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 originally expired on May 1, 2028 (the “Miami Lease”). 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.

On April 25, 2024, the landlord of the retail space (the “Landlord”) filed an action seeking eviction of GGI from the retail space and on April 30, 2024, the landlord of the retail space notified the Company that the rent abatements were rescinded as the result of late payments. On September 20, 2024, pursuant to a settlement agreement between the Company and the Landlord, the Miami Lease was terminated, the security deposit was applied to past due rent, and all remaining past due rent was paid to the Landlord. The Company recorded a loss of $566,000 upon the termination of the Miami Lease, consisting of (i) $676,000 related to the write-off of leasehold improvements and (ii) $1,000 of fees incurred, net of (iii) a gain of $111,000 resulting from the derecognition of the related right of use (“ROU”) asset and lease liability.

Following the termination of Miami Lease and the closing of GGI’s retail store, GGI sells its products exclusively through its online platform.

GAUCHO GROUP HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

Total operating lease expense was $82,965 for each of the three months ended September 30, 2024 and 2023 and was $248,896 for each of the nine months ended September 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 ROU asset was $0 and $1,218,408 as of September 30, 2024 and December 31, 2023, respectively, and the balance of the operating lease liability was $0 and $1,328,408 as of September 30, 2024 and December 31, 2023, respectively.

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. During the three and nine months ended September 30, 2024, the Company recorded depreciation expense of $5,038 in connection with the finance lease ROU asset, and recorded interest expense in the amount of $11,205 in connection with the finance lease liability.

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 finance lease 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 $11,560 and $29,337 during the three and nine months ended September 30, 2024 and recorded lease revenue of and $9,717 and $31,282 during the three and nine months ended September 30, 2023, respectively, related to this lease agreement.