Gaucho 10Q 2024 Q3 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

FORM 10-Q

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

For the quarterly period ended September 30, 2024

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

For the transition period from _____________ to ___________________.

Commission file number: 001-40075

Gaucho Group Holdings, Inc.

(Exact name of registrant as specified in its charter)

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

1111 Lincoln Road, Suite 500

Miami Beach, FL 33139

(Address of principal executive offices)

212-739-7700

(Registrant’s telephone number, including area code)

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

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

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

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

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

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

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

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

As of February 12, 2025, there were 945,115 shares of common stock outstanding.

GAUCHO GROUP HOLDINGS, INC. AND SUBSIDIARIES

TABLE OF CONTENTS

PART I

FINANCIAL INFORMATION

ITEM 1. Financial Statements

Condensed Consolidated Balance Sheets as of September 30, 2024 (unaudited) and December 31, 2023	1

Unaudited Condensed Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2024 and 2023	3

Unaudited Condensed Consolidated Statements of Comprehensive Loss for the Three and Nine Months Ended September 30, 2024 and 2023	4

Unaudited Condensed Consolidated Statement of Changes in Stockholders’ Equity for the Three and Nine Months Ended September 30, 2024	5

Unaudited Condensed Consolidated Statement of Changes in Stockholders’ Equity for the Three and Nine Months Ended September 30, 2023	6

Unaudited Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2024 and 2023	7

Notes to Condensed Consolidated Financial Statements (unaudited)	9

ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	34

ITEM 3. Quantitative and Qualitative Disclosures About Market Risk	42

ITEM 4. Controls and Procedures	43

PART II

OTHER INFORMATION

ITEM 1. Legal Proceedings	44

ITEM 1A. Risk Factors	45

ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds	48

ITEM 3. Defaults Upon Senior Securities	49

ITEM 4. Mine Safety Disclosures	49

ITEM 5. Other Information	49

ITEM 6. Exhibits	51

Signatures	52

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

GAUCHO GROUP HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

	September 30,		December 31,
	2024		2023
	(unaudited)
Assets
Current Assets
Cash	$	213,383	$	427,961
Accounts receivable, net of allowance of $7,482 and $6,649 at September 30, 2024 and December 31, 2023, respectively		76,310		41,261
Accounts receivable - related parties, net of allowance of $1,769,082 and $1,517,836 at September 30, 2024 and December 31, 2023, respectively.		-		-
Accounts receivable, net of allowance		-		-
Mortgages receivable, net of allowance of $500,125 and $357,505 at September 30, 2024 and December 31, 2023, respectively		777,314		653,496
Mortgages receivable, related party, net of allowance of $18,781 and $12,044 at September 30, 2024 and December 31, 2023, respectively		37,103		22,016
Inventory, net of allowance of $277,223 and $186,736 at September 30, 2024 and December 31, 2023, respectively		2,040,176		2,031,880
Inventory deposits		-		161,531
Real estate lots held for sale		560,869		615,585
Prepaid expenses and other current assets		816,012		343,199
Total Current Assets		4,521,167		4,296,929
Long Term Assets
Mortgages receivable, non-current portion, net of allowance of $1,108,496 and $1,024,560 at September 30, 2024 and December 31, 2023, respectively		1,379,165		1,776,086
Mortgages receivable, related party, non-current portion, net of allowance of $45,964 and $42,872 at September 30, 2024 and December 31, 2023, respectively		57,187		74,319
Advances to employees, net of allowance of $434,984 at September 30, 2024 and December 31, 2023		281,783		281,783
Property and equipment, net		6,668,434		7,806,370
Operating lease right-of-use asset		-		1,218,408
Finance lease right-of-use asset		70,696		-
Prepaid foreign taxes, net		1,010,213		953,570
Intangible assets, net		81,917		98,147
Deposits, non-current		21,553		54,713
Total Assets	$	14,092,115	$	16,560,325

The accompanying notes are an integral part of these condensed consolidated financial statements.

GAUCHO GROUP HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS, CONTINUED

	September 30,			December 31,
	2024			2023
		(unaudited)
Liabilities Temporary Equity and Stockholders’ Equity
Current Liabilities
Accounts payable	$	889,067		$	925,422
Accrued expenses, current portion		3,713,428			3,719,339
Deferred revenue, current portion		142,146			1,471,813
Deferred revenue, related party		250,000			250,000
Deferred revenue		250,000			250,000
Finance lease liability, current portion		9,698			-
Operating lease liabilities, current portion		-			250,711
Loans payable, current portion		295,460			188,628
Loans payable, related party		1,040,153			-
Loans payable		1,040,153			-
Lot sale obligation, net		527,998			541,027
Convertible debt obligations, net		1,595,697			1,320,902
Derivative liability		969,628			738,140
Other current liabilities		88,185			254,768
Total Current Liabilities		9,521,460			9,660,750
Long Term Liabilities
Accrued expenses, non-current portion		30,394			35,527
Deferred revenue, non current portion		1,242,958
Finance lease liability, non-current portion		59,781			-
Operating lease liabilities, non-current portion		-			1,077,697
Loans payable, non-current portion		-			90,372
Total Liabilities		10,854,593			10,864,346
Commitments and Contingencies (Note 15)		-			-
Temporary Equity
Series B convertible redeemable preferred stock, par value $0.01 per share; 8.5% cumulative dividend, 100,000 shares designated; 37,370 shares issued and outstanding at September 30, 2024 and 0 shares issued and outstanding at December 31, 2023; liquidation preference $3,767,761 and $0 at September 30, 2024 and December 31, 2023, respectively		3,767,761			-
Total Temporary Equity		3,767,761			-
Stockholders’ Equity
Preferred Stock, 902,670 shares authorized; no shares issued and outstanding		-			-
Common stock, par value $0.01 per share; 150,000,000 shares authorized; 915,118 and 480,794 shares issued and 915,115 and 480,791 shares outstanding at September 30, 2024 and December 31, 2023, respectively		9,151			4,808
Additional paid-in capital		152,798,337			150,631,395
Accumulated other comprehensive loss		(11,004,860	)		(11,104,706	)
Accumulated deficit		(142,286,512	)		(133,789,163	)
Treasury stock, at cost, 3 shares at September 30, 2024 and December 31, 2023		(46,355	)		(46,355	)
Total Stockholders’ Equity		(530,239	)		5,695,979
Total Liabilities, Temporary Equity and Stockholders’ Equity	$	14,092,115		$	16,560,325

The accompanying notes are an integral part of these condensed consolidated financial statements.

GAUCHO GROUP HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)

	2024			2023			2024			2023
	For the Three Months Ended						For the Nine Months Ended
	September 30,						September 30,
	2024			2023			2024			2023

Sales	$	422,691		$	464,004		$	1,437,296		$	1,622,746
Cost of sales		(353,266	)		(321,054	)		(1,172,475	)		(1,282,972	)
Gross profit		69,425			142,950			264,821			339,774
Operating Expenses
Selling and marketing		4,768			204,938			227,788			652,674
General and administrative		2,273,514			1,267,399			6,694,433			4,734,592
Depreciation and amortization		106,447			114,370			331,307			327,857
Loss on termination of lease		566,278			-			566,278			-
Total operating expenses		2,951,007			1,586,707			7,819,806			5,715,123
Loss from Operations		(2,881,582	)		(1,443,757	)		(7,554,985	)		(5,375,349	)

Other Expense (Income)
Change in fair value of derivative liability		75,861			95,727			231,488			2,236,844
Loss on extinguishment of debt		-			-			-			416,081
Gains from foreign currency remeasurement, net		(32,229	)		(132,493	)		(65,814	)		(347,201	)
Interest income		(1,643	)		(52,810	)		(17,043	)		(167,529	)
Interest expense		210,083			1,156,616			793,733			2,824,528
Other income, related party		-			(212,222	)		-			(362,222	)
Total other expense		252,072			854,818			942,364			4,600,501
Net Loss		(3,133,654	)		(2,298,575	)		(8,497,349	)		(9,975,850	)
Deemed dividend		(36,854	)		-			(36,854	)		-
Net loss attributable to common stockholders	$	(3,170,508	)	$	(2,298,575	)	$	(8,534,203	)	$	(9,975,850	)

Net Loss per Common Share
Basic and Diluted	$	(3.52	)	$	(3.04	)	$	(10.84	)	$	(10.72	)

Weighted Average Number of Common Shares Outstanding:
Basic and Diluted		901,608			757,036			787,026			930,160

The accompanying notes are an integral part of these condensed consolidated financial statements.

GAUCHO GROUP HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(unaudited)

	2024			2023			2024			2023
	For the Three Months Ended						For the Nine Months Ended
	September 30,						September 30,
	2024			2023			2024			2023
Net loss	$	(3,133,654	)	$	(2,298,575	)	$	(8,497,349	)	$	(9,975,850	)
Other comprehensive income (loss):
Foreign currency translation adjustments		52,036			64,280			99,846			(13,512	)
Comprehensive loss	$	(3,081,618	)	$	(2,234,295	)	$	(8,397,503	)	$	(9,989,362	)

The accompanying notes are an integral part of these condensed consolidated financial statements.

GAUCHO GROUP HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN TEMPORARY EQUITY

AND STOCKHOLDERS’ EQUITY

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2024

(unaudited)

	Shares		Amount			Shares			Amount		Shares		Amount			Capital			Loss			Deficit			Equity
	Temporary Equity					Stockholders’ Equity
	Senior																		Accumulated
	8.5% Convertible															Additional			Other						Total
	Preferred Stock					Common Stock					Treasury Stock					Paid-In			Comprehensive			Accumulated			Stockholders’
	Shares		Amount			Shares			Amount		Shares		Amount			Capital			Loss			Deficit			Equity
Balance - January 1, 2024		-	$	-	-		480,794	-	$	4,808		3	$	(46,355	)	$	150,631,395		$	(11,104,706	)	$	(133,789,163	)	$	5,695,979
Cumulative effect of change upon adoption of ASU 2016-13		-		-	-		-			-		-		-			-			-			-			-
Stock-based compensation:
Options		-		-			-			-		-		-			17,911			-			-			17,911
Restricted stock units		-		-			1,841			19		-		-			74,747			-			-			74,766
Common stock issued for 401(k) employer matching contibution		-		-			3,497			35		-		-			14,733			-			-			14,768
Common stock issued for cash in private placement		-		-			288,824			2,888		-		-			1,730,046			-			-			1,732,934
Net loss		-		-	-		-	-		-		-		-			-			-			(2,733,646	)		(2,733,646	)
Other comprehensive loss		-		-			-			-		-		-			-			(36,391	)		-			(36,391	)
Balance - March 31, 2024		-		-	-		774,956	-		7,750		3		(46,355	)		152,468,832			(11,141,097	)		(136,522,809	)		4,766,321
Stock-based compensation:
Options		-		-			-			-		-		-			17,909			-			-			17,909
Restricted stock units		-		-			12,500			125		-		-			81,611			-			-			81,736
Common stock issued for cash in private placement		-		-			16,667			166		-		-			99,834			-			-			100,000
Anti-dilution shares issued		-		-			4,764			48		-		-			(48	)		-			-			-
Effect of reverse stock split		-		-			80,379			804		-		-			(804	)		-			-			-
Net loss		-		-	-		-	-		-		-		-			-			-			(2,630,049	)		(2,630,049	)
Other comprehensive loss		-		-			-			-		-		-			-			84,201			-			84,201
Balance - June 30, 2024		-		-	-		889,266	-		8,893		3		(46,355	)		152,667,334			(11,056,896	)		(139,152,858	)		2,420,118
Senior 8.5% preferred stock issued for cash		4,084		408,400	408,400		-			-		-		-			-			-			-			-
Exchange of 8.5 % notes for senior preferred stock [1]		33,286		3,322,507	3,327,668		-			-		-		-			-			-			-			-
Accretion of senior preferred stock to redemption value		-		36,854	36,854		-			-		-		-			(36,854	)		-			-			(36,854	)
Stock-based compensation:																										-
Options		-		-			-			-		-		-			17,909			-			-			17,909
Restricted stock units		-		-			12,500			125		-		-			150,081			-			-			150,206
Common stock		-		-			-			-		-		-			-			-			-			-
Anti-dilution shares issued		-		-			13,352			133		-		-			(133	)		-			-			-
Net loss		-		-	-		-	-		-		-		-			-			-			(3,133,654	)		(3,133,654	)
Other comprehensive loss		-		-			-			-		-		-			-			52,036			-			52,036
Balance - September 30, 2024		37,370	$	3,767,761	3,772,922		915,118	-	$	9,151		3	$	(46,355	)	$	152,798,337		$	(11,004,860	)	$	(142,286,512	)	$	(530,239	)

The accompanying notes are an integral part of these condensed consolidated financial statements.

