UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10–Q
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2024
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______________
to ______________
Commission file number: 001–38363
HALL OF FAME RESORT & ENTERTAINMENT COMPANY
(Exact name of registrant as specified in its charter)
Delaware | | 84-3235695 |
(State or other jurisdiction of
incorporation or organization) | | (I.R.S. Employer
Identification No.) |
2014 Champions Gateway
Canton, OH 44708
(Address of principal executive offices)
(330) 458–9176
(Registrant’s telephone number, including
area code)
Securities registered pursuant
to Section 12(b) of the Act:
Title of each class | | Trading Symbol(s) | | Name of each exchange on which registered |
Common Stock, $0.0001 par value per share | | HOFV | | Nasdaq Capital Market |
Warrants to purchase 0.064578 shares of Common Stock | | HOFVW | | Nasdaq Capital Market |
Indicate by check mark whether
the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether
the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S–T
(§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit
such files). Yes ☒ No ☐
Indicate by check mark whether
the registrant is a large accelerated filer, an accelerated filer, a non–accelerated filer, a smaller reporting company, or an emerging
growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting
company,” and “emerging growth company” in Rule 12b–2 of the Exchange Act.
Large accelerated filer ☐ | Accelerated filer ☐ |
Non–accelerated filer ☒ | Smaller reporting company ☒ |
| Emerging growth company ☐ |
If an emerging growth company,
indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised
financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether
the registrant is a shell company (as defined in Rule 12b–2 of the Exchange Act). Yes ☐ No ☒
As of May 10, 2024, there
were 6,525,582 shares of the registrant’s Common stock, $0.0001 par value per share, issued and outstanding.
HALL OF FAME RESORT & ENTERTAINMENT COMPANY
AND SUBSIDIARIES
FORM 10-Q
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
HALL OF FAME RESORT & ENTERTAINMENT COMPANY
AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
| |
As of | |
| |
March 31, 2024 | | |
December 31, 2023 | |
| |
(unaudited) | | |
| |
Assets | |
| | |
| |
Cash | |
$ | 2,713,210 | | |
$ | 3,243,353 | |
Restricted cash | |
| 4,170,957 | | |
| 8,572,730 | |
Equity method investments | |
| 2,476,397 | | |
| - | |
Investments available for sale | |
| 2,000,000 | | |
| 2,000,000 | |
Accounts receivable, net | |
| 1,268,174 | | |
| 1,108,460 | |
Prepaid expenses and other assets | |
| 8,109,121 | | |
| 3,514,135 | |
Property and equipment, net | |
| 341,626,103 | | |
| 344,378,835 | |
Property and equipment held for sale | |
| - | | |
| 12,325,227 | |
Right-of-use lease assets | |
| 7,274,397 | | |
| 7,387,693 | |
Project development costs | |
| 69,932,439 | | |
| 59,366,200 | |
Total assets | |
$ | 439,570,798 | | |
$ | 441,896,633 | |
| |
| | | |
| | |
Liabilities and stockholders’ equity | |
| | | |
| | |
Liabilities | |
| | | |
| | |
Notes payable, net | |
$ | 221,653,857 | | |
$ | 219,532,941 | |
Accounts payable and accrued expenses | |
| 23,363,469 | | |
| 21,825,540 | |
Due to affiliate | |
| 2,726,806 | | |
| 1,293,874 | |
Warrant liability | |
| 176,000 | | |
| 225,000 | |
Financing liability | |
| 65,867,451 | | |
| 62,982,552 | |
Operating lease liability | |
| 3,321,009 | | |
| 3,440,630 | |
Other liabilities | |
| 8,858,499 | | |
| 5,858,682 | |
Total liabilities | |
| 325,967,091 | | |
| 315,159,219 | |
| |
| | | |
| | |
Commitments and contingencies (Note 6, 7, and 8) | |
| | | |
| | |
| |
| | | |
| | |
Stockholders’ equity | |
| | | |
| | |
Undesignated preferred stock, $0.0001 par value; 4,917,000 shares authorized; no shares issued or outstanding at March 31, 2024 and December 31, 2023 | |
| - | | |
| - | |
Series B convertible preferred stock, $0.0001 par value; 15,200 shares designated; 200 shares issued and outstanding at March 31, 2024 and December 31, 2023; liquidation preference of $222,011 as of March 31, 2024 | |
| - | | |
| - | |
Series C convertible preferred stock, $0.0001 par value; 15,000 shares designated; 15,000 shares issued and outstanding at March 31, 2024 and December 31, 2023; liquidation preference of $15,707,500 as of March 31, 2024 | |
| 2 | | |
| 2 | |
Common stock, $0.0001 par value; 300,000,000 shares authorized; 6,502,437 and 6,437,020 shares issued and outstanding at March 31, 2024 and December 31, 2023, respectively | |
| 650 | | |
| 643 | |
Additional paid-in capital | |
| 346,097,951 | | |
| 344,335,489 | |
Accumulated deficit | |
| (231,531,470 | ) | |
| (216,643,882 | ) |
Total equity attributable to HOFRE | |
| 114,567,133 | | |
| 127,692,252 | |
Non-controlling interest | |
| (963,426 | ) | |
| (954,838 | ) |
Total equity | |
| 113,603,707 | | |
| 126,737,414 | |
Total liabilities and stockholders’ equity | |
$ | 439,570,798 | | |
$ | 441,896,633 | |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
HALL OF FAME RESORT & ENTERTAINMENT COMPANY
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
| |
For the Three Months Ended
March
31, | |
| |
2024 | | |
2023 | |
| |
| | |
| |
Revenues | |
| | |
| |
Sponsorships, net of activation costs | |
$ | 859,731 | | |
$ | 673,475 | |
Event, rents, restaurant, and other revenues | |
| 2,054,877 | | |
| 908,312 | |
Hotel revenues | |
| 1,276,707 | | |
| 1,538,646 | |
Total revenues | |
| 4,191,315 | | |
| 3,120,433 | |
| |
| | | |
| | |
Operating expenses | |
| | | |
| | |
Operating expenses | |
| 6,150,364 | | |
| 12,528,716 | |
Hotel operating expenses | |
| 974,432 | | |
| 1,459,203 | |
Impairment expense | |
| - | | |
| 1,145,000 | |
Depreciation expense | |
| 4,158,750 | | |
| 2,553,360 | |
Total operating expenses | |
| 11,283,546 | | |
| 17,686,279 | |
| |
| | | |
| | |
Loss from operations | |
| (7,092,231 | ) | |
| (14,565,846 | ) |
| |
| | | |
| | |
Other income (expense) | |
| | | |
| | |
Interest expense, net | |
| (6,521,534 | ) | |
| (3,632,637 | ) |
Amortization of discount on note payable | |
| (955,322 | ) | |
| (855,891 | ) |
Change in fair value of warrant liability | |
| 49,000 | | |
| (238,000 | ) |
Change in fair value of interest rate swap | |
| - | | |
| (100,000 | ) |
Loss on sale of asset | |
| (140,041 | ) | |
| - | |
Income from equity method investments | |
| 29,952 | | |
| - | |
Total other expense | |
| (7,537,945 | ) | |
| (4,826,528 | ) |
| |
| | | |
| | |
Net loss | |
$ | (14,630,176 | ) | |
$ | (19,392,374 | ) |
| |
| | | |
| | |
Preferred stock dividends | |
| (266,000 | ) | |
| (266,000 | ) |
Loss attributable to non-controlling interest | |
| 8,588 | | |
| 48,577 | |
| |
| | | |
| | |
Net loss attributable to HOFRE stockholders | |
$ | (14,887,588 | ) | |
$ | (19,609,797 | ) |
| |
| | | |
| | |
Net loss per share, basic and diluted | |
$ | (2.30 | ) | |
$ | (3.48 | ) |
| |
| | | |
| | |
Weighted average shares outstanding, basic and diluted | |
| 6,486,044 | | |
| 5,629,086 | |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
HALL OF FAME RESORT & ENTERTAINMENT COMPANY
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES
IN STOCKHOLDERS’ EQUITY
FOR THE THREE MONTHS ENDED MARCH 31, 2024 AND
2023
(unaudited)
| |
Series
B
Convertible
Preferred stock | | |
Series
C
Convertible
Preferred stock | | |
Common
Stock | | |
Additional
Paid-In | | |
Accumulated | | |
Total Equity
Attributable to
HOFRE | | |
Non-controlling | | |
Total
Stockholders’ | |
| |
Shares | | |
Amount | | |
Shares | | |
Amount | | |
Shares | | |
Amount | | |
Capital | | |
Deficit | | |
Stockholders | | |
Interest | | |
Equity | |
| |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| |
Balance as of
January 1, 2024 | |
| 200 | | |
$ | - | | |
| 15,000 | | |
$ | 2 | | |
| 6,437,020 | | |
$ | 643 | | |
$ | 344,335,489 | | |
$ | (216,643,882 | ) | |
$ | 127,692,252 | | |
$ | (954,838 | ) | |
$ | 126,737,414 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Stock-based compensation
on RSU and restricted stock awards | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 96,469 | | |
| - | | |
| 96,469 | | |
| - | | |
| 96,469 | |
Vesting of restricted stock units, net of 7,672 shares withheld for taxes | |
| - | | |
| - | | |
| - | | |
| - | | |
| 65,417 | | |
| 7 | | |
| (7 | ) | |
| - | | |
| - | | |
| - | | |
| - | |
Preferred stock dividend | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| (266,000 | ) | |
| (266,000 | ) | |
| - | | |
| (266,000 | ) |
Warrants issued for financing
liability proceeds | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 1,666,000 | | |
| - | | |
| 1,666,000 | | |
| - | | |
| 1,666,000 | |
Net
loss | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| (14,621,588 | ) | |
| (14,621,588 | ) | |
| (8,588 | ) | |
| (14,630,176 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Balance
as of March 31, 2024 | |
| 200 | | |
$ | - | | |
| 15,000 | | |
$ | 2 | | |
| 6,502,437 | | |
$ | 650 | | |
$ | 346,097,951 | | |
$ | (231,531,470 | ) | |
$ | 114,567,133 | | |
$ | (963,426 | ) | |
$ | 113,603,707 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Balance as of January 1,
2023 | |
| 200 | | |
$ | - | | |
| 15,000 | | |
$ | 2 | | |
| 5,604,869 | | |
$ | 560 | | |
$ | 339,038,466 | | |
$ | (146,898,343 | ) | |
$ | 192,140,685 | | |
$ | (882,573 | ) | |
$ | 191,258,112 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Stock-based compensation
on RSU and restricted stock awards | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 651,034 | | |
| - | | |
| 651,034 | | |
| - | | |
| 651,034 | |
Issuance of restricted stock
awards | |
| - | | |
| - | | |
| - | | |
| - | | |
| 6,207 | | |
| 1 | | |
| (1 | ) | |
| - | | |
| - | | |
| - | | |
| - | |
Vesting of restricted stock units, net of 8,741 shares withheld for taxes | |
| - | | |
| - | | |
| - | | |
| - | | |
| 46,255 | | |
| 5 | | |
| (5 | ) | |
| - | | |
| - | | |
| - | | |
| - | |
Cancellation of fractional shares | |
| - | | |
| - | | |
| - | | |
| - | | |
| (10,433 | ) | |
| (1 | ) | |
| 1 | | |
| - | | |
| - | | |
| - | | |
| - | |
Preferred stock dividend | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| (266,000 | ) | |
| (266,000 | ) | |
| - | | |
| (266,000 | ) |
Net
loss | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| (19,343,797 | ) | |
| (19,343,797 | ) | |
| (48,577 | ) | |
| (19,392,374 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Balance
as of March 31, 2023 | |
| 200 | | |
$ | - | | |
| 15,000 | | |
$ | 2 | | |
| 5,646,898 | | |
$ | 565 | | |
$ | 339,689,495 | | |
$ | (166,508,140 | ) | |
$ | 173,181,922 | | |
$ | (931,150 | ) | |
$ | 172,250,772 | |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
HALL OF FAME RESORT & ENTERTAINMENT COMPANY
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
| |
For the Three Months Ended March 31, | |
| |
2024 | | |
2023 | |
Cash Flows From Operating Activities | |
| | |
| |
Net loss | |
$ | (14,630,176 | ) | |
$ | (19,392,374 | ) |
Adjustments to reconcile net loss to cash flows used in operating activities | |
| | | |
| | |
Depreciation expense | |
| 4,158,750 | | |
| 2,553,360 | |
Amortization of note discount and deferred financing costs | |
| 955,322 | | |
| 855,891 | |
Amortization of financing liability | |
| 1,798,295 | | |
| 1,681,073 | |
Impairment of film costs | |
| - | | |
| 1,145,000 | |
Interest income on investments held to maturity | |
| - | | |
| (273,523 | ) |
Income from equity method investments | |
| (29,952 | ) | |
| - | |
Interest paid in kind | |
| 2,905,941 | | |
| 1,127,491 | |
Loss on sale of asset | |
| 140,041 | | |
| - | |
Change in fair value of interest rate swap | |
| - | | |
| 100,000 | |
Change in fair value of warrant liability | |
| (49,000 | ) | |
| 238,000 | |
Stock-based compensation expense | |
| 96,469 | | |
| 651,034 | |
Non-cash operating lease expense | |
| 124,429 | | |
| 128,143 | |
Changes in operating assets and liabilities: | |
| | | |
| | |
Accounts receivable | |
| (189,474 | ) | |
| (888,740 | ) |
Prepaid expenses and other assets | |
| (3,106,777 | ) | |
| (1,588,240 | ) |
Accounts payable and accrued expenses | |
| 977,566 | | |
| (875,060 | ) |
Operating leases | |
| (76,608 | ) | |
| (78,508 | ) |
Due to affiliate | |
| 1,432,932 | | |
| (110,903 | ) |
Other liabilities | |
| 3,015,367 | | |
| 3,184,424 | |
Net cash used in operating activities | |
| (2,476,875 | ) | |
| (11,542,932 | ) |
| |
| | | |
| | |
Cash Flows From Investing Activities | |
| | | |
| | |
Investments in securities held to maturity | |
| - | | |
| (30,021,129 | ) |
Proceeds from securities held to maturity | |
| - | | |
| 15,021,129 | |
Proceeds from sale of assets | |
| 8,126,634 | | |
| - | |
Additions to project development costs and property and equipment | |
| (11,094,441 | ) | |
| (9,679,007 | ) |
Net cash used in investing activities | |
| (2,967,807 | ) | |
| (24,679,007 | ) |
| |
| | | |
| | |
Cash Flows From Financing Activities | |
| | | |
| | |
Proceeds from notes payable | |
| 8,722,258 | | |
| 20,500,000 | |
Repayments of notes payable | |
| (10,962,096 | ) | |
| (312,431 | ) |
Payment of financing costs | |
| - | | |
| (1,537,342 | ) |
Payment on financing liability | |
| (747,396 | ) | |
| (1,093,750 | ) |
Proceeds from financing liabilities | |
| 3,500,000 | | |
| - | |
Payment of Series B dividends | |
| - | | |
| (150,000 | ) |
Net cash provided by financing activities | |
| 512,766 | | |
| 17,406,477 | |
| |
| | | |
| | |
Net decrease in cash and restricted cash | |
