConvertibleNotesPayableMember 2023-01-01 2023-12-31 0001559998 VINO:GGHConvertibleNotesPayableMember 2023-12-31 0001559998 VINO:InvestorConvertibleNotesPayableMember 2023-12-31 0001559998 VINO:OctoberConvertibleNotesPayableMember 2023-12-31 0001559998 VINO:TwentyTwentyThreeConvertibleNotesPayableMember 2023-12-31 0001559998 VINO:GGHConvertibleNotesPayableMember 2021-11-03 0001559998 VINO:GGHConvertibleNotesPayableMember 2021-11-03 2021-11-03 0001559998 VINO:GGHConvertibleNotesPayableMember VINO:GauchoGroupHoldingsIncMember 2021-11-03 0001559998 2021-11-09 0001559998 VINO:GGHConvertibleNotesPayableMember 2021-11-09 0001559998 VINO:GGHConvertibleNotesPayableMember 2021-11-09 2021-11-09 0001559998 VINO:GGHConvertibleNotesPayableMember 2022-02-07 2022-02-07 0001559998 VINO:ExchangeAgreementMember 2022-02-21 2022-02-22 0001559998 VINO:ExchangeAgreementMember 2022-02-22 0001559998 srt:MinimumMember VINO:LetterAgreementMember 2022-05-13 0001559998 srt:MaximumMember VINO:LetterAgreementMember 2022-05-13 0001559998 VINO:LetterAgreementMember 2022-05-03 2022-05-11 0001559998 VINO:LetterAgreementMember 2022-05-11 0001559998 VINO:GGHConvertibleNotesPayableMember VINO:ConversionAgreementMember 2022-05-12 0001559998 VINO:GGHConvertibleNotesPayableMember VINO:ConversionAgreementMember 2022-05-12 2022-05-12 0001559998 VINO:LetterAgreementMember 2022-05-10 2022-05-13 0001559998 VINO:LetterAgreementMember 2022-05-13 0001559998 VINO:LetterAgreementMember 2021-11-08 2021-11-09 0001559998 VINO:EmbeddedConversionOptionMember 2023-12-31 0001559998 VINO:EmbeddedConversionOptionMember 2023-01-01 2023-12-31 0001559998 VINO:LetterAgreementMember 2022-07-05 0001559998 VINO:LetterAgreementMember 2022-09-05 0001559998 VINO:LetterAgreementMember 2022-07-07 2022-08-30 0001559998 VINO:LetterAgreementMember 2022-08-30 0001559998 VINO:ExchangeAgreementMember 2022-09-22 0001559998 VINO:ExchangeAgreementMember 2022-11-30 0001559998 VINO:ExchangeAgreementMember VINO:ThreeYearWarrantsMember 2022-11-30 0001559998 VINO:GGHConvertibleNotesPayableMember 2023-02-03 2023-02-15 0001559998 VINO:GGHConvertibleNotesPayableMember 2023-02-15 0001559998 VINO:GGHConvertibleNotesPayableMember srt:MinimumMember 2023-02-15 0001559998 VINO:GGHConvertibleNotesPayableMember srt:MaximumMember 2023-02-15 0001559998 VINO:ExchangeAgreementMember 2023-02-20 0001559998 VINO:GGHConvertibleNotesPayableMember 2023-02-21 0001559998 VINO:GGHConvertibleNotesPayableMember 2023-02-01 2023-02-21 0001559998 VINO:InvestorConvertibleNotesPayableMember 2022-08-30 0001559998 VINO:InvestorConvertibleNotesPayableMember srt:MaximumMember 2022-08-30 0001559998 VINO:InvestorConvertibleNotesPayableMember 2022-07-13 2022-08-30 0001559998 VINO:InvestorNotesMember 2022-07-13 2022-08-30 0001559998 VINO:InvestorNotesMember 2022-08-30 0001559998 VINO:OctoberConvertibleNotesPayableMember 2022-10-22 0001559998 VINO:OctoberConvertibleNotesPayableMember 2022-10-20 2022-10-22 0001559998 VINO:OctoberConvertibleNotesPayableMember us-gaap:CommonStockMember 2022-10-22 0001559998 VINO:OctoberConvertibleNotesPayableMember srt:MaximumMember 2022-12-19 2022-12-19 0001559998 VINO:OctoberConvertibleNotesPayableMember 2022-12-19 2022-12-19 0001559998 VINO:OctoberConvertibleNotesPayableMember 2022-12-19 2022-12-19 0001559998 VINO:OctoberConvertibleNotesPayableMember 2022-12-19 0001559998 VINO:SecuritiesPurchaseAgreementMember 2023-02-21 2023-02-21 0001559998 VINO:SecuritiesPurchaseAgreementMember 2023-02-21 0001559998 VINO:SecuritiesPurchaseAgreementMember VINO:TwoThousandTwentyThreeLoanMember 2023-02-21 0001559998 VINO:SecuritiesPurchaseAgreementMember VINO:TwoThousandTwentyThreeLoanMember 2023-02-21 2023-02-21 0001559998 VINO:TwoThousandTwentyThreeLoanMember 2023-02-21 2023-02-21 0001559998 VINO:SecuritiesPurchaseAgreementMember srt:MinimumMember 2023-02-21 0001559998 VINO:SecuritiesPurchaseAgreementMember 2023-02-01 2023-02-21 0001559998 VINO:TwoThousandTwentyThreeLoanMember 2023-02-21 0001559998 VINO:SecuritiesPurchaseAgreementMember VINO:TwoThousandTwentyThreeNotesMember 2023-02-21 0001559998 VINO:GauchoGroupHoldingsIncMember VINO:TwoThousandTwentyThreeLoanMember 2021-11-03 0001559998 us-gaap:InvestorMember VINO:TwoThousandTwentyThreeLoanMember VINO:LetterAgreementMember srt:MinimumMember 2023-05-21 0001559998 us-gaap:InvestorMember VINO:TwoThousandTwentyThreeLoanMember VINO:LetterAgreementMember srt:MaximumMember 2023-05-21 0001559998 us-gaap:InvestorMember VINO:TwoThousandTwentyThreeLoanMember VINO:LetterAgreementMember 2023-05-21 0001559998 srt:MinimumMember VINO:TwoThousandTwentyThreeNotesMember 2023-10-05 0001559998 srt:MaximumMember VINO:TwoThousandTwentyThreeNotesMember 2023-10-05 0001559998 VINO:TwoThousandTwentyThreeLoanMember 2023-01-01 2023-12-31 0001559998 VINO:TwoThousandTwentyThreeLoanMember 2023-01-01 2023-12-30 0001559998 srt:MinimumMember VINO:TwoThousandTwentyThreeLoanMember 2023-12-31 0001559998 srt:MaximumMember VINO:TwoThousandTwentyThreeLoanMember 2023-12-31 0001559998 VINO:LossOnExtinguishmentOfDebtMember 2023-01-01 2023-12-31 0001559998 us-gaap:ConvertibleNotesPayableMember 2023-01-01 2023-12-31 0001559998 us-gaap:ConvertibleNotesPayableMember 2022-01-01 2022-12-31 0001559998 country:US 2023-01-01 2023-12-31 0001559998 country:US 2022-01-01 2022-12-31 0001559998 VINO:InternationalMember 2023-01-01 2023-12-31 0001559998 VINO:InternationalMember 2022-01-01 2022-12-31 0001559998 us-gaap:DomesticCountryMember 2023-12-31 0001559998 us-gaap:DomesticCountryMember VINO:NoExpirationMember 2023-12-31 0001559998 2012-06-30 0001559998 us-gaap:DomesticCountryMember 2022-12-31 0001559998 stpr:FL 2023-12-31 0001559998 stpr:NY 2023-12-31 0001559998 VINO:NewYorkCityMember 2023-12-31 0001559998 us-gaap:StateAndLocalJurisdictionMember 2022-12-31 0001559998 stpr:FL 2022-12-31 0001559998 stpr:NY 2022-12-31 0001559998 VINO:NewYorkCityMember 2022-12-31 0001559998 stpr:FL 2022-01-01 2022-12-31 0001559998 VINO:NewYorkAndNewYorkCityMember 2022-01-01 2022-12-31 0001559998 VINO:WriteOffsMember 2023-01-01 2023-12-31 0001559998 VINO:WriteOffsMember 2022-01-01 2022-12-31 0001559998 VINO:RealEstateDevelopmentMember 2023-01-01 2023-12-31 0001559998 VINO:FashionECommerceMember 2023-01-01 2023-12-31 0001559998 us-gaap:CorporateMember 2023-01-01 2023-12-31 0001559998 VINO:RealEstateDevelopmentMember 2023-12-31 0001559998 VINO:FashionECommerceMember 2023-12-31 0001559998 us-gaap:CorporateMember 2023-12-31 0001559998 VINO:RealEstateDevelopmentMember 2022-01-01 2022-12-31 0001559998 VINO:FashionECommerceMember 2022-01-01 2022-12-31 0001559998 us-gaap:CorporateMember 2022-01-01 2022-12-31 0001559998 VINO:RealEstateDevelopmentMember 2022-12-31 0001559998 VINO:FashionECommerceMember 2022-12-31 0001559998 us-gaap:CorporateMember 2022-12-31 0001559998 us-gaap:RelatedPartyMember 2022-12-30 2023-01-02 0001559998 us-gaap:RelatedPartyMember 2023-01-01 2023-12-31 0001559998 us-gaap:RelatedPartyMember 2022-01-01 2022-12-31 0001559998 us-gaap:GeneralAndAdministrativeExpenseMember 2023-01-01 2023-12-31 0001559998 us-gaap:GeneralAndAdministrativeExpenseMember 2022-01-01 2022-12-31 0001559998 VINO:SLVHLLCMember 2021-06-16 0001559998 VINO:LVHHoldingsLLCMember 2023-12-31 0001559998 VINO:LVHHoldingsLLCMember 2021-07-16 0001559998 VINO:LVHHoldingsLLCMember 2021-11-10 0001559998 VINO:LVHHoldingsLLCMember 2022-12-31 0001559998 VINO:GVIMember 2023-09-27 2023-09-27 0001559998 VINO:LVHHoldingsLLCMember 2023-01-01 2023-12-31 0001559998 VINO:LVHHoldingsLLCMember 2022-01-01 2022-12-31 0001559998 VINO:LVHHoldingsLLCMember 2023-12-31 0001559998 VINO:LVHHoldingsLLCMember 2022-12-31 0001559998 2023-01-22 2023-01-23 0001559998 2023-01-23 0001559998 2022-03-31 2022-03-31 0001559998 2022-03-31 0001559998 VINO:TwoThousandTwentyTwoReverseStockSplitMember 2022-11-04 2022-11-04 0001559998 2022-09-15 0001559998 2022-09-16 0001559998 VINO:TwoThousandAndEighteenEquityIncentivePlanMember 2018-07-27 0001559998 VINO:TwoThousandAndEighteenEquityIncentivePlanMember 2022-08-30 2022-08-30 0001559998 VINO:TwoThousandAndEighteenEquityIncentivePlanMember 2022-08-30 0001559998 VINO:TwoThousandAndEighteenEquityIncentivePlanMember 2023-12-31 0001559998 VINO:TwoThousandAndEighteenEquityIncentivePlanMember us-gaap:SubsequentEventMember 2024-01-01 0001559998 VINO:TwoThousandAndEighteenEquityIncentivePlanMember us-gaap:SubsequentEventMember 2024-01-01 2024-01-01 0001559998 VINO:TwoThousandAndEighteenEquityIncentivePlanMember 2018-01-01 2018-12-31 0001559998 VINO:TwoThousandAndEighteenEquityIncentivePlanMember srt:MinimumMember VINO:GauchoGroupHoldingsIncMember 2018-12-31 0001559998 VINO:TwoThousandAndEighteenEquityIncentivePlanMember 2018-12-31 0001559998 VINO:TwoThousandAndEighteenGauchoPlanMember srt:MaximumMember 2018-10-05 0001559998 2022-06-21 2022-06-22 0001559998 2022-06-22 0001559998 2022-06-22 2022-06-22 0001559998 VINO:TwoThousandAndEighteenGauchoPlanMember 2023-01-01 2023-12-31 0001559998 VINO:TwoThousandAndEighteenGauchoPlanMember 2022-01-01 2022-12-31 0001559998 VINO:TwoThousandAndEighteenGauchoPlanMember 2023-12-31 0001559998 2022-02-03 2022-02-03 0001559998 us-gaap:InternetDomainNamesMember srt:MinimumMember 2022-08-14 0001559998 us-gaap:InternetDomainNamesMember 2022-08-14 0001559998 us-gaap:InternetDomainNamesMember 2022-08-14 2022-08-14 0001559998 us-gaap:CommonStockMember VINO:HollywoodBurgerHoldingsIncMember 2022-02-02 2022-02-03 0001559998 us-gaap:CommonStockMember VINO:HollywoodBurgerHoldingsIncMember 2022-02-03 0001559998 us-gaap:CommonStockMember VINO:GauchoGroupIncMember 2022-03-26 2022-03-28 0001559998 VINO:GauchoGroupIncMember us-gaap:CommonStockMember 2022-03-28 0001559998 VINO:BoardOfDirectorMember 2022-06-06 2022-06-07 0001559998 VINO:GauchoGroupIncMember us-gaap:RestrictedStockMember 2022-06-21 2022-06-22 0001559998 VINO:GauchoGroupIncMember 2022-06-21 2022-06-22 0001559998 2023-02-02 2023-02-02 0001559998 2023-02-02 0001559998 srt:MinimumMember 2023-02-02 0001559998 srt:MaximumMember 2023-02-02 0001559998 VINO:BoardOfDirectorMember 2023-07-16 2023-07-17 0001559998 us-gaap:PrivatePlacementMember 2023-11-27 2023-11-27 0001559998 us-gaap:PrivatePlacementMember 2023-11-27 0001559998 us-gaap:PrivatePlacementMember 2023-11-30 2023-12-31 0001559998 VINO:TumimStoneCapitalMember VINO:PurchaseAgreementMember srt:MaximumMember 2021-05-06 0001559998 VINO:PurchaseAgreementMember VINO:TumimStoneCapitalMember 2021-05-05 2021-05-06 0001559998 VINO:PurchaseAgreementMember VINO:TumimStoneCapitalMember 2021-05-06 0001559998 VINO:PurchaseAgreementMember VINO:VWAPTumimStoneCapitalMember 2021-05-06 0001559998 VINO:PurchaseAgreementMember VINO:TumimStoneCapitalMember 2022-01-01 2022-12-31 0001559998 VINO:NewELOCAgreementMember 2023-01-01 2023-12-31 0001559998 VINO:NewELOCAgreementMember VINO:UnderwriterMember 2022-12-30 2022-12-31 0001559998 us-gaap:RestrictedStockUnitsRSUMember 2023-01-21 2023-01-23 0001559998 us-gaap:RestrictedStockUnitsRSUMember 2023-10-21 2023-10-23 0001559998 us-gaap:RestrictedStockUnitsRSUMember 2023-10-23 0001559998 VINO:GauchoGroupIncMember 2023-01-01 2023-12-31 0001559998 VINO:GauchoGroupIncMember 2022-01-01 2022-12-31 0001559998 VINO:StockIncentivePlanMember 2023-12-31 0001559998 VINO:StockIncentivePlanMember 2022-12-31 0001559998 VINO:StockIncentivePlanMember 2023-01-01 2023-12-31 0001559998 VINO:GauchoGroupIncMember 2023-01-01 2023-12-31 0001559998 VINO:GauchoGroupIncMember 2022-01-01 2022-12-31 0001559998 VINO:WarrantsMember 2022-12-31 0001559998 VINO:WarrantsMember 2023-01-01 2023-12-31 0001559998 VINO:WarrantsMember 2023-12-31 0001559998 VINO:SecuritiesPurchaseAgreementMember VINO:WarrantOneMember 2023-02-21 0001559998 VINO:SecuritiesPurchaseAgreementMember VINO:WarrantTwoMember 2023-02-21 0001559998 VINO:SecuritiesPurchaseAgreementMember us-gaap:WarrantMember 2023-02-21 0001559998 VINO:TwoThousandTwentyThreeNotesMember 2023-08-11 0001559998 VINO:TwoThousandTwentyThreeNotesMember srt:MaximumMember 2023-08-11 0001559998 VINO:TwoThousandTwentyThreeNotesMember srt:MinimumMember 2023-08-11 0001559998 VINO:ExercisePriceRangeOneMember 2023-12-31 0001559998 VINO:ExercisePriceRangeOneMember 2023-01-01 2023-12-31 0001559998 VINO:ExercisePriceRangeTwoMember 2023-12-31 0001559998 VINO:ExercisePriceRangeTwoMember 2023-01-01 2023-12-31 0001559998 VINO:ExercisePriceRangeThreeMember 2023-12-31 0001559998 VINO:ExercisePriceRangeThreeMember 2023-01-01 2023-12-31 0001559998 us-gaap:RestrictedStockUnitsRSUMember 2022-12-31 0001559998 us-gaap:RestrictedStockUnitsRSUMember 2023-01-01 2023-12-31 0001559998 us-gaap:RestrictedStockUnitsRSUMember 2023-12-31 0001559998 VINO:ExercisePriceRangeFourMember 2023-12-31 0001559998 VINO:ExercisePriceRangeFourMember 2023-01-01 2023-12-31 0001559998 VINO:ExercisePriceRangeFiveMember 2023-12-31 0001559998 VINO:ExercisePriceRangeFiveMember 2023-01-01 2023-12-31 0001559998 VINO:ExercisePriceRangeSixMember 2023-12-31 0001559998 VINO:ExercisePriceRangeSixMember 2023-01-01 2023-12-31 0001559998 VINO:MsMariaEchevarriaMember VINO:EmploymentAgreementMember 2023-01-01 2023-12-31 0001559998 2021-04-08 0001559998 2021-04-05 2021-04-08 0001559998 us-gaap:SubsequentEventMember us-gaap:PrivatePlacementMember us-gaap:CommonStockMember 2024-01-01 2024-02-28 0001559998 us-gaap:PrivatePlacementMember us-gaap:SubsequentEventMember us-gaap:CommonStockMember 2024-02-28 0001559998 us-gaap:SubsequentEventMember 2024-02-07 2024-02-07 0001559998 us-gaap:PrivatePlacementMember us-gaap:CommonStockMember 2023-04-11 2023-04-11 0001559998 us-gaap:PrivatePlacementMember us-gaap:CommonStockMember 2023-04-11 0001559998 us-gaap:SubsequentEventMember 2024-02-05 2024-02-05 0001559998 us-gaap:SubsequentEventMember VINO:TwoThousandTwentyThreeNotesMember 2024-02-21 0001559998 us-gaap:SubsequentEventMember VINO:TwoThousandTwentyThreeNotesMember 2024-02-28 0001559998 us-gaap:SubsequentEventMember VINO:TwoThousandTwentyThreeNotesMember 2024-03-06 0001559998 us-gaap:SubsequentEventMember 2024-01-22 2024-01-22 0001559998 us-gaap:SubsequentEventMember 2024-01-22 0001559998 us-gaap:SubsequentEventMember 2024-04-19 0001559998 us-gaap:SubsequentEventMember 2024-04-19 2024-04-19 iso4217:USD xbrli:shares iso4217:USD xbrli:shares iso4217:ARS VINO:Integer utr:ha xbrli:pure

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-K

 

(Mark one)

 

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

 

For the Fiscal Year Ended December 31, 2023

 

TRANSITION REPORT PURSUANT TO 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

of Incorporation or Organization)

 

(I.R.S. Employer

Identification No.)

 

112 NE 41st Street, Suite 106, Miami, Florida   33137
(Address of Principal Executive Offices)   (Zip Code)

 

(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(s)   Name of each exchange on which registered
Common Stock   VINO   The Nasdaq Stock Market LLC

 

Securities registered pursuant to Section 12(g) of the Act: N/A

 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No

 

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No

 

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 pursuant to Rule 405 of Regulation S-T 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, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

 

  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 the check mark whether the registration has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.

 

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements.

 

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐

 

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

 

Auditor PCAOB ID: 688 Auditor Name: Marcum LLP Auditor Location: New York, New York

 

The aggregate market value of the voting and non-voting common equity held by non-affiliates (633,231 shares) computed by reference to the price at which the common equity was last sold as of June 30, 2023, the last business day of the registrant’s most recently completed second fiscal quarter, was $3,546,091. Solely for the purposes of this calculation, shares held by directors, executive officers and 10% owners of the registrant have been excluded. Such exclusion should not be deemed a determination or an admission by the registrant that such individuals are, in fact, affiliates of the registrant.

 

As of April 26, 2024, there were 7,963,810 shares of the registrant’s common stock outstanding.

 

 

 

 
 

 

INDEX

 

Forward Looking Statements

 

PART I  
     
ITEM 1. Business 7
ITEM 1A. Risk Factors 35
ITEM 1B. Unresolved Staff Comments 63
ITEM 1C. Cybersecurity 63
ITEM 2. Properties 64
ITEM 3. Legal Proceedings 64
ITEM 4. Mine Safety Disclosures 64
     
PART II  
     
ITEM 5. Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchase of Equity Securities 65
ITEM 6. [Reserved] 74
ITEM 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 74
ITEM 7A. Quantitative and Qualitative Disclosures About Market Risk 86
ITEM 8. Financial Statements and Supplementary Data 86
ITEM 9. Changes In and Disagreements with Accountants on Accounting and Financial Disclosures. 86
ITEM 9A. Controls and Procedures 86
ITEM 9B. Other Information 88
ITEM 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections 91
     
PART III  
     
ITEM 10. Directors, Officers and Corporate Governance 92
ITEM 11. Executive Compensation 102
ITEM 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters. 107
ITEM 13. Certain Relationships and Related Transactions and Director Independence 109
ITEM 14. Principal Accountant Fees and Services 111
     
PART IV  
     
ITEM 15. Exhibits, Financial Statements and Schedules 112
ITEM 16. Form 10-K Summary 114

 

2
 

 

PART I

 

Certain statements included or incorporated by reference in this annual report constitute forward-looking statements within the meaning of applicable securities laws. All statements contained in this annual report that are not clearly historical in nature are forward-looking, and the words “anticipate”, “believe”, “continue”, “expect”, “estimate”, “intend”, “may”, “plan”, “will”, “shall” and other similar expressions are generally intended to identify forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934 (the “Exchange Act”). All forward-looking statements are based on our beliefs and assumptions based on information available at the time the assumption was made. These forward-looking statements are not based on historical facts but on management’s expectations regarding future growth, results of operations, performance, future capital and other expenditures (including the amount, nature and sources of funding thereof), competitive advantages, business prospects and opportunities. Forward-looking statements involve significant known and unknown risks, uncertainties, assumptions and other factors that may cause our actual results, levels of activity, performance or achievements to differ materially from those implied by forward-looking statements. These factors should be considered carefully, and prospective investors should not place undue reliance on the forward-looking statements. Although the forward-looking statements contained in this annual report or incorporated by reference herein are based upon what management believes to be reasonable assumptions, there is no assurance that actual results will be consistent with these forward-looking statements. These forward-looking statements are made as of the date of this annual report or as of the date specified in the documents incorporated by reference herein, as the case may be. Important factors that could cause such differences include, but are not limited to:

 

the risks and additional expenses associated with international operations and operations in a country (Argentina) which has had significantly high inflation in the past;
   
the uncertainties raised by a fluid political situation and fundamental policy changes that could be affected by presidential elections;
   
uncertainties associated with financial services industry which could adversely affect the Company’s current and projected business operations and its financial condition and results of operations.
   
the risks associated with a business that has never been profitable, whose business model has been restructured from time to time, and which continues to have and has significant working capital needs;
   
the possibility of external economic and political factors preventing or delaying the acquisition, development or expansion of real estate projects, or adversely affecting consumer interest in our real estate offerings;
   
changes in external market factors, as they relate to our emerging e-commerce business;
   
changes in the overall performance of the industries in which our various business units operate;
   
changes in business strategies that could be necessitated by market developments as well as economic and political considerations;
   
possible inability to execute the Company’s business strategies due to industry changes or general changes in the economy generally;
   
changes in productivity and reliability of third parties, counterparties, joint venturers, suppliers or contractors; and
   
the success of competitors and the emergence of new competitors.

 

Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity or performance. You should not place undue reliance on forward-looking statements contained in this annual report.

 

3
 

 

We undertake no obligation to update any forward-looking statements to reflect events or circumstances after the date on which such statements were made or to reflect the occurrence of unanticipated events, except as may be required by applicable securities laws.

