UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM
For
the quarterly period ended
OR
For the transition period from _____________ to ___________________.
Commission
file number:
(Exact name of registrant as specified in its charter)
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Securities registered pursuant to Section 12(b) of the Act:
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| The
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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
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| ☒ | Smaller reporting company | |||
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As of February 12, 2025, there were shares of common stock outstanding.
GAUCHO GROUP HOLDINGS, INC. AND SUBSIDIARIES
TABLE OF CONTENTS
| i |
PART I – FINANCIAL INFORMATION
Item 1. Financial Statements
GAUCHO GROUP HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
| September 30, | December 31, | |||||||
| 2024 | 2023 | |||||||
| (unaudited) | ||||||||
| Assets | ||||||||
| Current Assets | ||||||||
| Cash | $ | $ | ||||||
| Accounts receivable, net
of allowance of $ and $ at September 30, 2024 and December 31, 2023, respectively | ||||||||
| Accounts receivable - related
parties, net of allowance of $ and $ | ||||||||
| Mortgages receivable, net
of allowance of $ and $ at September 30, 2024 and December 31, 2023, respectively | ||||||||
| Mortgages receivable, related party, net of allowance of $ | ||||||||
| Inventory, net of
allowance of $ | ||||||||
| Inventory deposits | ||||||||
| Real estate lots held for sale | ||||||||
| Prepaid expenses and other current assets | ||||||||
| Total Current Assets | ||||||||
| Long Term Assets | ||||||||
| Mortgages receivable, non-current portion, net of allowance of $ and $ at September 30, 2024 and December 31, 2023, respectively | ||||||||
| Mortgages receivable, related party, non-current portion, net of allowance of $ | ||||||||
| Advances to employees, net of allowance of $ | ||||||||
| Property and equipment, net | ||||||||
| Operating lease right-of-use asset | ||||||||
| Finance lease right-of-use asset | ||||||||
| Prepaid foreign taxes, net | ||||||||
| Intangible assets, net | ||||||||
| Deposits, non-current | ||||||||
| Total Assets | $ | $ | ||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
| 1 |
GAUCHO GROUP HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS, CONTINUED
| September 30, | December 31, | |||||||
| 2024 | 2023 | |||||||
| (unaudited) | ||||||||
| Liabilities Temporary Equity and Stockholders’ Equity | ||||||||
| Current Liabilities | ||||||||
| Accounts payable | $ | $ | ||||||
| Accrued expenses, current portion | ||||||||
| Deferred revenue, current portion | ||||||||
| Deferred revenue, related party | ||||||||
| Finance lease liability, current portion | ||||||||
| Operating lease liabilities, current portion | ||||||||
| Loans payable, current portion | ||||||||
| Loans payable, related party | ||||||||
| Lot sale obligation, net | ||||||||
| Convertible debt obligations, net | ||||||||
| Derivative liability | ||||||||
| Other current liabilities | ||||||||
| Total Current Liabilities | ||||||||
| Long Term Liabilities | ||||||||
| Accrued expenses, non-current portion | ||||||||
| Deferred revenue, non current portion | ||||||||
| Finance lease liability, non-current portion | ||||||||
| Operating lease liabilities, non-current portion | ||||||||
| Loans payable, non-current portion | ||||||||
| Total Liabilities | ||||||||
| Commitments and Contingencies (Note 15) | ||||||||
| Temporary Equity | ||||||||
| Series
B convertible redeemable preferred stock, par value $
per share; | ||||||||
| Total Temporary Equity | ||||||||
| Stockholders’ Equity | ||||||||
| Preferred Stock, shares authorized; shares issued and outstanding | ||||||||
| Common stock, par value $ per share; shares authorized; and shares issued and and shares outstanding at September 30, 2024 and December 31, 2023, respectively | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated other comprehensive loss | ( | ) | ( | ) | ||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Treasury stock, at cost, shares at September 30, 2024 and December 31, 2023 | ( | ) | ( | ) | ||||
| Total Stockholders’ Equity | ( | ) | ||||||
| Total Liabilities, Temporary Equity and Stockholders’ Equity | $ | $ | ||||||
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)
| For the Three Months Ended | For the Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| Sales | $ | $ | $ | $ | ||||||||||||
| Cost of sales | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Gross profit | ||||||||||||||||
| Operating Expenses | ||||||||||||||||
| Selling and marketing | ||||||||||||||||
| General and administrative | ||||||||||||||||
| Depreciation and amortization | ||||||||||||||||
| Loss on termination of lease | ||||||||||||||||
| Total operating expenses | ||||||||||||||||
| Loss from Operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other Expense (Income) | ||||||||||||||||
| Change in fair value of derivative liability | ||||||||||||||||
| Loss on extinguishment of debt | ||||||||||||||||
| Gains from foreign currency remeasurement, net | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Interest income | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Interest expense | ||||||||||||||||
| Other income, related party | ( | ) | ( | ) | ||||||||||||
| Total other expense | ||||||||||||||||
| Net Loss | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Deemed dividend | ( | ) | ( | ) | ||||||||||||
| Net loss attributable to common stockholders | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Net Loss per Common Share | ||||||||||||||||
| Basic and Diluted | $ | ) | $ | ) | $ | ) | $ | ) | ||||||||
| Weighted Average Number of Common Shares Outstanding: | ||||||||||||||||
| Basic and Diluted | ||||||||||||||||
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)
| For the Three Months Ended | For the Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| Net loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Other comprehensive income (loss): | ||||||||||||||||
| Foreign currency translation adjustments | ( | ) | ||||||||||||||
| Comprehensive loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
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 TEMPORARY EQUITY
AND STOCKHOLDERS’ EQUITY
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2024
(unaudited)
| Temporary Equity | Stockholders’ Equity | |||||||||||||||||||||||||||||||||||||||
| Senior | Accumulated | |||||||||||||||||||||||||||||||||||||||
| 8.5% Convertible | Additional | Other | Total | |||||||||||||||||||||||||||||||||||||
| Preferred Stock | Common Stock | Treasury Stock | Paid-In | Comprehensive | Accumulated | Stockholders’ | ||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | Capital | Loss | Deficit | Equity | |||||||||||||||||||||||||||||||
| Balance - January 1, 2024 | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | $ | | ||||||||||||||||||||||||||
| Stock-based compensation: | ||||||||||||||||||||||||||||||||||||||||
| Options | - | - | - | - | ||||||||||||||||||||||||||||||||||||
| Restricted stock units | - | - | - | |||||||||||||||||||||||||||||||||||||
| Common stock issued for 401(k) employer matching contibution | - | - | - | |||||||||||||||||||||||||||||||||||||
Common stock issued for cash in private placement | - | - | - | |||||||||||||||||||||||||||||||||||||
| Net loss | - | - | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||
| Other comprehensive loss | - | - | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||
| Balance - March 31, 2024 | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||
| Stock-based compensation: | ||||||||||||||||||||||||||||||||||||||||
| Options | - | - | - | - | ||||||||||||||||||||||||||||||||||||
| Restricted stock units | - | - | - | |||||||||||||||||||||||||||||||||||||
| Common stock issued for cash in private placement | - | - | - | |||||||||||||||||||||||||||||||||||||
| Anti-dilution shares issued | - | - | - | ( | ) | |||||||||||||||||||||||||||||||||||
| Effect of reverse stock split | - | - | - | ( | ) | |||||||||||||||||||||||||||||||||||
| Net loss | - | - | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||
| Other comprehensive loss | - | - | - | - | ||||||||||||||||||||||||||||||||||||
| Balance - June 30, 2024 | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||
| Senior | - | - | ||||||||||||||||||||||||||||||||||||||
| Exchange of | - | - | ||||||||||||||||||||||||||||||||||||||
| Accretion of senior preferred stock to redemption value | - | - | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||
| Stock-based compensation: | - | |||||||||||||||||||||||||||||||||||||||
| Options | - | - | - | - | ||||||||||||||||||||||||||||||||||||
| Restricted stock units | - | - | - | |||||||||||||||||||||||||||||||||||||
| Common stock | - | - | - | - | ||||||||||||||||||||||||||||||||||||
| Anti-dilution shares issued | - | - | - | ( | ) | |||||||||||||||||||||||||||||||||||
| Net loss | - | - | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||
| Other comprehensive loss | - | - | - | - | ||||||||||||||||||||||||||||||||||||
| Balance - September 30, 2024 | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||||||||||||||||||||||||
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 NINE MONTHS ENDED SEPTEMBER 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 | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | | |||||||||||||||||||||
| Cumulative effect of change upon adoption of ASU 2016-13 | - | - | ( | ) | ( | ) | |||||||||||||||||||||||||||
| Stock-based compensation: | |||||||||||||||||||||||||||||||||
| Options | - | - | |||||||||||||||||||||||||||||||
| Restricted stock units | - | ||||||||||||||||||||||||||||||||
| Common stock issued for 401(k) employer matching | - | ||||||||||||||||||||||||||||||||
| Shares issued under the New ELOC, net of offering costs [1] | - | ||||||||||||||||||||||||||||||||
| Relative fair value of warrants issued with 2023 Notes, net of issuance costs [2] | - | - | |||||||||||||||||||||||||||||||
| Warrants issued for modification of GGH Notes | - | - | |||||||||||||||||||||||||||||||
| Reduction of warrant exercise price on new debt issuance | - | - | |||||||||||||||||||||||||||||||
| Shares issued upon conversion of debt and interest | - | ||||||||||||||||||||||||||||||||
| Common stock issued for cash in private placement | - | ||||||||||||||||||||||||||||||||
| Cashless warrant exercise | - | ( | ) | ||||||||||||||||||||||||||||||
| True-up adjustment | - | ||||||||||||||||||||||||||||||||
| Net loss | - | - | ( | ) | ( | ) | |||||||||||||||||||||||||||
| Other comprehensive loss | - | - | ( | ) | ( | ) | |||||||||||||||||||||||||||
| Balance - March 31, 2023 | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||||
| Stock-based compensation: | |||||||||||||||||||||||||||||||||
| Options | - | - | |||||||||||||||||||||||||||||||
| Restricted stock units | - | - | |||||||||||||||||||||||||||||||
| Shares issued under the New ELOC, net of offering costs [3] | - | ||||||||||||||||||||||||||||||||
| Shares issued upon conversion of debt and interest | - | ||||||||||||||||||||||||||||||||
| Net loss | - | - | ( | ) | ( | ) | |||||||||||||||||||||||||||
| Other comprehensive loss | - | - | ( | ) | ( | ) | |||||||||||||||||||||||||||
| Balance - June 30, 2023 | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||||
| Stock-based compensation: | |||||||||||||||||||||||||||||||||
| Options | - | - | |||||||||||||||||||||||||||||||
| Restricted stock units | - | - | |||||||||||||||||||||||||||||||
| Common stock | - | ||||||||||||||||||||||||||||||||
| Shares issued under the New ELOC [4] | - | ||||||||||||||||||||||||||||||||
| Warrant modification | - | - | |||||||||||||||||||||||||||||||
| Shares issued upon conversion of debt and interest | - | ||||||||||||||||||||||||||||||||
| Common stock issued for cash in private placement | - | ||||||||||||||||||||||||||||||||
| Effect of reverse stock spit | - | ( | ) | ||||||||||||||||||||||||||||||
| Net loss | - | - | ( | ) | ( | ) | |||||||||||||||||||||||||||
| Other comprehensive loss | - | - | |||||||||||||||||||||||||||||||
| Balance - September 30, 2023 | $ | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | $ | |||||||||||||||||||||
| [1] |
| [2] |
| [3] |
| [4] |
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)
| For the Nine Months Ended | ||||||||
| September 30, | ||||||||
| 2024 | 2023 | |||||||
| Cash Flows from Operating Activities | ||||||||
| Net loss | ( | ) | $ | ( | ) | |||
| Adjustments to reconcile
net loss to net cash used in operating activities: | ||||||||
| Stock-based compensation: | ||||||||
| 401(k) stock | ||||||||
| Common stock | ||||||||
| Stock options and warrants | ||||||||
| Restricted stock units | ||||||||
| Non-cash lease expense | ||||||||
| Loss on lease termination | ||||||||
| Gains from foreign currency remeasurement, net | ( | ) | ( | ) | ||||
| Depreciation and amortization | ||||||||
| Amortization of debt discount | ||||||||
| Provision for credit losses, net of recoveries | ||||||||
| Provision for unrealizable prepaid taxes | ||||||||
| Provision for obsolete inventory | ||||||||
| Change in fair value of derivative liability | ||||||||
| Loss on extinguishment of debt | ||||||||
| Loss on sale of land | ||||||||
| Decrease (increase) in assets: | ||||||||
| Accounts receivable and mortgages receivable | ( | ) | ( | ) | ||||
| Employee advances | ( | ) | ||||||
| Inventory | ( | ) | ( | ) | ||||
| Inventory deposits | ||||||||
| Real estate lots held for sale | ||||||||
| Prepaid expenses and other current assets | ( | ) | ||||||
| Increase (decrease) in liabilities: | ||||||||
| Accounts payable and accrued expenses | ( | ) | ||||||
| Operating lease liabilities | ( | ) | ( | ) | ||||
| Deferred revenue | ( | ) | ||||||
| Other liabilities | ( | ) | ( | ) | ||||
| Total Adjustments | ||||||||
| Net Cash Used in Operating Activities | ( | ) | ( | ) | ||||
| Cash Flows from Investing Activities | ||||||||
| Purchase of property and equipment | ( | ) | ( | ) | ||||
| Proceeds from sale of land | ||||||||
| Purchase of intangible asset | ( | ) | ||||||
| Security deposit on lease | ( | ) | ||||||
| Net Cash Used in Investing Activities | ( | ) | ||||||
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)
| September 30, | ||||||||
| 2024 | 2023 | |||||||
| Cash Flows from Financing Activities | ||||||||
| Proceeds from the issuance of convertible debt | ||||||||
| Proceeds from the issuance of convertible debt, related party | ||||||||
| Financing costs in connection with the issuance of convertible debt | ( | ) | ||||||
| Costs in connection with the conversion of convertible debt to preferred stock | ( | ) | ||||||
| Repayments of convertible debt obligations | ( | ) | ||||||
| Redemption premiums paid on convertible debt obligations | ( | ) | ||||||
| Proceeds from preferred stock issued for cash, net of issuance costs [1] | ||||||||
| Proceeds from common stock issued for cash | ||||||||
| Proceeds from issuance of shares under the New ELOC, net of offering costs [2] | ||||||||
| Proceeds from loans payable | ||||||||
| Proceeds from loans payable, related parties | ||||||||
| Repayments of loans payable | ( | ) | ( | ) | ||||
| Proceeds from equity deposits | ||||||||
| Repayment of finance lease | ( | ) | ||||||
| Refund of lot sale obligation | ( | ) | ||||||
| Net Cash Provided by Financing Activities | ||||||||
| Effect of Exchange Rate Changes on Cash | ( | ) | ||||||
| Net Decrease in Cash | ( | ) | ( | ) | ||||
| Cash - Beginning of Period | ||||||||
| Cash - End of Period | $ | |||||||
| Supplemental Disclosures of Cash Flow Information: | ||||||||
| Interest paid | $ | $ | ||||||
| Income taxes paid | $ | $ | ||||||
| Non-Cash Investing and Financing Activity | ||||||||
| Preferred shares issued upon conversion of debt and accrued interest | $ | $ | ||||||
| Accretion of preferred stock to redemption value | $ | $ | ||||||
| Common shares issued upon conversion of debt and accrued interest | $ | $ | ||||||
| Common shares issued in connection with anti-dilution protection | $ | $ | ||||||
| Warrants issued and debt
principal exchanged upon modification of convertible debt | $ | $ | ||||||
| Accrued interest exchanged for notes payable | $ | $ | ||||||
| Relative fair value of
warrants issued with 2023 Notes, net of allocable issuance costs [3] | $ | $ | ||||||
| Finance lease liability for equipment | $ | $ | ||||||
| Equity issued to satisfy accrued stock-based compensation obligation | $ | $ | ||||||
| Cashless warrant exercise | $ | $ | ||||||
| Debt discount for warrant modification | $ | $ | ||||||
| [1] |
| [2] |
| [3] |
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 Gaucho Development S.R.L. (“GDS”), and the subdivision of a portion of this property for residential development.
