Forma 10-Q Gaucho Group Holdings, para: 30 de junio

GAUCHO
GROUP HOLDINGS, INC. Y SUBSIDIARIAS

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las notas adjuntas son parte integral de estos estados financieros condensados ​​consolidados.

GAUCHO
GROUP HOLDINGS, INC. Y SUBSIDIARIAS

CONDENSADO
BALANCES CONSOLIDADOS (CONTINUACIÓN)

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las notas adjuntas son parte integral de estos estados financieros condensados ​​consolidados.

GAUCHO
GROUP HOLDINGS, INC. Y SUBSIDIARIAS

(no auditado)

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las notas adjuntas son parte integral de estos estados financieros condensados ​​consolidados.

GAUCHO
GROUP HOLDINGS, INC. Y SUBSIDIARIAS

(no auditado)

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las notas adjuntas son parte integral de estos estados financieros condensados ​​consolidados.

GAUCHO
GROUP HOLDINGS, INC. Y SUBSIDIARIAS

PARA
LOS TRES Y SEIS MESES TERMINADOS EL 30 DE JUNIO DE 2020

(no auditado)

PARA
LOS TRES Y SEIS MESES TERMINADOS EL 30 DE JUNIO DE 2019

(no auditado)

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

GAUCHO
GROUP HOLDINGS, INC. AND SUBSIDIARIES

(unaudited)

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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)

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

GAUCHO
GROUP HOLDINGS, INC. AND SUBSIDIARIES

(unaudited)

1.
ORGANIZATION

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.

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wholly owned subsidiaries of GGH, InvestProperty Group, LLC (“IPG”) and Algodon Global Properties, LLC (“AGP”)
operate as holding companies that invest in, develop and operate global real estate and other lifestyle businesses such as wine
production and distribution, golf, tennis, and restaurants. GGH operates its properties through its ALGODON® brand. IPG and
AGP have invested in two ALGODON® brand projects located in Argentina. The first project is Algodon Mansion, a Buenos Aires-based
luxury boutique hotel property that opened in 2010 and is owned by the Company’s subsidiary, The Algodon – Recoleta,
SRL (“TAR”). The second project is the redevelopment, expansion and repositioning of a Mendoza-based winery and golf
resort property now called Algodon Wine Estates (“AWE”), the integration of adjoining wine producing properties, and
the subdivision of a portion of this property for residential development. GGH’s wholly owned subsidiary Algodon Europe,
Ltd., is a United Kingdom wine distribution company. GGH also holds a 79% ownership interest in its subsidiary Gaucho Group, Inc.
(“GGI”) which began operations in 2019 for the manufacture, distribution and sale of high-end luxury fashion and accessories
through an e-commerce platform. On March 20, 2020, the Company formed a wholly-owned subsidiary, Bacchus Collection, Inc., which
is still in the concept stage and is not yet operational.

2.
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 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. During the six months ended June 30, 2020, the
Company incurred a net loss of $2,801,729 and used cash in operations of $2,036,177. The Company has an accumulated
deficit of $90,592,519 at June 30, 2020. Further, as of June 30, 2020, principal and interest in the amount of $1,270,354
and $541,418, respectively, owed in connection with the Company’s debt obligations are past due and are payable on demand,
principal and interest in the amount of $1,358,420 and $18,956 owed in connection with the Company’s convertible debt matures
on December 31, 2020, and $1,466,203 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 June 30, 2020. During the six months ended June 30, 2020
the Company funded its operations with the proceeds of debt financing of $1,989,945.

