LOT SALE OBLIGATIONS

6 Months Ended

Jun. 30, 2024

Lot Sale Obligations

LOT SALE OBLIGATIONS

8. LOT SALE OBLIGATIONS

The following table summarizes the activity in connection with the Company’s lot sale obligations during the six months ended June 30, 2024:

	Lot Sale Obligations
	Lot Sale Obligations			Debt Discount			Lot Sale Obligations, net of discount
Balance at January 1, 2024	$	605,096		$	(64,068	)	$	541,027
Lot deposit refunded in 1Q24		(25,000	)		-			(25,000	)
Amortization of debt discount		-			19,355			19,355
Balance at March 31, 2024		580,096			(44,713	)		535,382
Portion of lot deposit refunded in 2Q24		(48,450	)		-			(48,450	)
Amortization of debt discount		-			20,022			20,022
Balance at June 30, 2024	$	531,646		$	(24,691	)	$	506,954

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 pay the full purchase price (the “Purchase Amount”) for the purchased lots, (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. In the event of such rescission, the Company agrees to refund the deposit 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.

During the fourth quarter of 2023, the Company entered into Lot Deposit Agreements for the purchase of eleven real estate lots and received Purchase Amounts in the aggregate amount of $525,000, which is recorded as lot sale obligations on the accompanying condensed consolidated balance sheet. A Purchase Amount of $25,000 is receivable as of June 30, 2024, 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 $30,640 and $60,459 related to lot sale obligations during the three and six months ended June 30, 2024, respectively, which consisted of $10,618 and $21,083, respectively, of interest accrued at the stated rate of 8.5%, plus amortization of debt discount in the amount of $20,022 and $39,377, respectively. As of June 30, 2024 and December 31, 2023, there is accrued interest of $18,120 and $9,052, respectively, related to the Company’s lot sale obligations.

GAUCHO GROUP HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)