GGH creates couture fashion pieces in-house and, through its wholly-owned subsidiary, Gaucho Group, Inc. (“GGI”), oversees the outsourced manufacturing, distribution, and sale of the rest of its high-end luxury fashion and accessories line.
Reverse Stock Splits
On
September 25, 2023,
On
May 1, 2024,
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.
Current Bankruptcy Proceedings and Delisting from Nasdaq
On November 12, 2024, the Company filed a voluntary petition, Case No. 24-21852 (the “Chapter 11 Reorganization”) in the United States Bankruptcy Court for the Southern District of Florida (the “Bankruptcy Court”) seeking relief under Chapter 11 of Title 11 of the United States Code (the “Bankruptcy Code”). The Company continues to operate its business as a “debtor in possession” subject to the jurisdiction of the Bankruptcy Court and in accordance with the applicable provisions of the Bankruptcy Code, orders of the Bankruptcy Court, and applicable non-bankruptcy law. The Company has sought approval of various motions with the Bankruptcy Court that are intended to enable the Company to continue its ordinary course operations and facilitate an orderly transition of its operations into Chapter 11.
On November 13, 2024, the Company’s shares of common stock were delisted from the Nasdaq Stock Market (“Nasdaq”) as a result of the Chapter 11 Reorganization. The Company’s shares of common stock are currently quoted on the over-the-counter market with the symbol “VINOQ”. See Note 15, Commitments and Contingencies: Legal Matters and Note 17, Subsequent Events.
| 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 September 30, 2024, and for the three and nine months ended September 30, 2024 and 2023. The results of operations for the three and nine months ended September 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
In accordance with Accounting Standards Codification (“ASC”) 205-40, Going Concern, the Company continues to critically review its liquidity and anticipated capital requirements, including for service of the Company’s debt post-emergence from Chapter 11 protection, in light of the significant uncertainty created by the Chapter 11 petition, to determine whether these conditions, when considered in the aggregate, raise substantial doubt about its ability to continue as a going concern within twelve months after the date that the accompanying consolidated financial statements are issued.
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 Company’s ability to continue as a going concern is contingent upon the Company’s ability to successfully reorganize its operations under Chapter 11, among other factors. As a result of the Chapter 11 case, the realization of assets and the satisfaction of liabilities are subject to uncertainty. The Chapter 11 filing also affects the Company’s ability to complete the necessary infrastructure on its real estate lots, that is required in order to consummate the lot sales and issue property deeds, due to constraints on capital resources.
As a result of the Company’s financial condition, the defaults under the Company’s debt agreements, and the risks and uncertainties surrounding the Company’s ability or the timing to reorganize operations under Chapter 11, substantial doubt exists that the Company will be able to continue as a going concern. 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 September 30, 2024, the Company had cash of
approximately $
As
of September 30, 2024, future cash requirements for current liabilities include $
On February 27, 2024, the Company’s equity line of credit was terminated.
On
November 4, 2024 the Company received cash proceeds of $
On November 12, 2024, the Company received $
Between October 11, 2024 through November 12, 2024, the Company received cash proceeds of $ upon the sale of preferred stock (See Note 17, Subsequent Events).
During the period from November 29, 2024 through
December 30, 2024, the Company received $
| 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.
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 nine months ended September 30, 2024, the Company recorded gains of $
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 $
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:
| For the Three Months Ended | For the Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| Real estate sales | $ | $ | $ | $ | ||||||||||||
| Hotel rooms and events | ||||||||||||||||
| Clothes and accessories | ||||||||||||||||
| Restaurants | ||||||||||||||||
| Winemaking | ||||||||||||||||
| Agricultural sales | ||||||||||||||||
| Golf, tennis and other | ||||||||||||||||
| Total Revenues | $ | $ | $ | $ | ||||||||||||
Revenue from the sale of food, wine, agricultural products, clothes and accessories is recorded when the customer obtains control of the goods purchased. Revenues from hospitality and other services are recognized as earned at the point in time that the related service is rendered, and the performance obligation has been satisfied. Revenues from gift card sales are recognized when the card is redeemed by the customer. The Company does not adjust revenue for the portion of gift card values that is not expected to be redeemed (“breakage”) due to the lack of historical data. Revenue from real estate lot sales is recorded when the lot is deeded, and legal ownership of the lot is transferred to the customer.
The timing of the Company’s revenue recognition may differ from the timing of payment by its customers. A receivable is recorded when revenue is recognized prior to payment and the Company has an unconditional right to payment. Alternatively, when payment precedes the provision of the related services, the Company records deferred revenue until the performance obligations are satisfied. Deferred revenues associated with real estate lot sale deposits are recognized as revenues (along with any outstanding balance) when the lot sale closes, and the deed is provided to the purchaser. Other deferred revenues primarily consist of deposits accepted by the Company in connection with agreements to sell barrels of wine, advance deposits received for grapes and other agricultural products, and hotel deposits. Wine barrel and agricultural product advance deposits are recognized as revenues (along with any outstanding balance) when the product is shipped to the purchaser. Hotel deposits are recognized as revenue upon occupancy of rooms, or the provision of services. See Note 7, Deferred Revenue.
Contracts related to the sale of wine, agricultural products and hotel services have an original expected length of less than one year. The Company has elected not to disclose information about remaining performance obligations pertaining to contracts with an original expected length of one year or less, as permitted under the guidance.
| 12 |
GAUCHO GROUP HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
Basic loss per common share is computed by dividing net loss by the weighted average number of common shares outstanding during the period. Diluted loss per common share is computed by dividing net loss by the weighted average number of common shares outstanding, plus the impact of common shares, if dilutive, resulting from the exercise of outstanding stock options and warrants and the conversion of convertible instruments.
| As of September 30, | ||||||||
| 2024 | 2023 | |||||||
| Options | ||||||||
| Warrants | ||||||||
| Unvested restricted stock units | ||||||||
| Senior Secured Convertible Notes | [1] | [2] | ||||||
| Senior Convertible Preferred Stock | [3] | |||||||
| Total potentially dilutive shares | ||||||||
| [1] | ||
| [2] | ||
| [3] |
| 13 |
GAUCHO GROUP HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
Derivative Instruments
The Company evaluates its convertible instruments to determine if those contracts or embedded components of those contracts qualify as derivative financial instruments to be separately accounted for in accordance with Topic 815 “Derivatives and Hedging” (“ASC 815”) of the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”). The accounting treatment of derivative financial instruments requires that the Company record any bifurcated embedded features at their fair values as of the inception date of the agreement and at fair value as of each subsequent balance sheet date. Any change in fair value is recorded in earnings each period as non-operating, non-cash income or expense. The Company reassesses the classification of its derivative instruments at each balance sheet date. If the classification changes as a result of events during the period, the contract is reclassified as of the date of the event that caused the reclassification. Bifurcated embedded features are recorded upon note issuance at their initial fair values which create additional debt discount to the host instrument.
Recently Issued Accounting Pronouncements
In November 2023, the FASB issued ASU 2023-07, Improvements to Reportable Segments Disclosures (Topic 280), which updates reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses on both an annual and interim basis. The guidance becomes effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. Since this new ASU addresses only disclosures, the Company does not expect the adoption of this ASU to have any material effects on its financial condition, results of operations or cash flows. The Company is currently evaluating any new disclosures that may be required upon adoption of ASU 2023-07.
The Company’s Senior Convertible Preferred Stock includes certain redemption rights that are considered to be outside of the Company’s control and subject to the occurrence of uncertain future events (See Not 14, Temporary Equity and Stockholders’ Equity). Accordingly, the Senior Convertible Preferred Stock is classified as temporary equity. The Company accretes the carrying value of Senior Convertible Preferred Stock to equal its redemption value at the end of each reporting period.
Reclassification
Certain prior period amounts included in prior year financial statements have been reclassified to conform to the current year presentation, including reclassification of accrued interest, current portion to loan payable, current portion and the reclassification of mortgages receivable from a related party. These reclassifications did not have a material impact on the Company’s previously reported financial statements.
| 14 |
GAUCHO GROUP HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
3. MORTGAGES RECEIVABLE
The
Company offers loans to purchasers in connection with the sale of real estate lots. The loans bear interest at
Management
evaluates each loan individually on a quarterly basis, to assess collectability and estimate a reserve for past due amounts. Past due
principal and interest in the aggregate amounts of $
The following represents the maturities of mortgages receivable as of September 30, 2024:
| Non-related Parties |
Related Party |
Total | ||||||||||
| For the period from October 1, 2024 through December 31, 2024 | $ | $ | $ | |||||||||
| For the years ended December 31, | ||||||||||||
| 2025 | ||||||||||||
| 2026 | ||||||||||||
| 2027 | ||||||||||||
| 2028 | ||||||||||||
| 2029 | ||||||||||||
| Thereafter | ||||||||||||
| Gross Receivable | ||||||||||||
| Less: Allowance | ( |
) | ( |
) | ( | ) | ||||||
| Net receivable | ||||||||||||
| Less: current portion | ( |
) | ( |
) | ( | ) | ||||||
| Mortgages receivable, non-current portion | $ | $ | $ | |||||||||
As
of each of September 30, 2024 and December 31, 2023, two borrowers had past-due loans outstanding representing
The
Company recorded interest income from its mortgages receivable of $
| 15 |
GAUCHO GROUP HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
4. INVENTORY
Inventory at September 30, 2024 and December 31, 2023 was comprised of the following:
| September 30, | December 31, | |||||||
| 2024 | 2023 | |||||||
| Vineyard in process | $ | $ | ||||||
| Wine in process | ||||||||
| Finished wine | ||||||||
| Clothes and accessories | ||||||||
| Other | ||||||||
| Less: Reserve for obsolescence | ( | ) | ( | ) | ||||
| Total | $ | $ | ||||||
The
Company had deposits for inventory purchases in the amount of $ and $
The
Company recorded a provision for obsolete inventory in the amount of $
5. INVESTMENTS AND FAIR VALUE OF FINANCIAL INSTRUMENTS
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. In determining fair value, the Company often utilizes certain assumptions that market participants would use in pricing the asset or liability, including assumptions about risk and/or the risks inherent in the inputs to the valuation technique. These inputs can be readily observable, market corroborated or developed by the Company. The fair value hierarchy ranks the quality and reliability of the information used to determine fair values. Financial assets and liabilities carried at fair value are classified and disclosed in one of the following three categories:
Level 1 - Valued based on quoted prices at the measurement date for identical assets or liabilities trading in active markets. Financial instruments in this category generally include actively traded equity securities.
Level 2 - Valued based on (a) quoted prices for similar assets or liabilities in active markets; (b) quoted prices for identical or similar assets or liabilities in markets that are not active; (c) inputs other than quoted prices that are observable for the asset or liability; or (d) from market corroborated inputs. Financial instruments in this category include certain corporate equities that are not actively traded or are otherwise restricted.
| 16 |
GAUCHO GROUP HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
Level 3 - Valued based on valuation techniques in which one or more significant inputs is not readily observable. Included in this category are certain corporate debt instruments, certain private equity investments, and certain commitments and guarantees. The carrying amounts of the Company’s short-term financial instruments including cash, accounts receivable, prepaid commissions on lot sales, prepaid taxes and expenses, accounts payable, accrued expenses and other liabilities approximate fair value due to the short-term nature of these instruments. The carrying value of the Company’s loans payable, debt obligations, convertible debt obligations and derivative liability approximate fair value, as they bear terms and conditions comparable to the market for obligations with similar terms and maturities.
