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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

 

FORM 10-Q

 

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended September 30, 2021

 

OR

 

☐ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from _____________ to ___________________.

 

Commission file number: 000-55209

 

Gaucho Group Holdings, Inc.

 

(Exact name of registrant as specified in its charter)

 

Delaware   52-2158952
(State or other jurisdiction of   (I.R.S. Employer
incorporation or organization)   Identification No.)

 

112 NE 41st Street, Suite 106

Miami, FL 33137

(Address of principal executive offices)

212-739-7700

 

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class   Trading Symbol   Name of each exchange on which registered
Common Stock   VINO   The Nasdaq Stock Market LLC

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this Chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

  Large accelerated filer ☐ Accelerated filer ☐
  Non-accelerated filer ☒ Smaller reporting company ☒
      Emerging growth company ☒

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

 

As of November 11, 2021, there were 9,770,414 shares of common stock outstanding.

 

 

 

 
 

 

GAUCHO GROUP HOLDINGS, INC. AND SUBSIDIARIES

TABLE OF CONTENTS

 

PART I    
  FINANCIAL INFORMATION  
  ITEM 1. Financial Statements  
    Condensed Consolidated Balance Sheets as of September 30, 2021 (unaudited) and December 31, 2020 1
    Unaudited Condensed Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2021 and 2020 3
    Unaudited Condensed Consolidated Statements of Comprehensive Income (Loss) for the Three and Nine Months Ended September 30, 2021 and 2020 4
    Unaudited Condensed Consolidated Statement of Changes in Temporary Equity and Stockholders’ Equity (Deficiency) for the Three and Nine Months Ended September 30, 2021 5
    Unaudited Condensed Consolidated Statement of Changes in Temporary Equity and Stockholders’ Deficiency for the Three and Nine Months Ended September 30, 2020 6
    Unaudited Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2021 and 2020 7
    Notes to Unaudited Condensed Consolidated Financial Statements 9
  ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 26
  ITEM 3. Quantitative and Qualitative Disclosures About Market Risk 35
  ITEM 4. Controls and Procedures 35
PART II    
  OTHER INFORMATION  
  ITEM 1. Legal Proceedings 36
  ITEM 1A. Risk Factors 36
  ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds 36
  ITEM 3. Defaults Upon Senior Securities 37
  ITEM 4. Mine Safety Disclosures 37
  ITEM 5. Other Information 37
  ITEM 6. Exhibits 38
  Signatures 39

 

 
 

 

PART I – FINANCIAL INFORMATION

 

Item 1. Financial Statements

 

GAUCHO GROUP HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

 

    September 30,     December 31,  
    2021     2020  
      (unaudited)          
Assets                
Current Assets                
Cash   $ 2,836,500     $ 134,536  
Accounts receivable, net of allowance of $215,026 and $180,941 as of September 30, 2021 and December 31, 2020, respectively     433,562       255,720  
Accounts receivable - related parties, net of allowance of $339,503 and $332,130 as of September 30, 2021 and December 31, 2020, respectively     741,495       252,852  
Advances to employees     282,204       282,508  
Inventory     1,327,572       1,172,775  
Real estate lots held for sale     59,790       139,492  
Operating lease right-of-use asset, current portion     311,925       -  
Investment     45,182       53,066  
Deposits, current     15,269       35,854  
Prepaid expenses and other current assets     602,415       196,539  
Total Current Assets     6,655,914       2,523,342  
Long Term Assets                
Accounts receivable, non-current portion, net    

1,919,914

      

-

  
Property and equipment, net     3,396,950       2,860,222  
Operating lease right-of-use asset, non-current portion     1,396,857       -  
Prepaid foreign taxes, net     664,128       519,499  
Investment - related parties     3,500,000       457  
Deferred offering costs     24,000       67,016  
Deposits, non-current     56,130       -  
Total Assets   $ 17,613,893     $ 5,970,536  

 

See notes to the condensed consolidated financial statements.

