NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
1.
BUSINESS ORGANIZATION AND NATURE OF OPERATIONS
Organization
and Operations
Through
its subsidiaries, Gaucho Group Holdings, Inc. (“Company”, “GGH”), a Delaware corporation that was incorporated
on April 5, 1999, currently invests in, develops, and operates a collection of luxury assets, including real estate development, fine
wines, and a boutique hotel in Argentina, as well as an e-commerce platform for the sale of high-end fashion and accessories.
As
wholly owned subsidiaries of GGH, InvestProperty Group, LLC (“IPG”), Algodon Global Properties, LLC (“AGP”) and
Gaucho Ventures I – Las Vegas, LLC (“GVI”) operate as holding companies that invest in, develop and operate global
real estate and other lifestyle businesses such as wine production and distribution, golf, tennis, and restaurants. GGH operates its
properties through its ALGODON® brand. IPG and AGP have invested in two ALGODON® brand projects located in Argentina. The first
project is Algodon Mansion, a Buenos Aires-based luxury boutique hotel property that opened in 2010 and is owned by the Company’s
subsidiary, The Algodon – Recoleta, SRL (“TAR”). The second project is the redevelopment, expansion and repositioning
of a Mendoza-based winery and golf resort property now called Algodon Wine Estates (“AWE”), the integration of adjoining
wine producing properties, and the subdivision of a portion of this property for residential development. (“GDS”). GVI is
a party to an agreement with LVH Holdings (“LVH”) to develop a project in Las Vegas, Nevada.
On
February 3, 2022, the Company acquired additional real estate through the acquisition of 100% ownership in Hollywood Burger Argentina
S.R.L., now Gaucho Development S.R.L.
GGH
also manufactures, distributes, and sells high-end luxury fashion and accessories through its subsidiary, Gaucho Group, Inc. (“GGI”).
GGH held a 79% ownership interest in GGI through March 28, 2022, at which time GGH acquired the remaining 21% ownership interest in GGI.
See Non-Controlling Interest, below.
Non-Controlling
interest
As
a result of a 2019 conversion of certain convertible debt into shares of Gaucho Group, Inc. (“GGI”) common stock, GGI investors
obtained a 21% ownership interest in GGI, which was recorded as a non-controlling interest. The profits and losses of GGI for the period
from January 1, 2022 through March 28, 2022 are allocated between the controlling interest and the non-controlling interest in the same
proportions as their membership interest. On March 28, 2022, the Company issued 86,899 shares of its common stock to the minority holders
of GGI, in exchange for the remaining 21% ownership of GGI. Consequently, the Company owns 100% of the outstanding common stock of GGI.
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
There
have been no material changes to the Company’s significant accounting policies as set forth in the Company’s audited consolidated
financial statements included in the annual report on Form 10-K for the year ended December 31, 2022, except as disclosed below.
GAUCHO
GROUP HOLDINGS, INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
Basis
of Presentation
The
accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally
accepted in the United States of America (“GAAP”) for interim financial information. Accordingly, they do not include all
of the information and disclosures required by accounting principles generally accepted in the United States of America for annual financial
statements. In the opinion of management, such statements include all adjustments (consisting only of normal recurring items) which are
considered necessary for a fair presentation of the unaudited condensed consolidated financial statements of the Company as of March
31, 2023 and for the three months ended March 31, 2023 and 2022. The results of operations for the three months ended March 31, 2023
are not necessarily indicative of the operating results for the full year. It is suggested that these unaudited condensed consolidated
financial statements be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s
annual report on Form 10-K for the year ended December 31, 2022, filed with the Securities and Exchange Commission (“SEC”)
on April 17, 2023.
On
November 4, 2022, the Company effected a reverse stock split in a ratio of 1 share of common stock for 12 issued shares of common stock.
As a result of the reverse stock split, prior period shares and per share amounts appearing in the accompanying condensed consolidated
financial statements and all references in this Quarterly Report to our common stock, as well as amounts per share of our common stock,
have been retroactively restated as if the reverse stock split occurred at the beginning of the period presented.
Going
Concern and Management’s Liquidity Plans
The
accompanying condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the realization
of assets and the satisfaction of liabilities in the normal course of business. The condensed financial statements do not include any
adjustments relating to the recoverability and classification of asset amounts or the classification of liabilities that might be necessary
should the company be unable to continue as a going concern.
As
of March 31, 2023, the Company had cash and working capital of $2,389,882
and $361,192,
respectively. During the three months ended March 31, 2023 and 2022, the Company incurred net losses of $2,695,148
and $2,272,101, respectively,
and used cash in operating activities of $2,939,377
and $2,099,246,
respectively. Further, as of March 31, 2023, $5,536,404
owed in connection with the Company’s convertible debt matures on February
21, 2024, and $293,110
represents the current portion of the Company’s loans payable which are payable on demand or for which payments are due within
twelve months after March 31, 2023. During the three months ended March 31, 2023, the Company funded its operations with proceeds
from convertible debt financing of $5,000,000,
proceeds of $185,000 from a loan, proceeds of $441,409
from draws on the Company’s equity line of credit, and $591,000
from the sale of common stock.
The
Company’s operating needs include the planned costs to operate its business, including amounts required to fund working capital
and capital expenditures. Based upon projected revenues and expenses, the Company believes that it may not have sufficient funds to operate
for the next twelve months from the date these financial statements are made available. Since inception, the Company’s operations
have primarily been funded through proceeds received from equity and debt financings. The Company believes it has access to capital resources
and continues to evaluate additional financing opportunities. There is no assurance that the Company will be able to obtain funds on
commercially acceptable terms, if at all. There is also no assurance that the amount of funds the Company might raise will enable the
Company to complete its development initiatives or attain profitable operations. The aforementioned factors raise substantial doubt about
the Company’s ability to continue as a going concern.
GAUCHO
GROUP HOLDINGS, INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
Highly
Inflationary Status in Argentina
The
Company recorded gains on foreign currency transactions of $111,792 and $182,922 during the three months ended March 31, 2023 and 2022
respectively, as a result of the net monetary liability position of its Argentine subsidiaries.
Concentrations
The
Company maintains cash with major financial institutions. Cash held in US bank institutions is currently insured by the Federal Deposit
Insurance Corporation (“FDIC”) up to $250,000 at each institution. No similar insurance or guarantee exists for cash held
in Argentina bank accounts. There were aggregate uninsured cash balances of $2,094,461and $115,338 at March 31, 2023 and December 31,
2022, respectively, of which $193,318 and $115,338, respectively, represents cash held in Argentine bank accounts.
Revenue
Recognition
The
Company recognizes revenue in accordance with ASC Topic 606, Revenue from Contracts with Customers. ASC Topic 606 provides a single comprehensive
model to use in accounting for revenue arising from contracts with customers, and gains and losses arising from transfers of non-financial
assets including sales of property and equipment, real estate, and intangible assets.
The
Company earns revenues from the sale of real estate lots, as well as hospitality, food & beverage, other related services, and from
the sale of clothing and accessories. The Company recognizes revenue when goods or services are transferred to customers in an amount
that reflects the consideration which it expects to receive in exchange for those goods or services. In determining when and how revenue
is recognized from contracts with customers, the Company performs the following five-step analysis: (i) identification of contract with
customer; (ii) determination of performance obligations; (iii) measurement of the transaction price; (iv) allocation of
the transaction price to the performance obligations; and (v) recognition of revenue when (or as) the Company satisfies each performance
obligation.
The
following table summarizes the revenue recognized in the Company’s condensed consolidated statements of operations:
SCHEDULE
OF DISAGGREGATION OF REVENUE
| | |
2023 | | |
2022 | |
| | |
For
the Three Months Ended | |
| | |
March
31, | |
| | |
2023 | | |
2022 | |
| | |
| | |
| |
| Real estate sales | |
$ | - | | |
$ | 184,658 | |
| Hotel rooms and events | |
| 245,687 | | |
| 139,099 | |
| Restaurants | |
| 79,018 | | |
| 17,270 | |
| Winemaking | |
| 29,823 | | |
| 26,809 | |
| Agricultural | |
| - | | |
| 27,498 | |
| Golf, tennis and other | |
| 27,857 | | |
| 25,101 | |
| Clothes
and accessories | |
| 65,382 | | |
| 5,162 | |
| Total
revenues | |
$ | 447,767 | | |
$ | 425,597 | |
GAUCHO
GROUP HOLDINGS, INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
Revenue
from the sale of food, wine, agricultural products, clothes and accessories is recorded when the customer obtains control of the goods
purchased. Revenues from hospitality and other services are recognized as earned at the point in time that the related service is rendered,
and the performance obligation has been satisfied. Revenues from gift card sales are recognized when the card is redeemed by the customer.
The Company does not adjust revenue for the portion of gift card values that is not expected to be redeemed (“breakage”)
due to the lack of historical data. Revenue from real estate lot sales is recorded when the lot is deeded, and legal ownership of the
lot is transferred to the customer.
The
timing of the Company’s revenue recognition may differ from the timing of payment by its customers. A receivable is recorded when
revenue is recognized prior to payment and the Company has an unconditional right to payment. Alternatively, when payment precedes the
provision of the related services, the Company records deferred revenue until the performance obligations are satisfied. Deferred revenues
associated with real estate lot sale deposits are recognized as revenues (along with any outstanding balance) when the lot sale closes,
and the deed is provided to the purchaser. Other deferred revenues primarily consist of deposits accepted by the Company in connection
with agreements to sell barrels of wine, advance deposits received for grapes and other agricultural products, and hotel deposits. Wine
barrel and agricultural product advance deposits are recognized as revenues (along with any outstanding balance) when the product is
shipped to the purchaser. Hotel deposits are recognized as revenue upon occupancy of rooms, or the provision of services.
Contracts
related to the sale of wine, agricultural products and hotel services have an original expected length of less than one year. The Company
has elected not to disclose information about remaining performance obligations pertaining to contracts with an original expected length
of one year or less, as permitted under the guidance.
As
of March 31, 2023 and December 31, 2022, the Company had deferred revenue of $1,466,652 and $1,373,906, respectively, consisting of $1,309,495
and $1,179,654, respectively, associated with real estate lot sale deposits, $82,157 and $44,252, respectively, related to hotel deposits
and $75,000 and $150,000, respectively, related to prepaid management fees received.
Net
Loss per Common Share
Basic
loss per common share is computed by dividing net loss attributable to GGH common stockholders by the weighted average number of common
shares outstanding during the period. Diluted loss per common share is computed by dividing net loss attributable to common stockholders
by the weighted average number of common shares outstanding, plus the impact of common shares, if dilutive, resulting from the exercise
of outstanding stock options and warrants and the conversion of convertible instruments.
GAUCHO
GROUP HOLDINGS, INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
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
| | |
2023 | | |
2022 | |
| | |
As
of March 31, | |
| | |
2023 | | |
2022 | |
| | |
| | |
| |
| Options | |
| 34,806 | | |
| 561,027 | |
| Warrants | |
| 4,839,254 | | |
| 2,024,166 | |
| Unvested restricted stock
units | |
| 517,610 | | |
| - | |
| Convertible
debt | |
| 5,827,783
| [1] | |
| 1,897,860 | [2]
|
| Total
potentially dilutive shares | |
| 11,219,453 | | |
| 4,483,053 | |
| [1] | | Represents shares
issuable upon conversion of $5,536,394 in convertible debt outstanding as of March 31, 2023 at a conversion price of $0.95 per share,
which represents the conversion price in effect as of March 31, 2023. The conversion price of such debt is variable (see Note 9, Convertible Debt Obligations). |
| [2] | | Represents shares
issuable upon conversion of principal and interest outstanding in the aggregate amount of $6,642,510 at a conversion price of $3.50 per
share. |
Sequencing
Policy
Under
ASC 815, the Company has adopted a sequencing policy, whereby, in the event that reclassification of contracts from equity to assets
or liabilities is necessary pursuant to ASC 815 due to the Company’s inability to demonstrate it has sufficient authorized shares
as a result of certain securities with a potentially indeterminable number of shares or the Company’s total potentially dilutive
shares exceed the Company’s authorized share limit, shares will be allocated on the basis of the earliest issuance date of potentially
dilutive instruments, with the earliest grants receiving the first allocation of shares. Pursuant to ASC 815, issuances of securities
granted as compensation in a share-based payment arrangement are not subject to the sequencing policy.