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.
Further, while the Company plans to apply to NASDAQ later this year to uplist its common stock, should that effort not be successful,
the Company would be required, on December 31, 2020, to redeem all Series B Shares that have not been previously converted to common
stock. The cost to redeem these shares would likely have a material adverse effect on the Company’s financial position and
would likely require either the liquidation of certain Company assets or an effort to raise new equity or debt financing. Ya sea
the Company would be able to consummate any such transaction, should it need to do so, on economically beneficial terms or otherwise,
cannot be presently known. 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)

En
December 2019, the 2019 novel coronavirus (“COVID-19”) surfaced in Wuhan, China. The World Health Organization declared
the outbreak as a global pandemic in March 2020. Recently, we temporarily closed our corporate office, as well as our hotel, restaurant,
winery operations, and golf and tennis operations. Further, the Gaucho factories have closed, borders for importing product have
been impacted and the Gaucho fulfillment center is also closed. In response, we have reduced costs by negotiating out of our New
York lease, renegotiating with our vendors and implementing salary reductions. We have also created an e-commerce platform for
our wine sales in response to the pandemic. The Company is continuing to monitor the outbreak of COVID-19 and the related business
and travel restrictions, and changes to behavior intended to reduce its spread, and the related impact on the Company’s
operations, financial position and cash flows, as well as the impact on its employees. Due to the rapid development and fluidity
of this situation, the magnitude and duration of the pandemic and its impact on the Company’s future operations and liquidity
is uncertain as of the date of this report. While there could ultimately be a material impact on operations and liquidity of the
Company, at the time of issuance, the impact could not be determined.

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Company presently has enough cash on hand to sustain its operations on a month to month basis. 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. Historically, the Company has been successful in raising funds to support its capital
necesidades. Management believes that it will be successful in obtaining additional financing; however, no assurance can be provided
that the Company will be able to do so. Further, there is no assurance that these funds will be sufficient to enable the Company
to attain profitable operations or continue as a going concern. To the extent that the Company is unsuccessful, the Company may
need to curtail its operations and implement a plan to extend payables, reduce overhead and possibly sell certain Company assets
until sufficient additional capital is raised to support further operations. There can be no assurance that such a plan will be
successful. Such a plan could have a material adverse effect on the Company’s business, financial condition and results
of operations, and ultimately the Company could be forced to discontinue its operations, liquidate and/or seek reorganization
in bankruptcy.

Estas
condensed consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

3.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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 June 30, 2020, and for the three and six months ended June 30, 2020 and 2019. The results of operations for the three
and six months ended June 30, 2020 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, 2019, filed with
the Securities and Exchange Commission (“SEC”) on March 30, 2020. The condensed consolidated balance sheet as of December
31, 2019 has been derived from the Company’s audited consolidated financial statements.

Non-Controlling
Interest

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a result of the conversion of certain convertible debt into shares of GGI common stock, GGI investors obtained a 21% ownership
interest in GGI, which is recorded as a non-controlling interest. The profits and losses of GGI are allocated between the controlling
interest and the non-controlling interest in the same proportions as their ownership interest. (See Note 8 – Debt Obligations)

GAUCHO
GROUP HOLDINGS, INC. AND SUBSIDIARIES

NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

Utilizar
of Estimates

A
prepare financial statements in conformity with accounting principles generally accepted in the United States of America, the
Company must make estimates and assumptions. These estimates and assumptions affect the reported amounts in the financial statements,
the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ from those estimates. The significant estimates and assumptions
of the Company include the valuation of investments, equity and liability instruments, the value of right-of-use assets and related
lease liabilities, the useful lives of property and equipment and reserves associated with the realizability of certain assets.

Segment
Información

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Financial Accounting Standards Board (“FASB”) has established standards for reporting information on operating segments
of an enterprise in interim and annual financial statements. The Company currently operates in three segments which are the (i)
business of real estate development and manufacture, (ii) the sale of high-end fashion and accessories through an e-commerce platform
and (iii) its corporate operations. This classification is consistent with how the Company’s chief operating decision maker
makes decisions about resource allocation and assesses the Company’s performance.

Highly
Inflationary Status in Argentina

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International Practices Task Force (“IPTF”) of the Center for Audit Quality discussed the inflationary status of Argentina
at its meeting on May 16, 2018 and categorized Argentina as a country with a projected three-year cumulative inflation rate greater
than 100%. Therefore, the Company has transitioned its Argentine operations to highly inflationary status as of July 1, 2018.