| (4,931,916 | ) | |
| (18,815,462 | ) |
| |
| | | |
| | |
Cash and restricted cash, beginning of year | |
| 11,816,083 | | |
| 33,516,382 | |
| |
| | | |
| | |
Cash and restricted cash, end of period | |
$ | 6,884,167 | | |
$ | 14,700,920 | |
| |
| | | |
| | |
Cash | |
$ | 2,713,210 | | |
$ | 7,395,025 | |
Restricted Cash | |
| 4,170,957 | | |
| 7,305,895 | |
Total cash and restricted cash | |
$ | 6,884,167 | | |
$ | 14,700,920 | |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
HALL OF FAME RESORT & ENTERTAINMENT COMPANY
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
| |
For the Three Months Ended
March 31, | |
| |
2024 | | |
2023 | |
Supplemental disclosure of cash flow information | |
| | |
| |
Cash paid during the year for interest | |
$ | 1,739,082 | | |
$ | 2,644,324 | |
Cash paid for income taxes | |
$ | - | | |
$ | - | |
| |
| | | |
| | |
Non-cash investing and financing activities | |
| | | |
| | |
Project development cost acquired through accounts payable and accrued expenses,
net | |
$ | 9,028,091 | | |
$ | - | |
Warrants issued in connection with financing liability | |
$ | 1,666,000 | | |
$ | - | |
Proceeds from sale of assets held in escrow | |
$ | 1,500,000 | | |
$ | - | |
Accrued Series B preferred stock dividends | |
$ | 116,000 | | |
$ | 116,000 | |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
Hall of Fame
Resort & Entertainment Company and Subsidiaries
Notes to Condensed
Consolidated Financial Statements
Note 1: Organization, Nature of Business, and
Liquidity
Organization and Nature of Business
Hall of Fame Resort &
Entertainment Company, a Delaware corporation (together with its subsidiaries, unless the context indicates otherwise, the “Company”
or “HOFRE”), was incorporated in Delaware as GPAQ Acquisition Holdings, Inc., a wholly owned subsidiary of our legal predecessor,
Gordon Pointe Acquisition Corp. (“GPAQ”), a special purpose acquisition company.
On July 1, 2020, the Company consummated a business
combination with HOF Village, LLC, a Delaware limited liability company (“HOF Village”), pursuant to an Agreement and Plan
of Merger dated September 16, 2019 (as amended on November 6, 2019, March 10, 2020 and May 22, 2020, the “Merger Agreement”),
by and among the Company, GPAQ, GPAQ Acquiror Merger Sub, Inc., a Delaware corporation (“Acquiror Merger Sub”), GPAQ Company
Merger Sub, LLC, a Delaware limited liability company (“Company Merger Sub”), HOF Village and HOF Village Newco, LLC, a Delaware
limited liability company (“Newco”). The transactions contemplated by the Merger Agreement are referred to as the “Business
Combination”.
The Company is a resort and entertainment company leveraging the power
and popularity of professional football and its legendary players in partnership with the National Football Museum, Inc., doing business
as the Pro Football Hall of Fame (“PFHOF”). Headquartered in Canton, Ohio, the Company owns the DoubleTree by Hilton located
in downtown Canton and the Hall of Fame Village, which is a multi-use sports, entertainment, and media destination centered around the
PFHOF’s campus. The Company is pursuing a differentiation strategy across three business verticals, including destination-based
assets, HOF Village Media Group, LLC (“Hall of Fame Village Media”), and gaming.
The Company has entered into
multiple agreements with PFHOF, and certain government entities, which outline the rights and obligations of each of the parties with
regard to the property on which the Hall of Fame Village sits, portions of which are owned by the Company and portions of which are net
leased to the Company by government and quasi-governmental entities (see Note 9 for additional information). Under these agreements, the
PFHOF and the lessor entities are entitled to use portions of the Hall of Fame Village on a direct-cost basis.
Hall of Fame
Resort & Entertainment Company and Subsidiaries
Notes to Condensed
Consolidated Financial Statements
Note 1: Organization, Nature of Business, and Liquidity
(continued)
Liquidity and Going Concern
The Company has sustained recurring losses through March 31, 2024 and
the Company’s accumulated deficit was $231.5 million as of such date. Since inception, the Company’s operations have been
funded principally through the issuance of debt and equity. As of March 31, 2024, the Company had approximately $2.7 million of unrestricted
cash and $4.2 million of restricted cash. During the three months ended March 31, 2024, the Company used cash for operating activities
of $2.5 million. The Company has approximately $90.6 million of debt coming due through May 14, 2025. In April 2024, IRG and its affiliated
lenders agreed to extend the maturity of $51.6 million of principal of its debt until March 31, 2025. On May 10, 2024, the Company amended its waterpark ground lease to provide for a cure period resulting from the Company not making a payment
due in May 2024 (see Note 14 Subsequent Events).
The Company expects that it will need to raise
additional financing to accomplish its development plan and fund its working capital. The Company is seeking to obtain additional funding
through debt, construction lending, and equity financing. There are no assurances that the Company will be able to raise capital on terms
acceptable to the Company or at all, or that cash flows generated from its operations will be sufficient to meet its current operating
costs. If the Company is unable to obtain sufficient amounts of additional capital, it may be required to reduce the scope of its planned
development, which could harm its financial condition and operating results, or it may not be able to continue to fund its ongoing operations.
These conditions raise substantial doubt about the Company’s ability to continue as a going concern to meet its obligations as they
come due for at least one year from the issuance of these condensed consolidated financial statements. The accompanying condensed consolidated
financial statements do not include any adjustments that might result from the outcome of these uncertainties.
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements
of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S.
GAAP”) for interim financial information and Rule 10 of Regulation S-X under the Securities Act of 1933, as amended (the “Securities
Act”). Accordingly, they do not include all of the information and notes required by U.S. GAAP. However, in the opinion of the management
of the Company, all adjustments necessary for a fair presentation of the financial position and operating results have been included in
these statements. These unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial
statements and notes thereto included in the Company’s Form 10-K for the year ended December 31, 2023, filed on March 25, 2024.
Operating results for the three months ended March 31, 2024 are not necessarily indicative of the results that may be expected for any
subsequent quarters or for the year ending December 31, 2024.
Consolidation
The condensed consolidated financial statements
include the accounts and activity of the Company and its wholly owned subsidiaries. Investments in a variable interest entity in which
the Company is not the primary beneficiary, or where the Company does not own a majority interest but has the ability to exercise significant
influence over operating and financial policies, are accounted for using the equity method. All intercompany profits, transactions, and
balances have been eliminated in consolidation.
The Company owns a 60% interest in Mountaineer
GM, LLC (“Mountaineer”), whose results are consolidated into the Company’s results of operations. The portion of Mountaineer’s
net income (loss) that is not attributable to the Company is included in non-controlling interest.
Hall of Fame
Resort & Entertainment Company and Subsidiaries
Notes to Condensed
Consolidated Financial Statements
Note 2: Summary of Significant Accounting Policies
Reclassification
Certain financial statement line
items of the Company’s historical presentation have been reclassified to conform to the corresponding financial statement line items.
These reclassifications have no material impact on the historical operating loss, net loss, total assets, total liabilities, or stockholders’
equity previously reported.
Use of Estimates
The preparation of the unaudited condensed consolidated
financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements
and the reported amounts of revenues and expenses during the reporting period. The most significant estimates and assumptions for the
Company relate to credit losses, depreciation, costs capitalized to project development costs, useful lives of long-lived assets, impairment,
stock-based compensation, and fair value of financial instruments (including the fair value of the Company’s warrant liability).
Management adjusts such estimates when facts and circumstances dictate. Actual results could differ from those estimates.
Warrant Liability
The Company accounts for warrants for shares of
the Company’s common stock, par value $0.0001 per share (“Common Stock”) that are not indexed to its own stock as liabilities
at fair value on the balance sheet under U.S. GAAP. Such warrants are subject to remeasurement at each balance sheet date and any change
in fair value is recognized as a component of other expense on the statements of operations. The Company will continue to adjust the liability
for changes in fair value until the earlier of the exercise or expiration of such Common Stock warrants. At that time, the portion of
the warrant liability related to such Common Stock warrants will be reclassified to additional paid-in capital.
Cash and Restricted Cash
The Company considers all highly liquid investments
with an original maturity of three months or less when purchased, to be cash equivalents. There were no cash equivalents as of March 31,
2024 and December 31, 2023, respectively. The Company maintains its cash and escrow accounts at national financial institutions. The balances,
at times, may exceed federally insured limits.
Restricted cash includes escrow reserve accounts
for capital improvements and debt service as required under certain of the Company’s debt agreements. The balances as of March 31,
2024 and December 31, 2023 were $4,170,957 and $8,572,730, respectively.
Hall of Fame
Resort & Entertainment Company and Subsidiaries
Notes to Condensed
Consolidated Financial Statements
Note 2: Summary of Significant Accounting Policies
(continued)
Investments
The Company from time to time invests in debt
and equity securities, including companies engaged in complementary businesses. All marketable equity and debt securities held by the
Company are accounted for under ASC Topic 320, “Investments – Debt and Equity Securities.” The Company recognizes interest
income on these securities ratably over their term utilizing the interest method.
As of March 31, 2024 and December 31, 2023, the
Company also had $2,000,000 and $2,000,000, respectively in investments available for sale, which are marked to market value at each reporting
period.
Equity Method Investments
Investments in unconsolidated affiliates, which the Company exerts
significant influence but does not control or otherwise consolidate are accounted for using the equity method. Equity method investments
are initially recorded at cost. These investments are included in equity method investment in the accompanying condensed consolidated
balance sheets. The Company’s share of the profits and losses from these investments is reported in income from equity method investment
in the accompanying condensed consolidated statements of operations. The Company monitors its investments for other-than-temporary impairment
by considering factors such as current economic and market conditions and the operating performance of the investees and records reductions
in carrying values when necessary.
Accounts Receivable
Accounts receivable are generally amounts due
under sponsorship and other agreements and are recorded at the invoiced amount. Accounts receivable are reviewed for delinquencies on
a case-by-case basis and are considered delinquent when the sponsor or customer has missed a scheduled payment. Interest is not charged
on delinquencies.
The carrying amount of accounts receivable is
reduced by an allowance that reflects management’s best estimate of the amounts that will not be collected. Management individually
reviews all delinquent accounts receivable balances and based on an assessment of current creditworthiness, estimates the portion, if
any, of the balance that will not be collected. The Company reviews its Accounts Receivable on a case-by-case basis and writes off any
accounts receivable for which collection efforts have been exhausted. As of March 31, 2024 and December 31, 2023, the Company has recorded
an allowance for credit losses of $243,964 and $243,081, respectively.
Deferred Financing Costs
Costs incurred in obtaining financing are capitalized and amortized
to additions in project development costs during the construction period over the term of the related loans, without regard for any extension
options until the project or portion thereof is considered substantially complete. Upon substantial completion of the project or portion
thereof, such costs are amortized as interest expense utilizing the interest method over the term of the related loan. Any unamortized
costs are shown as an offset to “Notes Payable, net” on the accompanying consolidated balance sheets.
