UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM
For
the quarterly period ended
OR
For the transition period from _____________ to ___________________.
Commission
file number:
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of | (I.R.S. Employer | |
| incorporation or organization) | Identification No.) |
(Address of principal executive offices)
(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 | ||
| The
|
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.
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).
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 | ☐ | |
| ☒ | 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 ☐
As of May 18, 2023, there were shares of common stock outstanding.
GAUCHO GROUP HOLDINGS, INC. AND SUBSIDIARIES
TABLE OF CONTENTS
| i |
PART I – FINANCIAL INFORMATION
Item 1. Financial Statements
GAUCHO GROUP HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
| March 31, | December 31, | |||||||
| 2023 | 2022 | |||||||
| (unaudited) | ||||||||
| Assets | ||||||||
| Current Assets | ||||||||
| Cash | $ | $ | ||||||
| Accounts
receivable, net of allowance of $ and $ at March 31, 2023 and December 31, 2022, respectively | ||||||||
| Accounts
receivable - related parties, net of allowance of $ and $ at March 31, 2023 and December 31, 2022, respectively | ||||||||
| Mortgages
receivable, net of allowance $ at March 31, 2023 and December 31, 2022, respectively | ||||||||
| Inventory | ||||||||
| Real estate lots held for sale | ||||||||
| Prepaid expenses and other current assets | ||||||||
| Total Current Assets | ||||||||
| Long Term Assets | ||||||||
| Mortgages
receivable, non-current portion, net of allowance of $ | ||||||||
| Advances to employees | ||||||||
| Property and equipment, net | ||||||||
| Operating lease right-of-use asset | ||||||||
| Prepaid foreign taxes, net | ||||||||
| Intangible assets, net | ||||||||
| Deposits, non-current | ||||||||
| Total Assets | $ | $ | ||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
| 1 |
GAUCHO GROUP HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS, CONTINUED
| March 31, | December 31, | |||||||
| 2023 | 2022 | |||||||
| (unaudited) | ||||||||
| Liabilities, Temporary Equity and Stockholders’ Equity | ||||||||
| Current Liabilities | ||||||||
| Accounts payable | $ | $ | ||||||
| Accrued expenses, current portion | ||||||||
| Deferred revenue | ||||||||
| Operating lease liabilities, current portion | ||||||||
| Loans payable, current portion | ||||||||
| Convertible debt obligations, net, current portion | ||||||||
| Other current liabilities | ||||||||
| Total Current Liabilities | ||||||||
| Long Term Liabilities | ||||||||
| Accrued expenses, non-current portion | ||||||||
| Operating lease liabilities, non-current portion | ||||||||
| Loans payable, non-current portion | ||||||||
| Convertible debt obligations, net, non-current portion | ||||||||
| Total Liabilities | ||||||||
| Commitments and Contingencies (Note 14) | ||||||||
| Series
B convertible redeemable preferred stock, par value $ per share; shares designated; issued and outstanding
at March 31, 2023 and December 31, 2022; shares are available for issuance | ||||||||
| Stockholders’ Equity | ||||||||
| Preferred stock, shares authorized | ||||||||
| Common stock, par value $ per share; shares authorized; and shares issued and and shares outstanding as of March 31, 2023 and December 31, 2022, respectively | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated other comprehensive loss | ( | ) | ( | ) | ||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Treasury stock, at cost, shares at March 31, 2023 and December 31, 2022 | ( | ) | ( | ) | ||||
| Total Stockholders’ Equity | ||||||||
| Total Liabilities, Temporary Equity and Stockholders’ Equity | $ | $ | ||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
| 2 |
GAUCHO GROUP HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
| For the Three Months Ended | ||||||||
| March 31, | ||||||||
| 2023 | 2022 | |||||||
| Sales | $ | $ | ||||||
| Cost of sales | ( | ) | ( | ) | ||||
| Gross profit | ||||||||
| Operating Expenses | ||||||||
| Selling and marketing | ||||||||
| General and administrative | ||||||||
| Depreciation and amortization | ||||||||
| Total operating expenses | ||||||||
| Loss From Operations | ( | ) | ( | ) | ||||
| Other Expense (Income) | ||||||||
| Interest income | ( | ) | ( | ) | ||||
| Interest expense | ||||||||
| Other income, related party | ( | ) | ( | ) | ||||
| Loss on extinguishment of debt | ||||||||
| Gains from foreign currency translation | ( | ) | ( | ) | ||||
| Total other (income) expense | ||||||||
| Net Loss | ( | ) | ( | ) | ||||
Net loss attributable to non-controlling interest |
| |||||||
| Net Loss Attributable to Common Stockholders | $ | ( | ) | $ | ( | ) | ||
| Net Loss Per Common Share | ||||||||
| Basic and Diluted | $ | ( | ) | $ | ( | ) | ||
| Weighted Average Number of Common Shares Oustanding | ||||||||
| Basic and Diluted | ||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
| 3 |
GAUCHO GROUP HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(unaudited)
| For the Three Months Ended | ||||||||
| March 31, | ||||||||
| 2023 | 2022 | |||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Other comprehensive (loss) income: | ||||||||
| Foreign currency translation adjustments | ( | ) | ||||||
| Comprehensive loss | ( | ) | ( | ) | ||||
| Comprehensive loss attributable to non-controlling interests | ||||||||
| Comprehensive loss attributable to controlling interests | $ | ( | ) | $ | ( | ) | ||
The accompanying notes are an integral part of these condensed consolidated financial statements.
| 4 |
GAUCHO GROUP HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY
FOR THE THREE MONTHS ENDED MARCH 31, 2023
(unaudited)
| Accumulated | ||||||||||||||||||||||||||||||||
| Additional | Other | Total | ||||||||||||||||||||||||||||||
| Common Stock | Treasury Stock | Paid-In | Comprehensive | Accumulated | Stockholders’ | |||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Loss | Deficit | Equity | |||||||||||||||||||||||||
| Balance - January 1, 2023 | $ | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | $ | ||||||||||||||||||||
| Cumulative
effect of change upon adoption of ASU 2016-13 | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Stock-based compensation: | - | |||||||||||||||||||||||||||||||
| Options | - | - | ||||||||||||||||||||||||||||||
| Restricted stock units | - | |||||||||||||||||||||||||||||||
| Common
stock issued for 401(k) employer matching | - | |||||||||||||||||||||||||||||||
| Shares
issued under the New ELOC, net of offering costs [1] | - | |||||||||||||||||||||||||||||||
Relative fair value of warrants issued with 2023 Notes, net of issuance costs [2] | - | - | ||||||||||||||||||||||||||||||
Warrants issued for modification of GGH Notes | - | - | ||||||||||||||||||||||||||||||
| Reduction
of warrant exercise price on new debt issuance | - | - | ||||||||||||||||||||||||||||||
| Shares
issued upon conversion of debt and interest | - | |||||||||||||||||||||||||||||||
| Common
stock issued for cash in private placement | - | |||||||||||||||||||||||||||||||
| Cashless warrant exercise | - | ( | ) | |||||||||||||||||||||||||||||
| True-up adjustment | - | |||||||||||||||||||||||||||||||
| Net loss | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Other comprehensive income | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Balance, March 31, 2023 | $ | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | $ | ||||||||||||||||||||
| [1] | ||
[2] |
The accompanying notes are an integral part of these condensed consolidated financial statements.
| 5 |
GAUCHO GROUP HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY
FOR THE THREE MONTHS ENDED MARCH 31, 2022
(unaudited)
| Accumulated | Gaucho Group | |||||||||||||||||||||||||||||||||||||||
| Additional | Other | Holdings | Non- | Total | ||||||||||||||||||||||||||||||||||||
| Common Stock | Treasury Stock | Paid-In | Comprehensive | Accumulated | Stockholders’ | Controlling | Stockholders’ | |||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Loss | Deficit | Equity | Interest | Equity | |||||||||||||||||||||||||||||||
| Balance - January 1, 2022 | $ | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | $ | ||||||||||||||||||||||||
| Stock-based compensation: | ||||||||||||||||||||||||||||||||||||||||
| Options | - | - | ||||||||||||||||||||||||||||||||||||||
| Common stock issued for 401(k) employer matching | - | |||||||||||||||||||||||||||||||||||||||
| Common stock issued for purchase of minority interest | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||||
| Common stock issued for acquisition of GDS | - | |||||||||||||||||||||||||||||||||||||||
| Common stock issued for purchase of domain name | - | |||||||||||||||||||||||||||||||||||||||
| Warrants issued for modification of convertible debt principal | - | - | ||||||||||||||||||||||||||||||||||||||
| Net loss | - | - | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||
| Other comprehensive income | - | - | ||||||||||||||||||||||||||||||||||||||
| Balance, March 31, 2022 | $ | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | $ | $ | $ | ||||||||||||||||||||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
| 6 |
GAUCHO GROUP HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
| For the Three Months Ended | ||||||||
| March 31, | ||||||||
| 2023 | 2022 | |||||||
| Cash Flows from Operating Activities | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Stock-based compensation: | ||||||||
| 401(k) stock | ||||||||
| Stock options | ||||||||
| Restricted stock units | ||||||||
| Noncash lease expense | ||||||||
| Gain on foreign currency translation | ( | ) | ( | ) | ||||
| Depreciation and amortization | ||||||||
| Amortization of debt discount | ||||||||
| Provision for credit losses | ||||||||
| Loss on extinguishment of debt | ||||||||
| Decrease (increase) in assets: | ||||||||
| Accounts receivable and mortgages receivable | ( | ) | ( | ) | ||||
| Employee advances | ( | ) | ||||||
| Inventory | ( | ) | ( | ) | ||||
| Deposits | ||||||||
| Prepaid expenses and other current assets | ( | ) | ( | ) | ||||
| Increase (decrease) in liabilities: | ||||||||
| Accounts payable and accrued expenses | ( | ) | ||||||
| Operating lease liabilities | ( | ) | ( | ) | ||||
| Deferred revenue | ||||||||
| Other liabilities | ( | ) | ( | ) | ||||
| Total Adjustments | ( | ) | ||||||
| Net Cash Used in Operating Activities | ( | ) | ( | ) | ||||
| Cash Used in Investing Activities | ||||||||
| Cash paid to acquire GDS, net of cash acquired | ( | ) | ||||||
| Purchase of property and equipment | ( | ) | ( | ) | ||||
| Purchase of intangible asset | ( | ) | ||||||
| Net Cash Used in Investing Activities | ( | ) | ( | ) | ||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
| 7 |
GAUCHO GROUP HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS, CONTINUED
(unaudited)
| For the Three Months Ended | ||||||||
| March 31, | ||||||||
| 2023 | 2022 | |||||||
| Cash Provided by Financing Activities | ||||||||
| Proceeds from loans payable | ||||||||
| Repayments of loans payable | ( | ) | ( | ) | ||||
| Proceeds from common stock issued for cash | ||||||||
| Proceeds from the issuance of convertible debt | ||||||||
| Financing costs in connection with the issuance of convertible debt | ( | ) | ||||||
| Repayments of convertible debt obligations | ( | ) | ||||||
| Proceeds from issuance of shares under the New ELOC, net of offering costs [1] | ||||||||
| Net Cash Provided by Financing Activities | ( | ) | ||||||
| Effect of Exchange Rate Changes on Cash | ( | ) | ||||||
| Net (Decrease) Increase in Cash | ( | ) | ||||||
| Cash - Beginning of Period | ||||||||
| Cash - End of Period | $ | $ | ||||||
| Supplemental Disclosures of Cash Flow Information: | ||||||||
| Interest paid | $ | $ | ||||||
| Non-Cash Investing and Financing Activity | ||||||||
| Equity issued to satisfy accrued stock based compensation obligation | $ | $ | ||||||
| Equity issued as consideration for intangible assets | $ | $ | ||||||
| Equity issued for purchase of non controlling interest | $ | $ | ||||||
| Equity issued for acquisition of GDS | $ | $ | ||||||
| Warrants issued and debt principal exchanged upon modification of convertible debt | $ | $ | ||||||
| Shares issued upon conversion of debt and interest | $ | $ | ||||||
| Cashless warrant exercise | $ | $ | ||||||
| Relative fair value of warrants issued with 2023 Notes, net of allocable issuance costs [2] | $ | $ | ||||||
| Change in value of modified warrants | $ | $ | ||||||
| [1] | ||
| [2] |
The accompanying notes are an integral part of these condensed consolidated financial statements.
| 8 |
GAUCHO GROUP HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
1. BUSINESS ORGANIZATION AND NATURE OF OPERATIONS
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”), Algodon Global Properties, LLC (“AGP”) and Gaucho Ventures I – Las Vegas, LLC (“GVI”) 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. (“GDS”). GVI is a party to an agreement with LVH Holdings (“LVH”) to develop a project in Las Vegas, Nevada.
On
February 3, 2022, the Company acquired additional real estate through the acquisition of
GGH
also manufactures, distributes, and sells high-end luxury fashion and accessories through its subsidiary, Gaucho Group, Inc. (“GGI”).
GGH held a
Non-Controlling interest
As
a result of a 2019 conversion of certain convertible debt into shares of Gaucho Group, Inc. (“GGI”) common stock, GGI investors
obtained a
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
There have been no material changes to the Company’s significant accounting policies as set forth in the Company’s audited consolidated financial statements included in the annual report on Form 10-K for the year ended December 31, 2022, except as disclosed below.
| 9 |
GAUCHO GROUP HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
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 March 31, 2023 and for the three months ended March 31, 2023 and 2022. The results of operations for the three months ended March 31, 2023 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, 2022, filed with the Securities and Exchange Commission (“SEC”) on April 17, 2023.
On November 4, 2022, the Company effected a reverse stock split in a ratio of 1 share of common stock for 12 issued shares of common stock. As a result of the reverse stock split, prior period shares and per share amounts appearing in the accompanying condensed consolidated financial statements and all references in this Quarterly Report to our common stock, as well as amounts per share of our common stock, have been retroactively restated as if the reverse stock split occurred at the beginning of the period presented.
Going Concern and Management’s Liquidity Plans
The accompanying condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The condensed financial statements do not include any adjustments relating to the recoverability and classification of asset amounts or the classification of liabilities that might be necessary should the company be unable to continue as a going concern.
As
of March 31, 2023, the Company had cash and working capital of $
The Company’s operating needs include the planned costs to operate its business, including amounts required to fund working capital and capital expenditures. Based upon projected revenues and expenses, the Company believes that it may not have sufficient funds to operate for the next twelve months from the date these financial statements are made available. Since inception, the Company’s operations have primarily been funded through proceeds received from 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 aforementioned factors raise substantial doubt about the Company’s ability to continue as a going concern.
| 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 of $
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 $
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, 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 | ||||||||
| March 31, | ||||||||
| 2023 | 2022 | |||||||
| Real estate sales | $ | $ | ||||||
| Hotel rooms and events | ||||||||
| Restaurants | ||||||||
| Winemaking | ||||||||
| Agricultural | ||||||||
| Golf, tennis and other | ||||||||
| Clothes and accessories | ||||||||
| Total revenues | $ | $ | ||||||
| 11 |
GAUCHO GROUP HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
Revenue from the sale of food, wine, agricultural products, clothes and accessories is recorded when the customer obtains control of the goods purchased. Revenues from hospitality and other services are recognized as earned at the point in time that the related service is rendered, and the performance obligation has been satisfied. Revenues from gift card sales are recognized when the card is redeemed by the customer. The Company does not adjust revenue for the portion of gift card values that is not expected to be redeemed (“breakage”) due to the lack of historical data. Revenue from real estate lot sales is recorded when the lot is deeded, and legal ownership of the lot is transferred to the customer.
The timing of the Company’s revenue recognition may differ from the timing of payment by its customers. A receivable is recorded when revenue is recognized prior to payment and the Company has an unconditional right to payment. Alternatively, when payment precedes the provision of the related services, the Company records deferred revenue until the performance obligations are satisfied. Deferred revenues associated with real estate lot sale deposits are recognized as revenues (along with any outstanding balance) when the lot sale closes, and the deed is provided to the purchaser. Other deferred revenues primarily consist of deposits accepted by the Company in connection with agreements to sell barrels of wine, advance deposits received for grapes and other agricultural products, and hotel deposits. Wine barrel and agricultural product advance deposits are recognized as revenues (along with any outstanding balance) when the product is shipped to the purchaser. Hotel deposits are recognized as revenue upon occupancy of rooms, or the provision of services.
Contracts related to the sale of wine, agricultural products and hotel services have an original expected length of less than one year. The Company has elected not to disclose information about remaining performance obligations pertaining to contracts with an original expected length of one year or less, as permitted under the guidance.
As
of March 31, 2023 and December 31, 2022, the Company had deferred revenue of $
Basic loss per common share is computed by dividing net loss attributable to GGH common stockholders by the weighted average number of common shares outstanding during the period. Diluted loss per common share is computed by dividing net loss attributable to common stockholders by the weighted average number of common shares outstanding, plus the impact of common shares, if dilutive, resulting from the exercise of outstanding stock options and warrants and the conversion of convertible instruments.
| 12 |
GAUCHO GROUP HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
| As of March 31, | ||||||||
| 2023 | 2022 | |||||||
| Options | ||||||||
| Warrants | ||||||||
| Unvested restricted stock units | ||||||||
| Convertible debt | [1] | [2] | ||||||
| Total potentially dilutive shares | ||||||||
| [1] |
| [2] |
Sequencing Policy
Under ASC 815, the Company has adopted a sequencing policy, whereby, in the event that reclassification of contracts from equity to assets or liabilities is necessary pursuant to ASC 815 due to the Company’s inability to demonstrate it has sufficient authorized shares as a result of certain securities with a potentially indeterminable number of shares or the Company’s total potentially dilutive shares exceed the Company’s authorized share limit, shares will be allocated on the basis of the earliest issuance date of potentially dilutive instruments, with the earliest grants receiving the first allocation of shares. Pursuant to ASC 815, issuances of securities granted as compensation in a share-based payment arrangement are not subject to the sequencing policy.
Derivative Instruments
The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period. If the classification changes as a result of events during the period, the contract is reclassified as of the date of the event that caused the reclassification. For derivative financial instruments that are accounted for as liabilities, the derivative instruments are initially recorded at their fair values and are then re-valued at each reporting date. with changes in the fair value reported in the consolidated statements of operations.
Recently Adopted Accounting Pronouncements
In
June 2016, the FASB issued ASU No. 2016-13 “Financial Instruments – Credit Losses (Topic 326)” and also issued subsequent
amendments to the initial guidance under ASU 2018-19, ASU 2019-04, ASU 2019-05 and ASU 2020-02 (collectively Topic 326). Topic 326 requires
the measurement and recognition of expected credit losses for financial assets held at amortized cost. This replaces the existing incurred
loss model with an expected loss model and requires the use of forward-looking information to calculate credit loss estimates. The Company
adopted the provisions of this ASU on January 1, 2023 using the modified retrospective method for all financial assets measured at amortized
cost. Results for reporting periods beginning after December 31, 2022 are presented under Topic 326 while prior period amounts continue
to be reported in accordance with previously applicable GAAP. The Company recorded an adjustment to accumulated deficit of $
| 13 |
GAUCHO GROUP HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
Reclassifications
Certain reclassifications have been made to prior period amounts to conform to the current period financial statement presentation.
3. MORTGAGES RECEIVABLE
The
Company offers loans to purchasers in connections with the sale of real estate lots. The loans bear interest at
Management
evaluates each loan individually on a quarterly basis, to assess collectability and estimate a reserve for past due amounts. The total
allowance for uncollectable mortgages as of March 31, 2023 and 2022 was $
The following represents the maturities of mortgages receivable as of March 31, 2023.
| April 1 through December 31, 2023 | ||||
| For the years ended December 31, | ||||
| 2024 | ||||
| 2025 | ||||
| 2026 | ||||
| 2027 | ||||
| 2028 | ||||
| Thereafter | ||||
| Gross Receivable | ||||
| Less: Allowance | ( | ) | ||
| Net Receivable | $ |
| 14 |
GAUCHO GROUP HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
As
of March 31, 2023 and December 31, 2022, no single borrower had loans outstanding representing more than
The
Company recorded interest income of $
4. INVENTORY
Inventory at March 31, 2023 and December 31, 2022 was comprised of the following:
March 31, 2023 | December 31, 2022 | |||||||
| Vineyard in process | $ | $ | ||||||
| Wine in process | ||||||||
| Finished wine | ||||||||
| Clothes and accessories | ||||||||
| Total | $ | $ | ||||||
5. FAIR VALUE OF FINANCIAL INSTRUMENTS
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. In determining fair value, the Company often utilizes certain assumptions that market participants would use in pricing the asset or liability, including assumptions about risk and/or the risks inherent in the inputs to the valuation technique. These inputs can be readily observable, market corroborated, or developed by the Company. The fair value hierarchy ranks the quality and reliability of the information used to determine fair values. Financial assets and liabilities carried at fair value are classified and disclosed in one of the following three categories:
Level 1 – Valued based on quoted prices at the measurement date for identical assets or liabilities trading in active markets. Financial instruments in this category generally include actively traded equity securities.