Derivative
Instruments
The
classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is evaluated
at the end of each reporting period. If the classification changes as a result of events during the period, the contract is reclassified
as of the date of the event that caused the reclassification. For derivative financial instruments that are accounted for as liabilities,
the derivative instruments are initially recorded at their fair values and are then re-valued at each reporting date. with changes in
the fair value reported in the consolidated statements of operations.
Recently
Adopted Accounting Pronouncements
In
June 2016, the FASB issued ASU No. 2016-13 “Financial Instruments – Credit Losses (Topic 326)” and also issued subsequent
amendments to the initial guidance under ASU 2018-19, ASU 2019-04, ASU 2019-05 and ASU 2020-02 (collectively Topic 326). Topic 326 requires
the measurement and recognition of expected credit losses for financial assets held at amortized cost. This replaces the existing incurred
loss model with an expected loss model and requires the use of forward-looking information to calculate credit loss estimates. The Company
adopted the provisions of this ASU on January 1, 2023 using the modified retrospective method for all financial assets measured at amortized
cost. Results for reporting periods beginning after December 31, 2022 are presented under Topic 326 while prior period amounts continue
to be reported in accordance with previously applicable GAAP. The Company recorded an adjustment to accumulated deficit of $111,582 as
of January 1, 2023 for the cumulative effect of adopting Topic 326.
GAUCHO
GROUP HOLDINGS, INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
Reclassifications
Certain
reclassifications have been made to prior period amounts to conform to the current period financial statement presentation.
3.
MORTGAGES RECEIVABLE
The
Company offers loans to purchasers in connections with the sale of real estate lots. The loans bear interest at 7.2% per annum and terms
generally range from eight to ten years. Principal and interest for each loan is billed and receivable on a monthly basis. The loans
are secured by a first mortgage lien on the property purchased by the borrower. Mortgages receivable includes the related interest receivable
and are presented at amortized cost, less bad debt allowances, in the condensed consolidated financial statements.
Management
evaluates each loan individually on a quarterly basis, to assess collectability and estimate a reserve for past due amounts. The total
allowance for uncollectable mortgages as of March 31, 2023 and 2022 was $190,172 and $196,550, respectively. Past due principal amounts
of $309,498 and $254,683 are included in mortgages receivable, current as of March 31, 2023 and December 31, 2022, respectively, in accordance
with the mortgages’ contractual terms. In the case of each of the past due loans, the Company believes that the value of the collateral
exceeds the outstanding balance on the loan, plus accrued interest.
The
following represents the maturities of mortgages receivable as of March 31, 2023.
SCHEDULE
OF MATURITIES OF MORTGAGES RECEIVABLE
| | |
| | |
| April 1 through
December 31, 2023 | |
| 807,654 | |
| For the years ended December
31, | |
| | |
| 2024 | |
| 381,532 | |
| 2025 | |
| 409,927 | |
| 2026 | |
| 440,436 | |
| 2027 | |
| 473,215 | |
| 2028 | |
| 480,227 | |
| Thereafter | |
| 1,093,286 | |
| Gross
Receivable | |
| 4,086,276 | |
| Less: Allowance | |
| (190,172 | ) |
| Net Receivable | |
$ | 3,896,104 | |
GAUCHO
GROUP HOLDINGS, INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
As
of March 31, 2023 and December 31, 2022, no single borrower had loans outstanding representing more than 10% of the total balance of
mortgages receivable.
The
Company recorded interest income of $50,344 and $3,852 for the three months ended March 31, 2023 and 2022, respectively. As of March
31, 2023 and December 31, 2022, there is $232,754 and $185,197, respectively, of interest receivable included in mortgages receivable
on the accompanying condensed consolidated balance sheets.
4.
INVENTORY
Inventory
at March 31, 2023 and December 31, 2022 was comprised of the following:
SCHEDULE
OF INVENTORY
| | |
March
31, 2023 | | |
December
31, 2022 | |
| | |
| | |
| |
| Vineyard in process | |
$ | 711,418 | | |
$ | 516,096 | |
| Wine in process | |
| 757,500 | | |
| 797,862 | |
| Finished wine | |
| 31,552 | | |
| 40,735 | |
| Clothes
and accessories | |
| 498,524 | | |
| 534,269 | |
| Total | |
$ | 1,998,994 | | |
$ | 1,888,962 | |
5.
FAIR VALUE OF FINANCIAL INSTRUMENTS
Fair
value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants
at the measurement date. In determining fair value, the Company often utilizes certain assumptions that market participants would use
in pricing the asset or liability, including assumptions about risk and/or the risks inherent in the inputs to the valuation technique.
These inputs can be readily observable, market corroborated, or developed by the Company. The fair value hierarchy ranks the quality
and reliability of the information used to determine fair values. Financial assets and liabilities carried at fair value are classified
and disclosed in one of the following three categories:
Level
1 – Valued based on quoted prices at the measurement date for identical assets or liabilities trading in active markets. Financial
instruments in this category generally include actively traded equity securities.
Level
2 – Valued based on (a) quoted prices for similar assets or liabilities in active markets; (b) quoted prices for identical
or similar assets or liabilities in markets that are not active; (c) inputs other than quoted prices that are observable for the asset
or liability; or (d) from market corroborated inputs. Financial instruments in this category include certain corporate equities that
are not actively traded or are otherwise restricted.
Level
3 – Valued based on valuation techniques in which one or more significant inputs is not readily observable. Included in this
category are certain corporate debt instruments, certain private equity investments, and certain commitments and guarantees.