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operations in highly inflationary economies, monetary asset and liabilities are translated at exchange rates in effect at the
balance sheet date, and non-monetary assets and liabilities are translated at historical exchange rates. Under highly inflationary
accounting, the Company’s Argentina subsidiaries’ functional currency became the United States dollar. Nonmonetary
assets and liabilities existing on July 1, 2018 (the date that the Company adopted highly inflationary accounting) were translated
using the Argentina Peso (“ARS”) to United States Dollar exchange rate in effect on June 30, 2018, which was 28.880.
Since the adoption of highly inflationary accounting, activity in nonmonetary assets and liabilities is translated using historical
exchange rates, monetary assets and liabilities are translated using the exchange rate at the balance sheet date, and income and
expense accounts are translated at the weighted average exchange rate in effect during the period. Translation adjustments are
reflected in income (loss) on foreign currency translation on the accompanying statements of comprehensive loss. During the three
and six months ended June 30, 2020 the Company recorded gains on foreign currency transactions of $20,025 and $20,490, respectively,
and during the three and six months ended June 30, 2019, respectively, the Company recorded a $(15,189) and $32,334 (loss) gain,
respectively, on foreign currency transactions as a result of the net monetary liability position of its Argentine subsidiaries.

Foreign
Currency Translation

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Company’s functional and reporting currency is the United States dollar. The functional currencies of the Company’s
operating subsidiaries are their local currencies (United States dollar, Argentine peso and British pound) except for the Company’s
Argentine subsidiaries since July 1, 2018, as described above. The assets and liabilities of Algodon Europe, LTD are translated
from its local currency (British Pound) to the Company’s reporting currency using period end exchange rates while income
and expense accounts were translated at the average rates in effect during the during the period. The assets, liabilities and
income and expense accounts of the Company’s Argentine subsidiaries are translated as described above. The resulting translation
adjustment is recorded as part of other comprehensive loss, a component of stockholders’ deficit. The Company engages in
foreign currency denominated transactions with customers and suppliers, as well as between subsidiaries with different functional
currencies. Gains and losses resulting from transactions denominated in non-functional currencies are recognized in earnings.

GAUCHO
GROUP HOLDINGS, INC. AND SUBSIDIARIES

NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

Cash
and Cash Equivalents

Cash
and cash equivalents represent cash on hand, demand deposits placed with banks or other financial institutions and all highly
liquid investments with an original maturity of three months or less as of the purchase date of such investments.

Concentrations

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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 $20,550 and $29,027 at June 30, 2020
and December 31, 2019, respectively, which represents cash held in Argentine bank accounts.

Revenue
Recognition

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Company recognizes revenue in accordance with Accounting Standards Codification (“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.

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

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

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 recognize 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.

GAUCHO
GROUP HOLDINGS, INC. AND SUBSIDIARIES

NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

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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.

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the three and six months ended June 30, 2020, the Company did not recognize any revenue related to performance obligations satisfied
in previous periods. 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.

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of June 30, 2020 and December 31, 2019, the Company had deferred revenue of $841,451 and $838,471, respectively, associated with
real estate lot sale deposits, and had $43,064 and $61,449, respectively, of deferred revenue related to hotel deposits. Ventas
taxes and value added (“VAT”) taxes collected from customers and remitted to governmental authorities are excluded
from revenues in the condensed consolidated statements of operations.

Convertible
Debt

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Company evaluates for the existence of a beneficial conversion feature (“BCF”) related to the issuance of convertible
notes, if such instruments are not deemed to be derivative financial instruments, by comparing the commitment date fair value
to the effective conversion price of the instrument. The Company records a BCF as debt discount, which is amortized to interest
expense over the life of the respective note using the effective interest method. BCFs that are contingent upon the occurrence
of a future event are recognized when the contingency is resolved.

Derivative
Financial Instruments

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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 FASB ASC 815 “Derivatives and Hedging”
(“ASC 815”). Embedded derivatives are valued separately from the host instrument and are recognized as derivative
liabilities in the Company’s balance sheet. Fair value accounting requires measurement of embedded derivatives at fair value.
Changes in the fair value of derivative instruments are recognized in results of operation during the period of change.

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.

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 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.