Level 2 – Valued based on (a) quoted prices for similar assets or liabilities in active markets; (b) quoted prices for identical or similar assets or liabilities in markets that are not active; (c) inputs other than quoted prices that are observable for the asset or liability; or (d) from market corroborated inputs. Financial instruments in this category include certain corporate equities that are not actively traded or are otherwise restricted.
Level 3 – Valued based on valuation techniques in which one or more significant inputs is not readily observable. Included in this category are certain corporate debt instruments, certain private equity investments, and certain commitments and guarantees.
| 15 |
GAUCHO GROUP HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
The carrying amounts of the Company’s short-term financial instruments including cash, accounts receivable, advances and loans to employees, prepaid taxes and expenses, accounts payable, accrued expenses and other liabilities approximate fair value due to the short-term nature of these instruments. The carrying value of the Company’s loans payable, debt obligations and convertible debt obligations approximate fair value, as they bear terms and conditions comparable to market, for obligations with similar terms and maturities.
6. ACCRUED EXPENSES
Accrued expenses are comprised of the following:
| March 31, | December 31, | |||||||
| 2023 | 2022 | |||||||
| Accrued compensation and payroll taxes | $ | $ | ||||||
| Accrued taxes payable - Argentina | ||||||||
| Accrued interest | ||||||||
| Other accrued expenses | ||||||||
| Accrued expenses, current | ||||||||
| Accrued payroll tax obligations, non-current | ||||||||
| Total accrued expenses | $ | $ | ||||||
| 16 |
GAUCHO GROUP HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
On
November 27, 2020, the Company entered into various payment plans, pursuant to which it agreed to pay its Argentine payroll tax obligations
over a period of
7. DEFERRED REVENUE
Deferred revenue is comprised of the following:
| March 31, 2023 | December 31, 2022 | |||||||
| Real estate lot sales deposits | $ | $ | ||||||
| Prepaid management fees | ||||||||
| Other | ||||||||
| Total | $ | $ | ||||||
The
Company accepts deposits in conjunction with agreements to sell real estate building lots at Algodon Wine Estates in the Mendoza
wine region of Argentina. These lot sale deposits are generally denominated in U.S. dollars. The Company received deposits in the
amount of $
8. LOANS PAYABLE
The Company’s loans payable are summarized below:
| March 31, | December 31, | |||||||
| 2023 | 2022 | |||||||
| EIDL | $ | $ | ||||||
| 2018 Loan | ||||||||
| 2022 Loan | ||||||||
| 2023 Note | ||||||||
| Total Loans Payable | ||||||||
| Less: current portion | ||||||||
| Loans Payable, non-current | $ | $ | ||||||
On
January 9, 2023, the Company received $
| 17 |
GAUCHO GROUP HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
The
Company incurred interest expense related to the loans payable in the amount of $
9. CONVERTIBLE DEBT OBLIGATIONS
Amounts owed pursuant to the Company’s convertible debt obligations are as follows:
GGH Notes | 2023 Notes | Total Principal | Debt Discount | Convertible debt, net of discount | ||||||||||||||||
| Balance at January 1, 2023 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||
| Notes issued | ( | ) | ||||||||||||||||||
| Debt principal converted to common stock: | ( | ) | ( | ) | ( | ) | ||||||||||||||
| Principal repayments | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||
| Amortization of debt discount | ||||||||||||||||||||
| Balance at March 31, 2023 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||
GGH Convertible Notes
On
February 2, 2023, the Company and the holders of the remaining GGH Notes entered into a fourth letter agreement (“Letter Agreement
#4). Pursuant to Letter Agreement #4, the parties agreed to reduce the conversion price of the GGH Notes to the lower of: (i) the closing
sale price on the trading day immediately preceding the conversion date; and (ii) the average closing sale price of the common stock
for the five trading days immediately preceding the conversion date. The conversion price is not subject to a floor price. Between February
3 and February 15, 2023, the holders elected to convert $
On February 8, 2023, the Company and the holders of the remaining GGH Notes entered into a fifth letter agreement (“Letter Agreement #5). Pursuant to Letter Agreement #5, the parties agreed to extend the maturity date of the notes from February 9, 2023 to February 28, 2023.
On
February 20, 2023, the Company entered into another exchange agreement (the “Exchange Agreement #4”) with the remaining holders
of the GGH Notes, pursuant to which warrants for the purchase up to an aggregate of
| 18 |
GAUCHO GROUP HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
On
February 21, the Company redeemed the remaining GGH Notes for $
Securities Purchase Agreement
On
February 21, 2023, the Company entered into a securities purchase agreement (the “SPA”) with an institutional investor
(the “Investor”), pursuant to which the Company received proceeds of $
Pursuant
to the SPA, the exercise price of certain warrants for the purchase of
The
convertible notes (the “2023 Notes”) are convertible into shares of common stock of the Company at a conversion price equal
to the lower of (i) $
The 2023 Notes mature on the first
anniversary of the issuance date (the “Maturity Date”) and bear interest at a rate of
The
2023 Notes are redeemable at the Company’s election, so long as the Company is not in default, at the greater of (a)
Upon
an event of default, the 2023 Notes the Conversion Price is reduced to the lesser of (a) $1.34 (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 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 $
In
addition to other terms, conditions and rights, both the Company and the institutional investor have the right to initiate additional
closings for up to $
Pursuant to the terms of the 2023 Notes, the Company must pay, convert or redeem one quarter of the initial principal, plus any outstanding interest and make-whole amount by each three-month anniversary of the issuance date.
During
the three months ended March 31, 2023, the Company made redemption payments in the aggregate amount of $
| 19 |
GAUCHO GROUP HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
The Company incurred financing
costs of $
Upon the issuance of the 2023 Notes, the Company recorded a debt discount at issuance in the aggregate amount $
Interest Expense on Convertible Debt Obligations
The
Company incurred total interest expense of $
10. SEGMENT DATA
The Company’s financial position and results of operations are classified into three reportable segments, consistent with how the CODM makes decisions about resource allocation and assesses the Company’s performance.
| ● | Real Estate Development, through AWE and TAR, including hospitality and winery operations, which support the ALGODON® brand. | |
| ● | Fashion (e-commerce), through GGI, including the manufacture and sale of high-end fashion and accessories sold through an e-commerce platform. | |
| ● | Corporate, consisting of general corporate overhead expenses not directly attributable to any one of the business segments. |
| 20 |
GAUCHO GROUP HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
The following tables present segment information for the three months ended March 31, 2023 and 2022:
| For the Three Months Ended March 31, 2023 | For the Three Months Ended March 31, 2022 | |||||||||||||||||||||||||||||||
| Real Estate Development | Fashion (e-commerce) | Corporate | TOTAL | Real Estate Development | Fashion (e-commerce) | Corporate | TOTAL | |||||||||||||||||||||||||
| Revenues | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Revenues
from Foreign Operations | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Loss
from Operations | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||||
The following tables present segment information as of March 31, 2023 and December 31, 2022:
| As of March 31, 2023 | As of December 31, 2022 | |||||||||||||||||||||||||||||||
| Real Estate Development | Fashion (e-commerce) | Corporate | TOTAL | Real Estate Development | Fashion (e-commerce) | Corporate | TOTAL | |||||||||||||||||||||||||
| Total Property and Equipment, net | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Total Property and Equipment, net in Foreign Countries | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Total Assets | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
11. RELATED PARTY TRANSACTIONS
Accounts Receivable – Related Parties
As
of March 31, 2023 and December 31, 2022 the Company had accounts receivable – related parties of $ and $ net
of allowances for expected credits loss of $ and $, respectively, representing the net realizable value of advances made
to, and expense sharing obligations receivable from, separate entities under common management. During the three months ended March 31,
2023 and 2022, the Company made advances in the amount of $
The
Company recorded credit losses of $
| 21 |
GAUCHO GROUP HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
Expense Sharing
On
April 1, 2010, the Company entered into an agreement with a Related Party to share expenses such as office space, support staff, professional
services, and other operating expenses (the “Related Party ESA”). During the three months ended March 31, 2023 and 2022,
the Company recorded a contra-expense of $
Management Fee Income
The
Company earns management fees of $
12. BENEFIT CONTRIBUTION PLAN
The Company sponsors a 401(k) profit-sharing plan (“401(k) Plan”) that covers substantially all of its employees in the United States. The 401(k) Plan provides for a discretionary annual contribution, which is allocated in proportion to compensation. In addition, each participant may elect to contribute to the 401(k) Plan by way of a salary deduction.
A
participant is always fully vested in their account, including the Company’s contribution. For the three months ended March 31,
2023 and 2022, the Company recorded a charge associated with its contribution of $
13. STOCKHOLDERS’ EQUITY
Common Stock
On
February 2, 2023, the Company issued shares of common stock upon the cashless exercise of
On
February 10, 2023, the Company sold shares of common stock and warrants to purchase
During
the three months ended March 31, 2023, the Company sold an aggregate of shares of the Company’s common stock for gross
proceeds of $
See Note 9 – Convertible Debt Obligations for additional details regarding common shares issued during the three months ended March 31, 2023.
| 22 |
GAUCHO GROUP HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
Accumulated Other Comprehensive Loss
For
three months ended March 31, 2023 and 2022, the Company recorded a loss of $(
Warrants
A summary of warrant activity during the three months ended March 31, 2023 is presented below:
| Number of Warrants | Weighted Average Exercise Price | Weighted Average Remaining Life in Years | Intrinsic Value | |||||||||||||
| Outstanding, January 1, 2023 | $ | |||||||||||||||
| Issued | ||||||||||||||||
| Exercised | ( | ) | ||||||||||||||
| Expired | ||||||||||||||||
| Canceled | ||||||||||||||||
| Outstanding, March 31, 2023 | $ | $ | ||||||||||||||
| Exercisable, March 31, 2023 | $ | $ | ||||||||||||||
See Note 9 – Convertible Debt Obligations and Note 13 – Stockholder’s Equity (Common Stock) for additional details regarding warrants issued during the three months ended March 31, 2023.
| Warrants Outstanding | Warrants Exercisable | |||||||||||||||
| Exercise Price | Exercisable Into | Outstanding Number of Warrants | Weighted Average Remaining Life in Years | Exercisable Number of Warrants | ||||||||||||
| $ | ||||||||||||||||
| $ | ||||||||||||||||
| $ | ||||||||||||||||
| $ | ||||||||||||||||
| $ | ||||||||||||||||
| Total | ||||||||||||||||
| 23 |
GAUCHO GROUP HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
Restricted Stock Units
| Weighted Average | ||||||||
| Number of | Grant Date Value | |||||||
| RSUs | Per Share | |||||||
| RSUs non-vested January 1, 2023 | $ | |||||||
| Granted | ||||||||
| Vested | ( | ) | ||||||
| RSUs non-vested March 31, 2023 | $ | |||||||
On
January 23, 2023, the Company granted restricted stock units (“RSUs”) to certain employees and advisors for their
service, of which RSUs vested on the grant date and
During the three months ended March 31, 2023 and 2022, the Company recorded stock-based compensation expense of $ and $, respectively, related to the amortization of RSUs.
Stock Options
| Weighted | Weighted | |||||||||||||||
| Average | Average | |||||||||||||||
| Number of | Exercise | Remaining | Intrinsic | |||||||||||||
| Options | Price | Term (Yrs) | Value | |||||||||||||
| Outstanding, January 1, 2023 | ||||||||||||||||
| Granted | ||||||||||||||||
| Exercised | ||||||||||||||||
| Expired | ( | ) | ||||||||||||||
| Forfeited | ||||||||||||||||
| Outstanding, March 31, 2023 | $ | $ | ||||||||||||||
| Exercisable, March 31, 2023 | $ | $ | ||||||||||||||
During the three months ended March 31, 2023 and 2022, the Company recorded stock-based compensation expense of $ and $, respectively, related to stock options for the purchase of GGH common stock, and recorded stock-based compensation expense of $ and $, respectively, related to options for the purchase of GGI common stock. Stock-based compensation expense is reflected in general and administrative expenses (classified in the same manner as the grantees’ wage compensation) in the accompanying condensed consolidated statements of operations. As of March 31, 2023, there was $ of unrecognized stock-based compensation expense related to stock option grants that will be amortized over a weighted average period of years.
| 24 |
GAUCHO GROUP HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
14. COMMITMENTS AND CONTINGENCIES
Legal Matters
The Company is involved in litigation and arbitrations from time to time in the ordinary course of business. After consulting legal counsel, the Company does not believe that the outcome of any such pending or threatened litigation will have a material adverse effect on its financial condition or results of operations. However, as is inherent in legal proceedings, there is a risk that an unpredictable decision adverse to the Company could be reached. The Company records legal costs associated with loss contingencies as incurred. Settlements are accrued when, and if, they become probable and estimable.
15. LEASES
On
April 8, 2021, GGI entered into a lease agreement to lease a retail space in Miami, Florida for
As of March 31, 2023, the Company had no leases that were classified as a financing lease.
Total
operating lease expenses was $
Supplemental cash flow information related to leases was as follows:
| For the Three Months Ended March 31, | ||||||||
| 2023 | 2022 | |||||||
| Cash paid for amounts included in the measurement of lease liabilities: | ||||||||
| Operating cash flows from operating leases | $ | $ | ||||||
| Right-of-use assets obtained in exchange for lease obligations: | ||||||||
| Operating leases | $ | $ | ||||||
| Weighted Average Remaining Lease Term: | ||||||||
| Operating leases | ||||||||
| Weighted Average Discount Rate: | ||||||||
| Operating leases | % | % | ||||||
| 25 |
GAUCHO GROUP HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
Future minimum lease commitments are as follows:
| For the period April 1 through December 31, 2023 | $ | |||
| For the years ended December 31, | ||||
| 2024 | ||||
| 2025 | ||||
| 2026 | ||||
| 2027 | ||||
| 2028 | ||||
| Total future minimum lease payments | ||||
| Less: imputed interest | ( | ) | ||
| Net future minimum lease payments | ||||
| Less: operating lease liabilities, current portion | ( | ) | ||
| Operating lease liabilities, non-current portion | $ |
The
Company is the lessor of a building and land that it purchased in connection with the acquisition of GDS, pursuant to an operating lease
which expires on August 31, 2031. At the end of the leases, the lessee may enter into a new lease or return the asset, which would be
available to the Company for releasing. The Company recorded lease revenue of $
16. SUBSEQUENT EVENTS
During the period subsequent to
March 31, 2023 and prior to filing, the Company sold an additional 458,768 shares, in aggregate, of the Company’s common stock for
gross proceeds of $
Between May 1 and May 5, 2023,
an aggregate of $
Foreign Currency Exchange Rates
The
Argentine Peso to United States Dollar exchange rate was 229.02,
The
British pound to United States dollar exchange rate was 0.7999,
| 26 |
Item 2: MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with our unaudited condensed consolidated financial statements and notes thereto included herein. In connection with, and because we desire to take advantage of, the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995, we caution readers regarding certain forward-looking statements in the following discussion and elsewhere in this report and in any other statement made by, or on our behalf, whether or not in future filings with the Securities and Exchange Commission. Forward-looking statements are statements not based on historical information and which relate to future operations, strategies, financial results or other developments. Forward looking statements are necessarily based upon estimates and assumptions that are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond our control and many of which, with respect to future business decisions, are subject to change. These uncertainties and contingencies can affect actual results and could cause actual results to differ materially from those expressed in any forward-looking statements made by, or on our behalf. Words such as “anticipate,” “estimate,” “plan,” “continuing,” “ongoing,” “expect,” “believe,” “intend,” “may,” “will,” “should,” “could,” and similar expressions are used to identify forward-looking statements. We disclaim any obligation to update forward-looking statements.
Unless the context requires otherwise, references in this document to “GGH”, “we”, “our”, “us” or the “Company” are to Gaucho Group Holdings, Inc. and its subsidiaries.
Please note that because we qualify as an emerging growth company and as a smaller reporting company, we have elected to follow the smaller reporting company rules in preparing this Quarterly Report on Form 10-Q.
Overview
Gaucho Group Holdings, Inc. (“GGH” or the “Company”) positions its e-commerce leather goods, accessories, and fashion brand, Gaucho – Buenos Aires™, as one of luxury, creating a platform for the global consumer to access their piece of Argentine style and high-end products. With a concentration on leather goods, ready-to-wear and accessories, this is the luxury brand in which Argentina finds its contemporary expression. During the first quarter of 2022, the Company launched Gaucho Casa, a Home & Living line of luxury textiles and home accessories, which will be marketed and sold on the Gaucho – Buenos Aires e-commerce platform. Gaucho Casa challenges traditional lifestyle collections with its luxury textiles and home accessories rooted in the singular spirit of the gaucho aesthetic. GGH seeks to grow its direct-to-consumer online products to global markets in the United States, Asia, the United Kingdom, Europe, and Argentina. We intend to focus on e-commerce and scalability of the Gaucho – Buenos Aires and Gaucho Casa brands, as real estate in Argentina is politically sensitive.
GGH’s goal is to become recognized as the LVMH (“Louis Vuitton Moët Hennessy”) of South America’s leading luxury brands. Through one of its wholly owned subsidiaries, GGH also owns and operates legacy investments in the boutique hotel, hospitality and luxury vineyard property markets. This includes a golf, tennis and wellness resort, as well as an award winning, wine production company concentrating on Malbecs and Malbec blends. Utilizing these wines as its ambassador, GGH seeks to further develop its legacy real estate, which includes developing residential vineyard lots located within its resort.
Due to COVID-19, we have terminated the corporate office lease and senior management works remotely. GGH’s local operations are managed by professional staff with substantial hotel, hospitality and resort experience in Buenos Aires and San Rafael, Argentina.
| 27 |
Recent Developments and Trends
While the World Health Organization declared an end to the COVID-19 global health emergency on May 5, 2023, we continue to closely monitor the outbreak of COVID-19 and the related impact on our operations, financial position and cash flows, as well as the impact on our employees. Due to the continued fluidity of this situation, and the magnitude and duration of the pandemic, its impact our future operations and liquidity remains uncertain as of the date of this report.
We have faced, and may continue to face, significant cost inflation, specifically in raw materials and other supply chain costs due to increased demand for raw materials and the broad disruption of the global supply chain associated with the impact of COVID-19. International conflicts or other geopolitical events, including the 2022 Russian invasion of Ukraine, may further contribute to increased supply chain costs due to shortages in raw materials, increased costs for transportation and energy, disruptions in supply chains, and heightened inflation. Further escalation of geopolitical tensions may also lead to changes to foreign exchange rates and financial markets, any of which may adversely affect our business and supply chain, and consequently our results of operation. 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 February 2, 2023, the Company and the holders of notes pursuant to the 2021 SPA entered into a fourth letter agreement pursuant to which the parties agreed to reduce the Conversion Price of the Notes to the lower of: (i) the Closing Sale Price on the Trading Day immediately preceding the Conversion Date; and (ii) the average Closing Sale Price of the common stock for the five Trading Days immediately preceding the Conversion Date, beginning on the Trading Day of February 3, 2023.
On February 8, 2023, the Company and the holders of notes pursuant to the 2021 SPA entered into a fifth letter agreement pursuant to which the parties agreed to extend the maturity date of the notes from February 9, 2023 to February 28, 2023.
On February 10, 2023, the Company sold 591,000 shares of common stock (the “Shares”) for gross proceeds of $591,000 to accredited investors and warrants to purchase 147,750 shares of common stock at an exercise price of $1.00 per share (the “Warrants”). The Warrants are exercisable for two years from the date of issuance.
On February 20, 2023, the Company entered into an exchange agreement with the holders of notes pursuant to the 2021 SPA in order to amend certain provisions of the 2021 SPA and issued the holders warrants to purchase up to an aggregate of 150,000 shares of the Company’s Common Stock at an exercise price of $1.00.
