Item 1.01 Entry into a Material Definitive Agreement
On February 21, 2023, Gaucho Group Holdings, Inc. (the "Company," "we," "us" or
"our") entered into a Securities Purchase Agreement (the "Purchase Agreement")
with an institutional investor, pursuant to which the Company will sell to the
investor a series of senior secured convertible notes of the Company in the
aggregate original principal amount of $5,617,978 (the "Notes"), and a series of
common stock purchase warrants of the Company, which warrants shall be
exercisable into an aggregate of 3,377,099 shares of common stock of the Company
for a term of three years (the "Warrants"). The Company received $5,000,000 in
proceeds after the original issue discount of 11% on the principal.
The Notes are convertible into shares of common stock of the Company at a
conversion price of $1.34 (subject to adjustment). The Notes are due and payable
on the first anniversary of the Issuance Date and bear interest at a rate of 7%
per annum, which shall be payable either in cash monthly or by way of inclusion
of the interest in the Conversion Amount on each Conversion Date (as defined in
the Notes). The investor is entitled to convert any portion of the outstanding
and unpaid Conversion Amount (as defined in the Notes) at any time or times
after the Issuance Date, but we may not effect the conversion of any portion of
the Notes if it would result in any of the investor beneficially owning more
than 4.99% of the common stock.
The investor also has a option to enter into a convertible promissory note for
an additional $5 million, or if certain equity condition are met, the Company
may exercise that option.
Under the applicable rules of The Nasdaq Stock Market LLC ("Nasdaq"), in no
event may we issue any shares of common stock upon conversion of the Notes or
otherwise pursuant to the terms of this Notes if the issuance of such shares of
common stock would exceed 19.99% of the shares of the common stock outstanding
immediately prior to the execution of the Purchase Agreement and the Notes and
Warrants (the "Exchange Cap"), unless we (i) obtain stockholder approval to
issue shares of common stock in excess of the Exchange Cap or (ii) obtain a
written opinion from our counsel that such approval is not required. In any
event, we may not issue any shares of our common under the Purchase Agreement or
Notes if such issuance or sale would breach any applicable rules or regulations
of the Nasdaq.
The Notes will rank senior to all outstanding and future indebtedness of the
Company and its subsidiaries, and will be secured by (i) a security interest in
all of the existing and future assets of the Company, as evidenced by the
Security and Pledge Agreement entered into between the Company and the investor
(the "Security Agreement"; and (ii) a pledge of shares of common stock of the
Company held by Scott L. Mathis, President and CEO of the Company, and other
entities managed by him, as evidenced by the Stockholder Pledge Agreements
entered into between the Company, Mr. Mathis and his entities, and the investor
(the "Pledge Agreement").
In connection with the foregoing, the Company also entered into a Registration
Rights Agreement with the investor (the "Registration Rights Agreement"),
pursuant to which the Company has agreed to provide certain registration rights
with respect to the Registrable Securities (as defined in the Registration
Rights Agreement) under the Securities Act of 1933 (the "1933 Act") and the
rules and regulation promulgated thereunder, and applicable state securities
laws. The Purchase Agreement and the Registration Rights Agreement contain
customary representations, warranties, conditions and indemnification
obligations of the parties. The representations, warranties and covenants
contained in such agreements were made only for purposes of such agreements and
as of specific dates, were solely for the benefit of the parties to such
agreements and may be subject to limitations agreed upon by the contracting
parties.
EF Hutton, division of Benchmark Investments, Inc. ("EF Hutton") acted as the
exclusive placement agent in connection with the transactions contemplated by
the Purchase Agreement, for which the Company will pay to EF Hutton a cash
placement fee equal to 6.0% of the amount of capital raised, invested or
committed under the Purchase Agreement and Notes.
The foregoing description of the Purchase Agreement, Notes, Warrants, Security
Agreement, Pledge Agreement, and Registration Rights Agreement, do not purport
to be complete and is qualified in its entirety by reference to the complete
text of the Purchase Agreement, Notes, Warrants, Security Agreement, Pledge
Agreement, and Registration Rights Agreement, copies of which are filed as
Exhibit 10.1, Exhibit 10.2, Exhibit 10.3, Exhibit 10.4, Exhibit 10.5, and
Exhibit 10.6 to this Current Report on Form 8-K, respectively, and incorporated
by reference into this Item 1.01.
Item 2.03 Creation of a Direct Financial Obligation or an Obligation under an
Off-Balance Sheet Arrangement of a Registrant.
The information set forth in Item 1.01 of this Current Report on Form 8-K is
incorporated herein by reference into this Item 2.03 in its entirety.
Item 3.02. Unregistered Sales of Equity Securities.
The information set forth in Item 1.01 of this Current Report on Form 8-K is
incorporated herein by reference into this Item 3.02 in its entirety. The shares
of common stock that have been and may be issued under the Purchase Agreement,
Notes, and Warrants are being offered and sold in a transaction exempt from
registration under the 1933 Act, in reliance on Section 4(a)(2) thereof and/or
Rule 506(b) of Regulation D thereunder. The investor represented that it is an
"accredited investor," as defined in Regulation D, and are acquiring such shares
under the Purchase Agreement for investment purposes only and not with a view
towards, or for resale in connection with, the public sale or distribution
thereof. Accordingly, the shares of common stock that have been and may be
issued to the investor under the Purchase Agreement have not been registered
under the 1933 Act or any applicable state securities laws and may not be
offered or sold in the United States absent registration or an exemption from
registration under the 1933 Act and any applicable state securities laws. The
Company will file a Form D with the SEC within 15 days of February 21, 2023.
This Current Report on Form 8-K shall not constitute an offer to sell or the
solicitation of an offer to buy any shares of our common stock nor shall there
be any sale of the shares in any state or jurisdiction in which such offer,
solicitation or sale would be unlawful prior to registration or qualification
under the securities laws of any such state or other jurisdiction.
Item 8.01 Other Events.
As previously reported on our Current Report on Form 8-K filed on November 8,
2021, the Company and certain investors (the "Holders") entered into a
Securities Purchase Agreement, dated as of November 3, 2021 (as the same has
been amended, restated, amended and restated, supplemented or otherwise modified
prior to the date hereof, the "Prior Securities Purchase Agreement") and the
Company issued to the Holders certain senior secured convertible notes (as the
same has been amended, restated, amended and restated, supplemented or otherwise
modified prior to the date hereof, each, a "Prior Note" and together with the
Securities Purchase Agreement, the "Prior Note Documents").
For the full description of the Prior Note Documents, please refer to our
Current Reports on Forms 8-K and the exhibits attached thereto as filed with the
SEC on November 8, 2021, March 1, 2022, May 2, 2022, May 13, 2022, July 5, 2022,
September 23, 2022, December 1, 2022, February 3, 2023, February 8, 2023, and
February 21, 2023.
On February 21, 2023, the Company used the proceeds from the Purchase Agreement
described in Item 1.01 of this Current Report on Form 8-K to repay all
principal, interest, and fees of $905,428.06 owing under the Prior Notes. Upon
repayment in full, the Prior Note Documents were terminated on February 21,
2023.
On February 21, 2023, the Company published a press release announcing the
execution of the Purchase Agreement and related agreements, and the issuance of
the Notes and Warrants. The full text of the press release is furnished hereto
as Exhibit 99.1 and incorporated herein by reference.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits
10.1 Securities Purchase Agreement dated February 21, 2023
10.2 Form of Senior Secured Convertible Note Issued by Gaucho Group Holdings,
Inc.
10.3 Form of Warrant to Purchase Common Stock
10.4 Form of Security and Pledge Agreement
10.5 Form of Stockholder Pledge Agreement
10.6 Form of Registration Rights Agreement
99.1 Press Release dated February 21, 2023
104 Cover Page Interactive Data File (embedded within the Inline XBRL document)
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