 

In evaluating the Company, its business and any investment in the Company, readers should carefully consider the following factors:

 

Risk Factors Summary

 

Our failure to maintain compliance with Nasdaq’s continued listing requirements could result in the delisting of our common stock.
   
The Company is currently in default under its convertible promissory note with 3i and has received demands for payment.
   
We no longer have an equity line of credit as a source of funding for the Company.
   
We may not receive a complete return of our investment in LVH.
   
Our level of debt may adversely affect our operations and our ability to pay our debt as it becomes due.
   
We may not be able to continue as a going concern.
   
The Company is facing and may continue to face significant cost inflation.
   
Revenues are currently insufficient to pay operating expenses and costs which may result in the inability to execute the Company’s business concept.
   
Adverse developments affecting the financial services industry, such as the failure of Silicon Valley Bank, could adversely affect the Company’s current and projected business operations and its financial condition and results of operations.
   
Cybersecurity risks and cyber incidents may adversely affect our business by causing a disruption to our operations, a compromise or corruption of our confidential information and/ or damage to our business relationships, all of which could negatively impact our business, financial condition and operating results.
   
Argentina’s economy may not support foreign investment or our business.
   
Argentina has a highly inflationary economy, which may continue to increase our accounting and legal costs.
   
Argentina has in the past discussed nationalizing private businesses.
   
The Company is exposed to the risk of changes in foreign exchange rates.
   
A significant number of our employees are located in Argentina, and any favorable or unfavorable developments in Argentina could have an impact on our results of operations.
   
Argentina’s ability to obtain financing from international markets is limited, which may impair its ability to implement reforms and foster economic growth.
   
The stability of the Argentine banking system is uncertain and the Argentine government may again place currency limitations on withdrawals of funds.
   
Government measures to pre-empt or respond to social unrest may adversely affect the Argentine economy and our business.
   
The Argentine economy could be adversely affected by economic developments in other global markets.
   
The Argentine government may order salary increases to be paid to employees in the private sector, which would increase our operating costs.
   
We are exposed to risks in relation to compliance with anti-corruption and anti-bribery laws and regulations overseas and in the U.S.
   
The real estate market is uncertain in Argentina and the investment in Argentine real property is subject to economic and political risks.

 

4
 

 

An adverse economic environment for real estate companies such as a credit crisis may adversely impact our results of operations and business prospects significantly.
   
There are limitations on the ability of foreign persons to own Argentinian real property.
   
Our business is subject to extensive domestic and foreign regulation, including regulations and laws imposed by the U.S. and Argentine governments, and additional regulations may be imposed in the future.
   
There is limited public information about real estate in Argentina and there may be a lack of liquidity in the underlying real estate.
   
The Company may be subject to certain losses that are not covered by insurance.
   
The boutique hotel market is highly competitive.
   
The profitability of Algodon Wine Estates will depend on consumer demand for leisure and entertainment and the performance of hotel management.
   
The tourism industry is highly competitive and may affect the success of the Company’s projects.
   
The ability of the Company to operate its businesses may be adversely affected by U.S. and Argentine government regulations.
   
Climate change, or legal, regulatory or market measures to address climate change, may negatively affect our business, operations or financial performance, and water scarcity or poor water quality could negatively impact our production costs and capacity.
   
GGI has a limited operating history, and the flagship store is still operating at a loss.
   
The markets in which we operate, and which plan to operate in are highly competitive, and such competition could cause our business to be unsuccessful.
   
Our business is subject to risks associated with importing products, and the imposition of additional duties and any changes to international trade agreements could have a material adverse effect on our business, results of operations and financial condition.
   
We may not be able to protect our intellectual property rights, which may cause us to incur significant costs.
   
Privacy breaches and other cyber security risks related to our business could negatively affect our reputation, credibility and business.
   
Insiders continue to have substantial control over the Company.
   
The loss of our Chairman, President and Chief Executive Officer could adversely affect the Company’s businesses.
   
The Company is dependent upon additional financing which it may not be able to secure in the future and may result in dilution of our stockholders.
   
The Company’s officers and directors are indemnified against certain conduct that may prove costly to defend.
   
Our bylaws designate the federal and state courts of the State of Delaware as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers or employees.

 

5
 

 

 

The Company has not and may not pay dividends on its common stock.
   
Our financial controls and procedures may not be sufficient to accurately or timely report our financial condition or results of operations, which may adversely affect investor confidence in us and, as a result, the value of our common stock.
   
Although we qualify as an emerging growth company, we also qualify as a smaller reporting company and under the smaller reporting company rules we are subject to scaled disclosure requirements that may make it more challenging for investors to analyze our results of operations and financial prospects.
   
Raising additional funds through debt or equity financing could be dilutive and may cause the market price of our common stock to decline. We still may need to raise additional funding which may not be available on acceptable terms, or at all.

 

Please see Item 1A “Risk Factors” for more details.

 

Implications of Being an Emerging Growth Company

 

We qualify as an “emerging growth company” as defined in the JOBS Act. For so long as we remain an emerging growth company, we are permitted and currently intend to rely on the following provisions of the JOBS Act that contain exceptions from disclosure and other requirements that otherwise are applicable to companies that conduct initial public offerings and file periodic reports with the SEC. These provisions include, but are not limited to:

 

  being permitted to present only two years of audited financial statements in this prospectus and only two years of related “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our periodic reports and registration statements, including this prospectus;
     
  not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act (“SOX”);
     
   reduced disclosure obligations regarding executive compensation in our periodic reports, proxy statements and registration statements, including in this prospectus; and
     
  exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.

 

We will remain an emerging growth company until:

 

  the first to occur of the last day of the fiscal year (i) that follows February 19, 2026, (ii) in which we have total annual gross revenue of at least $1.235 billion or (iii) in which we are deemed to be a “large accelerated filer,” as defined in the Exchange Act, which means the market value of our common stock that is held by non-affiliates exceeds $700 million as of the end of that year’s second fiscal quarter; or
     
  if it occurs before any of the foregoing dates, the date on which we have issued more than $1 billion in non-convertible debt over a three-year period.

 

We have elected to take advantage of certain of the reduced disclosure obligations in this annual report and may elect to take advantage of other reduced reporting requirements in our future filings with the SEC. As a result, the information that we provide to our stockholders may be different than what you might receive from other public reporting companies in which you hold equity interests.

 

We have elected to avail ourselves of the provision of the JOBS Act that permits emerging growth companies to take advantage of an extended transition period to comply with new or revised accounting standards until those standards apply to private companies. As a result, we will not be subject to new or revised accounting standards at the same time as other public companies that are not emerging growth companies.

 

For additional information, see the section titled “Risk Factors — Risks of being an Emerging Growth Company —We are an “emerging growth company” and the reduced disclosure requirements applicable to emerging growth companies may make our common stock less attractive to investors.

 

6
 

 

ITEM 1. BUSINESS

 

The current corporate organizational structure of GGH and how we have operated substantially for the past year appears below:

 

 

7
 

 

Recent Business Developments

 

Between December 28, 2022, and October 5, 2023, the Company requested draw-downs and received gross proceeds of $937,146 pursuant to the Common Stock Purchase Agreement dated November 8, 2022 (the “2022 ELOC”) and issued 151,684 shares of common stock to Tumim Stone Capital LLC (“Tumim”).
   
On January 9, 2023, the Company entered into a promissory note for gross proceeds of $185,000 bearing interest at 8% per annum. The maturity date is January 9, 2024. The Company repaid principal in the amount of $100,000 on February 22, 2024, and the lender has agreed to being paid $50,000 and $35,000 during March and April, respectively.
   
On February 2, 2023, the Company and 3i, LP (“3i”), the holder of promissory notes (the “2021 Notes”) pursuant to the Securities Purchase Agreement dated November 3, 2021 (the “2021 SPA”) entered into a fourth letter agreement pursuant to which the parties agreed to reduce the Conversion Price of the 2021 Notes to the lower of: (i) the Closing Sale Price on the Trading Day immediately preceding the Conversion Date; and (ii) the average Closing Sale Price of the common stock for the five Trading Days immediately preceding the Conversion Date, beginning on the Trading Day of February 3, 2023.
   
Between February 3 and February 15, 2023, the holder of the 2021 Note elected to convert an aggregate of $1,571,553 in principal and interest, of which $1,335,439, $124,049, and $112,065 was principal, interest and premium converted, into 83,333 shares of common stock at prices ranging from $14.50 to $24.00 per share.
   
On February 8, 2023, the Company and 3i entered into a letter agreement pursuant to which the parties agreed to extend the maturity date of the notes from February 9, 2023 to February 28, 2023.
   
On February 10, 2023, the Company sold 59,100 shares of common stock for gross proceeds of $591,000 to accredited investors and warrants to purchase 14,775 shares of common stock at an exercise price of $10.00 per share. The warrants are exercisable for two years from the date of issuance.
   
On February 20, 2023, the Company entered into an exchange agreement with 3i in order to amend certain provisions of the 2021 SPA and issued the holders warrants to purchase up to an aggregate of 15,000 shares of the Company’s common stock at an exercise price of $10.00.
   
On February 21, 2023, the Company entered into a Securities Purchase Agreement with 3i, pursuant to which the Company will sell to 3i a series of senior secured convertible notes of the Company in the aggregate original principal amount of $5,617,978 (the “2023 Note”), and a series of common stock purchase warrants of the Company, which warrants shall be exercisable into an aggregate of 337,710 shares of common stock of the Company for a term of three years. The Company received $5,000,000 in proceeds after the original issue discount of 11% on the principal. The Company used the proceeds to repay all principal, interest and fees owing under the 2021 SPA.
   
Between May 2, 2023 and December 1, 2023, at the request of 3i, the Company converted a total of $3,822,210 of principal, $220,996 of interest, $13,077 of redemption premium and $1,767,591 of derivative liabilities (including default premium and redemption feature) pursuant to the 2023 Note and the Company issued 2,297,005 shares of common stock upon conversion. The Company recorded cash true up liabilities in the amount of $1,484,677 representing the excess of the conversion amount over the value of shares issued upon conversion.
   
On April 18, 2023, the Company filed a resale registration statement on Form S-1 (File No. 333-271305) to register up to 151,946 shares upon conversion of the 2023 Note, which was declared effective on April 21, 2023.

 

8
 

 

On May 8, 2023, the Company held a Special Meeting of Stockholders, and the stockholders approved, a measure for purposes of complying with Nasdaq Listing Rule 5635(d), the full issuance and exercise of shares of our common stock to be issued pursuant to the Purchase Agreement and Note.
   
On May 9, 2023, the Company filed a resale registration statement on Form S-1 (File No. 333-271305) as amended on May 22, 2023 to register up to 200,000 shares upon conversion of the 2023 Note, which was declared effective on May 26, 2023.
   
On May 21, 2023, an Event of Default occurred with respect to the 2023 Note. As a result, on August 11, 2023, the Company and 3i entered into an agreement pursuant to which, among other things 3i agreed to forbear from issuing an event of default notice and event of default redemption notice through December 31, 2023.
   
On June 1, 2023, the Company received a deficiency letter from the Nasdaq Stock Market notifying the Company that, for the preceding 30 consecutive business days, the closing bid price for the Company’s common stock was trading below the minimum $1.00 per share requirement for continued inclusion on The Nasdaq Capital Market. The Company was given until November 28, 2023 to regain compliance with the $1.00 per share requirement.
   
On June 30, 2023, the Company, through its wholly owned subsidiary, Gaucho Ventures I – Las Vegas, LLC, executed a Fourth Amendment to the Amended and Restated Limited Liability Company Agreement of LVH Holdings LLC to extend the outside date for execution of the ground lease from June 30, 2023 to December 29, 2023.
   
On July 14, 2023, the Company issued a total of 27,027 shares at $5.55 per share to the non-executive directors of the Company as compensation for service as members of the Board of Directors of the Company for the first half of 2023.
   
On August 11, 2023, the Company and 3i entered into an agreement pursuant to which, among other things: (i) 3i agreed to forbear from issuing an Event of Default Notice and Event of Default Redemption Notice; (ii) 3i waived the requirement in the 2023 Note to pay Interest on the 2023 Note monthly in cash for a certain period of time; (iii) 3i agreed to waive application of the Default Rate in the 2023 Note for a certain period of time; (iv) 3i agreed to waive the requirement in the 2023 Note for the Company to prepay, redeem, or convert one quarter of the initial Principal and Interest on the 2023 Note by each three (3) month anniversary of the Issuance Date for a certain period of time; (v) the Company adjusted the exercise price of the Warrant from $13.40 to $4.50; and (vi) 3i may continue to convert the 2023 Note at the Alternate Conversion Price or at $4.50.
   
On August 24, 2023, the Company held its 2023 Annual General Meeting of the Stockholders, at which the stockholders approved: (i) the election of two directors to the Board of Directors; (ii) a reverse stock split in the ratio of 1:2 up to 1:10; (iii) advisory vote on executive compensation; (iv) frequency of advisory vote on executive compensation to be every three years; and (v) ratification of Marcum as the Company’s auditor for 2023. See item 9B for more information.
   
On August 29, 2023, the Company amended its U.S. Registration No. 6043175 for the GAUCHO BUENOS AIRES trademark to include a limitation in Class 25 to goods “other than snapshirts and western style shirts or shirts with western style embroidery.” The amended registration was filed in connection with the settlement of a Petition to Cancel the Company’s registration filed by Heard Design, LLC, dba Howler Brothers.
   
On September 15, 2023, the Company raised a total of $405,000 through the private placement of units at $4.50 per unit, each unit equal to 1 share of common stock and 1/5 of a warrant, not including warrant exercise. A total of 90,000 shares of common stock and warrants to purchase 18,000 shares of common stock were issued. Each whole warrant is exercisable at $4.50 for two years from the date of issuance.

 

9
 

 

On September 25, 2023, the Company implemented a reverse stock split of the Company’s issued and outstanding shares of common stock, par value $0.01 per share, at a ratio of 1-for-10.
   
On September 27, 2023, the Company, through its wholly owned subsidiary, Gaucho Ventures I – Las Vegas, LLC, executed a Letter Agreement regarding LVH Holdings LLC by and between the Company, SLVH LLC, a Delaware limited liability company, and Timberline Development Partners LLC, a Texas limited liability company (“Timberline”), to suspend its business operations, terminate the development agreement with Timberline, distribute all of its available cash in excess of an agreed reserve, waive the provision requiring dissolution of LVH Holdings LLC if no ground lease is signed, and release and terminate certain obligations of the members or their affiliates to contribute capital or perform services to or for the benefit of LVH Holdings LLC.
   
On October 5, 2023, the Company and 3i entered into the First Amendment to the 2023 Note which lowers the conversion floor price of the 2023 Note from $2.70 to $0.40.
   
On October 9, 2023, the Company and 3i entered into the Second Amendment to the 2023 Note (the “Second Amendment”) which amends the 2023 Note and reiterates that the issuance of shares pursuant to the 2023 Note, Note Documents, First Amendment and Second Amendment are subject to compliance with Nasdaq Rule 5635.
   
On October 27, 2023, the Company filed a Preliminary Proxy Statement on Form 14-A, an amended Preliminary Proxy Statement on Form 14-A on November 3, 2023, a Definitive Proxy Statement on Form 14-A and additional definitive proxy materials on Form 14-A on November 13, 2023, and an amendment to the Definitive Proxy Statement on Form 14-A on November 24, 2023, which requested stockholder approval of the following proposals: (i) to approve for purposes of complying with Nasdaq Listing Rule 5635(d), the full issuance of shares of our common stock pursuant to the 2022 ELOC, without giving effect to the 19.99% cap provided under Nasdaq Listing Rule 5635(d); (ii) to grant the Board of Directors discretion (if necessary to prevent the delisting of the Company’s common stock on Nasdaq) on or before June 30, 2024, to implement a reverse stock split of the outstanding shares of common stock in a range from one-for-two (1:2) up to one-for-ten (1:10), or anywhere between, while maintaining the number of authorized shares of common stock at 150,000,000 shares, as required for Nasdaq listing; and (iii) to approve for purposes of complying with Nasdaq Listing Rule 5635(d), the full issuance of shares of our common stock to be issued in a private placement of common stock for gross proceeds of up to $7.2 million pursuant to Rule 506(b) of the Securities Act of 1933, as amended, without giving effect to the 19.99% cap provided under Rule 5635(d).
   
On November 21, 2023, the Company announced the successful completion of drilling of a third water well at Algodon Wine Estates.
   
On November 27, 2023, the Company commenced a private placement of shares of common stock for gross proceeds of up to $4,000,000 at a price per share which equals the Nasdaq Rule 5653(d) Minimum Price definition, but in no event at a price per share lower than $0.60) (the “Private Placement”). Between November 30, 2023 and April 11, 2024, pursuant to the Private Placement, the Company issued a total of 4,741,581 shares of common stock for gross proceeds of $2,850,000.
   
On November 28, 2023, the Company sent correspondence to the Nasdaq Stock Market LLC announcing its intention to effect a reverse stock split, if necessary to regain compliance with Nasdaq’s minimum bid price requirement, pending stockholder approval on December 28, 2023.

 

10
 

 

On November 29, 2023, the Company received a letter from the Staff notifying the Company that it is eligible for an additional 180 calendar day period, or until May 28, 2024 to regain compliance (the “Compliance Date”). Provided that the Company meets the continued listing requirement for market value of publicly held shares and all other applicable requirements for initial listing on the Nasdaq Capital Market with the exception of the Bid Price Requirement, and the Company provides written notice of its intention to cure the deficiency during the second compliance period by effecting a reverse stock split, if necessary, then if at any time before the Compliance Date the closing bid price for the Company’s Common Stock is at least $1.00 for a minimum of 10 consecutive business days, the Staff will provide the Company written confirmation of compliance with the Bid Price Requirement.
   
On December 4, 2023, the Company announced the appointment of Michael Koh to the Advisory Board of Gaucho Holdings.
   
On December 13, 2023, the Company issued a press release announcing that it has retained securities litigation attorney Mark R. Basile, Esq. and his firm, The Basile Law Firm P.C. to recommend courses of action that may bring value to the Company and its stockholders.
   
On December 19, 2023, Gaucho Group Holdings, Inc. issued a press release announcing the postponement of its Special Meeting of Stockholders, originally scheduled to be held at 12:00 p.m. Eastern Time on Thursday, December 28, 2023.
   
Also on December 19, 2023, the Company filed additional definitive proxy materials on Form 14-A on November 13, 2023, an amendment to the Definitive Proxy Statement on Form 14-A on January 5, 2024, a second amendment to the Definitive Proxy Statement on Form 14-A on January 18, 2024, and a third amendment to the Definitive Proxy Statement on Form 14-A on January 22, 2024 which requested stockholder approval of the following proposals: (i) to approve for purposes of complying with Nasdaq Listing Rule 5635(d), the full issuance of shares of our common stock pursuant to the 2022 ELOC, without giving effect to the 19.99% cap provided under Nasdaq Listing Rule 5635(d); (ii) to grant the Board of Directors discretion (if necessary to prevent the delisting of the Company’s common stock on Nasdaq) on or before June 30, 2024, to implement a reverse stock split of the outstanding shares of common stock in a range from one-for-two (1:2) up to one-for-ten (1:10), or anywhere between, while maintaining the number of authorized shares of common stock at 150,000,000 shares, as required for Nasdaq listing; (iii) to approve for purposes of complying with Nasdaq Listing Rule 5635(d), the full issuance of shares of our common stock to be issued in a private placement of common stock for gross proceeds of up to $7.2 million pursuant to Rule 506(b) of the Securities Act of 1933, as amended, without giving effect to the 19.99% cap provided under Rule 5635(d); and (iv) to approve for purposes of complying with Nasdaq Listing Rule 5635(d), the full issuance and exercise of shares of our common stock to be issued pursuant to that certain Securities Purchase Agreement, dated February 21, 2023, the 2023 Note, that certain common stock purchase warrant dated February 21, 2023, and that certain Registration Rights Agreement, dated February 21, 2023 by and between the Company and 3i.
   
In connection with the vesting of Restricted Stock Units (“RSUs”) on December 31, 2023, the Company’s CEO and CFO received a total of 7,093 shares pursuant to RSUs issued under the 2018 Equity Incentive Plan with a grant date value of $11.60 per share.
   
Effective December 31, 2023, William Allen, a Class III Director of the Company, resigned from the Company’s Board of Directors. Mr. Allen did not resign due to any disagreement with the Company on any matter relating to its operations, policies or practices.
   
On January 22, 2024, the Company issued a total of 34,963 shares of common stock at $0.4224 per share in settlement of its matching obligations for the year ended December 31, 2023 under the Company’s 401(k) profit sharing plan for the benefit of the Company’s Chief Executive Officer and Chief Financial Officer.

 

11
 

 

Effective February 5, 2024, pursuant to the 2023 Note, 3i elected to increase the cap on its beneficial ownership of the Company from 4.99% to 9.99% per Section 3(d)(i) of the 2023 Note (the “Maximum Percentage”) by providing written notice to the Company. Such increase in the Maximum Percentage will not be effective until the sixty-first (61st) day after such notice is delivered to the Company.
   
On February 16, 2024, the Company filed a complaint in the United States District Court for the District of Delaware alleging 3i, LP, 3i Management LLC, and Maier Joshua Tarlow engaged in an unlawful securities transaction with the Company as an unregistered dealer under U.S. securities laws.
   
On February 7, 2024, in connection with the vesting of RSUs on December 31, 2023, certain of the Company’s employees, consultants and advisors received a total of 18,410 shares pursuant to RSUs issued under the 2018 Equity Incentive Plan with a grant date value of $11.60 per share.
   
On February 22, 2024, the Company received notice from Tumim of its election to terminate the 2022 ELOC. While the notice to terminate stated that it was effective immediately, Section 8.2 of the Purchase Agreement requires at least 10 Trading Days prior written notice. The Company treated the 2022 ELOC as being terminated by Tumim effective March 7, 2024. No early termination penalties are incurred by either party under the 2022 ELOC.
   
On February 21, 2024, the Company received an Event of Default Redemption Notice from 3i providing notice of Events of Default arising under the 2023 Note Documents and demanding immediate payment of the Event of Default Redemption Price equal to a minimum of $3,437,646
   
On February 28, 2024, the Company received a second Event of Default Redemption Notice from 3i providing notice of an additional Event of Default arising under the 2023 Note Documents, and demanding immediate payment of the Event of Default Redemption Price equal to a minimum of $3,450,711
   
On February 29, 2024, at the Special Meeting of the Stockholders of the Company, the stockholders: (i) approved, for purposes of complying with Nasdaq Listing Rule 5635(d), the full issuance of shares of our common stock pursuant to the ELOC, without giving effect to the 19.99% cap provided under Nasdaq Listing Rule 5635(d); (ii) granted the Board of Directors discretion (if necessary to prevent the delisting of the Company’s common stock on Nasdaq) on or before June 30, 2024, to implement a reverse stock split of the outstanding shares of common stock in a range from one-for-two (1:2) up to one-for-ten (1:10), or anywhere between, while maintaining the number of authorized shares of common stock at 150,000,000 shares, as required for Nasdaq listing; (iii) approved the full issuance of shares of our common stock to be issued in a private placement of common stock for gross proceeds of up to $7.2 million pursuant to Rule 506(b) of the Securities Act of 1933; and (iv) declined to approve, for purposes of complying with Nasdaq Listing Rule 5635(d), the full issuance of shares of our common stock to be issued in a private placement of common stock for gross proceeds of up to $7.2 million pursuant to Rule 506(b) of the Securities Act of 1933, as amended, without giving effect to the 19.99% cap provided under Rule 5635(d). The stockholders did not approve for purposes of complying with Nasdaq Listing Rule 5635(d), the full issuance and exercise of shares of our common stock to be issued pursuant to the 2023 Note Documents by and between the Company and 3i.
   
On March 6, 2024, the Company received an Event of Default notice from 3i regarding an Event of Default arising under the Note Documents for failure to cure a Conversion Failure for a Conversion Notice submitted by 3i on February 20, 2024, and demanding immediate payment of the Event of Default Redemption Price equal to a minimum of $3,460,510
   
On March 14, 2024, the Company announced the launch of its vineyard home rental program, allowing Algodon Wine Estates’ private homeowners to list the luxury vineyard homes for rent for short or long-term stays.
   
On April 2, 2024, the Company filed a post-effective amendment to the registration statement registering 166,667 shares of common stock for resale by Tumim filed on December 16, 2022 and effective December 23, 2022 (the “Original Registration Statement”) in order to terminate the effectiveness of the Original Registration Statement and to deregister, as of the effective date of amendment, all registered securities that remain unsold under the Original Registration Statement as of the date thereof. The amendment was declared effective April 2, 2024.
   