On February 21, 2023, the Company entered into a Securities Purchase Agreement with an institutional investor, pursuant to which the Company will sell to the investor a series of senior secured convertible notes of the Company in the aggregate original principal amount of $5,617,978, and a series of common stock purchase warrants of the Company, which warrants shall be exercisable into an aggregate of 3,377,099 shares of common stock of the Company for a term of three years. The Company received $5,000,000 in proceeds after the original issue discount of 11% on the principal. The Company used the proceeds to repay all principal, interest and fees owing under the 2021 SPA.
On February 20, 2023, we issued a one-year, non-convertible promissory note in the amount of $185,000.
| 28 |
Consolidated Results of Operations
Three months ended March 31, 2023 compared to three months ended March 31, 2022
Overview
We reported a net loss of approximately $2.7 million and $2.3 million for the three months ended March 31, 2023 and 2022, respectively.
Revenues
Revenues from operations were approximately $448,000 and $426,000 during the three months ended March 31, 2023 and 2022, respectively, reflecting an increase of approximately $22,000 or 5%. The overall increase in sales was driven by increases in hotel, restaurant and wine revenues of approximately $428,000 and increases in clothes, accessories and other sales of approximately $85,000 resulting from the easing of COVID restrictions and the Argentine government’s efforts to promote tourism and revitalize local businesses by subsidizing a portion of sales, were partially offset by a decrease of approximately $185,000 in lot sales, a decrease of agricultural sales of approximately $27,000, and a decrease of approximately $278,000 resulting from the impact of the decline in the value of the Argentine peso vis-à-vis the U.S. dollar.
Gross profit
We generated a gross profit of approximately $154,000 and $187,000 for the three months ended March 31, 2023 and 2022, respectively, representing a decrease of approximately $33,000 or 18%.
Cost of sales, which consists of real estate lots, raw materials, direct labor and indirect labor associated with our business activities, increased by approximately $55,000, or 23%, from approximately $238,000 for the three months ended March 31, 2022 to approximately $293,000 for the three months ended March 31, 2023. The increase in cost of sales resulted from the increase in hotel, restaurant and wine costs of approximately $215,000 which corresponds to the increase in the related revenues as discussed above, and an increase in clothes, accessories and other costs of approximately $44,000, which were partially offset by a decrease of approximately $16,000 in costs associated with lot sales and a decrease of approximately $187,000 resulting from the impact of the decline in the value of the Argentine peso vis-à-vis the U.S. dollar.
Selling and marketing expenses
Selling and marketing expenses were approximately $235,000 and $172,000 for the three months ended March 31, 2023 and 2022, respectively, representing an increase of $63,000 or 37%, primarily related to GGI advertising and marketing expenses for GGI’s new retail space.
General and administrative expenses
General and administrative expenses were approximately $1,757,000 and $1,745,000 for the three months ended March 31, 2023 and 2022, respectively, representing an increase of $12,000 or 1%. Increases in general and administrative expenses primarily consisted of a $290,000 increase in employee compensation, an increase of approximately $117,000 in professional and consulting fees and an increase of approximately $50,000 in other aggregated expenses not individually material, partially offset by a decrease of approximately $445,000 resulting from the impact of the decline in the value of the Argentine peso vis-à-vis the U.S. dollar.
| 29 |
Depreciation and amortization expense
Depreciation and amortization expense was approximately $109,000 and $46,000 during the three months ended March 31, 2023 and 2022, respectively, representing an increase of $63,000 or 137%, resulting from additions to leasehold improvements associated with GGI’s new retail space.
Interest income
Interest income was approximately $50,000 and $4,000 during the three months ended March 31, 2023 and 2022, respectively, representing an increase of $46,000.
Interest expense
Interest expense was approximately $602,000 and $758,000 during the three months ended March 31, 2023 and 2022, respectively, representing a decrease of $156,000 or 21%. The decrease is primarily related to a reduction in the interest and amortization of debt discount on the convertible debt as a result of the reduced weighted carrying value of debt for the 2023 quarter compared to the previous year’s quarter.
Other income
Other income of approximately $75,000 during the three months ended March 31, 2023 and 2022 represents the management fee received from LVH.
Loss on extinguishment of debt
Loss on extinguishment of debt in the aggregate amount of $383,987 is comprised of (i) premium paid on the conversion of GGH Notes of $112,065, (ii) premium paid on the cash redemption of GH Notes of $124,049 , (iii) premium paid on the 2023 Notes for cash redemption of principal in the amount of $13,094, and (iv) the fair value of $134,779 in warrants issued in the exchange agreement for the GGH Notes (See Note 9—Convertible Debt Obligations for additional details).
(Gains) losses from foreign currency translation
The Company recorded gains from foreign currency translation of approximately $112,000 and $183,000 during the three months ended March 31, 2023 and 2022, respectively. The reduction of approximately $71,000 in gains from foreign currency translation is due to the fluctuation in the Argentine peso to United States dollar exchange rates.
| 30 |
Liquidity and Capital Resources
We measure our liquidity a variety of ways, including the following:
March 31, 2023 | December 31, 2022 | |||||||
| (unaudited) | ||||||||
| Cash | $ | 2,389,882 | $ | 300,185 | ||||
| Working capital | $ | 361,192 | $ | 595,120 | ||||
| Convertible debt obligations | $ | 5,536,394 | $ | 1,997,909 | ||||
| Loans payable | $ | 386,651 | $ | 256,321 | ||||
Cash requirements for our current liabilities include approximately $1,767,000 for accounts payable and accrued expenses, approximately $209,000 for lease liabilities, and approximately $360,000 for loans payable and other current liabilities. We also have convertible debt obligations in the amount of $5,536,394 which, if not converted prior to maturity, are due on February 21, 2024. Cash requirements for our long-term liabilities include approximately $1,275,000 for operating lease liabilities, approximately $94,000 in loans payable, and approximately $52,000 of long-term accrued expenses.
During the three months ended March 31, 2023, we financed a portion of our activities from proceeds derived from debt and equity financings. A significant portion of the funds have been used to cover working capital needs and personnel, office expenses and various consulting and professional fees.
Net cash used in operating activities for the three months ended March 31, 2023 and 2022 amounted to approximately $2,939,000 and $2,099,000, respectively. During the three months ended March 31, 2023, the net cash used in operating activities was primarily attributable to the net loss of approximately $2,695,000 adjusted for approximately $969,000 of net non-cash expenses, and approximately $1,214,000 of cash used to fund changes in the levels of operating assets and liabilities. During the three months ended March 31, 2022, the net cash used in operating activities was primarily attributable to the net loss of approximately $2,272,000 adjusted for approximately $570,000 of net non-cash expenses, and approximately $397,000 of cash used to fund changes in the levels of operating assets and liabilities.
Cash used in investing activities for the three months ended March 31, 2023 and 2022 amounted to approximately $50,000 and $810,000, respectively, related to the purchase of property and equipment of $50,000 and $767,000, respectively, and $0 and $35,000, respectively, related to the purchase the gaucho.com domain name and $0 and $7,560, respectively, of cash used to acquire GDS.
Net cash provided by financing activities for the three months ended March 31, 2023 amounted to approximately $5,119,000. Net cash used in financing activities for the three months ended March 31, 2022 amounted to approximately $26,000. For the three months ended March 31, 2023, the net cash provided by financing activities resulted from approximately $4,678,000 in net proceeds from the issuance of debt, $591,000 in proceeds from the issuance of common stock in a private placement, approximately $441,000 in proceeds from the issuance of stock under the New ELOC and $185,000 in proceeds from the issuance of a note payable, partially offset by the repayment of and interest of approximately $744,000 and repayment of loans payable of approximately $33,000. Net cash used in financing activities for the three months ended March 31, 2022 amounted to approximately $26,000 in repayments of loans payable.
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As of March 31, 2023, the Company had cash and working capital of approximately $2,390,000 and $361,000, respectively. During the three months ended March 31, 2023 and 2022, the Company incurred net losses of approximately $2,695,000 and $2,272,000, respectively, and used cash in operating activities of approximately $2,939,000 and $2,099,000, respectively. Further, as of March 31, 2023, approximately $5,536,000 owed in connection with the Company’s convertible debt matures on February 21, 2024, and $293,000 represents the current portion of the Company’s loans payable which are payable on demand or for which payments are due within twelve months after March 31, 2023. During the three months ended March 31, 2023, the Company funded its operations with proceeds from convertible debt financing of $5,000,000, proceeds of approximately $441,000 from draws on the Company’s equity line of credit, and $591,000 from the sale of common stock.
The Company’s operating needs include the planned costs to operate its business, including amounts required to fund working capital and capital expenditures. Based upon projected revenues and expenses, the Company believes that it may not have sufficient funds to operate for the next twelve months from the date these financial statements are made available. Since inception, the Company’s operations have primarily been funded through proceeds received from 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 aforementioned factors raise substantial doubt about the Company’s ability to continue as a going concern.
Availability of Additional Funds
As a result of our financings, we have been able to sustain operations. However, we will need to raise additional capital in order to meet our future liquidity needs for operating expenses and capital expenditures, including GGI inventory production, continued development of the GGI e-commerce platform, expansion of our winery and additional investments in real estate development. If we are unable to obtain adequate funds on reasonable terms, we may be required to significantly curtail or discontinue operations.
Off-Balance Sheet Arrangements
None.
Contractual Obligations
As a smaller reporting company, we are not required to provide the information requested by paragraph (a)(5) of this Item.
Critical Accounting Policies and Estimates
There are no material changes from the critical accounting policies, estimates and new accounting pronouncements set forth in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” set forth in our Annual Report on Form 10-K filed with the SEC on April 17, 2023, except as described below. Please refer to that document for disclosures regarding the critical accounting policies related to our business.
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Sequencing Policy
Under ASC 815, the Company has adopted a sequencing policy, whereby, in the event that reclassification of contracts from equity to assets or liabilities is necessary pursuant to ASC 815 due to the Company’s inability to demonstrate it has sufficient authorized shares as a result of certain securities with a potentially indeterminable number of shares or the Company’s total potentially dilutive shares exceed the Company’s authorized share limit, shares will be allocated on the basis of the earliest issuance date of potentially dilutive instruments, with the earliest grants receiving the first allocation of shares. Pursuant to ASC 815, issuances of securities granted as compensation in a share-based payment arrangement are not subject to the sequencing policy.
Derivative Instruments
The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period. If the classification changes as a result of events during the period, the contract is reclassified as of the date of the event that caused the reclassification. For derivative financial instruments that are accounted for as liabilities, the derivative instruments are initially recorded at their fair values and are then re-valued at each reporting date. with changes in the fair value reported in the consolidated statements of operations.
Item 3. Quantitative and Qualitative Disclosure About Market Risk
As a “smaller reporting company” as defined by Item 10 of Regulation S-K, we are not required to provide the information required by this Item.
Item 4: Controls and Procedures
Disclosure Controls and Procedures
Our management carried out an evaluation, under the supervision and with the participation of our Chief Executive Officer (who is our Principal Executive Officer) and our Chief Financial Officer (who is our Principal Financial Officer and Principal Accounting Officer), of the effectiveness of the design of our disclosure controls and procedures (as defined by Exchange Act Rules 13a-15(e) or 15d-15(e)) as of March 31, 2023, pursuant to Exchange Act Rule 13a-15(b). Based upon that evaluation, our Principal Executive Officer and Principal Financial Officer concluded that, as of the end of the period covered by this report, our disclosure controls and procedures were not effective at the reasonable assurance level.
During the year ended December 31, 2022, our management identified a material weakness in our internal control over financial reporting, which continued to exist as of March 31, 2023, resulting from a lack of segregation of duties due to our small size, and lack of testing of the operating effectiveness of the controls.
Changes in Internal Control over Financial Reporting
During the quarter ended March 31, 2023, there were no changes in our internal control over financial reporting identified in management’s evaluation pursuant to Rules 13a-15(d) or 15d-15(d) of the Exchange Act during the quarter ended March 31, 2023 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Inherent Limitations of Controls
Management does not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent or detect all error and all fraud. Controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions, or deterioration in the degree of compliance with the policies or procedures. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.
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PART II - OTHER INFORMATION
Item 1. Legal Proceedings
From time to time, the Company and its subsidiaries and affiliates are subject to litigation and arbitration claims incidental to its business. Such claims may not be covered by its insurance coverage, and even if they are, if claims against GGH and its subsidiaries are successful, they may exceed the limits of applicable insurance coverage. We are not involved in any litigation that we believe is likely, individually or in the aggregate, to have a material adverse effect on our condensed consolidated financial condition, results of operations or cash flows.
Item 1A. Risk Factors
As a “smaller reporting company” as defined by Item 10 of Regulation S-K, we are not required to provide information required by this Item. However, our current risk factors are set forth in Item 1A of the Company’s Annual Report on Form 10-K as filed with the SEC on April 17, 2023.
Our stock has been trading below $1.00 and our failure to maintain compliance with Nasdaq’s continued listing requirements could result in the delisting of our common stock.
Our common stock is currently listed for trading on The Nasdaq Capital Market. We must satisfy the continued listing requirements of The Nasdaq Stock Market LLC (or Nasdaq), to maintain the listing of our common stock on The Nasdaq Capital Market.
On July 14, 2022, the Company received a deficiency letter from the Listing Qualifications Department (the “Staff”) of the Nasdaq Stock Market notifying the Company that, for the preceding 30 consecutive business days, the closing bid price for the Company’s common stock was trading below the minimum $1.00 per share requirement for continued inclusion on The Nasdaq Capital Market pursuant to Nasdaq Listing Rule 5450(a)(1) (the “Bid Price Requirement”). The notification has no immediate effect on the Company’s Nasdaq listing and the Company’s common stock will continue to trade on Nasdaq under the ticker symbol “VINO.”
In accordance with Nasdaq Rules, the Company was provided with an initial period of 180 calendar days, or until January 10, 2023 (the “Compliance Date”), to regain compliance with the Bid Price Requirement. If at any time before the Compliance Date the closing bid price for the Company’s common stock is at least $1.00 for a minimum of 10 consecutive business days, the Staff will provide the Company written confirmation of compliance with the Bid Price Requirement.
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 “Amended and Restated Certificate of Incorporation”).
On November 21, 2022, the Company received a letter from the Staff of the Nasdaq Stock Market advising that the Company regained compliance with the minimum bid price listing requirements for its shares of common stock and that the matter is now closed.
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However, there can be no assurance that the market price of our common stock will remain at the level required for continuing compliance with that requirement. Our stock has recently been trading below $1.00 and it is not uncommon for the market price of a company’s common stock to decline in the period following a reverse stock split. Other factors unrelated to the number of shares of our common stock outstanding, such as negative financial or operational results, could adversely affect the market price of our common stock and thus jeopardize our ability to meet or maintain the Nasdaq’s minimum bid price requirement.
In order to maintain our listing, we must satisfy minimum financial and other continued listing requirements and standards, including those regarding director independence and independent committee requirements, minimum stockholders’ equity, minimum share price, and certain corporate governance requirements. There can be no assurances that we will be able to comply with such applicable listing standards.
If our common stock were delisted from Nasdaq, trading of our common stock would most likely take place on an over-the-counter market established for unlisted securities, such as the OTCQB or the Pink Market maintained by OTC Markets Group Inc. An investor would likely find it less convenient to sell, or to obtain accurate quotations in seeking to buy, our common stock on an over-the-counter market, and many investors would likely not buy or sell our common stock due to difficulty in accessing over-the-counter markets, policies preventing them from trading in securities not listed on a national exchange or other reasons. In addition, as a delisted security, our common stock would be subject to SEC rules as a “penny stock”, which impose additional disclosure requirements on broker-dealers. The regulations relating to penny stocks, coupled with the typically higher cost per trade to the investor of penny stocks due to factors such as broker commissions generally representing a higher percentage of the price of a penny stock than of a higher-priced stock, would further limit the ability of investors to trade in our common stock. In addition, delisting would materially and adversely affect our ability to raise capital on terms acceptable to us, or at all, and may result in the potential loss of confidence by investors, suppliers, customers and employees and fewer business development opportunities. For these reasons and others, delisting would adversely affect the liquidity, trading volume and price of our common stock, causing the value of an investment in us to decrease and having an adverse effect on our business, financial condition and results of operations, including our ability to attract and retain qualified employees and to raise capital.
If LVH does not sign a ground lease by June 30, 2023, LVH will be dissolved and we may not receive a complete return of our investment.
Currently, the Company, through its wholly-owned subsidiary, Gaucho Ventures I – Las Vegas, LLC (“GVI”), contributed total capital of $7.0 million to LVH Holdings LLC (“LVH”) to develop a project in Las Vegas, Nevada and received 396 limited liability company interests, representing an 11.9% equity interest in LVH. Pursuant to the Third Amendment to the Amended and Restated Limited Liability Company Agreement of LVH dated December 12, 2022, if a ground lease for the premises within which the luxury hotel, casino, entertainment and retail project will be developed and constructed has not been executed by LVH on or before June 30, 2023, then as promptly as reasonably practicable after such date, LVH will be liquidated and dissolved.
As of March 31, 2023, LVH has used our cash contribution to LVH for land improvement expenses, such as architectural, legal, engineering, and accounting fees. Should LVH be liquidated and dissolved on or before June 30, 2023, we most likely will not receive our entire contribution back from LVH and may lose our entire investment.
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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
Issuance of Shares Pursuant to 401(k) Match
On January 23, 2023, the Company issued 24,160 shares of common stock at $1.35 per share in settlement of its matching obligations for the year ended December 31, 2022 under the Company’s 401(k) profit sharing plan.
Restricted Stock Units
On January 23, 2023, the Board approved the issuance of restricted stock units (“RSUs”) subject to vesting, representing 10,000 shares of common stock of the Company to certain consultants of the Company located in Argentina with a grant date value of $1.35 per share. On the same date, RSUs representing a total of 3,890 shares of common stock of the Company vested and the Company issued such shares to the consultants. The remainder of the RSUs vest equally on January 23, 2024 and January 23, 2025. A Form D was filed on May 15, 2023.
Unit Offering
On February 10, 2023, the Company sold 591,000 shares of common stock (the “Shares”) for gross proceeds of $591,000 to accredited investors and warrants to purchase 147,750 shares of common stock at an exercise price of $1.00 per share (the “Warrants”). The Warrants are exercisable for two years from the date of issuance. For this sale of Shares, Warrants, and shares underlying the Warrants, there was no general solicitation and no commissions paid, all purchasers were accredited investors with a prior relationship with the Company, and the Company is relying on the exemption from registration available under Section 4(a)(2) and/or Rule 506(b) of Regulation D promulgated under the Securities Act with respect to transactions by an issuer not involving any public offering. A Form D was filed on February 22, 2023.
Convertible Promissory Notes
As previously reported on our Annual Report on Form 10-K filed on April 17, 2023, the Company and certain investors (the “Holders”) entered into that Securities Purchase Agreement, dated as of November 3, 2021 (the “2021 SPA”) and the Company issued to the Holders certain senior secured convertible notes in the aggregate original principal amount of $6,480,000 (each, a “Note” and together with the 2021 SPA, the “2021 Note Documents”).
On February 2, 2023, the Company and the Holders entered into a fourth letter agreement (the “Letter Agreement #4”) pursuant to which the parties agreed to reduce the Conversion Price of the Notes to the lower of: (i) the Closing Sale Price on the Trading Day immediately preceding the Conversion Date; and (ii) the average Closing Sale Price of the common stock for the five Trading Days immediately preceding the Conversion Date, beginning on the Trading Day of February 3, 2023. Any conversion which occurs shall be voluntary at the election of the Holder. All terms not defined herein refer to the defined terms in the 2021 Note Documents, as amended.
On February 8, 2023, the Company and the Holders entered into a fifth letter agreement (the “Letter Agreement #5”) pursuant to which the parties agreed to extend the Maturity Date of the Notes from February 9, 2023 to February 28, 2023. The Conversion Amount and all outstanding Amortization Amounts and Amortization Redemption Amounts (as defined in the Notes) shall be due and payable in full on the Maturity Date or such earlier date as any such amount shall become due and payable pursuant to the other terms of the Note and/or the Letter Agreement #5. All terms not defined herein refer to the defined terms in the 2021 Note Documents, as amended.
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On February 20, 2023, the Company entered into an exchange agreement (the “Exchange Agreement #4”) with the Holders in order to amend certain provisions of the 2021 Note Documents, as amended and exchange $100 in aggregate principal amount of each of the Notes, on the basis and subject to the terms and conditions set forth in the Exchange Agreement, for warrants to purchase up to an aggregate of 150,000 shares of the Company’s common stock at an exercise price of $1.00 (the “Warrants” and with respect to the common stock issuable, the “Warrant Shares”) (subject to customary adjustment upon subdivision or combination of the common stock).
