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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

 

FORM 10-Q

 

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

 

For the quarterly period ended June 30, 2024

 

OR

 

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

 

For the transition period from _____________ to ___________________.

 

Commission file number: 001-40075

 

Gaucho Group Holdings, Inc.

(Exact name of registrant as specified in its charter)

 

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

 

112 NE 41st Street, Suite 106

Miami, FL 33137

(Address of principal executive offices)

 

212-739-7700

(Registrant’s telephone number, including area code)

 

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

 

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

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this Chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

 

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

 

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

 

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

 

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

 

As of August 14, 2024, there were 889,263 shares of common stock outstanding.

 

 

 

 
 

 

GAUCHO GROUP HOLDINGS, INC. AND SUBSIDIARIES

TABLE OF CONTENTS

 

PART I  
   
FINANCIAL INFORMATION  
   
ITEM 1. Financial Statements  
   
Condensed Consolidated Balance Sheets as of June 30, 2024 (unaudited) and December 31, 2023 1
   
Unaudited Condensed Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2024 and 2023 3
   
Unaudited Condensed Consolidated Statements of Comprehensive Loss for the Three and Six Months Ended June 30, 2024 and 2023 4
   
Unaudited Condensed Consolidated Statement of Changes in Stockholders’ Equity for the Three and Six Months Ended June 30, 2024 5
   
Unaudited Condensed Consolidated Statement of Changes in Stockholders’ Equity for the Three and Six Months Ended June 30, 2023 6
   
Unaudited Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2024 and 2023 7
   
Notes to Condensed Consolidated Financial Statements (unaudited) 9
   
ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 32
   
ITEM 3. Quantitative and Qualitative Disclosures About Market Risk 40
   
ITEM 4. Controls and Procedures 40
   
PART II  
   
OTHER INFORMATION  
   
ITEM 1. Legal Proceedings 41
   
ITEM 1A. Risk Factors 42
   
ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds 43
   
ITEM 3. Defaults Upon Senior Securities 44
   
ITEM 4. Mine Safety Disclosures 44
   
ITEM 5. Other Information 45
   
ITEM 6. Exhibits 48
   
Signatures 49

 

i
 

 

PART I – FINANCIAL INFORMATION

 

Item 1. Financial Statements

 

GAUCHO GROUP HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

 

   June 30,   December 31, 
   2024   2023 
   (unaudited)     
Assets          
Current Assets          
Cash  $469,049   $427,961 
Accounts receivable, net of allowance of $7,832 and $6,649 at June 30, 2024 and December 31, 2023, respectively   93,648    41,261 
Accounts receivable - related parties, net of allowance of $1,506,651 and $1,517,836 at June 30, 2024 and December 31, 2023, respectively   4,473    - 
Mortgages receivable, net of allowance of $520,763 and $369,549 at June 30, 2024 and December 31, 2023, respectively   712,124    675,512 
Inventory, net of allowance of 367,357 and 186,736 at June 30, 2024 and December 31, 2023, respectively   1,916,041    2,031,880 
Inventory deposits   50,214    161,531 
Real estate lots held for sale   560,869    615,585 
Prepaid expenses and other current assets   540,066    343,199 
Total Current Assets   4,346,484    4,296,929 
Long Term Assets          
Mortgages receivable, non-current portion, net of allowance of $1,152,603 and $1,067,432 at June 30, 2024 and December 31, 2023, respectively   1,577,752    1,850,405 
Advances to employees   282,805    281,783 
Property and equipment, net   7,463,278    7,806,370 
Operating lease right-of-use asset   1,097,381    1,218,408 
Finance lease right-of-use asset   75,361    - 
Prepaid foreign taxes, net   954,311    953,570 
Intangible assets, net   87,327    98,147 
Deposits, non-current   54,713    54,713 
Total Assets  $15,939,412   $16,560,325 

 

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

 

1
 

 

GAUCHO GROUP HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS, CONTINUED

 

