12. LOT SALE OBLIGATIONS

The following table summarizes the activity in connection with the Company’s lot sale obligations during the year ended December 31, 2023:

SCHEDULE OF LOT SALE OBLIGATION

Lot Deposit Agreements

During the fourth quarter of 2023, the Company entered into agreements (each, a “Lot Deposit Agreement”) with five investors in the Company (each, a “Purchaser”) , pursuant to which (1) each Purchaser agreed to purchase either two or three real estate lots at a purchase price of $50,000 per lot and provide a deposit in an amount equal to the full purchase price (the “Purchase Amount”) of the lots to be purchased, (2) each Purchaser has the right to rescind the Lot Deposit Agreement at any time between twelve months from the date of the Lot Deposit Agreement but prior to the closing of the lot sale. The lot sale is expected to close approximately eighteen months after the execution of the Lot Deposit Agreement. In the event of such rescission, the Company agrees to refund the Purchase Amount plus interest at a rate of 8.5% compounded quarterly and agrees to transfer title to one residential lot of the Purchaser’s choosing within 30 calendar days of receiving the Purchaser’s written notice to rescind.

The Company entered into Lot Deposit Agreements for the purchase of eleven lots and received Purchase Amounts in the aggregate amount of $525,000, which is recorded as Lot Deposit Obligations on the accompanying consolidated balance sheet. A Purchase Amount of $25,000 is receivable as of December 31, 2023, and will be recorded as additional Lot Sale Obligation when received. The $80,096 aggregate cost of the lots to be transferred in the event of rescission of the Lot Deposit Agreements was recorded as a discount to the lot sale obligations and is being amortized over twelve months using the effective interest method.

Interest Expense on Lot Sale Obligations

The Company recorded interest expense in the amount of $28,864 related to lot sale obligations during the year ended December 31, 2023, which consisted of $12,657 interest accrued at the stated rate of 8.5%, plus amortization of debt discount in the amount of $16,027.

GAUCHO GROUP HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Lot Deposit Agreements with Related Parties

On October 30, 2023, the Company entered into a Lot Deposit Agreement with a holder of more than 5% of the Company’s outstanding common stock (the “Related Party Purchaser”) pursuant to which (1) the Related Party Purchaser agreed to purchase five real estate lots at a purchase price of $50,000 per lot and paid a deposit equal to the full purchase price for the purchased lots, (2) the Related Party Purchaser had the right to rescind the Lot Deposit Agreement at any time between twelve months from the date of the Lot Deposit Agreement but prior to the closing of the lot sale. The lot sale is expected to close approximately eighteen months after the execution of the Lot Deposit Agreement. In the event of such rescission, the Company agrees to refund the Purchase Amount plus interest at a rate of 8.5% compounded quarterly and agrees to transfer title to two residential lots of the Related Party Purchaser’s choosing within 30 calendar days of receiving the Related Party Purchaser’s written notice to rescind.

Management believes it is not probable that the Related Party Purchaser will rescind his Lot Deposit Agreement; therefore, the $250,000 proceeds received in connection with the Related Party’s Lot Deposit Agreement are recorded as deferred revenues, related party on the accompanying consolidated balance sheet.