Hall of Fame
Resort & Entertainment Company and Subsidiaries
Notes to Condensed
Consolidated Financial Statements
Note 2: Summary of Significant Accounting Policies
(continued)
Revenue Recognition
The Company follows the Financial Accounting Standards
Board’s (“FASB”) Accounting Standards Codification (“ASC”) 606, Revenue with Contracts with Customers,
to properly recognize revenue. Under ASC 606, revenue is recognized when a customer obtains control of promised goods or services,
in an amount that reflects the consideration which the entity expects to receive in exchange for those goods or services. To determine
revenue recognition for arrangements that an entity determines are within the scope of ASC 606, the Company performs the following five
steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction
price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the
entity satisfies a performance obligation.
The Company generates revenues from various streams
such as sponsorship agreements, rents, food & beverage, events (including admissions, concessions, and parking), hotel and restaurant
operations. The sponsorship arrangements, in which the customer sponsors a play area or event and receives specified brand recognition
and other benefits over a set period of time, recognize revenue on a straight-line basis over the time period specified in the contract.
The excess of amounts contractually due over the amounts of sponsorship revenue recognized are included in other liabilities on the accompanying
consolidated balance sheets. Contractually due but unpaid sponsorship revenue are included in accounts receivable on the accompanying
consolidated balance sheets. Refer to Note 6 for more details. Revenue for short-term rentals and events are recognized at the time the
respective event or service has been performed. Rental revenue for long term leases is recorded on a straight-line basis over the term
of the lease beginning on the commencement date.
A performance obligation is a promise in a contract
to transfer a distinct good or service to a customer. If the contract does not specify the revenue by performance obligation, the Company
allocates the transaction price to each performance obligation based on its relative standalone selling price. Such prices are generally
determined using prices charged to customers or using the Company’s expected cost plus margin. Revenue is recognized as the Company’s
performance obligations are satisfied. If consideration is received in advance of the Company’s performance, including amounts which
are refundable, recognition of revenue is deferred until the performance obligation is satisfied or amounts are no longer refundable.
The Company’s owned hotel revenues primarily
consist of hotel room sales, revenue from accommodations sold in conjunction with other services (e.g., package reservations), food and
beverage sales, and other ancillary goods and services (e.g., parking) related to owned hotel properties. Revenue is recognized when rooms
are occupied or goods and services have been delivered or rendered, respectively. Payment terms typically align with when the goods and
services are provided. Although the transaction prices of hotel room sales, goods, and other services are generally fixed and based on
the respective room reservation or other agreement, an estimate to reduce the transaction price is required if a discount is expected
to be provided to the customer. For package reservations, the transaction price is allocated to the performance obligations within the
package based on the estimated standalone selling price of each component.
Restaurant revenue at Company-operated restaurants is recognized when
payment is tendered at the point of sale, net of sales tax, discounts and other sales related taxes.
Hall of Fame
Resort & Entertainment Company and Subsidiaries
Notes to Condensed
Consolidated Financial Statements
Note 2: Summary of Significant Accounting Policies (continued)
Income Taxes
The Company utilizes an asset and liability approach
for financial accounting and reporting for income taxes. The provision for income taxes is based upon income or loss after adjustment
for those permanent items that are not considered in the determination of taxable income. Deferred income taxes represent the tax effects
of differences between the financial reporting and tax basis of the Company’s assets and liabilities at the enacted tax rates in
effect for the years in which the differences are expected to reverse.
The Company evaluates the recoverability of deferred
tax assets and establishes a valuation allowance when it is more likely than not that some portion or all the deferred tax assets will
not be realized. Management makes judgments as to the interpretation of the tax laws that might be challenged upon an audit and cause
changes to previous estimates of tax liability. In management’s opinion, adequate provisions for income taxes have been made. If
actual taxable income by tax jurisdiction varies from estimates, additional allowances or reversals of reserves may be necessary.
Tax benefits are recognized only for tax positions
that are more likely than not to be sustained upon examination by tax authorities. The amount recognized is measured as the largest amount
of benefit that is greater than 50% likely to be realized upon settlement. A liability for “unrecognized tax benefits” is
recorded for any tax benefits claimed in the Company’s tax returns that do not meet these recognition and measurement standards.
As of March 31, 2024 and December 31, 2023, no liability for unrecognized tax benefits was required to be reported.
The Company’s policy for recording interest
and penalties associated with tax audits is to record such items as a component of operating expenses on the Company’s consolidated
statements of operations. There were no amounts incurred for penalties and interest for the three months ended March 31, 2024 and 2023.
The Company does not expect its uncertain tax position to change during the next twelve months. Management is currently unaware of any
issues under review that could result in significant payments, accruals or material deviations from its position. The Company’s
effective tax rates of zero differ from the statutory rate for the years presented primarily due to the Company’s net operating
loss, which was fully reserved for all years presented.
The Company has identified its United States tax return and its state
tax return in Ohio as its “major” tax jurisdictions, and such returns for the years 2020 through 2023 remain subject to examination.
Hall of Fame
Resort & Entertainment Company and Subsidiaries
Notes to Condensed
Consolidated Financial Statements
Note 2: Summary of Significant Accounting Policies
(continued)
Film and Media Costs
The Company capitalizes all costs to develop films and related media
as an asset, included in “project development costs” on the Company’s condensed consolidated balance sheets. The costs
for each film or media will be expensed over the expected release period. During the three months ended March 31, 2024 and 2023, the Company
recorded $0 and $1,305,000 in film and media costs, respectively, including an impairment charge of $0 and $1,145,000, respectively. The
impairment in film and media costs is included in “Impairment expense” on the Company’s condensed consolidated statements
of operations.
Fair Value Measurement
The Company follows FASB’s ASC 820–10,
Fair Value Measurement, to measure the fair value of its financial instruments and non-financial instruments and to incorporate
disclosures about fair value of its financial instruments. ASC 820–10 establishes a framework for measuring fair value and expands
disclosures about fair value measurements. To increase consistency and comparability in fair value measurements and related disclosures,
ASC 820–10 establishes a fair value hierarchy which prioritizes the inputs to valuation techniques used to measure fair value into
three broad levels.
The three levels of fair value hierarchy defined
by ASC 820–10-20 are described below:
Level 1 |
|
Quoted market prices available in active markets for identical assets or liabilities as of the reporting date. |
|
|
|
Level 2 |
|
Pricing inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date. |
|
|
|
Level 3 |
|
Pricing inputs that are generally unobservable inputs and not corroborated by market data. |
Financial assets or liabilities are considered
Level 3 when their fair values are determined using pricing models, discounted cash flow methodologies, or similar techniques and at least
one significant model assumption or input is unobservable.
The fair value hierarchy gives the highest priority
to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. If
the inputs used to measure the financial assets and liabilities fall within more than one level described above, the categorization is
based on the lowest level input that is significant to the fair value measurement of the instrument.
The carrying amounts of the Company’s financial
assets and liabilities, such as cash, accounts receivable, prepaid expenses and other current assets, accounts payable, and accrued expenses
approximate their fair values due to the short-term nature of these instruments.
The carrying amount of the Company’s notes
payable are considered to approximate their fair value based on the borrowing rates currently available to the Company for loans with
similar terms and maturities.
Hall of Fame
Resort & Entertainment Company and Subsidiaries
Notes to Condensed
Consolidated Financial Statements
Note 2: Summary of Significant Accounting Policies
(continued)
Fair Value Measurement (continued)
The Company uses the fair value hierarchy to measure
the fair value of its warrant liabilities, investments available for sale and interest rate swap. The Company revalues its financial instruments
at every reporting period. The Company recognizes gains or losses on the change in fair value of the warrant liabilities as “change
in fair value of warrant liability” in the condensed consolidated statements of operations. The Company recognizes gains or losses
on the change in fair value of the investments available for sale as “change in fair value of investments available for sale”
in the condensed consolidated statements of operations. The Company recognizes gains or losses on the change in fair value of the interest
rate swap as “change in fair value of interest rate swap” in the condensed consolidated statements of operations.
The following table provides the financial liabilities
measured on a recurring basis and reported at fair value on the consolidated balance sheets as of March 31, 2024 and December 31, 2023
and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value:
| |
Level | |
March 31, 2024 | | |
December 31, 2023 | |
Warrant liabilities – Public Series A Warrants | |
1 | |
$ | 159,000 | | |
$ | 204,000 | |
Warrant liabilities – Private Series A Warrants | |
3 | |
| - | | |
| - | |
Warrant liabilities – Series B Warrants | |
3 | |
| 17,000 | | |
| 21,000 | |
Fair value of aggregate warrant liabilities | |
| |
$ | 176,000 | | |
$ | 225,000 | |
| |
| |
| | | |
| | |
Investments available for sale | |
3 | |
$ | 2,000,000 | | |
$ | 2,000,000 | |
The Series A Warrants issued to the previous shareholders
of GPAQ (the “Public Series A Warrants”) are classified as Level 1 due to the use of an observable market quote in the active
market. Level 3 financial liabilities consist of the Series A Warrants issued to the sponsors of GPAQ (the “Private Series A Warrants”)
and the Series B Warrants issued in the Company’s November 2020 follow-on public offering, for which there is no current market
for these securities, and the determination of fair value requires significant judgment or estimation. Changes in fair value measurement
categorized within Level 3 of the fair value hierarchy are analyzed each period based on changes in estimates or assumptions and recorded
appropriately.
Hall of Fame
Resort & Entertainment Company and Subsidiaries
Notes to Condensed
Consolidated Financial Statements
Note 2: Summary of Significant Accounting Policies
(continued)
Fair Value Measurement (continued)
Subsequent measurement
The following table presents the changes
in fair value of the warrant liabilities:
| |
Public
Series A
Warrants | | |
Private
Series A
Warrants | | |
Series B
Warrants | | |
Series C
Warrants | | |
Total
Warrant
Liability | |
Fair value as of December 31, 2023 | |
$ | 204,000 | | |
$ | - | | |
$ | 21,000 | | |
| - | | |
$ | 225,000 | |
Change in fair value | |
| (45,000 | ) | |
| - | | |
| (4,000 | ) | |
| - | | |
| (49,000 | ) |
Fair value as of March 31, 2024 | |
$ | 159,000 | | |
$ | - | | |
$ | 17,000 | | |
$ | - | | |
$ | 176,000 | |
The key inputs into the Black Scholes valuation model for the Level
3 valuations as of March 31, 2024 and December 31, 2023 are as follows:
| |
March 31, 2024 | | |
December 31, 2023 | |
| |
Private
Series A
Warrants | | |
Series B
Warrants | | |
Private
Series A
Warrants | | |
Series B
Warrants | |
Term (years) | |
| 1.3 | | |
| 1.6 | | |
| 1.5 | | |
| 1.9 | |
Stock price | |
$ | 3.59 | | |
$ | 3.59 | | |
$ | 3.25 | | |
$ | 3.25 | |
Exercise price | |
$ | 253.11 | | |
$ | 30.81 | | |
$ | 253.11 | | |
$ | 30.81 | |
Dividend yield | |
| 0.0 | % | |
| 0.0 | % | |
| 0.0 | % | |
| 0.0 | % |
Expected volatility | |
| 85.19 | % | |
| 83.85 | % | |
| 88.37 | % | |
| 85.42 | % |
Risk free interest rate | |
| 4.59 | % | |
| 4.59 | % | |
| 4.23 | % | |
| 4.23 | % |
| |
| | | |
| | | |
| | | |
| | |
Number of shares | |
| 95,576 | | |
| 170,862 | | |
| 95,576 | | |
| 170,862 | |
The valuation of the investments available for sale was based on an
option pricing model using market rate assumptions. The interest rate swap was terminated in 2023.
Hall of Fame
Resort & Entertainment Company and Subsidiaries
Notes to Condensed
Consolidated Financial Statements
Note 2: Summary of Significant Accounting
Policies (continued)
Net Loss Per Common Share
Basic net loss per common
share is computed by dividing net loss by the weighted average number of common shares outstanding during the periods.
Diluted net loss per share
is computed by dividing the net loss by the weighted average number of common shares outstanding during the period. The Company’s
potentially dilutive common stock equivalent shares, which include incremental common shares issuable upon (i) the exercise of outstanding
stock options and warrants, (ii) vesting of restricted stock units and restricted stock awards, and (iii) conversion of preferred stock,
are only included in the calculation of diluted net loss per share when their effect is dilutive.
For the three months ended March 31, 2024 and
2023, the Company was in a loss position and therefore all potentially dilutive securities would be anti-dilutive.