   June 30,   December 31, 
   2024   2023 
   (unaudited)     
Liabilities and Stockholders’ Equity          
Current Liabilities          
Accounts payable  $931,351   $925,422 
Accrued expenses, current portion   4,035,702    3,719,798 
Deferred revenue   1,376,325    1,471,813 
Deferred revenue, related party   250,000    250,000 
Finance lease liability, current portion   11,701    - 
Operating lease liabilities, current portion   276,440    250,711 
Loans payable, current portion   191,073    188,169 
Loans payable, related party   420,000    - 
Lot sale obligation, net   506,954    541,027 
Convertible debt obligations, net   2,529,644    1,320,902 
Convertible debt obligations, net, related party   1,000,000    - 
Derivative liability   893,767    738,140 
Other current liabilities   78,731    254,768 
Total Current Liabilities   12,501,688    9,660,750 
Long Term Liabilities          
Accrued expenses, non-current portion   18,648    35,527 
Finance lease liability, non-current portion   62,757    - 
Operating lease liabilities, non-current portion   936,201    1,077,697 
Loans payable, non-current portion   -    90,372 
Total Liabilities   13,519,294    10,864,346 
Commitments and Contingencies (Note 15)   -    - 
Senior Convertible Preferred Stock, par value $0.01 per share: 100,000 shares designated; no shares issued and outstanding   -    - 
Stockholders’ Equity          
Preferred Stock, 902,670 shares authorized; no shares issued and outstanding   -    - 
Common stock, par value $0.01 per share; 150,000,000 shares authorized; 889,266 and 480,794 shares issued and 889,263 and 480,791 shares outstanding at June 30, 2024 and December 31, 2023, respectively   8,893    4,808 
Additional paid-in capital   152,667,334    150,631,395 
Accumulated other comprehensive loss   (11,056,896)   (11,104,706)
Accumulated deficit   (139,152,858)   (133,789,163)
Treasury stock, at cost, 3 shares at June 30, 2024 and December 31, 2023   (46,355)   (46,355)
Total Stockholders’ Equity   2,420,118    5,695,979 
Total Liabilities and Stockholders’ Equity  $15,939,412   $16,560,325 

 

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

 

2
 

 

GAUCHO GROUP HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)

 

   2024   2023   2024   2023 
   For the Three Months Ended   For the Six Months Ended 
   June 30,   June 30, 
   2024   2023   2024   2023 
                 
Sales  $427,227   $710,975   $1,014,605   $1,158,742 
Cost of sales   (451,560)   (668,619)   (819,209)   (961,918)
Gross (loss) profit   (24,333)   42,356    195,396    196,824 
Operating Expenses                    
Selling and marketing   126,983    213,157    223,020    447,736 
General and administrative   2,156,317    1,710,505    4,420,919    3,467,193 
Depreciation and amortization   114,521    104,281    224,860    213,487 
Total operating expenses   2,397,821    2,027,943    4,868,799    4,128,416 
Loss from Operations   (2,422,154)   (1,985,587)   (4,673,403)   (3,931,592)
                     
Other Expense (Income)                    
Change in fair value of derivative liability   75,037    2,141,117    155,627    2,141,117 
Loss on extinguishment of debt   -    32,094    -    416,081 
Gains from foreign currency remeasurement, net   (23,602)   (102,916)   (33,585)   (214,708)
Interest income   -    (64,375)   (15,400)   (114,719)
Interest expense   156,460    1,065,620    583,650    1,667,912 
Other income, related party   -    (75,000)   -    (150,000)
Total other expense   207,895    2,996,540    690,292    3,745,683 
Net Loss  $(2,630,049)  $(4,982,127)  $(5,363,695)  $(7,677,275)
                     
Net Loss per Common Share                    
Basic and Diluted  $(3.11)  $(7.99)  $(7.36)  $(14.08)
                     
Weighted Average Number of Common Shares Outstanding:                    
Basic and Diluted   846,002    623,674    729,105    545,354 

 

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

 

3
 

 

GAUCHO GROUP HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(unaudited)

 

   2024   2023   2024   2023 
   For the Three Months Ended   For the Six Months Ended 
   June 30,   June 30, 
   2024   2023   2024   2023 
Net loss  $(2,630,049)  $(4,982,127)  $(5,363,695)  $(7,677,275)
Other comprehensive loss:                    
 Foreign currency translation adjustments   84,201    (37,993)   47,810    (77,792)
 Comprehensive loss  $(2,545,848)  $(5,020,120)  $(5,315,885)  $(7,755,067)

 

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

 

4
 

 