 

1
 

 

GAUCHO GROUP HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS (CONTINUED)

 

    September 30,     December 31,  
    2021     2020  
      (unaudited)          
Liabilities, Temporary Equity and Stockholders’ Equity (Deficiency)                
Current Liabilities                
Accounts payable   $ 457,129     $ 891,168  
Accrued expenses, current portion     451,278       1,401,402  
Deferred revenue     753,302       933,941  
Operating lease liabilities, current portion     263,292       -  
Loans payable, current portion     249,000       437,731  
Debt obligations     7,000       1,270,354  
Investor deposits     29,950       29,950  
Other current liabilities     130,628       131,895  
Total Current Liabilities     2,341,579       5,096,441  
Long Term Liabilities                
Accrued expenses, non-current portion     126,103       169,678  
Operating lease liabilities, non-current portion     1,470,046       -  
Loans payable, non-current portion     94,000       310,591  
Total Liabilities     4,031,728       5,576,710  
Commitments and Contingencies (Note 13)     -           
Series B convertible redeemable preferred stock, par value $0.01 per share;
902,670 shares authorized; 0 and 901,070 issued and outstanding at
September 30, 2021 and December 31, 2020, respectively		     -       9,010,824  
Stockholders’ Equity (Deficiency)                
Preferred stock, 11,000,000 shares authorized:                
Series A convertible preferred stock, par value $0.01 per share;
10,097,330 shares authorized; no shares are available for issuance		     -       -  
Common stock, par value $0.01 per share; 150,000,000 shares authorized;
8,784,618 and 5,234,406 shares issued and 8,781,249 and 5,231,037 shares
outstanding as of September 30, 2021 and December 31, 2020, respectively		     87,845       52,344  
Additional paid-in capital     120,184,675       96,951,440  
Accumulated other comprehensive loss     (11,598,452 )     (11,932,801 )
Accumulated deficit     (94,919,120 )     (93,534,828 )
Treasury stock, at cost, 3,369 shares at September 30, 2021 and December 31, 2020     (46,355 )     (46,355 )
Total Gaucho Group Holdings, Inc. Stockholders’ Equity (Deficiency)     13,708,593       (8,510,200 )
Non-controlling interest     (126,428 )     (106,798 )
Total Stockholders’ Equity (Deficiency)     13,582,165       (8,616,998 )
Total Liabilities, Temporary Equity and Stockholders’ Equity (Deficiency)   $ 17,613,893     $ 5,970,536  

 

See notes to the condensed consolidated financial statements.

 

2
 

 

GAUCHO GROUP HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)

 

                         
    For the Three Months Ended     For the Nine Months Ended  
    September 30,     September 30,  
    2021     2020     2021     2020  
                         
Sales   $ 2,605,158     $ 60,228     $ 3,220,557     $ 474,546  
Cost of sales     (210,437 )     (80,995 )     (650,003 )     (571,621 )
Gross profit (loss)     2,394,721       (20,767 )     2,570,554       (97,075 )
Operating Expenses                                
Selling and marketing     100,870       110,687       336,081       160,686  
General and administrative     1,370,870       859,967       3,934,500       3,342,240  
Depreciation and amortization     35,758       45,906       103,680       138,409  
Gain from insurance settlement     -       (30,240 )     -       (30,240 )
Total operating expenses     1,507,498       986,320       4,374,261       3,611,095  
Income (Loss) From Operations     887,223       (1,007,087 )     (1,803,707 )     (3,708,170 )
                                 
Other Expense (Income)                                
Interest expense, net     49,646       72,459       88,209       193,595  
Forgiveness of PPP Loan     -       -       (242,486 )     -  
Gain on debt restructuring     -       (130,421 )     -       (130,421 )
Other income     (87,500 )     -       (87,500 )     -  
Gains from foreign currency translation     (6,130 )     (14,826 )     (34,991 )     (35,316 )
Total other (income) expense     (43,984 )     (72,788 )     (276,768 )     27,858  
Net Income (Loss)     931,207       (934,299 )     (1,526,939 )     (3,736,028 )
Net loss attributable to non-controlling interest     45,086       32,838       142,647       128,355  
Series B preferred stock dividends     -       (178,094 )     -       (540,217 )
Net Income (Loss) Attributable to Common Stockholders   $ 976,293     $ (1,079,555 )   $ (1,384,292 )   $ (4,147,890 )
                                 