GAUCHO GROUP HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2023

(unaudited)

	Shares		Amount		Shares		Amount			Capital			Loss			Deficit			Equity
													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		365,340	$	3,654		28	$	(46,355	)		139,156,522		$	(10,842,569	)	$	(117,479,571	)	$	10,791,681
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		389		4		-		-			79,418			-			-			79,422
Common stock issued for 401(k) employer matching		2,416		24		-		-			32,593			-			-			32,617
Shares issued under the New ELOC, net of offering costs [1]		36,443		365		-		-			441,044			-			-			441,409
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		83,333		833		-		-			1,570,720			-			-			1,571,553
Common stock issued for cash in private placement		59,100		591		-		-			590,409			-			-			591,000
Cashless warrant exercise		5,131		51		-		-			(51	)		-			-			-
True-up adjustment		28		-		-		-			-			-			-			-
Net loss		-		-		-		-			-			-			(2,695,148	)		(2,695,148	)
Other comprehensive loss		-		-		-		-			-			(39,799	)		-			(39,799	)
Balance - March 31, 2023		552,180		5,522		28		(46,355	)		143,614,089			(10,882,368	)		(120,286,301	)		12,404,587
Stock-based compensation:
Options		-		-		-		-			38,834			-			-			38,834
Restricted stock units		-		-		-		-			74,978			-			-			74,978
Shares issued under the New ELOC, net of offering costs [3]		45,877		459		-		-			291,138			-			-			291,597
Shares issued upon conversion of debt and interest		82,878		829		-		-			574,427			-			-			575,256
Net loss		-		-		-		-			-			-			(4,982,127	)		(4,982,127	)
Other comprehensive loss		-		-		-		-			-			(37,993	)		-			(37,993	)
Balance - June 30, 2023		680,935		6,810		28		(46,355	)		144,593,466			(10,920,361	)		(125,268,428	)		8,365,132
Balance		680,935		6,810		28		(46,355	)		144,593,466			(10,920,361	)		(125,268,428	)		8,365,132
Stock-based compensation:
Options		-		-		-		-			17,910			-			-			17,910
Restricted stock units		-		-		-		-			75,645			-			-			75,645
Common stock		27,027		270		-		-			149,730			-			-			150,000
Shares issued under the New ELOC [4]		29,364		294		-		-			42,339			-			-			42,633
Warrant modification		-		-		-		-			392,273			-			-			392,273
Shares issued upon conversion of debt and interest		231,912		2,319		-		-			672,692			-			-			675,011
Common stock issued for cash in private placement		90,000		900		-		-			404,100			-			-			405,000
Effect of reverse stock spit		358		3		-		-			(3	)		-			-			-
Net loss		-		-		-		-			-			-			(2,298,575	)		(2,298,575	)
Other comprehensive loss		-		-		-		-			-			64,280			-			64,280
Balance - September 30, 2023		1,059,596	$	10,596		28	$	(46,355	)	$	146,348,152		$	(10,856,081	)	$	(127,567,003	)	$	7,889,309
Balance		1,059,596	$	10,596		28	$	(46,355	)	$	146,348,152		$	(10,856,081	)	$	(127,567,003	)	$	7,889,309

[1]

Includes gross proceeds of $480,670, less $39,261 of offering costs.

[2]

Represents $1,609,935 relative fair value of warrants, less $103,616 of allocable issuance costs.

[3]

Includes gross proceeds of $316,953, less $25,356 of offering costs.

[4]

Includes gross proceeds of $52,988, less $10,355 of offering costs.

The accompanying notes are an integral part of these condensed consolidated financial statements.

GAUCHO GROUP HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

	2024			2023
	For the Nine Months Ended
	September 30,
	2024			2023
Cash Flows from Operating Activities
Net loss		(8,497,349	)	$	(9,975,850	)
Adjustments to reconcile net loss to net cash used in operating activities:
Stock-based compensation:
401(k) stock		10,792			5,908
Common stock		-			150,000
Stock options and warrants		53,729			95,578
Restricted stock units		306,708			305,045
Non-cash lease expense		236,320			171,933
Loss on lease termination		566,278			-
Gains from foreign currency remeasurement, net		(65,814	)		(347,201	)
Depreciation and amortization		362,304			337,433
Amortization of debt discount		341,941			2,104,384
Provision for credit losses, net of recoveries		488,463			112,289
Provision for unrealizable prepaid taxes		32,124			-
Provision for obsolete inventory		187,908			123,225
Change in fair value of derivative liability		231,488			2,236,844
Loss on extinguishment of debt		-			416,081
Loss on sale of land		44,406			-
Decrease (increase) in assets:
Accounts receivable and mortgages receivable		(295,197	)		(176,542	)
Employee advances		-			(8,082	)
Inventory		(196,204	)		(611,752	)
Inventory deposits		161,531			1,336
Real estate lots held for sale		54,716			-
Prepaid expenses and other current assets		(561,580	)		103,075
Increase (decrease) in liabilities:
Accounts payable and accrued expenses		105,752			(9,778	)
Operating lease liabilities		(182,650	)		(149,994	)
Deferred revenue		(86,709	)		150,859
Other liabilities		(163,873	)		(19,154	)
Total Adjustments		1,632,433			4,991,487
Net Cash Used in Operating Activities		(6,864,916	)		(4,984,363	)
Cash Flows from Investing Activities
Purchase of property and equipment		(111,230	)		(580,120	)
Proceeds from sale of land		187,860			-
Purchase of intangible asset		-			(50,000	)
Security deposit on lease		(20,000	)		-
Net Cash Used in Investing Activities		56,630			(630,120	)

The accompanying notes are an integral part of these condensed consolidated financial statements.

GAUCHO GROUP HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS, CONTINUED

(unaudited)

	2024			2023
	September 30,
	2024			2023
Cash Flows from Financing Activities
Proceeds from the issuance of convertible debt		2,299,700			5,000,000
Proceeds from the issuance of convertible debt, related party		1,000,000			-
Financing costs in connection with the issuance of convertible debt		-			(321,802	)
Costs in connection with the conversion of convertible debt to preferred stock		(5,161	)		-
Repayments of convertible debt obligations		-			(862,541	)
Redemption premiums paid on convertible debt obligations		-			(156,161	)
Proceeds from preferred stock issued for cash, net of issuance costs [1]		408,400			-
Proceeds from common stock issued for cash		1,832,934			996,000
Proceeds from issuance of shares under the New ELOC, net of offering costs [2]		-			775,639
Proceeds from loans payable		100,000			185,000
Proceeds from loans payable, related parties		1,020,000			-
Repayments of loans payable		(87,929	)		(87,217	)
Proceeds from equity deposits		-			-
Repayment of finance lease		(632	)		-
Refund of lot sale obligation		(73,450	)		-
Net Cash Provided by Financing Activities		6,493,862			5,528,918
Effect of Exchange Rate Changes on Cash		99,846			(13,512	)
Net Decrease in Cash		(214,578	)		(99,077	)
Cash - Beginning of Period		427,961			300,185
Cash - End of Period		213,383		$	201,108

Supplemental Disclosures of Cash Flow Information:
Interest paid	$	597,420		$	1,011,650
Income taxes paid	$	-		$	-

Non-Cash Investing and Financing Activity
Preferred shares issued upon conversion of debt and accrued interest	$	3,327,668		$	-
Accretion of preferred stock to redemption value	$	36,854		$	-
Common shares issued upon conversion of debt and accrued interest	$	-		$	2,821,820
Common shares issued in connection with anti-dilution protection	$	181		$	-
Warrants issued and debt principal exchanged upon modification of convertible debt	$	-		$	63,502
Accrued interest exchanged for notes payable	$	24,541		$	-
Relative fair value of warrants issued with 2023 Notes, net of allocable issuance costs [3]	$	-		$	1,506,319
Finance lease liability for equipment	$	75,734		$	-
Equity issued to satisfy accrued stock-based compensation obligation	$	14,768		$	32,617
Cashless warrant exercise	$	-		$	51
Debt discount for warrant modification	$	-		$	392,273

[1]

Gross proceeds of $413,560, less offering costs of $5,160.

[2]

Gross proceeds of $850,611, less offering costs of $74,972.

[3]

Represents $1,609,935 relative fair value of warrants, less $103,616 in allocable issuance costs.

The accompanying notes are an integral part of these condensed consolidated financial statements.

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”) and Algodon Global Properties, LLC (“AGP”) operate as holding companies that invest in, develop and operate global real estate and other lifestyle businesses such as wine production and distribution, golf, tennis, and restaurants. GGH operates its properties through its ALGODON® brand. IPG and AGP have invested in two ALGODON® brand projects located in Argentina. The first project is Algodon Mansion, a Buenos Aires-based luxury boutique hotel property that opened in 2010 and is owned by the Company’s subsidiary, The Algodon – Recoleta, SRL (“TAR”). The second project is the redevelopment, expansion and repositioning of a Mendoza-based winery and golf resort property now called Algodon Wine Estates (“AWE”), the integration of adjoining wine producing properties by Gaucho Development S.R.L. (“GDS”), and the subdivision of a portion of this property for residential development.

GGH creates couture fashion pieces in-house and, through its wholly-owned subsidiary, Gaucho Group, Inc. (“GGI”), oversees the outsourced manufacturing, distribution, and sale of the rest of its high-end luxury fashion and accessories line.

Reverse Stock Splits

On September 25, 2023, the Company effected a reverse stock split wherein each 10 shares of common stock outstanding immediately prior to the effective date was combined and converted into one share of common stock.

On May 1, 2024, the Company effected another reverse stock split wherein each 10 shares of common stock outstanding immediately prior to the effective date was combined and converted into one share of common stock.

All share and per share amounts in this Quarterly Report have been adjusted to reflect the effect of these reverse stock splits (hereafter referred to collectively as the “Reverse Stock Splits”) as if the Reverse Stock Splits occurred as of the earliest period presented.

Current Bankruptcy Proceedings and Delisting from Nasdaq

On November 12, 2024, the Company filed a voluntary petition, Case No. 24-21852 (the “Chapter 11 Reorganization”) in the United States Bankruptcy Court for the Southern District of Florida (the “Bankruptcy Court”) seeking relief under Chapter 11 of Title 11 of the United States Code (the “Bankruptcy Code”). The Company continues to operate its business as a “debtor in possession” subject to the jurisdiction of the Bankruptcy Court and in accordance with the applicable provisions of the Bankruptcy Code, orders of the Bankruptcy Court, and applicable non-bankruptcy law. The Company has sought approval of various motions with the Bankruptcy Court that are intended to enable the Company to continue its ordinary course operations and facilitate an orderly transition of its operations into Chapter 11.

On November 13, 2024, the Company’s shares of common stock were delisted from the Nasdaq Stock Market (“Nasdaq”) as a result of the Chapter 11 Reorganization. The Company’s shares of common stock are currently quoted on the over-the-counter market with the symbol “VINOQ”. See Note 15, Commitments and Contingencies: Legal Matters and Note 17, Subsequent Events.

GAUCHO GROUP HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. GAAP for interim financial information. Accordingly, they do not include all of the information and disclosures required by U.S. GAAP for annual consolidated financial statements. In the opinion of management, the accompanying condensed consolidated financial statements include all adjustments which are considered necessary for a fair presentation of the unaudited condensed consolidated financial statements of the Company as of September 30, 2024, and for the three and nine months ended September 30, 2024 and 2023. The results of operations for the three and nine months ended September 30, 2024 are not necessarily indicative of the operating results for the full year ending December 31, 2024 or any other period. These unaudited condensed consolidated financial statements have been derived from the Company’s accounting records and should 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, 2023, filed with the Securities and Exchange Commission (“SEC”) on April 30, 2024.

Going Concern and Management’s Liquidity Plans

In accordance with Accounting Standards Codification (“ASC”) 205-40, Going Concern, the Company continues to critically review its liquidity and anticipated capital requirements, including for service of the Company’s debt post-emergence from Chapter 11 protection, in light of the significant uncertainty created by the Chapter 11 petition, to determine whether these conditions, when considered in the aggregate, raise substantial doubt about its ability to continue as a going concern within twelve months after the date that the accompanying consolidated financial statements are issued.

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 Company’s ability to continue as a going concern is contingent upon the Company’s ability to successfully reorganize its operations under Chapter 11, among other factors. As a result of the Chapter 11 case, the realization of assets and the satisfaction of liabilities are subject to uncertainty. The Chapter 11 filing also affects the Company’s ability to complete the necessary infrastructure on its real estate lots, that is required in order to consummate the lot sales and issue property deeds, due to constraints on capital resources.

As a result of the Company’s financial condition, the defaults under the Company’s debt agreements, and the risks and uncertainties surrounding the Company’s ability or the timing to reorganize operations under Chapter 11, substantial doubt exists that the Company will be able to continue as a going concern. The condensed consolidated 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 September 30, 2024, the Company had cash of approximately $213,000 and a working capital deficit of approximately $5,000,000. During the nine months ended September 30, 2024 and 2023, the Company incurred net losses of approximately $8,497,000 and $9,976,000, respectively, and used cash in operating activities of approximately $6,865,000 and $4,984,000, respectively.

As of September 30, 2024, future cash requirements for current liabilities include $4,602,495 for accounts payable and accrued expenses (including cash true up obligations in connection with convertible debt in the amount of $1,484,677), $451,550 for lot sale obligations, $1,595,697 of principal owed in connection with convertible debt, $1,335,613 for loans payable, $36,849 for future payments (including interest portion) under a finance lease, and $88,185 for other current liabilities. Further, the Company’s convertible debt matured on February 21, 2024, and the Company has subsequently received event of default notices demanding immediate payment of all balances owed in connection with the convertible debt, including $287,303 of redemption premiums currently included derivative liability on the accompanying balance sheet. Balances owed in connection with convertible debt in default remain outstanding as of the date of the filing of this quarterly report on Form 10-Q. Future cash requirements for long-term liabilities include $101,118 for future payments under a finance lease (including interest portion) and $30,394 for accrued expenses.

On February 27, 2024, the Company’s equity line of credit was terminated.

On November 4, 2024 the Company received cash proceeds of $395,000 in connection with a promissory note.

On November 12, 2024, the Company received $150,000 in proceeds upon the issuance of a convertible promissory note with one of its stockholders.

Between October 11, 2024 through November 12, 2024, the Company received cash proceeds of $616,907 upon the sale of preferred stock (See Note 17, Subsequent Events).

During the period from November 29, 2024 through December 30, 2024, the Company received $141,758 in proceeds upon the issuance of a non-convertible promissory note with the Company’s President and CEO. (See Note 17, Subsequent Events).

GAUCHO GROUP HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

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

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 condensed consolidated financial statements are issued. The aforementioned factors raise substantial doubt about the Company’s ability to continue as a going concern.

Highly Inflationary Status in Argentina

During the three and nine months ended September 30, 2024, the Company recorded gains of $32,229 and $65,814, respectively, and during the three and nine months ended September 30, 2023, the Company recorded gains of $132,493 and $347,201, respectively, resulting from foreign currency remeasurement of the Company’s Argentine subsidiaries’ 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 $74,430 and $93,878 at September 30, 2024 and December 31, 2023, respectively, which 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 and 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.

GAUCHO GROUP HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

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

SCHEDULE OF DISAGGREGATION OF REVENUE

	2024		2023		2024		2023
	For the Three Months Ended				For the Nine Months Ended
	September 30,				September 30,
	2024		2023		2024		2023

Real estate sales	$	-	$	-	$	104,143	$	154,959
Hotel rooms and events		175,187		249,873		634,748		714,398
Clothes and accessories		14,964		62,450		101,882		170,213
Restaurants		55,953		49,382		152,423		185,389
Winemaking		148,071		74,530		280,040		150,271
Agricultural sales		-		-		81,537		162,764
Golf, tennis and other		28,516		27,769		82,523		84,752
Total Revenues	$	422,691	$	464,004	$	1,437,296	$	1,622,746

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. See Note 7, Deferred Revenue.

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.

GAUCHO GROUP HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

Net Loss per Common Share

Basic loss per common share is computed by dividing net loss by the weighted average number of common shares outstanding during the period. Diluted loss per common share is computed by dividing net loss 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.

The following securities are excluded from the calculation of weighted average dilutive common shares because their inclusion would have been anti-dilutive:

SCHEDULE OF ANTIDILUTIVE SECURITIES EXCLUDED FROM COMPUTATION OF EARNINGS PER SHARE

	2024			2023
	As of September 30,
	2024			2023

Options		103			280
Warrants		39,627			45,647
Unvested restricted stock units		19,866			5,163
Senior Secured Convertible Notes		442,372	[1]		309,384	[2]
Senior Convertible Preferred Stock		934,250	[3]		-
Total potentially dilutive shares		1,436,218			360,474

	[1]	Represents shares issuable upon conversion of $1,595,707 in convertible debt, $287,302 of redemption premium and $319,648 of related accrued interest outstanding as of September 30, 2024, at a conversion price of $4.9792 per share, which represents the conversion price in effect as of September 30, 2024. The conversion price of such debt is variable and is subject to a floor price of $4.00 per share (see Note 10, Convertible Debt Obligations).

	[2]	Represents shares issuable upon conversion of $4,335,137 of convertible debt, $676,986 of redemption premium and $178,104 of related accrued interest outstanding as of September 30, 2023, at a conversion price of $16.776 per share, which represents the conversion price in effect as of September 30, 2023. The conversion price of such debt is variable. (see Note 10, Convertible Debt Obligations).

	[3]	Represents common shares issuable upon conversion of 37,370 shares of convertible preferred stock outstanding at September 30, 2024. Each share of Senior Convertible Preferred Stock is convertible into 25 shares of common stock. (See Note 14, Temporary Equity and Stockholders Equity).

GAUCHO GROUP HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

Derivative Instruments

The Company evaluates its convertible instruments to determine if those contracts or embedded components of those contracts qualify as derivative financial instruments to be separately accounted for in accordance with Topic 815 “Derivatives and Hedging” (“ASC 815”) of the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”). The accounting treatment of derivative financial instruments requires that the Company record any bifurcated embedded features at their fair values as of the inception date of the agreement and at fair value as of each subsequent balance sheet date. Any change in fair value is recorded in earnings each period as non-operating, non-cash income or expense. The Company reassesses the classification of its derivative instruments at each balance sheet date. 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. Bifurcated embedded features are recorded upon note issuance at their initial fair values which create additional debt discount to the host instrument.

Recently Issued Accounting Pronouncements

In November 2023, the FASB issued ASU 2023-07, Improvements to Reportable Segments Disclosures (Topic 280), which updates reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses on both an annual and interim basis. The guidance becomes effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. Since this new ASU addresses only disclosures, the Company does not expect the adoption of this ASU to have any material effects on its financial condition, results of operations or cash flows. The Company is currently evaluating any new disclosures that may be required upon adoption of ASU 2023-07.

Preferred Stock Subject to Possible Redemption

The Company’s Senior Convertible Preferred Stock includes certain redemption rights that are considered to be outside of the Company’s control and subject to the occurrence of uncertain future events (See Not 14, Temporary Equity and Stockholders’ Equity). Accordingly, the Senior Convertible Preferred Stock is classified as temporary equity. The Company accretes the carrying value of Senior Convertible Preferred Stock to equal its redemption value at the end of each reporting period.

Reclassification

Certain prior period amounts included in prior year financial statements have been reclassified to conform to the current year presentation, including reclassification of accrued interest, current portion to loan payable, current portion and the reclassification of mortgages receivable from a related party. These reclassifications did not have a material impact on the Company’s previously reported financial statements.

GAUCHO GROUP HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

3. MORTGAGES RECEIVABLE

The Company offers loans to purchasers in connection 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. The Company records a credit loss reserve for unsecured amounts of past due mortgages receivable. Mortgages receivable include the related interest receivable and are presented at amortized cost, less the reserve for expected credit losses, in the accompanying condensed consolidated financial statements.

Management evaluates each loan individually on a quarterly basis, to assess collectability and estimate a reserve for past due amounts. Past due principal and interest in the aggregate amounts of $929,069 and $815,674 are included in mortgages receivable, current as of September 30, 2024 and December 31, 2023, respectively, of which $37,330 and $17,295, respectively represents amounts past due from an owner of more than 10% of the Company’s common stock. The total allowance for uncollectable mortgages is $1,673,366 and $1,436,981 as of September 30, 2024 and December 31, 2023, respectively.

The following represents the maturities of mortgages receivable as of September 30, 2024:

SCHEDULE OF MATURITIES OF MORTGAGES RECEIVABLE


	Non-related Parties			Related Party			Total
For the period from October 1, 2024 through December 31, 2024	$	983,027		$	44,008		$	1,027,035

For the years ended December 31,
2025		391,037			18,890			409,927
2026		420,140			20,296			440,436
2027		451,408			21,807			473,215
2028		456,797			23,430			480,227
2029		469,961			25,174			495,135
Thereafter		592,730			5,430			598,160
Gross Receivable		3,765,100			159,035			3,924,135
Less: Allowance		(1,608,621	)		(64,745	)		(1,673,366	)
Net receivable		2,156,479			94,290			2,250,769
Less: current portion		(777,314	)		(37,103	)		(814,417	)
Mortgages receivable, non-current portion	$	1,379,165		$	57,187		$	1,436,352

As of each of September 30, 2024 and December 31, 2023, two borrowers had past-due loans outstanding representing 11% and 10% of the total balance of mortgages receivable. A reserve is established for the unsecured portion of these receivables.

The Company recorded interest income from its mortgages receivable of $813 and $51,593 for the three months ended September 30, 2024 and 2023, respectively, and recorded interest income of $10,376 and $161,409 for the nine months ended September 30, 2024 and 2023, respectively. As of September 30, 2024 and December 31, 2023, there is $168,794 and $190,967, respectively, of interest receivable included in mortgages receivable on the accompanying condensed consolidated balance sheets.

GAUCHO GROUP HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

4. INVENTORY

Inventory at September 30, 2024 and December 31, 2023 was comprised of the following:

SCHEDULE OF INVENTORY

	September 30,			December 31,
	2024			2023

Vineyard in process	$	853,085		$	713,104
Wine in process		497,551			622,167
Finished wine		136,091			37,636
Clothes and accessories		557,495			638,023
Other		273,177			207,686
Inventory gross		2,317,399			2,218,616
Less: Reserve for obsolescence		(277,223	)		(186,736	)
Total	$	2,040,176		$	2,031,880
Inventory	$	2,040,176		$	2,031,880

The Company had deposits for inventory purchases in the amount of $0 and $161,531 as of September 30, 2024 and December 31, 2023, respectively.

The Company recorded a provision for obsolete inventory in the amount of $7,288 and $187,908 during the three and nine months ended September 30, 2024, respectively, related to its clothing and accessories inventory. The Company recorded a provision for obsolete inventory in the amount of $23,902 and $123,225 during the three and nine months ended September 30, 2023, respectively.

5. INVESTMENTS AND 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.

GAUCHO GROUP HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

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. The carrying amounts of the Company’s short-term financial instruments including cash, accounts receivable, prepaid commissions on lot sales, 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, convertible debt obligations and derivative liability approximate fair value, as they bear terms and conditions comparable to the market for obligations with similar terms and maturities.

6. ACCRUED EXPENSES

Accrued expenses are comprised of the following:

SCHEDULE OF ACCRUED EXPENSES

	September 30,		December 31,
	2024		2023

Accrued compensation and payroll taxes	$	1,532,218	$	1,803,869
Accrued taxes payable - Argentina		191,940		84,494
Accrued insurance expense		18,176		36,352
Accrued consulting fees		4,223		74,512
Accrued commissions		22,307		66,267
Accrued interest		411,309		129,821
Accrued cash true up obligation (see Note 10)		1,484,677		1,484,677
Other accrued expenses		48,578		39,347
Accrued expenses, current		3,713,428		3,719,339
Accrued Argentine tax obligations, non-current		30,394		30,003
Other long term accruals		-		5,524
Total accrued expenses	$	3,743,822	$	3,754,866

On November 27, 2020, the Company entered into various payment plans, pursuant to which it agreed to pay its Argentine tax obligations over a period of 60 to 120 months. The current portion of payments due under the plan is $185,445 and $75,769 as of September 30, 2024 and December 31, 2023, respectively, which is included in accrued taxes payable – Argentina, above. The non-current portion of accrued tax obligations represents payments under the plan that are scheduled to be paid after twelve months. The Company incurred interest and penalties expense of $49,521 and $86,952 during the three and nine months ended September 30, 2024, respectively, and incurred interest expense of $14,031 and $95,617 during the three and nine months ended September 30, 2023, respectively, related to these payment plans.