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

(1)
As of June 30, 2020, certain of the convertible notes had variable conversion prices and the potentially dilutive shares were
estimated based on market conditions. See Note 9 – Convertible Debt Obligations.

(2)
As of June 30, 2019, all notes are past their maturity date and no longer convertible. See Note 8 – Debt obligations.

Nuevo
Accounting Pronouncements

En
August 2018, the FASB issued ASU 2018-13, Fair Value Measurement – Disclosure Framework (Topic 820). The updated guidance improves
the disclosure requirements on fair value measurements. The updated guidance if effective for fiscal years, and interim periods
within those fiscal years, beginning after December 15, 2019. Early adoption is permitted for any removed or modified disclosures.
The Company adopted ASU 2018-13, effective January 1, 2020, which did not have a material effect on the Company’s unaudited
condensed consolidated financial statements.

En
March 2020, the FASB issued ASU 2020-03, “Codification Improvements to Financial Instruments” (“ASU 2020-03”).
ASU 2020-03 improves and clarifies various financial instruments topics. ASU 2020-03 includes seven different issues that describe
the areas of improvement and the related amendments to GAAP, intended to make the standards easier to understand and apply by
eliminating inconsistencies and providing clarifications. The Company adopted ASU 2020-03 upon issuance, which did not have a
material effect on the Company’s unaudited condensed consolidated financial statements.

GAUCHO
GROUP HOLDINGS, INC. AND SUBSIDIARIES

NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

4.
INVENTORY

Inventory
at June 30, 2020 and December 31, 2019 was comprised of the following:

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. Financiero
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)

Investments
at Fair Value:

UNA
reconciliation of Level 3 assets is as follows:

Investment
at June 30, 2020, consisted of the Company’s investment in an Argentine government bond, purchased by the Company on December
3, 2019. The bond had an effective interest rate of 48% per annum and matures on December 31, 2020. The decrease in the government
bond value was a result from the effects of fluctuations in the foreign currency exchange rate during the period.

Investment
– related parties at June 30, 2020, consisted of retained certain affiliate warrants which are marked to market at each
reporting date using the Black-Scholes option pricing model. The Company recorded unrealized gains (losses) on the affiliate warrants
of $1,405 and $448 during the three and six months ended June 30, 2020, respectively, and $(1,066) and $(1,773) during the three
and six months ended June 30, 2019, respectively, which are included in revenues on the accompanying unaudited condensed consolidated
statements of operations.

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fair value of the Company’s derivative liabilities as of June 30, 2020 was de minimis (see Note 9 – Convertible Debt
Obligations).

6.
ACCRUED EXPENSES

Accrued
expenses were comprised of the following as of:

GAUCHO
GROUP HOLDINGS, INC. AND SUBSIDIARIES

NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

7.
LOANS PAYABLE

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Company’s loans payable are summarized below:

En
March 1, 2020, the Company received a loan in the amount of $27,641 (ARS $1,777,778) (the” 2020 Demand Loan”) which
bears interest at 10% per month and is due upon demand of the lender (the “Demand Loan”). Interest is paid monthly.

During
the six months ended June 30, 2020, the Company made principal payments on loans payable in the aggregate of $102,756, of which
$7,940 was paid on the 2020 Demand Loan, $5,906 was paid on the 2018 Demand Loan, $42,246 was paid on the 2018 Loan, $37,664
was paid on the 2017 Loan and $9,000 was paid on the Land Loan. The remaining decrease in principal balances are the result of
the impact of the change in exchange rates during the period.

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Company incurred interest expense related to the loans payable in the amount of $16,087 and $38,707 during the three and six months
ended June 30, 2020, respectively, of which $3,777 and $7,102, respectively represented amortization of debt discount, and incurred
interest expense of $32,006 and $72,828 during the three and six months ended June 30, 2019, respectively, of which $8,241 and
$14,736, respectively represented amortization of debt discount.