GAUCHO
GROUP HOLDINGS, INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
The
carrying amounts of the Company’s short-term financial instruments including cash, accounts receivable, advances and loans to employees,
prepaid taxes and expenses, accounts payable, accrued expenses and other liabilities approximate fair value due to the short-term nature
of these instruments. The carrying value of the Company’s loans payable, debt obligations and convertible debt obligations approximate
fair value, as they bear terms and conditions comparable to market, for obligations with similar terms and maturities.
6.
ACCRUED EXPENSES
Accrued
expenses are comprised of the following:
SCHEDULE
OF ACCRUED EXPENSES
| | |
March
31, | | |
December
31, | |
| | |
2023 | | |
2022 | |
| | |
| | |
| |
| Accrued compensation
and payroll taxes | |
$ | 634,385 | | |
$ | 652,943 | |
| Accrued taxes payable - Argentina | |
| 273,226 | | |
| 270,239 | |
| Accrued interest | |
| 12,716 | | |
| 78,368 | |
| Other
accrued expenses | |
| 294,589 | | |
| 663,266 | |
| Accrued
expenses, current | |
| 1,214,916 | | |
| 1,664,816 | |
| Accrued
payroll tax obligations, non-current | |
| 51,951 | | |
| 66,018 | |
| Total
accrued expenses | |
$ | 1,266,867 | | |
$ | 1,730,834 | |
GAUCHO
GROUP HOLDINGS, INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
On
November 27, 2020, the Company entered into various payment plans, pursuant to which it agreed to pay its Argentine payroll tax obligations
over a period of 60 to 120 months. The current portion of payments due under the plan is $141,880 and $209,938 as of March 31, 2023 and
December 31, 2022, respectively, which is included in accrued taxes payable – Argentina, above. The non-current portion of accrued
expenses represents payments under the plan that are scheduled to be paid after twelve months. The Company incurred interest expense
of $17,304 and $4,487 during the three months ended March 31, 2023 and 2022, respectively, related to these payment plans.
7.
DEFERRED REVENUE
Deferred
revenue is comprised of the following:
SCHEDULE
OF DEFERRED REVENUES
| | |
March
31, 2023 | | |
December
31, 2022 | |
| | |
| | |
| |
| Real estate lot
sales deposits | |
$ | 1,309,495 | | |
$ | 1,179,654 | |
| Prepaid management fees | |
| 75,000 | | |
| 150,000 | |
| Other | |
| 82,157 | | |
| 44,252 | |
| Total | |
$ | 1,466,652 | | |
$ | 1,373,906 | |
The
Company accepts deposits in conjunction with agreements to sell real estate building lots at Algodon Wine Estates in the Mendoza
wine region of Argentina. These lot sale deposits are generally denominated in U.S. dollars. The Company received deposits in the
amount of $129,841
in connection with 5 additional lot sales during the three months ended March 31, 2023. Revenue is recorded when the sale closes,
and the deeds are issued.
8.
LOANS PAYABLE
The
Company’s loans payable are summarized below:
SCHEDULE
OF LOANS PAYABLE
| | |
March
31, | | |
December
31, | |
| | |
2023 | | |
2022 | |
| | |
| | |
| |
| EIDL | |
$ | 93,541 | | |
$ | 93,541 | |
| 2018 Loan | |
| 74,178 | | |
| 111,137 | |
| 2022 Loan | |
| 33,932 | | |
| 51,643 | |
| 2023 Note | |
| 185,000 | | |
| - | |
| Total
Loans Payable | |
| 386,651 | | |
| 256,321 | |
| Less:
current portion | |
| 293,110 | | |
| 164,656 | |
| Loans
Payable, non-current | |
$ | 93,541 | | |
$ | 91,665 | |
On
January 9, 2023, the Company received $185,000 in proceeds on the issuance of a one-year, non-convertible promissory note with a February
20, 2024 maturity date. The note bears interest at a rate of 8% per annum. In addition, during the three months ended March 31, 2023,
the Company made principal payments in the amount of $23,215 on the 2018 Loan payable and $9,390 on the 2022 Loan payable.
GAUCHO
GROUP HOLDINGS, INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
The
Company incurred interest expense related to the loans payable in the amount of $16,486 and $4,273 during the three months ended March
31, 2023 and 2022, respectively. As of March 31, 2023 and December 31, 2022, there is accrued interest of $12,716 and $9,437, respectively,
related to the Company’s loans payable.
9.
CONVERTIBLE DEBT OBLIGATIONS
Amounts
owed pursuant to the Company’s convertible debt obligations are as follows:
SCHEDULE
OF CONVERTIBLE NOTES
| | |
GGH
Notes | | |
2023
Notes | | |
Total Principal | | |
Debt Discount | | |
Convertible
debt, net
of discount | |
| | |
| | |
| | |
| | |
| | |
| |
| Balance at January 1, 2023 | |
$ | 1,997,909 | | |
$ | - | | |
$ | 1,997,909 | | |
$ | (6,450 | ) | |
$ | 1,991,459 | |
| Notes
issued | |
| - | | |
| 5,617,978 | | |
| 5,617,978 | | |
| (2,509,601 | ) | |
| 3,108,377 | |
| Debt principal
converted to common stock: | |
| (1,335,439 | ) | |
| - | | |
| (1,335,439 | ) | |
| - | | |
| (1,335,439 | ) |
| Principal
repayments | |
| (662,470 | ) | |
| (81,584 | ) | |
| (744,054 | ) | |
| - | | |
| (744,054 | ) |
| Amortization
of debt discount | |
| - | | |
| - | | |
| - | | |
| 362,166 | | |
| 362,166 | |
| Balance at March 31,
2023 | |
$ | - | | |
$ | 5,536,394 | | |
$ | 5,536,394 | | |
$ | (2,153,885 | ) | |
$ | 3,382,509 | |
GGH
Convertible Notes
On
February 2, 2023, the Company and the holders of the remaining GGH Notes entered into a fourth letter agreement (“Letter Agreement
#4). Pursuant to Letter Agreement #4, the parties agreed to reduce the conversion price of the GGH Notes to the lower of: (i) the closing
sale price on the trading day immediately preceding the conversion date; and (ii) the average closing sale price of the common stock
for the five trading days immediately preceding the conversion date. The conversion price is not subject to a floor price. Between February
3 and February 15, 2023, the holders elected to convert $1,571,553 in principal and interest, of which $1,335,439, $124,049, and $112,065
was principal, interest and premium paid on conversion, into 833,333 shares of common stock at prices ranging from $1.45 and $2.40. The
premium paid on conversion of the GGH Notes was recorded as a loss on extinguishment.
On
February 8, 2023, the Company and the holders of the remaining GGH Notes entered into a fifth letter agreement (“Letter Agreement
#5). Pursuant to Letter Agreement #5, the parties agreed to extend the maturity date of the notes from February 9, 2023 to February 28,
2023.
On
February 20, 2023, the Company entered into another exchange agreement (the “Exchange Agreement #4”) with the remaining holders
of the GGH Notes, pursuant to which warrants for the purchase up to an aggregate of 150,000 shares of the Company’s common stock
at an exercise price of $1.00 were issued as consideration for extending maturity date in connection with Letter Agreement #5. The warrants
have a grant date fair value of $134,779 and expire on the second anniversary of the date of issuance. Because the value of the new warrants
was deemed to be substantial as compared to the $662,470 remaining principal of the GGH Notes, the transaction was accounted for as an
extinguishment of old notes which were replaced with the new note. The fair value of the warrants was recorded as a loss on extinguishment
and is reflected under Other Expense (Income) in the accompanying condensed consolidated statement of operations.
GAUCHO
GROUP HOLDINGS, INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
On
February 21, the Company redeemed the remaining GGH Notes for $905,428, which includes the $662,470 of principal, $118,909 of accrued
interest and $124,049 of redemption premium, the latter of which was charged to extinguishment loss.
Securities
Purchase Agreement
On
February 21, 2023, the Company entered into a securities purchase agreement (the “SPA”) with an institutional investor
(the “Investor”), pursuant to which the Company received proceeds of $5,000,000
in exchange for senior secured convertible notes of the Company in the aggregate original principal amount of $5,617,978 (the “2023 Notes”),
and three-year common stock purchase warrants exercisable into an aggregate of 3,377,099
shares of common stock of the Company at an exercise price equal to $1.34
(the “2023 Note Warrants”).
Pursuant
to the SPA, the exercise price of certain warrants for the purchase of 62,500 common shares exercisable at $21.00 per share and warrants
for the purchase of 43,814 shares exercisable at $6.00 per share was reduced to $1.00 per share. The increase in the value of the warrants
in the aggregate amount of $63,502 as a result of the reduction in exercise price was recorded as debt discount on the 2023 Notes.
The
convertible notes (the “2023 Notes”) are convertible into shares of common stock of the Company at a conversion price equal
to the lower of (i) $1.34
(subject to adjustment for standard anti-dilution
events, the non-exempt issuance of common stock for less than $1.34
per share and the issuance of additional variable
price securities); (ii) the trading price on the day immediately prior to conversion or (iii) the average trading price of the Company’s
common stock for the 5 days preceding conversion (collectively the “Conversion Price”), subject to a floor price of $0.27. If the Conversion Price in effect
on the date of conversion is less than $0.27, the Investor is entitled to a cash true up payment equal to the difference between the conversion dollar amount and the value of shares issued upon
conversion (the “Cash True Up Provision”).
The 2023 Notes mature on the first
anniversary of the issuance date (the “Maturity Date”) and bear interest at a rate of 7%
per annum, which is payable either in cash monthly, or by way of inclusion in the accrued interest in the conversion amount on the
conversion date. Interest includes a make-whole amount equal to the additional interest that would accrue if the entire 2023 Notes
principal remained outstanding through the Maturity Date.
The
2023 Notes are redeemable at the Company’s election, so long as the Company is not in default, at the greater of (a) 115% of the
conversion amount, or (b) the amount equal to the shares issuable upon conversion times the greatest closing price from the redemption
notice date through the date the Company makes the redemption payment. The minimum redemption amount is $500,000 and the Company can
only deliver one redemption notice in a 20-day period.
Upon
an event of default, the 2023 Notes the Conversion Price is reduced to the lesser of (a) $1.34 (subject to adjustment as described
above); (b) 80% of the volume-weighted average price on the day preceding receipt of the conversion notice; or (c) 80% of average of
the three lowest volume-weighted average prices over the fifteen trading days which precede receipt of the conversion notice, subject
to a floor price of $0.27. In addition, the Investor may require the Company to redeem the 2023 Notes using the same formula that would
be used for a Company-initiated redemption, described above.
In
addition to other terms, conditions and rights, both the Company and the institutional investor have the right to initiate additional
closings for up to $5 million of cash for additional 2023 Notes and warrants.
Pursuant
to the terms of the 2023 Notes, the Company must pay, convert or redeem one quarter of the initial principal, plus any outstanding interest
and make-whole amount by each three-month anniversary of the issuance date.
During
the three months ended March 31, 2023, the Company made redemption payments in the aggregate amount of $100,388 related to the 2023 Notes,
which included principal repayments of $81,584, accrued interest of $5,710 and redemption premiums of $13,094.
GAUCHO
GROUP HOLDINGS, INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
The Company incurred financing
costs of $321,803 in connection with the SPA, of which $218,187 was allocated to the 2023 Notes and recorded as debt discount and $103,616
was allocated to the 2023 Note Warrants and charged against additional paid-in capital.
Upon the issuance of the 2023 Notes, the Company recorded a debt discount at issuance in the aggregate amount $2,509,601,
consisting of (i) the $617,978 difference between the aggregate principal amount of the 2023 Notes and the cash proceeds received, (ii)
financing costs in the aggregate amount of $218,187, (iii) value of warrant modification of $63,502, and (iv) the $1,609,935 relative
fair value of the 2023 Note Warrants. The debt discount is being amortized using the effective interest method over the term of the 2023
Notes.
