Item
1.01 Entry into a Material Definitive Agreement
Common
Stock Purchase Agreement and Registration Rights Agreement
On
May 6, 2021, Gaucho Group Holdings, Inc. (the “Company,” “we,” “us” or “our”)
entered into a Common Stock Purchase Agreement (the “Purchase Agreement”) and a Registration Rights Agreement (the
“Registration Rights Agreement”) with Tumim Stone Capital LLC (“Tumim Stone Capital”). Pursuant to the
Purchase Agreement, the Company has the right to sell to Tumim Stone Capital up to the lesser of (i) $50,000,000 of newly issued
shares (the “Shares”) of the Company’s common stock, par value $0.01 per share (the “Common Stock”),
and (ii) the Exchange Cap (as defined below) (subject to certain conditions and limitations), from time to time during the term
of the Purchase Agreement. Sales of Common Stock pursuant to the Purchase Agreement, and the timing of any sales, are solely at
the option of the Company and the Company is under no obligation to sell securities pursuant to this arrangement. Shares of Common
Stock may be sold by the Company pursuant to this arrangement over a period of up to 36 months after Commencement (as defined
below).
Upon
the satisfaction of the conditions in the Purchase Agreement, including that a registration statement that we agreed to file with
the Securities and Exchange Commission (the “SEC”) pursuant to the Registration Rights Agreement is declared effective
by the SEC and a final prospectus in connection therewith is filed with the SEC (such event, the “Commencement”),
we will have the right, but not the obligation, from time to time at our sole discretion over the 36-month period from and after
the Commencement, to direct Tumim Stone Capital 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, so long as, (i) the daily volume weighted
average price for the Common Stock for such trading day is not the lowest daily volume weighted average price for the Common Stock
during the 10-consecutive trading day period ending on and including such trading day (the “Valuation Period”), (ii)
the closing sale price of the Common Stock on such trading day is greater than each of (A) the specified threshold price set forth
in the Purchase Agreement and (B) the arithmetic average of the 10-daily volume weighted average prices for the Common Stock during
the Valuation Period, (iii) at least three trading days shall have elapsed since the trading day on which the most recent prior
notice to purchase Common Stock under the Purchase Agreement was delivered by the Company to Tumim Stone Capital, and (iv) all
shares of Common Stock subject to all prior purchases by Tumim Stone Capital under the Purchase Agreement have theretofore been
received by Tumim Stone Capital electronically as set forth in the Purchase Agreement. The purchase price of the shares of Common
Stock that we elect to sell to Tumim Stone Capital pursuant to the Purchase Agreement will be determined by reference to the market
prices of the Common Stock during the Valuation Period at the time of such purchases as set forth in the Commitment Purchase Agreement,
less a fixed 7% discount.
In
addition to Fixed Purchases, as described above, we will have the right, but not the obligation, from time to time at our sole
discretion over the 36-month period from and after the Commencement, to direct Tumim Stone Capital to purchase additional amounts
of our Common Stock as VWAP purchases as set forth in the Purchase Agreement (each, a “VWAP Purchase”) on any trading
day, so long as, (i) the closing sale price of the Common Stock on such trading day is greater than the specified threshold price
set forth in the Purchase Agreement, (ii) at least three trading days shall have elapsed since the trading day on which the most
recent prior notice to purchase Common Stock under the Purchase Agreement was delivered by the Company to Tumim Stone Capital,
and (iii) all shares of Common Stock subject to all prior purchases by Tumim Stone Capital under the Purchase Agreement have theretofore
been received by Tumim Stone Capital electronically as set forth in the Purchase Agreement. The Company may not deliver a notice
for a Fixed Purchase and a notice for a VWAP Purchase to Tumim Stone Capital on the same trading day.
From
and after Commencement, the Company will control the timing and amount of any sales of Common Stock to Tumim Stone Capital. Actual
sales of shares of our Common Stock to Tumim Stone Capital under the Purchase Agreement will depend on a variety of factors to
be determined by the Company from time to time, including, among other things, market conditions, the trading price of the Common
Stock and determinations by the Company as to the appropriate sources of funding for the Company and its operations.
As
consideration for Tumim Stone Capital’s irrevocable commitment to purchase shares of Common Stock upon the terms of and
subject to satisfaction of the conditions set forth in the Purchase Agreement, concurrently with the execution and delivery of
the Purchase Agreement, the Company issued to Tumim Stone Capital 120,337 shares of Common Stock (the “Commitment Shares”).
The Company has also agreed to reimburse Tumim Stone Capital for the fees and expenses of its counsel, up to a maximum of $35,000.