Earnings (Loss) Per Common Share - Basic and Diluted                                
Basic   $ 0.11     $ (0.26 )   $ (0.18 )   $ (1.02 )
Diluted   $ 0.11     $ (0.26 )   $ (0.18 )   $ (1.02 )
                                 
Shares used in computing earnings per share:                                
Basic     8,658,395       4,110,303       7,530,833       4,049,059  
Diluted     8,658,395       4,110,303       7,530,833       4,049,059  

 

See notes to the condensed consolidated financial statements.

 

3
 

 

GAUCHO GROUP HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(unaudited)

 

    2021     2020     2021     2020  
    For the Three Months Ended     For the Nine Months Ended  
    September 30,     September 30,  
    2021     2020     2021     2020  
                         
Net income (loss)   $ 931,207     $ (934,299 )   $ (1,526,939 )   $ (3,736,028 )
Other comprehensive income (loss):                                
Foreign currency translation adjustments     98,709       (17,837 )     334,349       400,686  
Comprehensive income (loss)     1,029,916       (952,136 )     (1,192,590 )     (3,335,342 )
Comprehensive loss attributable to non-controlling interests     45,086       32,838       142,647       128,355  
Comprehensive income (loss) attributable to controlling interests   $ 1,075,002     $ (919,298 )   $ (1,049,943 )   $ (3,206,987 )

 

See notes to the condensed consolidated financial statements.

 

4
 

 

GAUCHO GROUP HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN TEMPORARY EQUITY AND

STOCKHOLDERS’ (DEFICIENCY) EQUITY

 

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2021

(unaudited)

 

    Shares     Amount     Shares     Amount     Shares     Amount     Capital     Loss     Deficit     Deficiency     Interest     Equity  
    

Series B

Convertible

                                   Accumulated           Gaucho Group           Total  
    Redeemable                             Additional     Other           Holdings     Non-     Stockholders’  
    Preferred Stock     Common Stock     Treasury Stock     Paid-In     Comprehensive     Accumulated     Stockholders’     controlling     (Deficiency)  
    Shares     Amount     Shares     Amount     Shares     Amount     Capital     Loss     Deficit     Deficiency     Interest     Equity  
Balance - January 1, 2021     901,070     $   9,010,824       5,234,406     $   52,344       3,369     $   (46,355 )   $ 96,951,440     $ (11,932,801 )   $   (93,534,828 )   $      (8,510,200 )   $ (106,798 )   $      (8,616,998 )
Stock-based compensation:                                                                                                
Options and warrants     -       -       -       -       -       -       101,453       -       -       101,453       67,196       168,649  
Common stock and warrants issued for cash, in public offering, net of offering costs [1]     -       -       1,333,334       13,333       -       -       6,589,008       -       -       6,602,341       -       6,602,341  
Common stock and warrants issued for cash     -       -       73,167       732       -       -       438,268       -       -       439,000       -       439,000  
Common stock and warrants issued to underwriter in public offering     -       -       -       -       -       -       297,963       -       -       297,963       -       297,963  
Common stock and warrants issued upon exchange of debt and accrued interest     -       -       237,012       2,370       -       -       1,419,698       -       -       1,422,068       -       1,422,068  
Common stock issued upon conversion of Series B Convertible Preferred Stock     (901,070 )     (9,010,824 )     600,713       6,007       -       -       9,004,817       -       -       9,010,824       -       9,010,824  
Effect of reverse stocksplit     -       -       495       -       -       -       -       -       -       -       -       -  
Comprehensive loss:                                                                                                
Net loss     -       -       -       -       -       -       -       -       (1,112,851 )     (1,112,851 )     (27,509 )     (1,140,360 )
Other comprehensive
income		     -       -       -       -       -       -       -       98,980       -       98,980       -       98,980  
Balance - March 31, 2021     -       -       7,479,127       74,786       3,369       (46,355 )     114,802,647       (11,833,821 )     (94,647,679 )     8,349,578       (67,111 )     8,282,467  
Stock-based compensation:                                                                                                
Options and warrants     -       -       -       -       -       -       101,453       -       -       101,453       44,610       146,063  
Common stock issued to placement agent as
commitment fees		     -       -       120,337       1,208       -       -       498,792       -       -       500,000       -       500,000  
Common stock issued for cash, net of offering costs [2]     -       -       489,400       4,894       -       -       1,582,066       -       -       1,586,960       -       1,586,960  
Comprehensive loss:                                                                                                
Net loss     -       -       -       -       -       -       -       -       (1,247,734 )     (1,247,734 )     (70,052 )     (1,317,786 )
Other comprehensive
income		     -       -       -       -       -       -       -       136,660       -       136,660       -       136,660  
Balance - June 30, 2021     -       -       8,088,864       80,888       3,369       (46,355 )     116,984,958       (11,697,161 )     (95,895,413 )     9,426,917       (92,553 )     9,334,364  
Stock-based compensation:                                                                                                
Common stock issued in satisfaction of 401(k) profit
sharing liability		     -       -       8,254       82       -       -       39,455       -       -       39,537       -       39,537  
Options and warrants     -       -       -       -       -       -       101,453       -       -       101,453       11,211       112,664  
Common stock issued upon exercise of warrants     -       -       274,500       2,745       -       -       1,644,255       -       -       1,647,000       -       1,647,000  
Common stock issued for cash, net of offering costs [3]     -       -       383,000       3,830       -       -       1,308,954       -       -       1,312,784       -       1,312,784  
Common stock issued for service     -       -       30,000       300       -       -       105,600       -       -       105,900       -       105,900  
Comprehensive loss:                                                                                                
Net income (loss)     -       -       -       -       -       -       -       -       976,293       976,293       (45,086 )     931,207  
Other comprehensive
income		     -       -       -       -       -       -       -       98,709       -       98,709       -       98,709  
Balance - September 30, 2021     -     $ -       8,784,618     $ 87,845       3,369     $ (46,355 )   $ 120,184,675     $ (11,598,452 )   $ (94,919,120 )   $ 13,708,593     $ (126,428 )   $ 13,582,165  

 

[1] Includes gross proceeds of $8,002,004, less offering costs of $1,399,663 ($1,034,684 of cash and $364,979 of non-cash).
[2] Includes gross proceeds of $2,303,211, less offering costs of $716,251 ($216,251 of cash and $500,000 of non-cash).
[3] Includes gross proceeds of $1,443,243, less cash offering costs of $130,459.

 

See notes to the condensed consolidated financial statements.

 

5
 

 

GAUCHO GROUP HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN TEMPORARY EQUITY AND

STOCKHOLDERS’ DEFICIENCY

 

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2020

(unaudited)

 

   

