14. RELATED PARTY TRANSACTIONS

Assets

Accounts receivable – related parties of $927,874 and $252,852 at December 31, 2021 and 2020, respectively, represent the net realizable value of advances made to separate entities under common management. See Note 6 – 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

On 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 years ended December 31, 2021 and 2020, the Company recorded a contra-expense of $626,101 and $705,912, respectively, related to the reimbursement of general and administrative expenses as a result of the agreement.

GAUCHO GROUP HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The 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. During the year ended December 31, 2020, the Company received payments from the entity in the amount of $63,985 and recorded recovery of the bad debt allowance of $63,985. During the year ended December 31, 2021, the Company provided advances to the entity in the amount of $7,372 and recorded bad debt expense in the amount of $7,372. The balance owed to the Company under this expense sharing agreement as of December 31, 2021 is $339,503, of which the entire balance is deemed unrecoverable and is reserved.

Amended and Restated Limited Liability Company Agreement

On June 16, 2021, the Company, through its wholly owned subsidiary, GVI, entered into the Amended and Restated Limited Liability Company Agreement (the “LLC Agreement”) of LVH Holdings LLC (“LVH”). LVH was organized on May 24, 2021 pursuant to the Delaware Limited Liability Act (the “Delaware Act”) with a sole member of SLVH LLC, a Delaware limited liability company (“SLVH”).

A member of the Company’s board of directors is the managing member of SLVH and holds a 20% membership interest in SLVH. Pursuant to the Company’s Related Party Transactions Policy, adopted as amended on March 25, 2021 by the Board of Directors of the Company (the “Board”), this director is considered a related party with respect to this transaction and provided notice of his interest to the Board. The disinterested members of the Board unanimously approved the transaction pursuant to such Related Party Transactions Policy and the Code of Business Conduct and Ethics and Whistleblower Policy, also adopted by the Board on March 25, 2021.

Capital contributions

Pursuant to the terms of the LLC Agreement, upon the execution of the LLC Agreement, GVI made an initial capital contribution to LVH, in cash, in the amount of exactly $1 million and received 56.6 limited liability company interests (the “LVH Units”) in LVH. On July 16, 2021, the Company made an additional capital contribution to LVH in the amount of $2.5 million and received an additional 141.4 LVH Units, and on November 10, 2021, the Company made an additional capital contribution to LVH in the amount of $3.5 million and received an additional 198 LVH Units. As of December 31, 2021, the Company owns an aggregate of 396 LVH Units, representing 11.9% ownership of LVH. The aggregate capital contribution of $7,000,000 as of December 31, 2021 is included within investment – related parties on the consolidated balance sheet.

On November 16, 2021, the LLC Agreement was amended to modify the number, amount and timing of the Company’s additional capital contributions to LVH. Additional required contributions by GVI (“Additional Gaucho Contributions”) pursuant to the LLC Agreement, as amended, are as follows:

If each of the Additional Gaucho Contributions is made timely, the Company will hold 1,980 LVH Units, representing 40% of the ownership of LVH, immediately after the Fifth Outside Date.

GAUCHO GROUP HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS