10. CONVERTIBLE DEBT OBLIGATIONS

Convertible debt obligations consist of the following:

 SCHEDULE OF CONVERTIBLE NOTES

2023 Senior Secured Convertible Note

Effective February 5, 2024, the Investor in the 2023 Senior Secured Convertible Note (the “Investor”) 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 Senior Secured Convertible Note (the “2023 Note”) is convertible at the Event of Default conversion price, equal to the lessor of a) $134.00; (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, all subject to a floor price of $4.00. If the conversion price in effect on the date of conversion is less than $4.00, 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 June 30, 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 six months ended June 30, 2024.

GAUCHO GROUP HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

Derivative Liability in Connection with 2023 Notes

The Event of Default Conversion Price on the 2023 Notes represents a redemption feature, which was bifurcated from the 2023 Note host and recorded as a derivative liability. During the six months ended June 30, 2024, the Company has recorded $155,627 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.

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:

 SUMMARY OF THE CHANGES IN THE FAIR VALUE OF DERIVATIVE LIABILITIES

Convertible 8.5% Preferred Promissory Notes

During the period from May 2024 through June 2024, the Company issued 120-day convertible preferred promissory notes (the “Preferred Share Convertible Notes”) in in the aggregate amount of $936,025, of which convertible promissory notes in the aggregate amount of $669,300 were issued for cash, and convertible promissory notes in the aggregate amount of $366,725 were issued in satisfaction of an aggregate of $260,000 of deposits for the purchase of equity, in lieu of issuance of shares The notes bear interest at 8.5% per annum, and automatically convert into Senior Convertible Preferred Stock at a conversion price of $100.00 per share of Senior Convertible Preferred Stock on the date that the Company obtains stockholder approval to issue such shares. The Company expects to obtain stockholder approval for the issuance of the Senior Convertible Preferred Stock at its Annual General Meeting of Stockholders, currently scheduled for August 16, 2024. If the Company does not obtain such approval, all principal and interest accrued on the Preferred Share Convertible Notes will be due and payable at maturity. The Company recorded $6,725 of original issue discount in connection with two Preferred Share Convertible Notes which will be amortized over the 120-day term, using the effective interest method.

Convertible 8.5% Preferred Promissory Notes - Related Party

During the period from May 2024 through June 2024, the Company issued Preferred Share Convertible Notes in exchange for cash aggregate amount of $1,000,000, to a holder of greater than 10% of the Company’s common stock. The notes bear interest at 8.5% per annum, and automatically convert into Senior Convertible Preferred Stock at a conversion price of $100.00 per share of Senior Convertible Preferred Stock on the date that the Company obtains stockholder approval to issue such shares. The Company expects to obtain stockholder approval for the issuance of the Senior Convertible Preferred Stock at its Annual General Meeting of Stockholders, currently scheduled for August 16, 2024. If the Company does not obtain such approval, all principal and interest accrued on the Preferred Share Convertible Notes will be due and payable at maturity.

GAUCHO GROUP HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

Interest Expense on Convertible Debt Obligations

The Company incurred total interest expense of approximately $95,692 and $987,034 related to its convertible debt obligations during the three months ended June 30, 2024 and 2023, respectively. Interest expense during the three months ended June 30, 2024 and 2023 consisted of (i) $47,313 and $211,260, respectively, of interest and make-whole interest accrued at stated interest rates and (ii) $43,732 and $58,907, respectively, of incremental default interest, and (iii) $4,647 and $716,867, respectively, of amortization of debt discount.

The Company incurred total interest expense of approximately $454,734 and $1,553,076 related to its convertible debt obligations during the six months ended June 30, 2024 and 2023, respectively. Interest expense during the six months ended June 30, 2024 and 2023 consisted of approximately (i) $87,828 and $415,135 of interest and make-whole interest accrued at stated interest rates and (ii) $87,464 and $58,907, respectively, of incremental default interest, and (iii) $279,442 and $1,079,034 of amortization of debt discount.

As of June 30, 2024 and December 31, 2023, there is accrued interest of $266,786 and $91,494, respectively, related to the Company’s convertible debt obligations.