19. STOCKHOLDERS’ EQUITY

Authorized Shares

Common Shares Authorized

The Company is authorized to issue up to 150,000,000 shares of common stock, $0.01 par value per share, pursuant to the Amended and Restated Certificate of Incorporation filed with the Secretary of State of Delaware on September 22, 2023 (the “Amended and Restated Certificate of Incorporation”) .

On November 4, 2022, the Company effected a reverse stock split in the ratio of 1 share of common stock for 12 previously issued shares of common stock and filed an amended and restated certificate of incorporation (the “2022 Reverse Stock Split”). There were 738 fractional shares issued as a result of the 2022 Reverse Stock Split, which were rounded up to the nearest whole number.

GAUCHO GROUP HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

On September 25, 2023, the Company effected a reverse stock split in the ratio of 1 share of common stock for 10 previously issued shares of common stock, pursuant to the Amended and Restated Certificate of Incorporation.

As of December 31, 2023 and 2022, there were 4,807,938 and 365,340 shares of common stock issued, and 4,807,909 and 365,312 shares outstanding, respectively.

Preferred Shares Authorized

Effective September 16, 2022, the Company filed an amended and restated certificate of incorporation (the “2022 Amended and Restated Certificate of Incorporation”) with the Secretary of State of the State of Delaware to reflect the reduction in the number of authorized shares of preferred stock from 11,000,000 shares to 902,670 shares as a result of the previous conversion of the Series A Convertible Preferred into shares of common stock of the Company. There were no shares of preferred stock issued or outstanding at December 31, 2023 and 2022.

Equity Incentive Plans

On July 27, 2018, the Board of Directors adopted the 2018 Equity Incentive Plan (the “2018 Plan”), which was approved by the Company’s shareholders on September 28, 2018. The 2018 Plan provides for grants for the purchase of up to an aggregate of 10,000 shares, including incentive and non-qualified stock options, restricted and unrestricted stock, loans and grants, and performance awards. The number of shares available under the 2018 Plan will automatically increase on January 1 of each year by the amount equal to 2.5% of the total number of shares outstanding on such date, on a fully diluted basis. Further, any shares subject to an award issued under the 2018 Plan, the 2016 Stock Option Plan or the 2008 Stock Option Plan that are canceled, forfeited or expired shall be added to the total number of shares available under the 2018 Plan.

On August 30, 2022, the stockholders approved an increase of the number of shares authorized to be awarded under the 2018 Equity Incentive Plan to 25% of the Company’s common stock outstanding on a fully diluted basis as of the date of stockholder approval. As a result of the stockholder’s approval, the number of shares authorized to be awarded was 84,803 shares.

As of December 31, 2023, there were 16,453 shares available for issuance under the 2018 Equity Incentive Plan. On January 1, 2024, the 2.5% automatic increase to available shares provided for an additional 234,193 shares.

Under the 2018 Plan, awards may be granted to employees, consultants, independent contractors, officers and directors or any affiliate of the Company as determined by the Board of Directors. The maximum term of any award granted under the 2018 shall be ten years from the date of grant, and the exercise price of any award shall not be less than the fair value of the Company’s stock on the date of grant, except that any incentive stock option granted under the 2018 Plan to a person owning more than 10% of the total combined voting power of the Company’s common stock must be exercisable at a price of no less than 110% of the fair market value per share on the date of grant.

On October 5, 2018, GGH, as the sole stockholder of GGI, and the Board of Directors of GGI approved the Gaucho 2018 Equity Incentive Plan (the “2018 Gaucho Plan”). The 2018 Gaucho Plan provides for grants for the purchase of up to an aggregate of 8,000,000 shares of GGI’s common stock, including incentive and non-qualified stock options, restricted stock, performance awards and other stock-based awards. On June 22, 2022, a total of 5,502,500 options for the purchase of GGI common stock were exchanged for 183,942 vested shares of GGH common stock and 26,278 restricted stock units vesting through December 18, 2022.

GAUCHO GROUP HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

No equity awards were granted pursuant to the 2018 Gaucho Plan during the years ended December 31, 2023 or 2022. As of December 31, 2023, no options remain outstanding under the 2018 Gaucho Plan. While the 2018 Gaucho Plan is still in effect, GGI plans to terminate the 2018 Gaucho Plan as a result of the acquisition by the Company of the remaining 21% interest in GGI in March 2022.

Common Stock

On February 3, 2022, the Company issued 125 shares of common stock and paid $34,999 cash as consideration for the purchase of the domain name Gaucho.com. The seller is entitled to additional shares if the closing price per share is less than $316.80 on August 14, 2022, such that the collective value of the total shares issued to the seller has a fair market value of $39,600. (See Note 7 - Intangible Assets). On August 14, 2022, the closing price per share was $43.20. As a result, the Company issued 736 additional shares to the seller of the domain name.

