Gaucho Group Holdings, Inc. Annual report pursuant to Section 13 and 15(d)

Annual report pursuant to Section 13 and 15(d)

STOCKHOLDERS' EQUITY

STOCKHOLDERS' EQUITY

12 Months Ended

Dec. 31, 2015

Stockholders' Equity Note [Abstract]

Shareholders' Equity and Share-based Payments [Text Block]

16.

STOCKHOLDERS’ EQUITY

Authorized Shares

Pursuant to the Company’s Amended and Restated Certificate of Incorporation, the Company is authorized to issue up to 80,000,000 shares of common stock, $0.01 par value per share. As of December 31, 2015 and 2014, there were 38,879,333 and 35,745,831 shares of common stock issued, and 38,874,922 and 35,741,420 shares outstanding, respectively.

The Company is authorized to issue up to 11,000,000 shares of Series A Preferred, $0.01 par value per share, of which 902,670 shares are available for issuance as of December 31, 2015. As of December 31, 2015 and 2014, there were no shares of preferred stock outstanding.

Application for Quotation on OTC Bulletin Board

On January 20, 2016 FINRA cleared the Company’s request to submit quotations on the OTC Bulletin Board and in OTC Link. In addition, the Company submitted its application for quotation on the OTCQB marketplace and was approved on March 7, 2016.

Convertible Preferred Stock

During the year ended December 31, 2014, the Company issued 2,748,995 shares of Series A Preferred to accredited investors in a private placement transaction for gross proceeds of $6,322,677.

On July 14, 2014, the Company’s Registration Statement on Form 10 filed with the SEC on May 14, 2014, as amended on July 3, 2014 and August 13, 2014, September 12, 2014, October 23, 2014 and December 12, 2014, became effective with the result that the Company became subject to the reporting requirements under Section 13 of the Securities Exchange Act of 1934. As a result, the 10,097,330 outstanding shares of Series A Preferred were automatically converted into 10,097,330 aggregate shares of common stock. As a result of the conversion, the investors were no longer eligible for dividend payments, and all liquidation preferences were extinguished.

Common Stock

In January 2014, the Company issued 10,485 shares of common stock to settle certain accounts payable for $23,591 or an average of $2.25 per share of common stock.

In February 2014, the Company issued 166,305 shares of common stock to settle cashless exercised options for the purchase of 566,946 shares of common stock at an exercise price of $1.59 per share and issued 31,421 shares of common stock to settle an exercised option for the aggregate purchase price of $49,959 or $1.59 per share of common stock.

In March 2014, the Company issued 21,454 shares of common stock at $2.25 per share to settle its 2013 obligation (an aggregate of $48,272 representing the combination of employee contributions and Company matching contributions) to the Company’s 401(k) profit-sharing plan.

In April 2014, the Company engaged a financial advisor for a six month term (subject to immediate termination by either party) for consideration comprised of a $15,000 cash fee and the issuance of 50,000 shares of common stock, valued at $2.25 per share or $112,501.

During 2014, the Company issued 1,223,349 shares of its common stock at $2.00 per share for cash proceeds of $2,446,697.

See Note 12 – Loans Payable for details associated with the 2014 exchange of loans payable and the related accrued interest into common stock.

See Note 16 – Stockholders’ Equity – Convertible Preferred Stock for details associated with the 2014 conversion of Series A Preferred into common stock.

On June 30, 2015, the Company issued 36,700 shares of common stock at $2.00 per share to settle its 2014 obligation, (an aggregate of $73,400 representing the combination of employee contributions and Company matching contributions), to the Company’s 401(k) profit-sharing plan.

During 2015, the Company issued 2,821,942 shares of common stock at $2.00 per share for cash proceeds of $5,643,884, and issued 274,860 shares of common stock at $2.50 per share for cash proceeds at $687,150.

Accumulated Other Comprehensive Loss

For the years ended December 31, 2015 and 2014, the Company recorded $1,821,060 and $1,567,513, respectively, of foreign currency translation adjustments as accumulated other comprehensive loss.

Warrants

During 2014, in connection with the sale of Series A Preferred, the Company issued five-year warrants to its subsidiary CAP, who acted as placement agent, to purchase 299,444 shares of Series A Preferred at an exercise price of $2.30 per share as well as warrants for the purchase of 50,000 shares of the Company’s common stock at an exercise price of $2.00 per share. CAP, in turn, awarded such warrants to its registered representatives and recorded $285,147 of stock-based compensation expense for the year ended December 31, 2014 within general and administrative expense in the consolidated statements of operations.