The Warrants are immediately exercisable and may be exercised at any time, and from time to time, on or before the second anniversary of the date of issuance. The Warrants include a “blocker” provision that, subject to certain exceptions described in the Warrants, prevents the Investors from exercising the Warrants to the extent such exercise would result in the Investors together with certain affiliates beneficially owning in excess of 4.99% of the common stock outstanding immediately after giving effect to such exercise.
The 2021 Note Documents, as amended, Letter Agreement #4, Letter Agreement #5, and Exchange Agreement #4 are referred to herein as the 2021 Transaction Documents.
During 2023 and pursuant to the 2021 Transaction Documents, investors converted the following amounts of principal of the 2021 Notes: (i) on February 3, 2023, one investor converted a total of approximately $859,000 of principal, interest and redemption premium on the 2021 Notes and the Company issued 416,667 shares of common stock upon conversion; (ii) on February 6, 2023, certain investors converted a total of approximately $207,000 of principal and interest of the 2021 Notes and the Company issued 86,250 shares of common stock upon conversion; (iii) on February 13, 2022, certain investors converted a total of approximately $360,000 of principal and interest of the 2021 Notes and the Company issued 230,000 shares of common stock upon conversion; and on (iv) on February 15, 2023, certain investors converted a total of approximately $146,000 of principal and interest of the 2021 Notes and the Company issued 100,416 shares of common stock upon conversion.
The shares of common stock that have been and may be issued under the 2021 Transaction Documents are being offered and sold in a transaction exempt from registration under the Securities Act of 1933, as amended, in reliance on Section 4(a)(2) thereof and/or Rule 506(b) of Regulation D thereunder. The Company filed a Form D with the SEC on or about November 10, 2021.
The Company filed a Registration Statement on Form S-1 (File No. 333-261564) registering the resale of up to 1,013,684 shares upon exercise of the Notes on December 9, 2021, which was declared effective on January 13, 2022. The shares registered for resale under the Form S-1 have all been resold.
For the full description of the 2021 Transaction Documents, please refer to our Current Reports on Forms 8-K and the exhibits attached thereto as filed with the SEC on November 8, 2021, March 1, 2022, May 2, 2022, May 13, 2022, July 5, 2022, September 23, 2022, December 1, 2022, February 3, 2023, February 8, 2023, and February 21, 2023.
On February 21, 2023, the Company used the proceeds from a new convertible promissory note to repay all principal, interest, and fees of $905,428 owing under the Notes. Upon repayment in full, the 2021 Note Documents, as amended were terminated on February 21, 2023. See below for more information.
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New Convertible Promissory Note
On February 21, 2023, the Company entered into a Securities Purchase Agreement (the “2023 Purchase Agreement”) with an institutional investor (the “Initial Closing”), pursuant to which the Company will sell to the investor a series of senior secured convertible notes of the Company in the aggregate original principal amount of $5,617,978 with an original issue discount of 11% (the “2023 Notes”), and a series of common stock purchase warrants of the Company, which warrants shall be exercisable at a price per share of $1.34 into an aggregate of 3,377,099 shares of common stock of the Company for a term of three years (the “2023 Warrants”). The Company received $5,000,000 in proceeds after the original issue discount of 11% on the principal.
The 2023 Notes are convertible into shares of common stock of the Company at a conversion price of $1.34 (subject to adjustment and a floor price of $0.27). The 2023 Notes are due and payable on the first anniversary of the Issuance Date and bear interest at a rate of 7% per annum, which shall be payable either in cash monthly or by way of inclusion of the interest in the Conversion Amount on each Conversion Date (as defined in the 2023 Notes). The investor is entitled to convert any portion of the outstanding and unpaid Conversion Amount (as defined in the 2023 Notes) at any time or times after the Issuance Date, but we may not effect the conversion of any portion of the 2023 Notes if it would result in any of the investor beneficially owning more than 4.99% of the common stock.
The investor also has an option to enter into an additional promissory note for $5,617,978 and warrants to purchase 3,377,099 shares of common stock, or if certain equity condition are met, the Company may exercise that option (the “Second Closing”) on the same terms as the Initial Closing. The maximum amount of the 2023 Notes therefore, would be $11,235,956 with total 2023 Warrants to purchase 6,754,198 shares of common stock.
Under the applicable rules of The Nasdaq Stock Market LLC (“Nasdaq”), in no event may we issue any shares of common stock upon conversion of the 2023 Notes or otherwise pursuant to the terms of the 2023 Notes if the issuance of such shares of common stock would exceed 19.99% of the shares of the common stock outstanding immediately prior to the execution of the 2023 Purchase Agreement and the 2023 Notes and 2023 Warrants (the “Exchange Cap”), unless we (i) obtain stockholder approval to issue shares of common stock in excess of the Exchange Cap or (ii) obtain a written opinion from our counsel that such approval is not required. In any event, we may not issue any shares of our common under the 2023 Purchase Agreement or 2023 Notes if such issuance or sale would breach any applicable rules or regulations of the Nasdaq.
The 2023 Notes will rank senior to all outstanding and future indebtedness of the Company and its subsidiaries, and will be secured by (i) a security interest in all of the existing and future assets of the Company, as evidenced by the Security and Pledge Agreement entered into between the Company and the investor (the “2023 Security Agreement”; and (ii) a pledge of shares of common stock of the Company held by Scott L. Mathis, President and CEO of the Company, and other entities managed by him, as evidenced by the stockholder pledge agreements entered into between the Company, Mr. Mathis and his entities, and the investor.
In connection with the foregoing, the Company also entered into a Registration Rights Agreement with the investor (the “2023 Registration Rights Agreement”), pursuant to which the Company has agreed to provide certain registration rights with respect to the Registrable Securities (as defined in the 2023 Registration Rights Agreement) under the Securities Act of 1933 (the “1933 Act”) and the rules and regulation promulgated thereunder, and applicable state securities laws. The 2023 Purchase Agreement and the 2023 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.
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EF Hutton, division of Benchmark Investments, Inc. (“EF Hutton”) acted as the exclusive placement agent in connection with the transactions contemplated by the Purchase Agreement, for which the Company will pay to EF Hutton a cash placement fee equal to 6.0% of the amount of capital raised, invested or committed under the 2023 Purchase Agreement and Notes.
The shares of common stock that have been and may be issued under the 2023 Purchase Agreement, 2023 Notes, and 2023 Warrants are being offered and sold in a transaction exempt from registration under the 1933 Act, in reliance on Section 4(a)(2) thereof and/or Rule 506(b) of Regulation D thereunder. The investor represented that it is an “accredited investor,” as defined in Regulation D, and are acquiring such shares under the 2023 Purchase Agreement for investment purposes only and not with a view towards, or for resale in connection with, the public sale or distribution thereof. Accordingly, the shares of common stock that have been and may be issued to the investor under the 2023 Purchase Agreement have not been registered under the 1933 Act or any applicable state securities laws and may not be offered or sold in the United States absent registration or an exemption from registration under the 1933 Act and any applicable state securities laws. The Company filed a Form D with the SEC on March 3, 2023.
The Company filed a Registration Statement on Form S-1 (File No. 333-271305) registering the resale of up to 1,519,454 shares upon conversion of the Notes on April 18, 2023, which was declared effective on April 21, 2023.
On February 21, 2023, the Company used the proceeds from the 2023 Purchase Agreement to repay all principal, interest, and fees of $905,428 owing under the 2021 Notes. Upon repayment in full, the 2021 Transaction Documents were terminated on February 21, 2023.
Equity Line of Credit
Pursuant to the Purchase Agreement with Tumim Capital dated November 8, 2022, the Company requested draw-downs and issued shares of common stock and received gross proceeds of the following for the three months ended March 31, 2023: (i) January 4, 2023, the Company issued 7,500 shares of common stock to Tumim for gross proceeds of $8,734; (ii) on January 9, 2023, the Company issued 7,300 shares of common stock to Tumim for gross proceeds of $8,329; (iii) on January 24, the Company issued 6,700 shares of common stock to Tumim for gross proceeds of $7,949; (iv) on January 31, 2023, the Company issued 6,852 shares of common stock to Tumim for gross proceeds of $7,952; (v) on February 3, 2023, the Company issued 59,357 shares of common stock to Tumim for gross proceeds of $131,437; (vi) on February 8, 2023, the Company issued 63,000 shares of common stock to Tumim for gross proceeds of $98,034; (vii) on February 22, 2023, the Company issued 68,378 shares of common stock to Tumim for gross proceeds of $71,695; (viii) on March 1, 2023, the Company issued 55,983 shares of common stock to Tumim for gross proceeds of $58,093; (ix) on March 7, 2023, the Company issued 57,968 shares of common stock to Tumim for gross proceeds of $56,716; and (x) on March 14, 2023, the Company issued 31,392 shares of common stock to Tumim for gross proceeds of $31,731. No general solicitation was used, and a commission of 8% of the total gross proceeds was paid to Benchmark Investments, Inc. pursuant to the Underwriting Agreement between the Company and Kingswood Capital Markets, a division of Benchmark Investments, Inc., f/k/a EF Hutton, dated February 16, 2021. The Company relied on the exemptions from registration available under Section 4(a)(2) and/or Rule 506(b) of Regulation D of the Securities Act, in connection with the sales. A Form D was filed with the SEC on November 21, 2022.
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Item 3. Defaults upon Senior Securities
None.
Item 4. Mine and Safety Disclosure
Not applicable.
Item 5. Other Information
Promissory Notes
On January 9, 2023, the Company entered into a series of promissory notes for gross proceeds of $185,000 bearing interest at 8% per annum. No payments are due until the maturity date, which is January 9, 2024.
Equity Line of Credit
Pursuant to the Purchase Agreement with Tumim Capital dated November 8, 2022, the Company requested draw-downs and issued shares of common stock and received gross proceeds as follows: (i) April 19, 2023, the Company issued 195,970 shares of common stock to Tumim for gross proceeds of $144,339; and (ii) on May 5, 2023, the Company issued 262,798 shares of common stock to Tumim for gross proceeds of $172,614. No general solicitation was used, and a commission of 8% of the total gross proceeds was paid to Benchmark Investments, Inc. pursuant to the Underwriting Agreement between the Company and Kingswood Capital Markets, a division of Benchmark Investments, Inc., f/k/a EF Hutton, dated February 16, 2021. The Company relied on the exemptions from registration available under Section 4(a)(2) and/or Rule 506(b) of Regulation D of the Securities Act, in connection with the sales. A Form D was filed with the SEC on November 21, 2022.
New Convertible Promissory Note
In connection with entering into the Securities Purchase Agreement dated February 21, 2023 with an institutional investor, pursuant to which the Company will sell to the investor a series of senior secured convertible notes of the Company in the aggregate original principal amount of $5,617,978 (the “Notes”), the Company and holders of the Notes converted the following: (i) on May 2, 2023, a total of $190,000 of principal and interest of the Notes and the Company issued 246,754 shares of common stock upon conversion; (ii) on May 4, 2023, a total of $190,000 of principal and interest of the Notes and the Company issued 243,922 shares of common stock upon conversion; and (iii) on May 5, 2023, a total of $95,000 of principal and interest of the Notes and the Company issued 121,961 shares of common stock upon conversion. A Form D was filed with the SEC on March 3, 2023.
Warrants
In connection with the 2023 Purchase Agreement, all outstanding warrants issued in connection with the 2021 Transaction Documents were repriced at an exercise price of $1.00.
See
also Items 1A and 3 above.
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Item 6. Exhibits
The following documents are being filed with the Commission as exhibits to this Current Report on Form 10-Q.
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| 1. | Incorporated by reference from the Company’s Registration of Securities Pursuant to Section 12(g) on Form 10 dated May 14, 2014. |
| 2. | Incorporated by reference from the Company’s Annual Report on Form 10-K, filed on March 31, 2017. |
| 3. | Incorporated by reference from the Company’s Quarterly Report on Form 10-Q, filed on November 19, 2018. |
| 4. | Incorporated by reference to the Company’s Current Report on Form 8-K filed on July 9, 2019. |
| 5. | Incorporated by reference to the Company’s Current Report on Form 8-K filed on February 18, 2021. |
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| 6. | Incorporated by reference to the Company’s Current Report on Form 8-K filed on February 22, 2021. |
| 7. | Incorporated by reference to the Company’s Current Report on Form 8-K filed on April 1, 2020. |
| 8. | Incorporated by reference to the Company’s Annual Report on Form 10-K filed on April 12, 2021. |
| 9. | Incorporated by reference to the Company’s Quarterly Report on Form 10-Q filed on August 16, 2021. |
| 10. | Incorporated by reference to the Company’s Current Report on Form 8-K filed on November 8, 2021. |
| 11. | Incorporated by reference to the Company’s Current Report on Form 8-K filed on November 17, 2021. |
| 12. | Incorporated by reference to the Company’s Current Report on Form 8-K as filed on March 1, 2022. |
| 13. | Incorporated by reference to the Company’s Annual Report on Form 10-K, filed on April 14, 2022. |
| 14. | Incorporated by reference to the Company’s Current Report on Form 8-K, filed on May 2, 2022. |
| 15. | Incorporated by reference to the Company’s Current Report on Form 8-K, filed on May 13, 2022. |
| 16. | Incorporated by reference to the Company’s Current Report on Form 8-K, filed on June 8, 2022. |
| 17. | Incorporated by reference to the Company’s Current Report on Form 8-K, filed on July 5, 2022. |
| 18. | Incorporated by reference to the Company’s Current Report on Form 8-K, filed on August 31, 2021. |
| 19. | Incorporated by reference to the Company’s Current Report on Form 8-K, filed on November 3, 2022. |
| 20. | Incorporated by reference to the Company’s Current Report on Form 8-K, filed on November 9, 2022. |
| 21. | Incorporated by reference to the Company’s Current Report on Form 8-K, filed on October 24, 2022. |
| 22. | Incorporated by reference to the Company’s Current Report on Form 8-K, filed on September 23, 2022. |
| 23. | Incorporated by reference to the Company’s Amended Current Report on Form 8-K/A, filed on September 8, 2022. |
| 24. | Incorporated by reference to the Company’s Current Report as amended on Form 8-K/A, filed on November 14, 2022. |
| 25. | Incorporated by reference to the Company’s Quarterly Report on Form 10-Q, filed on November 18, 2022. |
| 26. | Incorporated by reference to the Company’s Current Report on Form 8-K, filed on December 1, 2022. |
| 27. | Incorporated by reference to the Company’s Current Report on Form 8-K, filed on December 13, 2022. |
| 28. | Incorporated by reference to the Company’s Current Report on Form 8-K, filed on December 15, 2022. |
| 29. | Incorporated by reference to the Company’s Quarterly Report on Form 10-Q, filed on November 16, 2015. |
| 30. | Incorporated by reference to the Company’s Current Report on Form 8-K, filed on February 3, 2023. |
| 31. | Incorporated by reference to the Company’s Current Report on Form 8-K, filed on February 8, 2023. |
| 32. | Incorporated by reference to the Company’s Current Report on Form 8-K, filed on February 21, 2023. |
| 33. | Incorporated by reference to the Company’s Current Report on Form 8-K, filed on February 21, 2023. |
| 34. | Incorporated by reference to the Company’s Annual Report on Form 10-K, filed on April 17, 2023. |
| * | Filed herewith. |
| ** | Furnished, not filed herewith. |
| 43 |
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| Date: May 19, 2023 | GAUCHO GROUP HOLDINGS, INC. | |
| By: | /s/ Scott L. Mathis | |
| Scott L. Mathis | ||
| Chief Executive Officer | ||
| By: | /s/ Maria Echevarria | |
| Maria Echevarria | ||
| Chief Financial Officer and Chief Operating Officer | ||
| 44 |
Exhibit 31.1
CERTIFICATION PURSUANT TO RULE 13a-14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
I, Scott L. Mathis, certify that:
| 1. | I have reviewed this quarterly report on Form 10-Q of Gaucho Group Holdings, Inc.; | |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; | |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; | |
| 4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: | |
| (a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; | |
| (b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; | |
| (c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and | |
| (d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and | |
| 5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): | |
| (a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and | |
| (b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. | |
| Date: May 19, 2023 | /s/ Scott L. Mathis | |
| Name: | Scott L. Mathis | |
| Title: | Chief Executive Officer | |
| (Principal Executive Officer) |
Exhibit 31.2
CERTIFICATION PURSUANT TO RULE 13a-14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
I, Maria Echevarria, certify that:
| 1. | I have reviewed this quarterly report on Form 10-Q of Gaucho Group Holdings, Inc.; | |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; | |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; | |
| 4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: | |
| (a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; | |
| (b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; | |
| (c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and | |
| (d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and | |
| 5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): | |
| (a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and | |
| (b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. | |
| Date: May 19, 2023 | /s/ Maria Echevarria | |
| Name: | Maria I. Echevarria | |
| Title: | Chief Financial Officer | |
| (Principal Accounting Officer) |
Exhibit 32
CERTIFICATION PURSUANT TO
18 U.S.C. §1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Gaucho Group Holdings, Inc. (the “Company’s Quarterly Report”) on Form 10-Q for the period ended March 31, 2023, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), Scott L. Mathis, as Chief Executive Officer and principal executive officer and Maria I. Echevarria, as Chief Financial Officer and principal financial officer of the Company hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, to the best of the undersigned’s knowledge and belief, that:
| 1. | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and | |
| 2. | Information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of the dates and for the periods expressed in the Report. |
| /s/ Scott L. Mathis | |
| Scott L. Mathis | |
| Chief Executive Officer and Principal Executive Officer | |
| Dated: May 19, 2023 | |
| /s/ Maria I. Echevarria | |
| Maria I. Echevarria | |
| Chief Financial Officer and Principal Financial Officer | |
| Dated: May 19, 2023 |
This certification accompanies this Report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.