Interest
Expense on Convertible Debt Obligations
The
Company incurred total interest expense of $566,041,
and $749,229
related to its convertible debt obligations during
the three months ended March 31, 2023 and 2022, respectively. Interest expense during the three months ended March 31, 2023 and 2022
consists of (i) $117,336
and $113,396,
respectively, of interest accrued at 7%
per annum; (ii) make-whole amounts of $86,539
and $84,393,
respectively, and (iii) amortization of debt discount in the amount of $362,166
and $551,440,
respectively, during the three months ended March 31, 2023. During the three months ended March 31, 2023, accrued interest in the amount
of $160,782
was paid in cash and accrued interest in the
amount of $124,049
was converted into common stock, such that interest
accrued on convertible debt is $0
as of March 31, 2023.
10.
SEGMENT DATA
The
Company’s financial position and results of operations are classified into three reportable segments, consistent with how the CODM
makes decisions about resource allocation and assesses the Company’s performance.
| |
● |
Real
Estate Development, through AWE and TAR, including hospitality and winery operations, which support the ALGODON® brand. |
| |
● |
Fashion
(e-commerce), through GGI, including the manufacture and sale of high-end fashion and accessories sold through an e-commerce platform. |
| |
● |
Corporate,
consisting of general corporate overhead expenses not directly attributable to any one of the business segments. |
GAUCHO
GROUP HOLDINGS, INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
The
following tables present segment information for the three months ended March 31, 2023 and 2022:
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 March 31, 2023 | | |
For
the Three Months Ended March 31, 2022 | |
| | |
Real
Estate Development | | |
Fashion (e-commerce) | | |
Corporate | | |
TOTAL | | |
Real
Estate Development | | |
Fashion (e-commerce) | | |
Corporate | | |
TOTAL | |
| Revenues | |
$ | 382,385 | | |
$ | 65,382 | | |
$ | - | | |
$ | 447,767 | | |
$ | 420,435 | | |
$ | 5,162 | | |
$ | - | | |
$ | 425,597 | |
Revenues
from
Foreign Operations | |
$ | 382,385 | | |
$ | - | | |
$ | - | | |
$ | 382,385 | | |
$ | 420,435 | | |
$ | - | | |
$ | - | | |
$ | 420,435 | |
Loss
from
Operations | |
$ | (334,004 | ) | |
$ | (492,199 | ) | |
$ | (1,119,802 | ) | |
$ | (1,946,005 | ) | |
$ | (385,853 | ) | |
$ | (358,533 | ) | |
$ | (1,031,417 | ) | |
$ | (1,775,803 | ) |
The
following tables present segment information as of March 31, 2023 and December 31, 2022:
| | |
Real
Estate Development | | |
Fashion (e-commerce) | | |
Corporate | | |
TOTAL | | |
Real
Estate Development | | |
Fashion (e-commerce) | | |
Corporate | | |
TOTAL | |
| | |
As
of March 31, 2023 | | |
As
of December 31, 2022 | |
| | |
Real
Estate Development | | |
Fashion (e-commerce) | | |
Corporate | | |
TOTAL | | |
Real
Estate Development | | |
Fashion (e-commerce) | | |
Corporate | | |
TOTAL | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| |
| Total
Property and Equipment, net | |
$ | 6,238,314 | | |
$ | 1,325,055 | | |
$ | - | | |
$ | 7,563,369 | | |
$ | 6,234,856 | | |
$ | 1,369,205 | | |
$ | 17,196 | | |
$ | 7,621,257 | |
| Total
Property and Equipment, net in Foreign Countries | |
$ | 6,238,314 | | |
$ | - | | |
$ | - | | |
$ | 6,238,314 | | |
$ | 6,234,856 | | |
$ | - | | |
$ | - | | |
$ | 6,234,856 | |
| Total
Assets | |
$ | 14,127,549 | | |
$ | 3,514,330 | | |
$ | 3,367,462 | | |
$ | 21,009,341 | | |
$ | 13,504,914 | | |
$ | 3,522,415 | | |
$ | 1,665,656 | | |
$ | 18,692,985 | |
11.
RELATED PARTY TRANSACTIONS
Accounts
Receivable – Related Parties
As
of March 31, 2023 and December 31, 2022 the Company had accounts receivable – related parties of $1,179,121 and $1,115,816 net
of allowances for expected credits loss of $470,516 and $339,503, respectively, representing the net realizable value of advances made
to, and expense sharing obligations receivable from, separate entities under common management. During the three months ended March 31,
2023 and 2022, the Company made advances in the amount of $85,644 and $36,000, respectively, to the related entities, and received repayments
in the amount of $130,000 and $120,000, respectively, from the related entities. Receivables recorded in the amount of $175,426 and $228,226
in connection with an expense sharing agreement during the three months ended March 31, 2023 and 2022 are discussed below.
The
Company recorded credit losses of $19,431 and $0 during the three months ended March 31, 2023 and 2022, respectively, which is reflected
in the general and administrative expenses on the on the accompanying unaudited consolidated statements of operations.
GAUCHO
GROUP HOLDINGS, INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
Expense
Sharing
On
April 1, 2010, the Company entered into an agreement with a Related Party to share expenses such as office space, support staff, professional
services, and other operating expenses (the “Related Party ESA”). During the three months ended March 31, 2023 and 2022,
the Company recorded a contra-expense of $175,426 and $228,226, respectively, related to the reimbursement of general and administrative
expenses as a result of the agreement.
Management
Fee Income
The
Company earns management fees of $75,000 per quarter, from LVH. A member of the Company’s board of directors is the managing member
of SLVH, LLC, and holds a 20% membership interest in SLVH. SLVH owns 88% of the limited liability interest of LVH.
12.