Series B

Convertible

                                   Accumulated           Gaucho Group              
    Redeemable                             Additional     Other           Holdings     Non     Total  
    Preferred Stock     Common Stock     Treasury Stock     Paid-In     Comprehensive     Accumulated     Stockholders’     controlling     Stockholders’  
    Shares     Amount     Shares     Amount     Shares     Amount     Capital     Loss     Deficit     Deficiency     Interest     Deficiency  
Balance - January 1, 2020     902,670     $ 9,026,824       4,021,470     $ 40,215       3,369     $ (46,355 )   $ 91,238,518     $ (12,399,833 )   $ (87,886,307 )   $     (9,053,762 )   $ 26,364     $     (9,027,398 )
Options and warrants     -       -       -       -       -       -       103,581       -       -       103,581       -       103,581  
Comprehensive loss:                                                                                                
Net loss     -       -       -       -       -       -       -       -       (1,252,847 )     (1,252,847 )     (42,645 )     (1,295,492 )
Other comprehensive income     -       -       -       -       -       -       -       128,051       -       128,051       -       128,051  
Balance - March 31, 2020     902,670       9,026,824       4,021,470       40,215       3,369       (46,355 )     91,342,099       (12,271,782 )     (89,139,154 )     (10,074,977 )     (16,281 )     (10,091,258 )
Options and warrants     -       -       -       -       -       -       102,675       -       -       102,675       -       102,675  
Repurchase of preferred stock     (1,600 )     (16,000 )     -       -       -       -       -       -       -       -       -       -  
Comprehensive loss:                                                                                                
Net loss     -       -       -       -       -       -       -       -       (1,453,365 )     (1,453,365 )     (52,872 )     (1,506,237 )
Other comprehensive income     -       -       -       -       -       -       -       290,472       -       290,472       -       290,472  
Balance - June 30, 2020     901,070       9,010,824       4,021,470       40,215       3,369       (46,355 )     91,444,774       (11,981,310 )     (90,592,519 )     (11,135,195 )     (69,153 )     (11,204,348 )
Options and warrants     -       -       -       -       -       -       56,414       -       -       56,414       -       56,414  
Common stock issued upon conversion of convertible
debt and interest		     -       -       247,120       2,471       -       -       1,257,843       -       -       1,260,314       -       1,260,314  
Common stock issued for cash     -       -       235,531       2,355       -       -       1,198,845       -       -       1,201,200       -       1,201,200  
Common stock issued for subscription receivable     -       -       27,569       276       -       -       140,324       -       -       140,600       -       140,600  
Comprehensive loss:                                                                                                
Net loss     -       -       -       -       -       -       -       -       (901,461 )     (901,461 )     (32,838 )     (934,299 )
Other comprehensive income     -       -       -       -       -       -       -       (17,837 )     -       (17,837 )     -       (17,837 )
Balance - September 30, 2020     901,070     $   9,010,824       4,531,690     $ 45,317       3,369     $   (46,355 )   $   94,098,200     $ (11,999,147 )   $   (91,493,980 )   $ (9,395,965 )   $ (101,991 )   $ (9,497,956 )

 

See notes to the condensed consolidated financial statements.

 

6
 

 

GAUCHO GROUP HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

 

    2021     2020  
    For the Nine Months Ended  
    September 30,  
    2021     2020  
Cash Flows from Operating Activities                
Net loss   $ (1,526,939 )   $ (3,736,028 )
Adjustments to reconcile net loss to net cash used in operating activities:                
Stock-based compensation:                
401(k) stock     23,845       24,945  
Options     427,376       262,670  
Common stock     105,900       -  
Gain on foreign currency translation     (34,991 )     (35,316 )
Unrealized investment losses     457       1,739  
Depreciation and amortization     103,680       138,409  
Amortization of right-of-use asset     134,261       92,862  
Amortization of debt discount     -       9,335  
Provision for (recovery of) uncollectible assets     19,865       -  
Recovery of uncollectible assets     -       (13,079 )
Loss on derecognition of right-of-use asset and lease liabilities     -       39,367  
Forgiveness of PPP Loan     (242,486 )     -  
Gain on debt restructuring     -       (130,421 )
Decrease (increase) in assets:                
Accounts receivable     (2,713,685 )     (487,000 )
Inventory     (75,095 )     51,462  
Deposits     (35,545 )     18,451  
Prepaid expenses and other current assets     (498,785 )     (45,831 )
Increase (decrease) in liabilities:                
Accounts payable and accrued expenses     (1,057,858 )     232,632  
Operating lease liabilities     (109,705 )     (98,641 )
Deferred revenue     (180,639 )     (11,001 )
Other liabilities     (1,267 )     2,782  
Total Adjustments     (4,134,672 )     53,365  
Net Cash Used in Operating Activities     (5,661,611 )     (3,682,663 )
Cash Flows from Investing Activities                
Purchase of property and equipment     (640,440 )     (39,859 )
Purchase of investment - related parties     (3,500,000 )     -  
Net Cash Used in Investing Activities     (4,140,440 )     (39,859 )
Cash Flows from Financing Activities                
Proceeds from loans payable     -       27,641  
Proceeds from loans payable - related parties     -       574,000  
Repayments of loans payable     (159,441 )     (266,580 )
Repayments of loans payable - related parties     -       (579,011 )
Proceeds from convertible debt obligations     -       3,214,389  
Repayments of debt obligations     (100,000 )     -  
Proceeds from underwritten public offering, net of offering costs [1]     7,287,004       -  
Payment of offering costs     (690,400 )     -  
Proceeds from common stock issued for cash     3,746,454       -  
Proceeds from sale of common stock and warrants     439,000       -  
Proceeds from common stock offering     -       1,201,200  
Proceeds from PPP Loan     -       242,487  
Proceeds from SBA Economic Injury Disaster Loan     -       94,000  
Repurchase of preferred stock     -       (16,000 )
Proceeds from exercise of warrants     1,647,000       -  
Net Cash Provided by Financing Activities     12,169,617       4,492,126  
Effect of Exchange Rate Changes on Cash     334,398       400,686  
Net Increase in Cash     2,701,964       1,170,290  
Cash - Beginning of Period     134,536       40,378  
Cash - End of Period   $ 2,836,500     $ 1,210,668  