On April 11, 2024, the Company issued a total of 47,637 shares of common stock at a price per share of $0.60 in connection with the anti-dilution provisions of the Private Placement as approved by the Company’s stockholders on February 29, 2024.
   
On April 18, 2024, the Company received a deficiency letter from the Nasdaq Listing Qualifications Department notifying the Company that, due to the Company’s failure to timely file its Annual Report on Form 10-K for the fiscal year ended December 31, 2023 with the Securities and Exchange Commission (the “SEC”), the Company is not in compliance with Nasdaq’s continued listing requirements under Nasdaq Listing Rule 5250(c)(1), which requires the timely filing of all required periodic reports with the SEC.
   
On April 19, 2024, the Board of Directors of the Company, as authorized by the stockholders of the Company, approved a reverse stock split of the Company’s issued and outstanding shares of common stock, par value $0.01 per share, at a ratio of 1-for-10 (the “Reverse Stock Split”). The Board of Directors of the Company also approved an amended and restated Certificate of Incorporation (the “Certificate”) to effect the Reverse Stock Split. On April 24, 2024, the Company filed the Certificate with the Delaware Secretary of State with an effective date of 12:01 a.m., Eastern Time, on May 1, 2024.

 

Please also see Item 5 “Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities” and Item 9B “Other Items” for details on securities issued by the Company in connection with private placements.

 

For a more thorough discussion of the Company’s business, see Item 1 “Business” and Item 7 “Management’s Discussion and Analysis - Recent Developments and Trends”.

 

12
 

 

Company Overview

 

Gaucho Group Holdings, Inc. (the “Company”) was incorporated on April 5, 1999, Effective October 1, 2018, the Company changed its name from Algodon Wines & Luxury Development, Inc. to Algodon Group, Inc., and effective March 11, 2019, the Company changed its name from Algodon Group, Inc. to Gaucho Group Holdings, Inc. (“GGH”).

 

Through its wholly-owned subsidiaries, GGH invests in, develops and operates real estate projects in Argentina. GGH operates a hotel, golf and tennis resort, vineyard and producing winery in addition to developing residential lots located near the resort. In 2016, GGH formed a new subsidiary, Gaucho Group, Inc. and in 2018, established an e-commerce platform for the manufacture and sale of high-end fashion and accessories. In February 2022, the Company acquired 100% of Hollywood Burger Argentina, S.R.L., now Gaucho Development S.R.L (“GD”), through InvestProperty Group, LLC and Algodon Wine Estates S.R.L., which is an Argentine real estate holding company. In addition to GD, the activities in Argentina are conducted through its operating entities: InvestProperty Group, LLC, Algodon Global Properties, LLC, The Algodon – Recoleta S.R.L, Algodon Properties II S.R.L., and Algodon Wine Estates S.R.L. Algodon distributes its wines in Europe under the name Algodon Wines (Europe). On June 14, 2021, the Company formed a wholly-owned Delaware limited liability company subsidiary, Gaucho Ventures I – Las Vegas, LLC (“GVI”), for purposes of holding the Company’s interest in LVH Holdings LLC.

 

GGH’s mission is to increase our scalability, diversify the Company’s assets, and minimize our political risk. We believe our goal of becoming the LVMH of South America (Moët Hennessy Louis Vuitton) can help us to achieve that. While we continue making excellent wine, upgrading our rooms at the Algodon Mansion, and completing the infrastructure at the vineyard, our growth area is in e-commerce through Gaucho – Buenos Aires™ because of the potential for immediate revenues and growth/scale on a global basis. The Gaucho brand also diversifies our business outside of Argentina and helps insulate us from political risk. Together with our wines, these aspects of our business have the potential to insulate us from both the economic and political fluctuations in Argentina. However, we also refer to our Risk Factors in Item 1A regarding the minimal revenues of the Gaucho—Buenos Aires™ brand and its ability to generate revenue in the future.

 

13
 

 

The below table provides an overview of GGH’s operating entities.

 

Entity Name  Abbreviation  Jurisdiction & Date of Formation  Ownership  Business
Gaucho Group, Inc.  GGI  Delaware,
September 12, 2016
  100% by GGH  Luxury fashion and leather accessories brand and e-commerce platform
             
InvestProperty Group, LLC (“InvestProperty Group”)  IPG  Delaware,
October 27, 2005
  100% by GGH  Real estate acquisition and management in Argentina
             
Algodon Global Properties, LLC  AGP  Delaware,
March 17, 2008
  100% by GGH  Holding company
             
Gaucho Ventures I – Las Vegas  GVI  Delaware, June 14, 2021  100% by GGH  Holding company
             
The Algodon - Recoleta S.R.L.  TAR  Argentina,
September 29, 2006
  100% by GGH through IPG, AGP and APII  Hotel owner and operating entity in Buenos Aires
             
Algodon Properties II S.R.L.  APII  Argentina,
March 13, 2008
  100% by GGH through IPG and AGP  Holding company in Argentina
             
Algodon Wine Estates S.R.L.  AWE  Argentina,
July 16, 1998
  100% by GGH through IPG, AGP, APII and TAR  Resort complex including real estate development and wine making in Argentina; owns vineyard, hotel, restaurant, golf and tennis resort in San Rafael, Mendoza, Argentina
             
Gaucho Development S.R.L.  GD  Argentina,
July 16, 1998
  100% by GGH through IPG and AWE  Real estate holding company in Argentina

 

As noted above, Algodon Wine Estates S.R.L. Algodon distributes its wines in Europe under the name Algodon Wines (Europe).

 

14
 

 

Gaucho - Buenos Aires™

 

 

Gaucho – Buenos Aires™ is a luxury leather goods and accessories brand, with a strategic focus on growing its e-commerce business, that is the result of more than a decade’s investment in Argentina’s heart and soul, featuring luxury products that merge the traditional Gaucho style with a modern twist, infused with uniqueness and modern Buenos Aires glamour. With Gaucho – Buenos Aires, GGH adds a high-end leather goods, accessories, and home decor e-commerce sector to its collection of luxury assets. Our e-commerce platform is able to process and fulfill orders in the United States and internationally, and we believe this asset has the potential to achieve significant scale and add value to our company. Gaucho – Buenos Aires connects buyers with some of Argentina’s best creative talents that harness the country’s unique heritage and artisanship of products such as woven fabrics, leather goods and precious metal jewelry.

 

Once dubbed the “Paris of South America” for its exquisite Belle Époque style, we believe that evolving politics and tastes suggest the time is now for Buenos Aires to once again align itself with Milan, New York, Paris and London as a global fashion capital – and for Gaucho – Buenos Aires to become its ambassador. With Argentina beginning to regain its status as a global cultural enclave, we believe it is entering a new golden age. We believe there may be a sizeable appetite in the USA and beyond for our luxury products, such as fine leather goods, accessories and apparel, that deliver and reflect a unique and unmistakable Argentine point of view.

 

Seen in the intricate stitching of handmade leather, or the workmanship of an embossed belt buckle, the “Gaucho” style is a world-renowned symbol of Argentine craftsmanship. Though rooted in the traditions of Argentine culture, Gaucho – Buenos Aires intends to become a brand in which Argentine luxury finds its contemporary expression: merging the traditional Gaucho style with a modern twist, infused with uniqueness and modern Buenos Aires glamour.

 

We believe that Gaucho – Buenos Aires reflects the very spirit of Argentina – its grand history and its revival as a global center of luxury. Our goal is to reintroduce the world to the grandeurs of the city’s elegant past, intertwined with an altogether deeper cultural connection: the strength, honor and integrity of the Gaucho.

 

Gaucho Buenos Aires brand milestones include:

 

  Gaucho - Buenos Aires debuts with its Resort Collection to fashion industry media at Algodon Mansion in Buenos Aires, October 2018;
     
  Gaucho - Buenos Aires debuts ecommerce store, March 2019;
     
  Gaucho - Buenos Aires (GAUCHO.com) debuts Fall/Winter Collection at Argentine fashion week’s Designers Buenos Aires, March 2019;
     
  Gaucho - Buenos Aires celebrates U.S. debut at New York Fashion Week, September 2019;
     
  Gaucho announces agreement with Bergen Logistics, a leading fashion logistics and technology solutions provider to provide international order fulfillment, warehousing, and distribution service, October 2019;
     
  Gaucho - Bueno Aires launches storefront on Amazon.com, June 2021;
     
  Release of The Lucky Bag, in December 2021, an evergreen silhouette to be carried from season to season, intended to serve as a part of Gaucho’s core collection of handbags;
     
  Launch of Gaucho’s e-commerce home and living collection Gaucho Casa, February 2022;

 

15
 

 

  Gaucho - Buenos Aires presents its Fall 2022 collection at Runway 7 for New York Fashion Week, February 2022;
     
  Welcomed new Director of Design Lautaro Garcia de la Peña, in February 2022, to lead Gaucho’s creative team, and as the main designer behind Gaucho’s debut jewelry collection;
     
  Launched flagship brick and mortar retail location in Miami Design District in Q3 2022.

 

Our Products

 

GGI’s Gaucho – Buenos Aires™ primarily sells what Argentina is well known for: leather goods and accessories, all defining the style, quality, and uniqueness of Argentina.

 

Gaucho – Buenos Aires’s fully optimized e-commerce platform (www.GAUCHO.com) offers a commercial line of designer clothing, including leather jackets, branded hoodies, t-shirts, polo shirts and ponchos, with an emphasis on leather goods accessories. In the first quarter of 2022, Gaucho launched its home and living décor collection, Gaucho Casa, which challenges traditional lifestyle collections with its luxury textiles and home accessories rooted in the singular spirit of the gaucho aesthetic. Using the highest-quality natural materials ethically sourced from countries that are pioneers in the field of eco production, such as New Zealand, Iceland and, of course, Argentina, each piece within the line embodies the rarefied heritage of Buenos Aires and its deep-rooted connection to artisanship. In the following 18 months, we also anticipate a strategic roll-out introducing other new products such as fragrances, a Gaucho Kids clothing line, and Gaucho Residences as the natural evolution of the brand’s growth.

 

Blending the quality of a bygone era with what we believe to be a sophisticated, modern, global outlook, the brand’s handcrafted clothing and accessories herald the birth of what we hope will become Argentina’s finest designer label.

 

 

16
 

 

Fragrances: Homme (Men), Femme (Women), Vamos Sport (Unisex)

 

The fragrance collection of Gaucho – Buenos Aires™ was created by Firmenich, the world’s largest privately-owned company in the fragrance and flavor business. Founded in Geneva, Switzerland in 1895, it has created many of the world’s best-known perfumes that consumers the world over enjoy each day, including Giorgio Armani, Hugo Boss, Ralph Lauren, Kenzo, and Dolce & Gabbana. Its passion for smell and taste is at the heart of its success. It is renowned for its world-class research and creativity, as well as its thought leadership in sustainability and exceptional understanding of consumer trends. Each year, it invests 10% of its revenues in research and innovation, reflecting its continuous desire to understand, develop and distill the best that nature has to offer.

 

Sales and Marketing Strategy / Competitive Edge

 

During the economic crisis in Argentina, iconic international fashion chains left the country. As scarcity is the mother of invention, this gave rise to local brands that made up for that absence. Despite the fact that, in our view, Argentina’s fashion scene is today thriving, the country lacks any international mainstream exposure. Argentina’s continuing challenges with inflation and unemployment have made it difficult for local labels to break into the global fashion landscape, and today there is not a single Argentine fashion brand that is a household name. We believe Gaucho – Buenos Aires has the ability to fill that void. Our intention is to become the leading fashion and leather accessories brand out of South America.

 

We have assembled a talented team who speak in the unique voice most representative of Argentina’s local fashion scene, and we believe we have the opportunity, the aptitude and the vision not only to successfully introduce this voice to the world’s fashion scene, but to become a major player in that landscape.

 

Our U.S.-based e-commerce website has been designed to deliver Argentine luxury goods to the U.S. marketplace and elsewhere around the globe. We believe the devaluation of the peso can have positive ramifications for the tourism industry (and Algodon’s hospitality businesses). Tourists from outside Argentina can spend more money at hotels, restaurants and other attractions with a favorable exchange rate. We intend to take advantage of the historic low and deep devaluation of the Argentine peso by producing many of our products and wine in Argentina, thereby paying for product and labor in pesos, we then intend to sell to consumers at a favorable exchange rate in USD to the U.S. and the world.

 

Currently, one of the few ways to buy Argentina goods is to travel there and buy local. We want to change that, and in a favorable economic and political climate, we seek to be in the forefront of opening Argentina’s luxury market to the millions of potential customers around the globe interested in luxury items from Argentina.

 

Our target market is upper and upper-middle class female and male millennials in urban areas of the United States and Europe. Millennials have the potential to become the largest spending generation in history, and with the popularity of midrange to high end fashion brands such as Gucci, Armani, Lululemon, and many others, we believe our millennial target market appreciates high quality clothing and accessories and is willing to spend above the average market price for such quality items in the “affordable luxury” category.

 

17
 

 

Business Advisors

 

John I. Griffin, Board Advisor. Mr. Griffin is Chairman, President, Chief Executive Officer, and the sole shareholder of Maurice Pincoffs Company, Inc. headquartered in Houston, Texas USA. Pincoffs began product trading operations in 1880 and today specializes in international trade, marketing, and distribution of various products. Following 13 years of active and reserve duty, he retired from the United States Navy as Lieutenant Commander. Mr. Griffin was employed by Corning Glass Works where he was involved in plant management and international business activities and then worked outside of the United States for 13 years, first in Tokyo as President of Graco Japan K.K., a metal related manufacturing and marketing joint venture. This was followed by seven years in Paris as Vice President of Graco Inc. where he managed manufacturing and marketing companies throughout Europe as President Directeur General of Graco France S.A. and Fogautolube S.A. (France). Stationed in Brussels for two years, Mr. Griffin was President of Monroe Auto Equipment S.A. with manufacturing facilities in Belgium and Spain and marketing companies throughout Europe and the Middle East. With the acquisition of Maurice Pincoffs Company in 1978, he assumed his current position.

 

During his stay in Europe, Mr. Griffin was a partner in a Haut Medoc vineyard, Le Fournas Bernadotte. For several years Pincoffs was heavily involved in the wine import business as the third largest importer in Texas. Mr. Griffin served for a number of years as Founder and President of the American Institute for International Steel (Washington D.C.) and the American Institute for Imported Steel (New York City) as well as serving as a Director of the West Coast Metal Importers Association (Los Angeles). Active in the Greater Houston Partnership, Mr. Griffin was a Director of the World Trade Division and served as Chairman of the Africa Committee. He was a member of the Committee on Foreign Relations and the World Affairs Council of Houston, and a past Director of The Houston World Trade Association and the Armand Bayou Nature Center.

 

Juliano de Rossi, Creative Solutions Consultant. Juliano serves as a consultant providing valuable guidance to the GGI team, having significant experience in the high-end fashion world. We entered into an oral consulting contract with Juliano on an independent contractor basis in July 2017 for project-based work. The amount paid to Juliano is not considered material because of the project-by-project basis. He currently serves as Creative Solutions Consultant to the Net-a-Porter Group. De Rossi has 15 years’ experience in marketing and advertising for global brands and luxury retailers. He has resided in London for the past five years, working in marketing, content production and brand partnership campaigns for MatchesFashion.com and at the YOOX Net-a-Porter Group where he was responsible for leading the in-house creative solutions (design and production teams) managing multiple content productions served across all YOOX Net-a-Porter Group digital platforms, print publications and social channels. At Mr. Porter, Net-A-Porter, Porter Magazine and Matchesfashion.com, he oversaw the production of top-rate campaigns, driving the content vision for the management of branded content productions including fashion shoots and video series productions for brands such as BMW, Johnnie Walker Blue Label, American Express, Piaget, Cartier, IWC, Marc Jacobs, Burberry Prorsum, Fendi, Lanvin, Crème De La Mer, Chloe, Stella McCartney, Michael Kors, and Helmut Lang.

 

Marketing Strategy

 

Our digital marketing efforts will include ongoing search engine optimization (“SEO”) campaigns and initiatives to increase website conversions and brand awareness, social media marketing via Instagram, Facebook, Amazon and Google Marketplace using micro and macro/celebrity influencers, and public relations firms specializing in the international fashion scene. Our public relations firm, Tara Ink, is currently creating an action plan to generate buzz about our brand, our designers, and our e-commerce platform. Social media star, Neels Visser, is also contacting his broad network of social influencers and micro influencers to lay the groundwork for potential partnerships and brand affiliates/ambassadors.

 

18
 

 

GGI’s Gaucho – Buenos Aires is primarily an e-commerce store targeting U.S. customers. However, we do plan on pursuing reselling retail venues both online and brick and mortar. For example, in the wake of our press launch, we received unsolicited inquiries from several high-end boutiques in Brazil interested in carrying the Gaucho – Buenos Aires™ line. There are of course numerous avenues for us to explore involving brick and mortar opportunities alone, via agencies or direct solicitation.

 

Online reselling avenues we expect to pursue include Net-a-Porter, MatchesFashion and at least six other high-end, reputable venues with whom we already have an established foot in the door via our networking channels.

 

We anticipate our marketing strategy will include pop-up shops in cities such as Austin, Dallas, Houston, Miami, Los Angeles, New York City and Aspen. With pop-up shops, we can for example, work with local PR companies to get the word out, as these opportunities are typically promoted via direct mail, PR and digital marketing efforts, as well as word of mouth and strategic geographic positioning.

 

Our online marketing efforts include SEO initiatives, social media marketing via Instagram, Facebook, Amazon and Google Marketplace, and retargeting ads.

 

Gaucho – Buenos Aires presents an opportunity for global press to talk about Argentina finding its foothold once again on the global fashion scene, spotlighting our designers, our designs, and our concentration on leather goods. As there are few brands launching out of Argentina, and certainly fewer with global intentions, the press reaction to Gaucho – Buenos Aires has been extremely positive and encouraging.

 

Press

 

In early 2019, Gaucho – Buenos Aires garnered the front cover pages of Marie Claire Argentina and Vogue Italia, one of the most iconic fashion magazines on the globe, who states that Gaucho – Buenos Aires is currently “among the most interesting brands on the Argentinian scene.” Our recent press clippings since our Argentina debut in October 2018 include appearances in some of the most widely read fashion magazines in Latin American fashion, including Forbes Argentina, Revista L’Officiel, Revista Luz, Women’s Wear Daily, Nista, and others.

 

Gaucho – Buenos Aires Trademarks

 

We filed a U.S. Trademark Application (Serial No. 87743647) for the Gaucho – Buenos Aires in January 2018, and in February 2019, the U.S. Patent and Trademark Office issued a Notice of Allowance for this mark. This application covers goods and services such as apparel, leather accessories and other products, jewelry, cosmetic fragrances and home goods.

 

The Company intends to promote Gaucho – Buenos Aires™ so that its name and logo collectively become a recognizable trademark with international appeal. We anticipate seeking trademark protection for other marks as we develop our business and product lines.

 

Within six months of the Notice of Allowance date, or August 12, 2019, we were required to file a satisfactory Statement of Use if use has occurred, or file for an extension of time. The mark was then in use with some of the goods, but not others. As a result, on August 6, 2019, we filed to divide the application for the goods that were in use for which a Statement of Use was filed and filed an Extension Request in the existing application for the remaining goods. As the mark was put into use with other of the remaining goods, we filed Statements of Use on August 12, 2020 and August 12, 2021. On April 28, 2020, and October 20, 2020, and October 12, 2021, the trademarks were officially registered with the United States Patent and Trademark Office.

 

19
 

 

On October 13, 2022, Heard Design, LLC, dba Howler Brothers, filed a Petition to Cancel the Company’s U.S. Registration No. 6043175 for the GAUCHO BUENOS AIRES and Design mark in Classes 18, 25 and 33 with the United States Trademark Trial and Appeal Board. The action was filed after an application the petitioner filed for the mark GAUCHO SNAPSHIRT in Class 25, US Trademark Application No. 90837298, was rejected over the Company’s registration. The parties reached a settlement agreement effective May 12, 2023, in which the Company excluded “snapshirts and western style shorts or shirts with western style embroidery” (but not shirts in the traditional Argentinian gaucho style) from the goods in its U.S. Registration No. 6043175 and agreed to not sell such shirts under a mark that includes “GAUCHO”.

 

The details of the registrations are:

 

Registration No. 6,043,175

Registration Date: April 28, 2020

Classes: 18, 25 and 33

Goods: Class 18–- Handbags; purses; clutch wallets and handbags; wallets; belt bags; necessaire, namely, cosmetic bags sold empty; travel bags,
  Class 25–- T-shirts; tops; shirts other than snapshirts and western style shirts or shirts with western style embroidery; sweaters; hoodies; ponchos; pants; bottoms; shorts; skirts; dresses; jackets; coats; scarves; pocket squares; ties; belts; hosiery; underwear; gloves; footwear; shoes; headwear; hats; caps being headwear
  Class 33 – Wines

 

Registration No. 6,180,633

Registration Date: October 20, 2020

Corrected: February 8, 2022

Classes: 3 and 24

Goods: Class 3 – Fragrances; perfumes
  Class 24 – Bed and table linen; bed blankets; bed sheets; pillowcases; comforters; duvets; bath linen

 

Registration No. 6,521,054

Registration Date: October 12, 2021

Classes: 14 and 21

Goods: Class 14 – Jewelry; earrings; keychains

Class 21 – Beverageware; cups; coffee services in the nature of tableware; tea services in the nature of tableware; saucers; serving trays

 

Below are additional marks the Company made filings for in 2021 and 2022 and updates:

 

MAISON GAUCHO – App. No. 90869612 filed August 6, 2021 for:

Class 41 - Casinos; Night club services; Dance club services

Class 43 - Hotel accommodation services; restaurant services; bar services; bar and cocktail lounge services

The application is allowed with a Statement of Use/3rd Extension due September 20, 2024

 

GAUCHO CASA BUENOS AIRES – App. No. 90869668 filed August 6, 2021 for:

Class 4 - Candles; scented candles

Class 8 - Flatware, namely, forks, knives and spoons; table cutlery; knives; tableware, namely, forks, knives and spoons that are made of precious metals or are precious metal-plated; champagne sabres

Class 11 - Lamps

Class 20 - Furniture; mirrors; picture frames; drapery hardware, namely, traverse rods, poles, curtain hooks, curtain rods and finials

An Office Action issued on January 15, 2024 rejecting the application over two prior registrations. A response arguing over the refusal will be filed by July 15, 2024.

 

20
 

 

VAMOS SPORT – App. No. 97163672 filed December 9, 2021 for:

Class 3 – Fragrances

The application is allowed with a Statement of Use/3rd Extension due September 27, 2024.

 

GAUCHO FUEGO – App. No. 97182237 filed December 21, 2021 for:

Class 3 – Fragrances

The application is allowed with a Statement of Use/4th Extension due August 9, 2024.

 

GAUCHO FIRE – App. No. 97182241 filed December 21, 2021 for:

Class 3 – Fragrances

The application is allowed with a Statement of Use/4th Extension due August 9, 2024.

 

GAUCHO BUENOS AIRES – App. No. 97316578 filed March 17, 2022 for:

Class 35 – Online retail store services featuring clothing and clothing accessories, fragrances, jewelry, handbags, bags, wallets and credit card cases

The application has been approved and was published on April 9, 2024. If no oppositions are filed, the mark will register around the beginning of July 2024.

 

 

– Reg. No. 6872808 registered October 11, 2022, from App. No. 97316580 filed March 17, 2022 for:

Class 35 – Online retail store services featuring clothing and clothing accessories, fragrances, jewelry, beverageware and housewares, cutlery, candles, handbags and bags, wallets and credit card cases.

 

VAMOS SPORT – App. No. 97326711 filed March 23, 2022 for:

Class 18 – Tote bags; athletic bags; leather tote bags; leather backpacks.

The application is currently suspended over an earlier-filed application.

 

Argentina Activities

 

GGH, through its wholly-owned subsidiary and holding company, InvestProperty Group (“IPG”), identifies and develops specific investments in the boutique hotel, hospitality and luxury property markets and in other lifestyle businesses such as wine production and distribution, golf, tennis and real estate development. GGH also operates hotel, hospitality and related properties and is actively seeking to expand its real estate investment portfolio by acquiring additional properties and businesses in Argentina, or by entering into strategic joint ventures. Using GGH’s fine wines as its ambassador, GGH’s mission is to develop a group of real estate projects under its ALGODON® brand with the goal of developing synergies among its luxury properties.