Under
the applicable rules of The Nasdaq Stock Market LLC (“Nasdaq”), in no event may we issue to Tumim Stone Capital under
the Purchase Agreement more than 1,949,404 shares of our Common Stock (including the Commitment Shares), which represents 19.99%
of the shares of the Common Stock outstanding immediately prior to the execution of the Purchase Agreement (the “Exchange
Cap”), unless (i) we obtain stockholder approval to issue shares of Common Stock in excess of the Exchange Cap or (ii) the
average price of all applicable sales of Common Stock to Tumim Stone Capital under the Purchase Agreement equals or exceeds the
lower of (i) the Nasdaq official closing price immediately preceding the execution of the Purchase Agreement or (ii) the arithmetic
average of the five Nasdaq official closing prices for the Common Stock immediately preceding the execution of the Purchase Agreement,
plus an incremental amount of $0.322, such that the transactions contemplated by the Purchase Agreement are exempt from the Exchange
Cap limitation under applicable Nasdaq rules. In any event, the Purchase Agreement specifically provides that we may not issue
or sell any shares of our Common Stock under the Purchase Agreement if such issuance or sale would breach any applicable rules
or regulations of the Nasdaq.
In
all instances, we may not sell shares of our Common Stock to Tumim Stone Capital under the Purchase Agreement if it would result
in Tumim Stone Capital beneficially owning more than 4.99% of the Common Stock.
The
net proceeds from sales, if any, under the Purchase Agreement, will depend on the frequency and prices at which the Company sells
shares of Common Stock to Tumim Stone Capital. To the extent the Company sells shares under the Purchase Agreement, the Company
currently plans to use any proceeds therefrom for inventory production and marketing for Gaucho Group, Inc., costs of this transaction,
operating expenses and for working capital and other general corporate purposes.
There
are no restrictions on future financings, rights of first refusal, participation rights, penalties or liquidated damages in the
Purchase Agreement or Registration Rights Agreement other than a prohibition on entering (with certain limited exceptions) into
a “Variable Rate Transaction,” as defined in the Purchase Agreement. Tumim Stone Capital has agreed not to cause,
or engage in any manner whatsoever, any direct or indirect short selling or hedging of the Common Stock during certain periods.
Kingswood
Capital Markets, division of Benchmark Investments, Inc. acted as the exclusive placement agent in connection with the transactions
contemplated by the Purchase Agreement, for which the Company will pay to Kingswood a cash placement fee equal to 8.0% of the
amount of the Total Commitment actually paid by Tumim Stone Capital to the Company pursuant to the Purchase Agreement.
Pursuant
to the terms of the Registration Rights Agreement, we have agreed to file with the SEC one or more registration statements on
Form S-1 to register for resale under the Securities Act the shares of our Common Stock that may be issued to Tumim Stone Capital
under the Purchase Agreement, including the Commitment Shares. The Purchase Agreement and the Registration Rights Agreement contain
customary representations, warranties, conditions and indemnification obligations of the parties. The representations, warranties
and covenants contained in such agreements were made only for purposes of such agreements and as of specific dates, were solely
for the benefit of the parties to such agreements and may be subject to limitations agreed upon by the contracting parties.
The
Purchase Agreement will automatically terminate on the earliest to occur of (i) the first day of the month next following the
36-month anniversary after Commencement (which term may not be extended by the parties), (ii) the date on which Tumim Stone Capital
shall have purchased the Total Commitment worth of shares of Common Stock, (iii) the date on which the Common Stock shall have
failed to be listed or quoted on The Nasdaq Capital Market or any other “Eligible Market” (as defined in the Purchase
Agreement), and (iv) the date on which the Company commences a voluntary bankruptcy proceeding or any Person commences a proceeding
against the Company, a Custodian is appointed for the Company or for all or substantially all of its property, or the Company
makes a general assignment for the benefit of its creditors. The Company has the right to terminate the Purchase Agreement at
any time after Commencement, at no cost or penalty, upon 10 trading days’ prior written notice to Tumim Stone Capital. Neither
the Company nor Tumim Stone Capital may assign or transfer its rights and obligations under the Purchase Agreement or the Registration
Rights Agreement, and no provision of the Purchase Agreement or the Registration Rights Agreement may be modified or waived by
the parties.
The
foregoing description of the Purchase Agreement and the Registration Rights Agreement do not purport to be complete and is qualified
in its entirety by reference to complete text of the Purchase Agreement and the Registration Rights Agreement, copies of which
are filed as Exhibit 10.1 and Exhibit 10.2 to this Current Report on Form 8-K, respectively, and incorporated by reference into
this Item 1.01.