Condensed Consolidated Statements of Comprehensive Income (Unaudited) - USD ($) |
3 Months Ended | |
|---|---|---|
Mar. 31, 2023 |
Mar. 31, 2022 |
|
| Income Statement [Abstract] | ||
| Net loss | $ (2,695,148) | $ (2,272,101) |
| Other comprehensive (loss) income: | ||
| Foreign currency translation adjustments | (39,799) | 263,406 |
| Comprehensive loss | (2,734,947) | (2,008,695) |
| Comprehensive loss attributable to non-controlling interests | 72,261 | |
| Comprehensive loss attributable to controlling interests | $ (2,734,947) | $ (1,936,434) |
Condensed Consolidated Statement of Changes in Stockholders' Equity (Unaudited) - USD ($) |
Cumulative Effect, Period of Adoption, Adjustment [Member]
Common Stock [Member]
|
Cumulative Effect, Period of Adoption, Adjustment [Member]
Treasury Stock, Common [Member]
|
Cumulative Effect, Period of Adoption, Adjustment [Member]
Additional Paid-in Capital [Member]
|
Cumulative Effect, Period of Adoption, Adjustment [Member]
AOCI Attributable to Parent [Member]
|
Cumulative Effect, Period of Adoption, Adjustment [Member]
Retained Earnings [Member]
|
Cumulative Effect, Period of Adoption, Adjustment [Member]
Gaucho Group Holdings Stockholders Deficiency [Member]
|
Cumulative Effect, Period of Adoption, Adjustment [Member]
Noncontrolling Interest [Member]
|
Cumulative Effect, Period of Adoption, Adjustment [Member] |
Common Stock [Member] |
Treasury Stock, Common [Member] |
Additional Paid-in Capital [Member] |
AOCI Attributable to Parent [Member] |
Retained Earnings [Member] |
Gaucho Group Holdings Stockholders Deficiency [Member] |
Noncontrolling Interest [Member] |
Total |
||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Balance - January 1, 2022 at Dec. 31, 2021 | $ 8,235 | $ (46,355) | $ 121,633,826 | $ (11,607,446) | $ (95,726,534) | $ 14,261,726 | $ (169,882) | $ 14,091,844 | ||||||||||||
| Beginning balance, shares at Dec. 31, 2021 | 823,496 | 281 | ||||||||||||||||||
| Stock-based compensation: | ||||||||||||||||||||
| Options | 72,700 | 72,700 | 10,354 | 83,054 | ||||||||||||||||
| Common stock issued for 401(k) employer matching | $ 10 | 27,811 | 27,821 | $ 27,821 | ||||||||||||||||
| Common stock issued for 401(k) employer matching, shares | 1,040 | 1,040 | ||||||||||||||||||
| Net loss | (2,199,840) | (2,199,840) | (72,261) | $ (2,272,101) | ||||||||||||||||
| Other comprehensive income | 263,406 | 263,406 | 263,406 | |||||||||||||||||
| Common stock issued for purchase of minority interest | $ 869 | (232,658) | (231,789) | 231,789 | ||||||||||||||||
| Common stock issued for purchase of minority interest, shares | 86,899 | |||||||||||||||||||
| Common stock issued for acquisition of GDS | $ 1,070 | 2,193,583 | 2,194,653 | 2,194,653 | ||||||||||||||||
| Common stock issued for acquisition of GDS, shares | 106,952 | |||||||||||||||||||
| Common stock issued for purchase of domain name | $ 13 | 39,587 | 39,600 | 39,600 | ||||||||||||||||
| Common stock issued for purchase of domain name, shares | 1,250 | |||||||||||||||||||
| Warrants issued for modification of convertible debt principal | 731,856 | 731,856 | 731,856 | |||||||||||||||||
| Ending balance, value at Mar. 31, 2022 | $ 10,197 | $ (46,355) | 124,466,705 | (11,344,040) | (97,926,374) | 15,160,133 | 15,160,133 | |||||||||||||
| Ending balance, shares at Mar. 31, 2022 | 1,019,637 | 281 | ||||||||||||||||||
| Balance - January 1, 2022 at Dec. 31, 2022 | $ 36,534 | $ (46,355) | 139,123,642 | (10,842,569) | (117,479,571) | 10,791,681 | ||||||||||||||
| Beginning balance, shares at Dec. 31, 2022 | 3,653,401 | 281 | ||||||||||||||||||
| Cumulative effect of change upon adoption of ASU 2016-13 | $ (111,582) | $ (111,582) | ||||||||||||||||||
| Stock-based compensation: | ||||||||||||||||||||
| Options | 38,834 | 38,834 | ||||||||||||||||||
| Restricted stock units | $ 39 | 79,383 | 79,422 | |||||||||||||||||
| Stock Issued During Period, Shares, Restricted Stock Award, Gross | 3,890 | |||||||||||||||||||
| Common stock issued for 401(k) employer matching | $ 242 | 32,375 | $ 32,617 | |||||||||||||||||
| Common stock issued for 401(k) employer matching, shares | 24,160 | 24,160 | ||||||||||||||||||
| Shares issued under the New ELOC, net of offering costs | [1] | $ 3,644 | 437,765 | $ 441,409 | ||||||||||||||||
| Stock Issued During Period, Shares, New Issues | 364,430 | |||||||||||||||||||
| Relative fair value of warrants issued with 2023 Notes, net of issuance costs | [2] | 1,506,319 | 1,506,319 | |||||||||||||||||
| Warrants issued for modification of GGH Notes | 134,779 | 134,779 | ||||||||||||||||||
| Reduction of warrant exercise price on new debt issuance | 63,502 | 63,502 | ||||||||||||||||||
| Shares issued upon conversion of debt and interest | $ 8,333 | 1,563,220 | 1,571,553 | |||||||||||||||||
| Shares issued upon conversion, shares | 833,333 | |||||||||||||||||||
| Common stock issued for cash in private placement | $ 5,910 | 585,090 | 591,000 | |||||||||||||||||
| Stock Issued During Period, Shares, Other | 591,000 | |||||||||||||||||||
| Cashless warrant exercise | $ 513 | (513) | ||||||||||||||||||
| Cashless warrant exercise, shares | 51,305 | |||||||||||||||||||
| True-up adjustment | ||||||||||||||||||||
| True-up adjustment, shares | 281 | |||||||||||||||||||
| Net loss | (2,695,148) | (2,695,148) | ||||||||||||||||||
| Other comprehensive income | (39,799) | (39,799) | ||||||||||||||||||
| Ending balance, value at Mar. 31, 2023 | $ 55,215 | $ (46,355) | $ 143,564,396 | $ (10,882,368) | $ (120,286,301) | $ 12,404,587 | ||||||||||||||
| Ending balance, shares at Mar. 31, 2023 | 5,521,800 | 281 | ||||||||||||||||||
| ||||||||||||||||||||
Condensed Consolidated Statement of Changes in Stockholders' Equity (Unaudited) (Parenthetical) |
3 Months Ended |
|---|---|
|
Mar. 31, 2023
USD ($)
| |
| Statement of Stockholders' Equity [Abstract] | |
| Gross proceeds from public offering | $ 480,670 |
| Offering cost | 39,261 |
| Fair value of warrants | 1,609,935 |
| Allocable issuance costs | $ 103,616 |
Condensed Consolidated Statements of Cash Flows (Unaudited) (Parenthetical) |
3 Months Ended |
|---|---|
|
Mar. 31, 2023
USD ($)
| |
| Statement of Cash Flows [Abstract] | |
| Gross proceeds from public offering | $ 480,671 |
| Offering cost | 39,261 |
| Fair value of warrants | 1,609,935 |
| Allocable issuance costs | $ 103,616 |
BUSINESS ORGANIZATION AND NATURE OF OPERATIONS |
3 Months Ended |
|---|---|
Mar. 31, 2023 | |
| Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
| BUSINESS ORGANIZATION AND NATURE OF OPERATIONS | 1. BUSINESS ORGANIZATION AND NATURE OF OPERATIONS
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”), Algodon Global Properties, LLC (“AGP”) and Gaucho Ventures I – Las Vegas, LLC (“GVI”) 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. (“GDS”). GVI is a party to an agreement with LVH Holdings (“LVH”) to develop a project in Las Vegas, Nevada.
On February 3, 2022, the Company acquired additional real estate through the acquisition of 100% ownership in Hollywood Burger Argentina S.R.L., now Gaucho Development S.R.L.
GGH also manufactures, distributes, and sells high-end luxury fashion and accessories through its subsidiary, Gaucho Group, Inc. (“GGI”). GGH held a 79% ownership interest in GGI through March 28, 2022, at which time GGH acquired the remaining 21% ownership interest in GGI. See Non-Controlling Interest, below.
Non-Controlling interest
As a result of a 2019 conversion of certain convertible debt into shares of Gaucho Group, Inc. (“GGI”) common stock, GGI investors obtained a 21% ownership interest in GGI, which was recorded as a non-controlling interest. The profits and losses of GGI for the period from January 1, 2022 through March 28, 2022 are allocated between the controlling interest and the non-controlling interest in the same proportions as their membership interest. On March 28, 2022, the Company issued shares of its common stock to the minority holders of GGI, in exchange for the remaining 21% ownership of GGI. Consequently, the Company owns 100% of the outstanding common stock of GGI.
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
There have been no material changes to the Company’s significant accounting policies as set forth in the Company’s audited consolidated financial statements included in the annual report on Form 10-K for the year ended December 31, 2022, except as disclosed below.
GAUCHO GROUP HOLDINGS, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
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 March 31, 2023 and for the three months ended March 31, 2023 and 2022. The results of operations for the three months ended March 31, 2023 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, 2022, filed with the Securities and Exchange Commission (“SEC”) on April 17, 2023.
On November 4, 2022, the Company effected a reverse stock split in a ratio of 1 share of common stock for 12 issued shares of common stock. As a result of the reverse stock split, prior period shares and per share amounts appearing in the accompanying condensed consolidated financial statements and all references in this Quarterly Report to our common stock, as well as amounts per share of our common stock, have been retroactively restated as if the reverse stock split occurred at the beginning of the period presented.
Going Concern and Management’s Liquidity Plans
The accompanying condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The condensed financial statements do not include any adjustments relating to the recoverability and classification of asset amounts or the classification of liabilities that might be necessary should the company be unable to continue as a going concern.
As of March 31, 2023, the Company had cash and working capital of $2,389,882 and $361,192, respectively. During the three months ended March 31, 2023 and 2022, the Company incurred net losses of $2,695,148 and $2,272,101, respectively, and used cash in operating activities of $2,939,377 and $2,099,246, respectively. Further, as of March 31, 2023, $5,536,404 owed in connection with the Company’s convertible debt matures on February 21, 2024, and $293,110 represents the current portion of the Company’s loans payable which are payable on demand or for which payments are due within twelve months after March 31, 2023. During the three months ended March 31, 2023, the Company funded its operations with proceeds from convertible debt financing of $5,000,000, proceeds of $185,000 from a loan, proceeds of $441,409 from draws on the Company’s equity line of credit, and $591,000 from the sale of common stock.
The Company’s operating needs include the planned costs to operate its business, including amounts required to fund working capital and capital expenditures. Based upon projected revenues and expenses, the Company believes that it may not have sufficient funds to operate for the next twelve months from the date these financial statements are made available. Since inception, the Company’s operations have primarily been funded through proceeds received from 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 aforementioned factors raise substantial doubt about the Company’s ability to continue as a going concern.
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 of $111,792 and $182,922 during the three months ended March 31, 2023 and 2022 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 $2,094,461and $115,338 at March 31, 2023 and December 31, 2022, respectively, of which $193,318 and $115,338, 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, 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:
GAUCHO GROUP HOLDINGS, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
Revenue from the sale of food, wine, agricultural products, clothes and accessories is recorded when the customer obtains control of the goods purchased. Revenues from hospitality and other services are recognized as earned at the point in time that the related service is rendered, and the performance obligation has been satisfied. Revenues from gift card sales are recognized when the card is redeemed by the customer. The Company does not adjust revenue for the portion of gift card values that is not expected to be redeemed (“breakage”) due to the lack of historical data. Revenue from real estate lot sales is recorded when the lot is deeded, and legal ownership of the lot is transferred to the customer.
The timing of the Company’s revenue recognition may differ from the timing of payment by its customers. A receivable is recorded when revenue is recognized prior to payment and the Company has an unconditional right to payment. Alternatively, when payment precedes the provision of the related services, the Company records deferred revenue until the performance obligations are satisfied. Deferred revenues associated with real estate lot sale deposits are recognized as revenues (along with any outstanding balance) when the lot sale closes, and the deed is provided to the purchaser. Other deferred revenues primarily consist of deposits accepted by the Company in connection with agreements to sell barrels of wine, advance deposits received for grapes and other agricultural products, and hotel deposits. Wine barrel and agricultural product advance deposits are recognized as revenues (along with any outstanding balance) when the product is shipped to the purchaser. Hotel deposits are recognized as revenue upon occupancy of rooms, or the provision of services.
Contracts related to the sale of wine, agricultural products and hotel services have an original expected length of less than one year. The Company has elected not to disclose information about remaining performance obligations pertaining to contracts with an original expected length of one year or less, as permitted under the guidance.
As of March 31, 2023 and December 31, 2022, the Company had deferred revenue of $1,466,652 and $1,373,906, respectively, consisting of $1,309,495 and $1,179,654, respectively, associated with real estate lot sale deposits, $82,157 and $44,252, respectively, related to hotel deposits and $75,000 and $150,000, respectively, related to prepaid management fees received.
Basic loss per common share is computed by dividing net loss attributable to GGH common stockholders by the weighted average number of common shares outstanding during the period. Diluted loss per common share is computed by dividing net loss attributable to common stockholders by the weighted average number of common shares outstanding, plus the impact of common shares, if dilutive, resulting from the exercise of outstanding stock options and warrants and the conversion of convertible instruments.
GAUCHO GROUP HOLDINGS, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
Sequencing Policy
Under ASC 815, the Company has adopted a sequencing policy, whereby, in the event that reclassification of contracts from equity to assets or liabilities is necessary pursuant to ASC 815 due to the Company’s inability to demonstrate it has sufficient authorized shares as a result of certain securities with a potentially indeterminable number of shares or the Company’s total potentially dilutive shares exceed the Company’s authorized share limit, shares will be allocated on the basis of the earliest issuance date of potentially dilutive instruments, with the earliest grants receiving the first allocation of shares. Pursuant to ASC 815, issuances of securities granted as compensation in a share-based payment arrangement are not subject to the sequencing policy.
Derivative Instruments
The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period. If the classification changes as a result of events during the period, the contract is reclassified as of the date of the event that caused the reclassification. For derivative financial instruments that are accounted for as liabilities, the derivative instruments are initially recorded at their fair values and are then re-valued at each reporting date. with changes in the fair value reported in the consolidated statements of operations.
Recently Adopted Accounting Pronouncements
In June 2016, the FASB issued ASU No. 2016-13 “Financial Instruments – Credit Losses (Topic 326)” and also issued subsequent amendments to the initial guidance under ASU 2018-19, ASU 2019-04, ASU 2019-05 and ASU 2020-02 (collectively Topic 326). Topic 326 requires the measurement and recognition of expected credit losses for financial assets held at amortized cost. This replaces the existing incurred loss model with an expected loss model and requires the use of forward-looking information to calculate credit loss estimates. The Company adopted the provisions of this ASU on January 1, 2023 using the modified retrospective method for all financial assets measured at amortized cost. Results for reporting periods beginning after December 31, 2022 are presented under Topic 326 while prior period amounts continue to be reported in accordance with previously applicable GAAP. The Company recorded an adjustment to accumulated deficit of $111,582 as of January 1, 2023 for the cumulative effect of adopting Topic 326.
GAUCHO GROUP HOLDINGS, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
Reclassifications
Certain reclassifications have been made to prior period amounts to conform to the current period financial statement presentation.
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MORTGAGES RECEIVABLE |
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| MORTGAGES RECEIVABLE | 3. MORTGAGES RECEIVABLE
The Company offers loans to purchasers in connections with the sale of real estate lots. The loans bear interest at 7.2% per annum and terms generally range from eight to ten years. Principal and interest for each loan is billed and receivable on a monthly basis. The loans are secured by a first mortgage lien on the property purchased by the borrower. Mortgages receivable includes the related interest receivable and are presented at amortized cost, less bad debt allowances, in the condensed consolidated financial statements.
Management evaluates each loan individually on a quarterly basis, to assess collectability and estimate a reserve for past due amounts. The total allowance for uncollectable mortgages as of March 31, 2023 and 2022 was $190,172 and $196,550, respectively. Past due principal amounts of $309,498 and $254,683 are included in mortgages receivable, current as of March 31, 2023 and December 31, 2022, respectively, in accordance with the mortgages’ contractual terms. In the case of each of the past due loans, the Company believes that the value of the collateral exceeds the outstanding balance on the loan, plus accrued interest.
The following represents the maturities of mortgages receivable as of March 31, 2023.
GAUCHO GROUP HOLDINGS, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
As of March 31, 2023 and December 31, 2022, no single borrower had loans outstanding representing more than 10% of the total balance of mortgages receivable.
The Company recorded interest income of $50,344 and $3,852 for the three months ended March 31, 2023 and 2022, respectively. As of March 31, 2023 and December 31, 2022, there is $232,754 and $185,197, respectively, of interest receivable included in mortgages receivable on the accompanying condensed consolidated balance sheets.
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INVENTORY |
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Mar. 31, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Inventory Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| INVENTORY | 4. INVENTORY
Inventory at March 31, 2023 and December 31, 2022 was comprised of the following:
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FAIR VALUE OF FINANCIAL INSTRUMENTS |
3 Months Ended |
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Mar. 31, 2023 | |
| Fair Value Disclosures [Abstract] | |
| FAIR VALUE OF FINANCIAL INSTRUMENTS | 5. FAIR VALUE OF FINANCIAL INSTRUMENTS
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. In determining fair value, the Company often utilizes certain assumptions that market participants would use in pricing the asset or liability, including assumptions about risk and/or the risks inherent in the inputs to the valuation technique. These inputs can be readily observable, market corroborated, or developed by the Company. The fair value hierarchy ranks the quality and reliability of the information used to determine fair values. Financial assets and liabilities carried at fair value are classified and disclosed in one of the following three categories:
Level 1 – Valued based on quoted prices at the measurement date for identical assets or liabilities trading in active markets. Financial instruments in this category generally include actively traded equity securities.
Level 2 – Valued based on (a) quoted prices for similar assets or liabilities in active markets; (b) quoted prices for identical or similar assets or liabilities in markets that are not active; (c) inputs other than quoted prices that are observable for the asset or liability; or (d) from market corroborated inputs. Financial instruments in this category include certain corporate equities that are not actively traded or are otherwise restricted.
Level 3 – Valued based on valuation techniques in which one or more significant inputs is not readily observable. Included in this category are certain corporate debt instruments, certain private equity investments, and certain commitments and guarantees.
GAUCHO GROUP HOLDINGS, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
The carrying amounts of the Company’s short-term financial instruments including cash, accounts receivable, advances and loans to employees, prepaid taxes and expenses, accounts payable, accrued expenses and other liabilities approximate fair value due to the short-term nature of these instruments. The carrying value of the Company’s loans payable, debt obligations and convertible debt obligations approximate fair value, as they bear terms and conditions comparable to market, for obligations with similar terms and maturities.
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ACCRUED EXPENSES |
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| Payables and Accruals [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| ACCRUED EXPENSES | 6. ACCRUED EXPENSES
Accrued expenses are comprised of the following:
GAUCHO GROUP HOLDINGS, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
On November 27, 2020, the Company entered into various payment plans, pursuant to which it agreed to pay its Argentine payroll tax obligations over a period of 60 to 120 months. The current portion of payments due under the plan is $141,880 and $209,938 as of March 31, 2023 and December 31, 2022, respectively, which is included in accrued taxes payable – Argentina, above. The non-current portion of accrued expenses represents payments under the plan that are scheduled to be paid after twelve months. The Company incurred interest expense of $17,304 and $4,487 during the three months ended March 31, 2023 and 2022, respectively, related to these payment plans.
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DEFERRED REVENUE |
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| Revenue from Contract with Customer [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| DEFERRED REVENUE | 7. DEFERRED REVENUE
Deferred revenue is comprised of the following:
The Company accepts deposits in conjunction with agreements to sell real estate building lots at Algodon Wine Estates in the Mendoza wine region of Argentina. These lot sale deposits are generally denominated in U.S. dollars. The Company received deposits in the amount of $129,841 in connection with 5 additional lot sales during the three months ended March 31, 2023. Revenue is recorded when the sale closes, and the deeds are issued.
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LOANS PAYABLE |
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| LOANS PAYABLE | 8. LOANS PAYABLE
The Company’s loans payable are summarized below:
On January 9, 2023, the Company received $185,000 in proceeds on the issuance of a one-year, non-convertible promissory note with a February 20, 2024 maturity date. The note bears interest at a rate of 8% per annum. In addition, during the three months ended March 31, 2023, the Company made principal payments in the amount of $23,215 on the 2018 Loan payable and $9,390 on the 2022 Loan payable.
GAUCHO GROUP HOLDINGS, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
The Company incurred interest expense related to the loans payable in the amount of $16,486 and $4,273 during the three months ended March 31, 2023 and 2022, respectively. As of March 31, 2023 and December 31, 2022, there is accrued interest of $12,716 and $9,437, respectively, related to the Company’s loans payable.
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CONVERTIBLE DEBT OBLIGATIONS |
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| CONVERTIBLE DEBT OBLIGATIONS | 9. CONVERTIBLE DEBT OBLIGATIONS
Amounts owed pursuant to the Company’s convertible debt obligations are as follows:
GGH Convertible Notes
On February 2, 2023, the Company and the holders of the remaining GGH Notes entered into a fourth letter agreement (“Letter Agreement #4). Pursuant to Letter Agreement #4, the parties agreed to reduce the conversion price of the GGH Notes to the lower of: (i) the closing sale price on the trading day immediately preceding the conversion date; and (ii) the average closing sale price of the common stock for the five trading days immediately preceding the conversion date. The conversion price is not subject to a floor price. Between February 3 and February 15, 2023, the holders elected to convert $1,571,553 in principal and interest, of which $1,335,439, $124,049, and $112,065 was principal, interest and premium paid on conversion, into shares of common stock at prices ranging from $1.45 and $2.40. The premium paid on conversion of the GGH Notes was recorded as a loss on extinguishment.
On February 8, 2023, the Company and the holders of the remaining GGH Notes entered into a fifth letter agreement (“Letter Agreement #5). Pursuant to Letter Agreement #5, the parties agreed to extend the maturity date of the notes from February 9, 2023 to February 28, 2023.
On February 20, 2023, the Company entered into another exchange agreement (the “Exchange Agreement #4”) with the remaining holders of the GGH Notes, pursuant to which warrants for the purchase up to an aggregate of 150,000 shares of the Company’s common stock at an exercise price of $1.00 were issued as consideration for extending maturity date in connection with Letter Agreement #5. The warrants have a grant date fair value of $134,779 and expire on the second anniversary of the date of issuance. Because the value of the new warrants was deemed to be substantial as compared to the $662,470 remaining principal of the GGH Notes, the transaction was accounted for as an extinguishment of old notes which were replaced with the new note. The fair value of the warrants was recorded as a loss on extinguishment and is reflected under Other Expense (Income) in the accompanying condensed consolidated statement of operations.
GAUCHO GROUP HOLDINGS, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
On February 21, the Company redeemed the remaining GGH Notes for $905,428, which includes the $662,470 of principal, $118,909 of accrued interest and $124,049 of redemption premium, the latter of which was charged to extinguishment loss.
Securities Purchase Agreement
On February 21, 2023, the Company entered into a securities purchase agreement (the “SPA”) with an institutional investor (the “Investor”), pursuant to which the Company received proceeds of $5,000,000 in exchange for senior secured convertible notes of the Company in the aggregate original principal amount of $5,617,978 (the “2023 Notes”), and three-year common stock purchase warrants exercisable into an aggregate of 3,377,099 shares of common stock of the Company at an exercise price equal to $1.34 (the “2023 Note Warrants”).
Pursuant to the SPA, the exercise price of certain warrants for the purchase of 62,500 common shares exercisable at $21.00 per share and warrants for the purchase of 43,814 shares exercisable at $6.00 per share was reduced to $1.00 per share. The increase in the value of the warrants in the aggregate amount of $63,502 as a result of the reduction in exercise price was recorded as debt discount on the 2023 Notes.
The convertible notes (the “2023 Notes”) are convertible into shares of common stock of the Company at a conversion price equal to the lower of (i) $1.34 (subject to adjustment for standard anti-dilution events, the non-exempt issuance of common stock for less than $1.34 per share and the issuance of additional variable price securities); (ii) the trading price on the day immediately prior to conversion or (iii) the average trading price of the Company’s common stock for the 5 days preceding conversion (collectively the “Conversion Price”), subject to a floor price of $0.27. If the Conversion Price in effect on the date of conversion is less than $0.27, 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 (the “Cash True Up Provision”).
The 2023 Notes mature on the first anniversary of the issuance date (the “Maturity Date”) and bear interest at a rate of 7% per annum, which is payable either in cash monthly, or by way of inclusion in the accrued interest in the conversion amount on the conversion date. Interest includes a make-whole amount equal to the additional interest that would accrue if the entire 2023 Notes principal remained outstanding through the Maturity Date.
The 2023 Notes are redeemable at the Company’s election, so long as the Company is not in default, at the greater of (a) 115% of the conversion amount, or (b) the amount equal to the shares issuable upon conversion times the greatest closing price from the redemption notice date through the date the Company makes the redemption payment. The minimum redemption amount is $500,000 and the Company can only deliver one redemption notice in a 20-day period.
Upon an event of default, the 2023 Notes the Conversion Price is reduced to the lesser of (a) $1.34 (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 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 $0.27. In addition, the Investor may require the Company to redeem the 2023 Notes using the same formula that would be used for a Company-initiated redemption, described above.
In addition to other terms, conditions and rights, both the Company and the institutional investor have the right to initiate additional closings for up to $5 million of cash for additional 2023 Notes and warrants.
Pursuant to the terms of the 2023 Notes, the Company must pay, convert or redeem one quarter of the initial principal, plus any outstanding interest and make-whole amount by each three-month anniversary of the issuance date.
During the three months ended March 31, 2023, the Company made redemption payments in the aggregate amount of $100,388 related to the 2023 Notes, which included principal repayments of $81,584, accrued interest of $5,710 and redemption premiums of $13,094.
GAUCHO GROUP HOLDINGS, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
The Company incurred financing costs of $321,803 in connection with the SPA, of which $218,187 was allocated to the 2023 Notes and recorded as debt discount and $103,616 was allocated to the 2023 Note Warrants and charged against additional paid-in capital.
Upon the issuance of the 2023 Notes, the Company recorded a debt discount at issuance in the aggregate amount $2,509,601, consisting of (i) the $617,978 difference between the aggregate principal amount of the 2023 Notes and the cash proceeds received, (ii) financing costs in the aggregate amount of $218,187, (iii) value of warrant modification of $63,502, and (iv) the $1,609,935 relative fair value of the 2023 Note Warrants. The debt discount is being amortized using the effective interest method over the term of the 2023 Notes.
Interest Expense on Convertible Debt Obligations
The Company incurred total interest expense of $566,041, and $749,229 related to its convertible debt obligations during the three months ended March 31, 2023 and 2022, respectively. Interest expense during the three months ended March 31, 2023 and 2022 consists of (i) $117,336 and $113,396, respectively, of interest accrued at 7% per annum; (ii) make-whole amounts of $86,539 and $84,393, respectively, and (iii) amortization of debt discount in the amount of $362,166 and $551,440, respectively, during the three months ended March 31, 2023. During the three months ended March 31, 2023, accrued interest in the amount of $160,782 was paid in cash and accrued interest in the amount of $124,049 was converted into common stock, such that interest accrued on convertible debt is $0 as of March 31, 2023.
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SEGMENT DATA |
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| Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| SEGMENT DATA | 10. SEGMENT DATA
The Company’s financial position and results of operations are classified into three reportable segments, consistent with how the CODM makes decisions about resource allocation and assesses the Company’s performance.
GAUCHO GROUP HOLDINGS, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
The following tables present segment information for the three months ended March 31, 2023 and 2022:
The following tables present segment information as of March 31, 2023 and December 31, 2022:
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RELATED PARTY TRANSACTIONS |
3 Months Ended |
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Mar. 31, 2023 | |
| Related Party Transactions [Abstract] | |
| RELATED PARTY TRANSACTIONS | 11. RELATED PARTY TRANSACTIONS
Accounts Receivable – Related Parties
As of March 31, 2023 and December 31, 2022 the Company had accounts receivable – related parties of $ and $ net of allowances for expected credits loss of $ and $, respectively, representing the net realizable value of advances made to, and expense sharing obligations receivable from, separate entities under common management. During the three months ended March 31, 2023 and 2022, the Company made advances in the amount of $85,644 and $36,000, respectively, to the related entities, and received repayments in the amount of $130,000 and $120,000, respectively, from the related entities. Receivables recorded in the amount of $175,426 and $228,226 in connection with an expense sharing agreement during the three months ended March 31, 2023 and 2022 are discussed below.
The Company recorded credit losses of $19,431 and $0 during the three months ended March 31, 2023 and 2022, respectively, which is reflected in the general and administrative expenses on the on the accompanying unaudited consolidated statements of operations.
GAUCHO GROUP HOLDINGS, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
Expense Sharing
On April 1, 2010, the Company entered into an agreement with a Related Party to share expenses such as office space, support staff, professional services, and other operating expenses (the “Related Party ESA”). During the three months ended March 31, 2023 and 2022, the Company recorded a contra-expense of $175,426 and $228,226, respectively, related to the reimbursement of general and administrative expenses as a result of the agreement.
Management Fee Income
The Company earns management fees of $75,000 per quarter, from LVH. A member of the Company’s board of directors is the managing member of SLVH, LLC, and holds a 20% membership interest in SLVH. SLVH owns 88% of the limited liability interest of LVH.
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BENEFIT CONTRIBUTION PLAN |
3 Months Ended |
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Mar. 31, 2023 | |
| Retirement Benefits [Abstract] | |
| BENEFIT CONTRIBUTION PLAN | 12. BENEFIT CONTRIBUTION PLAN
The Company sponsors a 401(k) profit-sharing plan (“401(k) Plan”) that covers substantially all of its employees in the United States. The 401(k) Plan provides for a discretionary annual contribution, which is allocated in proportion to compensation. In addition, each participant may elect to contribute to the 401(k) Plan by way of a salary deduction.
A participant is always fully vested in their account, including the Company’s contribution. For the three months ended March 31, 2023 and 2022, the Company recorded a charge associated with its contribution of $5,908 and $18,976, respectively. This charge has been included as a component of general and administrative expenses in the accompanying condensed consolidated statements of operations. The Company issues shares of its common stock to settle these obligations based on the fair value of its common stock on the date the shares are issued. During the three months ended March 31, 2023, the Company issued shares at $ per share in satisfaction of $32,617 of 401(k) contribution liabilities. During the three months ended March 31, 2022, the Company issued shares at $ per share in satisfaction of $27,821 of 401(k) contribution liabilities.
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STOCKHOLDERS’ EQUITY |
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| Equity [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| STOCKHOLDERS’ EQUITY | 13. STOCKHOLDERS’ EQUITY
Common Stock
On February 2, 2023, the Company issued shares of common stock upon the cashless exercise of 134,730 warrants at exercise prices ranging from $2.40 and $3.82.
On February 10, 2023, the Company sold shares of common stock and warrants to purchase 147,750 shares at an exercise price of $1.00 for aggregate proceeds of $591,000. The warrants are immediately exercisable and expire two years from the date of issuance.
During the three months ended March 31, 2023, the Company sold an aggregate of shares of the Company’s common stock for gross proceeds of $480,670 less placement agent fees of $39,261 pursuant to a Common Stock Purchase Agreement (the “New ELOC”).
See Note 9 – Convertible Debt Obligations for additional details regarding common shares issued during the three months ended March 31, 2023.
GAUCHO GROUP HOLDINGS, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
Accumulated Other Comprehensive Loss
For three months ended March 31, 2023 and 2022, the Company recorded a loss of $(39,799) and a gain of $263,406, respectively, of 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 three months ended March 31, 2023 is presented below:
See Note 9 – Convertible Debt Obligations and Note 13 – Stockholder’s Equity (Common Stock) for additional details regarding warrants issued during the three months ended March 31, 2023.
GAUCHO GROUP HOLDINGS, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
Restricted Stock Units
On January 23, 2023, the Company granted restricted stock units (“RSUs”) to certain employees and advisors for their service, of which RSUs vested on the grant date and 3,055 RSUs will vest on each of the next two anniversaries of the date of the grant.
During the three months ended March 31, 2023 and 2022, the Company recorded stock-based compensation expense of $ and $, respectively, related to the amortization of RSUs.
Stock Options
During the three months ended March 31, 2023 and 2022, the Company recorded stock-based compensation expense of $ and $, respectively, related to stock options for the purchase of GGH common stock, and recorded stock-based compensation expense of $ and $, respectively, related to options for the purchase of GGI common stock. Stock-based compensation expense is reflected in general and administrative expenses (classified in the same manner as the grantees’ wage compensation) in the accompanying condensed consolidated statements of operations. As of March 31, 2023, there was $ of unrecognized stock-based compensation expense related to stock option grants that will be amortized over a weighted average period of years.
GAUCHO GROUP HOLDINGS, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
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COMMITMENTS AND CONTINGENCIES |
3 Months Ended |
|---|---|
Mar. 31, 2023 | |
| Commitments and Contingencies Disclosure [Abstract] | |
| COMMITMENTS AND CONTINGENCIES | 14. COMMITMENTS AND CONTINGENCIES
Legal Matters
The Company is involved in litigation and arbitrations from time to time in the ordinary course of business. After consulting legal counsel, the Company does not believe that the outcome of any such pending or threatened litigation will have a material adverse effect on its financial condition or results of operations. However, as is inherent in legal proceedings, there is a risk that an unpredictable decision adverse to the Company could be reached. The Company records legal costs associated with loss contingencies as incurred. Settlements are accrued when, and if, they become probable and estimable.
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LEASES |
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| LEASES | 15. LEASES
On April 8, 2021, GGI entered into a lease agreement to lease a retail space in Miami, Florida for 7 years, which expires May 1, 2028. As of March 31, 2023, the lease had a remaining term of approximately 5.1 years. Lease payments begin at $26,758 per month and escalate 3% every year over the duration of the lease. The Company was granted rent abatements of 15% for the first year of the lease term, and 10% for the second and third year of the lease term. The Company was required to pay a $56,130 security deposit.
As of March 31, 2023, the Company had no leases that were classified as a financing lease.
Total operating lease expenses was $82,965 during the three months ended March 31, 2023 and 2022. Lease expenses are recorded in general and administrative expenses on the accompanying condensed consolidated statements of operations.
Supplemental cash flow information related to leases was as follows:
GAUCHO GROUP HOLDINGS, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
Future minimum lease commitments are as follows:
The Company is the lessor of a building and land that it purchased in connection with the acquisition of GDS, pursuant to an operating lease which expires on August 31, 2031. At the end of the leases, the lessee may enter into a new lease or return the asset, which would be available to the Company for releasing. The Company recorded lease revenue of $10,628 and $3,745 during the three months ended March 31, 2023 and 2022, respectively, related to this lease agreement.
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SUBSEQUENT EVENTS |
3 Months Ended |
|---|---|
Mar. 31, 2023 | |
| Subsequent Events [Abstract] | |
| SUBSEQUENT EVENTS | 16. SUBSEQUENT EVENTS
During the period subsequent to March 31, 2023 and prior to filing, the Company sold an additional 458,768 shares, in aggregate, of the Company’s common stock for gross proceeds of $316,953 less placement agent fees of $25,356 pursuant to the New ELOC. The Company used $144,818 of the proceeds to repay principal, interest and redemption premiums in amount of $118,487, $8,294 and $18,037 in connection with the 2023 Notes (See Note 9 – Convertible Debt).
Between May 1 and May 5, 2023, an aggregate of $475,000, consisting of principal and interest in the amount of $443,925 and $31,075, respectively, was converted into common shares at conversion prices ranging from $0.77 to $0.78.
Foreign Currency Exchange Rates
The Argentine Peso to United States Dollar exchange rate was 229.02, 208.98 and 175.74 at May 11, 2023, March 31, 2023, and December 31, 2022, respectively.
The British pound to United States dollar exchange rate was 0.7999, 0.8085 and 0.8264 at May 11, 2023, March 31, 2023, and December 31, 2022, respectively. |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) |
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| Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Basis of Presentation | 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 March 31, 2023 and for the three months ended March 31, 2023 and 2022. The results of operations for the three months ended March 31, 2023 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, 2022, filed with the Securities and Exchange Commission (“SEC”) on April 17, 2023.
On November 4, 2022, the Company effected a reverse stock split in a ratio of 1 share of common stock for 12 issued shares of common stock. As a result of the reverse stock split, prior period shares and per share amounts appearing in the accompanying condensed consolidated financial statements and all references in this Quarterly Report to our common stock, as well as amounts per share of our common stock, have been retroactively restated as if the reverse stock split occurred at the beginning of the period presented.
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| Going Concern and Management’s Liquidity Plans | Going Concern and Management’s Liquidity Plans
The accompanying condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The condensed financial statements do not include any adjustments relating to the recoverability and classification of asset amounts or the classification of liabilities that might be necessary should the company be unable to continue as a going concern.
As of March 31, 2023, the Company had cash and working capital of $2,389,882 and $361,192, respectively. During the three months ended March 31, 2023 and 2022, the Company incurred net losses of $2,695,148 and $2,272,101, respectively, and used cash in operating activities of $2,939,377 and $2,099,246, respectively. Further, as of March 31, 2023, $5,536,404 owed in connection with the Company’s convertible debt matures on February 21, 2024, and $293,110 represents the current portion of the Company’s loans payable which are payable on demand or for which payments are due within twelve months after March 31, 2023. During the three months ended March 31, 2023, the Company funded its operations with proceeds from convertible debt financing of $5,000,000, proceeds of $185,000 from a loan, proceeds of $441,409 from draws on the Company’s equity line of credit, and $591,000 from the sale of common stock.
The Company’s operating needs include the planned costs to operate its business, including amounts required to fund working capital and capital expenditures. Based upon projected revenues and expenses, the Company believes that it may not have sufficient funds to operate for the next twelve months from the date these financial statements are made available. Since inception, the Company’s operations have primarily been funded through proceeds received from 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 aforementioned factors raise substantial doubt about the Company’s ability to continue as a going concern.
GAUCHO GROUP HOLDINGS, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
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| Highly Inflationary Status in Argentina | Highly Inflationary Status in Argentina
The Company recorded gains on foreign currency transactions of $111,792 and $182,922 during the three months ended March 31, 2023 and 2022 respectively, as a result of the net monetary liability position of its Argentine subsidiaries.
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| Concentrations | 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 $2,094,461and $115,338 at March 31, 2023 and December 31, 2022, respectively, of which $193,318 and $115,338, respectively, represents cash held in Argentine bank accounts.
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| Revenue Recognition | 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, 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:
GAUCHO GROUP HOLDINGS, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
Revenue from the sale of food, wine, agricultural products, clothes and accessories is recorded when the customer obtains control of the goods purchased. Revenues from hospitality and other services are recognized as earned at the point in time that the related service is rendered, and the performance obligation has been satisfied. Revenues from gift card sales are recognized when the card is redeemed by the customer. The Company does not adjust revenue for the portion of gift card values that is not expected to be redeemed (“breakage”) due to the lack of historical data. Revenue from real estate lot sales is recorded when the lot is deeded, and legal ownership of the lot is transferred to the customer.
The timing of the Company’s revenue recognition may differ from the timing of payment by its customers. A receivable is recorded when revenue is recognized prior to payment and the Company has an unconditional right to payment. Alternatively, when payment precedes the provision of the related services, the Company records deferred revenue until the performance obligations are satisfied. Deferred revenues associated with real estate lot sale deposits are recognized as revenues (along with any outstanding balance) when the lot sale closes, and the deed is provided to the purchaser. Other deferred revenues primarily consist of deposits accepted by the Company in connection with agreements to sell barrels of wine, advance deposits received for grapes and other agricultural products, and hotel deposits. Wine barrel and agricultural product advance deposits are recognized as revenues (along with any outstanding balance) when the product is shipped to the purchaser. Hotel deposits are recognized as revenue upon occupancy of rooms, or the provision of services.
Contracts related to the sale of wine, agricultural products and hotel services have an original expected length of less than one year. The Company has elected not to disclose information about remaining performance obligations pertaining to contracts with an original expected length of one year or less, as permitted under the guidance.
As of March 31, 2023 and December 31, 2022, the Company had deferred revenue of $1,466,652 and $1,373,906, respectively, consisting of $1,309,495 and $1,179,654, respectively, associated with real estate lot sale deposits, $82,157 and $44,252, respectively, related to hotel deposits and $75,000 and $150,000, respectively, related to prepaid management fees received.
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| Net Loss per Common Share |
Basic loss per common share is computed by dividing net loss attributable to GGH common stockholders by the weighted average number of common shares outstanding during the period. Diluted loss per common share is computed by dividing net loss attributable to common stockholders by the weighted average number of common shares outstanding, plus the impact of common shares, if dilutive, resulting from the exercise of outstanding stock options and warrants and the conversion of convertible instruments.
GAUCHO GROUP HOLDINGS, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
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| Sequencing Policy | Sequencing Policy
Under ASC 815, the Company has adopted a sequencing policy, whereby, in the event that reclassification of contracts from equity to assets or liabilities is necessary pursuant to ASC 815 due to the Company’s inability to demonstrate it has sufficient authorized shares as a result of certain securities with a potentially indeterminable number of shares or the Company’s total potentially dilutive shares exceed the Company’s authorized share limit, shares will be allocated on the basis of the earliest issuance date of potentially dilutive instruments, with the earliest grants receiving the first allocation of shares. Pursuant to ASC 815, issuances of securities granted as compensation in a share-based payment arrangement are not subject to the sequencing policy.
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| Derivative Instruments | Derivative Instruments
The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period. If the classification changes as a result of events during the period, the contract is reclassified as of the date of the event that caused the reclassification. For derivative financial instruments that are accounted for as liabilities, the derivative instruments are initially recorded at their fair values and are then re-valued at each reporting date. with changes in the fair value reported in the consolidated statements of operations.
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| Recently Adopted Accounting Pronouncements | Recently Adopted Accounting Pronouncements
In June 2016, the FASB issued ASU No. 2016-13 “Financial Instruments – Credit Losses (Topic 326)” and also issued subsequent amendments to the initial guidance under ASU 2018-19, ASU 2019-04, ASU 2019-05 and ASU 2020-02 (collectively Topic 326). Topic 326 requires the measurement and recognition of expected credit losses for financial assets held at amortized cost. This replaces the existing incurred loss model with an expected loss model and requires the use of forward-looking information to calculate credit loss estimates. The Company adopted the provisions of this ASU on January 1, 2023 using the modified retrospective method for all financial assets measured at amortized cost. Results for reporting periods beginning after December 31, 2022 are presented under Topic 326 while prior period amounts continue to be reported in accordance with previously applicable GAAP. The Company recorded an adjustment to accumulated deficit of $111,582 as of January 1, 2023 for the cumulative effect of adopting Topic 326.