GAUCHO GROUP HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2024

(unaudited)

 

                       Accumulated         
                   Additional   Other       Total 
   Common Stock   Treasury Stock   Paid-In   Comprehensive   Accumulated   Stockholders’ 
   Shares   Amount   Shares   Amount   Capital   Loss   Deficit   Equity 
Balance - January 1, 2024   480,794   $4,808  -  3   $(46,355)  $150,631,395   $(11,104,706)  $(133,789,163)  $5,695,979 
Stock-based compensation:                                        
Options        -       -    -    17,911    -    -    17,911 
Restricted stock units   1,841    19    -    -    74,747    -    -    74,766 
Common stock issued for 401(k) employer matching   3,497    35    -    -    14,733    -    -    14,768 
Common stock issued for cash in private placement   288,824    2,888    -    -    1,730,046    -    -    1,732,934 
Net loss        -  -  -    -    -    -    (2,733,646)   (2,733,646)
Other comprehensive loss        -    -    -    -    (36,391)   -    (36,391)
Balance - March 31, 2024   774,956    7,750  -  3    (46,355)   152,468,832    (11,141,097)   (136,522,809)   4,766,321 
Stock-based compensation:                                        
Options        -    -    -    17,909    -    -    17,909 
Restricted stock units   12,500    125    -    -    81,611    -    -    81,736 
Common stock issued for cash in private placement   16,667    166    -    -    99,834    -    -    100,000 
Anti-dilution shares issued   4,764    48    -    -    (48)   -    -    - 
Effect of reverse stock split   80,379    804    -    -    (804)   -    -    - 
Net loss   -    -  -  -    -    -    -    (2,630,049)   (2,630,049)
Other comprehensive loss   -    -    -    -    -    84,201    -    84,201 
Balance - June 30, 2024   889,266   $8,893  -  3   $(46,355)  $152,667,334   $(11,056,896)  $(139,152,858)  $2,420,118 

 

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

 

5
 

 

GAUCHO GROUP HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2023

(unaudited)

 

                       Accumulated         
                   Additional   Other       Total 
   Common Stock   Treasury Stock   Paid-In   Comprehensive   Accumulated   Stockholders’ 
   Shares   Amount   Shares   Amount   Capital   Loss   Deficit   Equity 
Balance - January 1, 2023   36,534   $365  -  3   $(46,355)  $139,159,811   $(10,842,569)  $(117,479,571)  $10,791,681 
Cumulative effect of change upon adoption of ASU 2016-13   -    -    -    -    -    -    (111,582)   (111,582)
Stock-based compensation:                                        
Options   -    -    -    -    38,834    -    -    38,834 
Restricted stock units   39    -    -    -    79,422    -    -    79,422 
Common stock issued for 401(k) employer matching   242    3    -    -    32,614    -    -    32,617 
Shares issued under the New ELOC, net of offering costs [1]   3,644    37    -    -    441,372    -    -    441,409 
Relative fair value of warrants issued with 2023 Notes, net of issuance costs [2]   -    -    -    -    1,506,319    -    -    1,506,319 
Warrants issued for modification of GGH Notes   -    -    -    -    134,779    -    -    134,779 
Reduction of warrant exercise price on new debt issuance   -    -    -    -    63,502    -    -    63,502 
Shares issued upon conversion of debt and interest   8,333    83    -    -    1,571,470    -    -    1,571,553 
Common stock issued for cash in private placement   5,910    59    -    -    590,941    -    -    591,000 
Cashless warrant exercise   513    5    -    -    (5)   -    -    - 
True-up adjustment   3    -    -    -    -    -    -    - 
Net loss   -    -  -  -    -    -    -    (2,695,148)   (2,695,148)
Other comprehensive loss   -    -    -    -    -    (39,799)   -    (39,799)
Balance - March 31, 2023   55,218    552  -  3    (46,355)   143,619,059    (10,882,368)   (120,286,301)   12,404,587 
Stock-based compensation:   -    -                               
Options   -    -    -    -    38,834    -    -    38,834 
Restricted stock units   -    -    -    -    74,978    -    -    74,978 
Shares issued under the New ELOC, net of offering costs [3]   4,588    46    -    -    291,551    -    -    291,597 
Shares issued upon conversion of debt and interest   8,288    83    -    -    575,173    -    -    575,256 
Net loss   -    -  -  -    -    -    -    (4,982,127)   (4,982,127)
Other comprehensive loss   -    -    -    -    -    (37,993)   -    (37,993)
 Balance - June 30, 2023   68,093   $681  -  3   $(46,355)  $144,599,595   $(10,920,361)  $(125,268,428)  $8,365,132 

