17. RELATED PARTY TRANSACTIONS

Accounts Receivable – Related Parties

Accounts receivable – related parties of $1,115,816 and $927,874 at December 31, 2022 and 2021, respectively, represent the net realizable value of advances made to, and expense sharing obligations receivable from, separate entities under common management (the “Related Entities”). During the years ended December 31, 2022 and 2021, the Company made advances in the amount of $272,920 and $190,000, respectively, to the Related Entities, and received repayments in the amount of $825,000 and $144,000, respectively, from the Related Entities. Receivables recorded in the amount of $742,943 and 626,101 in connection with expense sharing agreement during the years ended December 31, 2022 and 2021 are discussed below.

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 Entity 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, 2022 and 2021, the Company recorded a contra-expense of $742,943 and $626,101, respectively, related to the reimbursement of general and administrative expenses as a result of the agreement.

Investment in Related Party

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”), for the purpose of developing a project in Las Vegas, Nevada (the “Las Vegas Project”). 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.

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. On June 7, 2022, the Company, through GVI, executed a Second Amendment to the Amended and Restated Limited Liability Company Agreement of LVH to modify the rules for distributions to the members of LVH, and modify the number, amount and timing of GVI’s additional capital contributions to LVH. On December 12, 2022, the Company, through GVI, executed a Third Amendment to the Amended and Restated Limited Liability Company Agreement of LVH to extend the outside date for execution of the ground lease from December 31, 2022 to June 30, 2023. As of December 31, 2022 and 2021, the Company owned an aggregate of 396 LVH Units, representing 11.9% ownership of LVH.

GAUCHO GROUP HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The aggregate capital contribution of $7,000,000 as of December 31, 2021 is included within investment – related parties on the consolidated balance sheet. As of December 31, 2022, LVH had not yet executed a lease for the Las Vegas project, and the Company determined that its investment in LVH was not recoverable. Accordingly, the Company recorded impairment expense in the amount of $7,000,000, such that the carrying amount of the Company’s investment in LVH is $0 as of December 31, 2022.

During the years ended December 31, 2022 and 2021, the Company recorded income of $300,000 and $162,500 respectively, representing management fees received from LVH pursuant to a June 2021 agreement with LVH. As of December 31, 2022 and 2021, the Company has deferred revenue in the amount of $150,000 and $0, respectively, related to prepaid management fees received from LVH.