GAUCHO GROUP HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

7. DEFERRED REVENUE

Deferred revenue is comprised of the following:

SCHEDULE OF DEFERRED REVENUES

	September 30,		December 31,
	2024		2023
Real estate lot sales deposits	$	1,351,958	$	1,436,758
Hotel deposits		30,719		32,657
Other		2,427		2,398
Total		1,385,104		1,471,813
Less: deferred revenue, current portion		142,146		1,471,813
Deferred revenue, non-current portion	$	1,242,958	$	-

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. Revenue is recorded when the sale closes, and the deeds are issued. The issuance of deeds is dependent on completion of infrastructure for each specific lot. See Footnote 2, Summary of Significant Accounting Policies: Going Concern and Management’s Liquidity Plans, for additional discussion of the impact of the Company’s liquidity on the real estate lot sales. The Company expects to recognize revenue in the aggregate amount of approximately $2.9 million upon the closing of the sale of lots for which deposits of been received as of September 30, 2024.

The Company entered into contracts for the sale of four lots and received deposits in the aggregate amount of $19,343 during the three and nine months ended September 30, 2024. The Company recorded revenue upon the closing of the sale of real estate lots in the amount of $0 and $104,143 during the three and nine months ended September 30, 2024, and recorded the sale of one lot and recorded revenue in the amount of $0 and $154,959 during the three and nine months ended September 30, 2023.

Deferred revenue, related party represents $250,000 received from a greater than 10% holder of the Company’s common stock, for the purchase of five real estate lots. The Company recorded interest expense of $5,291 and $15,814 during the three and nine months ended September 30, 2024, respectively, in connection with the deferred revenue received from the related party. As of September 30, 2024 and December 31, 2023, there is accrued interest of $19,485 and $3,605, respectively, related to the deferred revenue received from the related party.

8. LOT SALE OBLIGATIONS

The following table summarizes the activity in connection with the Company’s lot sale obligations during the nine months ended September 30, 2024:

SCHEDULE OF LOT SALE OBLIGATION

	Lot Sale Obligations			Debt Discount			Lot Sale Obligations, net of discount
	Lot Sale Obligations
	Lot Sale Obligations			Debt Discount			Lot Sale Obligations, net of discount
Balance at January 1, 2024	$	605,096		$	(64,068	)	$	541,027
Lot deposit refunded in 1Q24		(25,000	)		-			(25,000	)
Amortization of debt discount		-			19,355			19,355
Balance at March 31, 2024		580,096			(44,713	)		535,382
Portion of lot deposit refunded in 2Q24		(48,450	)		-			(48,450	)
Amortization of debt discount		-			20,022			20,022
Balance at June 30, 2024		531,646			(24,691	)		506,954
Balance at beginning		531,646			(24,691	)		506,954
Portion of lot deposit refunded in 3Q24		-			-			-
Portion of lot deposit refunded		-			-			-
Amortization of debt discount		-			21,044			21,044
Balance at September 30, 2024	$	531,646		$	(3,647	)	$	527,998
Balance at ending	$	531,646		$	(3,647	)	$	527,998

GAUCHO GROUP HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

During the fourth quarter of 2023, the Company entered into agreements (each, a “Lot Deposit Agreement”) with five investors in the Company (each, a “Purchaser”), pursuant to which (1) each Purchaser agreed to purchase either two or three real estate lots at a purchase price of $50,000 per lot and pay the full purchase price (the “Purchase Amount”) for the purchased lots, (2) each Purchaser has the right to rescind the Lot Deposit Agreement at any time between twelve months from the date of the Lot Deposit Agreement but prior to the closing of the lot sale. In the event of such rescission, the Company agrees to refund the deposit amount plus interest at a rate of 8.5% compounded quarterly and agrees to transfer title to one residential lot of the Purchaser’s choosing within 30 calendar days of receiving the Purchaser’s written notice to rescind.

During the fourth quarter of 2023, the Company entered into Lot Deposit Agreements for the purchase of eleven real estate lots and received Purchase Amounts in the aggregate amount of $525,000, which is recorded as lot sale obligations on the accompanying condensed consolidated balance sheet. A Purchase Amount of $25,000 is receivable as of September 30, 2024, and will be recorded as additional Lot Sale Obligation when received. The $80,096 aggregate cost of the lots to be transferred in the event of rescission of the Lot Deposit Agreements was recorded as a discount to the lot sale obligations and is being amortized over twelve months using the effective interest method.

Interest Expense on Lot Sale Obligations

The Company recorded interest expense in the amount of $31,864 and $92,324 related to lot sale obligations during the three and nine months ended September 30, 2024, respectively, which consisted of $10,820 and $31,903, respectively, of interest accrued at the stated rate of 8.5%, plus amortization of debt discount in the amount of $21,044 and $60,421, respectively. As of September 30, 2024 and December 31, 2023, there is accrued interest of $40,955 and $9,052, respectively, related to the Company’s lot sale obligations.

9. LOANS PAYABLE

The Company’s loans payable are summarized below:

SCHEDULE OF LOANS PAYABLE

	September 30,			December 31,
Loans Payable	2024			2023
EIDL	$	94,000		$	94,000
2023 Loan		101,460			185,000
2024 Loan		100,000			-
Total Loans Payable		295,460			279,000
Less: current portion		(295,460	)		(188,628	)
Total Loans Payable, non-current portion	$	-		$	90,372

Loans Payable, Related Party
Investor Loan	$	1,040,153		$	-
Total Loans Payable	$	1,040,153		$	-

GAUCHO GROUP HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

EIDL Loan

On May 22, 2020, the Company received a loan in the principal amount of $94,000 (the “EIDL Loan”) pursuant to the Economic Injury Disaster Loan (“EIDL”) assistance program offered by the SBA in response to the impact of the COVID-19 pandemic on the Company’s business. The EIDL Loan bears interest at 3.75% per annum, and originally matured in May 2050. As of September 30, 2024, the balance on the EIDL Loan is $94,000. The Company is currently in default on the EIDL Loan; as a result, the loan is payable upon demand.

2023 Loan

On January 9, 2023, the Company received $185,000 in proceeds upon the issuance of a one-year, non-convertible promissory note with a January 9, 2024 maturity date. The note bears interest at a rate of 8% per annum. On February 22, 2024, the Company repaid principal and interest on the 2023 Loan in the amount of $83,540 and $16,460, respectively. The Company is currently in default on the 2023 Loan, and the loan is payable upon demand. The Company is currently renegotiating the payment terms on the 2023 Loan.

2024 Loan

On September 5, 2024, the Company received $100,000 in proceeds upon the issuance of a one-year, non-convertible promissory note (the “2024 Loan”). The 2024 Loan bears interest at a rate of 8% per annum and matured on October 15, 2024. The Company is currently in default on the 2024 Loan is renegotiating payment terms with the holder.

Loans Payable, related party

On June 24, 2024, the Company issued promissory notes in the aggregate amount of $420,000 to a greater than 10% holder of the Company’s common stock (the “Investor”), which mature on June 23, 2025. During September 2024, the Company issued promissory notes in the aggregate amount of $600,000 to the Investor, which matured on October 31, 2024 (together with promissory notes issued to the Investor on June 24, 2024, the “Investor Loans”). Of the Investor Loans issued, Investor Loans in the aggregate amount of $900,000 were issued for cash and one Investor Loan in the amount of $120,000 was issued in satisfaction of a deposit for the purchase of equity, in lieu of issuance of shares. In addition, on August 16, 2024, accrued interest of $20,153 was capitalized as principal on the Investor Loans. The Investor Loans bear interest at 8.0% per annum. The Company is currently in default on $600,000 principal owed in connection with Investor Loans that matured on October 31, 2024, and is renegotiating payment terms with the Investor.

Interest Expense on Loans Payable

The Company incurred interest expense related to the loans payable in the amount of $14,298 and $23,823 during the three and nine months ended September 30, 2024, respectively, and incurred interest expense related to the loans payable in the amount of $20,475 and $56,989 during the three and nine months ended September 30, 2023, respectively. As of September 30, 2024 and December 31, 2023, there is accrued interest of $32,833 and $26,129, respectively, related to the Company’s loans payable.

GAUCHO GROUP HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

10. CONVERTIBLE DEBT OBLIGATIONS

Convertible debt obligations consist of the following:

SCHEDULE OF CONVERTIBLE NOTES

	2023 Convertible Note		Preferred Share Convertible Notes			Total Principal			Debt Discount			Convertible debt, net of discount			Preferred Share Convertible Notes - Related Party
Balance at January 1, 2024	$	1,595,697	$	-		$	1,595,697		$	(274,795	)	$	1,320,902		$	-
Convertible notes issued		-		2,306,425			2,306,425			(6,725	)		2,299,700			-
Convertible note issued to related party		-		-			-			-			-			1,000,000
Amortization of debt discount		-		-			-			281,520			281,520			-
Principal Conversions		-		(2,306,425	)		(2,306,425	)		-			(2,306,425	)		(1,000,000	)
Convertible notes outstanding at September 30, 2024	$	1,595,697	$	-		$	1,595,697		$	-		$	1,595,697		$	-

2023 Senior Secured Convertible Note

Effective February 5, 2024, 3i, LP (“3i”) elected to increase the cap on its beneficial ownership of the Company from 4.99% to 9.99% effective on the sixty-first day after such notice was delivered to the Company, pursuant to the terms of the 2023 Senior Secured Convertible Note (the “2023 Note”).

The 2023 Note is convertible at the Event of Default conversion price, equal to the lesser of (a) $134.00; (b) 80% of the volume-weighted average price on the day preceding receipt of the conversion notice; or (c) 80% of the average of the three lowest volume-weighted average prices over the fifteen trading days which precede receipt of the conversion notice, all subject to a floor price of $4.00. If the conversion price in effect on the date of conversion is less than $4.00, the Investor is entitled to a cash true up payment equal to the difference between the conversion dollar amount and the value of shares issued upon conversion. As of September 30, 2024 and December 31, 2023, the Company has accrued $1,484,677 of cash true up payments as the result of 2023 Note principal and interest converted at the floor price in effect at the date of conversion.

On February 21, 2024, the Company received an Event of Default Redemption Notice from 3i, demanding immediate payment of principal, interest and redemptions premiums owed under the 2023 Note equal to a minimum of $3,437,646. On February 28, 2024, the Company received a second Event of Default Redemption Notice from 3i providing notice of an additional Event of Default in connection with the 2023 Note demanding immediate payment of principal interest and redemption premiums equal to a minimum of $3,450,711. On March 6, 2024, the Company received an Event of Default notice from 3i demanding immediate payment of principal, interest and redemptions premiums owed under the 2023 Note equal to a minimum of $3,460,510.

See Note 15, Commitment and Contingencies. Legal Matters, regarding the Company’s litigation with 3i in the 2023 Note.

GAUCHO GROUP HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

Derivative Liability in Connection with 2023 Note

The Event of Default Conversion Price on the 2023 Note represents a redemption feature, which was bifurcated from the 2023 Note host and recorded as a derivative liability. During the three and nine months ended September 30, 2024, the Company recorded expense of $75,861 and $231,488, respectively, in connection with the change in fair value of the derivative liability, which represents the difference between shares issuable upon conversion with no event of default, and the value of shares issuable upon conversion of debt at the Event of Default Conversion Price.

The following table sets forth a summary of the changes in the fair value of the derivative liability that are measured at fair value on a recurring basis:

SUMMARY OF THE CHANGES IN THE FAIR VALUE OF DERIVATIVE LIABILITIES


Balance at January 1, 2024	$	738,140
Add: fair value of derivative associated with convertible interest accrued during the period		231,488
Balance at September 30, 2024	$	969,628

Interest Expense on 2023 Note

The Company incurred total interest expense of approximately $72,347 and $1,118,849 related to its 2023 Note during the three months ended September 30, 2024 and 2023, respectively. Interest expense during the three months ended September 30, 2024 and 2023 consisted of (i) $28,135 and $93,496, respectively, of interest and make-whole interest accrued at stated interest rates and (ii) $44,212 and $0, respectively, of incremental default interest, and (iii) $0 and $1,025,353, respectively, of amortization of debt discount.

The Company incurred total interest expense of approximately $502,950 and $2,671,922 related to its 2023 Note obligations during the nine months ended September 30, 2024 and 2023, respectively. Interest expense during the nine months ended September 30, 2024 and 2023 consisted of approximately (i) $96,479 and $449,149 of interest and make-whole interest accrued at stated interest rates and (ii) $131,676 and $118,389, respectively, of incremental default interest, and (iii) $274,795 and $2,104,384 of amortization of debt discount.