BENEFIT CONTRIBUTION PLAN
The
Company sponsors a 401(k) profit-sharing plan (“401(k) Plan”) that covers substantially all of its employees in the United
States. The 401(k) Plan provides for a discretionary annual contribution, which is allocated in proportion to compensation. In addition,
each participant may elect to contribute to the 401(k) Plan by way of a salary deduction.
A
participant is always fully vested in their account, including the Company’s contribution. For the three months ended March 31,
2023 and 2022, the Company recorded a charge associated with its contribution of $5,908 and $18,976, respectively. This charge has been
included as a component of general and administrative expenses in the accompanying condensed consolidated statements of operations. The
Company issues shares of its common stock to settle these obligations based on the fair value of its common stock on the date the shares
are issued. During the three months ended March 31, 2023, the Company issued 24,160 shares at $1.35 per share in satisfaction of $32,617
of 401(k) contribution liabilities. During the three months ended March 31, 2022, the Company issued 1,040 shares at $26.76 per share
in satisfaction of $27,821 of 401(k) contribution liabilities.
13.
STOCKHOLDERS’ EQUITY
Common
Stock
On
February 2, 2023, the Company issued 51,305 shares of common stock upon the cashless exercise of 134,730 warrants at exercise prices
ranging from $2.40 and $3.82.
On
February 10, 2023, the Company sold 591,000 shares of common stock and warrants to purchase 147,750 shares at an exercise price of $1.00
for aggregate proceeds of $591,000. The warrants are immediately exercisable and expire two years from the date of issuance.
During
the three months ended March 31, 2023, the Company sold an aggregate of 364,430 shares of the Company’s common stock for gross
proceeds of $480,670 less placement agent fees of $39,261 pursuant to a Common Stock Purchase Agreement (the “New ELOC”).
See
Note 9 – Convertible Debt Obligations for additional details regarding common shares issued during the three months ended March
31, 2023.
GAUCHO
GROUP HOLDINGS, INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
Accumulated
Other Comprehensive Loss
For
three months ended March 31, 2023 and 2022, the Company recorded a loss of $(39,799) and a gain of $263,406, respectively, of foreign
currency translation adjustments as accumulated other comprehensive income, primarily related to fluctuations in the Argentine peso to
United States dollar exchange rates (see Note 2 – Summary of Significant Accounting Policies, Highly Inflationary Status in Argentina).
Warrants
A
summary of warrant activity during the three months ended March 31, 2023 is presented below:
SUMMARY
OF WARRANTS ACTIVITY
| | |
Number
of Warrants | | |
Weighted
Average Exercise Price | | |
Weighted
Average Remaining Life in Years | | |
Intrinsic
Value | |
| | |
| | |
| | |
| | |
| |
| Outstanding, January 1, 2023 | |
| 1,299,135 | | |
$ | 5.77 | | |
| | | |
| | |
| Issued | |
| 3,674,849 | | |
| 1.31 | | |
| | | |
| | |
| Exercised | |
| (134,730 | ) | |
| 3.36 | | |
| | | |
| | |
| Expired | |
| - | | |
| - | | |
| | | |
| | |
| Canceled | |
| - | | |
| - | | |
| | | |
| | |
| Outstanding, March 31,
2023 | |
| 4,839,254 | | |
$ | 2.15 | | |
| 2.3 | | |
$ | - | |
| | |
| | | |
| | | |
| | | |
| | |
| Exercisable, March 31,
2023 | |
| 4,839,254 | | |
$ | 2.15 | | |
| 2.3 | | |
$ | - | |
See
Note 9 – Convertible Debt Obligations and Note 13 – Stockholder’s Equity (Common Stock) for additional details regarding
warrants issued during the three months ended March 31, 2023.
A
summary of outstanding and exercisable warrants as of March 31, 2023 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 | |
| | | |
| |
| | |
| | |
| |
| $ | 1.00 | | |
Common Stock | |
| 404,064 | | |
| 1.8 | | |
| 404,064 | |
| $ | 1.34 | | |
Common Stock | |
| 3,377,099 | | |
| 2.9 | | |
| 3,377,099 | |
| $ | 3.82 | | |
Common Stock | |
| 454,588 | | |
| 0.4 | | |
| 454,588 | |
| $ | 6.00 | | |
Common Stock | |
| 602,225 | | |
| 0.7 | | |
| 602,225 | |
| $ | 90.00 | | |
Common
Stock | |
| 1,278 | | |
| 2.9 | | |
| 1,278 | |
| | | | |
Total | |
| 4,839,254 | | |
| 2.3 | | |
| 4,839,254 | |
GAUCHO
GROUP HOLDINGS, INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
Restricted
Stock Units
A
summary of RSU activity during the three months ended March 31, 2023 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, 2023 | |
| 511,500 | | |
$ | 1.16 | |
| Granted | |
| 10,000 | | |
| 1.31 | |
| Vested | |
| (3,890 | ) | |
| 1.31 | |
| RSUs non-vested March
31, 2023 | |
| 517,610 | | |
$ | 1.16 | |
On
January 23, 2023, the Company granted 10,000 restricted stock units (“RSUs”) to certain employees and advisors for their
service, of which 3,890 RSUs vested on the grant date and 3,055 RSUs will vest on each of the next two anniversaries of the date of the
grant.
During
the three months ended March 31, 2023 and 2022, the Company recorded stock-based compensation expense of $79,422 and $0, respectively,
related to the amortization of RSUs.