On February 3, 2022, the Company issued 10,695 shares of its common stock, valued at $2,194,653, to Hollywood Burger Holdings, Inc, a company with whom GGH shares common management, in exchange for a 100% ownership interest in Hollywood Burger Argentina S.R.L., now Gaucho Development S.R.L. (see Note 3 - Acquisition of Hollywood Burger Argentina S.R.L.). The purpose of the acquisition was to acquire certain real property held by Gaucho Development S.R.L.

On March 28, 2022, the Company issued 8,690 shares of its common stock, valued at $2,419,268, to the minority holders of GGI, in exchange for the remaining 21% non-controlling interest in GGI. The acquisition of the remaining shares of GGI resulted in a decrease of non-controlling interest to zero, and an adjustment to additional paid-in capital to reflect the Company’s increased ownership in GGI.

On June 7, 2022, the Company issued an aggregate of 5,421 immediately-vested shares of its common stock, with a grant date value of $525,000, as compensation to the non-executive members of its board of directors.

On June 22, 2022, the Company issued (i) 18,394 vested shares of its common stock valued at $1,379,568 and (ii) 2,628 restricted stock units valued at $197,081 (see Restricted Stock Units, below), in exchange for, and upon the cancellation of, options for the purchase of 5,502,500 shares of GGI common stock (the “GGI Stock Options”). As of the date of this exchange, the value of the cancelled GGI options approximated the value of the common stock and restricted stock units issued to the GGI Option holders.

On February 2, 2023, the Company issued 5,131 shares of common stock upon the cashless exercise of 13,473 warrants at exercise prices ranging from $24.00 to $38.20.

On July 17, 2023, the Company issued an aggregate of 27,027 shares immediately-vested shares of its common stock, with a grant date value of $150,000, as compensation to the non-executive members of its board of directors.

During the year ended December 31, 2023, the Company sold 149,100 shares of common stock and warrants to purchase 32,775 shares at an exercise price of $4.50 for aggregate proceeds of $996,000. The warrants are immediately exercisable and expire two years from the date of issuance.

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 not lower than $0.60 per share (the “Private Placement”). During the period from November 30, 2023 through December 31, 2023, the Company sold 1,686,690 shares of common stock for aggregate proceeds of $1,017,066 in connection with the Private Placement (see Note 22 – Subsequent Events).

See Note 14 – Convertible Debt Obligations for additional details regarding common shares issued during the year ended December 31, 2023.

GAUCHO GROUP HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Common Stock Purchase Agreement and Registration Rights Agreement

On May 6, 2021, the Company entered into a Common Stock Purchase Agreement (the “Purchase Agreement”) and a Registration Rights Agreement (the “Registration Rights Agreement”) with an underwriter (the “Underwriter”) Pursuant to the Purchase Agreement, the Company has the right to sell to the Underwriter up to $50,000,000 (the “Total Commitment”) in shares of the Company’s common stock, subject to certain limitations and conditions set forth in the Purchase Agreement. The Company has the right, but not the obligation, from time to time at the Company’s sole discretion over a 36-month period from and after the commencement (the “Commencement Date”), to direct the Underwriter to purchase up to a fixed maximum amount of shares of Common Stock as set forth in the Purchase Agreement (each, a “Fixed Purchase”), on any trading day, in addition to other requirements set forth in the Purchase Agreement. In consideration for entering into the Purchase Agreement, the Company issued 1,003 shares of common stock (the “Commitment Shares”) to the Underwriter with an issuance date fair value of $500,000, which was recognized as a debit to additional paid-in capital.

The Purchase Agreement limits the sale of shares of the Company’s common stock to the Underwriter, such that no shares can be sold to the Underwriter under the Purchase Agreement if it would result in the Underwriter beneficially owning more than 4.99% of the then then total outstanding shares of the Company’s common stock.

The purchase price of the shares of common stock that the Company elects to sell to the Underwriter pursuant to a Fixed Purchase under the Purchase Agreement will be determined by reference to the market prices of the common stock during the applicable Fixed Purchase Valuation Period for such Fixed Purchase as set forth in the Purchase Agreement, less a fixed 7% discount. The purchase price of the shares of common stock that the Company elects to sell to the Underwriter pursuant to a VWAP Purchase under the Purchase Agreement will be determined by reference to the lowest daily volume weighted average price of the common stock during the three consecutive trading day-period immediately following the date on which the Company timely delivers the applicable VWAP Purchase notice for such VWAP Purchase to the Underwriter (the “VWAP Purchase Valuation Period”) as set forth in the Purchase Agreement, less a fixed 5% discount.

The Company engaged a placement agent to help identify and engage the Underwwriter. The Company has agreed to pay its placement agent a fee of 8% of the amount of the funds raised pursuant to the Purchase Agreement. During the year ended December 31, 2022, the Company sold an aggregate of 5,005 shares of the Company’s common stock to the Underwriter for gross proceeds of $555,811, less the 8% placement agent fee of $44,465.