 

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

 

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

 

6
 

 

GAUCHO GROUP HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

 

   2024   2023 
   For the Six Months Ended 
   June 30, 
   2024   2023 
Cash Flows from Operating Activities          
Net loss  $(5,363,695)  $(7,677,275)
Adjustments to reconcile net loss to net cash used in operating activities:          
Stock-based compensation:          
401(k) stock   6,816    5,908 
Options   35,820    77,668 
Restricted stock units   156,502    154,400 
Non-cash lease expense   121,400    113,744 
Gains from foreign currency remeasurement, net   (33,585)   (214,708)
Depreciation and amortization   232,875    213,487 
Amortization of debt discount   318,819    1,079,034 
Provision for credit losses, net of recoveries   226,743    57,104 
Provision for unrealizable prepaid taxes   32,124    - 
Provision for obsolete inventory   180,620    99,323 
Change in fair value of derivative liability   155,627    2,141,117 
Loss on sale of land   44,406    416,081 
Decrease (increase) in assets:          
Accounts receivable and mortgages receivable   (85,352)   (126,017)
Employee advances   -    (571)
Inventory   (64,781)   (57,274)
Inventory deposits   111,317    1,417 
Real estate lots held for sale   54,716    - 
Prepaid expenses and other current assets   (229,732)   (30,668)
Increase (decrease) in liabilities:          
Accounts payable and accrued expenses   380,100    (162,671)
Operating lease liabilities   (115,767)   (98,126)
Deferred revenue   (95,488)   (4,985)
Other liabilities   (174,156)   (20,131)
Total Adjustments   1,259,024    3,644,132 
Net Cash Used in Operating Activities   (4,104,671)   (4,033,143)
Cash Flows from Investing Activities          
Purchase of property and equipment   (111,229)   (438,895)
Proceeds from sale of land   187,860    - 
Purchase of intangible asset   -    (50,000)
Net Cash Provided by (Used in) Investing Activities   76,631    (488,895)

 

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

 

7
 

 

GAUCHO GROUP HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS, CONTINUED

(unaudited)

 

   June 30, 
   2024   2023 
Cash Flows from Financing Activities          
Proceeds from loan payable   -    185,000 
Proceeds from loans payable, related party   300,000    - 
Proceeds from equity deposits   380,000    - 
Repayments of loans payable   (87,469)   (58,718)
Refund of lot sale obligation   (73,450)   - 
Proceeds from the issuance of convertible debt   669,303    5,000,000 
Proceeds from the issuance of convertible debt, related party   1,000,000    - 
Financing costs in connection with the issuance of convertible debt   -    (321,803)
Repayments of convertible debt obligations   -    (862,541)
Proceeds from common stock issued for cash   1,832,934    591,000 
Redemption premiums paid on convertible debt obligations   -    (156,160)
Proceeds from issuance of shares under the New ELOC, net of offering costs [1]   -    733,006 
Net Cash Provided by Financing Activities   4,021,318    5,109,784 
Effect of Exchange Rate Changes on Cash   47,810    (77,792)
Net Increase in Cash   41,088    509,954 
Cash - Beginning of Period   427,961    300,185 
Cash - End of Period  $469,049   $810,139 
           
Supplemental Disclosures of Cash Flow Information:          
Interest paid  $240,725   $561,876 
Income taxes paid  $-   $- 
           
Non-Cash Investing and Financing Activity          
Finance lease liability for equipment  $75,734   $- 
Equity issued to satisfy accrued stock-based compensation obligation  $14,768   $32,617 
Shares issued in connection with anti-dilution protection  $48   $- 
Shares issued upon conversion of debt and accrued interest  $-   $2,146,809 
Equity deposits exchanged for notes payable  $120,000   $- 
Equity deposits exchanged for convertible debt  $260,000   $- 
Relative fair value of warrants issued with 2023 Notes, net of allocable issuance costs [2]  $-   $1,506,319 
Warrants issued and debt principal exchanged upon modification of convertible debt  $-   $63,502 
Cashless warrant exercise  $-   $513 