Stock
Options
No
stock options were granted during the three months ended March 31, 2023 or the three months ended March 31, 2022. The following table
presents information related to GGH stock options outstanding as of March 31, 2023:
SCHEDULE
OF STOCK OPTION ACTIVITY
| | |
| | |
Weighted | | |
Weighted | | |
| |
| | |
| | |
Average | | |
Average | | |
| |
| | |
Number
of | | |
Exercise | | |
Remaining | | |
Intrinsic | |
| | |
Options | | |
Price | | |
Term
(Yrs) | | |
Value | |
| | |
| | |
| | |
| | |
| |
| Outstanding, January 1, 2023 | |
| 40,612 | | |
| 85.35 | | |
| | | |
| | |
| Granted | |
| - | | |
| - | | |
| | | |
| | |
| Exercised | |
| - | | |
| - | | |
| | | |
| | |
| Expired | |
| (5,806 | ) | |
| 138.60 | | |
| | | |
| | |
| Forfeited | |
| - | | |
| - | | |
| | | |
| | |
| Outstanding, March 31,
2023 | |
| 34,806 | | |
$ | 76.47 | | |
| 1.4 | | |
$ | - | |
| | |
| | | |
| | | |
| | | |
| | |
| Exercisable, March 31,
2023 | |
| 29,698 | | |
$ | 75.78 | | |
| 1.2 | | |
$ | - | |
During
the three months ended March 31, 2023 and 2022, the Company recorded stock-based compensation expense of $38,834 and $72,700, respectively,
related to stock options for the purchase of GGH common stock, and recorded stock-based compensation expense of $0 and $10,354, respectively,
related to options for the purchase of GGI common stock. Stock-based compensation expense is reflected in general and administrative
expenses (classified in the same manner as the grantees’ wage compensation) in the accompanying condensed consolidated statements
of operations. As of March 31, 2023, there was $130,753 of unrecognized stock-based compensation expense related to stock option grants
that will be amortized over a weighted average period of 1.3 years.
GAUCHO
GROUP HOLDINGS, INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
14.
COMMITMENTS AND CONTINGENCIES
Legal
Matters
The
Company is involved in litigation and arbitrations from time to time in the ordinary course of business. After consulting legal counsel,
the Company does not believe that the outcome of any such pending or threatened litigation will have a material adverse effect on its
financial condition or results of operations. However, as is inherent in legal proceedings, there is a risk that an unpredictable decision
adverse to the Company could be reached. The Company records legal costs associated with loss contingencies as incurred. Settlements
are accrued when, and if, they become probable and estimable.
15.
LEASES
On
April 8, 2021, GGI entered into a lease agreement to lease a retail space in Miami, Florida for 7 years, which expires May 1, 2028. As
of March 31, 2023, the lease had a remaining term of approximately 5.1 years. Lease payments begin at $26,758 per month and escalate
3% every year over the duration of the lease. The Company was granted rent abatements of 15% for the first year of the lease term, and
10% for the second and third year of the lease term. The Company was required to pay a $56,130 security deposit.
As
of March 31, 2023, the Company had no leases that were classified as a financing lease.
Total
operating lease expenses was $82,965 during the three months ended March 31, 2023 and 2022. Lease expenses are recorded in general and
administrative expenses on the accompanying condensed consolidated statements of operations.
Supplemental
cash flow information related to leases was as follows:
SCHEDULE
OF SUPPLEMENTAL CASH FLOWS INFORMATION RELATED TO LEASES
| | |
For
the Three Months Ended March 31, | |
| | |
2023 | | |
2022 | |
| | |
| | |
| |
| Cash paid for amounts included
in the measurement of lease liabilities: | |
| | | |
| | |
| Operating
cash flows from operating leases | |
$ | 56,449 | | |
$ | 53,325 | |
| | |
| | | |
| | |
| Right-of-use assets obtained
in exchange for lease obligations: | |
| | | |
| | |
| Operating
leases | |
$ | - | | |
$ | - | |
| | |
| | | |
| | |
| Weighted Average Remaining Lease Term: | |
| | | |
| | |
| Operating
leases | |
| 5.1 | | |
| 6.1 | |
| | |
| | | |
| | |
| Weighted Average Discount Rate: | |
| | | |
| | |
| Operating
leases | |
| 7.0 | % | |
| 7.0 | % |
GAUCHO
GROUP HOLDINGS, INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
Future
minimum lease commitments are as follows:
SCHEDULE
OF FUTURE MINIMUM LEASE COMMITMENT
| | |
| | |
| For the period
April 1 through December 31, 2023 | |
$ | 229,191 | |
| For the years ended December
31, | |
| | |
| 2024 | |
| 336,102 | |
| 2025 | |
| 357,881 | |
| 2026 | |
| 368,617 | |
| 2027 | |
| 365,004 | |
| 2028 | |
| 120,463 | |
| Total future minimum lease
payments | |
| 1,777,258 | |
| Less:
imputed interest | |
| (293,970 | ) |
| Net future minimum lease payments | |
| 1,483,288 | |
| Less:
operating lease liabilities, current portion | |
| (208,590 | ) |
| Operating
lease liabilities, non-current portion | |
$ | 1,274,698 | |
The
Company is the lessor of a building and land that it purchased in connection with the acquisition of GDS, pursuant to an operating lease
which expires on August 31, 2031. At the end of the leases, the lessee may enter into a new lease or return the asset, which would be
available to the Company for releasing. The Company recorded lease revenue of $10,628 and $3,745 during the three months ended March
31, 2023 and 2022, respectively, related to this lease agreement.
16.
SUBSEQUENT EVENTS
During the period subsequent to
March 31, 2023 and prior to filing, the Company sold an additional 458,768 shares, in aggregate, of the Company’s common stock for
gross proceeds of $316,953 less placement agent fees of $25,356 pursuant to the New ELOC. The Company used $144,818 of the proceeds to
repay principal, interest and redemption premiums in amount of $118,487, $8,294 and $18,037 in connection with the 2023 Notes (See Note
9 – Convertible Debt).
Between May 1 and May 5, 2023,
an aggregate of $475,000, consisting of principal and interest in the amount of $443,925 and $31,075, respectively, was converted into
612,637 common shares at conversion prices ranging from $0.77 to $0.78.
Foreign
Currency Exchange Rates
The
Argentine Peso to United States Dollar exchange rate was 229.02, 208.98 and 175.74 at May 11, 2023, March 31, 2023, and December 31, 2022, respectively.
The
British pound to United States dollar exchange rate was 0.7999, 0.8085 and 0.8264 at May 11, 2023, March 31, 2023, and December 31, 2022, respectively.