During 2015, in connection with the sale of its common stock, the Company issued five-year warrants to CAP, who acted as a placement agent, to purchase 342,642 shares of the Company’s common stock at $2.00 per share, and 16,000 shares of the Company’s common stock at $2.50 per share. CAP, in turn, awarded such warrants to its registered representatives and recorded $259,901 of stock-based compensation expense for the year ended December 31, 2015 within general and administrative expense of the consolidated statement of operations.

A summary of warrants activity during the years ended December 31, 2015 and 2014 is presented below:

					Weighted
			Weighted		Average
	Number of		Average		Remaining
	Warrants		Exercise Price		Life in Years		Intrinsic Value
Outstanding, December 31, 2013		899,156	$	2.54
Issued		349,444		2.26
Exercised		-		-
Cancelled		(178,926)		3.70
Outstanding, December 31, 2014		1,069,674		2.26
Issued		358,642		2.00
Exercised		-		-
Cancelled		(46,130)		1.59
Outstanding, December 31, 2015		1,382,186	$	2.10		3.15	$	391,030

Exercisable, December 31, 2015		1,382,186	$	2.10		3.15	$	391,030

A summary of outstanding and exercisable warrants as of December 31, 2015 is presented below:

Warrants Oustanding					Warrants Exercisable
					Weighted
			Outstanding		Average	Exercisable
Exercise			Number of		Remaining Life	Number of
Price		Exercisable Info	Warrants		In Years	Warrants
$	2.00	Common Stock		392,642	4.5		392,642
$	2.30	Preferred Stock		973,544	5.0		973,544
$	2.50	Common Stock		16,000	2.6		16,000
		Total		1,382,186			1,382,186

Equity Incentive Plans

The Company’s 2001 Equity Incentive Plan, as amended (the “2001 Plan”), and the 2008 Equity Incentive Plan, as amended (the “2008 Plan”), were approved by the Company’s Board and shareholders on June 21, 2001 and August 25, 2008, respectively. The plans provide for grants to purchase up to an aggregate of 342,700 shares, and 9,000,000 shares, respectively. Both equity plans permit the granting of incentive and non-qualified stock options, restricted and unrestricted stock, loans and grants, and performance awards. Under all plans, (1) awards may be granted to employees, consultants, independent contractors, officers and directors; (2) the maximum term of any award shall be ten years from the date of grant; (3) the exercise price of any award shall not be less than the fair value on the date of grant. On June 21, 2011, the 2001 Plan expired, such that no new awards may be granted from the 2001 Plan, but all outstanding awards continue to run their course. The Company intends to issue new shares of common stock to satisfy any plan obligations.

Stock Options

The Company has computed the fair value of options granted using the Black-Scholes option pricing model. There is currently no public trading market for the shares of AWLD common stock underlying the Company’s 2001 Plan and 2008 Plan. Accordingly, the fair value of the AWLD common stock was estimated by management based on observations of the cash sales prices of AWLD equity securities. Forfeitures are estimated at the time of valuation and reduce expense ratably over the vesting period. This estimate will be adjusted periodically based on the extent to which actual forfeitures differ, or are expected to differ, from the previous estimate, when it is material. The expected term of options granted to consultants represents the contractual term, whereas the expected term of options granted to employees and directors was estimated based upon the “simplified” method for “plain-vanilla” options. Given that the Company’s shares are not publicly traded, the Company developed an expected volatility figure based on a review of the historical volatilities, over a period of time, of similarly positioned public companies within its industry. The risk-free interest rate was determined from the implied yields from U.S. Treasury zero-coupon bonds with a remaining term consistent with the expected term of the options. The Company estimated forfeitures related to options at an annual rate of 5% for options outstanding at December 31, 2015.

