CONVERTIBLE DEBT OBLIGATIONS |
3 Months Ended | |||||||||||||||
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Mar. 31, 2024 | ||||||||||||||||
| Debt Disclosure [Abstract] | ||||||||||||||||
| CONVERTIBLE DEBT OBLIGATIONS |
10. CONVERTIBLE DEBT OBLIGATIONS
2023 Convertible Note
Effective February 5, 2024, the Investor in the 2023 Convertible Note (the “2023 Note”) elected to increase the cap on its beneficial ownership of the Company from 4.99% to 9.99% effective on the sixty-first day after such notice was delivered to the Company, pursuant to the terms of the 2023 Note.
The 2023 Convertible Note is convertible at the Event of Default conversion price, equal to the lessor of a) $13.40 (subject to adjustment as described above); (b) 80% of the volume-weighted average price on the day preceding receipt of the conversion notice; or (c) 80% of the average of the three lowest volume-weighted average prices over the fifteen trading days which precede receipt of the conversion notice, subject to a floor price of $2.70. If the conversion price in effect on the date of conversion is less than $2.70, the Investor is entitled to a cash true up payment equal to the difference between the conversion dollar amount and the value of shares issued upon conversion. As of March 31, 2024 and December 31, 2023, the Company has accrued $1,484,677 of cash true up payments as the result of 2023 Convertible Note principal and interest converted at the floor price in effect at the date of conversion.
On February 21, 2024, the Company received an Event of Default Redemption Notice from the Investor, demanding immediate payment of principal, interest and redemptions premiums owed under the 2023 Note equal to a minimum of $3,437,646. On February 28, 2024, the Company received a second Event of Default Redemption Notice from the Investor providing notice of an additional Event of Default in connection with the 2023 Note demanding immediate payment of principal interest and redemption premiums equal to a minimum of $3,450,711. On March 6, 2024, the Company received an Event of Default notice from the Investor demanding immediate payment of principal, interest and redemptions premiums owed under the 2023 Note equal to a minimum of $3,460,510.
There were no repayments or conversions of the 2023 Note during the three months ended March 31, 2024.
Derivative Liability
The Event of Default Conversion Price represents a redemption feature, which was bifurcated from the 2023 Note host and recorded as a derivative liability. During the three months ended March 31, 2024, the Company has recorded $80,590 in connection with the change in fair value of the derivative liability, which represents the difference between shares issuable upon conversion with no event of default, and the value of shares issuable upon conversion of debt at the Event of Default Conversion Price.
GAUCHO GROUP HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
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:
Interest Expense on Convertible Debt Obligations
The Company incurred total interest expense of approximately $359,042 and $566,041 related to its convertible debt obligations during the three months ended March 31, 2024 and 2023, respectively.
Interest expense during the three months ended March 31, 2024 consisted of (i) $84,247 of interest and make-whole interest accrued at stated interest rates and (ii) $274,795 of amortization of debt discount. Interest expense during the three months ended March 31, 2023 consisted of approximately (i) $203,875 of interest and make-whole interest accrued at stated interest rates; and (ii) $362,166 of amortization of debt discount. As of March 31, 2024 and December 31, 2023, there is accrued interest of $175,740 and $91,494, respectively, related to the Company’s convertible debt obligations.
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