As of March 31, 2024 and
2023, the following outstanding common stock equivalents have been excluded from the calculation of net loss per share because their impact
would be anti-dilutive.
| |
For the Three Months Ended
March 31, | |
| |
2024 | | |
2023 | |
Warrants to purchase shares of Common Stock | |
| 3,683,962 | | |
| 2,003,649 | |
Unvested restricted stock units to be settled in shares of Common Stock | |
| 210,200 | | |
| 173,450 | |
Shares of Common Stock issuable upon conversion of convertible notes | |
| 9,990,227 | | |
| 3,435,659 | |
Shares of Common Stock issuable upon conversion of Series B Preferred Stock | |
| 2,971 | | |
| 2,971 | |
Shares of Common Stock issuable upon conversion of Series C Preferred Stock | |
| 454,408 | | |
| 454,545 | |
Total potentially dilutive securities | |
| 14,341,768 | | |
| 6,070,274 | |
Recent Accounting Standards
In November 2023, the Financial Accounting Standards
Board (“FASB”) issued ASU 2023-07, Segment Reporting, to improve reportable segment disclosure requirements, primarily
through enhanced disclosures about significant segment expenses. This ASU is effective for fiscal years beginning after December 15, 2023,
and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. We are currently evaluating the
impact of this standard on our consolidated financial statements and related disclosures.
In December 2023, the FASB issued ASU 2023-09, Income Taxes, requiring
more granular disclosure of the components of income taxes. This ASU is effective for fiscal years beginning after December 15, 2024 on
a prospective basis. Early adoption is permitted. We are currently evaluating the impact of this standard on our consolidated financial
statements and related disclosures.
Hall of Fame
Resort & Entertainment Company and Subsidiaries
Notes to Condensed
Consolidated Financial Statements
Note 3: Property and Equipment
Property and equipment, net, including property
and equipment held for sale consists of the following:
| |
Useful Life | |
March 31,
2024 | | |
December 31,
2023 | |
Land | |
| |
$ | 27,651,699 | | |
$ | 27,651,699 | |
Land improvements | |
25 years | |
| 33,571,252 | | |
| 48,478,397 | |
Building and improvements | |
15 to 39 years | |
| 345,156,756 | | |
| 344,006,337 | |
Equipment | |
5 to 10 years | |
| 10,412,936 | | |
| 13,314,547 | |
Property and equipment, gross | |
| |
| 416,792,643 | | |
| 433,450,980 | |
| |
| |
| | | |
| | |
Less: accumulated depreciation | |
| |
| (75,166,540 | ) | |
| (76,746,918 | ) |
Property and equipment, net, including property and equipment held for sale | |
| |
$ | 341,626,103 | | |
$ | 356,704,062 | |
| |
| |
| | | |
| | |
Project development costs | |
| |
$ | 69,932,439 | | |
$ | 59,366,200 | |
On January 11, 2024, pursuant to a membership
purchase agreement dated December 22, 2023, the Company sold an 80% interest in its ForeverLawn Sports Complex. These assets qualify as
“held for sale” under ASC 360 as of December 31, 2023. Therefore, the Company included the property and equipment anticipated
to be sold, in the amount of $12,325,227 as “Property and equipment held for sale” on the Company’s consolidated balance
sheets as of December 31, 2023.
For the three months ended March 31, 2024 and
2023, the Company recorded depreciation expense of $4,158,750 and $2,553,360, respectively. For the three months ended March 31, 2024
and 2023, the Company incurred $10,915,894 and $9,163,643 of capitalized project development costs, respectively.
For the three months ended March 31, 2024 and
2023, the Company transferred $349,655 and $6,031,376 from Project development costs to Property and Equipment, respectively.
Included in project development costs are film
development costs of $200,000 and $200,000 as of March 31, 2024 and December 31, 2023, respectively.
Hall of Fame
Resort & Entertainment Company and Subsidiaries
Notes to Condensed
Consolidated Financial Statements
Note 4: Notes Payable, net
Notes payable, net consisted of the following
at March 31, 2024(1):
|
|
|
|
|
Debt discount
and deferred |
|
|
|
|
|
Interest Rate |
|
|
Maturity |
|
|
Gross |
|
|
financing costs |
|
|
Net |
|
|
Stated |
|
|
Effective |
|
|
Date |
Preferred equity Loan(2) |
|
$ |
6,800,000 |
|
|
$ |
- |
|
|
$ |
6,800,000 |
|
|
|
7.00 |
% |
|
|
7.00 |
% |
|
Various |
City of Canton Loan(3) |
|
|
3,350,000 |
|
|
|
(3,861 |
) |
|
|
3,346,139 |
|
|
|
0.50 |
% |
|
|
0.53 |
% |
|
7/1/2027 |
New Market/SCF |
|
|
2,999,989 |
|
|
|
- |
|
|
|
2,999,989 |
|
|
|
4.00 |
% |
|
|
4.00 |
% |
|
12/30/2024 |
JKP Capital Loan(6) |
|
|
10,404,320 |
|
|
|
(103,013 |
) |
|
|
10,301,307 |
|
|
|
12.50 |
% |
|
|
12.50 |
% |
|
3/31/2025 |
MKG DoubleTree Loan |
|
|
11,000,000 |
|
|
|
- |
|
|
|
11,000,000 |
|
|
|
10.25 |
% |
|
|
10.25 |
% |
|
9/13/2028 |
Convertible PIPE Notes |
|
|
30,011,009 |
|
|
|
(3,823,616 |
) |
|
|
26,187,393 |
|
|
|
10.00 |
% |
|
|
24.40 |
% |
|
3/31/2025 |
Canton Cooperative Agreement |
|
|
2,465,000 |
|
|
|
(159,645 |
) |
|
|
2,305,355 |
|
|
|
3.85 |
% |
|
|
5.35 |
% |
|
5/15/2040 |
CH Capital Loan(5)(6) |
|
|
14,832,191 |
|
|
|
(146,873 |
) |
|
|
14,685,318 |
|
|
|
12.50 |
% |
|
|
12.50 |
% |
|
3/31/2025 |
Constellation EME #2(4) |
|
|
2,282,162 |
|
|
|
- |
|
|
|
2,282,162 |
|
|
|
5.93 |
% |
|
|
5.93 |
% |
|
4/30/2026 |
IRG Split Note(6) |
|
|
4,887,581 |
|
|
|
(48,392 |
) |
|
|
4,839,189 |
|
|
|
12.50 |
% |
|
|
12.50 |
% |
|
3/31/2025 |
JKP Split Note(6) |
|
|
4,887,581 |
|
|
|
(48,392 |
) |
|
|
4,839,189 |
|
|
|
12.50 |
% |
|
|
12.50 |
% |
|
3/31/2025 |
ErieBank Loan(7) |
|
|
18,484,250 |
|
|
|
(453,451 |
) |
|
|
18,030,799 |
|
|
|
9.50 |
% |
|
|
9.74 |
% |
|
12/15/2034 |
PACE Equity Loan |
|
|
8,016,152 |
|
|
|
(266,746 |
) |
|
|
7,749,406 |
|
|
|
6.05 |
% |
|
|
6.18 |
% |
|
7/31/2047 |
PACE Equity CFP |
|
|
3,171,659 |
|
|
|
(24,175 |
) |
|
|
3,147,484 |
|
|
|
6.05 |
% |
|
|
6.10 |
% |
|
7/31/2046 |
CFP Loan(6) |
|
|
4,574,734 |
|
|
|
(45,294 |
) |
|
|
4,529,440 |
|
|
|
12.50 |
% |
|
|
12.50 |
% |
|
3/31/2025 |
Stark County Community Foundation |
|
|
5,000,000 |
|
|
|
- |
|
|
|
5,000,000 |
|
|
|
6.00 |
% |
|
|
6.00 |
% |
|
5/31/2029 |
CH Capital Bridge Loan(6) |
|
|
12,014,052 |
|
|
|
(118,954 |
) |
|
|
11,895,098 |
|
|
|
12.50 |
% |
|
|
12.50 |
% |
|
3/31/2025 |
Stadium PACE Loan |
|
|
33,092,237 |
|
|
|
(601,615 |
) |
|
|
32,490,622 |
|
|
|
6.00 |
% |
|
|
6.51 |
% |
|
1/1/2049 |
Stark County Infrastructure Loan |
|
|
5,000,000 |
|
|
|
- |
|
|
|
5,000,000 |
|
|
|
6.00 |
% |
|
|
6.00 |
% |
|
8/31/2029 |
City of Canton Infrastructure Loan |
|
|
5,000,000 |
|
|
|
(9,651 |
) |
|
|
4,990,349 |
|
|
|
6.00 |
% |
|
|
6.04 |
% |
|
6/30/2029 |
TDD Bonds |
|
|
7,345,000 |
|
|
|
(651,291 |
) |
|
|
6,693,709 |
|
|
|
5.41 |
% |
|
|
5.78 |
% |
|
12/1/2046 |
TIF |
|
|
18,075,000 |
|
|
|
(1,538,128 |
) |
|
|
16,536,872 |
|
|
|
6.375 |
% |
|
|
6.71 |
% |
|
12/30/2048 |
CH Capital Retail |
|
|
10,509,115 |
|
|
|
- |
|
|
|
10,509,115 |
|
|
|
12.5 |
% |
|
|
12.5 |
% |
|
12/4/2027 |
DoubleTree TDD |
|
|
3,445,000 |
|
|
|
(665,078 |
) |
|
|
2,779,922 |
|
|
|
6.875 |
% |
|
|
8.53 |
% |
|
5/15/2044 |
DoubleTree PACE |
|
|
2,715,000 |
|
|
|
- |
|
|
|
2,715,000 |
|
|
|
6.625 |
% |
|
|
6.625 |
% |
|
5/15/2040 |
Total |
|
$ |
230,362,032 |
|
|
$ |
(8,708,175 |
) |
|
$ |
221,653,857 |
|
|
|
|
|
|
|
|
|
|
|
Hall of Fame
Resort & Entertainment Company and Subsidiaries
Notes to Condensed
Consolidated Financial Statements
Note 4: Notes Payable, net (continued)
Notes payable, net consisted of the following
at December 31, 2023(1):
| |
Gross | | |
Debt discount
and deferred
financing costs | | |
Net | |
Preferred equity Loan(2) | |
$ | 6,800,000 | | |
$ | - | | |
$ | 6,800,000 | |
City of Canton Loan(3) | |
| 3,387,500 | | |
| (4,155 | ) | |
| 3,383,345 | |
New Market/SCF | |
| 2,999,989 | | |
| - | | |
| 2,999,989 | |
JKP Capital Loan(6) | |
| 9,982,554 | | |
| - | | |
| 9,982,554 | |
MKG DoubleTree Loan | |
| 11,000,000 | | |
| - | | |
| 11,000,000 | |
Convertible PIPE Notes | |
| 29,279,034 | | |
| (4,721,488 | ) | |
| 24,557,546 | |
Canton Cooperative Agreement | |
| 2,520,000 | | |
| (161,400 | ) | |
| 2,358,600 | |
CH Capital Loan(5)(6) | |
| 14,278,565 | | |
| - | | |
| 14,278,565 | |
Constellation EME #2(4) | |
| 2,543,032 | | |
| - | | |
| 2,543,032 | |
IRG Split Note(6) | |
| 4,689,449 | | |
| - | | |
| 4,689,449 | |
JKP Split Note(6) | |
| 4,689,449 | | |
| - | | |
| 4,689,449 | |
ErieBank Loan(7) | |
| 19,888,626 | | |
| (470,357 | ) | |
| 19,418,269 | |
PACE Equity Loan | |
| 8,104,871 | | |
| (268,042 | ) | |
| 7,836,829 | |
PACE Equity CFP | |
| 2,984,572 | | |
| (24,878 | ) | |
| 2,959,694 | |
CFP Loan(6) | |
| 4,389,284 | | |
| - | | |
| 4,389,284 | |
Stark County Community Foundation | |
| 5,000,000 | | |
| - | | |
| 5,000,000 | |
CH Capital Bridge Loan(6) | |
| 11,426,309 | | |
| - | | |
| 11,426,309 | |
Stadium PACE Loan | |
| 33,387,844 | | |
| (1,123,635 | ) | |
| 32,264,209 | |
Stark County Infrastructure Loan | |
| 5,000,000 | | |
| - | | |
| 5,000,000 | |
City of Canton Infrastructure Loan | |
| 5,000,000 | | |
| (10,047 | ) | |
| 4,989,953 | |
TDD Bonds | |
| 7,345,000 | | |
| (654,905 | ) | |
| 6,690,095 | |
TIF | |
| 18,100,000 | | |
| (1,544,466 | ) | |
| 16,555,534 | |
CH Capital Retail | |
| 10,183,932 | | |
| - | | |
| 10,183,932 | |
DoubleTree TDD | |
| 3,445,000 | | |
| (668,696 | ) | |
| 2,776,304 | |
DoubleTree PACE | |
| 2,760,000 | | |
| - | | |
| 2,760,000 | |
Total | |
$ | 229,185,010 | | |
$ | (9,652,069 | ) | |
$ | 219,532,941 | |
During the three months ended March 31, 2024 and 2023, the Company
recorded amortization of note discounts and deferred financing costs of $955,322 and $855,891, respectively.
During three months ended March 31, 2024 and 2023,
the Company recorded paid-in-kind interest of $2,905,941 and $1,127,491, respectively.