On November 8, 2022, the parties terminated the Common Stock Purchase Agreement and Registration Rights Agreement by and between the Company and the Underwriter, dated May 6, 2021. On the same date, the parties entered into a new Common Stock Purchase Agreement and Registration Rights Agreement (the “New ELOC”) with the Underwriter. Under the New ELOC, the Company has the right to sell to the Underwriter up to the lesser of (i) $4,430,897 of newly issued shares of the Company’s common stock and (ii) the Exchange Cap, as defined, from time to time at a price equal to 95% of the lowest daily VWAP during the three consecutive trading days immediately following the date that the Company provides notice to the Underwriter, directing the Underwriter to purchase shares. The New ELOC expires on November 8, 2025. The Company’s registration statement required under the New ELOC was declared effective on December 27, 2022.

GAUCHO GROUP HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Company has agreed to reimburse the Underwriter for reasonable out-of-pocket expenses (including legal fees and expenses), up to a maximum of $35,000. The Company has agreed to pay the placement agent a fee of 8% of the amount of the funds raised pursuant to the Purchase Agreement.

On December 31, 2022, the Company sold 1,000 shares of the Company’s common stock to the Underwriter for net proceeds of $10,086, pursuant to the New ELOC.

During the year ended December 31, 2023, the Company issued an aggregate of 150,684 shares of the Company’s common stock for gross proceeds of $927,060, less placement agent fees of $74,972, pursuant to the New ELOC. See Note 22 - Subsequent Events, regarding the termination of the New ELOC.

Accumulated Other Comprehensive Loss

For the years ended December 31, 2023 and 2022, the Company recorded a (loss) gain of $(262,137) and $764,877, respectively, related to foreign currency translation adjustments as accumulated other comprehensive income, primarily related to fluctuations in the Argentine peso to United States dollar exchange rates (see Note 2 – Summary of Significant Accounting Policies, Highly Inflationary Status in Argentina).

Warrants

A summary of warrant activity during the year ended December 31, 2023 is presented below:

 SUMMARY OF WARRANTS ACTIVITY

See Common Stock, above, and Note 14 – Convertible Debt Obligations for additional details regarding warrants issued during the year ended December 31, 2023.

GAUCHO GROUP HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

A summary of outstanding and exercisable warrants as of December 31, 2023 is presented below:

 SCHEDULE OF WARRANTS OUTSTANDING AND EXERCISABLE 

Restricted Stock Units

A summary of RSU activity during the year ended December 31, 2023 is presented below:

 SCHEDULE OF RESTRICTED STOCK UNITS AND WEIGHTED AVERAGE GRANT DATE FAIR VALUES

On January 23, 2023, the Company granted 1,002 restricted stock units (“RSUs”) to certain employees and advisors for their service, of which 389 RSUs vested on the grant date and 306 RSUs will vest on each of the next two anniversaries of the date of the grant.

On October 23, 2023, the Company granted 50,000 RSUs upon the appointment of an advisor to the Company’s advisory board, of which 12,500 RSUs vest on each of the next four anniversaries of the date of grant. The RSUs were issued as a non-plan equity award approved by the Board of Directors on October 23, 2023 and were not granted pursuant to the 2018 Equity Incentive Plan.

During the years ended December 31, 2023, the Company recorded stock-based compensation expense of $307,148 and $579,630 respectively, related to the amortization of RSUs.

GAUCHO GROUP HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Stock Options

A summary of stock option activity during the year ended December 31, 2023 is presented below:

 SCHEDULE OF STOCK OPTION ACTIVITY 

During the years ended December 31, 2023 and 2022, the Company recorded total stock-based compensation expense of $113,487 and $269,965, respectively, related to stock option grants, which is reflected as general and administrative expenses in the consolidated statements of operations. As of December 31, 2023 and 2022, there was $56,108 and $169,595, respectively, of unrecognized stock-based compensation expense, all of which is related to GGH stock option grants that will be amortized over a weighted average period of 0.8 years. No stock options were granted during the years ended December 31, 2023 or 2022. The following table presents information related to GGH stock options outstanding as of December 31, 2023:

 SCHEDULE OF STOCK OPTION OUTSTANDING AND EXERCISABLE

GAUCHO GROUP HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Gaucho Group, Inc. Stock Options

As the result of the Company’s issuance of common stock and RSUs upon the exchange of GGI Stock Options on June 22, 2022 (see Common Stock, above), no options to purchase shares of GGI common stock under the 2018 Gaucho Plan (the “GGI Stock Options”) remain outstanding as of December 31, 2023 and 2022.

During the years ended December 31, 2023 and 2022, the Company recorded stock-based compensation expense of $0 and $10,354, respectively, related to GGI stock option grants.