 

[1] Includes gross proceeds of $8,002,004, less offering costs of $715,000.

 

See notes to the condensed consolidated financial statements.

 

7
 

 

GAUCHO GROUP HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

(unaudited)

 

    For the Nine Months Ended  
    September 30,  
    2021     2020  
Supplemental Disclosures of Cash Flow Information:            
Interest paid   $ 411,981     $ 199,632  
Income taxes paid   $ -     $ -  
                 
Non-Cash Investing and Financing Activity                
Accrued stock-based compensation converted to equity   $ 39,537     $ -  
Common stock and warrants issued upon exchange of debt and accrued interest   $ 1,422,068     $ -  
Series B Preferred stock converted to common stock   $ 9,010,824     $ -  
Reclassification of deferred offering cost to additional paid in capital   $ 67,016     $ -  
Debt and interest payable converted to equity   $ -     $ 1,260,314  
Common stock and warrants issued to underwriter in public offering   $ 297,963     $ -  
Common stock issued for subscription receivable   $ -     $ 140,600  
Common stock issued to placement agent as commitment fees   $ 500,000     $ -  
Right-of-use assets obtained in exchange for lease obligations   $ 1,843,043     $ -  

 

See notes to the condensed consolidated financial statements.

 

8
 

 

GAUCHO GROUP HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

 

1. BUSINESS ORGANIZATION, NATURE OF OPERATIONS, RISKS AND UNCERTAINTIES AND REVERSE STOCK SPLIT

 

Organization and Operations

 

Through its subsidiaries, Gaucho Group Holdings, Inc. (“Company”, “GGH”), a Delaware corporation that was incorporated on April 5, 1999, currently invests in, develops, and operates a collection of luxury assets, including real estate development, fine wines, and a boutique hotel in Argentina, as well as an e-commerce platform for the sale of high-end fashion and accessories.

 