Convertible 8.5% Preferred Promissory Notes

During the period from May 2024 through August 6, 2024, the Company issued 120-day convertible preferred promissory notes (the “Preferred Share Convertible Notes”) in the aggregate amount of $2,306,425 for cash proceeds of $2,299,700. The notes bear interest at 8.5% per annum. All principal and $21,243 of interest owed in connection with the Preferred Share Convertible Notes automatically converted into Senior Convertible Preferred Stock at a conversion price of $100.00 per share on August 16, 2024, upon stockholder approval for the issuance of the Senior Convertible Preferred Stock.

The Company recorded $6,725 of original issue discount in connection with two Preferred Share Convertible Notes which were issued on May 1, 2024, which was amortized over the 120-day term, using the effective interest method.

GAUCHO GROUP HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

Convertible 8.5% Preferred Promissory Notes - Related Party

During the period from May 2024 through June 2024, the Company issued 120-day Preferred Share Convertible Notes in exchange for cash aggregate amount of $1,000,000, to a holder of greater than 10% of the Company’s common stock (the Related Party Convertible Notes, and together with the Preferred Share Convertible Notes, the “Preferred Promissory Notes”). The Related Party Convertible Notes bear interest at 8.5% per annum. All principal owed in connection with the Related Party Convertible Notes automatically converted into Senior Convertible Preferred Stock at a conversion price of $100.00 per share on August 16, 2024, upon stockholder approval for the issuance of the Senior Convertible Preferred Stock.

Interest Expense on Preferred Promissory Notes

The Company incurred total interest expense of approximately $23,990 and $0 related to its Preferred Promissory Notes during the three months ended September 30, 2024 and 2023, respectively. Interest expense during the three months ended September 30, 2024 and 2023 consisted of (i) $21,912 and $0, respectively, of interest accrued at stated interest rates and (ii) $2,078 and $0, respectively, of amortization of debt discount.

The Company incurred total interest expense of approximately $48,121 and $0 related to its Preferred Promissory Notes during the nine months ended September 30, 2024 and 2023, respectively. Interest expense during the nine months ended September 30, 2024 and 2023 consisted of approximately (i) $41,396 and $0 of interest accrued at stated interest rates and (ii) $6,725 and $0, respectively, of amortization of debt discount.

11. 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.

GAUCHO GROUP HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

The following tables present segment information for the three and nine months ended September 30, 2024 and 2023, respectively:

SCHEDULE OF SEGMENT INFORMATION

	Real Estate Development			Fashion (e-commerce)			Corporate			TOTAL			Real Estate Development			Fashion (e-commerce)			Corporate			TOTAL
	For the Three Months Ended September 30, 2024												For the Nine Months Ended September 30, 2024
	Real Estate Development			Fashion (e-commerce)			Corporate			TOTAL			Real Estate Development			Fashion (e-commerce)			Corporate			TOTAL
Revenues	$	407,727		$	14,964		$	-		$	422,691		$	1,335,414		$	101,882		$	-		$	1,437,296
Revenues from Foreign Operations	$	407,727		$	-		$	-		$	407,727		$	1,335,414		$	-		$	-		$	1,335,414
Loss from Operations	$	(534,741	)	$	(835,993	)	$	(1,510,848	)	$	(2,881,582	)	$	(1,290,743	)	$	(1,764,584	)	$	(4,499,658	)	$	(7,554,985	)

	Real Estate Development			Fashion (e-commerce)			Corporate			TOTAL			Real Estate Development			Fashion (e-commerce)			Corporate			TOTAL
	For the Three Months Ended September 30, 2023												For the Nine Months Ended September 30, 2023
	Real Estate Development			Fashion (e-commerce)			Corporate			TOTAL			Real Estate Development			Fashion (e-commerce)			Corporate			TOTAL
Revenues	$	401,554		$	62,450		$	-		$	464,004		$	1,454,533		$	168,213		$	-		$	1,622,746
Revenues from Foreign Operations	$	401,554		$	-		$	-		$	401,554		$	1,454,533		$	-		$	-		$	1,454,533
Loss from Operations	$	(52,989	)	$	(352,495	)	$	(1,038,273	)	$	(1,443,757	)	$	(510,760	)	$	(1,307,820	)	$	(3,556,769	)	$	(5,375,349	)

The following table presents segment information as of September 30, 2024 and December 31, 2023.

	Real Estate Development		Fashion (e-commerce)		Corporate		TOTAL		Real Estate Development		Fashion (e-commerce)		Corporate		TOTAL
	As of September 30, 2024								As of December 31, 2023
	Real Estate Development		Fashion (e-commerce)		Corporate		TOTAL		Real Estate Development		Fashion (e-commerce)		Corporate		TOTAL
Total Property and Equipment, net	$	6,359,564	$	308,870	$	-	$	6,668,434	$	6,651,946	$	1,154,424	$	-	$	7,806,370
Total Property and Equipment, net in Foreign Countries	$	6,359,564	$	-	$	-	$	6,359,564	$	6,651,946	$	-	$	-	$	6,651,946
Total Assets	$	12,940,655	$	687,013	$	464,447	$	14,092,115	$	13,004,982	$	3,110,117	$	445,226	$	16,560,325

GAUCHO GROUP HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

12. RELATED PARTY TRANSACTIONS

Accounts Receivable – Related Parties

The Company had accounts receivable – related parties of $0 as of September 30, 2024 and December 31, 2023, net of allowances for expected credit losses of $1,769,082 and $1,517,836, respectively, representing the net realizable value of advances made to, and expense sharing obligations receivable from, separate entities under common management.

The Company recorded credit loss expense (net of recoveries) related to accounts receivable, related parties of $262,431 and $251,246 and during the three and nine months ended September 30, 2024, respectively. The Company recorded credit losses related to accounts receivable, related parties of $0 and $19,431 during the three and nine months ended September 30,2023, respectively. Credit losses are recorded as bad debt expense which is reflected within general and administrative expenses on the accompanying condensed consolidated statements of operations.

Expense Sharing

The Company is a party to expense sharing agreements with two related entities to share expenses such as support staff, professional services, and other operating expenses (the “Related Party ESAs”). During the three months ended September 30, 2024 and 2023, the Company made advances in the amount of $165,800 and $12,500, respectively, to the related entities, and paid salaries on behalf of the related entities (pursuant to the expense sharing agreements discussed below) in the amount of $97,098 and $108,994, respectively. The Company received repayments from the related parties in the amount of $0 and $217,414 during the three months ended September 30, 2024 and 2023, respectively.

During the nine months ended September 30, 2024 and 2023, the Company made advances in the amount of $338,340 and $98,144, respectively, to the related entities, and paid expenses on behalf of the related entities (pursuant to the expense sharing agreements discussed below) in the amount of $282,098 and $492,523, respectively. The Company received repayments from the related parties in the amount of $369,168 and $585,228 during the nine months ended September 30, 2024 and 2023, respectively.

Management Fee Income

During the nine months ended September 30, 2024 and 2023, the Company recorded income of $0 and $225,000 respectively, representing management fees received from LVH pursuant to a June 2021 agreement with LVH.

Other Related Party Transactions

See Note 9 – Loans Payable related to promissory notes issued and Note 10 – Convertible Debt related to Preferred Share Convertible Notes issued to a holder greater than 10% of the Company’s common stock.

GAUCHO GROUP HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

13. 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 September 30, 2024 and 2023, the Company recorded a charge associated with its contribution of approximately $3,976 and $4,084 respectively. For the nine months ended September 30, 2024 and 2023, the Company recorded a charge associated with its contribution of approximately $10,792 and $13,292, 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 market value of its common stock on the date the shares are issued. During the nine months ended September 30, 2024, the Company issued 3,497 shares at $4.22 per share in satisfaction of $14,768 of 401(k) contribution liabilities. During the nine months ended September 30, 2023, the Company issued 24 shares at $1,359.04 per share in satisfaction of $32,617 of 401(k) contribution liabilities.

14. TEMPORARY EQUITY AND STOCKHOLDERS’ EQUITY

Reverse Stock Splits

Preferred Stock Subject to Possible Redemption

On May 21, 2024, the Company filed a Certificate of Designation of Senior Convertible Preferred Stock with the Delaware Secretary of State, designating 100,000 shares of preferred stock of the Company, par value $0.01, as Senior Convertible Preferred Stock (the “Preferred Stock”). Holders of Preferred Stock are entitled to receive cumulative cash dividends at an annual rate of 8.5% of the Preferred Stock liquidation value (equal to face value of $100 per share), payable when, as and if declared by the Board of Directors.

Each share of Preferred Stock converts into 25 shares of common stock (a) at the option of the holder (and upon approval of the Company, which shall not be unreasonably withheld) at any time after 6 months and 1 day from the date of the termination of the Preferred Stock offering (the “Termination Date”); or (b) automatically, if, on the date that is 18 months from the Termination Date, the price of the Company’s common stock increases by more than 60% from the date of the initial purchase of Preferred Stock by each Preferred Stock holder. If not previously converted, the Company must redeem all then-outstanding shares of Preferred Stock on the date that is 18 months from the Termination Date for a price equal to the liquidation value of each share, plus all unpaid and accrued and accumulated dividends, whether or not declared, within 60 days. The Company classified the convertible preferred stock as temporary equity on the accompanying consolidated balance sheets because the Preferred Stock could be required to be redeemed upon the occurrence of certain change in control events that are outside of the Company’s control.

GAUCHO GROUP HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

On August 16, 2024, the Company issued 33,286 shares of Preferred Stock in connection with the conversion of $3,306,425 principal and $21,243 interest owed in connection with the Convertible 8.5% Preferred Promissory Notes. The Company incurred issuance costs of $5,161 in connection with the issuance of Preferred Stock upon the conversion of the Convertible 8.5% Preferred Promissory Notes.

During August 2024, the Company issued 4,084 shares of Preferred Stock for cash proceeds of $408,400.

The Company recorded $36,854 of accretion of the Preferred Stock to its redemption value during the three and nine months ended September 30, 2024.

Common Stock

On November 27, 2023, the Company commenced a private placement (“the Private Placement”) of shares of common stock for gross proceeds of up to $4,000,000 at a price per share which equals the Nasdaq Rule 5653(d) Minimum Price definition, but in no event at a price per share lower than $6.00). On February 29, 2024, the Company’s stockholders approved certain anti-dilution provisions for holders of shares purchased in connection with the Private Placement, for a period of 18 months following the closing of the offering. During the nine months ended September 30, 2024, the Company issued 18,116 shares pursuant to these anti-dilution provisions.

During the period from January 1, 2024 through February 28, 2024 the Company sold 288,824 shares of common stock at $6.00 per share for aggregate proceeds of $1,732,934 in connection with the Private Placement. On April 11, 2024 the Company sold an additional 16,667 shares of common stock at $6.00 per share for aggregate proceeds of $100,000 in connection with the Private Placement.

During the nine months ended September 30, 2024, the Company issued 26,841 shares of common stock to certain of the Company’s employees, consultants and advisors in connection with the vesting of RSUs.

Termination of Equity Line of Credit

On February 22, 2024, the Company received notice from the Underwriter of its election to terminate the equity line of credit pursuant to the Common Stock Purchase Agreement and Registration Rights Agreement (the “New ELOC”).

Accumulated Other Comprehensive Loss

For the three and nine months ended September 30, 2024, the Company recorded a gain of $52,036 and $99,846, respectively, and for the three and nine months ended September 30, 2023, the Company recorded a gain (loss) of $64,280 and $(13,512), respectively, related to foreign currency translation adjustments as accumulated other comprehensive loss, 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).

GAUCHO GROUP HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

Warrants

There was no activity with regard to the Company’s warrants during the nine months ended September 30, 2024.

As of September 30, 2024, warrants for the purchase of 39,627 shares of the Company’s common stock are outstanding with a weighted average exercise price of $53.55.

A summary of outstanding and exercisable warrants as of September 30, 2024 is presented below:

SCHEDULE OF WARRANTS OUTSTANDING AND EXERCISABLE

Warrants Outstanding				Warrants Exercisable
Exercise Price	Exercisable Into	Outstanding Number of Warrants		Weighted Average Remaining Life in Years		Exercisable Number of Warrants

$45.00	Common Stock		35,571		1.4		35,571
$100.00	Common Stock		4,043		0.3		4,043
$9,000.00	Common Stock		13		1.4		13
	Total		39,627		1.3		39,627

Restricted Stock Units

A summary of RSU activity during the nine months ended September 30, 2024 is presented below:

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

				Weighted Average
	Number of			Grant Date Value
	RSUs			Per Share
RSUs non-vested January 1, 2024		7,639		$	46.87
Granted		37,500			-
Vested		(25,031	)		5.22
Forfeited		(242	)		116.00
RSUs non-vested September 30, 2024		19,866		$	19.16

During the three and nine months ended September 30, 2024, the Company recorded stock-based compensation expense of $150,206 and $306,708 respectively, and during the three and nine months ended September 30, 2023, the Company recorded stock-based compensation expense of $150,206 and $306,708 respectively, related to the amortization of RSUs.

GAUCHO GROUP HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

Stock Options

A summary of stock option activity during the nine months ended September 30, 2024 is presented below:

SCHEDULE OF STOCK OPTION ACTIVITY

				Weighted		Weighted
				Average		Average
	Number of			Exercise		Remaining		Intrinsic
	Options			Price		Term (Yrs)		Value

Outstanding, January 1, 2024		302			8,274.93
Granted		-			-
Exercised		-			-
Expired		-			-
Forfeited		(199	)		6,930.00
Outstanding, September 30, 2024		103			10,873.40		1.0	$	-

Exercisable, September 30, 2024		102		$	10,874.31		1.0	$	-

During the three and nine months ended September 30, 2024, the Company recorded total stock-based compensation expense of $17,909 and $53,729, respectively, and during the three and nine months ended September 30, 2023, the Company recorded stock-based compensation expense of $17,910 and $95,578, respectively, related to stock option grants, which is reflected as general and administrative expenses in the condensed consolidated statements of operations. As of September 30, 2024 there was $3,551 of unrecognized stock-based compensation expense, all of which is related to GGH stock option grants that will be amortized over a weighted average period of 0.1 years. No stock options were granted during the three and nine months ended September 30, 2024 or 2023, respectively.

The following table presents information related to GGH stock options outstanding and exercisable as of September 30, 2024:

SCHEDULE OF STOCK OPTION OUTSTANDING AND EXERCISABLE

Options Outstanding				Options Exercisable
				Weighted
		Outstanding		Average		Exercisable
Exercise		Number of		Remaining Life		Number of
Price		Options		In Years		Options

$	10,890.00		90		1.0		90
$	10,800.00		10		1.1		9
$	10,620.00		3		1.2		3
			103		1.0		102

GAUCHO GROUP HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

15. COMMITMENTS AND CONTINGENCIES

Legal Matters

Gaucho Group Holdings Inc. (Bankr. S.D. Fla.)

Gaucho Group Holdings Inc. v. 3i, LP et al. (D. Del.)

On February 16, 2024, the Company commenced an action in the United States District Court for the District of Delaware (the “Delaware Action”) through the filing of a complaint against 3i, LP, 3i Management LLC and Maier Joshua Tarlow (“3i Parties”) in the 2023 Note committed underlying violations of the Securities Exchange Act of 1934 and, therefore, the securities contracts entered into by the parties are void.

On April 5, 2024, the 3i Parties filed its answer to the Company’s complaint, including affirmative defenses and asserted four counterclaims against the Company; specifically, (i) breach of contract, in connection with the 2023 Note, (ii) request for preliminary injunction and permanent injunction, (iii) unjust enrichment and (iv) restitution.

On April 26, 2024, the Company responded to the 3i Parties’ counterclaims by filing a partial motion to dismiss, which seeks dismissal of the 3i Parties’ counterclaims for (i) preliminary and permanent injunction, (ii) unjust enrichment and (iii) restitution. On May 17, 2024, the Company’s motion to dismiss was fully briefed and submitted to the court. As of the date of this filing, the court has not yet rendered a decision on the Company’s motion.

On August 13, 2024, the Company moved for a temporary restraining order and preliminary injunction against the 3i Parties. The Company’s motion specifically requests that the court enjoins the 3i Parties’ attempt to conduct a public disposition of certain assets of the Company.

On October 11, 2024, the U.S. District Court for the District of Delaware held a hearing on the Company’s motion for a preliminary injunction against the 3i Parties.

On November 5, 2024, the District Court denied the Company’s motion for a preliminary injunction against the 3i Parties.

On November 7, 2024, the Company appealed the District Court’s decision to the United States Court of Appeals for the Third Circuit.

On November 13, 2024, the District Court issued an Order (i) staying all further proceedings on the counterclaims alleged by the 3i Parties against the Company, and (ii) directing the Company to advise the Court within thirty (30) days thereof if it will be seeking leave of the Bankruptcy Court to proceed with its claims against the 3i Parties.

On December 12, 2024, the District Court issued an Order directing the Company to advise the Court on or before January 31, 2025, if it will be seeking leave of the Bankruptcy Court to proceed with its claims against the 3i Parties.

On January 22, 2025, the 3i Parties moved for a Judgment on the Pleadings against the Company.

On January 27, 2025, the Company withdrew its appeal of the District Court’s decision to the United States Court of Appeals for the Third Circuit.

On February 4, 2025, the Court issued an Order setting a Status Conference for March 7, 2025.

Subject to the Chapter 11 Reorganization, the Company remains committed to litigating its claims for relief against the 3i Parties and defending itself against the 3i Parties’ counterclaims.

3i, LP et al v. Gaucho Group Holdings, Inc. et al. (E.D.N.Y.)

On October 3, 2024, the 3i Parties commenced a proceeding in the U.S. District Court for the Eastern District of New York (“Quash Proceeding”). In the Quash Proceeding, the 3i Parties seek to quash the subpoenas issued in connection with the aforementioned litigation between the Company and the 3i Parties in the U.S. District Court for the District of Delaware, and were served against certain financial institutions used by the 3i Parties.

On November 12, 2024, the Company informed the New York Court that it voluntarily commenced Chapter 11 bankruptcy proceedings in the U.S. Bankruptcy Court for the Northern District of Florida.

On November 15, 2024, the District Court stayed the Quash Proceeding pending resolution of the Chapter 11 Reorganization.

Subject to the Chapter 11 Reorganization, the Company maintains that it is entitled to the information sought by the subpoenas.

3i, LP v. Gaucho Group Holdings, Inc. et al. (Sup. Ct., NY County)

On June 7, 2024, 3i, LP (“3i”) commenced an action in the Supreme Court of the State of New York, County of New York through the filing of a complaint against the Company and its subsidiary Gaucho Group, Inc. (the “Gaucho Parties”). 3i’s complaint alleges that the Gaucho Parties are in breach of a Senior Secured Convertible Note, dated February 21, 2023, and, therefore, 3i is permitted to exercise certain rights granted to it by a certain Security and Pledge Agreement, dated February 21, 2023.

On June 14, 2024, the Company moved to dismiss or, in the alternative, stay this action. On July 7, 2024, the Company’s motion was fully briefed and submitted to the court. As of the date hereof, the New York Court has not issued an order staying this action.

Subject to the Chapter 11 Reorganization, the Company remains committed to defending itself against 3i, LP’s claims.

Disputed 3i Claim

On November 18, 2024, 3i, LP (“3i”) filed a reservation of rights statement with the United States Bankruptcy Court, claiming that the balance due in connection with the 2023 Senior Secured Convertible Note was $7,417,599. On January 21, 2025, 3i filed a Proof of Claim with the Bankruptcy Court, alleging that the balance of the 2023 Note was approximately $8.0 million. As of September 30, 2024, the Company has recorded liabilities in the aggregate amount of approximately $4.4 million in connection with the 2023 Note, representing the aggregate amount of principal, accrued interest, cash true up obligations and redemption premiums. The $8.0 million balance alleged by 3i includes additional legal fees, late charges and conversion failure charges. The validity and application of these additional charges are disputed by the Company.

GAUCHO GROUP HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

3i, LP v. Gaucho Group Holdings, Inc. (Sup. Ct., NY County)

On June 19, 2024, 3i commenced an action in the Supreme Court of the State of New York, County of New York through the filing of a motion for summary judgment in lieu of a complaint against the Company (the “3i Motion for Summary Judgment”). 3i’s motion alleges that the Company is in breach of a Senior Secured Convertible Note, dated February 21, 2023.

On June 28, 2024, the Company moved to dismiss or, in the alternative, stay the 3i Motion for Summary Judgment.

On June 29, 2024, the Company submitted a letter application to the court requesting the 3i Motion for Summary Judgment be stayed indefinitely pending a final resolution of the Delaware Action.

On July 7, 2024, the New York Court entered an order indefinitely staying this action pending final resolution of the District of Delaware action.

On November 12, 2024, the Company informed the New York Court that it voluntarily commenced Chapter 11 bankruptcy proceedings in the U.S. Bankruptcy Court for the Northern District of Florida.

As of the date hereof, the New York Court has not issued an order in response to the Company’s November 12, 2024 Notice of Bankruptcy filing.

Subject to the Chapter 11 Reorganization, the Company remains committed to litigating its claims for relief against 3i and defending itself against 3i’s claims.

General Litigation Disclosure

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 the Company and its subsidiaries are successful, they may exceed the limits of applicable insurance coverage. The Company is not involved in any litigation that 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, except as disclosed.

Port Washington Imports, LLC v. Gaucho Group Holdings, Inc. (Sup. Ct., Nassau County)

On November 26, 2024, Port Washington Imports, LLC (“Port Washington”) filed suit against the Company alleging breach of contract and seeking damages in connection with an import and distribution agreement. The Company sent Port Washington a cease and desist letter advising that as a result of the Chapter 11 Reorganization, all litigation is subject to an automatic stay.

16. LEASES

Operating Lease

On April 8, 2021, GGI entered into a lease agreement to lease a retail space in Miami, Florida for 7 years, which originally expired on May 1, 2028 (the “Miami Lease”). 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.

On April 25, 2024, the landlord of the retail space (the “Landlord”) filed an action seeking eviction of GGI from the retail space and on April 30, 2024, the landlord of the retail space notified the Company that the rent abatements were rescinded as the result of late payments. On September 20, 2024, pursuant to a settlement agreement between the Company and the Landlord, the Miami Lease was terminated, the security deposit was applied to past due rent, and all remaining past due rent was paid to the Landlord. The Company recorded a loss of $566,000 upon the termination of the Miami Lease, consisting of (i) $676,000 related to the write-off of leasehold improvements and (ii) $1,000 of fees incurred, net of (iii) a gain of $111,000 resulting from the derecognition of the related right of use (“ROU”) asset and lease liability.

Following the termination of Miami Lease and the closing of GGI’s retail store, GGI sells its products exclusively through its online platform.

GAUCHO GROUP HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

Total operating lease expense was $82,965 for each of the three months ended September 30, 2024 and 2023 and was $248,896 for each of the nine months ended September 30, 2024 and 2023. Lease expenses are recorded in general and administrative expenses on the accompanying condensed consolidated statements of operations. The balance of the operating ROU asset was $0 and $1,218,408 as of September 30, 2024 and December 31, 2023, respectively, and the balance of the operating lease liability was $0 and $1,328,408 as of September 30, 2024 and December 31, 2023, respectively.

Finance Lease

During June 2024, the Company entered into a four-year lease agreement, (the “Equipment Lease”) for the lease of equipment to be used in the wine bottling / labeling process (the “Equipment”). The lease term began on June 12, 2024. The monthly fixed lease payment is $ARS 2,971,919, (USD $3,270 translated at the exchange rate in effect at lease inception). The Equipment Lease includes a purchase option pursuant to which the Company can purchase the Equipment at the end of the lease term for an additional payment of $ARS 2,761,940 (USD $3,039).

The Company recorded an ROU asset and lease liability in the amount of $75,734 upon the commencement of the Equipment Lease. During the three and nine months ended September 30, 2024, the Company recorded depreciation expense of $5,038 in connection with the finance lease ROU asset, and recorded interest expense in the amount of $11,205 in connection with the finance lease liability.