 

In 2016, GGH formed a new wholly-owned subsidiary, Gaucho Group, Inc. (“GGI”), and in 2019, the entity began developing a platform and infrastructure to manufacture, distribute and sell high end products created in Argentina under the brand name Gaucho – Buenos Aires™. See Gaucho – Buenos Aires™ .

 

GGH’s senior management is based in Miami. GGH’s local operations are managed by professional staff with substantial hotel, hospitality and resort experience in Buenos Aires and San Rafael, Argentina.

 

21
 

 

GGH’s Concept and Business: Repositioning of Hotel Properties, Luxury Destinations and Residential Properties

 

GGH, through IPG, focuses on opportunities that create value through repositioning of underperforming hotel and commercial assets such as hotel/residential/retail destinations. Repositioning means we are working to gradually increment our average fares to solidify our position as a luxury option. This trend has been well received in large metropolitan areas which have become quite competitive. We believe that the trend is now trickling down to secondary metropolitan, resort and foreign markets where there is significantly less competition from the established major operators. We continue to seek opportunities where value can be added through re-capitalization, repositioning, expansion, improved marketing and/or professional management. We believe that GGH can increase demand for all of a property’s various offerings, from its rooms to its dining, meeting and entertainment facilities, to its retail establishments through careful branding and positioning of properties. While the maxim remains true that the three most important factors in real estate are “location, location, location,” management believes that “style and superior service” have grown in importance and can lead to increased operating revenues and capital appreciation.

 

We continue to aim at increasing our activity, occupancy and presence in the market by using direct marketing actions (Facebook and Google Ads, Trip Advisor, Online Travel Agencies, internet presence), and expanding our net of travel agencies and operators, introducing effective changes in our direct sales capacity (new sales-oriented webpages, joint ventures with other hotel organizations, training of our reservations employees, implementing new reservation software). We have also reached out to travel industry media operators to develop new strategic relationships and we are implementing a new commercial management operation for a more aggressive approach with a sales-oriented objective. GGH has built a team of industry professionals to assist in implementing its vision toward repositioning real estate assets. See Item 10 - “Directors, Executive Officers and Corporate Governance”.

 

Plan of Operations

 

GGH continues to implement its growth and development strategy that includes a luxury boutique hotel, a resort estate, vineyard and winery, the sale of high-end fashion, leather goods and accessories, and a large land development project including residential houses within the vineyard. See “Algodon Wine Estates” below.

 

Long Term Growth Strategy

 

Our desire is to follow in the footsteps of global leading luxury brands such as Chanel from Paris, Burberry from London, Tom Ford from New York, and Gucci from Milan, and to establish Gaucho as “the Spirit of Argentina” representing Buenos Aires. In doing so, our mission is also to work with the intention of building a multi-billion-dollar brand. We believe that through our e-commerce website, we have the potential to achieve significant scale, and add value to our company.

 

Roll-up Strategy

 

We believe we are now positioned to utilize the Company’s listing on Nasdaq in a sort of “roll-up strategy” to acquire other companies that fall squarely within or complement the Company’s existing and planned lines of business. For example, we might seek to acquire businesses that offer high-end fashion and accessories, or other luxury products and/or experiential hospitality experiences, the quality of which is consistent with the GGH brand. We seek to become the LVMH (“Louis Vuitton Moet Hennessy”) of South America, with the goal of becoming its most well-known luxury brand. The Company hopes to continue to self-finance future acquisition and development projects because in countries like Argentina, having cash available to purchase land and other assets provides an advantage to buyers. Bank financing in such countries is often difficult or impossible to obtain. To be able to grow our business and expand into new projects, the Company would first want to deploy excess cash generated by operations, but significant amounts of excess cash flow is not anticipated for at least a number of years. Another option would be obtaining new investment funds from investors, including public offerings, and/or borrowing from institutional lenders. GGH may also be able to acquire property for stock instead of cash.

 

22
 

 

Cobranding and Strategic Alliances

 

One of GGH’s goals includes positioning its brand ALGODON® as one of luxury. In the past we have formed strategic alliances with well-established luxury brands that have strong followings to create awareness of the GGH brand and help build customer loyalty. Since its inception, GGH has been associated or co-branded with several world-class luxury brands including Relais & Châteaux, Veuve Clicquot Champagne (owned by Louis Vuitton Moët Hennessy), Nespresso, Porsche, Chanel, Hermès, Art Basel, and Andrew Harper Travel.

 

Catalysts for Growth

 

Gaucho Casa Residences

 

As Gaucho – Buenos Aires™ continues to expand its recognition on a domestic and international basis, another area that we can potentially create value and scale is by licensing our brand to commercial, and residential real estate developments. Current examples of such co-branded developments include: Aston Martin Residences in Miami, Bulgari Resort and Residences Dubai, Fendi Chateau Residences in Bal Harbour, Residences by Armani Casa in Miami, Mercedes House in New York, as well Porsche Design Tower in Sunny Isles Beach.

 

These fashion houses and automobile manufactures license their brand’s unique styles and unmistakable names to real estate developers, in an effort to create business opportunity. The mutually beneficial model could be a medium through which Gaucho – Buenos Aires™ makes its imprint on the global market. By using our distinct style – employing fine leathers, metals, and natural stones – in the design and construction of such a project, Gaucho – Buenos Aires could add intrinsic value to the parties involved. This creates potential for licensing fees, as well as a portion of proceeds from property sales.

 

 

Gaucho Casa

 

Gaucho Casa is a home & living décor brand, owned and operated entirely by GGI, which operates as a sub-brand nestled under Gaucho – Buenos Aires.

 

Gaucho Casa challenges traditional lifestyle collections with its luxury textiles and home accessories rooted in the singular spirit of the gaucho aesthetic. Using high-quality natural materials sourced from countries that are pioneers in the field of eco production, such as New Zealand, Iceland and, of course, Argentina, each piece within the line embodies the rarefied heritage of Buenos Aires and its deep-rooted connection to artisanship.

 

Celebrating the equestrian culture that “gaucho country” is world-renowned for, we believe that the collection’s silver-plated trays, bottle accessories and more elegant homeware pieces featuring elaborate horn detailing are a perfect embodiment of the contemporary glamour of Buenos Aires. Naturally, the epic wild landscapes have had their own influences, with a curated edit of sheepskin rugs, Tibetan cashmere cushions, mohair throws and Brazilian cow-hide cushions, providing the perfect partnership of form and function – and a chic complement to the more modern details in your home. Whether you’re looking to embrace the gaucho lifestyle or bring a touch of the country to the city, Gaucho Casa offers an organic design DNA for every interior space, ideal for modern living.

 

23
 

 

In recent years, there has been a rise of boutique hotel home goods collections such as by Marriott, who led the way with its debut of Autograph Collection. Others that have followed include Curio by Hilton (Starwood’s Tribute Portfolio), and The Unbound Collection (part of the Hyatt Hotels group). We envision the possibility of Gaucho – Buenos Aires utilizing Algodon Mansion as a launch point for a collection of hotel bedding, pillows, linens and robes. Likewise, Argentina’s “La Belle Époque” could serve as a reliable source of inspiration for a multitude of luxury consumer goods, including home soft-furnishings. Argentina’s rich Polo heritage might also serve as a reliable foundation for a collection of high-end, contemporary leather home furnishings for anything from armchairs and sofas to lamps and photo frames.

 

Gaucho – Kids Collection

 

We envision the possibility of a designer baby and kids’ clothes collection at Gaucho – Buenos Aires, so that parents who love our brand can treat their children to a luxury line of fun, Gaucho-inspired clothing for kids . We envision building this line around the idea of creating comfy, well-made garments that allow kids to be creative in the way they dress. Gaucho Kids may include, for example, branded onesies and toddler t-shirts, whimsical prints that foster imagination and individuality, and other unique printed separates for kids who don’t mind standing out in a crowd.

 

Popup Shops

 

Popup shops are a popular trend that can be a low cost means of creating a temporary store front focusing on spreading brand awareness, communicating brand values, collecting customer data, and providing personalized experiences. This can also provide a way for Gaucho – Buenos Aires to build a relationship with customers in person, while driving conversion on more cost-effective digital channels. We envision popup shops in U.S. cities such as Aspen, Austin, Dallas and Houston, Miami, Los Angeles, New York City, Berlin and Barcelona. With pop-up shops, we can work with local PR companies to get the word out, as these opportunities are typically promoted via direct mail, PR and digital marketing efforts, as well as word of mouth and strategic geographic positioning. We also anticipate installing a popup shop during the summer season in Punta Del Este, Uruguay, which is a popular vacation spot for wealthy Argentines and other Latin Americans.

 

Currency Devaluation

 

A currency devaluation can help Argentina tourism, enticing foreign holidaymakers seeking to make their vacation money stretch further. Vacationers looking for the most representative souvenirs of Argentina and its culture may know the country is best known for its leather. With hundreds of domestic tanneries, Argentina’s has high quality production of cow, sheep and goat leather goods such as jackets, shoes and handbags.

 

A devalued peso may also aid Argentina’s wine exporters by improving market competitiveness and leading to higher revenues. Additionally, non-leveraged real estate can be a hedge against inflation, and we believe that over time our land values may perform well.

 

While our contracts and vendors are largely payable in pesos, which is favorable to us given the current exchange rate of the peso against the U.S. dollar, the downside is that the Argentine market is somewhat closed off for our Gaucho brand goods and our wines. Even though we produce some Gaucho goods in Argentina, and we are able to realize a higher margin by selling outside of Argentina, we also do have some goods produced in the U.S. at a higher cost and our margins are therefore much lower.

 

Further, our real estate and hotel operations are stated in U.S. dollars, which can be seen as less desirable than stating in pesos and could have a negative effect on demand for those parts of our business.

 

24
 

 

The ALGODON® Brand

 

We believe that the force and power of brand is of paramount importance in the luxury real estate/hotel market. GGH has developed the ALGODON® brand, which is inspired by both the Cotton Club days of the Roaring 20’s and the distinctive style and glamour of the 50’s Rat Pack when travel and leisure was synonymous with cultural sophistication. This brand concept was taken from the Spanish word for “cotton”, and we believe that this connotes a clean and pure appreciation for the good life, a sense of refined culture, and ultimately a destination where the best elements of the illustrious past meet the affluent present. GGH is looking to attract attention and upscale demographic visitors to the ALGODON® properties and to round out the brand experience in various other forms including music, dining, wine, sports and apparel, by marketing themes that highlight active lifestyles and the pleasures of life. Management believes that these types of brand extensions will serve to reinforce the overall brand recognition and further build upon GGH’s presence in the luxury hotel segment.

 

Description of Specific Investment Projects 

 

GGH has invested in two ALGODON® brand properties located in Argentina. The first property is Algodon Mansion, a Buenos Aires-based luxury boutique hotel that opened in 2010 and is owned by IPG’s subsidiary, The Algodon – Recoleta S.R.L. (“TAR”). The second property, owned by Algodon Wine Estates S.R.L., is a Mendoza-based winery and golf resort called Algodon Wine Estates, consisting of 4,138 acres, which was subdivided for residential development and expanded by acquiring adjoining wine producing properties.

 

Algodon Mansion

 

 

The Company, through TAR, has renovated a hotel in the Recoleta section of Buenos Aires called Algodon Mansion, a six-story mansion (including roof-top facilities and basement) located at 1647 Montevideo Street, a tree-lined street in Recoleta, one of the most desirable neighborhoods in Buenos Aires. The property is approximately 20,000 square feet and is a ten-suite high-end luxury hotel with a lounge/living room area, a patio area featuring a glass ceiling and fireplace, and a private wine tasting room. The property also includes a rooftop that houses an open-air lounge and terrace pool. Each guest room is an ultra-luxury two-to-three room suite, each approximately 510-1,200 square feet. Recoleta is Buenos Aires’ embassy and luxury hotel district and has fashionable boutiques, high-end restaurants, cafés, art galleries, and opulent belle époque architecture.

 

25
 

 

Below is a table showing occupancy data, average daily rate and revenue per available room (“RevPAR”) for Algodon Mansion:

 

   TAR -  Buenos Aires 
   USD   ARS 
   For the Years Ended December 31,   For the Years Ended December 31, 
   2022   2023   Δ Amount   Δ %   2022   2023   Δ Amount   Δ % 
Occupancy level   50%   54%   4%   8%   50%   54%   4%   8%
Average daily Rate (ADR)   261    386    125    48%   36,335    119,681    83,346    229%
RevPAR   130    209    79    61%   18,129    64,813    46,684    258%

 

  This is a Hotel KPI calculation that shows the percentage of available rooms or beds being sold for a certain period of time.
   
Occupancy level: It is important for hotels to keep track of this data on a daily basis to identify the average daily rate, forecast and apply revenue management.
   
  This ratio increased by 4% keeping our steady increase in occupancy level. TAR revenue continues to be highly dependent on international tourism.
   
   
  This is a metric widely used in the hospitality industry to indicate the average realized room rental per day.
   
Average daily Rate (ADR): This is calculated by taking the average revenue earned from rooms and dividing it by the number of rooms sold. It excludes complimentary rooms and rooms occupied by staff.
   
  2023 ADR in USD increased in comparison with the previous year from USD 261 to USD 386 to reflect inflation. The same ratio in ARS has increased by 229% due to the effect of the devaluation of the Argentine peso.
   
   
  Revenue per available room (RevPAR) is a performance metric used in the hotel industry. It is calculated by multiplying a hotel’s average daily room rate (ADR) by its occupancy rate.
RevPAR:  
  2022 RevPAR in USD has increased in comparison with previous year from USD 130 to USD 209 due to the increased daily rate. The same metric in ARS has increased by 258% due to the effect of the devaluation of the Argentine peso.

 

Past guests of Algodon Mansion include President Mauricio Macri of Argentina, Roger Federer, Bobby Flay, Jim Courier, Andre Agassi, Pete Sampras, Mardy Fish, Salvatore Ferragamo, and Maguy Maccario Doyle, the Principality of Monaco’s Ambassador to the United States. Algodon Mansion was featured in an article by Huffington Post in January 2018, which praised the luxurious accommodations, impressive suites, and fine amenities of the hotel.

 

 

In both 2019 and 2018, Algodon Mansion was inducted to TripAdvisor’s Hall of Fame, a distinction given to recognize hotels that have won its Certificate of Excellence award for five consecutive years. Algodon Mansion won the Certificate of Excellence award for the years 2014 through 2019. The Certificate of Excellence award celebrates businesses that have continually delivered a quality customer experience, taking into account the quality, quantity and recency of reviews submitted by travelers on TripAdvisor over a 12-month period. To qualify, a business must maintain an overall TripAdvisor bubble rating of at least four out of five, have a minimum number of reviews and must have been listed on TripAdvisor for at least 12 months.

 

Algodon Wine Estates 

 

 

Algodon Wine Estates S.R.L. (“AWE”) is 4,138-acre area located in the Cuadro Benegas district of San Rafael, Mendoza, now known as Algodon Wine Estates. The resort property is part of the Mendoza wine region nestled in the foothills of the Andes mountain range. This property includes a winery (whose vines date back to the mid-1940’s), a 9-hole golf course, tennis, restaurant and hotel. The estate is situated on Mendoza’s Ruta del Vino (Wine Trail). The 4,138-acre property has an impressive lineage, both in terms of wine production and golf, and features structures on the property that date back to 1921.

 

Algodon Wine Estates features Algodon Villa, a private lodge originally built in 1921, that has been fully restored and refurbished to its original farmhouse design of adobe walls and cane roof. The lodge offers three suites, a gallery for private gatherings, a living area that may also serve as a dining and conference room, swimming pool, and adjacent vine-covered picnic area. The Algodon Villa offers five-star service and is situated for vacationing families, business conferences, retreat travelers, golfing companions, or wine route globe trekkers. Algodon Wine Estates has also recently completed the construction of a new lodge which lies adjacent to the original one. The new lodge features six additional suites and a gallery with two fireplaces and a bar.

 

26
 

 

Below is a table showing occupancy data, ADR and RevPAR for Algodon Wine Estates:

 

   AWE - San Rafael 
   USD   ARS 
   For the Years Ended December 31,   For the Years Ended December 31, 
   2022   2023   Δ Amount   Δ %   2022   2023   Δ Amount   Δ % 
Occupancy level   41%   35%   -6%   -15%   41%   35%   -6%   -15%
Average daily Rate (ADR)   232    293    61    26%   31,650    85,891    54,241    171%
RevPAR   94    103    9    10%   12,859    30,219    17,360    135%

 

  This is a Hotel KPI calculation that shows the percentage of available rooms or beds being sold for a certain period of time.
   
Occupancy level: It is important for hotels to keep track of this data on a daily basis to identify the average daily rate, forecast and apply revenue management.
   
  This ratio decreased by 6% due to the reduction of subsidy from Argentina’s Ministry of Tourism for luxury hotels.
   
   
  This is a metric widely used in the hospitality industry to indicate the average realized room rental per day. 
   
Average daily Rate (ADR): This is calculated by taking the average revenue earned from rooms and dividing it by the number of rooms sold. It excludes complimentary rooms and rooms occupied by staff.
   
  2023 ADR in USD increased from previous year (USD 232 vs USD 293) to reflect market pricing. The same ratio in ARS increased by 171% due to the effect of the devaluation of the Argentine peso to the USD.
   
   
  Revenue per available room (RevPAR) is a performance metric used in the hotel industry. It is calculated by multiplying a hotel’s average daily room rate (ADR) by its occupancy rate.
RevPAR:  
  2023 RevPAR in USD has increased in comparison with the previous year from USD 94 to USD 103 due to the lower occupancy level. The same ratio in ARS increased by 135% due to the devaluation of the peso.

 

 

In 2018, Algodon Wine Estates was inducted to TripAdvisor’s Hall of Fame, a distinction given to recognize hotels that have won its Certificate of Excellence award for five consecutive years. Algodon Wine Estates won the Certificate of Excellence award for the years 2014 through 2019. The Certificate of Excellence award celebrates businesses that have continually delivered a quality customer experience, taking into account the quality, quantity and recency of reviews submitted by travelers on TripAdvisor over a 12-month period. To qualify, a business must maintain an overall TripAdvisor bubble rating of at least four out of five, have a minimum number of reviews and must have been listed on TripAdvisor for at least 12 months.

 

Algodon Fine Wines

 

 

Algodon Wine Estates contains a vineyard with 290 acres of vines. Over 60 acres have been cultivated since the 1940’s, and approximately 20 acres since the 1960’s. The property produces eight varieties of grapes, including Argentina’s signature varietal, Malbec, as well as Bonarda, Cabernet Sauvignon, Merlot, Syrah, Pinot Noir, Chardonnay and Semillon. The primary difference between the old and new vines is the style of pruning. Algodon Wine Estates utilizes a boutique wine making process, typified by production of a low volume of premium wines sold at a higher-than-average price in the market.

 

In an effort to increase the distribution of its wines, Algodon Wine Estates is working with a number of importers operating in some of the world’s chief markets for premium wines. In Europe, Algodon Wine Estates warehouses its wines in Amsterdam for central distribution to clients in Germany and in the U.K. through Condor Wines (www.condorwines.co.uk), which works with regional distribution partners throughout the U.K. such as hotel and restaurant chains, regional and national brewers, pub companies, wholesalers and wine merchants. In the United States, Algodon Fine Wines is available for sale online and in stores at Spec’s Wines, Spirits and Finer Foods retail stores in Texas, and Wally’s Wine & Spirits retail store located in Los Angeles, among others. GGH’s Fine Wine’s Malbec has been featured on the esteemed wine lists of West London’s The Fat Duck, a Michelin 3-Star Restaurant, and arguably the U.K.’s most famous eatery, as well as London’s Restaurant Gordon Ramsay, A Michelin 3-Star Restaurant, also the exclusive London wine club, 67 Pall Mall, and the exclusive wine list of Buenos Aires’ fine dining restaurant, Parrilla Don Julio, one of Argentina’s most high-profile eateries.

 

27
 

 

In the first quarter of 2024, Algodon Fine Wines embarked on a new phase of growth in the United States by partnering with 3Js Importing, a family-owned wine importing and distribution company based in New Jersey. This new alliance replaces our previous relationship with Seaview Imports, positioning 3Js Importing as our primary distributor in the U.S.

 

3Js Importing is known for its passion for quality wines and a deep commitment to sharing exceptional wine experiences. With a focus on bringing to market wines that reflect the unique style and terroir of their regions, 3Js has built a robust distribution network that now includes Algodon Fine Wines. This partnership allows us to introduce our wines to a broader audience through a variety of respected establishments and retailers across New Jersey and nearby states, such as Fiorino’s, The Frog & The Peach, and Wine Chateau, among others.

 

Our collaboration with 3Js Importing is more than just a business venture; it’s a shared mission to connect wine lovers with stories and experiences that resonate. As we move forward, both Algodon Fine Wines and 3Js are focused on deepening these connections, fostering new relationships, and ensuring that our customers have access to our distinctive selection of wines. This partnership marks an exciting step forward in our mission to share our love of wine with more people in the U.S.

Current Distribution Markets (as of the first quarter of 2024)

 

California – dba Hollywood Burger

 

California – dba Salvatore Italian Restaurant

 

California – dba Wally’s Wine and Spirits

 

California – Golden State Wine & Spirits

 

California – Peach Systems Inc.

 

California – La Boutillier

 

California – Cyrus

 

Florida – Greystone

 

Florida – Southern Glazers Wine and Spirits

 

Florida – Bunberry

 

Florida – City Hall Cafe

 

Florida – Seaspice

 

Florida – Santorini by Georgios

 

Florida – Blue Ribbon Sushi

 

Florida – Think Hospitality Group

 

Florida – Meat & Bone

 

Florida – Lagniappe Wine Bar

 

Florida – Olivers Bistro

 

Georgia – Georgia Crown Distributing - Atlanta

 

Illinois – Louis Glunz Wines Inc

 

Illinois – Chicago Noble Grape

 

Indiana 21st Amendment

 

Maryland – Lanterna Distributors, Inc.

 

28
 

 

Massachusetts – Table & Vine (+ local wholesaler)

 

Minnesota – Bellboy Corporation

 

Missouri – Brown Derby

 

New Jersey – Alpine Country Club

 

New Jersey – Biagio’s Terrace

 

New Jersey – B2Bistro

 

New Jersey – Bottles by Sickles

 

New Jersey – Cellar97

 

New Jersey – Fiorino’s

 

New Jersey – The Frog & The Peach

 

New Jersey – Foresgate Country Club

 

New Jersey – Giannone Wine & Liquor, West NY, NJ

 

New Jersey – Hanley’s

 

New Jersey – Midtown Wine Merchants

 

New Jersey – Metuchen INN

 

New Jersey – Metuchen Golf & Country Club

 

New Jersey – Navasink Country Club

 

New Jersey – NJ Wine Seller

 

New Jersey – Planet of Wine

 

New Jersey – Port Washington Imports

 

New Jersey – Restaurant Da Benito

 

New Jersey – Royal Wine &Spirts I

 

New Jersey – Royal Wine & Spirits II

 

New Jersey – The Wine Shop

 

New Jersey – Woody’s Roadside Tavern

 

New Jersey – Wine List

 

New Jersey – Wine Anthology

 

New Jersey – Wine Anthology

 

New Jersey – dba Wine Chateau / Le Malt

 

New Jersey – Xplore Wine

 

New York – Paramount

 

New York – The Union League

 

New York – The Craft Group

 

New York – Buy Wise Liquor

 

New York – Independence Wine & Spirits of NY, LLC

 

29
 

 

New York – dba Ambassador Wine & Spirits

 

New York – dba Beekman Wine & Liquor

 

New York – dba Estancia 460

 

New York – dba Nirvana

 

New York – dba Pascalou

 

New York – dba Tuscany Steakhouse

 

New York – dba Friars National Association Inc.

 

New York – dba Mister Wright

 

Nevada – Franco Wine

 

Oklahoma – Elite Wine & Spirits

 

Texas – United Wine and Spirits, LLC

 

None of the understandings with wine importers constitute a binding commitment by either party to produce, import or export the Company’s wines; performance by any of the parties is dependent upon numerous factors such as economic and political climate, consumer spending, weather, the Company’s ability to continue wine production operations, the market acceptance of the Company’s products, and other matters described in Item 1A - “Risk Factors”.

 

AWE uses microvinification (barrel fermentation) for its premium varietals and blends. Microvinification is commonly used in France, but is uncommon in Argentina, and Algodon Wine Estates is one of the few wineries in the country to implement this specialized process.

 

 

 

In the third quarter of 2020, Algodon Fine Wines launched e-commerce websites in both the U.S. and Argentina.