 

  [1] Gross proceeds of $797,623, less offering costs of $64,617

 

  [2] Represents $1,609,935 relative fair value of warrants, less $103,616 in allocable issuance costs

 

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

 

8
 

 

GAUCHO GROUP HOLDINGS, INC. AND SUBSIDIARIES

 

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

 

1. BUSINESS ORGANIZATION AND NATURE OF OPERATIONS

 

Organization and Operations

 

Through its subsidiaries, Gaucho Group Holdings, Inc. (“Company”, “GGH”), a Delaware corporation that was incorporated on April 5, 1999, currently invests in, develops, and operates a collection of luxury assets, including real estate development, fine wines, and a boutique hotel in Argentina, as well as an e-commerce platform for the sale of high-end fashion and accessories.

 

As wholly owned subsidiaries of GGH, InvestProperty Group, LLC (“IPG”) and Algodon Global Properties, LLC (“AGP”) operate as holding companies that invest in, develop and operate global real estate and other lifestyle businesses such as wine production and distribution, golf, tennis, and restaurants. GGH operates its properties through its ALGODON® brand. IPG and AGP have invested in two ALGODON® brand projects located in Argentina. The first project is Algodon Mansion, a Buenos Aires-based luxury boutique hotel property that opened in 2010 and is owned by the Company’s subsidiary, The Algodon – Recoleta, SRL (“TAR”). The second project is the redevelopment, expansion and repositioning of a Mendoza-based winery and golf resort property now called Algodon Wine Estates (“AWE”), the integration of adjoining wine producing properties by Guacho Development S.R.L. (“GDS”), and the subdivision of a portion of this property for residential development.

 

GGH also manufactures, distributes, and sells high-end luxury fashion and accessories through its wholly-owned subsidiary, Gaucho Group, Inc. (“GGI”).

 

Reverse Stock Splits

 

On September 25, 2023, the Company effected a reverse stock split wherein each 10 shares of common stock outstanding immediately prior to the effective date was combined and converted into one share of common stock.

 

On May 1, 2024, the Company effected another reverse stock split wherein each 10 shares of common stock outstanding immediately prior to the effective date was combined and converted into one share of common stock.

 

All share and per share amounts in this Quarterly Report have been adjusted to reflect the effect of these reverse stock splits (hereafter referred to collectively as the “Reverse Stock Splits”) as if the Reverse Stock Splits occurred as of the earliest period presented.

 

9
 

 

GAUCHO GROUP HOLDINGS, INC. AND SUBSIDIARIES

 

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

 

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Basis of Presentation

 

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. GAAP for interim financial information. Accordingly, they do not include all of the information and disclosures required by U.S. GAAP for annual consolidated financial statements. In the opinion of management, the accompanying condensed consolidated financial statements include all adjustments which are considered necessary for a fair presentation of the unaudited condensed consolidated financial statements of the Company as of June 30, 2024, and for the three and six months ended June 30, 2024 and 2023. The results of operations for the three and six months ended June 30, 2024 are not necessarily indicative of the operating results for the full year ending December 31, 2024 or any other period. These unaudited condensed consolidated financial statements have been derived from the Company’s accounting records and should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s annual report on Form 10-K for the year ended December 31, 2023, filed with the Securities and Exchange Commission (“SEC”) on April 30, 2024.

 

Going Concern and Management’s Liquidity Plans

 

The accompanying condensed consolidated 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. The condensed consolidated financial statements do not include any adjustments relating to the recoverability and classification of asset amounts or the classification of liabilities that might be necessary should the Company be unable to continue as a going concern. As of June 30, 2024, the Company had cash of $469,049 and a working capital deficit of $8,155,204. During the six months ended June 30, 2024 and 2023, the Company incurred net losses of $5,363,695 and $7,677,275, respectively, and used cash in operating activities of $4,104,671 and $4,033,143, respectively.

