17. RELATED PARTY TRANSACTIONS

Accounts Receivable – Related Parties

As of December 31, 2023 and December 31, 2022 the Company had accounts receivable – related parties of $0 and $1,115,816 net of allowances for expected credit losses of $1,517,836 and $339,503, respectively, representing the net realizable value of advances made to, and expense sharing obligations receivable from, separate entities under common management.

During the years ended December 31, 2023 and 2022, the Company made advances in the amount of $187,144 and $272,920, respectively, to the related entities, and paid expenses on behalf of the related entities (pursuant to the expense sharing agreements discussed below) in the amount of $579,661 and $742,943, respectively. The Company received repayments from the related parties in the amount of $704,288 and $825,000 during the years ended December 31, 2023 and 2022, respectively.

The Company recorded an allowance of $111,582 for related party credit losses upon the adoption of ASU 2016-13 on January 1, 2023. The Company recorded additional credit losses related to accounts receivable, related parties of $1,066,751 during the year ended December 31, 2023, which is reflected within general and administrative expenses on the on the accompanying consolidated statements of operations. Credit losses charged to expense in connection with accounts receivable related parties was $0 for the year ended December 31, 2022.

GAUCHO GROUP HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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, professional services, and other operating expenses (the “Related Party ESA”). During the years ended December 31, 2023 and 2022, the Company recorded a contra-expense of approximately $705,994 and $742,943, 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”) in order to pursue opportunities in lodging, hospitality retail and gaming. The LLC Agreement, as amended, required the dissolution of LVH if LVH was not successful in executing a ground lease for the project by December 31, 2023. 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”).

The managing member of SLVH (the “SLVH Member”) holds a 20% membership interest in SLVH and was a member of the Company’s Board of Directors (the “Board”) as of the date of the LLC Agreement. Pursuant to the Company’s Related Party Transactions Policy, adopted as amended on March 25, 2021 by the Board of Directors of the Company, this SLVH Member was 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. The SLVH Member resigned from the Company’s Board effective December 31, 2023.

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. As of December 31, 2023 and 2022, the Company owned 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 was 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 likely 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, 2023 and 2022.

GAUCHO GROUP HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Letter of Agreement with LVH

On September 27, 2023, the Company through its wholly owned subsidiary, GVI, executed a Letter Agreement between the Company and LVH to (i) suspend the business operations of LVH; (ii) to waive the provision requiring the dissolution of LVH if no ground lease is signed, (iii) release and terminate certain obligations of the members or their affiliates to contribute capital or perform services to or for the benefit of LVH, and (iv) to return all available cash to GVI. GVI received cash in the amount of $137,222 representing the return of cash in excess of agreed upon reserves, which is included in other income on the accompanying consolidated statement of operations.

Management Fee Income

During the years ended December 31, 2023 and 2022, the Company recorded income of $225,000 and $300,000 respectively, representing management fees received from LVH pursuant to a June 2021 agreement with LVH. As of December 31, 2023 and 2022, the Company has deferred revenue in the amount of $0 and $150,000, respectively, related to prepaid management fees received from LVH.