 

30
 

 

In September 2020, Algodon Fine Wines announced the launch of an e-commerce initiative servicing patrons in Argentina, at AlgodonWines.com.ar. The e-commerce store sells and ships Algodon wines direct from its San Rafael, Mendoza winery to consumers living in Argentina. This debut is part of an expanded effort to roll out the brand’s premium Malbec-based wines, as well as the rest of the Algodon portfolio of award-winning varietals and blends. In September 2020, Algodon Fine Wines also launched an e-commerce initiative servicing the United States, with the backend warehousing and fulfillment provided by the California-based distributer VinPorter Wine Merchants, at AlgodonFineWines.com. In March 2024, AlgodonFineWines.com changed its ecommerce distributor to Giannone Wine & Liquor Co. The e-commerce store, powered by Giannone Wine & Liquor Co, links to a virtual storefront showcasing the Algodon wines currently distributed in the U.S. In addition to the Algodon Fine Wines site powered by Giannone Wine & Liquor Co, Algodon wines are also available throughout the U.S. both in-store and online at such retailers as Spec’s, The Noble Grape and Wine-Searcher.com (among others).

 

Algodon’s premium wines have received a number of top awards and ratings from the world’s foremost tasting competitions including Gold Medals from the prestigious Global Masters Wine Competition, comprised of master sommeliers. Algodon’s Black Label Reserves represent the best selection from Algodon with 100% microvinified blends whose low yield produces full concentration of fruit and flavor. Algodon’s complete portfolio of fine wines is currently available in wine bars, wine shops, restaurants and hotels in Buenos Aires, Mendoza, Germany, Switzerland, Guernsey, U.K., the Netherlands and the United States.

 

Algodon Wine Estates – Real Estate Development

 

 

AWE has acquired a total of 4,138 acres of contiguous real estate surrounding its project in Mendoza, Argentina. This land was purchased with the purpose of developing a vineyard-resort and attracting investment in second or third homes for the well-to-do from around the world. GGH continues to invest in the ongoing costs of building out infrastructure and anticipates that sales of lots will gradually improve and accelerate as worldwide economic conditions improve.

 

GGH is currently marketing portions of the property to be developed into luxury residential homes and vineyard estates. Management believes that the power of the ALGODON® brand combined with an attractive package of amenities will promote interest in the surrounding real estate. The estate’s master plan features a luxury golf and vineyard living community, made up of six distinct village sectors, with 610 home sites ranging in size from 0.2 to 2.8 hectares (0.5 to 7 acres) for private sale and development. The development’s village sectors have been designed and named in accordance with their characteristic surroundings and landscape: the Wine & Golf Village, the Polo & Equestrian Village, the Sierra Pintada Village, The North Vineyard & Orchard Village, The South Vineyard & Orchard Village, and the Desert Vista Village. The development is located fifteen minutes from both the local airport and city center.

 

31
 

 

In April 2019, GGH announced that it reached an agreement with Compass Real Estate to market and sell home sites at Algodon Wine Estates. Compass Real Estate (www.compass.com), dubbed “the country’s fastest-growing luxury real estate technology brokerage company” by Forbes Magazine, is set to revamp Algodon Wine Estates’ marketing and global sales initiatives by utilizing its network of 7,000 agents and over 1,000 employees. Compass’ business model has attracted investment capital from Fidelity, Softbank, Goldman Sachs, and several other corporations and individuals. GGH is developing lots for sale to third party builders and is not engaged in any construction activity. There are approximately 300 lots that remain unsold as of March 31, 2024.

 

Potential Value Creation

 

After an official “arm’s length” evaluation of the entire property (including the additional recently acquired 2,000 acres), we estimate the discovery and potential development of underground aquifers could help increase the value of the parcel. Due to the prohibition of developing new wells in Mendoza City Metro Area, it may be positive to take advantage of the lack of regulations in San Rafael. Additionally, the current administration of Mendoza Province has asked (upon approval of the Company) to construct a major road through the far reaches of the property in an effort to link the popular tourist destinations of Valle Grande, and Los Reyunos. This development could in effect raise the commercial value of the land significantly, as well as open up potential rental-income opportunities from storefronts, gas stations, and other businesses.

 

In November 2020, we began the process of drilling two water wells at Algodon Wine Estates, which we believe can significantly increase the value of the land. This initiative can allow us direct access to natural aquifers that can be utilized for a variety of infrastructural and landscape initiatives including crop production capabilities, residential and commercial development potential, or property resale. We received approval for, and have completed drilling, three wells, and are currently awaiting approval for a fourth well. In the future, we intend to apply for permits to add three additional water wells throughout the 4,138-acre property.

 

Owning real estate in Argentina is subject to risk. For more information see “Risk Factors.”

 

Argentina Land Purchase

 

In September 2021, Gaucho Group Holdings, Inc. announced that its shareholders had approved the purchase of additional land holdings in Argentina in an all-stock transaction valued at approximately $2.4 million. The purchase price was determined from an evaluation of the real estate performed by an independent third-party.

 

Located in Argentina, the properties were acquired from the related, but independent entity, Hollywood Burger Holdings, Inc. (“HBH”). One of the property lots is located in the San Rafael, Mendoza region of Argentina, and the other in Córdoba, Argentina, with the estimated fair market value of the combined properties totaling approximately $2.4 Million. Both properties are located on major thoroughfares, seeing significant foot and street traffic, and both with ample parking, a feature considered a rare benefit in Argentine cities.

 

For more information see Items 2 and 5.

 

32
 

 

Projects and Business Initiatives in Development

 

GGH’s luxury branded assets include fine experiences through our award-winning wines and exceptional luxury destinations. Our U.S.-based e-commerce website GAUCHO.com is designed to deliver Argentine luxury goods to the U.S. marketplace and elsewhere around the globe. We believe the potential for scale here is particularly significant as Argentina is now making noteworthy re-entry to international trade. With Argentina in the process of re-opening its borders, we believe it is poised to regain its status as a cultural and fashion exporter, and that there may be a sizeable appetite in the U.S. and elsewhere for luxury products that feature a distinctly Argentine point of view. We are excited about the potential for scale here.

 

Competition

 

The online luxury fashion business is highly competitive. The apparel industry is characterized by rapid shifts in fashion, consumer demand, and competitive pressures, resulting in both price and demand volatility. We believe that our emphasis on fine leather goods, accessories and apparel mitigates these factors.

 

We believe that the fit and quality of our garments, as well as the broad variety of colors and styles, our Gaucho and distinctly Argentine inspiration, as well as the contemporary luxury garments and accessories that we offer helps to differentiate us. We compete against a wide variety of smaller, independent specialty stores, as well as department stores and national and international specialty chains. Companies that operate in this space include, but are not limited to, Rag & Bone, Theory, Maison Kitsune, Vince, and All Saints. Many of these companies have substantially greater name recognition than Gaucho – Buenos Aires. Many of these companies also have greater financial, marketing, and other resources when compared to Gaucho – Buenos Aires.

 

Along with the competitive factors noted above, other key competitive factors for Gaucho – Buenos Aires online e-commerce operations include the success or effectiveness of customer mailing lists, advertising response rates, merchandise delivery, web site design and web site availability. The online e-commerce operations compete against numerous web sites, many of which may have a greater volume of web traffic, and greater financial, marketing, and other resources.

 

Government Regulation

 

With respect to the Company’s clothing line, pursuant to the Federal Trade Commission, clothing exported from Argentina to the U.S. must have a label that contains the country of origin and the composition of the item. Additional information can be found here: https://www.ftc.gov/tips-advice/business-center/guidance/threading-your-way-through-labeling-requirements-under-textile.

 

With respect to the Company’s wine production, please see Item 1A - “Risk Factors”. Additional information may be found here Additional information may be found here: https://www.ttb.gov/itd/international-imports-exports-requirements.

 

33
 

 

Human Capital Resources

 

Our experienced employees and management team are some of our most valuable resources, and we are committed to attracting, motivating, and retaining top professionals. Including the operating subsidiaries in Argentina, as of the date of this annual report, the Company has approximately 75 full-time employees. In Argentina, GGH also employs temporary, seasonal employees during the busy harvest season. In the United States, GGH employs approximately 5 full-time employees as of the date of this annual report. None of the employees in the United States are covered by a collective bargaining agreement and management believes it has good relations with its employees.

 

Our success is directly related to the satisfaction, growth, and development of our employees. We strive to offer a work environment where employee opinions are valued and allow our employees to use and augment their professional skills. To achieve our human capital goals, we intend to remain focused on providing our personnel with entrepreneurial opportunities to expand our business within their areas of expertise and continue to provide our personnel with personal and professional growth. The Company emphasizes several measures and objectives in managing our human capital assets, including, among others, employee safety and wellness, talent acquisition and retention, employee engagement, development and training, diversity and inclusion, and compensation and pay equity.

 

Diversity and Inclusion and Ethical Business Practices. We believe that a company culture focused on diversity and inclusion is a crucial driver of creativity and innovation. We also believe that diverse and inclusive teams make better business decisions, ultimately driving better business outcomes. We are committed to recruiting, retaining, and developing high-performing, innovative and engaged employees with diverse backgrounds and experiences. This commitment includes providing equal access to, and participation in, equal employment opportunities, programs, and services without regard to race, religion, color, national origin, disability, sex, sexual orientation, gender identity, stereotypes, or assumptions based thereon. We welcome and celebrate our teams’ differences, experiences, and beliefs, and we are investing in a more engaged, diverse, and inclusive workforce.

 

We also foster a strong corporate culture that promotes high standards of ethics and compliance for our business, including policies that set forth principles to guide employee, officer, director, and vendor conduct, such as our Code of Business Conduct and Ethics. We also maintain a whistleblower policy and anonymous hotline for the confidential reporting of any suspected policy violations or unethical business conduct on the part of our businesses, employees, officers, directors, or vendors.

 

Due to the COVID pandemic, on May 31, 2020 Gaucho Group Holdings, Inc. terminated its office lease at 135 Fifth Avenue in New York City. All senior management of Gaucho Group Holdings, Inc. have been working remotely since then. The Company’s principal office is currently located at 112 NE 41st Street, Suite 106, Miami, Florida 33137. The telephone number remains the same at +1-212-739-7700. The Company is licensed to do business in New York and Florida.

 

Ticker Symbol

 

The Company uplisted its common stock on the Nasdaq Capital Market (“Nasdaq”) effective as of February 16, 2021, and the common stock commenced trading on Nasdaq effective as of February 17, 2021 under the symbol “VINO”.

 

34
 

 

Available Information

 

Effective upon the uplist of the Company’s common stock to Nasdaq, we have updated our corporate governance policies. We maintain a website at http://www.gauchogroup.com. The information contained on, or accessible through, our website is not part of this Annual Report on Form 10-K. Our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to reports filed or furnished pursuant to Sections 13(a) and 15(d) of the Exchange Act, are available on our website, free of charge, as soon as reasonably practicable after we electronically file such reports with, or furnish those reports to, the SEC. In addition, we maintain our corporate governance documents on our website here: https://ir.gauchoholdings.com/corporate-governance/governance-documents, including:

 

  a Code of Business Conduct and Ethics for Directors, Officers and Employees which contains information regarding our whistleblower procedures,
     
  our Insider Trading Policy,
     
  our Audit Committee Charter,
     
  our Compensation Committee Charter,
     
  our Nominating and Corporate Governance Committee Charter,
     
  our Trading Blackout Policy, and
     
  our Related Party Transaction Policy.

 

ITEM 1A. RISK FACTORS

 

An investment in our securities involves certain risks relating to our structure and investment objective. The risks set forth below are the risks we have identified and which we currently deem material or predictable. We also may face additional risks and uncertainties not currently known to us, or which as of the date of this Annual Report we might not consider significant, which may adversely affect our business. In general, you take more risk when you invest in the securities of issuers in emerging markets such as Argentina than when you invest in the securities of issuers in the United States. If any of the following risks occur, our business, financial condition and results of operations could be materially adversely affected. In such case, our net asset value and the price of our common stock could decline, and you may lose all or part of your investment.

 

In evaluating the Company, its business and any investment in the Company, readers should carefully consider the following factors:

 

Our stock has been trading below $1.00 and our failure to maintain compliance with Nasdaq’s continued listing requirements could result in the delisting of our common stock.

 

Our common stock is currently listed for trading on The Nasdaq Capital Market. We must satisfy the continued listing requirements of The Nasdaq Stock Market LLC (or Nasdaq), to maintain the listing of our common stock on The Nasdaq Capital Market.

 

On June 1, 2023, the Company received a deficiency letter from the Listing Qualifications Department (the “Staff”) of the Nasdaq Stock Market notifying the Company that, for the preceding 30 consecutive business days, the closing bid price for the Company’s common stock was trading below the minimum $1.00 per share requirement for continued inclusion on The Nasdaq Capital Market pursuant to Nasdaq Listing Rule 5450(a)(1) (the “Bid Price Requirement”).

 

In accordance with Nasdaq Rules, the Company was provided with an initial period of 180 calendar days, or until November 28, 2023 (the “Compliance Date”), to regain compliance with the Bid Price Requirement.

 

35
 

 

On November 28, 2023, the Company provided the Staff with notice that it intends to effect a reverse stock split, if necessary to regain compliance with the Bid Price Requirement, pending stockholder approval on December 28, 2023 at the Company’s Special Stockholder Meeting.

 

On November 29, 2023, the Company received a letter from the Staff notifying the Company that it is eligible for an additional 180 calendar day period, or until May 28, 2024 to regain compliance (the “2024 Compliance Date”). Provided that the Company meets the continued listing requirement for market value of publicly held shares and all other applicable requirements for initial listing on the Nasdaq Capital Market with the exception of the Bid Price Requirement, and the Company provides written notice of its intention to cure the deficiency during the second compliance period by effecting a reverse stock split, if necessary, then if at any time before the 2024 Compliance Date the closing bid price for the Company’s Common Stock is at least $1.00 for a minimum of 10 consecutive business days, the Staff will provide the Company written confirmation of compliance with the Bid Price Requirement.

 

The notification has no immediate effect on the Company’s Nasdaq listing and the Company’s Common Stock will continue to trade on Nasdaq under the ticker symbol “VINO.”

 

The Company held a Special Stockholders’ Meeting on February 29, 2024, at which, among other things, the stockholders granted the Board of Directors discretion (if necessary to prevent the delisting of the Company’s common stock on Nasdaq) on or before June 30, 2024, to implement a reverse stock split of the outstanding shares of common stock in a range from one-for-two (1:2) up to one-for-ten (1:10), or anywhere between, while maintaining the number of authorized shares of common stock at 150,000,000 shares, as required for Nasdaq listing.

 

If the Company does not regain compliance with the Bid Price Requirement by the Compliance Date, the Staff will provide written notification to the Company that its Common Stock will be subject to delisting. At that time, the Company may appeal the Staff’s delisting determination to a Nasdaq Hearings Panel.

 

There can be no assurance that the Company will regain compliance or otherwise maintain compliance with any of the other listing requirements. Nonetheless, it is the Company’s intention to regain compliance with the Bid Price Requirement through effecting a reverse stock split if necessary.

 

If our common stock were delisted from Nasdaq, trading of our common stock would most likely take place on an over-the-counter market established for unlisted securities, such as the OTCQB or the Pink Market maintained by OTC Markets Group Inc. An investor would likely find it less convenient to sell, or to obtain accurate quotations in seeking to buy, our common stock on an over-the-counter market, and many investors would likely not buy or sell our common stock due to difficulty in accessing over-the-counter markets, policies preventing them from trading in securities not listed on a national exchange or other reasons. In addition, as a delisted security, our common stock would be subject to SEC rules as a “penny stock”, which impose additional disclosure requirements on broker-dealers. The regulations relating to penny stocks, coupled with the typically higher cost per trade to the investor of penny stocks due to factors such as broker commissions generally representing a higher percentage of the price of a penny stock than of a higher-priced stock, would further limit the ability of investors to trade in our common stock. In addition, delisting would materially and adversely affect our ability to raise capital on terms acceptable to us, or at all, and may result in the potential loss of confidence by investors, suppliers, customers and employees and fewer business development opportunities. For these reasons and others, delisting would adversely affect the liquidity, trading volume and price of our common stock, causing the value of an investment in us to decrease and having an adverse effect on our business, financial condition and results of operations, including our ability to attract and retain qualified employees and to raise capital.

 

36
 

 

The Company is currently in default under its convertible promissory note with 3i, which allows the holder to redeem all or a portion of the Note and has received demand for payment.

 

Pursuant to the 2023 Purchase Agreement and Note, as of May 21, 2023, the Company failed to prepay, redeem or convert one quarter of the initial principal and interest on the Note. On August 11, 2023, the Company and 3i entered into an agreement (the “Letter Agreement”) pursuant to which, among other things: 3i agreed to forbear from issuing an event of default notice and event of default redemption notice through December 31, 2023. The maturity date of the Note was February 21, 2024. 3i has issued three separate written notices requiring the Company to redeem all or a portion of the 2023 Note, which if enforced, would have a material adverse effect on the Company. The notices of default and demand for payment were issued by 3i on February 21, 2024, February 28, 2024, and March 6, 2024. The most recent notice demanded immediate payment of a minimum of $3,460,510 and cited failure of the Company to convert a portion of the 2023 Note into common stock of the Company.

 

See Item 5 for additional information.

 

Tumim has terminated the ELOC and a source of funding for the Company.

 

On February 22, 2024, the Company received notice from Tumim Stone Capital LLC of its election to terminate the 2022 ELOC. Pursuant to Section 8.2 of the Purchase Agreement, the Company has treated the ELOC as being terminated by Tumim effective March 7, 2024. Although no early termination penalties are incurred by either party under the ELOC, the Company has lost access to a line of credit of up to approximately $43,370,000. As a result, the Company must seek other sources of readily available funding, which could affect the Company’s ability to operate.

 

Due to the pause of activity with LVH, we may not receive a complete return of our investment.

 

The Company, through its wholly-owned subsidiary, Gaucho Ventures I – Las Vegas, LLC (“GVI”), contributed total capital of $7.0 million to LVH Holdings LLC (“LVH”) to develop a project in Las Vegas, Nevada and received 396 limited liability company interests, representing an 11.9% equity interest in LVH. As of September 30, 2023, LVH has used the Company’s cash contribution to LVH for land improvement expenses, such as architectural, legal, engineering, and accounting fees. Should LVH be liquidated and dissolved in the near future, it is most likely that the Company will not receive its entire contribution back from LVH and may lose its entire investment.

 

Revenues are currently insufficient to pay operating expenses and costs, which may result in the inability to execute the Company’s business concept.

 

The Company’s operations have to date generated significant operating losses, as reflected in the financial information included in this Quarterly Report. Management’s expectations in the past regarding when operations would become profitable have not been realized, and this has continued to put a strain on working capital. Business and prospects must be considered in light of the risks, expenses, and difficulties frequently encountered by companies in the early stages of operations. If the Company is not successful in addressing these risks, its business and financial condition will be adversely affected. In light of the uncertain nature of the markets in which the Company operates, it is impossible to predict future results of operations.

 

37
 

 

Our level of debt may adversely affect our operations and our ability to pay our debt as it becomes due.

 

The fact that we are leveraged may affect our ability to refinance existing debt or borrow additional funds to finance working capital requirements, acquisitions and capital expenditures. In addition, the recent disruptions in the global financial markets, including the bankruptcy and restructuring of major financial institutions, may adversely impact our ability to refinance existing debt and the availability and cost of credit in the future. In such conditions, access to equity and debt financing options may be restricted and it may be uncertain how long these economic circumstances may last. This would require us to allocate a substantial portion of cash flow to repay principal and interest, thereby reducing the amount of money available to invest in operations, including acquisitions and capital expenditures. Our leverage could also affect our competitiveness and limit our ability to changes in market conditions, changes in the real estate industry and economic downturns.

 

We may not be able to generate sufficient cash flows from operations to satisfy our debt service requirements or to obtain future financing. If we cannot satisfy our debt service requirements or if we default on any financial or other covenants in our debt arrangements, the lenders and/or holders of our debt will be able to accelerate the maturity of such debt or cause defaults under the other debt arrangements. Our ability to service debt obligations or to refinance them will depend upon our future financial and operating performance, which will, in part, be subject to factors beyond our control such as macroeconomic conditions and regulatory changes in Argentina. If we cannot obtain future financing, we may have to delay or abandon some or all of our planned capital expenditures, which could adversely affect our ability to generate cash flows and repay our obligations as they become due.

 

We may not be able to continue as a going concern.

 

The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. However, doubt has been raised as to the ability of the Company to continue as a going concern. The Company presently has enough cash on hand to sustain its operations on a month-to-month basis, but if the Company is not able to obtain additional sources of capital, it may not have sufficient funds to continue to operate the business for twelve months from the date these financial statements are issued. While management believes that it will be successful in obtaining additional financing, no assurance can be provided that the Company will be able to do so. Further, there is no assurance that these funds will be sufficient to enable the Company to attain profitable operations or continue as a going concern. To the extent that the Company is unsuccessful, the Company may need to curtail its operations and implement a plan to extend payables, reduce overhead and possibly sell certain Company assets until sufficient additional capital is raised to support further operations. There can be no assurance that such a plan will be successful. Such a plan could have a material adverse effect on the Company’s business, financial condition and results of operations, and ultimately the Company could be forced to discontinue its operations, liquidate and/or seek reorganization in bankruptcy.

 

38
 

 

The Company is facing and may continue to face significant cost inflation.

 

We have faced, and may continue to face, significant cost inflation, specifically in raw materials and other supply chain costs due to increased demand for raw materials and the broad disruption of the global supply chain associated with the impact of COVID-19. International conflicts or other geopolitical events may further contribute to increased supply chain costs due to shortages in raw materials, increased costs for transportation and energy, disruptions in supply chains, and heightened inflation. Further escalation of geopolitical tensions may also lead to changes to foreign exchange rates and financial markets, any of which may adversely affect our business and supply chain, and consequently our results of operation.

 

While we may try to mitigate the impact of inflation by increasing the price of some of our own products, we may be unable to do so due to the terms of existing contracts, a competitor’s pricing pressure, or other factors. Additionally, significant price increases may result in a loss of customers and adversely impact our business, results of operations, financial condition, and cash flows. Additionally, broad concerns related to the economy, including inflation may impact consumer spending, which could impact future demand for our products.

 

The Company is subject to the Inflation Reduction Act of 2022.

 

The Inflation Reduction Act of 2022 (the “IRA”) was enacted on August 16, 2022. This bill contains a number of tax-related provisions that are effective after December 31, 2023, including (1) the imposition of a 15% minimum tax on book income for corporations with a 3-year average adjusted book income over $1 billion, and (2) the creation of a 1% excise tax on the value of stock repurchases (net of the value of stock issuances) during the taxable year. Upon initial evaluation, the Company does not expect the IRA to have a material impact on the Company’s financial statements.

 

Adverse developments affecting the financial services industry, such as actual events or concerns involving liquidity, defaults, or non-performance by financial institutions or transactional counterparties, could adversely affect the Company’s current and projected business operations and its financial condition and results of operations.

 

Actual events involving reduced or limited liquidity, defaults, non-performance or other adverse developments that affect financial institutions or other companies in the financial services industry or the financial services industry generally, or concerns or rumors about any events of these kinds, have in the past and may in the future lead to market-wide liquidity problems. For example, on March 10, 2023, Silicon Valley Bank, was closed by the California Department of Financial Protection and Innovation, which appointed the Federal Deposit Insurance Corporation as receiver. Although we did not have any cash or cash equivalent balances on deposit with Silicon Valley Bank, investor concerns regarding the U.S. or international financial systems could result in less favorable commercial financing terms, including higher interest rates or costs and tighter financial and operating covenants, or systemic limitations on access to credit and liquidity sources, thereby making it more difficult for us to acquire financing on acceptable terms or at all. Any decline in available funding or access to our cash and liquidity resources could, among other risks, adversely impact our ability to meet our operating expenses, financial obligations or fulfill our other obligations, result in breaches of our financial and/or contractual obligations or result in violations of federal or state wage and hour laws. Any of these impacts, or any other impacts resulting from the factors described above or other related or similar factors not described above, could have material adverse impacts on our liquidity and our current and/or projected business operations and financial condition and results of operations.

 

Cybersecurity risks and cyber incidents may adversely affect our business by causing a disruption to our operations, a compromise or corruption of our confidential information and/or damage to our business relationships, all of which could negatively impact our business, financial condition and operating results.

 

In the ordinary course of our business, we collect, maintain and transmit sensitive data on our networks and systems, including our intellectual property and proprietary or confidential business information (such as research data and personal information) and confidential information with respect to our customers, and our investors. We have also outsourced significant elements of our information technology infrastructure and, as a result, third parties may or could have access to our confidential information. The secure maintenance of this information is critical to our business and reputation. We believe that companies have been increasingly subject to a wide variety of security incidents, cyber-attacks and other attempts to gain unauthorized access. These threats can come from a variety of sources, ranging in sophistication from an individual hacker to a state-sponsored attack and motive (including corporate espionage). Cyber threats may be generic, or they may be custom-crafted against our information systems. Cyber-attacks continue to become more prevalent and much harder to detect and defend against. Our network and storage applications and those of our vendors may be subject to unauthorized access by hackers or breached due to operator error, malfeasance or other system disruptions. It is often difficult to anticipate or immediately detect such incidents and the damage caused by such incidents. These data breaches and any unauthorized access or disclosure of our information or intellectual property could compromise our intellectual property and expose sensitive business information. A data security breach could also lead to public exposure of personal information of our clinical trial patients, customers and others. Cyber-attacks could cause us to incur significant remediation costs, result in product development delays, disrupt key business operations and divert attention of management and key information technology resources. Our network security and data recovery measures and those of our vendors may not be adequate to protect against such security breaches and disruptions. These incidents could also subject us to liability, expose us to significant expense and cause significant harm to our reputation and business.

 

39
 

 

Risks Relating to Argentina

 

As of the date of this annual report, the majority of our operations, property and sales are located in Argentina. As a result, the quality of our assets, our financial condition and the results of our operations are dependent upon the macroeconomic, regulatory, social and political conditions prevailing in Argentina from time to time. These conditions include growth rates, inflation rates, exchange rates, taxes, foreign exchange controls, changes to interest rates, changes to government policies, social instability, and other political, economic or international developments either taking place in, or otherwise affecting, Argentina.

 

Economic and political instability in Argentina may adversely and materially affect our business, results of operations and financial condition.

 

The Argentine economy has experienced significant volatility in recent decades, characterized by periods of low or negative GDP growth, high and variable levels of inflation and currency depreciation and devaluation. The economy has experienced high inflation and GDP growth has been sluggish in the last few years. According to the International Monetary Fund’s (IMF) “World Economic Outlook” report dated October 2023, the Argentine Real GDP decreased by 2.5% in 2023. In January 2024, the IMF cut its 2024 GDP growth forecast for Argentina, to a 2.8% contraction.

 

In its January 2023 update to the “World Economic Outlook”, the IMF noted that the slowdown in the global economy will affect Argentina as well, based on the tightening policies that are put in place in the country, both tightening monetary policy and the effort to keep down the elevated inflation rate.

 

In addition, according to the “World Economic Outlook” by the IMF in October 2023, it estimated that the inflation was approximately 135.7% for 2023 and it further forecasted the inflation rate to increase approximately 69.5% in 2024.

In its January 2024 report, the IMF noted that Argentina’s inconsistent economic policies have led to a higher federal deficit, triple digit inflation and a depletion of international reserves. Monthly inflation increased to 12.8% in November 2023, with over 320% annualized.

 

The operating environment in Argentina continues to be a challenging business environment, including the continuing significant devaluation of Argentina’s currency, high inflation and economic recession. Volatility and declines in the exchange rate are expected in the future, which could have an adverse impact on our Argentine revenues, net earnings, cash flows and net monetary asset position.

 

Economic and Political Risks Specific to Argentina

 

The Argentinian economy has been characterized by frequent and occasionally extensive intervention by the Argentinian government and by unstable economic cycles. The Argentinian government has often changed monetary, taxation, credit, tariff and other policies to influence the course of Argentina’s economy, and taken other actions which do, or are perceived to weaken the nation’s economy especially as it relates to foreign investors and other overall investment climate. The Argentine peso has devalued significantly against the U.S. dollar, from about 6.1 Argentine pesos per dollar in December 2013 to approximately 276.2 pesos per dollar in February 2024.

 

In June 24, 2021, the Morgan Stanley Capital International (MSCI) index stated that it would reclassify the Argentina Index from Emerging Markets to Standalone Market status during its November index review. Investors considering an investment in GGH should be mindful of these potential political and financial risks.

 

40
 

 

Argentina’s economy may not support foreign investment or our business.

 

Currently there is significant inflation, labor unrest, and currency deflation. There has also been significant governmental intervention into the Argentine economy, including price controls, foreign currency restrictions, and debt restructuring negotiations. As a result, uncertainty remains as to whether economic growth in Argentina is sustainable and whether foreign investment will be successful. Foreign investment is restricted in aviation, media, and foreign ownership in rural productive lands, bodies of water and areas along borders.

 

Since July 1, 2018, Argentina has had a highly inflationary economy, which may continue to increase our accounting and legal costs.

 

The International Practices Task Force (“IPTF”) of the Center for Audit Quality discussed the inflationary status of Argentina at its meeting on May 16, 2018 and, as further described in its May 16, 2018 Document for Discussion, it categorized Argentina as a country with a projected three-year cumulative inflation rate greater than 100%. Therefore, the Company transitioned its Argentine operations to highly inflationary status as of July 1, 2018. As a result, the Company was required to change the functional currency of its Argentine operations to the U.S. dollar, effective as of July 1, 2018. For operations in highly inflationary economies, monetary asset and liabilities are translated at exchange rates in effect at the balance sheet date, and non-monetary assets and liabilities are translated at historical exchange rates. Income and expense accounts are translated at the weighted average exchange rate in effect during the period. Translation adjustments are reflected in loss on foreign currency translation on the accompanying statements of operations.

 

Past efforts by Argentina to nationalize businesses and future efforts to de-nationalize businesses contributes to an already unstable economy.

 

In April 2012, then Argentine President Cristina Fernández de Kirchner announced her decision to nationalize YPF, the country’s largest oil company, from its majority stakeholder, thus contributing to declining faith from foreign investors in the country and again resulting in a downgrade by Standard and Poor’s of Argentina’s economic and financial outlook to “negative”. There were other discussions in Argentina about the possibility of nationalizing other businesses and industries under former President Kirchner, and she was elected a Senator in late 2017. She has made several public statements about her intent to debate everything and take firm positions on her political ideals.

 

On October 27, 2019, Alberto Fernández won as President of Argentina with Ms.de Kirchner becoming Vice President. In June of 2020, President Fernández announced his plan to nationalize Vicentin SAIC, a major Argentine soybean processor. In October 2023, Javier Milei won as President of Argentina and has made liberalization and deregulation of the economy a large part of his agenda. After being sworn into office, Mr. Milei signed a decree to stabilize Argentina’s economy through spending cuts, devaluing the peso and temporarily hiking import taxes and export taxes. In December 2023, he tabled a bill to the National Congress that focused on mass privatization, deregulating a number of sectors, and easing labor market rules.

 

While in the long run efforts to de-nationalize and de-regulate businesses may be beneficial to the Company, there is no assurance that any investment in GGH will be safe from fluctuations in the market and government control or nationalization.

 

41
 

 

Due to the Company’s operations in Argentina, the Company is exposed to the risk of changes in foreign exchange rates.

 

Due to the international nature of Gaucho Group Holdings’ business, movements in foreign exchange rates may impact the consolidated statements of operations, consolidated balance sheets and cash flows of the Company. Since almost all of the Company’s sales are located in Argentina, the Company’s consolidated net sales are impacted negatively by the strengthening or positively by the weakening of the U.S. dollar as compared to Argentina’s currencies. Additionally, movements in the foreign exchange rates may unfavorably or favorably impact the Company’s results of operations, financial condition and liquidity. In October 2020, Argentina’s central bank introduced measures to tighten controls on the movement of foreign currency, which resulted in a decline of the Argentine peso. The Argentine peso is stated at approximately 276.2 Argentine pesos per US dollar as of February 2024.

 

A significant number of our employees are located in Argentina, and any favorable or unfavorable developments in Argentina could have an impact on our results of operations.

 

A significant number of our employees are located in Argentina. Our business activities in Argentina also subject us to risks associated with changes in and interpretations of Argentine law, including laws related to employment, the protection and ownership of intellectual property and U.S. ownership of Argentine operations. Furthermore, if we had to scale down or close our Argentine operations, there would be significant time and cost required to relocate those operations elsewhere, which could have an adverse impact on our overall cost structure.

 

The Argentine government has historically exercised significant influence over the country’s economy. For example, since September 2019, the Argentine government has enacted a series foreign exchange currency controls. These controls include restrictions on Argentine citizens and Argentinian companies’ abilities to purchase U.S. dollars, transfer money to foreign accounts and make payments of dividends or payments for services by related parties without permission from the Argentine government. These controls have become stricter during the pandemic; currently it is challenging, and at times not possible for citizens in Argentina to formally access the exchange market, and strategies available for the purchase of foreign currency outside of the exchange market are largely cost prohibitive. The increase of the local inflation rates and the local currency devaluation have drastically reduced the purchasing power of our local employees’ salaries, because the purchase of certain goods and services in Argentina remains tied to the market value of the US dollar. In addition, it is possible that the Argentine government may impose additional controls on the foreign exchange market and on capital flows from and into Argentina in response to capital flight or depreciation of the Argentine peso. These restrictions may have a negative effect on the economy and harm our business if imposed in an economic environment where access to local capital is tightly constrained.

 

Additionally, Argentina’s economy and legal and regulatory framework have at times suffered radical changes, due to significant political influence and uncertainties. Currently, Argentina’s federal government is conducting negotiations with respect to the restructuring of their sovereign debt. Such policies, and the ongoing restructuring negotiations, could destabilize the country and, consequently, its provinces, and adversely affect our business and operating expenses.

 

42
 

 

Doing business in Argentina poses additional challenges, such as finding and retaining qualified employees, particularly management-level employees, navigating local bureaucracy and infrastructure-related issues and identifying and retaining qualified service providers, among other risks. Among these, the ability to retain employees without the possibility to offer alternatives that enable them to regain their salary value have been particularly challenging, and said difficulties are expected to continue or even increase. Furthermore, despite recent enactments of local anti-corruption and anti-bribery legislation in a number of developing markets such as Argentina, it may still be more common than in the United States for others to engage in business practices prohibited by laws and regulations applicable to us, such as the U.S. Foreign Corrupt Practices Act, U.K. Bribery Act or similar local anti-bribery laws. In turn, the decrease in investors’ confidence, among other factors, could have a significant adverse impact on the development of the Argentine economy, which could harm our business, results of operations and financial condition. Our commitment to legal compliance could put us at a competitive disadvantage, and any lapses in our compliance could subject us to civil and criminal penalties that could harm our business, results of operations and financial condition.

 

Argentina’s ability to obtain financing from international markets is limited, which may impair its ability to implement reforms and foster economic growth.

 

After the economic crisis in 2002, the Argentine government has maintained a policy of fiscal surplus. To be able to repay its debt, the Argentine government may be required to continue adopting austere fiscal measures that could adversely affect economic growth.

 

In 2005 and 2010, Argentina restructured over 91% of its sovereign debt that had been in default since the end of 2001. Some of the creditors who did not participate in the 2005 or 2010 exchange offers continued their pursuit of a legal action against Argentina for the recovery of debt.

 

A U.S. Court of Appeals blocked the most recent debt payment made by Argentina in June 2014 because it was improperly structured, giving Argentina through the end of July 2014 to find a way to pay to fulfill its obligations. In March 2015, more than 500 creditors, separate from the hedge fund creditors, filed suit against Argentina for payment on the debt of $5.4 billion. Argentina filed a motion opposing those claims noting that there were now $10 billion in judgments and claims before the court. In February 2016, Argentina and four of its major bond creditors entered into a settlement agreement whereby Argentina agreed to pay roughly $4.65 billion to those creditors to resolve the fifteen-year litigation. Subsequently, Argentina has also entered into settlement agreements with other bond default creditors who were not party to the original settlement which, in the aggregate, could have an estimated dollar value upwards of $10 billion.

 

As a result of Argentina’s default and its aftermath of litigation, the government may not have the financial resources necessary to implement reforms and foster economic growth, which, in turn, could have a material adverse effect on the country’s economy and, consequently, our businesses and results of operations. Furthermore, Argentina’s inability to obtain credit in international markets could have a direct impact on our own ability to access international credit markets to finance our operations and growth.

 

43
 

 

In April of 2016, after settling the litigation, Argentina was able to return to the international debt markets with a $16.5 billion century bond. The attractiveness of a century bond is debatable amongst investment advisers and its impact over the long-term in is this case unknown. In 2017, Argentina engaged in additional sales of bonds on international markets for around $13.4 billion. There can be no assurance that the Argentine government will not default on its obligations under these or any of its bonds if it experiences another economic crisis or has a change in political control. A new default by the Argentine government could lead to a new recession, even higher inflation, restrictions on Argentine companies access to financing and funds, limit the operations of Argentine companies in the international markets, higher unemployment and social unrest, which would negatively affect our financial condition, results of operations and cash flows. In June 2018, the Argentine Government entered into a US$50 billion, 36-month stand-by arrangement with the IMF. This measure was intended to halt the significant depreciation of the peso during the first half of 2018. In December 2018, the IMF completed a second review under the stand-by arrangement and although there were indications that the financial markets in Argentina have stabilized since the end of September 2018 following the adoption of the new monetary policy framework, the IMF noted that external risks are centered around an unanticipated tightening of global financial conditions, which could resurface concerns about Argentina’s ability to meet its large gross financing needs. The IMF also warned that greater than expected inertia in the inflation process may delay the expected easing of monetary policy and generate a greater economic loss during the needed disinflation and that a deeper recession or more persistent inflation could generate a more forceful opposition to the policies underpinning the program and hinder their implementation.

 

In August 2020, Argentina reported that it had successfully negotiated a restructuring of close to $65 billion in debt with large US investment firms. The government predicted that the deal will bring in billions of dollars in financial relief over the 2020-2030 term and help cut interest rates on foreign bonds by 4%. However, only weeks after the restructuring, investors criticized the Argentine government’s mismanagement of the economy, and bonds issued in September had already fallen 25 percent.

 

In March 2022, the IMF approved a new $44 billion 30-month arrangement that, according to the IMF, sets pragmatic objectives to improve public finances and reduce inflation. In January 2024, the IMF finished a seventh review of the arrangement with Argentina and authorized an immediate disbursement of US $4.7 billion, which brings the total of disbursements under the arrangements to approximately US $40.6 billion.

 

The Argentine government may again place currency limitations on withdrawals of funds.

 

Through 2015, the Argentine government, led by then president Cristina Fernández, instituted economic controls that included limiting the ability of individuals and companies to exchange local currency (Argentine peso) into U.S. dollars and to transfer funds out of the country. At the time, public reports stated that government officials were micromanaging money flows by limiting dollar purchases and discouraging dividend payments and international wire transfers. As a result of these controls, Argentine companies had limited access to U.S. dollars through regular channels (e.g., banks) and consumers faced difficulty withdrawing and exchanging invested funds. Given the Company’s investment in Argentine projects and developments, its ability to mobilize and access funds may be adversely affected by the above-mentioned political actions, despite the efforts to repeal economic controls in the recent past.

 

In December 2015, newly elected President Mauricio Macri ended the central bank’s support of the peso and removed the currency controls that limited the ability of Argentines to buy dollars, resulting in a 30% devaluation of the Argentine peso. In January 2017, the country lifted the 120-day holding period for incoming funds hoping to increase the flow of money into the country and ease access for tourists, citizens and businesses. However, Argentina is still feeling the impact of removing currency controls and continued experiencing a decrease in the value of the Argentine peso throughout 2023.

 

In 2020, the Argentine central bank restricted access to dollars, prohibiting private citizens from buying more than $200 in foreign currency per month on the official exchange market. Argentine officials have suggested that they will relax controls when the economy has stabilized, which has not yet happened. These restrictions may have a negative effect on the economy and on our business if imposed in an economic environment where access to local capital is constrained.

 

44
 

 

The stability of the Argentine banking system is uncertain.

 

Adverse economic developments, even if not related to or attributable to the financial system, could result in deposits flowing out of the banks and into the foreign exchange market, as depositors seek to shield their financial assets from a new crisis. Any run on deposits could create liquidity or even solvency problems for financial institutions, resulting in a contraction of available credit.

 

Additionally, unrest among the employment sector of the banking industry has led to strikes led by strong labor unions. This makes it difficult for citizens and businesses to conduct banking activities and decreases the level of trust people put into the Argentine banking system.

 

In the event of a future shock, such as the failure of one or more banks or a crisis in depositor confidence, the Argentine government could impose further exchange controls or transfer restrictions and take other measures that could lead to renewed political and social tensions and undermine the Argentine government’s public finances, which could adversely affect Argentina’s economy and prospects for economic growth which could adversely affect our business.

 

Government measures to preempt or respond to social unrest may adversely affect the Argentine economy and our business.

 

The Argentine government has historically exercised significant influence over the country’s economy. Additionally, the country’s legal and regulatory frameworks have at times suffered radical changes, due to political influence and significant political uncertainties. Future government policies to preempt, or in response to, social unrest may include expropriation, nationalization, forced renegotiation or modification of existing contracts, suspension of the enforcement of creditors’ rights, new taxation policies, including royalty and tax increases and retroactive tax claims, and changes in laws and policies affecting foreign trade and investment. Such policies could destabilize the country and adversely and materially affect the economy, and thereby our business.

 

The Argentine economy could be adversely affected by economic developments in other global markets.

 

Financial and securities markets in Argentina are influenced, to varying degrees, by economic and market conditions in other global markets. Although economic conditions vary from country to country, investors’ perception of the events occurring in one country may substantially affect capital flows into other countries. Lower capital inflows and declining securities prices negatively affect the real economy of a country through higher interest rates or currency volatility.

 

In addition, Argentina is also affected by the economic conditions of major trade partners, such as Brazil and/or countries that have influence over world economic cycles, such as the United States. If interest rates rise significantly in developed economies, including the United States, Argentina and other emerging market economies could find it more difficult and expensive to borrow capital and refinance existing debt, which would negatively affect their economic growth. In addition, if these developing countries, which are also Argentina’s trade partners, fall into a recession the Argentine economy would be affected by a decrease in exports. All of these factors would have a negative impact on us, our business, operations, financial condition and prospects.

 

45
 

 

The Argentine government may order salary increases to be paid to employees in the private sector, which would increase our operating costs.

 

There have been nationwide strikes in Argentina over wages and benefits paid to workers which workers believe to be inadequate in light of the high rate of inflation and rising utility rates. In the past, the Argentine government has passed laws, regulations and decrees requiring companies in the private sector to maintain minimum wage levels and provide specified benefits to employees and may do so again in the future. In the aftermath of the Argentine economic crisis, employers both in the public and private sectors have experienced significant pressure from their employees and labor organizations to increase wages and to provide additional employee benefits. Due to the high levels of inflation, the employees and labor organizations have begun again demanding significant wage increases. It is possible that the Argentine government could adopt measures mandating salary increases and/or the provision of additional employee benefits in the future. Any such measures could have a material and adverse effect on our business, results of operations and financial condition. To management’s knowledge, currently there are no pending measures.

 

Restrictions on the supply of energy could negatively affect Argentina’s economy.

 

As a result of a prolonged recession, and the forced conversion into pesos and subsequent freeze of gas and electricity tariffs in Argentina, there has been a lack of investment in gas and electricity supply and transport capacity in Argentina in recent years. At the same time, demand for natural gas and electricity has increased substantially, driven by a recovery in economic conditions and price constraints, which has prompted the government to adopt a series of measures that have resulted in industry shortages and/or cost increases. In 2017, the government increased the tariffs on electricity and gas hoping to spur an increase in domestic energy production which increased the cost for these utilities for citizens. Scheduled increases in electricity tariffs in May and August 2019 were canceled and the government committed to no further gas tariff increases in 2019.

 

The federal government has been taking a number of measures, including the tariff increase, to alleviate the short-term impact of energy shortages on residential and industrial users. If these measures prove to be insufficient, or if the investment that is required to increase natural gas production and transportation capacity and energy generation and transportation capacity over the medium-and long-term fails to materialize on a timely basis, economic activity in Argentina could be limited, which could have a significant adverse effect on our business.

 

We are exposed to risks in relation to compliance with foreign and domestic anti-corruption and anti-bribery laws and regulations.

 

Our operations are subject to various foreign and domestic anti-corruption and anti-bribery laws and regulations, including the Argentine Corporate Criminal Liability Law 27,401 effective March 1, 2018 (the “Corporate Criminal Liability Law”) and the U.S. Foreign Corrupt Practices Act of 1977 (the “FCPA”). Both the Corporate Criminal Liability Law and the FCPA impose liability against companies who engage in bribery of government officials, either directly or through intermediaries. The Corporate Criminal Liability Law establishes a system of criminal liability of private legal persons which include companies created under any legal form (LLCs, PLCs, partnerships, etc.) whether of national or foreign capital for criminal offenses against public administration and national and cross-border bribery committed by, among others, its shareholders, attorneys-in-fact, directors, managers, employees, or representatives. Such anti-corruption laws generally prohibit providing anything of value to government officials for the purposes of obtaining or retaining business or securing any improper business advantage. In January of 2019, the National Executive enacted Emergency Decree No. 62/2019, which allows for the confiscation of assets that were acquired from drug trafficking, smuggling, money laundering, and other corruption crimes, where there is proof that the assets do not reasonably correspond to the person’s income. Additionally, on April 10, 2019, President Macri approved Decree No. 258/2019, which implemented the National Anti-corruption Plan (2019-2023). The plan is intended to consolidate progress in fighting corruption, and includes various initiatives divided into three main categories: (1) initiatives on transparency and open government; (2) initiatives to prevent money laundering; and (3) investigation and sanctions initiatives. As part of our business, we may deal with entities in which the employees are considered government officials. We have a compliance program that is designed to manage the risks of doing business in light of these new and existing legal and regulatory requirements.

 

Although we have internal policies and procedures designed to ensure compliance with applicable anti-corruption and anti-bribery laws and regulations, there can be no assurance that such policies and procedures will be sufficient. Violations of anti-corruption laws and sanctions regulations could lead to financial penalties being imposed on us, limits being placed on our activities, our authorizations and licenses being revoked, damage to our reputation and other consequences that could have a material adverse effect on our business, results of operations and financial condition. Further, litigation or investigations relating to alleged or suspected violations of anti-corruption laws and sanctions regulations could be costly.

 

46
 

 

Real Estate Considerations and Risks Associated with the International Projects that GGH Operates

 

The Real Estate Industry and International Investing

 

Investments in our real estate projects are subject to numerous risks, including the following:

 

  Increased expenses and uncertainties related to international operations;
  Risks associated with Argentina’s past political uncertainties, economic crises, and high inflation;
  Risks associated with currency, exchange, and import/export controls;
  Adverse changes in national or international economic conditions;
  Adverse local market conditions;
  Construction and renovation costs exceeding original estimates;
  Price increases in basic raw materials used in construction;
  Delays in construction and renovation projects;
  Changes in availability of debt financing;
  Risks due to dependence on cash flow;
  Changes in interest rates, real estate taxes and other operating expenses;
  Changes in the financial condition of tenants, buyers and sellers of properties;
  Competition with others for suitable properties;
  Changes in environmental laws and regulations, zoning laws and other governmental rules and fiscal policies;
  Changes in energy prices;
  Changes in the relative popularity of properties;
  Risks related to the potential use of leverage;
  Costs associated with the need to periodically repair, renovate and re-lease space;
  Increases in operating costs including real estate taxes;
  Risks and operating problems arising out of the presence of certain construction materials;
  Environmental claims arising in respect of real estate acquired with undisclosed or unknown environmental problems or as to which inadequate reserves had been established;
  Uninsurable losses and acts of terrorism;
  Acts of God; and
  Other factors beyond the control of the Company.

 

Investment in Argentine real property is subject to economic and political risks.

 

Investment in foreign real estate requires consideration of certain risks typically not associated with investing in the United States. Such risks include, among other things, trade balances and imbalances and related economic policies, unfavorable currency exchange rate fluctuations, imposition of exchange control regulation by the United States or foreign governments, United States and foreign withholding taxes, limitations on the removal of funds or other assets, policies of governments with respect to possible nationalization of their industries, political difficulties, including expropriation of assets, confiscatory taxation and economic or political instability in foreign nations or changes in laws which affect foreign investors. Any one of these risks has the potential to reduce the value of our real estate holdings in Argentina and have a material adverse effect on the Company’s financial condition.

 

The real estate market is uncertain in Argentina.