As wholly owned subsidiaries of GGH, InvestProperty Group, LLC (“IPG”) and Algodon Global Properties, LLC (“AGP”) operate as holding companies that invest in, develop and operate global real estate and other lifestyle businesses such as wine production and distribution, golf, tennis, and restaurants. GGH operates its properties through its ALGODON® brand. IPG and AGP have invested in two ALGODON® brand projects located in Argentina. The first project is Algodon Mansion, a Buenos Aires-based luxury boutique hotel property that opened in 2010 and is owned by the Company’s subsidiary, The Algodon – Recoleta, SRL (“TAR”). The second project is the redevelopment, expansion and repositioning of a Mendoza-based winery and golf resort property now called Algodon Wine Estates (“AWE”), the integration of adjoining wine producing properties, and the subdivision of a portion of this property for residential development. GGH also holds a 79% ownership interest in its subsidiary Gaucho Group, Inc. (“GGI”) which began operations in 2019 for the distribution and sale of high-end luxury fashion and accessories through an e-commerce platform. On June 14, 2021, the Company formed a wholly-owned subsidiary, Gaucho Ventures I – Las Vegas, LLC (“GVI”), to develop a project in Las Vegas, Nevada, that may include opportunities in lodging, hospitality, retail, and gaming. On June 10, 2021, the Company announced the signing of a Letter of Intent to create a new strategic partnership with retail, hospitality, lifestyle, entertainment, leisure and gaming visionaries, Mark Advent, A. William (“Bill”) Allen, Timberline Real Estate Partners and Open Realty Properties for the purpose of creating a Gaucho Group Holdings development and Gaucho Group Holdings brand extensions in Las Vegas, Nevada. On June 17, 2021, Gaucho Group Holdings, Inc announced the signing of an agreement with LVH Holdings LLC to develop a project in Las Vegas, Nevada, expanding the Gaucho brand in ways that could include opportunities in lodging, hospitality, retail, and gaming. As of September 30, 2021, the Company had made a total of $3.5 million in capital contributions and received 198 limited liability company interests which represents 6.25% equity interest. The Company is currently renegotiating the agreement with LVH on the future capital contribution plans described in Note 8 – Related Party Transactions. Subsequently, On November 10, 2021, the Company made an additional capital contribution to LVH in the amount of $3.5 million and received an additional 198 Units.

 

Risks and Uncertainties

 

In December 2019, the 2019 novel coronavirus (“COVID-19”) surfaced in Wuhan, China. The World Health Organization declared the outbreak as a global pandemic in March 2020. Recently, we temporarily closed our corporate office, as well as our hotel, restaurant, winery operations, and golf and tennis operations. Further, some outsourced factories from which Gaucho ordered products had closed, borders for importing product had been impacted and the Gaucho fulfillment center had also closed for several weeks. In response, we have reduced costs by negotiating out of our New York lease, renegotiating with our vendors, and implementing salary reductions. We have also created an e-commerce platform for our wine sales in response to the pandemic. On October 19, 2020, we re-opened our winery and golf and tennis facilities with COVID-19 measures implemented. Most recently, we reopened the Algodon Mansion as of November 11, 2020 with COVID-19 measures implemented. Additionally, the construction on homes were temporarily halted from March to September but has since resumed. The Company is continuing to monitor the outbreak of COVID-19 and the related business and travel restrictions, and changes to behavior intended to reduce its spread, and the related impact on the Company’s operations, financial position and cash flows, as well as the impact on its employees. Due to the rapid development and fluidity of this situation, the magnitude and duration of the pandemic and its impact on the Company’s future operations and liquidity is uncertain as of the date of this report. While there could ultimately be a material impact on operations and liquidity of the Company, at the time of issuance, the impact could not be determined. On November 1, 2021, the Argentinian Government opened the border for fully vaccinated international travelers. After more than one year and a half, people have been able to travel back to Argentina. Algodon’s San Rafael hotel is currently under renovation, and is working at 50% capacity. We anticipate the hotel will fully reopen in December 2021. The San Rafael restaurant (Chez Gaston) is also currently closed for renovation. We anticipate the restaurant to fully reopen in January 2022. Algodon’s Buenos Aires hotel is currently open and operational.

 

9
 

 

GAUCHO GROUP HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

 

Reverse Stock Split

 

A 15:1 reverse stock split of the Company’s common stock was effected on February 16, 2021 (the “Reverse Stock Split”). All share and per share information has been retroactively adjusted to give effect to the Reverse Stock Split for all periods presented, unless otherwise indicated.

 

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

There have been no material changes to the significant accounting policies included in the audited consolidated financial statements as of December 31, 2020 and for the years then ended, which were included the Annual Report filed on Form 10-K on April 12, 2021, except as disclosed in this note.