PPP
Loan

En
May 6, 2020, the Company entered into a potentially forgivable loan from the U.S. Small Business Administration (“SBA”)
pursuant to the Paycheck Protection Program (“PPP”) enacted by Congress under the Coronavirus Aid, Relief, and Economic
Security Act (15 U.S.C. 636(a)(36)) (the “CARES Act”), resulting in net proceeds of $242,487 (the “PPP Loan”).
To facilitate the PPP Loan, the Company entered into a note payable agreement with Santander Bank, N.A. as the lender.

GAUCHO
GROUP HOLDINGS, INC. AND SUBSIDIARIES

NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

Under
the terms of the CARES Act, as amended by the Paycheck Protection Program Flexibility Act of 2020, the Company is eligible to
apply for and receive forgiveness for all or a portion of their respective PPP Loan. Such forgiveness will be determined, subject
to limitations, based on the use of the loan proceeds for certain permissible purposes as set forth in the PPP, including, but
not limited to, payroll costs (as defined under the PPP) and mortgage interest, rent or utility costs (collectively, “Qualifying
Expenses”) incurred during the 24 weeks subsequent to funding, and on the maintenance of employee and compensation levels,
as defined, following the funding of the PPP Loan. The Company intends to use the proceeds of the PPP Loan for Qualifying Expenses.
However, no assurance is provided that the Company will be able to obtain forgiveness of the PPP Loan in whole or in part. Alguna
amounts that are not forgiven incur interest at 1.0% per annum and monthly repayments of principal and interest are deferred for
six months after the date of disbursement. While the PPP Loan currently has a two-year maturity, the amended law permits the borrower
to request a five-year maturity from its lender.

SBA
Economic Injury Disaster Loans

En
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 matures on May 22, 2050. Proceeds from the
EIDL are being used for working capital purposes. Monthly installment payments of $459, including principal and interest, are
due monthly beginning May 22, 2021. The EIDL Loan is secured by a security interest in all of the Company’s assets.

8.
DEBT OBLIGATIONS

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Company’s debt obligations are summarized below:

⁽¹⁾
Accrued interest is included as a component of accrued expenses on the accompanying condensed consolidated balance sheets.

Cada
of the debt obligations listed above are past due and are payable on demand. The Company incurred interest expense of $31,261
and $62,523 in connection with its debt obligations during the three and six months ended June 30, 2020, respectively, and incurred
interest expense of $35,986 and $104,003 in connection with its debt obligations during the three and six months ended June 30,
2019, respectively.

GAUCHO
GROUP HOLDINGS, INC. AND SUBSIDIARIES

NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

9.
CONVERTIBLE DEBT OBLIGATIONS

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Company’s convertible debt obligations are summarized below:

⁽¹⁾
Accrued interest is included as a component of accrued expenses on the accompanying condensed consolidated balance sheets.

During
the six months ended June 30, 2020, the Company sold unsecured convertible promissory notes (“Convertible Notes”)
in an aggregate amount of $1,358,420 to accredited investors who are all stockholders of the Company. The Convertible Notes mature
on December 31, 2020 and bear interest at 7% per annum. Principal and interest outstanding under the Convertible Notes are convertible
(i) automatically upon the closing of a firm commitment underwritten public offering registered pursuant to the Securities Act
of 1933, as amended (a “Public Offering”, at a conversion price equal to 85% of the price per share of the Company’s
common stock sold in the Public Offering (the “Mandatory Conversion Option”), or (ii) at the option of the holder
at any time prior to the Public Offering at a conversion price equal to the closing price of the Company’s common stock
on the day prior to conversion (the “Holder’s Conversion Option”). The Company incurred total interest expense
of $15,595 and $18,956 related to this debt during the three and six months ended June 30, 2020, respectively.

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Company determined that the Holder’s Conversion Option represented a variable conversion feature with no floor. Accordingly,
the Company has adopted a sequencing policy in accordance with ASC 815-40-35-12 whereby the Holder’s Conversion Option and
all future instruments may be classified as a derivative liability with the exception of instruments related to share-based compensation
issued to employees or directors.

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of June 30, 2020, the value of Holders’ Conversion Option was de minimis. The contingently adjustable, non-bifurcated beneficial
conversion feature associated with the Mandatory Conversion Option of the Convertible Notes will be accounted for, if necessary,
at the time the contingency is resolved upon the occurrence of the Public Offering.