 

President Macri had attempted to boost the real estate market in Argentina by lifting various currency restrictions. However, the real estate market has not rebounded from the crippling effect of past currency controls, and the Argentine government recently imposed additional currency controls under new President Alberto Fernández. As a result on the currency controls and the decline in the Argentine peso, the real estate market in Argentina is uncertain. Continued investment in real estate in Argentina is very risky and could never materialize in the way our business model plans. However, waiting to act on certain real estate endeavors will have negative consequences if the market sees an increase in competitiveness. The main competitive factors in the real estate development business include availability and location of land, price, funding, design, quality, reputation and partnerships with developers. Although there is little to no leverage used to acquire real estate in Argentina, thereby greatly lessening the impact of foreclosures in the market, the practice of cash acquisitions can be a barrier to entry in the real estate market. A number of residential and commercial developers and real estate services companies may desire to enter the market and compete with the Company in seeking land for acquisition, financial resources for development and prospective purchasers. To the extent that one or more of the Company’s competitors are able to acquire and develop desirable properties, as a result of greater financial resources or otherwise, the Company’s business could be materially and adversely affected. If the Company is not able to acquire and develop sought-after property as promptly as its competitors, or should the level of competition increase, its financial position and results of operations could be adversely affected.

 

An adverse economic environment for real estate companies such as a credit crisis may adversely impact our results of operations and business prospects significantly.

 

The success of our business and profitability of our operations depend on continued investment in real estate and access to capital and debt financing. A prolonged crisis of confidence in real estate investments and lack of credit for acquisitions may constrain our growth. In order to pursue acquisitions, we may need access to equity capital and/or debt financing. Any disruptions in the financial markets may adversely impact our ability to refinance existing debt and the availability and cost of credit in the near future. Any consideration of sales of existing properties or portfolio interests may be offset by lower property values. Our ability to make scheduled payments or to refinance our existing debt obligations depends on our operating and financial performance, which in turn is subject to prevailing economic conditions. If a recurrence of the disruptions in financial markets remains or arises in the future, there can be no assurances that government responses to such disruptions will restore investor confidence, stabilize the markets or increase liquidity and the availability of credit.

 

47
 

 

There are limitations on the ability of foreign persons to own Argentinian real property.

 

In December 2011, the Argentine Congress passed Law 26,737 (Regime for Protection of National Domain over Ownership, Possession or Tenure of Rural Land) limiting foreign ownership of rural land, even when not in border areas, to a maximum of 15 percent of all national, provincial or departmental productive land. Ownership by the same foreign owner (i.e., foreign individuals, foreign entities or local entities controlled by a foreign person) may not exceed 1,000 hectares (2,470 acres) of the ‘core area’ or the ‘equivalent surface’ determined according to the location of the lands. The Interministerial Council of Rural Lands, the enforcement agency, defines the ‘equivalent surface’ taking into consideration: (1) the proportion of the ‘rural lands’ in relation to the municipality, department and province; and (2) the potential and quality of the rural lands for their use and exploitation. Every non-Argentine national must request permission from the National Land Registry of Argentina in order to acquire non-urban real property.

 

As approved, the law has been in effect since February 28, 2012 but is not retroactive. Furthermore, the general limit of 15 percent ownership by non-nationals must be reached before the law is applicable and each provincial government may establish its own maximum area of ownership per non-national.

 

Pursuant to Executive Order No. 550/13, as published on the Official Bulletin on May 9, 2013, in the Mendoza province, the maximum area allowed per type of production and activity per non-national is as follows: Mining—25,000 hectares (61,776 acres), cattle ranching—18,000 hectares (44,479 acres), cultivation of fruit or vines—15,000 hectares (37,066 acres), horticulture—7,000 hectares (17,297 acres), private lot—200 hectares (494 acres), and other—1,000 hectares (2,471 acres). A hectare is a unit of area in the metric system equal to approximately 2.471 acres. However, these maximums will only be considered if the total 15 percent is reached. Currently, the Company owns approximately 4,138 acres of Argentine rural land through AWE, 2,050 acres are considered land held for cultivation of fruit or vines and 2,088 was purchased during 2017 to provide additional access to AWE. Because the maximum area for this type of land allowed per non-national is 25,000 hectares, the Company is compliant with the law’s limit, were it to apply today. Costs of compliance with the law may be significant in the future. Although the area under foreign ownership in Mendoza is approximately 8.45 percent, this law may apply to the Company in the future and could affect the Company’s ability to acquire additional real property in Argentina. The inability to acquire additional land could curtail the Company’s growth strategy. Management is not currently aware of any change that would require the Company to divest itself of its properties.

 

Our business is subject to extensive regulation in Argentina and the U.S. and additional regulations may be imposed in the future.

 

Many aspects of the Company’s businesses face substantial government regulation and oversight. Our activities are subject to Argentine federal, state and municipal laws, and to regulations, authorizations and licenses required with respect to construction, zoning, use of the soil, environmental protection and historical patrimony, consumer protection, antitrust and other requirements, all of which affect our ability to acquire land, buildings and shopping malls, develop and build projects and negotiate with customers.

 

Additionally, hotel properties are subject to numerous laws, including those relating to the preparation and sale of food and beverages, including alcohol and those governing relationships with employees such as minimum wage and maximum working hours, overtime, working conditions, hiring and firing employees and work permits. Additionally, hotel properties may be subject to various laws relating to the environment and fire and safety. Compliance with these laws may be time consuming and costly and may adversely affect hotel operations in Argentina. Another example is the wine industry which is subject to extensive regulation by local and foreign governmental agencies concerning such matters as licensing, trade and pricing practices, permitted and required labeling, advertising and relations with wholesalers and retailers. New or revised regulations in Argentina, or other foreign countries and U.S. import laws could have a material adverse effect on Algodon Wine Estates’ financial condition or operations.

 

48
 

 

In addition, companies in this industry are subject to increasing tax rates, the creation of new taxes and changes in the taxation regime. We are required to obtain licenses and authorizations with different governmental authorities in order to carry out our projects. Maintaining our licenses and authorizations can be a costly provision. In the case of non-compliance with such laws, regulations, licenses and authorizations, we may face fines, project shutdowns, and cancellation of licenses and revocation of authorizations.

 

In addition, public authorities may issue new and stricter standards, or enforce or construe existing laws and regulations in a more restrictive manner, which may force us to make expenditures to comply with such new rules. Development activities are also subject to risks relating to potential delays in obtaining or an inability to obtain all necessary zoning, environmental, land-use, development, building, occupancy and other required governmental permits and authorizations. Any such delays or failures to obtain such government approvals may have an adverse effect on our business.

 

Finally, because many of the Company’s properties are located in Argentina, they are subject to its laws and to the laws of various local districts that affect ownership and operational matters. Compliance with applicable rules and regulations requires significant management attention and any failure to comply could jeopardize the Company’s ability to operate or sell a particular property and could subject the Company to monetary penalties, additional costs required to achieve compliance, and potential liability to third parties. Regulations governing the Argentinian real estate industry as well as environmental laws have tended to become more restrictive over time. The Company cannot assure that new and stricter standards will not be adopted or become applicable to the Company, or that stricter interpretations of existing laws and regulations will not be implemented.

 

There may be a lack of liquidity in the underlying real estate.

 

Because a substantial part of the assets managed by the Company will be invested in illiquid real estate, there is a risk that the Company will be unable to realize its investment objectives through the sale or other disposition of properties at attractive prices or to do so at a desirable time. This could hamper the Company’s ability to complete any exit strategy with regard to investments it has structured or participated in.

 

There is limited public information about real estate in Argentina.

 

There is generally limited publicly available information about real estate in Argentina, and the Company will be conducting its own due diligence on future transactions. Moreover, it is common in Argentinian real estate transactions that the purchaser bears the burden of any undiscovered conditions or defects and has limited recourse against the seller of the property. Should the pre-acquisition evaluation of the physical condition of any future investments have failed to detect certain defects or necessary repairs, the total investment cost could be significantly higher than expected. Furthermore, should estimates of the costs of developing, improving, repositioning or redeveloping an acquired property prove too low or estimates of the market demand or the time required to achieve occupancy prove too optimistic, the profitability of the investment may be adversely affected.

 

The Company may be subject to certain losses that are not covered by insurance.

 

GGH, its affiliates and/or subsidiaries currently maintain insurance coverage against liability to third parties and property damage as is customary for similarly situated businesses, however the Company does not hold any country-risk insurance. There can be no assurance, however, that insurance will continue to be available or sufficient to cover any such risks. Insurance against certain risks, such as earthquakes, floods or terrorism may be unavailable, available in amounts that are less than the full market value or replacement cost of the properties or subject to a large deductible. In addition, there can be no assurance the particular risks which are currently insurable will continue to be insurable on an economic basis.

 

49
 

 

Boutique Hotel

 

All real estate investments, hotel and hospitality investments are generally subject to additional risks which include:

 

  Competition for guests from other hotels based upon brand affiliations, room rates offered including those via internet wholesalers and distributors, customer service, location and the condition and upkeep of each hotel in general and in relation to other hotels in their local market;
  Specific competition from well-established operators of “boutique” or “lifestyle” hotel brands which have greater financial resources and economies of scale;
  Adverse effects of general and local political and/or economic conditions;
  Dependence on demand from business and leisure travelers, which may fluctuate and be seasonal;
  Increases in energy costs, airline fares and other expenses related to travel, which may deter travel;
  Impact of financial difficulties of the airline industry and potential reduction in demand on hotel rooms;
  Overbuilding in the hotel industry, especially in individual markets; and
  Disruption in business and leisure travel patterns relating to perceived fears of terrorism or political unrest.

 

The boutique hotel market is highly competitive.

 

The Company competes in the boutique hotel segment, which is highly competitive, is closely linked to economic conditions and may be more susceptible to changes in economic conditions than other segments of the hospitality industry. Competition within the boutique hotel segment is also likely to continue to increase in the future. Competitive factors include name recognition, quality of service, convenience of location, quality of the property, pricing, and range and quality of dining, services and amenities offered. Additionally, success in the boutique hotel market depends, largely, on an ability to shape and stimulate consumer tastes and demands by producing and maintaining innovative, attractive, and exciting properties and services. The Company competes in this segment against many well-known companies that have established brand recognition and significantly greater financial resources. If it is unable to achieve and maintain consumer recognition for its brand and otherwise compete with well-established competitors, the Company’s business and operations will be negatively impacted. There can be no assurance that the Company will be able to compete successfully in this market or that the Company will be able to anticipate and react to changing consumer tastes and demands in a timely manner.

 

Historically, the Company’s hotel incurs overhead costs higher than the total gross margin.

 

Historically the Algodon Mansion hotel has operated at a loss. There can be no assurance that the Algodon Mansion hotel will operate at a profit or that the Company will be able to increase revenues or lower the hotel’s overhead cost in the future.

 

The profitability of the Company’s hotels will depend on the performance of hotel management.

 

The profitability of the Company’s hotel and hospitality investment will depend largely upon the ability of management that it employs to generate revenues that exceed operating expenses. The failure of hotel management to manage the hotels effectively would adversely affect the cash flow received from hotel and hospitality operations.

 

50
 

 

We are subject to risks affecting the hotel industry.

 

In addition, the profitability of our hotels depends on:

 

  our ability to form successful relationships with international and local operators to run our hotels;
  changes in tourism and travel trends, including seasonal changes and changes due to pandemic outbreaks, weather phenomena or other natural events and social unrest;
  affluence of tourists, which can be affected by a slowdown in global economy; and
  taxes and governmental regulations affecting wages, prices, interest rates, construction procedures and costs.

 

Algodon Wine Estates and Land Development

 

The tourism industry is highly competitive and may affect the success of the Company’s projects.

 

The success of the tourism and real estate development projects underway at Algodon Wine Estates depends primarily on recreational and secondarily on business tourists and the extent to which the Company can attract tourists to the region and to its properties.

 

Generally, the Company is in competition with other hotels and developers based upon brand affiliations, room rates, customer service, location, facilities, and the condition and upkeep of the lodging in general, and in relation to other lodges/hotels/investment opportunities in the local market. Algodon Wine Estates operates as a multi-functional resort and winery and serves a niche market, which may be difficult to target. Algodon Wine Estates may also be disadvantaged because of its geographical location in the greater Mendoza region. While the San Rafael area continues to increase in popularity as a tourist destination, it is currently less traveled than other regions of Mendoza, where tourism is more established.

 

The profitability of Algodon Wine Estates will depend on consumer demand for leisure and entertainment.

 

Algodon Wine Estates is dependent on demand from leisure and business travelers, which may be seasonal and fluctuate based on numerous factors. Demand may decrease with increases in energy costs, airline fares and other expenses related to travel, which may deter travel. Business and leisure travel patterns may be disrupted due to perceived fears of local unrest or terrorism both abroad and in Argentina. General and local economic conditions and their effects on travel may adversely affect Algodon Wine Estates and our revenues.

 

Development of the Company’s projects will proceed in phases and is subject to unpredictability in costs and expenses.

 

It is contemplated that the expansion and development plans of Algodon Wine Estates will be completed in phases and each phase will present different types and degrees of risk. Algodon Wine Estates may be unable to acquire the property it needs for further expansion or be unable to raise the property to the standards anticipated for the ALGODON® brand. This may be due to difficulties associated with obtaining required future financing, purchasing additional parcels of land, or receiving the requisite zoning approvals. Algodon Wine Estates may have problems with local laws and customs that cannot be predicted or controlled. Development costs may also increase due to inflation or other economic factors.

 

51
 

 

The ability of the Company to operate its businesses may be adversely affected by U.S. and Argentine government regulations.

 

Many aspects of the Company’s businesses face substantial government regulation and oversight. For example, hotel properties are subject to numerous laws, including those relating to the preparation and sale of food and beverages, including alcohol and those governing relationships with employees such as minimum wage and maximum working hours, overtime, working conditions, hiring and firing employees and work permits. Additionally, hotel properties may be subject to various laws relating to the environment and fire and safety. Compliance with these laws may be time consuming and costly and may adversely affect hotel operations in Argentina.

 

Another example is the wine industry which is subject to extensive regulation by local and foreign governmental agencies concerning such matters as licensing, trade and pricing practices, permitted and required labeling, advertising and relations with wholesalers and retailers. New or revised regulations in Argentina, or other foreign countries and U.S. import laws could have a material adverse effect on Algodon Wine Estates’ financial condition or operations.

 

Finally, because many of the Company’s properties are located in Argentina, they are subject to its laws and to the laws of various local districts that affect ownership and operational matters. Compliance with applicable rules and regulations requires significant management attention and any failure to comply could jeopardize the Company’s ability to operate or sell a particular property and could subject the Company to monetary penalties, additional costs required to achieve compliance, and potential liability to third parties. Regulations governing the Argentinian real estate industry as well as environmental laws have tended to become more restrictive over time. The Company cannot assure that new and stricter standards will not be adopted or become applicable to the Company, or that stricter interpretations of existing laws and regulations will not be implemented.

 

Algodon Wine Estates—Vineyard and Wine Production

 

Competition within the wine industry could have a material adverse effect on the profitability of wine sales.

 

The operation of a winery is a highly competitive business and the dollar amount and unit volume of wine sales through the ALGODON® label could be negatively affected by a variety of competitive factors. Many other local and foreign producers of wine have significantly greater financial, technical, marketing and public relations resources and wine producing expertise than the Company, and many have more refined, developed and established brands. The wine industry is characterized by fickle demand and success in this industry relies heavily on successful branding. Thus, the ALGODON® brand concept may not appeal to a large segment of the market, preventing the Company from successfully competing against other Argentinian and foreign brands. Wholesaler, retailer and consumer purchasing decisions are also influenced by the quality, pricing and branding of the product, as compared to competitive products. Unit volume and dollar sales could be adversely affected by pricing, purchasing, financing, operational, advertising or promotional decisions made by competitors, which could affect the supply of, or consumer demand for, product produced under the ALGODON® brand.

 

Algodon Wine Estates is subject to import and export rules and taxes which may change.

 

Algodon Wine Estates primarily exports its products to the United States and Europe. In countries to which Algodon Wine Estates intends to export its products, Algodon Wine Estates will be subject to excise and other taxes on wine products in varying amounts, which are subject to change. Significant increases in excise or other taxes could have a material adverse effect on Algodon Wine Estates’ financial condition or operations. Political and economic instabilities of foreign countries may also disrupt or adversely affect Algodon Wine Estates’ ability to export or make profitable sales in that country. Moreover, exporting costs are subject to macro-economic forces that affect the price of transporting goods (e.g., the cost of oil and its impact on transportation systems), and this could have an adverse impact on operations.

 

52
 

 

The Company’s business would be adversely affected by natural disasters.

 

Natural disasters, floods, hurricanes, fires, earthquakes, hailstorms or other environmental disasters could damage the vineyard, its inventory, or other physical assets of the Algodon Wine Estates’ resort, including the golf course. If all or a portion of the vineyard or inventory were to be lost prior to sale or distribution as a result of any adverse environmental activity, or if the golf course and facilities were damaged, Algodon Wine Estates would become significantly less attractive as a destination resort and therefore lose a substantial portion of its anticipated profit and cash flow. Such a loss would seriously harm the business and reduce overall sales and profits. The Company is not insured against crop losses as a result of weather conditions or natural disasters. Moderate, but irregular weather conditions may adversely affect the grapes, making any one season less profitable than expected. In addition to weather conditions, many other factors, such as pruning methods, plant diseases, pests, the number of vines producing grapes, and machine failure could also affect the quantity and quality of grapes. Any of these conditions could cause an increase in the price of production or a reduction in the amount of wine Algodon Wine Estates is able to produce and a resulting reduction in business sales and profits.

 

Climate change, or legal, regulatory or market measures to address climate change, may negatively affect our business, operations or financial performance, and water scarcity or poor water quality could negatively impact our production costs and capacity.

 

Our wine business depends upon agricultural activity and natural resources. There has been much public discussion related to concerns that carbon dioxide and other greenhouse gases in the atmosphere may have an adverse impact on global temperatures, weather patterns and the frequency and severity of extreme weather and natural disasters. Severe weather events and climate change may negatively affect agricultural productivity in the regions from which we presently source our agricultural raw materials such as grapes. Decreased availability of our raw materials may increase the cost of goods for our products. Severe weather events or changes in the frequency or intensity of weather events can also disrupt our supply chain, which may affect production operations, insurance cost and coverage, as well as delivery of our products to wholesalers, retailers and consumers.

 

Water is essential in the production of our products. The quality and quantity of water available for use is important to the supply of grapes and our ability to operate our business. Water is a limited resource in many parts of the world and if climate patterns change and droughts become more severe, there may be a scarcity of water or poor water quality that may affect our production costs or impose capacity constraints. Management is unaware of any current water issues in Argentina.

 

53
 

 

Various diseases, pests and certain weather conditions may negatively affect our business, operations or financial performance.

 

Various diseases, pests, fungi, viruses, drought, frosts and certain other weather conditions could affect the quality and quantity of grapes other agricultural raw materials available, decreasing the supply of our products and negatively impacting profitability. We cannot guarantee that our grape suppliers or our suppliers of other agricultural raw materials will succeed in preventing contamination in existing vineyards or fields or that we will succeed in preventing contamination in our existing vineyards or future vineyards we may acquire. Future government restrictions regarding the use of certain materials used in growing grapes or other agricultural raw materials may increase vineyard costs and/or reduce production of grapes or other crops. Growing agricultural raw materials also requires adequate water supplies. A substantial reduction in water supplies could result in material losses of grape crops and vines or other crops, which could lead to a shortage of our product supply.

 

Contamination could adversely affect our sales.

 

The success of our brands depends upon the positive image that consumers have of those brands. Contamination, whether arising accidentally or through deliberate third-party action, or other events that harm the integrity or consumer support for our brands, could adversely affect their sales. Contaminants in raw materials, packaging materials or product components purchased from third parties and used in the production of our wine or defects in the fermentation or distillation process could lead to low beverage quality as (i) a perceived failure to maintain high ethical, social and environmental standards for all of our operations and activities; (ii) a perceived failure to address concerns relating to the quality, safety or integrity of our products; our environmental impact, including use of agricultural materials, packaging, water and energy use, and waste management; or (iii) effects that are perceived as insufficient to promote the responsible use of alcohol.

 

Gaucho Group, Inc.

 

(e-commerce, fashion & leather accessories brand)

 

Gaucho Group, Inc. (“GGI”) has a limited operating history and we may not recognize any significant revenue from the Gaucho – Buenos Aires™ line of business in the future.

 

GGI operates as a business segment subject to all the risks inherent in a newly established business venture. GGI began operations as an online retail store in 2019 with few assets and a limited operating history. The flagship store opened in Miami in June 2022 and even though sales have increased consistently, the store is still operating with losses from inception through December 31, 2023. Our projections for its growth have been developed internally and may not prove to be accurate. As such, there is a substantial risk regarding GGI’s ability to succeed and the risk that neither we nor GGI will recognize revenue in the future from the Gaucho – Buenos Aires™ line of business.

 

The markets in which GGI operates and plans to operate are highly competitive, and such competition could cause its business to be unsuccessful.

 

We expect GGI to face intense competition for its Argentine-sourced and designed products. There are many companies around the world that produce similar high-end products, though not necessarily with the Gaucho style that we plan to incorporate into GGI’s products. However, whether or not consumers find our products superior or more desirable than other high-end producers, including many branded products with established worldwide reputations and brands, such as Coach, Ralph Lauren, Hermès, Louis Vuitton, Gucci, Prada, Kate Spade and Calvin Klein, cannot yet be determined. In addition, GGI faces competition through third party distribution channels, such as e-commerce, department stores and specialty stores.

 

54
 

 

Competition is based on a number of factors, including, without limitation, the following:

 

  Anticipating and responding to changing consumer demands in a timely manner
  Establishing and maintaining favorable brand-name recognition
  Determining and maintaining product quality
  Maintaining and growing market share
  Developing quality and differentiated products that appeal to consumers
  Establishing and maintaining acceptable relationships with retail customers
  Pricing products appropriately
  Providing appropriate service and support to retailers
  Optimizing retail and supply chain capabilities
  Protecting intellectual property

 

In addition, many of GGI’s anticipated competitors will be significantly larger and more diversified than it and will likely have significantly greater financial, technological, manufacturing, sales, marketing and distribution resources than it does. Their greater capabilities in these areas may enable them to better withstand periodic downturns in the high-end product sector in which GGI plans to compete. They may also be able to compete more effectively on the basis of price and production, and to develop new products more quickly. The general availability of manufacturing contractors and agents also allows new entrants easy access to the markets in which GGI competes, which may increase the number of its competitors and adversely affect its competitive position and its business. Any increased competition, or GGI’s or our failure to adequately address any of these competitive factors, could result in the ability to generate significant revenues, which could adversely affect our business, results of operations and financial condition.

 

If we or GGI are unable to continue to compete effectively on any of the factors mentioned above, GGI may never be able to generate operating profits and our business, financial condition and results of operations would be adversely affected.

 

Our business is subject to risks associated with importing products, and the imposition of additional duties and any changes to international trade agreements could have a material adverse effect on our business, results of operations and financial condition.

 

There are risks inherent to importing our products. We anticipate that virtually all of our products will be manufactured in Argentina and thus could be subject to duties when imported into the United States, Canada, Europe and Asia, as applicable. Furthermore, if the United States imposes import duties or other protective import measures, other countries could retaliate in ways that could harm the international distribution of our products.

 

55
 

 

We may not be able to protect our intellectual property rights, which may cause us to incur significant costs.

 

The success of our future business will in part be dependent on intellectual property rights. We rely primarily on copyright, trade secret and trademark law to protect our intellectual property. For example, the process for obtaining federal trademark registration of our service mark “Gaucho—Buenos Aires™” was completed and the service mark was registered on April 28, 2020. However, a third party may copy or otherwise obtain and use our proprietary information without our authorization. Policing unauthorized use of our intellectual property is difficult, particularly in light of the global nature of the Internet and because the laws of other countries may afford us little or no effective protection of our intellectual property. Potentially expensive litigation may be necessary in the future to enforce our intellectual property rights, to protect our trade secrets, to determine the validity and scope of the proprietary rights of others or to defend against claims of infringement or invalidity.

 

Privacy breaches and other cyber security risks related to our business could negatively affect our reputation, credibility and business.