On August 27, 2014, the Company granted five-year options to purchase an aggregate of 2,649,000 shares of common stock at an exercise price of $2.48 to employees, officers, directors and consultants of the Company, pursuant to the 2008 Plan. The options vest as follows: (i) 550,000 shares vest over a five year period with one-fourth vesting on August 27, 2015 and the remainder vesting quarterly thereafter; (ii) 1,115,000 shares vest over a four year period with one-fourth vesting on August 27, 2015 and the remainder vesting quarterly thereafter; (iii) 1,000 shares vest over a four year period with one-fourth vesting on August 27, 2015 and the remainder vesting yearly thereafter; (iv) 483,000 shares vest over a one year period with one-fourth vesting on August 27, 2015 and the remainder vesting yearly thereafter; and (v) 500,000 shares vest over a four year period with one-sixteenth vesting on November 27, 2014 and the remainder vesting quarterly thereafter. The options had an aggregate grant date value of $1,489,951, of which, options granted to employees, officers and directors had an aggregate grant date fair value of $1,191,308, which will be recognized ratably over the vesting period, while options granted to consultants had an aggregate grant date value of $298,643, which will be re-measured on financial reporting dates and vesting dates until the service period is complete.

On June 15, 2015, the Company granted five-year options to purchase an aggregate of 2,211,890 shares of common stock to employees, officers, directors and consultants of the Company, pursuant to the 2008 Plan. Options to purchase an aggregate of 2,201,890 shares had an exercise price of $2.20 per share and an option to purchase 10,000 shares of common stock had an exercise price of $3.30 per share. The options vest over a four year period with one-fourth vesting on June 8, 2016 and the remainder vesting quarterly thereafter. The options had an aggregate grant date value of $1,409,900, of which, options granted to employees, officers and directors had an aggregate grant date fair value of $1,251,384, which will be recognized ratably over the vesting period, while options granted to consultants had an aggregate grant date value of $158,516, which will be re-measured on financial reporting dates and vesting dates until the service period is complete.

In applying the Black-Scholes option pricing model, the Company used the following assumptions:

	For The Years Ended
	December 31,
	2015		2014
Risk free interest rate		1.06% - 1.10%		0.25% - 1.14%
Expected term (years)		2.53 - 3.59		1.01 - 3.54
Expected volatility		45.9% - 46.1%		46.1% - 46.4%
Expected dividends		0%		0%
Forfeiture rate		5.0%		5.0%

The weighted average grant date fair value per share of options granted during the years ended December 31, 2015 and 2014 was $0.64 and $0.56, respectively.

During April 2015, in connection with certain employee separation agreements, the Company modified options to purchase an aggregate of 132,671 shares of common stock such that (a) previously vested options to purchase 68,671 shares of common stock will remain outstanding and exercisable until their original expiration dates notwithstanding the termination and (b) an unvested option to purchase 64,000 shares of common stock will become vested immediately and will remain outstanding and exercisable until its original expiration date notwithstanding the termination. During the year ended December 31, 2015, the Company recorded incremental stock-based compensation expense of $40,300 in connection with the modification of the options.

During the years ended December 31, 2015 and 2014, the Company recorded stock-based compensation expense of $782,234 and $568,022, respectively, related to stock option grants, which is reflected as general and administrative expenses in the consolidated statements of operations. As of December 31, 2015, there was $1,970,981 of unrecognized stock-based compensation expense related to stock option grants that will be amortized over a weighted average period of 3.2 years, of which $399,333 of unrecognized expense is subject to non-employee mark-to-market adjustments.

A summary of options activity during the years ended December 31, 2015 and 2014 is presented below:

			Weighted		Weighted
			Average		Average
			Exercise		Exercise
	Number of		Price		Price		Intrinsic
	Options		Warrants		Warrants		Value
Outstanding, December 31, 2013		7,136,236	$	2.85
Granted		2,649,000		2.48
Exercised		(598,367)		1.59
Cancelled		(784,965)		2.67
Forfeited		(595,068)		2.79
Outstanding, December 31, 2014		7,806,836		2.85
Granted		2,211,890		2.20
Exercised		-		-
Cancelled		(643,836)		2.95
Forfeited		(435,454)		2.51
Outstanding, December 31, 2015		8,939,436	$	2.70		2.9	$	754,890

Exercisable, December 31, 2015		5,432,487	$	2.95		2.0	$	71,221

The following table presents information related to stock options as of December 31, 2015:

Options Outstanding				Options Exercisable
				Weighted Average		Exercisable
		Outstanding Number		Remaining Life		Number of
Exercise Price		of Options		In Years		Options
$	2.20		2,191,890		-		-
	2.48		4,866,125		2.8		3,561,066
	3.30		10,000		-		-
	3.50		25,000		2.5		25,000
	3.85		1,846,421		0.5		1,846,421
			8,939,436		2.0		5,432,487