GAUCHO GROUP HOLDINGS, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
|
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| Reclassifications | Reclassifications
Certain reclassifications have been made to prior period amounts to conform to the current period financial statement presentation. |
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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| SCHEDULE OF DISAGGREGATION OF REVENUE | The following table summarizes the revenue recognized in the Company’s condensed consolidated statements of operations:
|
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| SCHEDULE OF ANTIDILUTIVE SECURITIES EXCLUDED FROM COMPUTATION OF EARNINGS PER SHARE |
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
MORTGAGES RECEIVABLE (Tables) |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Mortgages Receivable | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| SCHEDULE OF MATURITIES OF MORTGAGES RECEIVABLE | The following represents the maturities of mortgages receivable as of March 31, 2023.
|
INVENTORY (Tables) |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Inventory Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| SCHEDULE OF INVENTORY | Inventory at March 31, 2023 and December 31, 2022 was comprised of the following:
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
ACCRUED EXPENSES (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Payables and Accruals [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| SCHEDULE OF ACCRUED EXPENSES | Accrued expenses are comprised of the following:
|
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DEFERRED REVENUE (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Revenue from Contract with Customer [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| SCHEDULE OF DEFERRED REVENUES | Deferred revenue is comprised of the following:
|
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LOANS PAYABLE (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Loans Payable | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| SCHEDULE OF LOANS PAYABLE | The Company’s loans payable are summarized below:
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CONVERTIBLE DEBT OBLIGATIONS (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| SCHEDULE OF CONVERTIBLE NOTES | Amounts owed pursuant to the Company’s convertible debt obligations are as follows:
|
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SEGMENT DATA (Tables) |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Segment Reporting [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| SCHEDULE OF SEGMENT INFORMATION | The following tables present segment information for the three months ended March 31, 2023 and 2022:
The following tables present segment information as of March 31, 2023 and December 31, 2022:
|
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STOCKHOLDERS’ EQUITY (Tables) |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Equity [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| SUMMARY OF WARRANTS ACTIVITY | A summary of warrant activity during the three months ended March 31, 2023 is presented below:
|
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| SCHEDULE OF WARRANTS OUTSTANDING AND EXERCISABLE |
|
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| SCHEDULE OF RESTRICTED STOCK UNITS AND WEIGHTED AVERAGE GRANT DATE FAIR VALUES |
|
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| SCHEDULE OF STOCK OPTION ACTIVITY |
|
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LEASES (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Leases [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| SCHEDULE OF SUPPLEMENTAL CASH FLOWS INFORMATION RELATED TO LEASES | Supplemental cash flow information related to leases was as follows:
|
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| SCHEDULE OF FUTURE MINIMUM LEASE COMMITMENT | Future minimum lease commitments are as follows:
|
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BUSINESS ORGANIZATION AND NATURE OF OPERATIONS (Details Narrative) - shares |
Feb. 02, 2023 |
Mar. 28, 2022 |
Feb. 03, 2022 |
|---|---|---|---|
| Consolidation, Less than Wholly Owned Subsidiary, Parent Ownership Interest, Effects of Changes, Net [Line Items] | |||
| Stock issued during period, shares, new issues | 51,305 | ||
| Gaucho Group, Inc [Member] | |||
| Consolidation, Less than Wholly Owned Subsidiary, Parent Ownership Interest, Effects of Changes, Net [Line Items] | |||
| Ownership percentage by noncontrolling owners | 21.00% | ||
| Stock issued during period, shares, new issues | 86,899 | ||
| Ownership percentage by noncontrolling on outstanding common stock | 100.00% | ||
| Gaucho Development S.R.L. [Member] | |||
| Consolidation, Less than Wholly Owned Subsidiary, Parent Ownership Interest, Effects of Changes, Net [Line Items] | |||
| Ownership percentage | 100.00% | ||
| Gaucho Group, Inc [Member] | |||
| Consolidation, Less than Wholly Owned Subsidiary, Parent Ownership Interest, Effects of Changes, Net [Line Items] | |||
| Ownership percentage | 79.00% |
SCHEDULE OF DISAGGREGATION OF REVENUE (Details) - USD ($) |
3 Months Ended | |
|---|---|---|
Mar. 31, 2023 |
Mar. 31, 2022 |
|
| Product Information [Line Items] | ||
| Total revenues | $ 447,767 | $ 425,597 |
| Real Estate [Member] | ||
| Product Information [Line Items] | ||
| Total revenues | 184,658 | |
| Hotel Rooms and Events [Member] | ||
| Product Information [Line Items] | ||
| Total revenues | 245,687 | 139,099 |
| Restaurants [Member] | ||
| Product Information [Line Items] | ||
| Total revenues | 79,018 | 17,270 |
| Winemaking [Member] | ||
| Product Information [Line Items] | ||
| Total revenues | 29,823 | 26,809 |
| Agricultural [Member] | ||
| Product Information [Line Items] | ||
| Total revenues | 27,498 | |
| Golf Tennis and Other [Member] | ||
| Product Information [Line Items] | ||
| Total revenues | 27,857 | 25,101 |
| Clothes and Accessories [Member] | ||
| Product Information [Line Items] | ||
| Total revenues | $ 65,382 | $ 5,162 |
SCHEDULE OF ANTIDILUTIVE SECURITIES EXCLUDED FROM COMPUTATION OF EARNINGS PER SHARE (Details) - shares |
3 Months Ended | |||||||
|---|---|---|---|---|---|---|---|---|
Mar. 31, 2023 |
Mar. 31, 2022 |
|||||||
| Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||||||||
| Total potentially dilutive shares | 11,219,453 | 4,483,053 | ||||||
| Share-Based Payment Arrangement, Option [Member] | ||||||||
| Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||||||||
| Total potentially dilutive shares | 34,806 | 561,027 | ||||||
| Warrant [Member] | ||||||||
| Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||||||||
| Total potentially dilutive shares | 4,839,254 | 2,024,166 | ||||||
| Restricted Stock Units (RSUs) [Member] | ||||||||
| Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||||||||
| Total potentially dilutive shares | 517,610 | |||||||
| Convertible Debt [Member] | ||||||||
| Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||||||||
| Total potentially dilutive shares | 5,827,783 | [1] | 1,897,860 | [2] | ||||
| ||||||||
SCHEDULE OF ANTIDILUTIVE SECURITIES EXCLUDED FROM COMPUTATION OF EARNINGS PER SHARE (Details) (Parenthetical) - USD ($) |
Mar. 31, 2023 |
Dec. 31, 2022 |
Mar. 31, 2022 |
|---|---|---|---|
| Short-Term Debt [Line Items] | |||
| Convertible debt outstanding | $ 5,536,394 | $ 1,997,909 | |
| Conversion price | $ 3.50 | ||
| Convertible Debt [Member] | |||
| Short-Term Debt [Line Items] | |||
| Convertible debt outstanding | $ 5,536,394 | $ 6,642,510 | |
| Conversion price | $ 0.95 |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details Narrative) - USD ($) |
3 Months Ended | ||||
|---|---|---|---|---|---|
Mar. 31, 2023 |
Mar. 31, 2022 |
Jan. 01, 2023 |
Dec. 31, 2022 |
Dec. 31, 2021 |
|
| Cash | $ 2,389,882 | ||||
| Working capital deficit | 361,192 | ||||
| Net loss | 2,695,148 | $ 2,272,101 | |||
| Net cash used in operating activities | 2,939,377 | 2,099,246 | |||
| Convertible debt | 5,536,404 | ||||
| Loans payable, current portion | 293,110 | $ 164,656 | |||
| Proceeds from issuance of convertible debt | 5,000,000 | ||||
| Proceeds from loans | 185,000 | ||||
| Proceeds from draws on equity line of credit | 441,409 | ||||
| Proceeds from sale of common stock | 591,000 | ||||
| Gain on foreign currency translation | 111,792 | 182,922 | |||
| Cash, FDIC insured amount | 250,000 | ||||
| Cash uninsured amount | 2,094,461 | 115,338 | |||
| Deferred revenue | 1,466,652 | 1,373,906 | |||
| Adjustment to accumulated deficit | 12,404,587 | 15,160,133 | 10,791,681 | $ 14,091,844 | |
| Retained Earnings [Member] | |||||
| Net loss | 2,695,148 | 2,199,840 | |||
| Adjustment to accumulated deficit | (120,286,301) | $ (97,926,374) | (117,479,571) | $ (95,726,534) | |
| Cumulative Effect, Period of Adoption, Adjustment [Member] | Retained Earnings [Member] | |||||
| Adjustment to accumulated deficit | $ 111,582 | ||||
| Hotel [Member] | |||||
| Deferred revenue | 82,157 | 44,252 | |||
| Management Fee [Member] | |||||
| Deferred revenue | 75,000 | 150,000 | |||
| Real Estate Lot Sales Deposit [Member] | |||||
| Deferred revenue | 1,309,495 | 1,179,654 | |||
| Argentine Bank [Member] | |||||
| Cash, FDIC insured amount | $ 193,318 | $ 115,338 | |||
| Convertible Debt [Member] | |||||
| Convertible debt maturity date | Feb. 21, 2024 | ||||
| Loans payable, current portion | $ 293,110 | ||||
SCHEDULE OF MATURITIES OF MORTGAGES RECEIVABLE (Details) |
Mar. 31, 2023
USD ($)
|
|---|---|
| Mortgages Receivable | |
| April 1 through December 31, 2023 | $ 807,654 |
| 2024 | 381,532 |
| 2025 | 409,927 |
| 2026 | 440,436 |
| 2027 | 473,215 |
| 2028 | 480,227 |
| Thereafter | 1,093,286 |
| Gross Receivable | 4,086,276 |
| Less: Allowance | (190,172) |
| Net Receivable | $ 3,896,104 |
MORTGAGES RECEIVABLE (Details Narrative) - USD ($) |
3 Months Ended | ||
|---|---|---|---|
Mar. 31, 2023 |
Mar. 31, 2022 |
Dec. 31, 2022 |
|
| Short-Term Debt [Line Items] | |||
| Allowance for uncollectable mortgages | $ 190,172 | $ 196,550 | |
| Interest income | 50,344 | $ 3,852 | |
| Mortgage Receivable [Member] | |||
| Short-Term Debt [Line Items] | |||
| Mortgages receivable | $ 309,498 | $ 254,683 | |
| Mortgages receivable, percent | 10.00% | 10.00% | |
| Interest receivable | $ 232,754 | $ 185,197 | |
| Mortgages Loan [Member] | |||
| Short-Term Debt [Line Items] | |||
| Interest rate | 7.20% | ||
| Interest term | terms generally range from eight to ten years | ||
SCHEDULE OF INVENTORY (Details) - USD ($) |
Mar. 31, 2023 |
Dec. 31, 2022 |
|---|---|---|
| Inventory Disclosure [Abstract] | ||
| Vineyard in process | $ 711,418 | $ 516,096 |
| Wine in process | 757,500 | 797,862 |
| Finished wine | 31,552 | 40,735 |
| Clothes and accessories | 498,524 | 534,269 |
| Total | $ 1,998,994 | $ 1,888,962 |
SCHEDULE OF ACCRUED EXPENSES (Details) - USD ($) |
Mar. 31, 2023 |
Dec. 31, 2022 |
|---|---|---|
| Payables and Accruals [Abstract] | ||
| Accrued compensation and payroll taxes | $ 634,385 | $ 652,943 |
| Accrued taxes payable - Argentina | 273,226 | 270,239 |
| Accrued interest | 12,716 | 78,368 |
| Other accrued expenses | 294,589 | 663,266 |
| Accrued expenses, current | 1,214,916 | 1,664,816 |
| Accrued payroll tax obligations, non-current | 51,951 | 66,018 |
| Total accrued expenses | $ 1,266,867 | $ 1,730,834 |
ACCRUED EXPENSES (Details Narrative) - USD ($) |
3 Months Ended | |||
|---|---|---|---|---|
Nov. 27, 2020 |
Mar. 31, 2023 |
Mar. 31, 2022 |
Dec. 31, 2022 |
|
| Supplier Finance Program [Line Items] | ||||
| Accrued payroll taxes, current | $ 634,385 | $ 652,943 | ||
| Interest expenses | 602,292 | $ 758,072 | ||
| ARGENTINA | ||||
| Supplier Finance Program [Line Items] | ||||
| Accrued payroll taxes, current | 141,880 | $ 209,938 | ||
| Interest expenses | $ 17,304 | $ 4,487 | ||
| Minimum [Member] | ||||
| Supplier Finance Program [Line Items] | ||||
| Employee tax obligations, term | 60 months | |||
| Maximum [Member] | ||||
| Supplier Finance Program [Line Items] | ||||
| Employee tax obligations, term | 120 months | |||
SCHEDULE OF DEFERRED REVENUES (Details) - USD ($) |
Mar. 31, 2023 |
Dec. 31, 2022 |
|---|---|---|
| Disaggregation of Revenue [Line Items] | ||
| Total | $ 1,466,652 | $ 1,373,906 |
| Real Estate [Member] | ||
| Disaggregation of Revenue [Line Items] | ||
| Total | 1,309,495 | 1,179,654 |
| Management Fee [Member] | ||
| Disaggregation of Revenue [Line Items] | ||
| Total | 75,000 | 150,000 |
| Other Deferred Revenue [Member] | ||
| Disaggregation of Revenue [Line Items] | ||
| Total | $ 82,157 | $ 44,252 |
DEFERRED REVENUE (Details Narrative) - USD ($) |
Mar. 31, 2023 |
Dec. 31, 2022 |
|---|---|---|
| Disaggregation of Revenue [Line Items] | ||
| Deferred revenue | $ 1,466,652 | $ 1,373,906 |
| Real Estate [Member] | ||
| Disaggregation of Revenue [Line Items] | ||
| Deferred revenue | $ 129,841 |
SCHEDULE OF LOANS PAYABLE (Details) - USD ($) |
Mar. 31, 2023 |
Dec. 31, 2022 |
|---|---|---|
| Short-Term Debt [Line Items] | ||
| Total Loans Payable | $ 386,651 | $ 256,321 |
| Less: current portion | 293,110 | 164,656 |
| Loans Payable, non-current | 93,541 | 91,665 |
| Economic Injury Disaster Loan [Member] | ||
| Short-Term Debt [Line Items] | ||
| Total Loans Payable | 93,541 | 93,541 |
| 2018 Loan [Member] | ||
| Short-Term Debt [Line Items] | ||
| Total Loans Payable | 74,178 | 111,137 |
| 2022 Loan [Member] | ||
| Short-Term Debt [Line Items] | ||
| Total Loans Payable | 33,932 | 51,643 |
| 2023 Notes [Member] | ||
| Short-Term Debt [Line Items] | ||
| Total Loans Payable | $ 185,000 |
LOANS PAYABLE (Details Narrative) - USD ($) |
3 Months Ended | |||
|---|---|---|---|---|
Jan. 09, 2023 |
Mar. 31, 2023 |
Mar. 31, 2022 |
Dec. 31, 2022 |
|
| Short-Term Debt [Line Items] | ||||
| Proceeds from loans payable | $ 144,818 | |||
| Principal payments of loans | 744,054 | |||
| Interest expense | 16,486 | $ 4,273 | ||
| Accrued interest | 12,716 | $ 9,437 | ||
| 2018 Loan [Member] | ||||
| Short-Term Debt [Line Items] | ||||
| Principal payments of loans | 23,215 | |||
| 2022 Loan [Member] | ||||
| Short-Term Debt [Line Items] | ||||
| Principal payments of loans | $ 9,390 | |||
| Non-Convertible Promissory Note [Member] | ||||
| Short-Term Debt [Line Items] | ||||
| Proceeds from loans payable | $ 185,000 | |||
| Maturity date | Feb. 20, 2024 | |||
| Bears interest rate | 8.00% | |||
SCHEDULE OF CONVERTIBLE NOTES (Details) - USD ($) |
3 Months Ended | |
|---|---|---|
Mar. 31, 2023 |
Mar. 31, 2022 |
|
| Short-Term Debt [Line Items] | ||
| Balance at January 1, 2023 | $ 1,997,909 | |
| Debt Discount, beginning balance | (6,450) | |
| Convertible debt net of discount, beginning balance | 1,991,459 | |
| Notes issued | 5,617,978 | |
| Debt issued | 5,000,000 | |
| Debt principal converted to common stock: | (1,335,439) | |
| Debt Discount, Debt principal converted to common stock | ||
| Convertible debt net of discount, Debt principal converted to common stock | (1,335,439) | |
| Principal repayments | (744,054) | |
| Debt Discount, Principal repayments | ||
| Convertible debt net of discount, Principal repayments | (744,054) | |
| Amortization of debt discount | ||
| Debt Discount, Amortization of debt discount | 362,166 | |
| Convertible debt net of discount, Amortization of debt discount | 362,166 | |
| Balance at March 31, 2023 | 5,536,394 | |
| Debt Discount, ending balance | (2,153,885) | |
| Convertible debt net of discount, ending balance | 3,382,509 | |
| GGH Convertible Notes Payable [Member] | ||
| Short-Term Debt [Line Items] | ||
| Balance at January 1, 2023 | 1,997,909 | |
| Notes issued | ||
| Debt principal converted to common stock: | (1,335,439) | |
| Principal repayments | (662,470) | |
| Amortization of debt discount | ||
| Balance at March 31, 2023 | ||
| Twenty Twenty Three Convertible Notes Payable [Member] | ||
| Short-Term Debt [Line Items] | ||
| Balance at January 1, 2023 | ||
| Notes issued | 5,617,978 | |
| Debt principal converted to common stock: | ||
| Principal repayments | (81,584) | |
| Amortization of debt discount | ||
| Balance at March 31, 2023 | 5,536,394 | |
| Convertible Notes Payable Debt Discount [Member] | ||
| Short-Term Debt [Line Items] | ||
| Debt issued | (2,509,601) | |
| Convertible Notes Payable Net [Member] | ||
| Short-Term Debt [Line Items] | ||
| Debt issued | $ 3,108,377 | |
CONVERTIBLE DEBT OBLIGATIONS (Details Narrative) - USD ($) |
1 Months Ended | 3 Months Ended | ||||||||
|---|---|---|---|---|---|---|---|---|---|---|
Feb. 02, 2023 |
Feb. 21, 2023 |
Feb. 15, 2023 |
Mar. 31, 2023 |
Mar. 31, 2022 |
Feb. 20, 2023 |
Feb. 10, 2023 |
Dec. 31, 2022 |
|||
| Short-Term Debt [Line Items] | ||||||||||
| Interest expense | $ 16,486 | $ 4,273 | ||||||||
| Conversion price per share | $ 3.50 | |||||||||
| Warrant purchase | 134,730 | 147,750 | ||||||||
| Warrant exercise price | $ 1.00 | |||||||||
| Principal amount | 5,536,394 | $ 1,997,909 | ||||||||
| Accrued interest | 12,716 | 78,368 | ||||||||
| Redemption premium | 18,037 | |||||||||
| Proceeds from issuance of debt | 144,818 | |||||||||
| Proceeds from the issuance of convertible debt | 5,000,000 | |||||||||
| Allocable issuance costs | 103,616 | |||||||||
| Warrant value modification | 1,609,935 | |||||||||
| Interest Expense | 602,292 | 758,072 | ||||||||
| Amortization of Debt Discount (Premium) | 362,166 | 551,441 | ||||||||
| Stock Issued During Period, Value, New Issues | [1] | 441,409 | ||||||||
| Exchange Agreement [Member] | ||||||||||
| Short-Term Debt [Line Items] | ||||||||||
| Warrant purchase | 150,000 | |||||||||
| Warrant exercise price | $ 1.00 | |||||||||
| Grant date value of warrants | $ 134,779 | |||||||||
| Principal amount | $ 662,470 | |||||||||
| Securities Purchase Agreement [Member] | ||||||||||
| Short-Term Debt [Line Items] | ||||||||||
| Warrant purchase | 62,500 | |||||||||
| Warrant exercise price | $ 21.00 | |||||||||
| Grant date value of warrants | $ 63,502 | |||||||||
| Proceeds from issuance of debt | 5,000,000 | |||||||||
| Proceeds from the issuance of convertible debt | $ 5,617,978 | |||||||||
| Warrant exercise price increase | $ 6.00 | |||||||||
| Warrant exercise price decrease | $ 1.00 | |||||||||