 

We are likely to be dependent on information technology systems and networks for a significant portion of our direct-to-consumer sales, including our e-commerce sites and retail business credit card transaction authorization and processing. We are responsible for storing data relating to our customers and employees and also rely on third party vendors for the storage, processing and transmission of personal and Company information. In addition to taking the necessary precautions ourselves, we require that third-party service providers implement reasonable security measures to protect our employees’ and customers’ identity and privacy. We do not, however, control these third-party service providers and cannot guarantee that no electronic or physical computer break-ins or security breaches will occur in the future. Our systems and technology are vulnerable from time-to-time to damage, disruption or interruption from, among other things, physical damage, natural disasters, inadequate system capacity, system issues, security breaches, “hackers,” email blocking lists, computer viruses, power outages and other failures or disruptions outside of our control. A significant breach of customer, employee or Company data could damage our reputation, our relationship with customers and our brands, and could result in lost sales, sizable fines, significant breach-notification costs and lawsuits, as well as adversely affect our results of operations. We may also incur additional costs in the future related to the implementation of additional security measures to protect against new or enhanced data security and privacy threats, or to comply with state, federal and international laws that may be enacted to address those threats.

 

We may not be able to accurately predict consumer trends and preferences and our estimate of the size of the market may prove to be inaccurate.

 

Success in creating demand is dependent on GGI’s ability to continue to accurately predict consumer trends and preferences. If consumer tastes do not coincide with GGI’s product offerings, it could materially affect demand, having an adverse impact on our operations.

 

It is difficult to estimate the size of the market and predict the rate at which the market for our products will grow, if at all. While our market size estimate was made in good faith and is based on assumptions and estimates we believe to be reasonable, this estimate may not be accurate. If our estimates of the size of our addressable market are not accurate, our potential for future growth may be less than we currently anticipate, which could have a material adverse effect on our business, financial condition, and results of operations.

 

56
 

 

Additionally, we hope to enter new markets in which we may have limited or no operating experience. There can be no assurance that we will be able to achieve success and/or profitability in our new markets. The success of these new markets will be affected by the different competitive conditions, consumer tastes, and discretionary spending patterns within the new markets, as well as by our ability to generate market awareness of GGI’s Gaucho Group brand. When we enter highly competitive new markets or territories in which we have not yet established a market presence, the realization of our revenue targets and desired profit margins may be more susceptible to volatility and/or more prolonged than anticipated.

 

Labor laws and regulations may adversely affect the Company.

 

Various labor laws and regulations govern operations and relationships with employees, including minimum wages, breaks, overtime, fringe benefits, safety, working conditions and citizenship requirements. Changes in, or any failure to comply with, these laws and regulations could subject the Company to fines or legal actions. Settlements or judgments that are not insured or in excess of coverage limitations could also have a material adverse effect on the Company’s business. This could result in a disruption in the work force, sanctions and adverse publicity. Significant government-imposed increases in minimum wages, paid or unpaid leaves of absence and mandated health benefits could be detrimental to the Company’s profitability.

 

The employees of TAR and AWE are members of a labor unions in Argentina. The terms of any collective bargaining agreement(s) could result in increased labor costs. In addition, any failure to negotiate an agreement in a timely manner could result in an interruption of operations, which would materially and adversely affect the business, results of operations and its financial condition.

 

GGI relies on its suppliers to maintain consistent quality for our products.

 

The ability of GGI to maintain consistent quality depends in part upon its ability to acquire quality materials needed for its products from reliable sources in accordance with certain specifications, at certain prices, and in sufficient quantities. As such, GGI is and will likely continue to be dependent on its suppliers. This presents possible risks of shortages, interruptions and price fluctuations. If any suppliers do not perform adequately or otherwise fail to distribute products or supplies required for our business, management may not be able to replace the suppliers in a short period of time on acceptable terms. The inability to replace suppliers in a short period of time on acceptable terms could increase costs and could cause shortages of product that may force management to remove certain items from GGI’s product offerings.

 

Risks of Being an Emerging Growth Company

 

We are an “emerging growth company” and our election of reduced reporting requirements applicable to emerging growth companies may make our common stock less attractive to investors.

 

We are an “emerging growth company” as defined in the JOBS Act. For as long as we continue to be an emerging growth company, we may take advantage of exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies, including (1) not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, or Section 404, (2) reduced disclosure obligations regarding executive compensation in this annual report and our periodic reports and proxy statements and (3) exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. In addition, as an emerging growth company, we are only required to provide two years of audited financial statements and two years of selected financial data in this annual report. We could be an emerging growth company until February 19, 2026, although circumstances could cause us to lose that status earlier, including if we are deemed to be a “large accelerated filer,” which occurs when the market value of our common stock that is held by non-affiliates exceeds $700 million as of the prior June 30, or if we have total annual gross revenue of $1.07 billion or more during any fiscal year before that time, in which cases we would no longer be an emerging growth company as of the following December 31, or if we issue more than $1.0 billion in non-convertible debt during any three-year period before that time, in which case we would no longer be an emerging growth company immediately. Even after we no longer qualify as an emerging growth company, we could still qualify as a “smaller reporting company,” which would allow us to take advantage of many of the same exemptions from disclosure requirements including: (1) the reduced disclosure obligations regarding executive compensation, and (2) being required to provide only two years of audited financial statements.

 

57
 

 

General Corporate Business Considerations

 

Insiders continue to have substantial control over the Company.

 

As of April 26, 2024, the Company’s directors, executive officers, and 10%+ holders have the current right to vote approximately 45.1% of the Company’s outstanding common stock. Of this total, 43.7% is owned or controlled, directly or indirectly by three individuals. As a result, these individuals acting together, may have the ability to exert significant control over the Company’s decisions and control the management and affairs of the Company, and also to determine the outcome of matters submitted to stockholders for approval, including the election and removal of a director, the removal of any officer and any merger, consolidation or sale of all or substantially all of the Company’s assets. Accordingly, this concentration of ownership may harm a future market price of the shares by:

 

  Delaying, deferring or preventing a change in control of the Company;
  Impeding a merger, consolidation, takeover or other business combination involving the Company; or
  Discouraging a potential acquirer from making a tender offer or otherwise attempting to obtain control of the Company.

 

The loss of our Chairman, President and Chief Executive Officer could adversely affect the Company’s businesses.

 

We depend on the continued performance of Scott Mathis, our Chairman, President and Chief Executive Officer, who has contributed significantly to the expertise of our team and the position of our business. If we lose the services of Mr. Mathis, and are unable to locate a suitable replacement in a timely manner, it could have a material adverse effect on our business. We currently hold key man life insurance for Mr. Mathis the benefit of the Company.

 

We may incur losses and liabilities in the course of business which could prove costly to defend or resolve.

 

Companies that operate in one or more of the businesses that we operate face significant legal risks. There is a risk that we could become involved in litigation wherein an adverse result could have a material adverse effect on our business and our financial condition. There is a risk of litigation generally in conducting a commercial business. These risks often may be difficult to assess or quantify and their existence and magnitude often remain unknown for substantial periods of time. We may incur significant legal expenses in defending against litigation.

 

58
 

 

The Company is dependent upon additional financing which it may not be able to secure in the future.

 

As it has in the past, the Company will likely continue to require financing to address its working capital needs, continue its development efforts, support business operations, fund possible continuing operating losses, and respond to unanticipated capital requirements. For example, the continuing development of the Algodon Wine Estates project requires significant ongoing capital expenditures as well as the investment in GGI’s line of luxury goods. There can be no assurance that additional financing or capital will be available and, if available, upon acceptable terms and conditions, considering the economic climate of the market.

 

To the extent that any required additional financing is not available on acceptable terms, the Company’s ability to continue in business may be jeopardized and the Company may need to curtail its operations and implement a plan to extend payables and reduce overhead until sufficient additional capital is raised to support further operations. There can be no assurance that such a plan will be successful. Such a plan could have a material adverse effect on the Company’s business, financial condition and results of operations, and ultimately the Company could be forced to discontinue its operations, liquidate and/or seek reorganization in bankruptcy.

 

The Company may not pay dividends on its common stock.

 

The Company has not paid dividends to date on its common stock. The Company does not contemplate or anticipate declaring or paying any dividends with respect to its common stock. Due to the continuing devaluation of the peso, the Company has concluded in that it must still tread cautiously and manage its available cash resources prudently and the decisions were made to not declare any additional cash dividends with respect to its common stock.

 

The Company reserves the right to declare dividends when operations merit. However, payments of any cash dividends in the future will depend on our financial condition, results of operations, and capital requirements as well as other factors deemed relevant by our board of directors. It is anticipated that earnings, if any, will be used to finance the development and expansion of the Company’s business.

 

59
 

 

The Chief Executive Officer and the Chief Financial Officer of GGH are also involved in outside businesses which may affect their ability to fully devote their time to the Company.

 

Scott Mathis, Chairman of the Board of Directors of GGH, Chief Executive Officer, President and Treasurer of GGH is also the Chairman and Chief Executive Officer of Hollywood Burger Holdings, Inc., a private company he founded which is developing Hollywood-themed fast food restaurants in the United States. His duties as CEO of Hollywood Burger Holdings, Inc. consume less than 10% of his time, but which may interfere with Mr. Mathis’ duties as the CEO of GGH.

 

In addition, Maria Echevarria, Chief Financial Officer and Chief Operating Officer of GGH also serves as the Chief Financial Officer of Hollywood Burger Holdings, Inc. Ms. Echevarria’s duties as CFO of Hollywood Burger Holdings Inc. consume approximately 10% of her time, which may interfere with her duties as the CFO of GGH.

 

The Company’s officers and directors are indemnified against certain conduct that may prove costly to defend.

 

The Company may have to spend significant resources indemnifying its officers and directors or paying for damages caused by their conduct. The Company’s amended and restated certificate of incorporation, as amended (the “Certificate of Incorporation”), exculpates the Board of Directors and its affiliates from certain liability, and the Company has procured directors’ and officers’ liability insurance to reduce the potential exposure to the Company in the event damages result from certain types of potential misconduct. Furthermore, the General Corporation Law of the State of Delaware (the “DGCL”) provides for broad indemnification by corporations of their officers and directors, and the Company’s Certificate of Incorporation implement this indemnification to the fullest extent permitted under applicable law as it currently exists or as it may be amended in the future. Consequently, subject to the applicable provisions of the DGCL and to certain limited exceptions in the Certificate of Incorporation, the Company’s officers and directors will not be liable to the Company or to its stockholders for monetary damages resulting from their conduct as an officer or director.

 

Our bylaws designate the federal and state courts of the State of Delaware as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers or employees.

 

Our bylaws provide that, unless we consent in writing to the selection of an alternative forum, the federal and state courts of the State of Delaware are the exclusive forum for certain types of actions and proceedings, not including claims under the federal securities laws such as the Securities Act or the Exchange Act, that may be initiated by our stockholders with respect to our company and our directors. This choice of forum provision may limit a stockholder’s ability to bring a claim in a judicial forum that the stockholder believes is favorable for disputes with us or our directors, which may discourage meritorious claims from being asserted against us and our directors. Alternatively, if a court were to find this provision of our charter inapplicable to, or unenforceable in respect of, one or more of the specified types of actions or proceedings, we may incur additional costs associated with resolving such matters in other jurisdictions, which could adversely affect our business, financial condition or results of operations.

 

60
 

 

Our financial controls and procedures may not be sufficient to accurately or timely report our financial condition or results of operations, which may adversely affect investor confidence in us and, as a result, the value of our common stock.

 

As a public company, we are required to maintain internal control over financial reporting and to report any material weaknesses in such internal controls. Section 404 of the Sarbanes-Oxley Act requires that we evaluate and determine the effectiveness of our internal control over financial reporting and provide a management report on internal control over financial reporting.

 

The effectiveness of our controls and procedures may in the future be limited by a variety of factors, including:

 

  faulty human judgments and simple errors, omissions or mistakes;
  fraudulent actions of an individual or collusion of two or more people;
  inappropriate management override of procedures; and
  the possibility that any enhancements to controls and procedures may still not be adequate to assure timely and accurate financial information.

 

Management has concluded that our internal control over financial reporting was not effective as of December 31, 2023 due to ineffective controls over information technology, the lack of segregation of duties resulting from our small size, and lack of testing of the operating effectiveness of the controls. If we are unable to comply with the requirements of Section 404 in a timely manner, and if we are unable to assert that our internal control over financial reporting is effective, investors may lose confidence in the accuracy and completeness of our financial reports and the market price of our common stock could be adversely affected, and we could become subject to investigations by the stock exchange on which our securities are listed, the SEC, or other regulatory authorities, which could require additional financial and management resources.

 

Although we qualify as an emerging growth company, we also qualify as a smaller reporting company and under the smaller reporting company rules we are subject to scaled disclosure requirements that may make it more challenging for investors to analyze our results of operations and financial prospects.

 

Currently, we qualify as both a “smaller reporting company” and an “emerging growth company” as defined by Rule 12b-2 of the Exchange Act. However, we have elected to provide disclosure under the smaller reporting company rules and therefore we are able to provide simplified executive compensation disclosures in our filings and have certain other decreased disclosure obligations in our filings with the SEC, including being required to provide only two years of audited financial statements in annual reports. Consequently, it may be more challenging for investors to analyze our results of operations and financial prospects.

 

Furthermore, we are a non-accelerated filer as defined by Rule 12b-2 of the Exchange Act, and, as such, are not required to provide an auditor attestation of management’s assessment of internal control over financial reporting, which is generally required for SEC reporting companies under Section 404(b) of the Sarbanes-Oxley Act. Because we are not required to, and have not, had our auditors provide an attestation of our management’s assessment of internal control over financial reporting, a material weakness in internal controls may remain undetected for a longer period.

 

61
 

 

Compliance with public reporting requirements affects the Company’s financial resources.

 

The Company is subject to certain public reporting obligations as required by federal securities laws, regulations and agencies. The compliance with such reporting requirements will require the company to incur significant legal, accounting and other administrative expenses. Additionally, because the Company’s stock is now trading on Nasdaq, the Company is subject to additional rules and disclosure obligations as required by Nasdaq, increasing compliance expenses further. The expenses the Company may incur will have a significant impact on the Company’s financial resources and may lead to a decrease in the value and price of our common stock.

 

In the event that our common stock is delisted from Nasdaq, U.S. broker-dealers may be discouraged from effecting transactions in shares of our common stock because they may be considered penny stocks and thus be subject to the penny stock rules.

 

The SEC has adopted a number of rules to regulate “penny stock” that restricts transactions involving stock which is deemed to be penny stock. Such rules include Rules 3a51-1, 15g-1, 15g-2, 15g-3, 15g-4, 15g-5, 15g-6, 15g-7, and 15g-9 under the Exchange Act. These rules may have the effect of reducing the liquidity of penny stocks. “Penny stocks” generally are equity securities with a price of less than $5.00 per share (other than securities registered on certain national securities exchanges or quoted on Nasdaq if current price and volume information with respect to transactions in such securities is provided by the exchange or system). Our shares of common stock have in the past constituted, and may again in the future constitute, “penny stock” within the meaning of the rules. The additional sales practice and disclosure requirements imposed upon U.S. broker-dealers may discourage such broker-dealers from effecting transactions in shares of our common stock, which could severely limit the market liquidity of such shares of common stock and impede their sale in the secondary market. A U.S. broker-dealer selling penny stock to anyone other than an established customer or “accredited investor” (generally, an individual with a net worth in excess of $1,000,000 or an annual income exceeding $200,000, or $300,000 together with his or her spouse) must make a special suitability determination for the purchaser and must receive the purchaser’s written consent to the transaction prior to sale, unless the broker-dealer or the transaction is otherwise exempt. In addition, the “penny stock” regulations require the U.S. broker-dealer to deliver, prior to any transaction involving a “penny stock”, a disclosure schedule prepared in accordance with SEC standards relating to the “penny stock” market, unless the broker-dealer or the transaction is otherwise exempt. A U.S. broker-dealer is also required to disclose commissions payable to the U.S. broker-dealer and the registered representative and current quotations for the securities. Finally, a U.S. broker-dealer is required to submit monthly statements disclosing recent price information with respect to the “penny stock” held in a customer’s account and information with respect to the limited market in “penny stocks”.

 

Stockholders should be aware that, according to the SEC, the market for “penny stocks” has suffered in recent years from patterns of fraud and abuse. Such patterns include (i) control of the market for the security by one or a few broker-dealers that are often related to the promoter or issuer; (ii) manipulation of prices through prearranged matching of purchases and sales and false and misleading press releases; (iii) “boiler room” practices involving high-pressure sales tactics and unrealistic price projections by inexperienced sales persons; (iv) excessive and undisclosed bid-ask differentials and markups by selling broker-dealers; and (v) the wholesale dumping of the same securities by promoters and broker-dealers after prices have been manipulated to a desired level, resulting in investor losses. Our management is aware of the abuses that have occurred historically in the penny stock market. Although we do not expect to be In a position to dictate the behavior of the market or of broker-dealers who participate in the market, management will strive within the confines of practical limitations to prevent the described patterns from being established with respect to our securities.

 

62
 

 

Stockholders may experience future dilution as a result of future debt or equity offerings.

 

In order to raise additional capital, we may in the future offer additional shares of our common stock or other securities convertible into or exchangeable for our common stock that could result in further dilution to investors or result in downward pressure on the price of our common stock. Debt financing, if available, may involve agreements that include covenants limiting or restricting our ability to take certain actions, such as incurring debt, making capital expenditures or declaring dividends. We may sell shares of our common stock or other securities in other offerings at prices that are higher or lower than the prices previously paid by investors, and investors purchasing shares or other securities in the future could have rights superior to existing stockholders.

 

Raising additional funds through debt or equity financing could be dilutive and may cause the market price of our common stock to decline. We still may need to raise additional funding which may not be available on acceptable terms, or at all. Failure to obtain additional capital may force us to delay, limit, or terminate our product development efforts or other operations.

 

To the extent that we raise additional capital through the sale of equity, convertible debt securities or draw-downs under our equity line of credit, current ownership interests may be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of our stockholders. Furthermore, any additional fundraising efforts may divert our management from their day-to-day activities, which may adversely affect our ability to develop and commercialize our products. We could utilize our available capital resources sooner than we currently expect. We may continue to seek funds through equity or debt financings, collaborative or other arrangements with corporate sources, or through other sources of financing. Additional funding may not be available to us on acceptable terms, or at all. Any failure to raise capital as and when needed, as a result of insufficient authorized shares or otherwise, could have a negative impact on our financial condition and on our ability to pursue our business plans and strategies.

 

There is no public market for our warrants.

 

There is no established public trading market for our warrants, and we do not expect a market to develop. In addition, we do not intend to apply to list such warrants on any national securities exchange or other nationally recognized trading system, including Nasdaq. Without an active market, the liquidity of such warrants will be limited.

 

Holders of the warrants will not have rights of holders of our shares of common stock until such warrants are exercised.

 

Our warrants do not confer any rights of share ownership on their holders, but rather merely represent the right to acquire shares of our common stock at a fixed price. Until holders of warrants acquire shares of our common stock upon exercise of the warrants, holders of warrants will have no rights with respect to our shares of common stock underlying such warrants.

 

ITEM 1B. UNRESOLVED STAFF COMMENTS

 

Not applicable.

 

ITEM 1C. CYBERSECURITY

 

Risk Management and Strategy

 

The Company’s information security program consists of various processes designed to ensure that the Company and its electronic assets are shielded from cyber events that may compromise the Company’s ability to successfully execute its business on a day-to-day basis. These processes cover areas such as, but not limited to, risk management, access control, anti-virus management, sensitive data management, electronic communication, risk/security reporting, incident response planning and business continuation planning. Our Information Security Team is comprised of our Chief Financial Officer, Ambassador—Director of Marketing, Accounting Manager, and Accounting Support. It is responsible for (i) administering the Company’s policies and procedures in conjunction with our third-party information technology provider, Fairdinkum (“IT Provider”); (ii) distributing our policies to employees and consultants and providing training; (iii) responding to employee or consultant inquiries regarding our policies; (iv) overseeing our cybersecurity program and leading incident response efforts; (v) monitoring for cybersecurity-related legal or regulatory developments; coordinating with management, our IT Provider and /or legal counsel to discuss cybersecurity-related issues or topics; and (vi) reviewing and updating our policies as necessary and on an annual basis.

 

The Information Security Team carries out risk management primarily by outsourcing risks to those companies and agencies that specialize in handling such risks and that have the appropriate resources to do so. Our IT Provider has more than 20 years of experience in the latest technologies, experiences in a variety of network configurations.  The IT Provider also has the ability to analyze cybersecurity presence and technology processes to provide reports as needed.  The IT Provider currently manages and monitors our network, configures systems and controls, provides assistance and support during an incident and detects threats through antivirus scans, firewalls and base level spam filters. The Information Security Team meets quarterly with our IT Provider and notifies our IT Provider in real time of any major issues. The Information Security Team has engaged Drawbridge in the past for annual testing.

 

Governance

 

Management is ultimately responsible for assessing and managing the Company’s cybersecurity risk. The information security program is overseen by the Chief Financial Officer. The Audit Committee of the Board is then briefed each quarter on the occurrence of any cybersecurity incidents. The Board will also be provided an overview of the information security program on an annual basis, including updates on the IT team, IT training, implementation of IT controls, cybersecurity testing, the incident response process and the cybersecurity assets of the Company.

 

In the last fiscal year, we have not identified any risks from known cybersecurity threats that have materially affected the Company or our financial position, results of operations and/or cash flows. We continue to invest in cybersecurity and the resiliency of our networks and to enhance our internal controls and processes, which are designed to help protect our systems and infrastructure, and the information they contain. For more information regarding the risks we face from cybersecurity threats, please see “Risk Factors.”

 

63
 

 

ITEM 2. PROPERTIES

 

GGH and its operating subsidiaries currently operate out of the retail space located at 112 N.E. 41st Street, Suite 106, in Miami, Florida to sell its Gaucho – Buenos Aires™ products. On April 8, 2021, GGI entered into a seven-year lease for approximately 1,530 square feet.

 

The Algodon – Recoleta, SRL (“TAR”) owns a hotel in the Recoleta section of Buenos Aires called Algodon Mansion, located at 1647 Montevideo Street. The hotel is approximately 20,000 square feet and has ten suites, a restaurant, a dining room, and a luxury spa and pool.

 

Algodon Wine Estates owns and operates a resort property located Ruta Nacional 144 Km 674, Cuadro Benegas, San Rafael (5603) in Argentina which consists of 4,138 acres. The property has a winery, 9-hole golf course (the remaining 9 of 18 holes to be developed in 2024), tennis courts, dining and a hotel.

 

On February 3, 2022, the Company, through IPG and AWE, acquired 100% of Gaucho Development S.R.L. (“GD”), f/k/a Hollywood Burger Argentina, S.R.L., via a stock purchase agreement dated February 3, 2022 in exchange for 106,952 shares of common stock (approximately $2.4 million) issued to Hollywood Burger Holdings, Inc. GD holds the following properties:

 

  Property on Avenida Hipólito Yrigoyen, the main thoroughfare in downtown San Rafael, Mendoza, with a lot size of approximately 48,050 square feet (approximately 1.1 acres), and the traffic it receives during the lunch hour during the week and on weekend nights. A significant area of the property also serves as a parking lot. For many businesses in Argentine cities, parking is a rare commodity, both culturally and economically. This location had approximately 80 parking spaces at last count. The Company leases this property through a leasing agreement with Mostaza Group (https://www.mostazaweb.com.ar/) which expires in September 2031. The agreed monthly rent amount will be ARS 405,000 (VAT included). The rent amount is to be adjusted by inflation every 6 months, taking in consideration the inflation rates calculated by two private consulting firms.
  Property located in Córdoba, Argentina on Recta Martinolli Avenue, a central avenue in a densely populated upscale neighborhood of the west side of the city. The avenue sees a high concentration of traffic both day and night and is the main thoroughfare enroute to a number of cultural destinations such as public schools, rugby and soccer athletic clubs, tennis and golf clubs, supermarkets, bars and nightlife, country clubs, and offices. The lot is located in a prime area for development (such as retail, café and medical center). This unique piece of real estate, which takes up and entire city block, is accessible from the four streets surrounding the block.

 

ITEM 3. LEGAL PROCEEDINGS

 

On February 16, 2024, the Company filed a complaint in the United States District Court for the District of Delaware alleging 3i, LP, 3i Management LLC, and Maier Joshua Tarlow engaged in an unlawful securities transaction with the Company as an unregistered dealer under U.S. securities laws.

 

From time to time, GGH and its subsidiaries and affiliates are subject to litigation and arbitration claims incidental to its business. Such claims may not be covered by its insurance coverage, and even if they are, if claims against GGH and its subsidiaries are successful, they may exceed the limits of applicable insurance coverage. We are not involved in any litigation that we believe is likely, individually or in the aggregate, to have a material adverse effect on our consolidated financial condition, results of operations or cash flows.

 

ITEM 4. MINE SAFETY DISCLOSURES

 

Not applicable.

 

64