 

As of June 30, 2024, future cash requirements for current liabilities include $4,967,053 for accounts payable and accrued expenses (including cash true up obligations in connection with convertible debt in the amount of $1,484,677), $451,550 for lot sale obligations, $3,531,722 of principal owed in connection with convertible debt, $611,073 for loans payable, $276,440 for future payments under an operating lease, $11,701 for future payments under a finance lease, and $78,731 for other current liabilities. Further, the Company’s convertible debt matured on February 21, 2024 and the Company has subsequently received event of default notices demanding immediate payment of all balances owed in connection with the convertible debt, including cash true up obligations. Balances owed in connection with convertible debt in default remain outstanding as of the date of the filing of this quarterly report on Form 10-Q. Future cash requirements for long-term liabilities include $936,201 for future payments under an operating lease, $62,757 for future payments under a finance lease and $18,648 for accrued expenses.

 

On February 27, 2024, the Company’s equity line of credit was terminated.

 

10
 

 

GAUCHO GROUP HOLDINGS, INC. AND SUBSIDIARIES

 

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

 

Since inception, the Company’s operations have primarily been funded through proceeds received in equity and debt financings. The Company believes it has access to capital resources and continues to evaluate additional financing opportunities. There is no assurance that the Company will be able to obtain funds on commercially acceptable terms, if at all. There is also no assurance that the amount of funds the Company might raise will enable the Company to complete its development initiatives or attain profitable operations.

 

During the period from July 3, 2024 through August 6, 2024, the Company issued 120-day convertible promissory notes in exchange for cash proceeds in the aggregate amount of $1,290,400. The notes bear interest at 8.5% per annum, and automatically convert into preferred shares at a conversion price of $100.00 per preferred share on the date that the Company obtains stockholder approval to issue such shares. If the Company does not obtain such approval, all principal and interest accrued on the notes will be due and payable at maturity.

 

Based upon projected revenues and expenses, the Company believes that it may not have sufficient funds to operate for the next twelve months from the date these condensed consolidated financial statements are issued. The aforementioned factors raise substantial doubt about the Company’s ability to continue as a going concern.

 

Highly Inflationary Status in Argentina

 

During the three and six months ended June 30, 2024, the Company recorded gains of $23,602 and $33,585, respectively, and during the three and six months ended June 30, 2023, the Company recorded gains of $102,916 and $214,708, respectively, resulting from foreign currency remeasurement of the Company’s Argentine subsidiaries’ net monetary liability position of its Argentine subsidiaries.

 

Concentrations

 

The Company maintains cash with major financial institutions. Cash held in US bank institutions is currently insured by the Federal Deposit Insurance Corporation (“FDIC”) up to $250,000 at each institution. No similar insurance or guarantee exists for cash held in Argentina bank accounts. There were aggregate uninsured cash balances of $106,378 and $93,878 at June 30, 2024 and December 31, 2023, respectively, which represents cash held in Argentine bank accounts.

 

Revenue Recognition

 

The Company recognizes revenue in accordance with ASC Topic 606, Revenue from Contracts with Customers. ASC Topic 606 provides a single comprehensive model to use in accounting for revenue arising from contracts with customers, and gains and losses arising from transfers of non-financial assets including sales of property and equipment, real estate, and intangible assets.

 

The Company earns revenues from the sale of real estate lots, as well as hospitality, food and beverage, other related services, and from the sale of clothing and accessories. The Company recognizes revenue when goods or services are transferred to customers in an amount that reflects the consideration which it expects to receive in exchange for those goods or services. In determining when and how revenue is recognized from contracts with customers, the Company performs the following five-step analysis: (i) identification of contract with customer; (ii) determination of performance obligations; (iii) measurement of the transaction price; (iv) allocation of the transaction price to the performance obligations; and (v) recognition of revenue when (or as) the Company satisfies each performance obligation.

 

11
 

 

GAUCHO GROUP HOLDINGS, INC. AND SUBSIDIARIES

 

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

 

The following table summarizes the revenue recognized in the Company’s condensed consolidated statements of operations:

 

   2024   2023   2024   2023 
   For the Three Months Ended   For the Six Months Ended 
   June 30,   June 30, 
   2024   2023   2024   2023 
                 
Real estate sales  $-   $154,960   $104,143   $154,959 
Hotel rooms and events   146,174    218,837    459,561    464,525 
Clothes and accessories   31,977    42,381    86,918    107,763 
Restaurants   41,789    56,989    96,470    136,007