Supplemental cash flow information related to the Company’s operating and finance leases is as follows:

SCHEDULE OF SUPPLEMENTAL CASH FLOWS INFORMATION RELATED TO LEASES

	For the Nine Months Ended
	September 30,
	2024			2023

Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	124,174		$	149,994
Operating cash flows from finance lease	$	632		$	-

Right-of-use assets obtained in exchange for lease obligations:
Operating leases	$	-		$	-
Finance lease	$	75,734		$	-

Weighted Average Remaining Lease Term:
Operating leases		-			4.6
Finance lease		3.7			-

Weighted Average Discount Rate:
Operating leases		7.0	%		7.0	%
Finance Lease		41.5	%		N/A

GAUCHO GROUP HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

Future minimum lease commitments in connection with the Company’s finance lease are as follows:

SCHEDULE OF FUTURE MINIMUM LEASE COMMITMENT


For the period from October 1, 2024 through December 31, 2024	$	9,212
For the years ended December 31,
2025		36,849
2026		36,849
2027		36,849
2028		18,208
Total future minimum lease payments		137,967
Less: imputed interest		(68,488	)
Net future minimum lease payments		69,479
Less: finance lease liabilities, current portion		(9,698	)
Finance lease liabilities, non-current portion	$	59,781

Lease Revenue

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 lease, the lessee may enter into a new lease or return the asset, which would be available to the Company for re-leasing. The Company recorded lease revenue of $11,560 and $29,337 during the three and nine months ended September 30, 2024 and recorded lease revenue of and $9,717 and $31,282 during the three and nine months ended September 30, 2023, respectively, related to this lease agreement.

17. SUBSEQUENT EVENTS‌

Loans payable

On November 4, 2024, the Company entered into a promissory note agreement with an investor, and received cash proceeds of $395,000. The note bears interest at 8% per annum and matures on May 4, 2026.

On November 12, 2024, the Company received $150,000 in proceeds upon the issuance of a convertible promissory note with one of its stockholders. The holder is entitled to principal owed on the note into AWE real estate lots at a conversion price of $100,000 per real estate lot. In addition, the holder may convert principal and interest due under the note into shares of Senior Convertible 8.5% Preferred Stock until the maturity date. The note bears interest at 8% per annum and matures on November 12, 2025.

On December 30, 2024, the Bankruptcy Court issued an order authorizing the Company to borrow up to $100,000 from the Argentina Strategic Opportunity Fund, LLC (“ASOF”) on an unsecured basis, with an annual interest rate of 8%. On January 21, 2025, the Company entered into a promissory note for $70,000 with ASOF, with all interest and principal due on January 21, 2027. On January 23, 2025, the Company entered into a promissory note for $30,000 with ASOF, with all interest and principal due on January 23, 2027.

On January 31, 2025, the Bankruptcy Court issued an order authorizing the Company to borrow up to $1,500,000 from ASOF in a 12-month period on an unsecured basis, with an annual interest rate of 7.5% (the “ASOF Line of Credit”). The Company is required to file monthly reconciliation reports comparing funds received and expenses paid to the budget approved by the Bankruptcy Court. Subject to authorization from the Bankruptcy Court, the unpaid principal amount of each advance under the ASOF Line of Credit is payable on demand.

Preferred Stock

During the period from October 11, 2024 through November 12, 2024, the Company issued 6,200 shares of Preferred Stock for cash proceeds of $619,907.

Chapter 11 Petition

On November 12, 2024, the Company filed a petition pursuant to Chapter 11 of the United States Bankruptcy Code in the United States District Court for the Southern District of Florida. Subsequent to November 12, 2024. the Company will continue to operate its business as a “debtor in possession”. The Company has sought approval of various motions with the Bankruptcy Court that are intended to enable the Company to continue its ordinary course operations and facilitate an orderly transition of its operations into Chapter 11. On November 13, 2024, the Company’s shares of common stock were delisted from the Nasdaq Stock Market (“Nasdaq”) as a result of the Chapter 11 Reorganization and trading of the Company’s common stock on Nasdaq was suspended as of the opening of business on November 22, 2024. The Company’s shares of common stock are currently quoted on the over-the-counter market with the symbol “VINOQ”.

Disputed 3i Claim

On November 18, 2024, 3i, LP (“3i”) filed a reservation of rights statement with the United States Bankruptcy Court, claiming that the balance due in connection with the 2023 Senior Secured Convertible Note was $7,417,599 but did not provide a breakdown of this amount. The Company believes that the amount does not reflect previous payments and conversions in connection with the 2023 Note and the Company filed a formal objection to 3i’s claim.

On January 21, 2025, 3i filed a Proof of Claim with the Bankruptcy Court, alleging that the balance of the 2023 Note was $8,022,667.

As of September 30, 2024, the Company has recorded liabilities in the aggregate amount of $4,369,664 in connection with the 2023 Note, representing the aggregate amount of principal, accrued interest, cash true up obligations and redemption premiums. The $8,022,667 balance alleged by 3i includes additional legal fees, late charges and conversion failure charges. The validity and application of these additional charges are disputed by the Company.

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 is being 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 4,138-acre resort.

As a result of the COVID-19 pandemic, we terminated our corporate office lease, and senior management now 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.

Recent Developments and Trends

The Board of Directors of the Company approved the commencement of a private placement of shares of Senior Convertible Preferred Stock (“Preferred Shares”) at $100 per share and 8.5% promissory notes (the “Preferred Share Convertible Notes”) for aggregate proceeds of up to $7.2 million (the “Private Placement”).

Between May 1, 2024 and August 6, 2024, pursuant to the Private Placement, the Company entered into convertible promissory notes (the “Preferred Share Convertible Notes”) in the aggregate amount of $3,306,425, with a select group of investors, all of whom have a substantial pre-existing relationship with the Company. Preferred Share Convertible Notes in the aggregate amount of $1,000,000 were issued to a holder of greater than 10% of the Company’s common stock. The Preferred Share Convertible Notes bore interest at 8.5% per annum, and automatically converted into Preferred Shares at a price of $100 per share. On August 16, 2024, the Company issued 33,286 shares of Preferred Stock in connection with the conversion of $3,306,425 principal and $21,243 interest owed in connection with the Preferred Share Convertible Notes upon stockholder approval for the issuance of Preferred Shares at the Annual General Meeting of stockholders.

During August 2024, the Company issued 4,084 shares of Preferred Stock for cash proceeds of $408,400, pursuant to the Private Placement.

The Company is currently involved in litigation with the holder of a Senior Secured Convertible Note issued by the Company. Refer to Part II. Item 1, Legal Proceedings for more information.

On November 4, 2024 the Company entered into a promissory note agreement with an investor, and received cash proceeds of $395,000. The note bears interest at 8% per annum and matures on May 4, 2026.

During the period from October 11, 2024 through November 12, 2024, the Company issued 6,200 shares of Preferred Stock for cash proceeds of $619,907.

Chapter 11 Petition

The accompanying condensed consolidated financial statements have been prepared assuming that we will continue as a going concern, which contemplates the realization of assets and satisfaction of liabilities and commitments in the normal course of business. However, substantial doubt has been raised as to the ability of the Company to continue as a going concern. The Company presently has enough cash on hand to sustain its operations on a month-to-month basis, but if the Company is not able to obtain additional sources of capital, it may not have sufficient funds to continue to operate the business for twelve months from the date these financial statements are issued. Since inception, our operations have primarily been funded through proceeds received in equity and debt financings.

Consolidated Results of Operations

Three months ended September 30, 2024 compared to the three months ended September 30, 2023

Overview

We reported a net loss of approximately $3.2 million and $2.3 million for the three months ended September 30, 2024 and 2023, respectively.

Revenues

Revenues from operations were approximately $423,000 and $464,000 during the three months ended September 30, 2024 and 2023, respectively, reflecting a decrease of approximately $41,000 or 9%. Hotel and restaurant revenues decreased by approximately $69,000 and clothing and other sale revenues decreased by an aggregate of approximately $46,000, since inflationary price increases for these Argentine revenue streams were offset by the devaluation of the peso during the period. These revenue decreases were partially offset by an increase of approximately $74,000 in wine revenues as the result of new wine distribution channels and the launch of new wine products during 2024.

Gross profit

We generated a gross profit of approximately $69,000 for the three months ended September 30, 2024 compared to a gross profit of approximately $143,000 for the three months ended September 30, 2023, representing a decrease in gross profit of approximately $74,000. Approximately $41,000 of decreases in gross profit from clothing sales resulted from the decrease in related revenues as well as approximately $6,000 charged to cost of sales related for a provision for slow moving inventory. Gross profit from hotel and restaurant sales decreased by approximately $74,000 resulting from the decrease in revenues and the high percentage of fixed costs related to these revenues. These decreases in gross profit were partially offset by increases in gross profit related to wine revenues and wine cost savings resulting from bottling efficiencies.

Selling and marketing expenses

Selling and marketing expenses were approximately $5,000 and $205,000 for the three months ended September 30, 2024 and 2023, respectively, representing a decrease of approximately $200,000 or 98%, which consisted primarily of approximately $126,000 decrease in marketing expense resulting from fewer investor events during the three months ended September 30, 2024 as compared to same period of the previous year, as well as a decrease of approximately $74,000 in advertising and marketing expenses related to fashion and accessories sold through our subsidiary Gaucho Group, Inc. (“GGI”).

General and administrative expenses

General and administrative expenses were approximately $2,274,000 and $1,267,000 for the three months ended September 30, 2024 and 2023, respectively, representing an increase of approximately $1,007,000 or 79%. Increases in general and administrative expense included (i) approximately $539,000 in legal fees in connection with litigation with the holder of a convertible note, (ii) approximately $244,000 in expected credit losses associated with mortgages receivable and receivables in connection with expense sharing agreements with related entities, (iii) approximately $100,000 in bonuses expense, and (iv) approximately $70,000 professional and consulting fees, as well as aggregated net increases in other expenses that are not individually material.

Depreciation and amortization expense

Depreciation and amortization expense included in operating expenses was approximately $106,000 and $114,000 during the three months ended September 30, 2024 and 2023, respectively.

Loss on termination of lease

During the three months ended September 30, 2024, we recorded a loss of approximately $566,000 upon the termination of the lease of property in Miami, Florida, consisting of approximately (i) $676,000 related to the write-off of leasehold improvements and (ii) $1,000 of fees incurred, net of (iii) a gain of $111,000 resulting from the derecognition of the related right of use (“ROU”) asset and lease liability in expenses due to early termination of an operating lease on September 30, 2024. There were no similar losses during the three months ended September 30, 2023.

Interest income

Interest income was approximately $2,000 and $53,000 during the three months ended September 30, 2024 and 2023, respectively, representing a decrease of $51,000 or 96%. During the three months ended September 30, 2024, the Company did not recognize interest earned on past due mortgage receivable balances, since collectability is uncertain.

Interest expense

Interest expense was approximately $210,000 and $1,157,000 during the three months ended September 30, 2024 and 2023, respectively, representing a decrease of approximately $947,000 or 82%. The decrease consisted primarily of a decrease of approximately $1,002,000 in amortization of debt discount related to discount on convertible debt that was fully amortized during the first quarter of 2024, partially offset by an increase in interest expenses resulting from an increase in the average principal balance outstanding on notes payable during the three months ended September 30, 2024 as compared to the three months ended September 30, 2023.

Other income, related party

Other income was $0 and $212,000 during the three months ended September 30, 2024 and 2023, respectively. Other income during the three months ended September 30, 2023 represented management fees from LVH. LVH suspended operations on September 27, 2023; accordingly, no management fees were earned during the three months ended September 30, 2024.

Gains from foreign currency remeasurement

The Company recorded net gains from foreign currency remeasurement of approximately $32,000 and $132,000 during the three months ended September 30, 2024 and 2023, respectively, representing a decrease of approximately $100,000 or 76%, due to the fluctuation in the Argentine peso to United States dollar exchange rates.

Change in fair value of derivative liability

The Company recorded expense in connection with the change in fair value of derivative liability of approximately $76,000 and $96,000 during the three months ended September 30, 2024 and 2023, respectively. The change in fair value of derivative liability is associated with the derivative liability arising from the default terms in connection with outstanding principal on the 2023 Senior Secured Convertible Note (the “2023 Note”). The decrease in the change in the fair value of the derivative liability results primarily from the reduction in the principal balance outstanding due to the conversion of principal and interest to equity since September 30, 2023.

Nine months ended September 30, 2024 compared to the nine months ended September 30, 2023

Overview

We reported a net loss of approximately $8.6 million and $10.0 million for the nine months ended September 30, 2024 and 2023, respectively.

Revenues

Revenues from operations were approximately $1,437,000 and $1,623,000 during the nine months ended September 30, 2024 and 2023, respectively, reflecting a decrease of approximately $186,000 or 11%. Hotel, restaurant and agricultural sale revenues decreased by an aggregate of approximately $193,000, since inflationary price increases for these Argentine revenue streams were offset by the devaluation of the peso during the period. Lot sale revenues decreased by approximately $51,000 and clothing and other revenues decreased by approximately $71,000 during the period. These revenue decreases were partially offset by an increase of approximately $130,000 in wine revenues as the result of new wine distribution channels and the launch of new wine products during 2024.