10.
RELATED PARTY TRANSACTIONS

Assets

Cuentas
receivable – related parties in the amount of $40,257 and $39,837 at June 30, 2020 and December 31, 2019, represented the
net realizable value of advances made to separate entities under common management.

Ver
Note 5 – Investments and Fair Value of Financial Instruments, for a discussion of the Company’s investment in warrants
of a separate entity under common management.

Expense
Sharing

En
April 1, 2010, the Company entered into an agreement with a Related Party to share expenses such as office space, support staff
and other operating expenses (the “Related Party ESA”). The agreement was amended on January 1, 2017 to reflect the
current use of personnel, office space, professional services. During the three and six months ended June 30, 2020, the Company
recorded a contra-expense of $203,941 and $343,857, respectively, and during the three and six months ended June 30, 2019, the
Company recorded a contra-expense of $117,968 and $189,889, respectively, related to the reimbursement of general and administrative
expenses as a result of the agreement.

GAUCHO
GROUP HOLDINGS, INC. AND SUBSIDIARIES

NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

During
2019, the Related Party prepaid approximately $566,132 of its future obligations under the Related Party ESA, in exchange for
a 15% reduction in the Related Party’s expense obligations under the Related Party ESA until the prepayment has been reduced
to $0. During the six months ended June 30, 2020, the Related Party prepaid an additional $267,397 of its future obligations
under the Related Party ESA. The Company repaid $126,000 of the amounts owed to the Related Party during the second quarter
of 2020. The prepaid balance of $707,529 as of June 30, 2020, is reflected as loans payable – related parties
on the accompanying condensed consolidated balance sheet.

los
Company had an expense sharing agreement with a different related entity to share expenses such as office space and other clerical
services which was terminated in August 2017. The owners of more than 5% of that entity include (i) GGH’s chairman, and
(ii) a more than 5% owner of GGH. The entity owed $396,116 to the Company under the expense sharing agreement at December 31,
2019, of which the entire balance was deemed unrecoverable and reserved. During the six months ended June 30, 2020, the
Company received payments from the entity in the amount of $62,406 and recorded recovery of the bad debt allowance
of $62,406. The balance owed to the Company under this expense sharing agreement as of June 30, 2020 is $333,710 of which the
entire balance is deemed unrecoverable and is reserved.

11.
BENEFIT CONTRIBUTION PLAN

los
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.

UNA
participant is always fully vested in their account, including the Company’s contribution. For the three and six months
ended June 30, 2020, the Company recorded a charge associated with its contribution of $9,925 and $18,433 respectively, and for
the three and six months ended June 30, 2019, the Company recorded a charge associated with its contribution of $15,531 and $28,844,
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 (shares were issued at $0.35 per share during 2019). Como
of June 30, 2020, shares have not yet been issued in satisfaction of the previous year’s 401(k) obligation.

12.
TEMPORARY EQUITY AND STOCKHOLDERS’ DEFICIENCY

Serie
B Preferred Stock

En
March 29, 2020, the Company’s Board of Directors as well as the holders of the Series B Convertible Preferred Stock approved
an Amendment to the Certificate of Designation of the Series B Convertible Preferred Stock (the “Third Amendment”)
which extends the period in which holders of the Series B Shares may voluntarily elect to convert such shares into shares of common
stock of the Company to December 31, 2020. In addition, the Series B Amendment extends the date upon which the Company shall redeem
all then-outstanding Series B Shares and all unpaid accrued and accumulated dividends to December 31, 2020.

En
February 18, 2020, GGH repurchased 1,600 shares of the Series B Preferred Stock from a shareholder at $10 per share and paid accrued
dividends of $2,451.

los
Series B stockholders are entitled to cumulative cash dividends at an annual rate of 8% of the Series B liquidation value (equal
to face value of $10 per share), as defined, payable when, as and if declared by the Board of Directors. Dividends earned by the
Series B stockholders were $182,360 and $361,987 for the three and six months ended June 30, 2020, respectively, and were $179,770
and $357,565 for the three and six months ended June 30, 2019, respectively. Dividends payable of $82,772 are included in the
current portion of other liabilities at June 30, 2020. Cumulative unpaid and undeclared dividends in arrears related to the Series
B totaled $1,626,348 and $1,264,361 as of June 30, 2020 and December 31, 2019, respectively.