 

Basis of Presentation

 

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information. Accordingly, they do not include all of the information and disclosures required by accounting principles generally accepted in the United States of America for annual financial statements. In the opinion of management, such statements include all adjustments (consisting only of normal recurring items) which are considered necessary for a fair presentation of the unaudited condensed consolidated financial statements of the Company as of September 30, 2021 and for the three and nine months ended September 30, 2021 and 2020. The results of operations for the three and nine months ended September 30, 2021 are not necessarily indicative of the operating results for the full year. It is suggested that these unaudited condensed consolidated financial statements be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s annual report on Form 10-K for the year ended December 31, 2020, filed with the Securities and Exchange Commission (“SEC”) on April 12, 2021.

 

Liquidity

 

As of September 30, 2021, the Company had cash and working capital of $2,836,500 and $4,314,355, respectively. During the nine months ended September 30, 2021, the Company incurred a net loss of $1,526,939 and used cash in operating activities of $5,661,611. Subsequent to September 30, 2021, the Company raised gross proceeds of $1,096,561 from the sale of its common stock and net proceeds of $5,573,187 from the sale of convertible notes to its investors. See Note 14 – Subsequent Events for details.

 

The Company expects that its cash on hand plus additional cash from the sales of common stock under the Purchase Agreement (see Note 10 – Temporary Equity and Stockholders’ Equity) will fund its operations for a least 12 months after the issuance date of these financial statements.

 

Since inception, the Company’s operations have primarily been funded through proceeds received in equity and debt financings. The Company believes it has access to capital resources and continues to evaluate additional financing opportunities. There is no assurance that the Company will be able to obtain funds on commercially acceptable terms, if at all. There is also no assurance that the amount of funds the Company might raise will enable the Company to complete its development initiatives or attain profitable operations.

 

The Company’s operating needs include the planned costs to operate its business, including amounts required to fund working capital and capital expenditures. The Company’s future capital requirements and the adequacy of its available funds will depend on many factors, including the Company’s ability to successfully commercialize its products and services, competing technological and market developments, and the need to enter into collaborations with other companies or acquire other companies or technologies to enhance or complement its product and service offerings.

 

10
 

 

GAUCHO GROUP HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

 

Highly Inflationary Status in Argentina

 

The Company recorded gains on foreign currency transactions during the three and nine months ended September 30, 2021, of $6,130 and $34,991, respectively, and during the three and nine months ended September 30, 2020, of $14,826 and $35,316, respectively, as a result of the net monetary liability position of its Argentine subsidiaries.

 

Concentrations

 

The Company maintains cash with major financial institutions. Cash held in US bank institutions is currently insured by the Federal Deposit Insurance Corporation (“FDIC”) up to $250,000 at each institution. No similar insurance or guarantee exists for cash held in Argentina bank accounts. There were aggregate uninsured cash balances of $2,547,482 and $54,681 at September 30, 2021 and December 31, 2020, respectively, of which, $357,553 and $54,681, respectively, represents cash held in Argentine bank accounts.

 

Revenue Recognition

 

The Company recognizes revenue in accordance with ASC Topic 606, Revenue from Contracts with Customers. ASC Topic 606 provides a single comprehensive model to use in accounting for revenue arising from contracts with customers, and gains and losses arising from transfers of non-financial assets including sales of property and equipment, real estate, and intangible assets.

 

The Company earns revenues from the sale of real estate lots and sales of food and wine as well as hospitality, food & beverage, other related services, and from the sale of clothing and accessories. The Company recognizes revenue when goods or services are transferred to customers in an amount that reflects the consideration which it expects to receive in exchange for those goods or services. In determining when and how revenue is recognized from contracts with customers, the Company performs the following five-step analysis: (i) identification of contract with customer; (ii) determination of performance obligations; (iii) measurement of the transaction price; (iv) allocation of the transaction price to the performance obligations; and (v) recognition of revenue when (or as) the Company satisfies each performance obligation.

 

The following table summarizes the revenue recognized in the Company’s condensed consolidated statements of operations:

 

    For The Three Months Ended     For The Nine Months Ended  
    September 30,     September 30,  
    2021     2020     2021     2020  
                         
Real estate sales   $ 2,500,001     $ -     $ 2,647,257     $ -  
Hotel rooms and events     46,803       2,946       168,482