Gross profit

We generated a gross profit of approximately $265,000 for the nine months ended September 30, 2024 and a gross profit of approximately $340,000 for the nine months ended September 30, 2023, representing a decrease in gross profit of approximately $75,000. Increased gross losses of approximately $155,000 in connection with clothing sales as the result of provisions for slow-moving inventory were offset by improvements in gross profit in connection with wine revenues as the result of increases in wine revenues, as described above.

Selling and marketing expenses

Selling and marketing expenses were approximately $228,000 and $653,000 for the nine months ended September 30, 2024 and 2023, respectively, representing a decrease of approximately $425,000 or 65%, which consisted primarily of a $327,000 decrease in investor relation expenses as the result of the Company’s efforts to reduce expenses and conserve cash during the period, as well as a decrease of approximately $98,000 in advertising and marketing expenses.

General and administrative expenses

General and administrative expenses were approximately $6,694,000 and $4,735,000 for the nine months ended September 30, 2024 and 2023, respectively, representing an increase of approximately $1,959,000 or 41%. Increases in general and administrative expenses included an increase of approximately $923,000 in legal fees resulting primarily from the litigation with the holder of a convertible note, an increase of approximately $397,000 in other professional and consulting fees, approximately $520,000 of less gains on transactions denominated in a foreign currency, approximately $364,000 in expected credit losses in connection with our mortgages receivable and receivables associated with a expense sharing agreements with related entities, and approximately $123,000 of previously abated rent expense on the GGI lease charged by the landlord during the period as the result of a late rent payment. These increases were partially offset by a decrease of approximately $154,000 related to Board of Directors’ compensation and a decrease of approximately $102,000 related to severance payments paid to AWE employees during the first quarter of 2023, as well as other aggregated net expense decreases that are not individually material.

Depreciation and amortization expense

Depreciation and amortization expense included in operating expenses was approximately $331,000 and $328,000 during the nine months ended September 30, 2024 and 2023, respectively.

Loss on termination of lease

During the nine months ended September 30, 2024, we recorded a loss of approximately $566,000 upon the termination of the Miami Lease, consisting of approximately (i) $676,000 related to the write-off of leasehold improvements and (ii) $1,000 of fees incurred, net of (iii) a gain of $111,000 resulting from the derecognition of the related right of use (“ROU”) asset and lease liability in expenses due to early termination of an operating lease on September 30, 2024. There were no similar losses during the nine months ended September 30, 2023.

Interest income

Interest income was approximately $17,000 and $168,000 during the nine months ended September 30, 2024 and 2023, respectively, representing a decrease of $151,000 or 90%. During the nine months ended September 30, 2024, the Company did not recognize interest earned on past due mortgage receivable balances.

Interest expense

Interest expense was approximately $794,000 and $2,824,000 during the nine months ended September 30, 2024 and 2023, respectively, representing a decrease of approximately $2,031,000 or 72%. The decrease consisted of a decrease of approximately $1,762,000 in amortization of debt discount, since the discount on the Company’s convertible debt was fully amortized during the first quarter of 2024, and a decrease of approximately $309,000 in interest expense incurred at stated rates, resulting from a decrease in the average principal balance outstanding on convertible notes during the nine months ended September 30, 2024 as compared to the nine months ended September 30, 2023.

Other income, related party

Other income was approximately $0 and $362,222 during the nine months ended September 30, 2024 and 2023, respectively. Other income during the nine months ended September 30, 2023 represented management fees from LVH. LVH suspended operations on September 27, 2023; accordingly, no management fees were earned during the nine months ended September 30, 2024.

Loss on extinguishment of debt

There was no loss on extinguishment of debt for the nine months ended September 30, 2024. Loss on extinguishment of debt for the nine months ended September 30, 2023 in the aggregate amount of $416,000 was comprised of (i) premium paid on the conversion of GGH Notes of approximately $112,000, (ii) premium paid on the cash redemption of GGH Notes of approximately $124,000, (iii) premium paid on the 2023 Senior Secured Convertible Note (the “2023 Note”) for cash redemption of principal in the amount of approximately $32,000; (iv) premium in the amount of approximately $13,000 paid on the conversion an aggregate of $87,179 of principal and interest owed on the 2023 Note, and (iv) the fair value of approximately $135,000 in warrants issued in the exchange agreement for the GGH Notes.

Gains from foreign currency remeasurement

The Company recorded net gains from foreign currency remeasurement of approximately $66,000 and $347,000 during the nine months ended September 30, 2024 and 2023, respectively, representing a decrease of approximately $281,000 or 81%, due to the fluctuation in the Argentine peso to United States dollar exchange rates.

Change in fair value of derivative liability

The Company recorded a change in fair value of derivative liability of approximately $231,000 and $2,237,000 during the nine months ended September 30, 2024 and 2023, respectively. The change in fair value of derivative liability is associated with the derivative liability arising from the default terms in connection with outstanding principal on the 2023 Note During the nine months ended September 30, 2023, the Company recorded change in the fair value of the derivative liability based upon all principal and interest outstanding as of the June 2023 the event of default. During the nine months ended September 30, 2024, the change in the fair value of the derivative liability is in connection with additional interest accrued during the period.

Liquidity and Capital Resources

We measure our liquidity a variety of ways, including the following:

	September 30,		December 31,
	2024		2023
Cash	$	213,000	$	428,000
Working capital deficiency	$	5,000,000	$	5,363,000
Debt outstanding, gross principal amount	$	2,931,000	$	1,874,000
Cash true up obligations	$	1,485,000	$	1,485,000
Lot sale obligations (gross principal amount, refundable upon rescission)	$	452,000	$	525,000

Cash requirements for our current liabilities include approximately $4,603,000 for accounts payable and accrued expenses (including cash true up obligations in connection with convertible debt in the amount of $1,485,000), approximately $1,336,000 for loans payable, approximately $452,000 for lot sale obligations, approximately $37,000 for future payments under a finance lease (including interest portion), and approximately $88,000 for other current liabilities. Further, our convertible debt under the 2023 Note matured on February 21, 2024 and we have subsequently received event of default notices demanding immediate payment of all balances owed in connection with the 2023 Note (unless converted at the option of the investor prior to payment), including principal, accrued interest, accrued cash true up obligations and redemption premiums in the aggregate equal to a minimum of approximately $3.7 million. Cash requirements for our long-term liabilities include approximately $101,000 future payments under a finance lease (including interest portion), and approximately $30,000 for accrued expenses.

During the nine months ended September 30, 2024, we financed a portion of our activities from proceeds derived from equity financings. A significant portion of the funds have been used to cover working capital needs and costs related to the infrastructure of our real estate lots.

Net cash used in operating activities for the nine months ended September 30, 2024 and 2023 amounted to approximately $6,865,000 and $4,984,000, respectively. During the nine months ended September 30, 2024, the net cash used in operating activities was primarily attributable to the net loss of approximately $8,497,000, adjusted for approximately $2,796,000 of net non-cash expenses, and approximately $1,164,000 of cash used to fund changes in the levels of operating assets and liabilities. During the nine months ended September 30, 2023, the net cash used in operating activities was primarily attributable to the net loss of approximately $9,976,000 adjusted for approximately $5,712,000 of net non-cash expenses, and approximately $720,000 of cash used to fund changes in the levels of operating assets and liabilities.

Cash provided by (used in) investing activities for the nine months ended September 30, 2024 and 2023 amounted to approximately $57,000 and ($630,000), respectively, resulting from approximately $111,000 and $580,000, respectively, of cash used for the purchase of property and equipment, $0 and $50,000, respectively, of cash used for the purchase of an intangible asset, offset during the nine months ended September 30, 2024 by approximately $188,000 cash received upon the sale of land.

Net cash provided by financing activities for the nine months ended September 30, 2024 and 2023 amounted to approximately $6,493,000 and $5,529,000 respectively. For the nine months ended September 30, 2024, the net cash provided by financing activities resulted from approximately $3,300,000 of proceeds from the issuance of convertible debt, $1,833,000 in proceeds from the issuance of common stock, $1,120,000 proceeds from loans payable, and $408,000 in proceeds from preferred stock issued for cash, partially offset by approximately $88,000 in repayment of loans payable, $73,000 from the partial refund of a lot sale obligation, and $5,000 legal fees incurred in connection with the conversion of debt for Series B convertible redeemable preferred stock. For the nine months ended September 30, 2023, the net cash provided by financing activities resulted primarily from approximately $4,678,000 in net proceeds from the issuance of debt, $996,000 in proceeds from the issuance of common stock in a private placement, approximately $776,000 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 convertible debt obligations and related redemption premiums in the approximate amount of $1,019,000, and repayment of loans payable of approximately $87,000.

As of September 30, 2024, the Company had cash and a working capital deficit of approximately $213,000 and $5,000,000, respectively. During the nine months ended September 30, 2024 and 2023, the Company incurred net losses of approximately $8.5 million and $10.0 million, respectively, and used cash in operating activities of approximately $6.9 million and $5.0 million, respectively. Further, as of September 30, 2024, approximately $3.6 million owed in connection with the Company’s convertible debt (including principal, interest, redemption premiums and cash true up obligations) is past due and payable upon demand, and approximately $1.4 million 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 September 30, 2024.

On November 4, 2024 the Company received cash proceeds of $395,000 in connection with a promissory note.

On November 12, 2024, the Company received $150,000 in proceeds upon the issuance of a convertible promissory note with one of its stockholders.

Between October 11, 2024 through November 12, 2024, the Company received cash proceeds of $616,907 upon the sale of preferred 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 to extinguish debt, fund infrastructure development at Algodon Wine Estates, and for general working capital. 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 Estimates

The preparation of financial statements and related disclosures in conformity with U.S. GAAP. These accounting principles require us to make estimates and judgments that can affect the reported amounts of assets and liabilities as of the date of the financial statements as well as the reported amounts of revenue and expense during the periods presented. We believe that the estimates and judgments upon which it relies are reasonably based upon information available to us at the time that it makes these estimates and judgments. To the extent that there are material differences between these estimates and actual results, our financial results will be affected. We evaluate these estimates on an ongoing basis.

We consider an accounting estimate to be critical if: (i) the accounting estimate requires us to make assumptions about matters that were highly uncertain at the time the accounting estimate was made, and (ii) changes in the estimate that are reasonably likely to occur from period to period or use of different estimates that we reasonably could have used in the current period, would have a material impact on our financial condition or results of operations. We consider accounting for credit losses in connection with our mortgages receivable to be a critical accounting estimate.

Other items within our financial statements that require estimation, but are not deemed critical, include the valuation of investments, equity and liability instruments, the value of right-of-use assets and related lease liabilities and reserves associated with the realizability of certain assets.

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 September 30, 2024, pursuant to Exchange Act Rule 13a-15(b). Based upon that evaluation, our Principal Executive Officer and Principal Financial Officer concluded that our disclosure controls and procedures were not effective as of September 30, 2024, resulting from ineffective controls over information technology general controls for information systems that are relevant to the preparation of our financial statements with respect to user provisioning and deprovisioning and cybersecurity, 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

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 September 30, 2024 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 errors 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.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings

On April 25, 2024, Design District Development Partners, LLC, the landlord of the Company’s retail space in the Miami Design District, filed a lawsuit against the Company for eviction alleging non-payment of rent. On September 20, 2024, the parties entered into a settlement agreement for back rent and termination of the lease effective September 30, 2024.

The following disclosure provides an overview of the material developments to the disclosure provided Part II, Item 1 of the Company’s Quarterly Report on Form 10-Q, as filed on August 14, 2024.

Gaucho Group Holdings Inc. (Bankr. S.D. Fla.)

The Company continues to operate its business as a “debtor in possession” subject to the jurisdiction of the Bankruptcy Court and in accordance with the applicable provisions of the Bankruptcy Code, orders of the Bankruptcy Court, and applicable non-bankruptcy law. The Company has sought approval of various motions with the Bankruptcy Court that are intended to enable the Company to continue its ordinary course operations and facilitate an orderly transition of its operations into Chapter 11. The Company continues to operate as a “debtor-in-possession” under the jurisdiction of the Bankruptcy Court and in accordance with the applicable provisions of the Bankruptcy Code and orders of the Bankruptcy Court.

On January 21, 2025, 3i filed a Proof of Claim with the Bankruptcy Court, alleging that the balance of the 2023 Note was $8,022,667.19.

Gaucho Group Holdings Inc. v. 3i, LP et al. (D. Del.)

On October 11, 2024, the U.S. District Court for the District of Delaware held a hearing on the Company’s motion for a preliminary injunction against 3i, LP, 3i Management LLC and Maier Joshua Tarlow (“3i Parties”).