| Financing costs | 321,803 | |||||||||
| Minimum [Member] | ||||||||||
| Short-Term Debt [Line Items] | ||||||||||
| Warrant exercise price | $ 2.40 | |||||||||
| Minimum [Member] | Securities Purchase Agreement [Member] | ||||||||||
| Short-Term Debt [Line Items] | ||||||||||
| Warrant purchase | 43,814 | |||||||||
| Maximum [Member] | ||||||||||
| Short-Term Debt [Line Items] | ||||||||||
| Warrant exercise price | $ 3.82 | |||||||||
| GGH Convertible Notes Payable [Member] | ||||||||||
| Short-Term Debt [Line Items] | ||||||||||
| Debt instrument conversion amount | $ 1,571,553 | |||||||||
| Debt intrument principal amount | 1,335,439 | |||||||||
| Interest expense | $ 124,049 | |||||||||
| Principal amount | $ 662,470 | $ 112,065 | ||||||||
| Debt instrument conversion shares | 833,333 | |||||||||
| Principal amount | $ 1,997,909 | |||||||||
| Debt intrument redeemed value | 905,428 | |||||||||
| Accrued interest | 118,909 | 0 | ||||||||
| Redemption premium | $ 124,049 | |||||||||
| Interest Expense, Other | 86,539 | 84,393 | ||||||||
| Stock Issued During Period, Value, New Issues | 124,049 | |||||||||
| GGH Convertible Notes Payable [Member] | Minimum [Member] | ||||||||||
| Short-Term Debt [Line Items] | ||||||||||
| Conversion price per share | $ 1.45 | |||||||||
| GGH Convertible Notes Payable [Member] | Maximum [Member] | ||||||||||
| Short-Term Debt [Line Items] | ||||||||||
| Conversion price per share | $ 2.40 | |||||||||
| 2023 Notes [Member] | ||||||||||
| Short-Term Debt [Line Items] | ||||||||||
| Conversion price per share | $ 0.27 | |||||||||
| Grant date value of warrants | $ 1,609,935 | |||||||||
| Proceeds from the issuance of convertible debt | $ 5,000,000 | |||||||||
| Conversion percentage | 115.00% | |||||||||
| Minimum redemption value | $ 500,000 | |||||||||
| Debt Instrument, Unamortized Premium | 13,094 | |||||||||
| Debt Instrument, Unamortized Discount | 2,509,601 | |||||||||
| Debt instrument discount current | 617,978 | |||||||||
| Proceeds from financing costs | 218,187 | |||||||||
| Warrant value modification | $ 63,502 | |||||||||
| 2023 Notes [Member] | Securities Purchase Agreement [Member] | ||||||||||
| Short-Term Debt [Line Items] | ||||||||||
| Warrant purchase | 3,377,099 | |||||||||
| Warrant exercise price | $ 1.34 | |||||||||
| 2023 Notes [Member] | ||||||||||
| Short-Term Debt [Line Items] | ||||||||||
| Principal amount | 81,584 | |||||||||
| Debt intrument redeemed value | 100,388 | |||||||||
| Accrued interest | 5,710 | |||||||||
| Financing costs | 218,187 | |||||||||
| Allocable issuance costs | 103,616 | |||||||||
| 2023 Notes [Member] | Securities Purchase Agreement [Member] | ||||||||||
| Short-Term Debt [Line Items] | ||||||||||
| Conversion price per share | $ 1.34 | |||||||||
| Bears interest | 7.00% | |||||||||
| Convertible Notes Payable [Member] | ||||||||||
| Short-Term Debt [Line Items] | ||||||||||
| Interest Expense | 566,041 | 749,229 | ||||||||
| Debt Instrument, Increase, Accrued Interest | $ 117,336 | 113,396 | ||||||||
| Debt Instrument, Interest Rate, Stated Percentage | 7.00% | |||||||||
| Amortization of Debt Discount (Premium) | $ 362,166 | $ 551,440 | ||||||||
| [custom:PaymentForInterest] | $ 160,782 | |||||||||
| ||||||||||
SCHEDULE OF SEGMENT INFORMATION (Details) - USD ($) |
3 Months Ended | ||
|---|---|---|---|
Mar. 31, 2023 |
Mar. 31, 2022 |
Dec. 31, 2022 |
|
| Segment Reporting Information [Line Items] | |||
| Revenues | $ 447,767 | $ 425,597 | |
| Revenues from Foreign Operations | 382,385 | 420,435 | |
| Loss from Operations | (1,946,005) | (1,775,803) | |
| Total Property and Equipment, net | 7,563,369 | $ 7,621,257 | |
| Total Property and Equipment, net in Foreign Countries | 6,238,314 | 6,234,856 | |
| Total Assets | 21,009,341 | 18,692,985 | |
| Real Estate Development [Member] | |||
| Segment Reporting Information [Line Items] | |||
| Revenues | 382,385 | 420,435 | |
| Revenues from Foreign Operations | 382,385 | 420,435 | |
| Loss from Operations | (334,004) | (385,853) | |
| Total Property and Equipment, net | 6,238,314 | 6,234,856 | |
| Total Property and Equipment, net in Foreign Countries | 6,238,314 | 6,234,856 | |
| Total Assets | 14,127,549 | 13,504,914 | |
| Fashion (e-commerce) [Member] | |||
| Segment Reporting Information [Line Items] | |||
| Revenues | 65,382 | 5,162 | |
| Revenues from Foreign Operations | |||
| Loss from Operations | (492,199) | (358,533) | |
| Total Property and Equipment, net | 1,325,055 | 1,369,205 | |
| Total Property and Equipment, net in Foreign Countries | |||
| Total Assets | 3,514,330 | 3,522,415 | |
| Corporate Segment [Member] | |||
| Segment Reporting Information [Line Items] | |||
| Revenues | |||
| Revenues from Foreign Operations | |||
| Loss from Operations | (1,119,802) | $ (1,031,417) | |
| Total Property and Equipment, net | 17,196 | ||
| Total Property and Equipment, net in Foreign Countries | |||
| Total Assets | $ 3,367,462 | $ 1,665,656 | |
RELATED PARTY TRANSACTIONS (Details Narrative) - USD ($) |
3 Months Ended | ||
|---|---|---|---|
Mar. 31, 2023 |
Mar. 31, 2022 |
Dec. 31, 2022 |
|
| Related Party Transaction [Line Items] | |||
| Advance in amount | $ 85,644 | $ 36,000 | |
| Repayments of related party | 130,000 | 120,000 | |
| Entitled to receive reimbursement expenses | 175,426 | 228,226 | |
| Credit losses | 19,431 | 0 | |
| Management fees | $ 75,000 | ||
| SLVH, LLC [Member] | |||
| Related Party Transaction [Line Items] | |||
| Limited liability interest percentage | 88.00% | ||
| LVH Holdings LLC [Member] | |||
| Related Party Transaction [Line Items] | |||
| Ownership percentage | 20.00% | ||
| General and Administrative Expense [Member] | |||
| Related Party Transaction [Line Items] | |||
| Entitled to receive reimbursement expenses | $ 175,426 | $ 228,226 | |
| Related Party [Member] | |||
| Related Party Transaction [Line Items] | |||
| Accounts receivable- related parties | 1,179,121 | $ 1,115,816 | |
| Accounts receivable, allowance doubtful accounts | $ 470,516 | $ 339,503 | |
BENEFIT CONTRIBUTION PLAN (Details Narrative) - USD ($) |
3 Months Ended | |
|---|---|---|
Mar. 31, 2023 |
Mar. 31, 2022 |
|
| Retirement Benefits [Abstract] | ||
| Defined contribution plan cost recognized | $ 5,908 | $ 18,976 |
| Shares issued for benefit contribution plan | 24,160 | 1,040 |
| Shares issued, price per share | $ 1.35 | $ 26.76 |
| Shares issued value for benefit contribution plan | $ 32,617 | $ 27,821 |
SUMMARY OF WARRANTS ACTIVITY (Details) - Warrants [Member] |
3 Months Ended |
|---|---|
|
Mar. 31, 2023
USD ($)
$ / shares
shares
| |
| Accumulated Other Comprehensive Income (Loss) [Line Items] | |
| Number of Warrants Outstanding, Beginning Balance | shares | 1,299,135 |
| Weighted Average Exercise Price, Outstanding Beginning Balance | $ / shares | $ 5.77 |
| Number of Warrants, Issued | shares | 3,674,849 |
| Weighted Average Exercise Price, Issued | $ / shares | $ 1.31 |
| Number of Warrants, Exercised | shares | (134,730) |
| Weighted Average Exercise Price, Exercised | $ / shares | $ 3.36 |
| Number of Warrants, Expired | shares | |
| Weighted Average Exercise Price, Expired | $ / shares | |
| Number of Warrants, Cancelled | shares | |
| Weighted Average Exercise Price, Cancelled | $ / shares | |
| Number of Warrants Outstanding, Ending Balance | shares | 4,839,254 |
| Weighted Average Exercise Price, Outstanding Ending Balance | $ / shares | $ 2.15 |
| Weighted Average Remaining Life in Years Outstanding Ending | 2 years 3 months 18 days |
| Intrinsic Value Outstanding Ending | $ | |
| Number of Shares, Warrants Exercisable Ending | shares | 4,839,254 |
| Weighted Average Exercise Price Per Share Exercisable Ending | $ / shares | $ 2.15 |
| Weighted Average Remaining Life in Years Ending | 2 years 3 months 18 days |
| Intrinsic Value Outstanding Ending | $ |
SCHEDULE OF WARRANTS OUTSTANDING AND EXERCISABLE (Details) - $ / shares |
3 Months Ended | |
|---|---|---|
Mar. 31, 2023 |
Feb. 10, 2023 |
|
| Share-Based Payment Arrangement, Option, Exercise Price Range [Line Items] | ||
| Warrants outstanding, exercise price | $ 1.00 | |
| Warrants Outstanding, Number of Warrants | 4,839,254 | |
| Warrants Exercisable, Weighted Average Remaining Life in Years | 2 years 3 months 18 days | |
| Warrants Exercisable, Number of Warrants | 4,839,254 | |
| Range of Exercise Price One [Member] | ||
| Share-Based Payment Arrangement, Option, Exercise Price Range [Line Items] | ||
| Warrants outstanding, exercise price | $ 1.00 | |
| Warrants Outstanding Exercisable, Description | Common Stock | |
| Warrants Outstanding, Number of Warrants | 404,064 | |
| Warrants Exercisable, Weighted Average Remaining Life in Years | 1 year 9 months 18 days | |
| Warrants Exercisable, Number of Warrants | 404,064 | |
| Range of Exercise Price Two [Member] | ||
| Share-Based Payment Arrangement, Option, Exercise Price Range [Line Items] | ||
| Warrants outstanding, exercise price | $ 1.34 | |
| Warrants Outstanding Exercisable, Description | Common Stock | |
| Warrants Outstanding, Number of Warrants | 3,377,099 | |
| Warrants Exercisable, Weighted Average Remaining Life in Years | 2 years 10 months 24 days | |
| Warrants Exercisable, Number of Warrants | 3,377,099 | |
| Range of Exercise Price Three [Member] | ||
| Share-Based Payment Arrangement, Option, Exercise Price Range [Line Items] | ||
| Warrants outstanding, exercise price | $ 3.82 | |
| Warrants Outstanding Exercisable, Description | Common Stock | |
| Warrants Outstanding, Number of Warrants | 454,588 | |
| Warrants Exercisable, Weighted Average Remaining Life in Years | 4 months 24 days | |
| Warrants Exercisable, Number of Warrants | 454,588 | |
| Range of Exercise Price Four [Member] | ||
| Share-Based Payment Arrangement, Option, Exercise Price Range [Line Items] | ||
| Warrants outstanding, exercise price | $ 6.00 | |
| Warrants Outstanding Exercisable, Description | Common Stock | |
| Warrants Outstanding, Number of Warrants | 602,225 | |
| Warrants Exercisable, Weighted Average Remaining Life in Years | 8 months 12 days | |
| Warrants Exercisable, Number of Warrants | 602,225 | |
| Range of Exercise Price Five [Member] | ||
| Share-Based Payment Arrangement, Option, Exercise Price Range [Line Items] | ||
| Warrants outstanding, exercise price | $ 90.00 | |
| Warrants Outstanding Exercisable, Description | Common Stock | |
| Warrants Outstanding, Number of Warrants | 1,278 | |
| Warrants Exercisable, Weighted Average Remaining Life in Years | 2 years 10 months 24 days | |
| Warrants Exercisable, Number of Warrants | 1,278 |
SCHEDULE OF RESTRICTED STOCK UNITS AND WEIGHTED AVERAGE GRANT DATE FAIR VALUES (Details) - $ / shares |
3 Months Ended | |
|---|---|---|
Jan. 23, 2023 |
Mar. 31, 2023 |
|
| Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | ||
| Number of restricted stock units, granted | ||
| Number of restricted stock units, ending balance | 34,806 | |
| Restricted Stock Units (RSUs) [Member] | ||
| Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | ||
| Number of restricted stock units, beginning balance | 511,500 | |
| Weight average grant date value, beginning balance | $ 1.16 | |
| Number of restricted stock units, granted | 10,000 | 10,000 |
| Weight average grant date value, granted | $ 1.31 | |
| Number of restricted stock units, vested | (3,890) | (3,890) |
| Weight average grant date value, vested | $ 1.31 | |
| Number of restricted stock units, ending balance | 517,610 | |
| Weight average grant date value, ending balance | $ 1.16 |
SCHEDULE OF STOCK OPTION ACTIVITY (Details) |
3 Months Ended |
|---|---|
|
Mar. 31, 2023
USD ($)
$ / shares
shares
| |
| Equity [Abstract] | |
| Number of options, outstanding, beginning balance | shares | 40,612 |
| Weighted average exercise price, outstanding beginning balance | $ / shares | $ 85.35 |
| Number of options, granted | shares | |
| Weighted average exercise price, granted | $ / shares | |
| Number of options, exercised | shares | |
| Weighted average exercise price, exercised | $ / shares | |
| Number of options, expired | shares | (5,806) |
| Weighted average exercise price, expired | $ / shares | $ 138.60 |
| Number of options, forfeited | shares | |
| Weighted average exercise price, forfeited | $ / shares | |
| Number of restricted stock units, ending balance | shares | 34,806 |
| Weighted average exercise price, outstanding ending balance | $ / shares | $ 76.47 |
| Weighted average remaining life in years, outstanding ending balance | 1 year 4 months 24 days |
| Intrinsic value, outstanding ending balance | $ | |
| Number of options, exercisable ending | shares | 29,698 |
| Weighted average exercise price, exercisable ending | $ / shares | $ 75.78 |
| Weighted average remaining life in years, exercisable | 1 year 2 months 12 days |
| Intrinsic value, exercisable ending | $ |
STOCKHOLDERS’ EQUITY (Details Narrative) - USD ($) |
2 Months Ended | 3 Months Ended | |||
|---|---|---|---|---|---|
Feb. 02, 2023 |
Jan. 23, 2023 |
Feb. 10, 2023 |
Mar. 31, 2023 |
Mar. 31, 2022 |
|
| Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | |||||
| Stock Issued During Period, Shares, New Issues | 51,305 | ||||
| Valuation of warrants issued along with debt | 134,730 | 147,750 | |||
| Exercise price of warrants | $ 1.00 | ||||
| Sale of equity | 591,000 | ||||
| Proceeds on issuance of stock and warrants | $ 591,000 | ||||
| Sale of equity | 364,430 | ||||
| Proceeds from the sale of stock | $ 480,670 | ||||
| Offering costs | 39,261 | ||||
| Gain on foreign currency translation adjustments | 39,799 | $ (263,406) | |||
| Gain on foreign currency translation adjustments | $ (39,799) | 263,406 | |||
| Number of restricted stock units, granted | |||||
| Restricted stock units issued | $ 3,055 | ||||
| Stock based expense of stock options | $ 79,422 | 0 | |||
| Stock based compensation expense | 38,834 | 83,054 | |||
| Stock Incentive Plan [Member] | |||||
| Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | |||||
| Unrecognized expense | $ 130,753 | ||||
| Weighted average term | 1 year 3 months 18 days | ||||
| Gaucho Group, Inc [Member] | |||||
| Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | |||||
| Stock based expense of stock options | $ 0 | 10,354 | |||
| Stock based compensation expense | $ 38,834 | $ 72,700 | |||
| Restricted Stock Units (RSUs) [Member] | |||||
| Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | |||||
| Number of restricted stock units, granted | 10,000 | 10,000 | |||
| Number of restricted stock units, vested | 3,890 | 3,890 | |||
| Minimum [Member] | |||||
| Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | |||||
| Exercise price of warrants | $ 2.40 | ||||
| Maximum [Member] | |||||
| Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | |||||
| Exercise price of warrants | $ 3.82 | ||||
SCHEDULE OF SUPPLEMENTAL CASH FLOWS INFORMATION RELATED TO LEASES (Details) - USD ($) |
3 Months Ended | |
|---|---|---|
Mar. 31, 2023 |
Mar. 31, 2022 |
|
| Leases [Abstract] | ||
| Operating cash flows from operating leases | $ 56,449 | $ 53,325 |
| Operating leases | ||
| Remaining lease term | 5 years 1 month 6 days | 6 years 1 month 6 days |
| Operating leases | 7.00% | 7.00% |
SCHEDULE OF FUTURE MINIMUM LEASE COMMITMENT (Details) - USD ($) |
Mar. 31, 2023 |
Dec. 31, 2022 |
|---|---|---|
| Leases [Abstract] | ||
| For the period April 1 through December 31, 2023 | $ 229,191 | |
| 2024 | 336,102 | |
| 2025 | 357,881 | |
| 2026 | 368,617 | |
| 2027 | 365,004 | |
| 2028 | 120,463 | |
| Total future minimum lease payments | 1,777,258 | |
| Less: imputed interest | (293,970) | |
| Net future minimum lease payments | 1,483,288 | |
| Less: operating lease liabilities, current portion | (208,590) | $ (202,775) |
| Operating lease liabilities, non-current portion | $ 1,274,698 | $ 1,328,408 |
LEASES (Details Narrative) - USD ($) |
3 Months Ended | ||
|---|---|---|---|
Apr. 08, 2021 |
Mar. 31, 2023 |
Mar. 31, 2022 |
|
| Leases [Abstract] | |||
| Lease term of contract | 7 years | ||
| Lease term | May 01, 2028 | ||
| Lease remaining term | 5 years 1 month 6 days | ||
| Lease description | Lease payments begin at $26,758 per month and escalate 3% every year over the duration of the lease. The Company was granted rent abatements of 15% for the first year of the lease term, and 10% for the second and third year of the lease term | ||
| Security deposit | $ 56,130 | ||
| Operating lease expenses | $ 82,965 | $ 82,965 | |
| Operating lease income | $ 10,628 | $ 3,745 | |
SUBSEQUENT EVENTS (Details Narrative) |
3 Months Ended | |||
|---|---|---|---|---|
|
May 05, 2023
USD ($)
$ / shares
shares
|
Mar. 31, 2023
USD ($)
|
Dec. 31, 2022
USD ($)
|
Mar. 31, 2022
$ / shares
|
|
| Subsequent Event [Line Items] | ||||
| Proceeds from the sale of stock | $ 480,670 | |||
| Proceeds from issuance of debt | 144,818 | |||
| Debt conversion, original debt, amount | 118,487 | |||
| Debt instrument, periodic payment, interest | 8,294 | |||
| Redemption Premium | 18,037 | |||
| Debt instrument, face amount | $ 5,536,394 | $ 1,997,909 | ||
| Conversion price per share | $ / shares | $ 3.50 | |||
| Argentine Peso United States Currency Exchange Rate [Member] | ||||
| Subsequent Event [Line Items] | ||||
| Foreign currency exchange rate, translation | 208.98 | 175.74 | ||
| British Pound United States Currency Exchange Rate [Member] | ||||
| Subsequent Event [Line Items] | ||||
| Foreign currency exchange rate, translation | 0.8085 | 0.8264 | ||
| Subsequent Event [Member] | ||||
| Subsequent Event [Line Items] | ||||
| Debt instrument, periodic payment, interest | $ 31,075 | |||
| Debt instrument, face amount | 475,000 | |||
| Debt instrument, periodic payment, principal | $ 443,925 | |||
| Debt Conversion | shares | 612,637 | |||
| Subsequent Event [Member] | Minimum [Member] | ||||
| Subsequent Event [Line Items] | ||||
| Conversion price per share | $ / shares | $ 0.77 | |||
| Subsequent Event [Member] | Maximum [Member] | ||||
| Subsequent Event [Line Items] | ||||
| Conversion price per share | $ / shares | $ 0.78 | |||
| Common Stock [Member] | ||||
| Subsequent Event [Line Items] | ||||
| Proceeds from the sale of stock | $ 316,953 | |||
| Professional Fees | $ 25,356 |