GAUCHO
GROUP HOLDINGS, INC. AND SUBSIDIARIES

NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

Accumulated
Other Comprehensive Income

por
three and six months ended June 30, 2020, the Company recorded $290,472 and $418,523, respectively, of foreign currency
translation adjustments as accumulated other comprehensive income, and for the three and six months ended June 30, 2019, the Company
recorded benefits of $357,078 and $365,417, respectively, primarily related to fluctuations in the Argentine peso to United States
dollar exchange rates (see Note 3 – Summary of Significant Accounting Policies, Highly Inflationary Status in Argentina).

Warrants

UNA
summary of warrants activity during the six months ended June 30, 2020 is presented below:

UNA
summary of outstanding and exercisable warrants as of June 30, 2020 is presented below:

Stock
Opciones

During
the three and six months ended June 30, 2020, the Company recorded stock-based compensation expense of $102,675 and $206,256,
respectively, and during the three and six months ended June 30, 2019, the Company recorded stock-based compensation expense of
$68,508 and $226,502, respectively related to the amortization of stock option grants, and which is reflected in general and administrative
expenses in the accompanying condensed consolidated statements of operations. As of June 30, 2020, there was $861,664 of unrecognized
stock-based compensation expense related to stock option grants that will be amortized over a weighted average period of 2.27
años.

GAUCHO
GROUP HOLDINGS, INC. AND SUBSIDIARIES

NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

UNA
summary of GGH stock options activity during the six months ended June 30, 2020 is presented below:

los
following table presents information related to GGH stock options at June 30, 2020:

Gaucho
Group, Inc. Stock Options

Como
of June 30, 2020, options to purchase 6,570,000 shares of GGI common stock are outstanding under the 2018 Gaucho Plan.

13.
LEASES

los
Company leased one corporate office in New York, New York, through an operating lease agreement (the “New York Lease”),
which was set to expire on August 31, 2020. Effective May 31, 2020, the Company terminated the New York Lease. As consideration
of the termination, the landlord is entitled to retain and apply the full amount of the $61,284 security deposit as a partial
payment of the rent and the additional rent due and payable under the lease. The Company paid the landlord the following additional
amounts: (i) $5,683, representing the additional amount of unpaid rent and additional rent due and payable under the lease through
the termination date, and (ii) $11,860, representing the landlord’s cost for the post-termination date cleaning of the premises.
The Company recognized a loss of $39,367 in connection with the termination of the lease and the derecognition of
the ROU asset and related lease liability.

GAUCHO
GROUP HOLDINGS, INC. AND SUBSIDIARIES

NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

Como
of June 30, 2020, the Company had no leases that were classified as a financing lease and did not have any additional operating
and financing leases that have not yet commenced.

Total
operating lease expenses were $96,361 and $154,177, for the three and six months ended June 30, 2020, respectively, and were $57,816
and $115,633 for the three and six months ended June 30, 2019, respectively, Lease expenses are recorded in general and administrative
expenses on the unaudited condensed consolidated statements of operations.

Supplemental
cash flows information related to leases was as follows:

14.
SEGMENT DATA

Prior
to the commencement of GGI operations, the Company’s chief operating decision-maker (CODM) reviewed the operating results
of the Company on an aggregate basis and managed the Company’s operations as a single operating segment. As a result of
the commencement of GGI operations in the fourth quarter of 2019, the Company’s financial position and results of operations
are classified into three reportable segments, consistent with how the CODM makes decisions about resource allocation and assesses
the Company’s performance.

GAUCHO
GROUP HOLDINGS, INC. AND SUBSIDIARIES

NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

los
Company has recast its financial information and disclosures for the prior period to reflect the segment disclosures as if the
current presentation had been in effect throughout all periods presented. The following tables present segment information for
the three and six months ended June 30, 2020 and 2019: