16. LEASES

Operating Lease

On April 8, 2021, GGI entered into a lease agreement to lease a retail space in Miami, Florida for 7 years, which expires May 1, 2028. As of June 30, 2024, the lease had a remaining term of approximately 3.8 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.

Total operating lease expense was $82,965 for each of the three months ended June 30, 2024 and 2023 and was $165,931 for each of the six months ended June 30, 2024 and 2023. Lease expenses are recorded in general and administrative expenses on the accompanying condensed consolidated statements of operations. The balance of the operating right of use (“ROU”) asset was $1,097,381 and $1,218,408 as of June 30, 2024 and December 31, 2023, respectively, and the balance of the operating lease liability was $1,212,641 and $1,328,408 as of June 30, 2024 and December 31, 2023, respectively.

GAUCHO GROUP HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

Finance Lease

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

The Company recorded an ROU asset and lease liability in the amount of $75,734 upon the commencement of the Equipment Lease. As of June 30, 2024, the Equipment has not been placed into service, and no payments have been made on the lease. No depreciation expense or interest expense was recorded during the three or six months ended June 30, 2024 in connection with the Equipment Lease.

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

 SCHEDULE OF SUPPLEMENTAL CASH FLOWS INFORMATION RELATED TO LEASES

GAUCHO GROUP HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

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

 SCHEDULE OF FUTURE MINIMUM LEASE COMMITMENT

Lease Revenue

The Company is the lessor of a building and land that it purchased in connection with the acquisition of GDS, pursuant to an operating lease which expires on August 31, 2031. At the end of the lease, the lessee may enter into a new lease or return the asset, which would be available to the Company for re-leasing. The Company recorded lease revenue of $7,103 and $17,777 during the three and six months ended June 30, 2024 and recorded lease revenue of and $10,937 and $21,565 during the three and six months ended June 30, 2023, respectively, related to this lease agreement.