6. ACCRUED EXPENSES
Accrued expenses are comprised of the following:
| September 30, | December 31, | |||||||
| 2024 | 2023 | |||||||
| Accrued compensation and payroll taxes | $ | $ | ||||||
| Accrued taxes payable - Argentina | ||||||||
| Accrued insurance expense | ||||||||
| Accrued consulting fees | ||||||||
| Accrued commissions | ||||||||
| Accrued interest | ||||||||
| Accrued cash true up obligation (see Note 10) | ||||||||
| Other accrued expenses | ||||||||
| Accrued expenses, current | ||||||||
| Accrued Argentine tax obligations, non-current | ||||||||
| Other long term accruals | ||||||||
| Total accrued expenses | $ | $ | ||||||
On
November 27, 2020, the Company entered into various payment plans, pursuant to which it agreed to pay its Argentine tax obligations over
a period of
| 17 |
GAUCHO GROUP HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
7. DEFERRED REVENUE
Deferred revenue is comprised of the following:
| September 30, | December 31, | |||||||
| 2024 | 2023 | |||||||
| Real estate lot sales deposits | $ | $ | ||||||
| Hotel deposits | ||||||||
| Other | ||||||||
| Total | ||||||||
| Less: deferred revenue, current portion | ||||||||
| Deferred revenue, non-current portion | $ | $ | ||||||
The
Company accepts deposits in conjunction with agreements to sell real estate building lots at Algodon Wine Estates in the Mendoza
wine region of Argentina. These lot sale deposits are generally denominated in U.S. dollars. Revenue is recorded when the sale
closes, and the deeds are issued. The issuance of deeds is dependent on completion of infrastructure for each specific lot. See
Footnote 2, Summary of Significant Accounting Policies: Going Concern and Management’s Liquidity Plans, for additional
discussion of the impact of the Company’s liquidity on the real estate lot sales. The Company expects to recognize revenue in the aggregate amount of approximately
$
The Company entered into contracts for the sale of four lots and received deposits in the aggregate amount of
$
Deferred
revenue, related party represents $
8. LOT SALE OBLIGATIONS
The following table summarizes the activity in connection with the Company’s lot sale obligations during the nine months ended September 30, 2024:
| Lot Sale Obligations | ||||||||||||
| Lot Sale Obligations | Debt Discount | Lot
Sale Obligations, net of discount | ||||||||||
| Balance at January 1, 2024 | $ | $ | ( | ) | $ | |||||||
| Lot deposit refunded in 1Q24 | ( | ) | ( | ) | ||||||||
| Amortization of debt discount | ||||||||||||
| Balance at March 31, 2024 | ( | ) | ||||||||||
| Portion of lot deposit refunded in 2Q24 | ( | ) | ( | ) | ||||||||
| Amortization of debt discount | ||||||||||||
| Balance at June 30, 2024 | ( | ) | ||||||||||
| Portion of lot deposit refunded in 3Q24 | ||||||||||||
| Amortization of debt discount | ||||||||||||
| Balance at September 30, 2024 | $ | $ | ( | ) | $ | |||||||
| 18 |
GAUCHO GROUP HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
During
the fourth quarter of 2023, the Company entered into agreements (each, a “Lot Deposit Agreement”) with five investors in
the Company (each, a “Purchaser”), pursuant to which (1) each Purchaser agreed to purchase either two or three real estate
lots at a purchase price of $
During
the fourth quarter of 2023, the Company entered into Lot Deposit Agreements for the purchase of eleven real estate lots and received
Purchase Amounts in the aggregate amount of $
Interest Expense on Lot Sale Obligations
The
Company recorded interest expense in the amount of $
9. LOANS PAYABLE
The Company’s loans payable are summarized below:
| September 30, | December 31, | |||||||
| Loans Payable | 2024 | 2023 | ||||||
| EIDL | $ | $ | ||||||
| 2023 Loan | ||||||||
| 2024 Loan | ||||||||
| Total Loans Payable | ||||||||
| Less: current portion | ( | ) | ( | ) | ||||
| Total Loans Payable, non-current portion | $ | $ | ||||||
| Loans Payable, Related Party | ||||||||
| Investor Loan | $ | $ | ||||||
| 19 |
GAUCHO GROUP HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
EIDL Loan
On
May 22, 2020, the Company received a loan in the principal amount of $
2023 Loan
On
January 9, 2023, the Company received $
2024 Loan
On
September 5, 2024, the Company received $
Loans Payable, related party
On
June 24, 2024, the Company issued promissory notes in the aggregate amount of $
Interest Expense on Loans Payable
The
Company incurred interest expense related to the loans payable in the amount of $
| 20 |
GAUCHO GROUP HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
10. CONVERTIBLE DEBT OBLIGATIONS
Convertible debt obligations consist of the following:
| 2023
Convertible Note | Preferred
Share Convertible Notes | Total Principal | Debt Discount | Convertible
debt, net of discount | Preferred
Share Convertible Notes - Related Party | |||||||||||||||||||
| Balance at January 1, 2024 | $ | $ | $ | $ | ( | ) | $ | $ | ||||||||||||||||
| Convertible notes issued | ( | ) | ||||||||||||||||||||||
| Convertible note issued to related party | ||||||||||||||||||||||||
| Amortization of debt discount | ||||||||||||||||||||||||
| Principal Conversions | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||
| Convertible notes outstanding at September 30, 2024 | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
2023 Senior Secured Convertible Note
Effective
February 5, 2024,
The
2023 Note is convertible at the Event of Default conversion price, equal to
the lesser of (a) $
On
February 21, 2024, the Company received an Event of Default Redemption Notice from 3i, demanding immediate payment of principal,
interest and redemptions premiums owed under the 2023 Note equal to a minimum of $
See Note 15, Commitment and Contingencies. Legal Matters, regarding the Company’s litigation with 3i in the 2023 Note.
| 21 |
GAUCHO GROUP HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
Derivative Liability in Connection with 2023 Note
The
Event of Default Conversion Price on the 2023 Note represents a redemption feature, which was bifurcated from the 2023 Note host and
recorded as a derivative liability. During the three and nine months ended September 30, 2024, the Company recorded expense of $
The following table sets forth a summary of the changes in the fair value of the derivative liability that are measured at fair value on a recurring basis:
| Balance at January 1, 2024 | $ | |||
| Add: fair value of derivative associated with convertible interest accrued during the period | ||||
| Balance at September 30, 2024 | $ |
Interest Expense on 2023 Note
The
Company incurred total interest expense of approximately $
The
Company incurred total interest expense of approximately $
Convertible 8.5% Preferred Promissory Notes
During
the period from May 2024 through August 6, 2024, the Company issued 120-day convertible preferred promissory notes (the “Preferred
Share Convertible Notes”) in the aggregate amount of $
The
Company recorded $
| 22 |
GAUCHO GROUP HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
Convertible 8.5% Preferred Promissory Notes - Related Party
During
the period from May 2024 through June 2024, the Company issued 120-day Preferred Share Convertible Notes in exchange for cash
aggregate amount of $
Interest Expense on Preferred Promissory Notes
The
Company incurred total interest expense of approximately $
The
Company incurred total interest expense of approximately $
11. SEGMENT DATA
The
Company’s financial position and results of operations are classified into
| ● | Real Estate Development, through AWE and TAR, including hospitality and winery operations, which support the ALGODON® brand. | |
| ● | Fashion (e-commerce), through GGI, including the manufacture and sale of high-end fashion and accessories sold through an e-commerce platform. | |
| ● | Corporate, consisting of general corporate overhead expenses not directly attributable to any one of the business segments. |
| 23 |
GAUCHO GROUP HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
The following tables present segment information for the three and nine months ended September 30, 2024 and 2023, respectively:
| For the Three Months Ended September 30, 2024 | For the Nine Months Ended September 30, 2024 | |||||||||||||||||||||||||||||||
Real Estate Development | Fashion (e-commerce) | Corporate | TOTAL | Real
Estate Development | Fashion (e-commerce) | Corporate | TOTAL | |||||||||||||||||||||||||
| Revenues | $ | $ | | $ | $ | $ | $ | | $ | $ | ||||||||||||||||||||||
| Revenues from Foreign Operations | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Loss from Operations | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||||
| For the Three Months Ended September 30, 2023 | For the Nine Months Ended September 30, 2023 | |||||||||||||||||||||||||||||||
| Real
Estate Development | Fashion (e-commerce) | Corporate | TOTAL | Real
Estate Development | Fashion (e-commerce) | Corporate | TOTAL | |||||||||||||||||||||||||
| Revenues | $ | $ | | $ | $ | $ | $ | | $ | $ | ||||||||||||||||||||||
| Revenues from Foreign Operations | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Loss from Operations | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||||
The following table presents segment information as of September 30, 2024 and December 31, 2023.
| As of September 30, 2024 | As of December 31, 2023 | |||||||||||||||||||||||||||||||
| Real
Estate Development | Fashion (e-commerce) | Corporate | TOTAL | Real
Estate Development | Fashion (e-commerce) | Corporate | TOTAL | |||||||||||||||||||||||||
| Total Property and Equipment, net | $ | $ | | $ | $ | $ | $ | | $ | $ | ||||||||||||||||||||||
| Total Property and Equipment, net in Foreign Countries | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Total Assets | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| 24 |
GAUCHO GROUP HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
12. RELATED PARTY TRANSACTIONS
Accounts Receivable – Related Parties
The
Company had accounts receivable – related parties of $
The
Company recorded credit loss expense (net of recoveries) related to accounts receivable, related parties of $
Expense Sharing
The
Company is a party to expense sharing agreements with two related entities to share expenses such as support staff, professional
services, and other operating expenses (the “Related Party ESAs”). During the three months ended September 30, 2024 and 2023,
the Company made advances in the amount of $
During
the nine months ended September 30, 2024 and 2023, the Company made advances in the amount of $
Management Fee Income
During
the nine months ended September 30, 2024 and 2023, the Company recorded income of $
Other Related Party Transactions
See Note 9 – Loans Payable related to promissory notes issued and Note 10 – Convertible Debt related to Preferred Share Convertible Notes issued to a holder greater than 10% of the Company’s common stock.
| 25 |
GAUCHO GROUP HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
13. BENEFIT CONTRIBUTION PLAN
The Company sponsors a 401(k) profit-sharing plan (“401(k) Plan”) that covers substantially all of its employees in the United States. The 401(k) Plan provides for a discretionary annual contribution, which is allocated in proportion to compensation. In addition, each participant may elect to contribute to the 401(k) Plan by way of a salary deduction.
A
participant is always fully vested in their account, including the Company’s contribution. For the three months ended September
30, 2024 and 2023, the Company recorded a charge associated with its contribution of approximately $
14. TEMPORARY EQUITY AND STOCKHOLDERS’ EQUITY
Reverse Stock Splits
On
September 25, 2023,
On
May 1, 2024, the
Preferred Stock Subject to Possible Redemption
On
May 21, 2024, the Company filed a Certificate of Designation of Senior Convertible Preferred Stock with the Delaware Secretary of State,
designating shares of preferred stock of the Company, par value $, as Senior Convertible Preferred Stock (the “Preferred
Stock”). Holders of Preferred Stock are entitled to receive cumulative cash dividends at an annual rate of
Each share of Preferred Stock converts into shares of common stock (a) at the option of the holder (and upon approval of the Company, which shall not be unreasonably withheld) at any time after 6 months and 1 day from the date of the termination of the Preferred Stock offering (the “Termination Date”); or (b) automatically, if, on the date that is 18 months from the Termination Date, the price of the Company’s common stock increases by more than 60% from the date of the initial purchase of Preferred Stock by each Preferred Stock holder. If not previously converted, the Company must redeem all then-outstanding shares of Preferred Stock on the date that is 18 months from the Termination Date for a price equal to the liquidation value of each share, plus all unpaid and accrued and accumulated dividends, whether or not declared, within 60 days. The Company classified the convertible preferred stock as temporary equity on the accompanying consolidated balance sheets because the Preferred Stock could be required to be redeemed upon the occurrence of certain change in control events that are outside of the Company’s control.
| 26 |
GAUCHO GROUP HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
On
August 16, 2024, the Company issued shares of Preferred Stock in connection with the conversion of $
During
August 2024, the Company issued shares of Preferred Stock for cash proceeds of $
The
Company recorded $
Common Stock
On
November 27, 2023, the Company commenced a private placement (“the Private Placement”) of shares of common stock for gross
proceeds of up to $
During
the period from January 1, 2024 through February 28, 2024 the Company sold shares of common stock at $ per share for aggregate
proceeds of $
During the nine months ended September 30, 2024, the Company issued shares of common stock to certain of the Company’s employees, consultants and advisors in connection with the vesting of RSUs.
Termination of Equity Line of Credit
On February 22, 2024, the Company received notice from the Underwriter of its election to terminate the equity line of credit pursuant to the Common Stock Purchase Agreement and Registration Rights Agreement (the “New ELOC”).
Accumulated Other Comprehensive Loss
For
the three and nine months ended September 30, 2024, the Company recorded a gain of $
| 27 |
GAUCHO GROUP HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
Warrants
There was no activity with regard to the Company’s warrants during the nine months ended September 30, 2024.
As
of September 30, 2024, warrants for the purchase of
A summary of outstanding and exercisable warrants as of September 30, 2024 is presented below:
| Warrants Outstanding | Warrants Exercisable | |||||||||||||
| Exercise Price | Exercisable Into | Outstanding Number of Warrants | Weighted Average Remaining Life in Years | Exercisable Number of Warrants | ||||||||||
| $ | ||||||||||||||
| $ | ||||||||||||||
| $ | ||||||||||||||
| Total | ||||||||||||||
Restricted Stock Units
| Weighted Average | ||||||||
| Number of | Grant Date Value | |||||||
| RSUs | Per Share | |||||||
| RSUs non-vested January 1, 2024 | $ | |||||||
| Granted | ||||||||
| Vested | ( | ) | ||||||
| Forfeited | ( | ) | ||||||
| RSUs non-vested September 30, 2024 | $ | |||||||
During the three and nine months ended September 30, 2024, the Company recorded stock-based compensation expense of $ and $ respectively, and during the three and nine months ended September 30, 2023, the Company recorded stock-based compensation expense of $ and $ respectively, related to the amortization of RSUs.
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GAUCHO GROUP HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
Stock Options
| Weighted | Weighted | |||||||||||||||
| Average | Average | |||||||||||||||
| Number of | Exercise | Remaining | Intrinsic | |||||||||||||
| Options | Price | Term (Yrs) | Value | |||||||||||||
| Outstanding, January 1, 2024 | ||||||||||||||||
| Granted | ||||||||||||||||
| Exercised | ||||||||||||||||
| Expired | ||||||||||||||||
| Forfeited | ( | ) | ||||||||||||||
| Outstanding, September 30, 2024 | $ | |||||||||||||||
| Exercisable, September 30, 2024 | $ | $ | ||||||||||||||
During
the three and nine months ended September 30, 2024, the Company recorded total stock-based compensation expense of $
| Options Outstanding | Options Exercisable | |||||||||||||
| Weighted | ||||||||||||||
| Outstanding | Average | Exercisable | ||||||||||||
| Exercise | Number of | Remaining Life | Number of | |||||||||||
| Price | Options | In Years | Options | |||||||||||
| $ | ||||||||||||||
| $ | ||||||||||||||
| $ | ||||||||||||||
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GAUCHO GROUP HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
15. COMMITMENTS AND CONTINGENCIES
Legal Matters
Gaucho Group Holdings Inc. (Bankr. S.D. Fla.)
On November 12, 2024, the Company filed a voluntary petition, Case No. 24-21852 (the “Chapter 11 Reorganization”) in the United States Bankruptcy Court for the Southern District of Florida (the “Bankruptcy Court”) seeking relief under Chapter 11 of Title 11 of the United States Code (the “Bankruptcy Code”).
The Company continues to operate its business as a “debtor in possession” subject to the jurisdiction of the Bankruptcy Court and in accordance with the applicable provisions of the Bankruptcy Code, orders of the Bankruptcy Court, and applicable non-bankruptcy law. The Company has sought approval of various motions with the Bankruptcy Court that are intended to enable the Company to continue its ordinary course operations and facilitate an orderly transition of its operations into Chapter 11.
Gaucho Group Holdings Inc. v. 3i, LP et al. (D. Del.)
On February 16, 2024, the Company commenced an action in the United States District Court for the District of Delaware (the “Delaware Action”) through the filing of a complaint against 3i, LP, 3i Management LLC and Maier Joshua Tarlow (“3i Parties”) in the 2023 Note committed underlying violations of the Securities Exchange Act of 1934 and, therefore, the securities contracts entered into by the parties are void.
On April 5, 2024, the 3i Parties filed its answer to the Company’s complaint, including affirmative defenses and asserted four counterclaims against the Company; specifically, (i) breach of contract, in connection with the 2023 Note, (ii) request for preliminary injunction and permanent injunction, (iii) unjust enrichment and (iv) restitution.
On April 26, 2024, the Company responded to the 3i Parties’ counterclaims by filing a partial motion to dismiss, which seeks dismissal of the 3i Parties’ counterclaims for (i) preliminary and permanent injunction, (ii) unjust enrichment and (iii) restitution. On May 17, 2024, the Company’s motion to dismiss was fully briefed and submitted to the court. As of the date of this filing, the court has not yet rendered a decision on the Company’s motion.
On August 13, 2024, the Company moved for a temporary restraining order and preliminary injunction against the 3i Parties. The Company’s motion specifically requests that the court enjoins the 3i Parties’ attempt to conduct a public disposition of certain assets of the Company.
On October 11, 2024, the U.S. District Court for the District of Delaware held a hearing on the Company’s motion for a preliminary injunction against the 3i Parties.
On November 5, 2024, the District Court denied the Company’s motion for a preliminary injunction against the 3i Parties.
On November 7, 2024, the Company appealed the District Court’s decision to the United States Court of Appeals for the Third Circuit.
On November 13, 2024, the District Court issued an Order (i) staying all further proceedings on the counterclaims alleged by the 3i Parties against the Company, and (ii) directing the Company to advise the Court within thirty (30) days thereof if it will be seeking leave of the Bankruptcy Court to proceed with its claims against the 3i Parties.
On December 12, 2024, the District Court issued an Order directing the Company to advise the Court on or before January 31, 2025, if it will be seeking leave of the Bankruptcy Court to proceed with its claims against the 3i Parties.
On January 22, 2025, the 3i Parties moved for a Judgment on the Pleadings against the Company.
On January 27, 2025, the Company withdrew its appeal of the District Court’s decision to the United States Court of Appeals for the Third Circuit.
On February 4, 2025, the Court issued an Order setting a Status Conference for March 7, 2025.
Subject to the Chapter 11 Reorganization, the Company remains committed to litigating its claims for relief against the 3i Parties and defending itself against the 3i Parties’ counterclaims.
3i, LP et al v. Gaucho Group Holdings, Inc. et al. (E.D.N.Y.)
On October 3, 2024, the 3i Parties commenced a proceeding in the U.S. District Court for the Eastern District of New York (“Quash Proceeding”). In the Quash Proceeding, the 3i Parties seek to quash the subpoenas issued in connection with the aforementioned litigation between the Company and the 3i Parties in the U.S. District Court for the District of Delaware, and were served against certain financial institutions used by the 3i Parties.
On November 12, 2024, the Company informed the New York Court that it voluntarily commenced Chapter 11 bankruptcy proceedings in the U.S. Bankruptcy Court for the Northern District of Florida.
On November 15, 2024, the District Court stayed the Quash Proceeding pending resolution of the Chapter 11 Reorganization.
Subject to the Chapter 11 Reorganization, the Company maintains that it is entitled to the information sought by the subpoenas.
3i, LP v. Gaucho Group Holdings, Inc. et al. (Sup. Ct., NY County)
On June 7, 2024, 3i, LP (“3i”) commenced an action in the Supreme Court of the State of New York, County of New York through the filing of a complaint against the Company and its subsidiary Gaucho Group, Inc. (the “Gaucho Parties”). 3i’s complaint alleges that the Gaucho Parties are in breach of a Senior Secured Convertible Note, dated February 21, 2023, and, therefore, 3i is permitted to exercise certain rights granted to it by a certain Security and Pledge Agreement, dated February 21, 2023.
On June 14, 2024, the Company moved to dismiss or, in the alternative, stay this action. On July 7, 2024, the Company’s motion was fully briefed and submitted to the court. As of the date hereof, the New York Court has not issued an order staying this action.
Subject to the Chapter 11 Reorganization, the Company remains committed to defending itself against 3i, LP’s claims.
Disputed 3i Claim
On November 18, 2024, 3i, LP (“3i”) filed
a reservation of rights statement with the United States Bankruptcy Court, claiming that the balance due in connection with the 2023 Senior
Secured Convertible Note was $
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GAUCHO GROUP HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
3i, LP v. Gaucho Group Holdings, Inc. (Sup. Ct., NY County)
On June 19, 2024, 3i commenced an action in the Supreme Court of the State of New York, County of New York through the filing of a motion for summary judgment in lieu of a complaint against the Company (the “3i Motion for Summary Judgment”). 3i’s motion alleges that the Company is in breach of a Senior Secured Convertible Note, dated February 21, 2023.
On June 28, 2024, the Company moved to dismiss or, in the alternative, stay the 3i Motion for Summary Judgment.
On June 29, 2024, the Company submitted a letter application to the court requesting the 3i Motion for Summary Judgment be stayed indefinitely pending a final resolution of the Delaware Action.
On July 7, 2024, the New York Court entered an order indefinitely staying this action pending final resolution of the District of Delaware action.
On November 12, 2024, the Company informed the New York Court that it voluntarily commenced Chapter 11 bankruptcy proceedings in the U.S. Bankruptcy Court for the Northern District of Florida.
As of the date hereof, the New York Court has not issued an order in response to the Company’s November 12, 2024 Notice of Bankruptcy filing.
Subject to the Chapter 11 Reorganization, the Company remains committed to litigating its claims for relief against 3i and defending itself against 3i’s claims.
General Litigation Disclosure
From time to time, the Company 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 the Company and its subsidiaries are successful, they may exceed the limits of applicable insurance coverage. The Company is not involved in any litigation that is likely, individually or in the aggregate, to have a material adverse effect on our condensed consolidated financial condition, results of operations or cash flows, except as disclosed.
Port Washington Imports, LLC v. Gaucho Group Holdings, Inc. (Sup. Ct., Nassau County)
On November 26, 2024, Port Washington Imports, LLC (“Port Washington”) filed suit against the Company alleging breach of contract and seeking damages in connection with an import and distribution agreement. The Company sent Port Washington a cease and desist letter advising that as a result of the Chapter 11 Reorganization, all litigation is subject to an automatic stay.
16. LEASES
Operating Lease
On
April 8, 2021, GGI entered into a lease agreement to lease a retail space in Miami, Florida for
On April 25, 2024, the landlord of
the retail space (the “Landlord”) filed an action seeking eviction of GGI from the retail space and on April 30, 2024,
the landlord of the retail space notified the Company that the rent abatements were rescinded as the result of late payments. On
September 20, 2024, pursuant to a settlement agreement between the Company and the Landlord, the Miami Lease was terminated, the
security deposit was applied to past due rent, and all remaining past due rent was paid to the Landlord. The Company recorded a loss of $
Following the termination of Miami Lease and the closing of GGI’s retail store, GGI sells its products exclusively through its online platform.
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GAUCHO GROUP HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
Total
operating lease expense was $
Finance Lease
During
June 2024, the Company entered into a four-year lease agreement, (the “Equipment Lease”) for the lease of equipment to be
used in the wine bottling / labeling process (the “Equipment”). The lease term began on June 12, 2024. The monthly fixed
lease payment is $ARS
The
Company recorded an ROU asset and lease liability in the amount of $
Supplemental cash flow information related to the Company’s operating and finance leases is as follows:
| For the Nine Months Ended | ||||||||
| September 30, | ||||||||
| 2024 | 2023 | |||||||
| Cash paid for amounts included in the measurement of lease liabilities: | ||||||||
| Operating cash flows from operating leases | $ | $ | ||||||
| Operating cash flows from finance lease | $ | $ | ||||||
| Right-of-use assets obtained in exchange for lease obligations: | ||||||||
| Operating leases | $ | $ | ||||||
| Finance lease | $ | $ | ||||||
| Weighted Average Remaining Lease Term: | ||||||||
| Operating leases | ||||||||
| Finance lease | - | |||||||
| Weighted Average Discount Rate: | ||||||||
| Operating leases | % | % | ||||||
| Finance Lease | % | N/A | ||||||
| 32 |
GAUCHO GROUP HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
Future minimum lease commitments in connection with the Company’s finance lease are as follows:
| For the period from October 1, 2024 through December 31, 2024 | $ | |||
| For the years ended December 31, | ||||
| 2025 | ||||
| 2026 | ||||
| 2027 | ||||
| 2028 | ||||
| Total future minimum lease payments | ||||
| Less: imputed interest | ( | ) | ||
| Net future minimum lease payments | ||||
| Less: finance lease liabilities, current portion | ( | ) | ||
| Finance lease liabilities, non-current portion | $ |
Lease Revenue
The
Company is the lessor of a building and land that it purchased in connection with the acquisition of GDS, pursuant to an operating lease
which expires on August 31, 2031. At the end of the lease, the lessee may enter into a new lease or return the asset, which would be
available to the Company for re-leasing. The Company recorded lease revenue of $
17. SUBSEQUENT EVENTS
Loans payable
On
November 4, 2024, the Company entered into a promissory note agreement with an investor, and received cash proceeds of $
On
November 12, 2024, the Company received $
During
the period from November 29, 2024 through December 30, 2024, the Company received $
On December 30, 2024, the Bankruptcy Court issued
an order authorizing the Company to borrow up to $
On January 31, 2025, the Bankruptcy Court issued an
order authorizing the Company to borrow up to $
Preferred Stock
During
the period from October 11, 2024 through November 12, 2024, the Company issued shares of Preferred Stock for cash proceeds of $
Chapter 11 Petition
On November 12, 2024, the Company filed a petition pursuant to Chapter 11 of the United States Bankruptcy Code in the United States District Court for the Southern District of Florida. Subsequent to November 12, 2024. the Company will continue to operate its business as a “debtor in possession”. The Company has sought approval of various motions with the Bankruptcy Court that are intended to enable the Company to continue its ordinary course operations and facilitate an orderly transition of its operations into Chapter 11. On November 13, 2024, the Company’s shares of common stock were delisted from the Nasdaq Stock Market (“Nasdaq”) as a result of the Chapter 11 Reorganization and trading of the Company’s common stock on Nasdaq was suspended as of the opening of business on November 22, 2024. The Company’s shares of common stock are currently quoted on the over-the-counter market with the symbol “VINOQ”.
Disputed 3i Claim
On November 18, 2024, 3i, LP
(“3i”) filed a reservation of rights statement with the United States Bankruptcy Court, claiming that the balance due in
connection with the 2023 Senior Secured Convertible Note was $
On January 21, 2025, 3i filed a Proof of Claim with the Bankruptcy Court,
alleging that the balance of the 2023 Note was $
As
of September 30, 2024, the Company has recorded liabilities in the aggregate amount of $
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Item 2: MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with our unaudited condensed consolidated financial statements and notes thereto included herein. In connection with, and because we desire to take advantage of, the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995, we caution readers regarding certain forward-looking statements in the following discussion and elsewhere in this report and in any other statement made by, or on our behalf, whether or not in future filings with the Securities and Exchange Commission. Forward-looking statements are statements not based on historical information and which relate to future operations, strategies, financial results or other developments. Forward looking statements are necessarily based upon estimates and assumptions that are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond our control and many of which, with respect to future business decisions, are subject to change. These uncertainties and contingencies can affect actual results and could cause actual results to differ materially from those expressed in any forward-looking statements made by, or on our behalf. Words such as “anticipate,” “estimate,” “plan,” “continuing,” “ongoing,” “expect,” “believe,” “intend,” “may,” “will,” “should,” “could,” and similar expressions are used to identify forward-looking statements. We disclaim any obligation to update forward-looking statements.
Unless the context requires otherwise, references in this document to “GGH”, “we”, “our”, “us” or the “Company” are to Gaucho Group Holdings, Inc. and its subsidiaries.
Please note that because we qualify as an emerging growth company and as a smaller reporting company, we have elected to follow the smaller reporting company rules in preparing this Quarterly Report on Form 10-Q.
Overview
Gaucho Group Holdings, Inc. (“GGH” or the “Company”) positions its e-commerce leather goods, accessories, and fashion brand, Gaucho – Buenos Aires™, as one of luxury, creating a platform for the global consumer to access their piece of Argentine style and high-end products. With a concentration on leather goods, ready-to-wear and accessories, this is the luxury brand in which Argentina finds its contemporary expression. During the first quarter of 2022, the Company launched Gaucho Casa, a Home & Living line of luxury textiles and home accessories, which is being marketed and sold on the Gaucho – Buenos Aires e-commerce platform. Gaucho Casa challenges traditional lifestyle collections with its luxury textiles and home accessories rooted in the singular spirit of the gaucho aesthetic. GGH seeks to grow its direct-to-consumer online products to global markets in the United States, Asia, the United Kingdom, Europe, and Argentina. We intend to focus on e-commerce and scalability of the Gaucho – Buenos Aires and Gaucho Casa brands, as real estate in Argentina is politically sensitive. GGH’s goal is to become recognized as the LVMH (“Louis Vuitton Moët Hennessy”) of South America’s leading luxury brands. Through one of its wholly owned subsidiaries, GGH also owns and operates legacy investments in the boutique hotel, hospitality and luxury vineyard property markets. This includes a golf, tennis and wellness resort, as well as an award-winning wine production company concentrating on Malbecs and Malbec blends. Utilizing these wines as its ambassador, GGH seeks to further develop its legacy real estate, which includes developing residential vineyard lots located within its 4,138-acre resort.
As a result of the COVID-19 pandemic, we terminated our corporate office lease, and senior management now works remotely. GGH’s local operations are managed by professional staff with substantial hotel, hospitality and resort experience in Buenos Aires and San Rafael, Argentina.
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Recent Developments and Trends
The Board of Directors of the Company approved the commencement of a private placement of shares of Senior Convertible Preferred Stock (“Preferred Shares”) at $100 per share and 8.5% promissory notes (the “Preferred Share Convertible Notes”) for aggregate proceeds of up to $7.2 million (the “Private Placement”).
Between May 1, 2024 and August 6, 2024, pursuant to the Private Placement, the Company entered into convertible promissory notes (the “Preferred Share Convertible Notes”) in the aggregate amount of $3,306,425, with a select group of investors, all of whom have a substantial pre-existing relationship with the Company. Preferred Share Convertible Notes in the aggregate amount of $1,000,000 were issued to a holder of greater than 10% of the Company’s common stock. The Preferred Share Convertible Notes bore interest at 8.5% per annum, and automatically converted into Preferred Shares at a price of $100 per share. On August 16, 2024, the Company issued 33,286 shares of Preferred Stock in connection with the conversion of $3,306,425 principal and $21,243 interest owed in connection with the Preferred Share Convertible Notes upon stockholder approval for the issuance of Preferred Shares at the Annual General Meeting of stockholders.
During August 2024, the Company issued 4,084 shares of Preferred Stock for cash proceeds of $408,400, pursuant to the Private Placement.
The Company is currently involved in litigation with the holder of a Senior Secured Convertible Note issued by the Company. Refer to Part II. Item 1, Legal Proceedings for more information.
On November 4, 2024 the Company entered into a promissory note agreement with an investor, and received cash proceeds of $395,000. The note bears interest at 8% per annum and matures on May 4, 2026.
On November 12, 2024, the Company received $150,000 in proceeds upon the issuance of a convertible promissory note with one of its stockholders. The holder is entitled to principal owed on the note into AWE real estate lots at a conversion price of $100,000 per real estate lot. In addition, the holder may convert principal and interest due under the note into shares of Senior Convertible 8.5% Preferred Stock until the maturity date. The note bears interest at 8% per annum and matures on November 12, 2025.
During the period from November 29, 2024 through December 30, 2024, the Company received $141,758 in proceeds upon the issuance of a non-convertible promissory note with the Company’s President and CEO. The note bears interest at 8% per annum and matures on December 5, 2025.
During the period from October 11, 2024 through November 12, 2024, the Company issued 6,200 shares of Preferred Stock for cash proceeds of $619,907.
Chapter 11 Petition
On November 12, 2024, the Company filed a petition pursuant to Chapter 11 of the United States Bankruptcy Code in the United States District Court for the Southern District of Florida. Subsequent to November 12, 2024. the Company will continue to operate its business as a “debtor in possession”. The Company has sought approval of various motions with the Bankruptcy Court that are intended to enable the Company to continue its ordinary course operations and facilitate an orderly transition of its operations into Chapter 11. On November 13, 2024, the Company’s shares of common stock were delisted from the Nasdaq Stock Market (“Nasdaq”) as a result of the Chapter 11 Reorganization and trading of the Company’s common stock on Nasdaq was suspended as of the opening of business on November 22, 2024. The Company’s shares of common stock are currently quoted on the over-the-counter market with the symbol “VINOQ”.
The accompanying condensed consolidated financial statements have been prepared assuming that we will continue as a going concern, which contemplates the realization of assets and satisfaction of liabilities and commitments in the normal course of business. However, substantial 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. Since inception, our operations have primarily been funded through proceeds received in equity and debt financings.
Consolidated Results of Operations
Three months ended September 30, 2024 compared to the three months ended September 30, 2023
Overview
We reported a net loss of approximately $3.2 million and $2.3 million for the three months ended September 30, 2024 and 2023, respectively.
Revenues
Revenues from operations were approximately $423,000 and $464,000 during the three months ended September 30, 2024 and 2023, respectively, reflecting a decrease of approximately $41,000 or 9%. Hotel and restaurant revenues decreased by approximately $69,000 and clothing and other sale revenues decreased by an aggregate of approximately $46,000, since inflationary price increases for these Argentine revenue streams were offset by the devaluation of the peso during the period. These revenue decreases were partially offset by an increase of approximately $74,000 in wine revenues as the result of new wine distribution channels and the launch of new wine products during 2024.
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Gross profit
We generated a gross profit of approximately $69,000 for the three months ended September 30, 2024 compared to a gross profit of approximately $143,000 for the three months ended September 30, 2023, representing a decrease in gross profit of approximately $74,000. Approximately $41,000 of decreases in gross profit from clothing sales resulted from the decrease in related revenues as well as approximately $6,000 charged to cost of sales related for a provision for slow moving inventory. Gross profit from hotel and restaurant sales decreased by approximately $74,000 resulting from the decrease in revenues and the high percentage of fixed costs related to these revenues. These decreases in gross profit were partially offset by increases in gross profit related to wine revenues and wine cost savings resulting from bottling efficiencies.
Selling and marketing expenses
Selling and marketing expenses were approximately $5,000 and $205,000 for the three months ended September 30, 2024 and 2023, respectively, representing a decrease of approximately $200,000 or 98%, which consisted primarily of approximately $126,000 decrease in marketing expense resulting from fewer investor events during the three months ended September 30, 2024 as compared to same period of the previous year, as well as a decrease of approximately $74,000 in advertising and marketing expenses related to fashion and accessories sold through our subsidiary Gaucho Group, Inc. (“GGI”).
General and administrative expenses
General and administrative expenses were approximately $2,274,000 and $1,267,000 for the three months ended September 30, 2024 and 2023, respectively, representing an increase of approximately $1,007,000 or 79%. Increases in general and administrative expense included (i) approximately $539,000 in legal fees in connection with litigation with the holder of a convertible note, (ii) approximately $244,000 in expected credit losses associated with mortgages receivable and receivables in connection with expense sharing agreements with related entities, (iii) approximately $100,000 in bonuses expense, and (iv) approximately $70,000 professional and consulting fees, as well as aggregated net increases in other expenses that are not individually material.
Depreciation and amortization expense
Depreciation and amortization expense included in operating expenses was approximately $106,000 and $114,000 during the three months ended September 30, 2024 and 2023, respectively.
Loss on termination of lease
During the three months ended September 30, 2024, we recorded a loss of approximately $566,000 upon the termination of the lease of property in Miami, Florida, consisting of approximately (i) $676,000 related to the write-off of leasehold improvements and (ii) $1,000 of fees incurred, net of (iii) a gain of $111,000 resulting from the derecognition of the related right of use (“ROU”) asset and lease liability in expenses due to early termination of an operating lease on September 30, 2024. There were no similar losses during the three months ended September 30, 2023.
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Interest income
Interest income was approximately $2,000 and $53,000 during the three months ended September 30, 2024 and 2023, respectively, representing a decrease of $51,000 or 96%. During the three months ended September 30, 2024, the Company did not recognize interest earned on past due mortgage receivable balances, since collectability is uncertain.
Interest expense
Interest expense was approximately $210,000 and $1,157,000 during the three months ended September 30, 2024 and 2023, respectively, representing a decrease of approximately $947,000 or 82%. The decrease consisted primarily of a decrease of approximately $1,002,000 in amortization of debt discount related to discount on convertible debt that was fully amortized during the first quarter of 2024, partially offset by an increase in interest expenses resulting from an increase in the average principal balance outstanding on notes payable during the three months ended September 30, 2024 as compared to the three months ended September 30, 2023.
Other income, related party
Other income was $0 and $212,000 during the three months ended September 30, 2024 and 2023, respectively. Other income during the three months ended September 30, 2023 represented management fees from LVH. LVH suspended operations on September 27, 2023; accordingly, no management fees were earned during the three months ended September 30, 2024.
Gains from foreign currency remeasurement
The Company recorded net gains from foreign currency remeasurement of approximately $32,000 and $132,000 during the three months ended September 30, 2024 and 2023, respectively, representing a decrease of approximately $100,000 or 76%, due to the fluctuation in the Argentine peso to United States dollar exchange rates.
Change in fair value of derivative liability
The Company recorded expense in connection with the change in fair value of derivative liability of approximately $76,000 and $96,000 during the three months ended September 30, 2024 and 2023, respectively. The change in fair value of derivative liability is associated with the derivative liability arising from the default terms in connection with outstanding principal on the 2023 Senior Secured Convertible Note (the “2023 Note”). The decrease in the change in the fair value of the derivative liability results primarily from the reduction in the principal balance outstanding due to the conversion of principal and interest to equity since September 30, 2023.
Nine months ended September 30, 2024 compared to the nine months ended September 30, 2023
Overview
We reported a net loss of approximately $8.6 million and $10.0 million for the nine months ended September 30, 2024 and 2023, respectively.
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Revenues
Revenues from operations were approximately $1,437,000 and $1,623,000 during the nine months ended September 30, 2024 and 2023, respectively, reflecting a decrease of approximately $186,000 or 11%. Hotel, restaurant and agricultural sale revenues decreased by an aggregate of approximately $193,000, since inflationary price increases for these Argentine revenue streams were offset by the devaluation of the peso during the period. Lot sale revenues decreased by approximately $51,000 and clothing and other revenues decreased by approximately $71,000 during the period. These revenue decreases were partially offset by an increase of approximately $130,000 in wine revenues as the result of new wine distribution channels and the launch of new wine products during 2024.
Gross profit
We generated a gross profit of approximately $265,000 for the nine months ended September 30, 2024 and a gross profit of approximately $340,000 for the nine months ended September 30, 2023, representing a decrease in gross profit of approximately $75,000. Increased gross losses of approximately $155,000 in connection with clothing sales as the result of provisions for slow-moving inventory were offset by improvements in gross profit in connection with wine revenues as the result of increases in wine revenues, as described above.
Selling and marketing expenses
Selling and marketing expenses were approximately $228,000 and $653,000 for the nine months ended September 30, 2024 and 2023, respectively, representing a decrease of approximately $425,000 or 65%, which consisted primarily of a $327,000 decrease in investor relation expenses as the result of the Company’s efforts to reduce expenses and conserve cash during the period, as well as a decrease of approximately $98,000 in advertising and marketing expenses.
General and administrative expenses
General and administrative expenses were approximately $6,694,000 and $4,735,000 for the nine months ended September 30, 2024 and 2023, respectively, representing an increase of approximately $1,959,000 or 41%. Increases in general and administrative expenses included an increase of approximately $923,000 in legal fees resulting primarily from the litigation with the holder of a convertible note, an increase of approximately $397,000 in other professional and consulting fees, approximately $520,000 of less gains on transactions denominated in a foreign currency, approximately $364,000 in expected credit losses in connection with our mortgages receivable and receivables associated with a expense sharing agreements with related entities, and approximately $123,000 of previously abated rent expense on the GGI lease charged by the landlord during the period as the result of a late rent payment. These increases were partially offset by a decrease of approximately $154,000 related to Board of Directors’ compensation and a decrease of approximately $102,000 related to severance payments paid to AWE employees during the first quarter of 2023, as well as other aggregated net expense decreases that are not individually material.
Depreciation and amortization expense
Depreciation and amortization expense included in operating expenses was approximately $331,000 and $328,000 during the nine months ended September 30, 2024 and 2023, respectively.
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Loss on termination of lease
During the nine months ended September 30, 2024, we recorded a loss of approximately $566,000 upon the termination of the Miami Lease, consisting of approximately (i) $676,000 related to the write-off of leasehold improvements and (ii) $1,000 of fees incurred, net of (iii) a gain of $111,000 resulting from the derecognition of the related right of use (“ROU”) asset and lease liability in expenses due to early termination of an operating lease on September 30, 2024. There were no similar losses during the nine months ended September 30, 2023.
Interest income
Interest income was approximately $17,000 and $168,000 during the nine months ended September 30, 2024 and 2023, respectively, representing a decrease of $151,000 or 90%. During the nine months ended September 30, 2024, the Company did not recognize interest earned on past due mortgage receivable balances.
Interest expense
Interest expense was approximately $794,000 and $2,824,000 during the nine months ended September 30, 2024 and 2023, respectively, representing a decrease of approximately $2,031,000 or 72%. The decrease consisted of a decrease of approximately $1,762,000 in amortization of debt discount, since the discount on the Company’s convertible debt was fully amortized during the first quarter of 2024, and a decrease of approximately $309,000 in interest expense incurred at stated rates, resulting from a decrease in the average principal balance outstanding on convertible notes during the nine months ended September 30, 2024 as compared to the nine months ended September 30, 2023.
Other income, related party
Other income was approximately $0 and $362,222 during the nine months ended September 30, 2024 and 2023, respectively. Other income during the nine months ended September 30, 2023 represented management fees from LVH. LVH suspended operations on September 27, 2023; accordingly, no management fees were earned during the nine months ended September 30, 2024.
Loss on extinguishment of debt
There was no loss on extinguishment of debt for the nine months ended September 30, 2024. Loss on extinguishment of debt for the nine months ended September 30, 2023 in the aggregate amount of $416,000 was comprised of (i) premium paid on the conversion of GGH Notes of approximately $112,000, (ii) premium paid on the cash redemption of GGH Notes of approximately $124,000, (iii) premium paid on the 2023 Senior Secured Convertible Note (the “2023 Note”) for cash redemption of principal in the amount of approximately $32,000; (iv) premium in the amount of approximately $13,000 paid on the conversion an aggregate of $87,179 of principal and interest owed on the 2023 Note, and (iv) the fair value of approximately $135,000 in warrants issued in the exchange agreement for the GGH Notes.
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Gains from foreign currency remeasurement
The Company recorded net gains from foreign currency remeasurement of approximately $66,000 and $347,000 during the nine months ended September 30, 2024 and 2023, respectively, representing a decrease of approximately $281,000 or 81%, due to the fluctuation in the Argentine peso to United States dollar exchange rates.
Change in fair value of derivative liability
The Company recorded a change in fair value of derivative liability of approximately $231,000 and $2,237,000 during the nine months ended September 30, 2024 and 2023, respectively. The change in fair value of derivative liability is associated with the derivative liability arising from the default terms in connection with outstanding principal on the 2023 Note During the nine months ended September 30, 2023, the Company recorded change in the fair value of the derivative liability based upon all principal and interest outstanding as of the June 2023 the event of default. During the nine months ended September 30, 2024, the change in the fair value of the derivative liability is in connection with additional interest accrued during the period.
Liquidity and Capital Resources
We measure our liquidity a variety of ways, including the following:
| September 30, | December 31, | |||||||
| 2024 | 2023 | |||||||
| Cash | $ | 213,000 | $ | 428,000 | ||||
| Working capital deficiency | $ | 5,000,000 | $ | 5,363,000 | ||||
| Debt outstanding, gross principal amount | $ | 2,931,000 | $ | 1,874,000 | ||||
| Cash true up obligations | $ | 1,485,000 | $ | 1,485,000 | ||||
| Lot sale obligations (gross principal amount, refundable upon rescission) | $ | 452,000 | $ | 525,000 | ||||
Cash requirements for our current liabilities include approximately $4,603,000 for accounts payable and accrued expenses (including cash true up obligations in connection with convertible debt in the amount of $1,485,000), approximately $1,336,000 for loans payable, approximately $452,000 for lot sale obligations, approximately $37,000 for future payments under a finance lease (including interest portion), and approximately $88,000 for other current liabilities. Further, our convertible debt under the 2023 Note matured on February 21, 2024 and we have subsequently received event of default notices demanding immediate payment of all balances owed in connection with the 2023 Note (unless converted at the option of the investor prior to payment), including principal, accrued interest, accrued cash true up obligations and redemption premiums in the aggregate equal to a minimum of approximately $3.7 million. Cash requirements for our long-term liabilities include approximately $101,000 future payments under a finance lease (including interest portion), and approximately $30,000 for accrued expenses.
During the nine months ended September 30, 2024, we financed a portion of our activities from proceeds derived from equity financings. A significant portion of the funds have been used to cover working capital needs and costs related to the infrastructure of our real estate lots.
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Net cash used in operating activities for the nine months ended September 30, 2024 and 2023 amounted to approximately $6,865,000 and $4,984,000, respectively. During the nine months ended September 30, 2024, the net cash used in operating activities was primarily attributable to the net loss of approximately $8,497,000, adjusted for approximately $2,796,000 of net non-cash expenses, and approximately $1,164,000 of cash used to fund changes in the levels of operating assets and liabilities. During the nine months ended September 30, 2023, the net cash used in operating activities was primarily attributable to the net loss of approximately $9,976,000 adjusted for approximately $5,712,000 of net non-cash expenses, and approximately $720,000 of cash used to fund changes in the levels of operating assets and liabilities.
Cash provided by (used in) investing activities for the nine months ended September 30, 2024 and 2023 amounted to approximately $57,000 and ($630,000), respectively, resulting from approximately $111,000 and $580,000, respectively, of cash used for the purchase of property and equipment, $0 and $50,000, respectively, of cash used for the purchase of an intangible asset, offset during the nine months ended September 30, 2024 by approximately $188,000 cash received upon the sale of land.
Net cash provided by financing activities for the nine months ended September 30, 2024 and 2023 amounted to approximately $6,493,000 and $5,529,000 respectively. For the nine months ended September 30, 2024, the net cash provided by financing activities resulted from approximately $3,300,000 of proceeds from the issuance of convertible debt, $1,833,000 in proceeds from the issuance of common stock, $1,120,000 proceeds from loans payable, and $408,000 in proceeds from preferred stock issued for cash, partially offset by approximately $88,000 in repayment of loans payable, $73,000 from the partial refund of a lot sale obligation, and $5,000 legal fees incurred in connection with the conversion of debt for Series B convertible redeemable preferred stock. For the nine months ended September 30, 2023, the net cash provided by financing activities resulted primarily from approximately $4,678,000 in net proceeds from the issuance of debt, $996,000 in proceeds from the issuance of common stock in a private placement, approximately $776,000 in proceeds from the issuance of stock under the New ELOC and $185,000 in proceeds from the issuance of a note payable, partially offset by the repayment of convertible debt obligations and related redemption premiums in the approximate amount of $1,019,000, and repayment of loans payable of approximately $87,000.
As of September 30, 2024, the Company had cash and a working capital deficit of approximately $213,000 and $5,000,000, respectively. During the nine months ended September 30, 2024 and 2023, the Company incurred net losses of approximately $8.5 million and $10.0 million, respectively, and used cash in operating activities of approximately $6.9 million and $5.0 million, respectively. Further, as of September 30, 2024, approximately $3.6 million owed in connection with the Company’s convertible debt (including principal, interest, redemption premiums and cash true up obligations) is past due and payable upon demand, and approximately $1.4 million represents the current portion of the Company’s loans payable which are payable on demand or for which payments are due within twelve months after September 30, 2024.
On November 4, 2024 the Company received cash proceeds of $395,000 in connection with a promissory note.
On November 12, 2024, the Company received $150,000 in proceeds upon the issuance of a convertible promissory note with one of its stockholders.
During the period from November 29, 2024 through December 30, 2024, the Company received $141,758 in proceeds upon the issuance of a non-convertible promissory note with the Company’s President and CEO.
Between October 11, 2024 through November 12, 2024, the Company received cash proceeds of $616,907 upon the sale of preferred stock.
The Company’s operating needs include the planned costs to operate its business, including amounts required to fund working capital and capital expenditures. 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 financial statements are made available. Since inception, the Company’s operations have primarily been funded through proceeds received from 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. The aforementioned factors raise substantial doubt about the Company’s ability to continue as a going concern.
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Availability of Additional Funds
As a result of our financings, we have been able to sustain operations. However, we will need to raise additional capital to extinguish debt, fund infrastructure development at Algodon Wine Estates, and for general working capital. If we are unable to obtain adequate funds on reasonable terms, we may be required to significantly curtail or discontinue operations.
Off-Balance Sheet Arrangements
None.
Contractual Obligations
As a smaller reporting company, we are not required to provide the information requested by paragraph (a)(5) of this Item.
Critical Accounting Estimates
The preparation of financial statements and related disclosures in conformity with U.S. GAAP. These accounting principles require us to make estimates and judgments that can affect the reported amounts of assets and liabilities as of the date of the financial statements as well as the reported amounts of revenue and expense during the periods presented. We believe that the estimates and judgments upon which it relies are reasonably based upon information available to us at the time that it makes these estimates and judgments. To the extent that there are material differences between these estimates and actual results, our financial results will be affected. We evaluate these estimates on an ongoing basis.
We consider an accounting estimate to be critical if: (i) the accounting estimate requires us to make assumptions about matters that were highly uncertain at the time the accounting estimate was made, and (ii) changes in the estimate that are reasonably likely to occur from period to period or use of different estimates that we reasonably could have used in the current period, would have a material impact on our financial condition or results of operations. We consider accounting for credit losses in connection with our mortgages receivable to be a critical accounting estimate.
Other items within our financial statements that require estimation, but are not deemed critical, include the valuation of investments, equity and liability instruments, the value of right-of-use assets and related lease liabilities and reserves associated with the realizability of certain assets.
Item 3. Quantitative and Qualitative Disclosure About Market Risk
As a “smaller reporting company” as defined by Item 10 of Regulation S-K, we are not required to provide the information required by this Item.
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Item 4: Controls and Procedures
Disclosure Controls and Procedures
Our management carried out an evaluation, under the supervision and with the participation of our Chief Executive Officer (who is our Principal Executive Officer) and our Chief Financial Officer (who is our Principal Financial Officer and Principal Accounting Officer), of the effectiveness of the design of our disclosure controls and procedures (as defined by Exchange Act Rules 13a-15(e) or 15d-15(e)) as of September 30, 2024, pursuant to Exchange Act Rule 13a-15(b). Based upon that evaluation, our Principal Executive Officer and Principal Financial Officer concluded that our disclosure controls and procedures were not effective as of September 30, 2024, resulting from ineffective controls over information technology general controls for information systems that are relevant to the preparation of our financial statements with respect to user provisioning and deprovisioning and cybersecurity, a lack of segregation of duties due to our small size, and lack of testing of the operating effectiveness of the controls.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting identified in management’s evaluation pursuant to Rules 13a-15(d) or 15d-15(d) of the Exchange Act during the quarter ended September 30, 2024 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Inherent Limitations of Controls
Management does not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent or detect all errors and all fraud. Controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions, or deterioration in the degree of compliance with the policies or procedures. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.
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PART II - OTHER INFORMATION
Item 1. Legal Proceedings
On April 25, 2024, Design District Development Partners, LLC, the landlord of the Company’s retail space in the Miami Design District, filed a lawsuit against the Company for eviction alleging non-payment of rent. On September 20, 2024, the parties entered into a settlement agreement for back rent and termination of the lease effective September 30, 2024.
The following disclosure provides an overview of the material developments to the disclosure provided Part II, Item 1 of the Company’s Quarterly Report on Form 10-Q, as filed on August 14, 2024.
Gaucho Group Holdings Inc. (Bankr. S.D. Fla.)
On November 12, 2024, the Company filed a voluntary petition, Case No. 24-21852 (the “Chapter 11 Reorganization”) in the United States Bankruptcy Court for the Southern District of Florida (the “Bankruptcy Court”) seeking relief under Chapter 11 of Title 11 of the United States Code (the “Bankruptcy Code”).
The Company continues to operate its business as a “debtor in possession” subject to the jurisdiction of the Bankruptcy Court and in accordance with the applicable provisions of the Bankruptcy Code, orders of the Bankruptcy Court, and applicable non-bankruptcy law. The Company has sought approval of various motions with the Bankruptcy Court that are intended to enable the Company to continue its ordinary course operations and facilitate an orderly transition of its operations into Chapter 11. The Company continues to operate as a “debtor-in-possession” under the jurisdiction of the Bankruptcy Court and in accordance with the applicable provisions of the Bankruptcy Code and orders of the Bankruptcy Court.
On January 21, 2025, 3i filed a Proof of Claim with the Bankruptcy Court, alleging that the balance of the 2023 Note was $8,022,667.19.
Gaucho Group Holdings Inc. v. 3i, LP et al. (D. Del.)
On October 11, 2024, the U.S. District Court for the District of Delaware held a hearing on the Company’s motion for a preliminary injunction against 3i, LP, 3i Management LLC and Maier Joshua Tarlow (“3i Parties”).
On November 5, 2024, the District Court denied the Company’s motion for a preliminary injunction against the 3i Parties.
On November 7, 2024, the Company appealed the District Court’s decision to the United States Court of Appeals for the Third Circuit.
On November 13, 2024, the District Court issued an Order (i) staying all further proceedings on the counterclaims alleged by the 3i Parties against the Company, and (ii) directing the Company to advise the Court within thirty (30) days thereof if it will be seeking leave of the Bankruptcy Court to proceed with its claims against the 3i Parties.
On December 12, 2024, the District Court issued an Order directing the Company to advise the Court on or before January 31, 2025, if it will be seeking leave of the Bankruptcy Court to proceed with its claims against the 3i Parties.
On January 22, 2025, the 3i Parties moved for a Judgment on the Pleadings against the Company.
On January 27, 2025, the Company withdrew its appeal of the District Court’s decision to the United States Court of Appeals for the Third Circuit.
On February 4, 2025, the Court issued an Order setting a Status Conference for March 7, 2025.
Subject to the Chapter 11 Reorganization, the Company remains committed to litigating its claims for relief against the 3i Parties and defending itself against the 3i Parties’ counterclaims.
3i, LP et al v. Gaucho Group Holdings, Inc. et al. (E.D.N.Y.)
On October 3, 2024, the 3i Parties commenced a proceeding in the U.S. District Court for the Eastern District of New York (“Quash Proceeding”). In the Quash Proceeding, the 3i Parties seek to quash the subpoenas issued in connection with the aforementioned litigation between the Company and the 3i Parties in the U.S. District Court for the District of Delaware, and were served against certain financial institutions used by the 3i Parties—Metropolitan Commercial Bank, Clear Street LLC and TradeUP Securities, Inc.
On November 12, 2024, the Company informed the New York Court that it voluntarily commenced Chapter 11 bankruptcy proceedings in the U.S. Bankruptcy Court for the Northern District of Florida.
On November 15, 2024, the District Court stayed the Quash Proceeding pending resolution of the Chapter 11 Reorganization.
Subject to the Chapter 11 Reorganization, the Company maintains that it is entitled to the information sought by the subpoenas.
3i, LP v. Gaucho Group Holdings, Inc. (Sup. Ct., NY County)
On July 7, 2024, the New York Court entered an order indefinitely staying this action pending final resolution of the District of Delaware action.
On November 12, 2024, the Company informed the New York Court that it voluntarily commenced Chapter 11 bankruptcy proceedings in the U.S. Bankruptcy Court for the Northern District of Florida.
As of the date hereof, the New York Court has not issued an order in response to the Company’s November 12, 2024 Notice of Bankruptcy filing.
Subject to the Chapter 11 Reorganization, the Company remains committed to litigating its claims for relief against 3i and defending itself against 3i LP’s claims.
On November 26, 2024, Port Washington Imports, LLC (“Port Washington”) filed suit against the Company alleging breach of contract and seeking damages in connection with an import and distribution agreement. The Company sent Port Washington a cease and desist letter advising that as a result of the Chapter 11 Reorganization, all litigation is subject to an automatic stay.
Disputed 3i Claim
On November 18, 2024, 3i, LP (“3i”) filed a reservation of rights statement with the United States Bankruptcy Court, claiming that the balance due in connection with the 2023 Senior Secured Convertible Note was $7,417,599. On January 21, 2025, 3i filed a Proof of Claim with the Bankruptcy Court, alleging that the balance of the 2023 Note was approximately $8.0 million. As of September 30, 2024, the Company has recorded liabilities in the aggregate amount of approximately $4.4 million in connection with the 2023 Note, representing the aggregate amount of principal, accrued interest, cash true up obligations and redemption premiums. The $8.0 million balance alleged by 3i includes additional legal fees, late charges and conversion failure charges. The validity and application of these additional charges are disputed by the Company.
General Litigation Disclosure
From time to time, the Company 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 the Company 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 condensed consolidated financial condition, results of operations or cash flows, except as disclosed.
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Item 1A. Risk Factors
As a “smaller reporting company” as defined by Item 10 of Regulation S-K, we are not required to provide information required by this Item. However, our current risk factors are set forth in Item 1A of the Company’s Annual Report on Form 10-K as filed with the Securities and Exchange Commission (the “SEC”) on April 30, 2024, our subsequent Quarterly Reports and below.
Cautionary Statements Regarding Trading in the Company’s Securities
The Company’s securityholders are cautioned that trading in the common stock during the pendency of the Chapter 11 Reorganization is highly speculative and poses substantial risk. Trading prices for the common stock may bear little or no relationship to the actual recovery, if any, by holders thereof in the Chapter 11 Reorganization. Accordingly, the Company urges extreme caution with respect to existing and future investments in its common stock.
Risk Factors Relating to the Chapter 11 Reorganization
The Chapter 11 Reorganization may have a material adverse impact on our business, financial condition, results of operations and cash flows. In addition, the consummation of a plan of reorganization will result in the cancellation and discharge of our equity securities, including our common stock.
The Chapter 11 Reorganization could have a material adverse effect on our business, financial condition, results of operations and cash flows. During the pendency of the Chapter 11 Reorganization, our management may be required to spend a significant amount of time and effort dealing with restructuring matters rather than focusing exclusively on our business operations. Bankruptcy Court protection and operating as debtors-in-possession also may make it more difficult to retain management and the key personnel necessary to the success of our business. In addition, during the pendency of the Chapter 11 Reorganization, our customers may lose confidence in our ability to reorganize our business successfully and may seek to establish alternative commercial relationships, renegotiate the terms of our agreements, terminate their relationships with us or require financial assurances from us. Customers may lose confidence in our ability to provide them the level of service they expect, resulting in a significant decline in our revenues, profitability and cash flow.
Other significant risks include or relate to the following:
| ● | the effects of the filing of the Chapter 11 Reorganization on our business and the interests of various constituents, including our stockholders; |
| ● | Bankruptcy Court rulings in the Chapter 11 Reorganization, including with respect to our motions and third-party motions, as well as the outcome of other pending litigation; |
| ● | our ability to operate within the restrictions and the liquidity limitations of the DIP Credit Agreement and any related orders entered by the Bankruptcy Court in connection with the Chapter 11 Reorganization; |
| ● | our ability to maintain strategic control as debtors-in-possession during the pendency of the Chapter 11 Reorganization; |
| ● | the length of time that we will operate with Chapter 11 protection and the continued availability of operating capital during the pendency of the Chapter 11 Reorganization; |
| ● | increased advisory costs during the pendency of the Chapter 11 Reorganization; |
| ● | the risks associated with restrictions on our ability to pursue some of our business strategies during the pendency of the Chapter 11 Reorganization; |
| ● | our ability to satisfy the conditions precedent to consummation of a plan of reorganization; |
| ● | the potential adverse effects of the Chapter 11 Reorganization on our business, cash flows, liquidity, financial condition and results of operations; |
| ● | the ultimate outcome of the Chapter 11 Reorganization in general; |
| ● | the cancellation of our existing equity securities, including our outstanding shares of common stock and preferred stock, in the Chapter 11 Reorganization; |
| ● | the potential material adverse effects of claims that are not discharged in the Chapter 11 Reorganization; |
| ● | uncertainties regarding the reactions of our customers, prospective customers and service providers to the Chapter 11 Reorganization; |
| ● | uncertainties regarding our ability to retain and motivate key personnel; and |
| ● | uncertainties and continuing risks associated with our ability to achieve our stated goals and continue as a going concern. |
Further, under Chapter 11, transactions outside the ordinary course of business are subject to the prior approval of the Bankruptcy Court, which may limit our ability to respond in a timely manner to certain events, to take advantage of certain opportunities or adapt to changing market or industry conditions. Because of the risks and uncertainties associated with the Chapter 11 Reorganization, we cannot predict or quantify the ultimate impact that events occurring during the Chapter 11 Reorganization may have on our business, cash flows, liquidity, financial condition and results of operations, nor can we provide any assurance as to our ability to continue as a going concern.
As a result of the Chapter 11 Reorganization, realization of assets and liquidation of liabilities are subject to uncertainty. While operating under the protection of the Bankruptcy Code, and subject to Bankruptcy Court approval or otherwise as permitted in the normal course of business, we may sell or otherwise dispose of assets and liquidate or settle liabilities for amounts other than those reflected in our consolidated financial statements.
Delays in the Chapter 11 Reorganization may increase the risk of us being unable to reorganize our business and emerge from bankruptcy and increase our costs associated with the bankruptcy process.
There can be no assurance that a plan of reorganization will become effective in accordance with its terms on the timeline we anticipate, or at all. Prolonged Chapter 11 proceedings could adversely affect our relationships with customers and employees, among other parties, which in turn could adversely affect our business, competitive position, financial condition, liquidity and results of operations and our ability to continue as a going concern. A weakening of our financial condition, liquidity and results of operations could adversely affect our ability to implement a plan of reorganization (or any other Chapter 11 plan). If we are unable to consummate a plan of reorganization, we may be forced to liquidate our assets.
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We are subject to the risks and uncertainties associated with our exclusive right to file a plan of reorganization.
At the outset of the Chapter 11 Reorganization, the Bankruptcy Code provides debtors-in-possession the exclusive right to file and solicit acceptance of a plan of reorganization for the first 120 days of the bankruptcy case, subject to extension at the discretion of the court. All other parties are prohibited from filing or soliciting a plan of reorganization during this period. If the Bankruptcy Court terminates that right or the exclusivity period expires, there could be a material adverse effect on our ability to achieve confirmation of a plan in order to achieve our stated goals. The possible decision of creditors and/or other third parties, whose interest may be inconsistent with our own, to file alternative plans of reorganization could further protract the Chapter 11 Reorganization, leading us to continue to incur significant professional fees and costs. Because of these risks and uncertainties associated with the termination or expiration of our exclusivity rights, we cannot predict or quantify the ultimate impact that events occurring during the Chapter 11 Reorganization may have on our business, cash flows, liquidity, financial condition and results of operations, nor can we predict the ultimate impact that events occurring during the Chapter 11 Reorganization may have on our corporate or capital structure.
Adverse publicity in connection with the Chapter 11 Reorganization or otherwise could negatively affect our businesses.
Adverse publicity or news coverage relating to us, including, but not limited to, publicity or news coverage in connection with the Chapter 11 Reorganization, may negatively impact our efforts to establish and promote a positive image after emergence from the Chapter 11 Reorganization.
Risks of trading in an over-the-counter market.
As of November 22, 2024, our common stock has been quoted on the OTC Pink Marketplace maintained by the OTC Markets Group, Inc. under the symbol “VINOQ.” Securities traded in the over-the-counter market generally have significantly less liquidity than securities traded on a national securities exchange, due to factors such as a reduction in the number of investors that will consider investing in the securities, the number of market makers in the securities, reduction in securities analyst and news media coverage and lower market prices than might otherwise be obtained. In addition to those factors, the market for the outstanding shares of our common stock has been adversely affected Chapter 11 Reorganization.
We can provide no assurance that our common stock will continue to trade on the OTC Pink Marketplace, whether broker-dealers will continue to provide public quotes of our common stock on that market, whether the trading volume of our common stock will be sufficient to provide for an efficient trading market or whether quotes for our common stock will continue to be provided on that market in the future.
A plan of reorganization may not become effective.
Even if a plan of reorganization is confirmed by the Bankruptcy Court, it may not become effective because it is subject to the satisfaction of certain conditions precedent. There can be no assurance that such conditions will be satisfied and, therefore, that a plan of reorganization will become effective and that the Company will emerge from the Chapter 11 Reorganization as contemplated by a plan of reorganization. If the effective date of a plan of reorganization is delayed, the Company may not have sufficient cash available to operate their businesses. In that case, the Company may need new or additional post-petition financing, which may increase the cost of consummating a plan of reorganization. There can be no assurance of the terms on which such financing may be available or if such financing will be available. If the transactions contemplated by a plan of reorganization are not completed, it may become necessary to amend the plan. The terms of any such amendment are uncertain and could result in material additional expense and result in material delays to the Chapter 11 Reorganization.
Even if a Chapter 11 plan of reorganization is consummated, we may not be able to achieve our stated goals.
Even if a Chapter 11 plan of reorganization is consummated, we may continue to face a number of risks, such as changes in economic conditions, changes in our industry, changes in demand for our services and increasing expenses. Some of these risks become more acute when a case under the Bankruptcy Code continues for a protracted period without indication of how or when the transactions under a Chapter 11 plan of reorganization will close. As a result of these and other risks, we cannot guarantee that a Chapter 11 plan of reorganization will achieve our stated goals. Furthermore, even if our debts are reduced or discharged through a plan of reorganization, we may need to raise additional funds through public or private debt or equity financing or other various means to fund our business after the completion of the Chapter 11 Reorganization. Our access to additional financing may be limited, if it is available at all. Therefore, adequate funds may not be available when needed or may not be available on favorable terms. As a result, a plan of reorganization may not become effective and, thus, we cannot assure you of our ability to continue as a going concern.
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Our long-term liquidity requirements and the adequacy of our capital resources are difficult to predict at this time.
We face uncertainty regarding the adequacy of our liquidity and capital resources and have extremely limited, if any, access to additional financing. In addition to the cash requirements necessary to fund our ongoing operations, we have incurred significant professional fees and other costs in connection with preparation for the Chapter 11 Reorganization and expect that we will continue to incur significant professional fees and other costs throughout the Chapter 11 Reorganization. We cannot assure you that cash on hand and cash flow from operations will be sufficient to continue to fund our operations and allow us to satisfy our obligations related to the Chapter 11 Reorganization. We also cannot assure you that additional financing will be sufficient, that we will be able to secure additional interim financing or adequate exit financing sufficient to meet our liquidity needs (or if sufficient funds are available, that they will be offered to us on acceptable terms).
Our liquidity, including our ability to meet our ongoing operational obligations, depends on, among other things: (1) our ability to comply with the terms and conditions of any order governing the use of cash collateral that may be entered by the Bankruptcy Court in connection with the Chapter 11 Reorganization, (2) our ability to maintain adequate cash on hand, (3) our ability to generate cash flow from operations, (4) our ability to consummate a plan of reorganization or other alternative restructuring transaction, and (4) the cost, duration and outcome of the Chapter 11 Reorganization.
The unaudited condensed consolidated financial statements included in this Form 10-Q for the period ended September 30, 2020 contain disclosures that express substantial doubt about our ability to continue as a going concern.
The unaudited condensed consolidated financial statements included in this Form 10-Q for the period ended September 30, 2024 have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities and other commitments in the normal course of business and does not include any adjustments that might result from uncertainty about our ability to continue as a going concern. Such assumption may not be justified. The inclusion of disclosures that express substantial doubt about our ability to continue as a going concern may negatively impact the trading price of our common and preferred stock and have an adverse impact on our relationships with third parties with whom we do business, including our customers, subcontractors, suppliers and employees, and could have a material adverse impact on our business, financial condition, results of operations and cash flows.
As a result of the Chapter 11 Reorganization, our historical financial information may not be indicative of our future performance, which may be volatile.
During the Chapter 11 Reorganization, we expect our financial results to continue to be volatile as restructuring activities and expenses impact our consolidated financial statements. As a result, our historical financial performance is likely not indicative of our financial performance after the date of the filing of the Chapter 11 Reorganization. In addition, if we emerge from Chapter 11, the amounts reported in subsequent consolidated financial statements may materially change relative to our historical consolidated financial statements. We also will be required to adopt fresh start accounting, in which case our assets and liabilities will be recorded at fair value as of the fresh start reporting date, which may differ materially from the recorded values of assets and liabilities on our historical consolidated balance sheets. Our financial results after the application of fresh start accounting may be different from historical trends.
The Chapter 11 Reorganization limits the flexibility of our management team in running our business.
While we operate our businesses as debtor-in-possession under supervision by the Bankruptcy Court, we are required to obtain the approval of the Bankruptcy Court, and in some cases certain lenders, prior to engaging in activities or transactions outside the ordinary course of business. Bankruptcy Court approval of non-ordinary course activities entails preparation and filing of appropriate motions with the Bankruptcy Court, negotiation with the various creditors’ committees and other parties-in-interest and one or more hearings. The creditors’ committees and other parties-in-interest may be heard at any Bankruptcy Court hearing and may raise objections with respect to these motions. This process may delay major transactions and limit our ability to respond quickly to opportunities and events. Furthermore, in the event the Bankruptcy Court does not approve a proposed activity or transaction, we would be prevented from engaging in activities and transactions that we believe are beneficial to us.
We may experience employee attrition as a result of the Chapter 11 Reorganization.
As a result of the Chapter 11 Reorganization, we have experienced, and may continue to experience, employee attrition, and our employees may face considerable distraction and uncertainty. A loss of key personnel or material erosion of employee morale could adversely affect our business and results of operations. Our ability to engage, motivate and retain key employees or take other measures intended to motivate and incentivize key employees to remain with us through the pendency of the Chapter 11 Reorganization is limited by certain restrictions on the implementation of incentive programs under the Bankruptcy Code. The loss of services of members of our senior management team could impair our ability to execute our business strategies and implement operational initiatives, which may have a material adverse effect on our business, cash flows, liquidity, financial condition and results of operations.
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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
Issuance of Common Stock Pursuant to Anti-Dilution Rights
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 $6.00) (the “Private Placement”). The Private Placement closed on April 11, 2024.
Each investor in the Private Placement has certain anti-dilution protections for a period of 18 months following each closing of the Private Placement. If, during the 18-month period following each closing of the Offering, the Company issues or sells any shares of common stock of the Company (a “Dilutive Issuance”), then each participant in the Private Placement will automatically be issued such number of shares of common stock as is necessary to maintain the percentage ownership that such participant would have had if the Dilutive Issuance had not occurred. With respect to the issuance of any securities to 3i pursuant to the 2023 Convertible Note and related agreements as a result of Dilutive Issuances, the participant shall not be entitled to any additional Dilutive Issuances beyond the initial Dilutive Issuance. Further, at such time that the participant disposes of its shares acquired in the Private Placement, all rights to any Dilutive Issuance shall cease.
On August 19, 2024, the Company issued a total of 13,352 shares of common stock in connection with the anti-dilution provisions of the Private Placement as approved by the Company’s stockholders on February 29, 2024.
The Private Placement was conducted pursuant to Section 4(a)(2) of the Securities Act and/or Rule 506(b) of Regulation D promulgated under the Securities Act. The shares were only offered to a small select group of accredited investors, as defined in Rule 501 of Regulation D, all of whom have a substantial pre-existing relationship with the Company and no general advertising or solicitation was used. The Company filed a Form D on December 15, 2023, amended on January 11, 2024, amended on February 12, 2024, and amended on April 17, 2024.
Issuance of Common Stock to Advisor
On August 15, 2024, the Company issued a total of 12,500 shares of common stock upon the vesting of restricted stock units at a price per share of $5.75 to an advisor in connection with services provided to the Company.
Senior Convertible Preferred Stock
As described in our Current Report on Form 8-K as filed with the SEC on May 21, 2024, the Company filed a Certificate of Designation of Senior Convertible Preferred Stock with the Delaware Secretary of State, designating 100,000 shares of preferred stock of the Company, par value $0.01, as Senior Convertible Preferred Stock (the “Senior Convertible Preferred Stock”).
In order to raise additional capital for the Company, the Board of Directors of the Company approved the commencement of a private placement of shares of Senior Convertible Preferred Stock and 8.5% promissory notes (the “Notes”) for aggregate proceeds of up to $7.2 million (up to $6 million with a 20% overallotment) pursuant to Section 4(a)(2) of the 1933 Act and Rule 506(b) of Regulation D thereunder (the “Preferred Private Placement”). The Preferred Shares will be issued at a price per share of $100; provided that the Company is limited to the sale of up to 6,731 shares of Senior Convertible Preferred Stock for gross proceeds of $637,100 until such time as stockholder approval is granted pursuant to Nasdaq Rule 5635(d) at the Company’s Annual General Meeting of Stockholders on August 16, 2024 (the “2024 AGM”).
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At the 2024 AGM, the Company obtained the requisite stockholder approval, and the Notes comprised of $3,306,425 and $21,243 in interest were automatically converted into an aggregate of 33,286 Preferred Shares based on a conversion price of $100 per Preferred Share.
Between August 19, 2024 and September 25, 2024, the Company received gross proceeds of $408,400 and issued a total of 4,084 shares of Senior Preferred Convertible Stock.
For these sales of securities in the Preferred Private Placement, no general solicitation was used, the Notes and Preferred Shares were only offered to a small select group of accredited investors, all of whom have a substantial pre-existing relationship with the Company, and no commissions were paid. The Company relied on the exemption from registration available under Section 4(a)(2) and/or Rule 506(b) of Regulation D promulgated under the Securities Act with respect to transactions by an issuer not involving any public offering. A Form D will be filed with the SEC shortly after the filing of this Quarterly Report.
The Company presently intends to use the net proceeds from this Preferred Private Placement to extinguish debt, fund infrastructure development at Algodon Wine Estates, and for general working capital.
Item 3. Defaults upon Senior Securities
For a description of events, please see our Current Reports on Forms 8-K as filed with the SEC on February 27, 2024, March 1, 2024, March 7, 2024, and Item 3 of our Quarterly Report on Form 10-Q as filed with the SEC on May 20, 2024. The Company received notices of default under the 2023 Convertible Note and related agreements but has maintained since February 16, 2024 that it is not in default because the underlying 2023 Convertible Note and related agreements are void and unenforceable.
2023 Loan
On January 9, 2023, the Company received $185,000 in proceeds upon the issuance of a one-year, non-convertible promissory note with a January 9, 2024 maturity date. The note bears interest at a rate of 8% per annum. On February 22, 2024, the Company repaid principal and interest on the 2023 Loan in the amount of $83,540 and $16,460, respectively. The Company is currently in default on the 2023 Loan, and the loan is payable upon demand. As of September 30, 2024, the Company is renegotiating the payment terms on the 2023 Loan.
2024 Loan
On September 5, 2024, the Company received $100,000 in proceeds upon the issuance of a one-year, non-convertible promissory note (the “2024 Loan”). The 2024 Loan bears interest at a rate of 8% per annum and matured on October 15, 2024. The Company is currently in default on the 2024 Loan is renegotiating payment terms with the holder.
Item 4. Mine and Safety Disclosure
Not applicable.
Item 5. Other Information
Senior Preferred Convertible Shares
Between October 1, 2024 and November 12, 2024, the Company sold 6,200 shares of Senior Preferred Convertible Stock at a price per share of $100, in the total amount of $619,907 to investors who have a substantial pre-existing relationship with the Company. Please see Item 2 for more information.
Nasdaq Notice
As reported on our Current Report on Form 8-K as filed with the SEC on August 22, 2024, on August 20, 2024, the Company received an email notification from the Listing Qualifications Department of the Nasdaq Stock Market (the “Staff”) that as of June 30, 2024, the Company did not meet the required continued listing equity standard of stockholder equity of at least $2.5 million pursuant to Nasdaq Rule 5550(b)(1), as set forth on the Company’s Quarterly Report on Form 10-Q for the period ended June 30, 2024 as filed with the SEC on August 14, 2024.
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As of August 16, 2024, the Company was in compliance with Rule 5550(b)(1), based on the conversion of promissory notes on August 16, 2024 into shares of Senior Preferred Convertible Stock as detailed in our Current Report on Form 8-K, filed with the SEC on August 21, 2024.
On November 13, 2024, the Company received a letter from the Staff that it has determined that the Company’s shares of common stock will be delisted from the Nasdaq Stock Market (“Nasdaq”) in accordance with Nasdaq Listing Rules 5101, 5110(b) and IM-5101-1 as a result of the Chapter 11 Reorganization. Trading of the Company’s common stock will be suspended at the opening of business on November 22, 2024 and a Form 25-NSE will be filed with the SEC, which will remove the Company’s securities from listing and registration on Nasdaq. The Staff’s determination was based on the filing of the Chapter 11 Reorganization and public concerns raised by the filing; concerns regarding the residual equity interest of the stockholders holding the existing listed common stock; and concerns about the Company’s ability to sustain compliance with all requirements for continued listing on Nasdaq. The letter also indicates that the Company may appeal Nasdaq’s determination pursuant to procedures set forth in Nasdaq Listing Rule 5800 Series. The Company did not appeal this determination.
At the opening of business on November 22, 2024, trading of the Company’s common stock on Nasdaq was suspended. The Company’s shares of common stock are currently quoted on the over-the-counter market with the symbol “VINOQ”.
Loans
The Company entered into the following 12-month non-convertible promissory notes with one of its stockholders holding in excess of 10% of the Company’s common stock as follows: (i) August 16, 2024 in the amount of $21,243; (ii) September 9, 2024 in the amount of $500,000; and (iii) September 30, 2024 in the amount of $100,000.
On November 4, 2024 the Company received $395,000 in proceeds upon the issuance of a non-convertible promissory note with one of its stockholders. The note bears interest at 8% per annum and matures on May 4, 2026.
On November 12, 2024, the Company received $150,000 in proceeds upon the issuance of a convertible promissory note with one of its stockholders. The holder is entitled to principal owed on the note into AWE real estate lots at a conversion price of $100,000 per real estate lot. In addition, the holder may convert principal and interest due under the note into shares of Senior Convertible 8.5% Preferred Stock until the maturity date. The note bears interest at 8% per annum and matures on November 12, 2025.
During the period from November 29, 2024 through December 30, 2024, the Company received $141,758 in proceeds upon the issuance of a non-convertible promissory note with the Company’s President and CEO. The note bears interest at 8% per annum and matures on December 5, 2025.
On December 30, 2024, the Bankruptcy Court issued an order authorizing the Company to borrow up to $100,000 from the Argentina Strategic Opportunity Fund, LLC (“ASOF”) on an unsecured basis, with an annual interest rate of 8%. On January 21, 2025, the Company entered into a promissory note for $70,000 with ASOF, with all interest and principal due on January 21, 2027. On January 23, 2025, the Company entered into a promissory note for $30,000 with ASOF, with all interest and principal due on January 23, 2027.
On January 31, 2025, the Bankruptcy Court issued an order authorizing the Company to borrow up to $1,500,000 from ASOF in a 12-month period on an unsecured basis, with an annual interest rate of 7.5% (the “ASOF Line of Credit”). The Company is required to file monthly reconciliation reports comparing funds received and expenses paid to the budget approved by the Bankruptcy Court. Subject to authorization from the Bankruptcy Court, the unpaid principal amount of each advance under the ASOF Line of Credit is payable on demand.
Lease
On September 30, 2024, the Company terminated its lease for the retail space located at 112 N.E. 41st Street, Suite 106, in Miami, Florida to sell its Gaucho – Buenos Aires™ products. The Company has shifted its retail operations online.
Company Headquarters
As a result of the lease termination, the Company’s headquarters are now located at 1111 Lincoln Road, Suite 500, Miami Beach, Florida 33139.
Rule 10b5-1 Trading Arrangements
During
the Company’s third quarter of 2024, no director or officer
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Item 6. Exhibits
The following documents are being filed with the Commission as exhibits to this Quarterly Report on Form 10-Q.
| 1. | Incorporated by reference from the Company’s Registration of Securities Pursuant to Section 12(g) on Form 10 dated May 14, 2014. |
| 2. | Incorporated by reference from the Company’s Quarterly Report on Form 10-Q, filed on November 19, 2018. |
| 3. | Incorporated by reference to the Company’s Current Report on Form 8-K filed on July 9, 2019. |
| 4. | Incorporated by reference to the Company’s Current Report on Form 8-K filed on February 18, 2021. |
| 5. | Incorporated by reference to the Company’s Current Report on Form 8-K filed on February 22, 2021. |
| 6. | Incorporated by reference to the Company’s Current Report on Form 8-K filed on April 1, 2020. |
| 7. | Incorporated by reference to the Company’s Annual Report on Form 10-K filed on April 12, 2021. |
| 8. | Incorporated by reference to the Company’s Quarterly Report on Form 10-Q filed on August 16, 2021. |
| 9. | Incorporated by reference to the Company’s Current Report on Form 8-K filed on November 17, 2021. |
| 10. | Incorporated by reference to the Company’s Current Report on Form 8-K as filed on March 1, 2022. |
| 11. | Incorporated by reference to the Company’s Annual Report on Form 10-K, filed on April 14, 2022. |
| 12. | Incorporated by reference to the Company’s Current Report on Form 8-K, filed on June 8, 2022. |
| 13. | Incorporated by reference to the Company’s Current Report on Form 8-K, filed on December 1, 2022. |
| 14. | Incorporated by reference to the Company’s Current Report on Form 8-K, filed on December 13, 2022. |
| 15. | Incorporated by reference to the Company’s Current Report on Form 8-K, filed on December 15, 2022. |
| 16. | Incorporated by reference to the Company’s Quarterly Report on Form 10-Q, filed on November 16, 2015. |
| 17. | Incorporated by reference to the Company’s Current Report on Form 8-K, filed on February 21, 2023. |
| 18. | Incorporated by reference to the Company’s Current Report on Form 8-K, filed on February 21, 2023. |
| 19. | Incorporated by reference to the Company’s Current Report on Form 8-K, filed on April 29, 2024. |
| 20. | Incorporated by reference to the Company’s Current Report on Form 8-K, filed on May 22, 2024. |
| 21. | Incorporated by reference to the Company’s Current Report on Form 8-K, filed on August 21, 2024. |
| * | Filed herewith |
| ** | Furnished, not filed herewith |
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SIGNATURES
Pursuant to the requirements of Section 12 of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| Date: February 12, 2025 | GAUCHO GROUP HOLDINGS, INC. | |
| By: | /s/ Scott L. Mathis | |
| Scott L. Mathis | ||
| Chief Executive Officer | ||
| By: | /s/ Maria I. Echevarria | |
| Maria Echevarria | ||
| Chief Financial Officer and Chief Operating Officer | ||
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