Hall of Fame
Resort & Entertainment Company and Subsidiaries
Notes to Condensed
Consolidated Financial Statements
Note 4: Notes Payable, net (continued)
See below footnotes for the Company’s notes
payable:
Hall of Fame
Resort & Entertainment Company and Subsidiaries
Notes to Condensed
Consolidated Financial Statements
Note 4: Notes Payable, net (continued)
Accrued Interest on Notes Payable
As of March 31, 2024 and December 31, 2023, accrued
interest on notes payable, were as follows:
| |
March 31,
2024 | | |
December 31,
2023 | |
Preferred Equity Loan | |
$ | 124,930 | | |
$ | 5,930 | |
City of Canton Loan | |
| 1,533 | | |
| 5,925 | |
MKG DoubleTree Loan | |
| 74,772 | | |
| 80,144 | |
Canton Cooperative Agreement | |
| 121,626 | | |
| 92,926 | |
CH Capital Loan | |
| 61,143 | | |
| 4,713 | |
ErieBank Loan | |
| 171,369 | | |
| 178,893 | |
Stark County Community Foundation | |
| 80,447 | | |
| - | |
PACE Equity Loan | |
| 84,076 | | |
| 204,569 | |
PACE Equity CFP | |
| 66,139 | | |
| - | |
CFP Loan | |
| 6,672 | | |
| 6,672 | |
New Market/SCF | |
| 30,333 | | |
| - | |
Stadium PACE Loan | |
| 172,504 | | |
| 166,939 | |
TDD Bonds | |
| 99,396 | | |
| - | |
DoubleTree PACE | |
| 60,509 | | |
| 15,238 | |
DoubleTree TDD | |
| 101,975 | | |
| 42,764 | |
Total | |
$ | 1,257,424 | | |
$ | 804,713 | |
The amounts above were included in “accounts
payable and accrued expenses” on the Company’s consolidated balance sheets.
Hall of Fame
Resort & Entertainment Company and Subsidiaries
Notes to Condensed
Consolidated Financial Statements
Note 4: Notes Payable, net (continued)
CH Capital Term Loan
On January 11, 2024, the Company amended its Term
Loan Agreement with CH Capital Lending, LLC (“CH Capital”) in order to reflect the repayment of a portion of principal out
of the proceeds from the sale of the Sports Complex business. The Promissory Note was amended to reflect the change to the outstanding
principal balance.
On January 17, 2024, the Company amended its Term
Loan Agreement with CH Capital to document a $2,200,000 advance to Borrower resulting in an increase of the principal amount of the loan
to $12,751,934. The Promissory Note was amended to reflect the increase of the outstanding principal balance.
On February 1, 2024, the Company amended its Term
Loan Agreement with CH Capital to document an $800,000 advance to Borrower. To the extent monetary references in prior amendments to the
underlying Note and Loan Agreement are inconsistent with monetary references in this amendment, Borrower and Lender agreed such references
in prior amendments are the result of minor computational error plus the addition of accrued interest through January 31, 2024. The Promissory
Note was amended to reflect the increase of the outstanding principal balance.
On February 28, 2024, the Company amended its
Term Loan Agreement with CH Capital to document a $726,634 advance to Borrower resulting in an increase of the principal amount of the
loan to $14,417,076. The Promissory Note was amended to reflect the increase of the outstanding principal balance.
IRG Loan Amendments
On January 30, 2024,
the Company provided timely notice of its intention to exercise the option to extend the maturity date of the IRG Debt Instruments. On
April 7, 2024, the Company entered into a formal omnibus extension of certain debt instruments, effective March 31, 2024 (“Omnibus
Extension”) with CH Capital Lending, LLC, a Delaware limited liability company (“CHCL”), IRG, LLC, a Nevada limited liability
company (“IRGLLC”), JKP Financial, LLC, a Delaware limited liability company (“JKP”), and Midwest Lender Fund,
LLC, a Delaware limited liability company (“MLF” individually; IRGLLC, CHCL, JKP, and MLF referred to collectively as “Lenders”).
The impacted agreements include the following, as amended from time to time (collectively, “IRG Debt Instruments”):
Stuart Lichter, a director
of the Company, is President of IRGLLC and MLF and a director of CHCL.
Pursuant to the Omnibus
Extension, the parties agreed (i) to modify the maturity date for the IRG Debt Instruments from March 31, 2024 to March 31, 2025; (ii)
Borrower will pay Lenders an extension fee equal to one percent (1%) of the outstanding principal balance for each of the IRG Debt Instruments,
such fee to be capitalized and added to the outstanding principal balance for each instrument; and (iii) all interest due on the IRG Debt
Instruments shall continue to accrue until the extended maturity date at the rates set forth and subject to all other terms and conditions
of the respective debt instruments. See Note 14 for additional information.
Hall of Fame
Resort & Entertainment Company and Subsidiaries
Notes to Condensed
Consolidated Financial Statements
Note 4: Notes Payable, net (continued)
ErieBank Release of Cash Pledge
On December 15, 2021, the HOF Village Center for
Excellence, LLC (“HOFV CFE”), a wholly-owned subsidiary of the Company, entered into a Loan Agreement with ErieBank, a division
of CNB Bank, a wholly owned subsidiary of CNB Financial Corporation (“ErieBank”), pursuant to which HOFV CFE borrowed $22,040,000
(“ErieBank Loan”) in conjunction with the construction of the Center for Excellence. Pursuant to the terms of the ErieBank
Loan, ErieBank held back a portion of the loan proceeds pending HOFV CFE’s satisfaction of certain disbursement conditions.
On March 15, 2024, ErieBank agreed to release
a portion of the held back amount to HOFV CFE with $1,830,000 being released to HOFV CFE for its use in the ongoing construction of the
waterpark project and $2,000,000 being applied to reduce the underlying loan commitment from $22,040,000 to $20,040,000. In addition,
the parties agreed the loan will convert to a term loan on June 15, 2024 with the expiration of the interest-only period. The fixed rate
will be based on the five-year Federal Home Loan Bank of Pittsburgh rate plus 2.65% per annum pursuant to the existing loan documents.
Future Minimum Principal Payments
The minimum required principal payments on notes
payable outstanding as of March 31, 2024 are as follows:
For the years ending December 31, | |
Amount | |
2024 (nine months) | |
$ | 4,275,952 | |
2025 | |
| 86,355,474 | |
2026 | |
| 4,058,147 | |
2027 | |
| 17,637,809 | |
2028 | |
| 13,730,685 | |
Thereafter | |
| 104,303,965 | |
Total Gross Principal Payments | |
$ | 230,362,032 | |
| |
| | |
Less: Debt discount and deferred financing costs | |
| (8,708,175 | ) |
Total Net Principal Payments | |
$ | 221,653,857 | |
Hall of Fame
Resort & Entertainment Company and Subsidiaries
Notes to Condensed
Consolidated Financial Statements
Note 5: Stockholders’ Equity
2020 Omnibus Incentive Plan
On July 1, 2020, the Company’s omnibus incentive
plan (the “2020 Omnibus Incentive Plan”) became effective immediately. The 2020 Omnibus Incentive Plan was previously approved
by the Company’s stockholders and Board of Directors. Subject to adjustment, the maximum number of shares of Common Stock authorized
for issuance under the 2020 Omnibus Incentive Plan was 82,397 shares. On June 2, 2021, the Company held its 2021 Annual Meeting whereby
the Company’s stockholders approved an amendment to the 2020 Omnibus Incentive Plan to increase by 181,818 the number of shares
of Common Stock, that will be available for issuance under the 2020 Omnibus Incentive Plan. On June 7, 2023, the Company’s stockholders
further approved an amendment to increase by 275,000 the number of shares available under the 2020 Omnibus Incentive Plan. As of March
31, 2024, 101,006 shares remained available for issuance under the 2020 Omnibus Incentive Plan.
Hall of Fame Resort & Entertainment Company
2023 Inducement Plan
On January 24, 2023,
the Company’s board of directors adopted the Hall of Fame Resort & Entertainment Company 2023 Inducement Plan (the “Inducement
Plan”). The Inducement Plan is not subject to stockholder approval. The aggregate number of shares of Common Stock that
may be issued or transferred pursuant to awards covered by the Plan (including existing inducement awards amended to be subject to the
Inducement Plan) is 110,000. Awards covered by the Inducement Plan include only inducement grants under Nasdaq Listing Rule 5635(c)(4).
As of March 31, 2024, 76,674 shares remained available for issuance under the Inducement Plan.
Equity Distribution Agreement
On September 30, 2021, the Company entered into
an Equity Distribution Agreement with Wedbush Securities Inc. and Maxim Group LLC with respect to an at-the-market offering program under
which the Company may, from time to time, offer and sell shares of the Company’s Common Stock having an aggregate offering price
of up to $50,000,000 (as of September 30, 2023).
On October
10, 2023, the Company reduced the amount of shares of its Common Stock that could be issued and sold pursuant to its “at-the-market”
program (“ATM”) with Wedbush Securities Inc. and Maxim Group LLC, as agents (the “Agents”), to an amount equal
to $39,016,766. The reduction in the amount of shares that can be issued and sold under the ATM was effected pursuant to the Amendment
No. 1 to Equity Distribution Agreement, which amended the Company’s Equity Distribution Agreement with the Agents, dated September
30, 2021 (the “Equity Distribution Agreement”), to reduce the aggregate offering price under the Equity Distribution Agreement
from $50,000,000 to $39,016,766.
The Underwriting
Agreement requires that we not issue any shares of our Common Stock for 90 days after October 11, 2023, subject to certain exceptions,
and as a result, we have suspended sales pursuant to our ATM under our Equity Distribution Agreement during such period.
On April
8, 2024, the Company and Wedbush Securities Inc. and Maxim Group LLC entered into an Amendment No. 2 to the Equity Distribution Agreement,
which was effective immediately and increased the compensation to which the Agents are entitled from up to 2.0% to up to 4.0% of the aggregate
gross offering proceeds of the shares of Common Stock sold pursuant to the equity distribution agreement.
Hall of Fame
Resort & Entertainment Company and Subsidiaries
Notes to Condensed
Consolidated Financial Statements
Note 5: Stockholders’ Equity (continued)
Issuance of Restricted Stock Units
During
the three months ended March 31, 2024, the Company granted an aggregate of 181,781 Restricted Stock Units (“RSUs”) to its
employees and directors, of which
174,824 were granted under the 2020 Omnibus Incentive Plan and 6,957 were granted under the HOFV 2023 Inducement Plan. The RSUs were valued
at the value of the Company’s Common Stock on the date of grant, which approximated $3.21 per share for these awards. The RSUs granted
to employees vest one third on the first anniversary of their grant, one third on the second anniversary of their grant, and one third
on the third anniversary of their grant. The RSUs granted to directors vest one year from the date of grant.
The Company’s activity in RSUs was as follows
for the three months ended March 31, 2024:
| |
Number of shares | | |
Weighted
average grant date fair value | |
Non–vested at January 1, 2024 | |
| 126,350 | | |
$ | 17.54 | |
Granted | |
| 181,781 | | |
$ | 3.21 | |
Vested | |
| (73,089 | ) | |
$ | 20.94 | |
Forfeited | |
| (24,842 | ) | |
$ | 10.98 | |
Non–vested at March 31, 2024 | |
| 210,200 | | |
$ | 4.73 | |
For the three months ended March 31, 2024 and
2023, the Company recorded $181,768 and $600,377, respectively, in stock-based compensation expense related to restricted stock units.
Stock-based compensation expense is a component of “Operating expenses” in the consolidated statements of operations. As of
March 31, 2024, unamortized stock-based compensation costs related to restricted stock units were $826,693 and will be recognized over
a weighted average period of 1.0 years.
Hall of Fame
Resort & Entertainment Company and Subsidiaries
Notes to Condensed
Consolidated Financial Statements
Note 5: Stockholders’ Equity (continued)
Issuance of Performance Stock Units
During the three months ended March 31, 2024,
the Company did not grant any Performance Stock Units (“PSUs”) under the 2020 Omnibus Incentive Plan. The PSUs were valued
at the value of the Company’s Common Stock on the date of grant, which approximated $9.62 per share for these awards. The PSUs were
scheduled to vest upon the achievement of certain performance targets during the year ended December 31, 2023 and certification by the
compensation committee in early 2024. In accordance with ASC 718, the Company expensed the portion of the PSUs which were probable to
vest.
The Company’s activity in PSUs was as follows
for the three months ended March 31, 2024:
| |
Number of shares | | |
Weighted
average grant date fair value | |
Non–vested at January 1, 2024 | |
| 88,965 | | |
$ | 9.62 | |
Granted | |
| - | | |
| | |
Vested | |
| - | | |
| | |
Forfeited | |
| (88,965 | ) | |
$ | 9.62 | |
Non–vested at March 31, 2024 | |
| - | | |
| | |
During January 2024, the Company determined that
none of the performance criteria were met, and the entire PSU award was forfeited. For the three months ended March 31, 2024, the Company
recorded a reversal of $85,299 due to the forfeiture of the PSU’s and for the three months ended March 31, 2023, the Company recorded
$0, in stock-based compensation expense related to performance stock units. Stock-based compensation expense is a component of “Operating
expenses” in the consolidated statements of operations. As of March 31, 2024, unamortized stock-based compensation costs related
to performance stock units was $0.
Warrants
The Company’s warrant activity was as follows for the three months
ended March 31, 2024:
| |
Number of
Shares | | |
Weighted
Average
Exercise
Price (USD) | | |
Weighted
Average
Contractual
Life (years) | | |
Intrinsic
Value (USD) | |
Outstanding - January 1, 2024 | |
| 2,793,649 | | |
$ | 107.99 | | |
| 2.68 | | |
$ | - | |
Granted | |
| 890,313 | | |
$ | 2.81 | | |
| | | |
| | |
Outstanding – March 31, 2024 | |
| 3,683,962 | | |
$ | 82.57 | | |
| 2.55 | | |
$ | 694,444 | |
Exercisable – March 31, 2024 | |
| 3,683,962 | | |
$ | 82.57 | | |
| 2.55 | | |
$ | 694,444 | |
Hall of Fame
Resort & Entertainment Company and Subsidiaries
Notes to Condensed
Consolidated Financial Statements
Note 5: Stockholders’ Equity (continued)
Amended and Restated
Series C Warrants
On March 1, 2022, in connection with the amendment
to the IRG Split Note, the Company amended its Series C Warrants to extend the term of the Series C Warrants to March 1, 2027. The exercise
price of $30.80 per share was not amended, but the amendments subject the exercise price to a weighted-average antidilution adjustment.
The amendments also remove certain provisions regarding fundamental transactions, which subsequently allowed the Series C Warrants to
be derecognized as a liability and classified as equity.
The Company accounted for this modification as
a cost of the IRG Split Note, whereby the Company calculated the incremental fair value of the Series C Warrants and recorded them as
a discount against the IRG Split Note.
On November 7, 2022, the Company further amended
the Series C Warrants to reduce the exercise price to $12.77 per share as part of the IRG Letter Agreement. See Note 4 for additional
information.
The following assumptions were used to calculate
the fair value of Series C Warrants in connection with the modifications:
| |
Original
Series C Warrants | | |
March 1,
2022 Modification | | |
November 7,
2022
Modification | |
Term (years) | |
| 3.8 | | |
| 5.0 | | |
| 3.1 | |
Stock price | |
$ | 22.22 | | |
$ | 22.22 | | |
$ | 14.52 | |
Exercise price | |
$ | 30.80 | | |
$ | 30.80 | | |
$ | 12.77 | |
Dividend yield | |
| 0.0 | % | |
| 0.0 | % | |
| 0.0 | % |
Expected volatility | |
| 54.7 | % | |
| 50.8 | % | |
| 63.9 | % |
Risk free interest rate | |
| 1.5 | % | |
| 1.5 | % | |
| 4.8 | % |
Number of shares | |
| 455,867 | | |
| 455,867 | | |
| 455,867 | |
Aggregate fair value | |
$ | 3,336,000 | | |
$ | 3,648,000 | | |
$ | 3,230,000 | |
Amended and Restated Series D Warrants issue
to CH Capital Lending
On March 1, 2022, in
connection with the amendment to the CH Capital Loan, the Company amended the Series D Warrants issued to CH Capital Lending to extend
the term of such Series D Warrants to March 1, 2027. The exercise price of $151.80 per share was not amended, but the amendments subject
the exercise price to a weighted-average antidilution adjustment.
On November 7, 2022, the Company further amended
the Series D Warrants to reduce the exercise price to $12.77 per share as part of the IRG Letter Agreement. See Note 4 for additional
information.
The following assumptions were used to calculate
the fair value of Series D Warrants in connection with the modifications:
| |
Original
Series D Warrants | | |
March 1,
2022 Modification | | |
November 7,
2022
Modification | |
Term (years) | |
| 3.8 | | |
| 3.8 | | |
| 3.1 | |
Stock price | |
$ | 22.22 | | |
$ | 22.22 | | |
$ | 14.52 | |
Exercise price | |
$ | 151.80 | | |
$ | 151.80 | | |
$ | 12.77 | |
Dividend yield | |
| 0.0 | % | |
| 0.0 | % | |
| 0.0 | % |
Expected volatility | |
| 63.5 | % | |
| 50.8 | % | |
| 63.9 | % |
Risk free interest rate | |
| 1.3 | % | |
| 1.6 | % | |
| 4.8 | % |
Number of shares | |
| 111,321 | | |
| 111,321 | | |
| 111,321 | |
Aggregate fair value | |
$ | 50,000 | | |
$ | 138,000 | | |
$ | 910,000 | |
Hall of Fame
Resort & Entertainment Company and Subsidiaries
Notes to Condensed
Consolidated Financial Statements
Note 5: Stockholders’ Equity (continued)
7.00% Series A Cumulative Redeemable Preferred
Stock
On January 12, 2023,
the Company issued to ADC LCR Hall of Fame Manager II, LLC (the “Series A Preferred Investor”) 1,600 shares of the Company’s
7.00% Series A Cumulative Redeemable Preferred Stock, par value $0.0001 per share (“Series A Preferred Stock”), at a price
of $1,000 per share for an aggregate purchase price of $1,600,000. On January 23, 2023, the Company issued to the Series A Preferred Investor
800 additional shares of the Company’s Series A Preferred Stock at a price of $1,000 per share for an aggregate purchase price of
$800,000. Additionally, on May 2, 2023, the Company issued to the Series A Preferred Investor 800 shares of the Company’s Series
A Preferred Stock, at a price of $1,000 per share for an aggregate purchase price of $800,000. The Company paid the Series A Preferred
Investor an origination fee of 2% of the aggregate purchase price for each issuance. The issuance and sale of the shares to the Series
A Preferred Investor is exempt from registration pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended (the “Securities
Act”). The Series A Preferred Stock is not convertible into Common Stock. The Series A Preferred Investor has represented to the
Company that it is an “accredited investor” as defined in Rule 501 of the Securities Act and that the shares are being acquired
for investment purposes and not with a view to, or for sale in connection with, any distribution thereof.
Note 6: Sponsorship
Revenue and Associated Commitments
Sponsorship Revenue
The Company has additional revenue primarily from
sponsorship programs that provide its sponsors with strategic opportunities to reach customers through our venue including advertising
on our website. Sponsorship agreements may contain multiple elements, which provide several distinct benefits to the sponsor over the
term of the agreement and can be for a single or multi-year term. These agreements provide sponsors various rights such as venue naming
rights, signage within our venues, the ability to be the exclusive provider of a certain category of product, and advertising on our website
and other benefits as detailed in the agreements.
As of March 31, 2024, scheduled future cash to
be received under the agreements, are as follows:
Year ending December 31,
2024 (nine months) | |
$ | 1,094,025 | |
2025 | |
| 2,101,327 | |
2026 | |
| 1,890,839 | |
2027 | |
| 1,317,265 | |
2028 | |
| 1,257,265 | |
Thereafter | |
| 1,257,265 | |
Total | |
$ | 8,917,986 | |
As services are provided, the Company is recognizing
revenue on a straight-line basis over the expected term of the agreement. During the three months ended March 31, 2024 and 2023, the Company
recognized $859,731 and $673,475 of net sponsorship revenue, respectively.
Note 7: Other Commitments
Management Agreement with Crestline Hotels &
Resorts
On October 22, 2019, the Company entered into
a management agreement with Crestline Hotels & Resorts (“Crestline”). The Company appointed and engaged Crestline as the
Company’s exclusive agent to supervise, direct, and control management and operation of the DoubleTree Canton Downtown Hotel. The
agreement will be terminated on the fifth anniversary of the commencement date, or October 22, 2024, unless otherwise extended. For the
three months ended March 31, 2024 and 2023, the Company incurred $35,109 and $45,500, respectively in management fees.
Hall of Fame
Resort & Entertainment Company and Subsidiaries
Notes to Condensed
Consolidated Financial Statements
Note 7: Other Commitments (continued)
Management Agreement with Shula’s Steak
Houses, LLLP
On October 7, 2020, the Company entered into a
management agreement with Shula’s Steak Houses, LLLP (“Shula’s”). The Company appointed and engaged Shula’s
to develop, operate and manage the Don Shula’s American Kitchen restaurant. The initial term of the agreement is for a period of
ten years or October 7, 2030. For the three months ended March 31, 2024 and 2023, the Company incurred $24,374 and $0, respectively in
management fees.
Constellation EME Express Equipment Services
Program
On February 1, 2021, the Company entered into
a contract with Constellation whereby Constellation will sell and/or deliver materials and equipment purchased by the Company. The Company
is required to maintain an escrow account held by Constellation, representing adequate assurance of future performance. Constellation
will invoice the Company in 60 monthly installments, which began in April 2021 for $103,095. Additionally, the Company has one note payable
with Constellation. See Note 4 for additional information.
Sports Betting Agreements
On July 14, 2022, the Company entered into an
Online Market Access Agreement with Instabet, Inc. doing business as betr (“BETR”), pursuant to which BETR will serve as a
Mobile Management Services Provider (as defined under applicable Ohio gaming law) wherein BETR will host, operate and support a branded
online sports betting service in Ohio, subject to procurement and maintenance of all necessary licenses. The initial term of the Online
Market Access Agreement is ten years.
As part of this agreement, the Company will receive
a limited equity interest in BETR and certain revenue sharing, along with the opportunity for sponsorship and cross-marketing. The limited
equity interest was in the form of penny warrants initially valued at $4,000,000 at the grant date. The grant date value of these warrants
was recorded as deferred revenue (within “Other liabilities” on the consolidated balance sheets) and will be amortized over
the life of the sports betting agreement. At March 31, 2024 and December 31, 2023, the amount remaining in deferred revenue was $3,500,000
and $3,600,000, respectively. The Company is also recognizing the change in fair value of the warrants under “Change in fair value
of investments available for sale” on the consolidated statements of operations.
On November 2, 2022,
the Company secured conditional approval from the state for mobile and retail sports betting. The Ohio Casino Control Commission provided
the required authorization for HOFV to gain licensing for a physical sports betting operation – called a sportsbook – as well
as an online sports betting platform, under Ohio’s sports betting law H.B.29. As of January 1, 2023, sports betting is legal
in Ohio for anyone in the state that is of legal betting age. The conditional approval required that the Company accept bets under both
the mobile and retail sports books prior to December 31, 2023. The Company satisfied that condition for the mobile sports book.
However, the Company does not currently have a sports betting partner for its retail sports book. In November 2023, Ohio granted
an extension to June 30, 2024 for all retail license holders.
Hall of Fame
Resort & Entertainment Company and Subsidiaries
Notes to Condensed
Consolidated Financial Statements
Note 7: Other Commitments (continued)
Other Liabilities
Other liabilities consisted of the following at
March 31, 2024 and December 31, 2023:
| |
March 31,
2024 | | |
December 31,
2023 | |
Activation fund reserves | |
$ | 243,661 | | |
$ | 126,685 | |
Deferred revenue | |
| 8,150,932 | | |
| 5,441,640 | |
Deposits and other liabilities | |
| 463,906 | | |
| 290,357 | |
Total | |
$ | 8,858,499 | | |
$ | 5,858,682 | |
Other Commitments
The Company has other commitments, as disclosed in Notes 6, 8 and 9
within these condensed consolidated footnotes.
Note 8: Contingencies
During the normal course of its business, the Company is subject to
occasional legal proceedings and claims. The Company does not have any pending litigation that, separately or in the aggregate, would,
in the opinion of management, have a material adverse effect on its results of operations, financial condition, or cash flows.
Note 9: Related-Party Transactions
Due to Affiliates
Due to affiliates consisted of the following at
March 31, 2024 and December 31, 2023:
| |
March 31,
2024 | | |
December 31,
2023 | |
Due to IRG Member | |
$ | 1,961,221 | | |
$ | 1,127,390 | |
Due to PFHOF | |
| 765,585 | | |
| 166,484 | |
Total | |
$ | 2,726,806 | | |
$ | 1,293,874 | |
IRG Canton Village Member, LLC, a member of HOF
Village, LLC controlled by our director Stuart Lichter (the “IRG Member”) and an affiliate, provides certain supporting services
to the Company. As noted in the Operating Agreement of HOF Village, LLC, an affiliate of the IRG Member, IRG Canton Village Manager, LLC,
the manager of HOF Village, LLC controlled by our director Stuart Lichter, may earn a master developer fee calculated as 4.0% of development
costs incurred for the Hall of Fame Village, including, but not limited to site assembly, construction supervision, and project financing.
These development costs incurred are netted against certain costs incurred for general project management.
The due to related party amounts in the table
above are non-interest bearing advances from an affiliate of IRG Member due on demand.
The amounts above due to PFHOF relate to advances
to and from PFHOF, including costs for onsite sponsorship activation, sponsorship sales support, shared services, event tickets, and expense
reimbursements.
As of March 31, 2024 and 2023, PFHOF owed the
Company $75,027 and $10,049, respectively, which is included in “Accounts Receivable, net” on the accompanying consolidated
balance sheets.
Hall of Fame
Resort & Entertainment Company and Subsidiaries
Notes to Condensed
Consolidated Financial Statements
Note 9: Related-Party Transactions (continued)
Global License Agreement
Effective April 8, 2022, the Company and PFHOF,
entered into a Global License Agreement (the “Global License Agreement”). The Global License Agreement consolidates and replaces
the First Amended and Restated License Agreement, the Amended and Restated Media License Agreement, and the Branding Agreement the parties
had previously entered into. The Global License Agreement sets forth the terms under which PFHOF licenses certain marks and works to the
Company to exploit existing PFHOF works and to create new works. The Global License Agreement grants the Company and its affiliates an
exclusive right and license to use the PFHOF marks in conjunction with theme-based entertainment and attractions within the City of Canton,
Ohio; youth sports programs, subject to certain exclusions; e-gaming and video games; and sports betting. The Global License Agreement
also grants the Company and its affiliates a non-exclusive license to use the PFHOF marks and works in other areas of use, with a right
of first refusal, subject to specified exclusions. The Global License Agreement acknowledges the existence of agreements in effect between
PFHOF and certain third parties that provide for certain restrictions on the rights of PFHOF, which affects the rights that can be granted
to the Company. These restrictions include, but are not limited to, such third parties having co-exclusive rights to exploit content based
on the PFHOF enshrinement ceremonies and other enshrinement events. The Global License Agreement requires the Company to pay PFHOF an
annual license fee of $900,000 in the first contract year, inclusive of calendar years 2021 and 2022; an annual license fee of $600,000
in each of contract years two through six; and an annual license fee of $750,000 per year starting in contract year seven through the
end of the initial term. The Global License Agreement also provides for an additional license royalty payment by the Company to PFHOF
for certain usage above specified financial thresholds, as well as a commitment to support PFHOF museum attendance through the Company’s
and its affiliates’ ticket sales for certain concerts and youth sports tournaments. Effective September 13, 2023, the Company and
PFHOF entered into an Amendment to Global License Agreement, which modified the structure of the ticket sales component to focus on event
profitability, with PFHOF receiving a portion of net profits realized from certain covered events at the Tom Benson Hall of Fame Stadium
with caps tied to ticket sales. The Global License Agreement has an initial term through December 31, 2036, subject to automatic renewal
for successive five-year terms, unless timely notice of non-renewal is provided by either party.
The future minimum payments under this agreement
as of March 31, 2024 are as follows:
For the years ending March 31, | |
Amount | |
2024 (nine months) | |
$ | 600,000 | |
2025 | |
| 600,000 | |
2026 | |
| 600,000 | |
2027 | |
| 600,000 | |
2028 | |
| 750,000 | |
Thereafter | |
| 6,000,000 | |
Total Gross Principal Payments | |
$ | 9,150,000 | |
During the three months ended March 31, 2024 and
2023, the Company paid $0 and $300,000 of the annual license fee, respectively. The Company is in discussions with PFHOF regarding potential
modifications to the Global License Agreement to help ensure alignment between usage and fees.
Hotel Construction
Loan Commitment Letter
On November 3, 2022, the Company entered into a Commitment Letter (the
“Hotel Construction Loan Commitment Letter”), by and among the Company, as guarantor, HOF Village Hotel WP, LLC (“Hotel”),
an indirect wholly owned subsidiary of the Company, as borrower, and Industrial Realty Group, Inc. (“IRGInc”), as lender.
Stuart Lichter, a director of the Company, is President and Chairman of the Board of Industrial Realty Group, LLC (“IRGLLC”).
Pursuant to the terms of the Hotel Construction Loan Commitment Letter, IRGInc committed to provide, or to arrange for one of IRGInc’s
affiliates to provide, a loan of $28,000,000 (the “Hotel Construction Loan”) to finance a portion of Hotel’s costs and
expenses in connection with the ground-up development of a 180-room family hotel (the “Hotel Project”) on approximately 1.64
acres of land located in the Hall of Fame Village, Canton, Ohio (the “Hotel Property”), adjacent to the Waterpark Property.
The commitment to provide the Hotel Construction Loan was subject to certain closing conditions, including, but not limited to, the execution
and delivery of definitive documentation with respect to the Hotel Construction Loan. The Company and IRGInc did not reach agreement on
definitive documentation by the target closing date set forth in the Hotel Construction Loan Commitment Letter. IRGInc. has since informed
the Company that it does not intend to provide the Hotel Construction Loan directly through IRGInc. or one of its affiliates; however,
IRGInc. and Mr. Lichter have continued to play an active role in supporting the Company’s efforts to secure an alternative source
for a different loan facility for a comparable loan amount.
Hall of Fame
Resort & Entertainment Company and Subsidiaries
Notes to Condensed
Consolidated Financial Statements
Note 9: Related-Party Transactions (continued)
IRG Financial Support
and Consideration
On November 7, 2022,
the Company entered into a letter agreement (the “IRG Letter Agreement”) with IRGLLC, pursuant to which IRGLLC agreed that
IRGLLC and IRGLLC’s affiliates and related parties will provide the Company and its subsidiaries with certain financial support
described below in exchange for certain consideration described below.
The financial support
provided under the IRG Letter Agreement consists of the following (the “IRG Financial Support”):
Waterpark Construction
Financing Facilitation. IRGLLC agreed that its affiliate CH Capital Lending, LLC (“CHCL”), would help facilitate the closing
of financing with Oak Street with regard to construction of the waterpark project, by among other things, releasing CHCL’s first
mortgage lien on the Stadium Leasehold Interests and pledge of membership interests in HOFV Stadium. In addition, IRGLLC agreed to
provide a completion guaranty to facilitate other needed financing for the waterpark project, as required.
Extension of CHCL
Bridge Loan. IRGLLC agreed that CHCL would extend to March 31, 2024 the maturity of the promissory note dated June 16, 2022,
issued by the Company, HOF Village Retail I, LLC and HOF Village Retail II, LLC, as borrowers, to CHCL, as lender (the “Bridge Loan”).
Provide One Year Extension Option for All IRG
Affiliate Lender Loans. All loans from affiliates and related parties of IRGLLC (“IRG Affiliate Lenders”) will be
amended to provide for an optional one-year extension of their maturity until March 31, 2025 for a one percent extension fee, which
is payable if and when an IRG Affiliate Lender loan is extended. The IRG Affiliate Lender loans consist of the following: (i) Bridge Loan,
with an existing modified maturity date of March 31, 2024; (ii) the term loan, payable to CHCL, with an existing maturity of
March 31, 2024; (iii) the first amended and restated promissory note, dated March 1, 2022, payable to IRG, LLC, with an existing
maturity of March 31, 2024; (iv) the first amended and restated promissory note, dated March 1, 2022, payable to JKP Financial,
LLC, with an existing maturity of March 31, 2024; (v) the Secured Cognovit Promissory Note, dated as of June 19, 2020, assigned June 30,
2020 and amended December 1, 2020 and March 1, 2022, payable to JKP Financial, LLC, with an existing maturity of March 31, 2024;
and (vi) the promissory note, dated April 27, 2022, payable to Midwest Lender Fund, LLC (“MLF”), with an existing maturity
of April 30, 2023, and with an option to extend the maturity until March 31, 2024.
Tapestry Hotel Construction
Financing Commitment Letter. IRGLLC agreed to provide a commitment for financing the Hotel Project, as set forth in the Hotel Construction
Loan Commitment Letter.
Hall of Fame
Resort & Entertainment Company and Subsidiaries
Notes to Condensed
Consolidated Financial Statements
Note 9: Related-Party Transactions (continued)
IRG Financial Support
and Consideration (continued)
In consideration of the IRG Financial Support
to be received by the Company and its subsidiaries, the Company agreed in the IRG Letter Agreement to provide the following consideration
to IRGLLC and the IRG Affiliate Lenders:
The Company agreed to
make a payment of $4,500,000 as a fee for providing the completion guaranty and other IRG Financial Support described above, payable
to CHCL to be held in trust for the IRG Affiliate Lenders, to be allocated as the IRG Affiliate Lenders shall determine. The Company also
agreed to issue 90,909 shares of common stock, par value $0.0001 per share (“Common Stock”) to the IRG Affiliate Lenders,
to be allocated as the IRG Affiliate Lenders shall determine, in reliance upon an exemption from the registration requirements of the
Securities Act of 1933, as amended, pursuant to Section 4(a)(2) thereof, as a transaction by an issuer not involving any public offering.
The Company agreed to
modify the IRG Affiliate Lender loans as follows: (i) all IRG Affiliate Lender loans will bear interest at 12.5% per annum, compounded
monthly, with payment required monthly at 8% per annum, and with the remaining interest accrued and deferred until maturity; (ii) the
price at which the principal and accumulated and unpaid interest under the IRG Affiliated Lender loans is convertible into shares of Common
Stock will be reset to a price equal to $12.77 per share; (iii) the Company and its subsidiaries will record a blanket junior mortgage
on all real estate owned or leased by the Company and its subsidiaries, whether fee or leasehold estates, other than those parcels for
which existing lenders prohibit junior financing; (iv) the Company agreed to acknowledge an existing pledge of the Company’s
100% membership interest in the Company and reflect that such pledge secures all amounts due under the IRG Affiliate Lender Loans; (v)
all IRG Affiliate Lender loans will be cross-collateralized and cross-defaulted; (vi) the Company and its subsidiaries will covenant not
to assign, pledge, mortgage, encumber or hypothecate any of the underlying assets, membership interests in affiliated entities or IP rights
without IRGLLC’s written consent; (vii) prior development fees owed by the Company to IRGLLC will be accrued and added to the Bridge
Loan, and future development fees owed by the Company to IRGLLC will be paid as when due; and (viii) the Company will pay to IRGLLC 25%
of all contractual dispute cash settlements collected by the Company with regard to existing contractual disputes in settlement discussions,
which shall be applied to outstanding IRG Affiliate Lender loans, first against accrued interest and other charges and then against principal.
The Company agreed to
modify the Series C through Series G warrants held by IRG Affiliate Lenders as follows: (i) the exercise price of the Series C through
Series G warrants held by IRG Affiliate Lenders will be reset to Market Price; and (ii) the warrant expiration dates of the Series
C through Series G warrants held by IRG Affiliate Lenders will be extended by two years from their current expiration dates.
Hall of Fame
Resort & Entertainment Company and Subsidiaries
Notes to Condensed
Consolidated Financial Statements
Note 9: Related-Party Transactions (continued)
IRG Financial Support
and Consideration (continued)
In the IRG Letter Agreement,
IRGLLC and the Company agreed to comply with all federal and state securities laws and Nasdaq listing rules and to insert “blocker”
provisions for the above-described re-pricing of the warrants and the conversion provisions, such that the total cumulative number of
shares of Common Stock that may be issued to IRGLLC and its affiliated and related parties pursuant to the IRG Letter Agreement may not
exceed the requirements of Nasdaq Listing Rule 5635(d) (“Nasdaq 19.99% Cap”), except that such limitation will not apply following
approval of the Company’s stockholders. In addition, the provisions of the IRG Letter Agreement are limited by Nasdaq Listing
Rule 5635(c). On June 7, 2023, the stockholders of the Company approved (i) issuance of shares of Common Stock in excess of the Nasdaq
19.99% Cap to IRG Affiliate Lenders with respect to transactions described in the IRG Letter Agreement; and (ii) the issuance to an entity
wholly owned by a director of additional shares of Common Stock issuable upon the conversion of certain convertible debt and the exercise
of certain warrants described in the IRG Letter Agreement.
On November 1, 2023, HOF Village CFE, LLC (“Landlord”)
entered into a ten-year lease agreement with Touchdown Work Place, LLC (“Tenant”) to rent approximately twelve thousand three
hundred and thirty-one (12,331) square feet with annual increases of two percent (2%) for years two (2) through ten (10) and an abatement
for the first five (5) months of year one. On or about March 26, 2024, Landlord and Tenant negotiated a First Amendment to Lease Agreement
to redefine the abatement period to six (6) months, waiver of the security deposit, and Landlord agreed to provide monthly rent invoices
for the term of the lease. Stuart Lichter is a director of the Company and the Managing Member of Touchdown Work Place, LLC.
Note 10: Concentrations
For the three months ended March 31, 2024, two
customers represented approximately 34.0% and 31.5% of the Company’s sponsorship revenue. For the three months ended March 31, 2023,
two customers represented approximately 42.9% and 18.5% of the Company’s sponsorship revenue. No other customers exceeded 10% of
sponsorship revenue in 2024 and 2023.
As of March 31, 2024, four customers represented
approximately 24.3%, 19.4%, 13.6% and 11.1% of the Company’s sponsorship accounts receivable. As of March 31, 2023, one customer
represented approximately 83.5% of the Company’s sponsorship accounts receivable. No other customers exceeded 10% of outstanding
accounts receivable as of March 31, 2024 and 2023.
At any point in time, the Company can have funds
in their operating accounts and restricted cash accounts that are with third-party financial institutions. These balances in the U.S.
may exceed the Federal Deposit Insurance Corporation insurance limits. While the Company monitors the cash balances in their operating
accounts, these cash and restricted cash balances could be impacted if the underlying financial institutions fail or other adverse conditions
in the financial markets occurs.
Hall of Fame
Resort & Entertainment Company and Subsidiaries
Notes to Condensed
Consolidated Financial Statements
Note 11: Leases
The Company has entered into operating leases
as the lessee primarily for ground leases under its stadium, sports complex, parking facilities and equipment leases.
At the inception of a
contract the Company assesses whether the contract is, or contains, a lease. The Company’s assessment is based on: (i) whether the
contract involves the use of a distinct identified asset, (ii) whether the Company obtained the right to substantially all the economic
benefit from the use of the asset throughout the period, and (iii) whether the Company has the right to direct the use of the asset. Leases
entered into prior to January 1, 2022, which were accounted for under ASC 840, were not reassessed for classification.
For operating leases, the lease liability is initially
and subsequently measured at the present value of the unpaid lease payments. For finance leases, the lease liability is initially measured
in the same manner and date as for operating leases and is subsequently presented at amortized cost using the effective interest method.
The Company uses its incremental borrowing rate as the discount rate for leases, unless an interest rate is implicitly stated in the lease.
The present value of the lease payments is calculated using the incremental borrowing rate for operating and finance leases, which was
determined using a portfolio approach based on the rate of interest that the Company would have to pay to borrow an amount equal to the
lease payments on a collateralized basis over a similar term. The lease term for all of the Company’s leases includes the noncancelable
period of the lease plus any additional periods covered by either a Company option to extend the lease that the Company is reasonably
certain to exercise, or an option to extend the lease controlled by the lessor. All right-of-use (“ROU”) lease assets are
reviewed periodically for impairment.
Lease expense for operating leases consists of
the lease payments plus any initial direct costs and is recognized on a straight-line basis over the lease term. Lease expense for finance
leases consists of the amortization of the asset on a straight-line basis over the shorter of the lease term or its useful life and interest
expense determined on an amortized cost basis, with the lease payments allocated between a reduction of the lease liability and interest
expense.
Hall of Fame
Resort & Entertainment Company and Subsidiaries
Notes to Condensed
Consolidated Financial Statements
Note 11: Leases (continued)
Balance sheet information related to our leases
is presented below:
| |
March 31, | | |
December 31, | |
| |
2024 | | |
2023 | |
Operating leases: | |
| | |
| |
Right-of-use assets | |
$ | 7,274,397 | | |
$ | 7,387,693 | |
Lease liability | |
| 3,321,009 | | |
| 3,440,630 | |
Other information related to leases is presented below:
| |
Three Months
Ended
March 31,
2024 | | |
Three Months
Ended March 31,
2023 | |
Operating lease cost | |
$ | 124,429 | | |
$ | 128,143 | |
Other information: | |
| | | |
| | |
Operating cash flows from operating leases | |
| 76,608 | | |
| 78,508 | |
Weighted-average remaining lease term – operating leases (in years) | |
| 90.6 | | |
| 91.2 | |
Weighted-average discount rate – operating leases | |
| 10.0 | % | |
| 10.0 | % |
As of March 31, 2024, the annual minimum lease payments of our operating
lease liabilities were as follows:
For The Years Ending December 31, | |
| |
2024 (nine months) | |
$ | 229,820 | |
2025 | |
| 304,603 | |
2026 | |
| 301,400 | |
2027 | |
| 301,400 | |
2028 | |
| 328,600 | |
Thereafter | |
| 39,116,467 | |
Total future minimum lease payments, undiscounted | |
| 40,582,290 | |
Less: imputed interest | |
| (37,261,281 | ) |
Present value of future minimum lease payments | |
$ | 3,321,009 | |
Hall of Fame
Resort & Entertainment Company and Subsidiaries
Notes to Condensed
Consolidated Financial Statements
Note 11: Leases (continued)
Lessor Commitments
As of March 31, 2024 and December 31, 2023, the
Company’s Constellation Center for Excellence and retail facilities were partially leased including leases by the Company’s
subsidiaries.
Property and equipment currently under lease consists
of the following:
| |
March 31, 2024 | | |
December 31, 2023 | |
Land | |
$ | 5,067,746 | | |
$ | 5,067,746 | |
Land improvements | |
| 189,270 | | |
| 189,270 | |
Building and improvements | |
| 72,515,037 | | |
| 71,160,127 | |
Equipment | |
| 2,786,805 | | |
| 2,802,324 | |
Property and equipment, gross | |
| 80,558,858 | | |
| 79,219,467 | |
| |
| | | |
| | |
Less: accumulated depreciation | |
| (5,945,920 | ) | |
| (5,056,214 | ) |
Property and equipment, net | |
$ | 74,612,938 | | |
$ | 74,163,253 | |
Certain of the Company’s lease arrangements
have a base rent component plus a component of lease income that is variable based on the respective tenant’s sales performance.
Lease revenue is included in “Event, rents,
restaurant, and other revenues” in the consolidated statements of operations. During the three months ended March 31, 2024 and 2023,
the Company recorded $641,577 and $94,540 of lease revenue, respectively. The future minimum lease revenue under these leases, excluding
leases of the Company’s subsidiaries, are as follows:
Year ending December 31:
2024 (nine months) | |
$ | 874,956 | |
2025 | |
| 1,174,695 | |
2026 | |
| 1,184,837 | |
2027 | |
| 1,170,697 | |
2028 | |
| 1,002,686 | |
Thereafter | |
| 4,216,921 | |
Total | |
$ | 9,624,792 | |
Hall of Fame
Resort & Entertainment Company and Subsidiaries
Notes to Condensed
Consolidated Financial Statements
Note 12: Financing Liability
On September 27, 2022 the Company sold the land
under the Company’s Fan Engagement Zone to Twain GL XXXVI, LLC (“Twain”). Simultaneously, the Company entered into a
lease agreement with Twain (the sale of the property and simultaneous leaseback is referred to as the “Sale-Leaseback”). The
Sale-Leaseback is repayable over a 99-year term. Under the terms of the lease agreement, the Company’s initial base rent is approximately
$307,125 per quarter, with annual increases of approximately 2% each year of the term. The Company has a right to re-purchase the land
from Twain at any time on or after September 27, 2025 at a fixed price according to the lease.
On November 7, 2022, HOF Village Waterpark, LLC
(“HOFV Waterpark”), sold the land under the Company’s future waterpark to Oak Street Real Estate Capital, LLC (“Oak
Street”). Simultaneously, the Company entered into a lease agreement with Oak Street. The Sale-Leaseback for the waterpark is repayable
over a 99-year term. Under the terms of the leaseback agreement, the Company’s initial base rent is $4,375,000 per annum, payable
monthly, with customary escalations over the lease term. On November 7, 2022, Oak Street and HOFV Waterpark also entered into a Purchase
Option Agreement (the “Purchase Option Agreement”), pursuant to which HOFV Waterpark is granted an option to purchase the
waterpark property back from Oak Street that can be exercised during the period beginning on December 1, 2027 and ending on November 30,
2034 (the “Option Period”).
The Company accounted for the Sale-Leaseback transactions
with Twain and Oak Street as financing transactions with the purchaser of the property. The Company concluded the lease agreements both
met the qualifications to be classified as finance leases due to the significance of the present value of the lease payments, using a
discount rate of 10.25% to reflect the Company’s incremental borrowing rate, compared to the fair value of the leased property as
of the lease commencement date.
The presence of a finance-type lease in the sale-leaseback
transactions indicates that control of the land under the Fan Engagement Zone and HOFV Waterpark has not transferred to the buyer/lessor
and, as such, the transactions were both deemed a failed sale-leaseback and must be accounted for as a financing arrangement. As a result
of this determination, the Company is viewed as having received the sales proceeds from the buyer/lessor in the form of a hypothetical
loan collateralized by its leased land. The hypothetical loan is payable as principal and interest in the form of “lease payments”
to the buyer/lessor. As such, the Company will not derecognize the property from its books for accounting purposes until the lease ends.
On February 23, 2024, the Company entered into
a first amendment to lease agreement with Oak Street to amend the existing waterpark ground lease to reflect: (a) Landlord’s tenant
allowance for the benefit of the Company in the amount of $2,500,000; (b) an increase in the base rent; (c) the Company’s pledge
pursuant to a pledge agreement of its twenty percent (20%) beneficial membership interest in Sandlot HOFV Canton SC, LLC (“Sports
Complex Entity”); and (d) the Company’s issuance of a Series H Common Stock Purchase Warrant to Landlord to purchase 890,313
shares of the Company’s common stock, par value $0.0001 per share. The Company recorded the fair value of the warrant as a discount
against the Company’s financing liability.
On February 29, 2024, the Company entered into
a second amendment to lease agreement with Landlord to memorialize: (a) Landlord’s forbearance of base rent due for March and April
of 2024, which shall be due on May 1, 2024; and (b) Landlord’s allowance for the benefit of the Tenant of $1,000,000.
On May 10, 2024, the parties entered into a third amendment to the lease agreement. See Note 14 – Subsequent Events.
Hall of Fame
Resort & Entertainment Company and Subsidiaries
Notes to Condensed
Consolidated Financial Statements
Note 12: Financing Liability (continued)
As of March 31, 2024, the carrying value of the
financing liability was $65,867,451, representing $2,324,731,722 in remaining payments under the leases, net of a discount of $2,258,864,271.
The lease payments are split between a reduction of principal and interest expense using the effective interest rate method.
As of March 31, 2023, the carrying value of the
financing liability was $60,675,230, representing $2,202,986,526 in remaining payments under the leases, net of a discount of $2,142,311,296.
The monthly lease payments are split between a reduction of principal and interest expense using the effective interest rate method.
Remaining future cash payments related to the
financing liability, for the years ending December 31 are as follows:
2024 (nine months) | |
$ | 4,181,246 | |
2025 | |
| 6,179,956 | |
2026 | |
| 6,328,158 | |
2027 | |
| 6,479,940 | |
2028 | |
| 6,635,387 | |
Thereafter | |
| 2,294,927,035 | |
Total Minimum Liability Payments | |
| 2,324,731,722 | |
Imputed Interest | |
| (2,258,864,271 | ) |
Total | |
$ | 65,867,451 | |
Hall of Fame
Resort & Entertainment Company and Subsidiaries
Notes to Condensed
Consolidated Financial Statements
Note 13: Disposition
On January 11, 2024, HOF Village completed the
sale to Sandlot Facilities, LLC (“Sandlot”) for a $10 million purchase price, subject to adjustment, of 80% of a newly formed
limited liability company named Sandlot HOFV Canton SC, LLC (“Sports Complex Newco”), to which the Company, HOF Village and
HOF Village Youth Fields, LLC had contributed the ForeverLawn Sports Complex business prior to closing. The transaction occurred pursuant
to the terms of the Membership Interest Purchase Agreement, dated December 22, 2023 (the “Purchase Agreement”), among the
Company, HOF Village, Sandlot and Sandlot Youth Sports Holdings, LLC. Under the Purchase Agreement, Sandlot held back $1.5 million of
the Purchase Price (which is included in “Prepaid expenses and other assets” on the Company’s condensed consolidated
balance sheets) to secure certain indemnification obligations of the Company and HOF Village, which holdback will be released by Sandlot
for the benefit of HOF Village in three $500,000 increments at 6, 12 and 18 months after the January 11, 2024 closing date of the Transaction,
subject to post-closing adjustment of the Purchase Price and any indemnification claims pursuant to the Purchase Agreement.
In connection with this transaction, the Company
recognized a loss on the sale of the sports complex of $140,041, as follows:
Purchase price | |
$ | 10,000,000 | |
Working capital adjustment | |
| (214,222 | ) |
Net purchase price | |
| 9,785,778 | |
| |
| | |
Less: transaction costs | |
| (159,144 | ) |
Less: book value of net assets sold | |
| (12,213,120 | ) |
Plus: investment retained | |
| 2,446,445 | |
Loss on sale | |
$ | (140,041 | ) |
The Company will account for the remaining investment in the sports
complex as an equity-method investment and record its share of profit or loss as “income/(loss) from equity method investment”
on its condensed consolidated statements of operations.
Note 14: Subsequent Events
Subsequent events have been evaluated through
May 14, 2024, the date the consolidated financial statements were issued.
Omnibus Extension of Certain IRG-Related Debt Instruments
On April 7, 2024, the Company and HOF Village
Newco, LLC (collectively “Borrower”) entered into a formal omnibus extension of certain debt instruments, effective March
31, 2024, with CH Capital Lending, LLC, IRG, LLC, JKP Financial, LLC and Midwest Lender Fund, LLC (collectively “Lenders”).
Borrower and Lenders agreed to extend the maturity date from March 31, 2024 to March 31, 2025. The impacted agreements, dated effective
November 7, 2022, include the (i) Joinder and First Amended and Restated Secured Cognovit Promissory Note payable to CH Capital Lending,
LLC; (ii) Second Amended and Restated Secured Promissory Note payable to CH Capital Lending, LLC; (iii) Joinder and Second Amended and
Restated Secured Cognovit Promissory Note payable to IRG, LLC; (iv) Secured Cognovit Promissory Note payable to JKP Financial, LLC (v)
Joinder and Second Amended and Restated Secured Cognovit Promissory Note payable to JKP Financial, LLC; and (vi) Secured Cognovit Promissory
Note payable to Midwest Lender Fund, LLC. Stuart Lichter, a director of the Company, is President of IRG, LLC and Midwest Lender Fund,
LLC and a director of CH Capital Lending, LLC.
Second and Third Amendment to the Waterpark Ground Lease
On February 29, 2024, HOF Village
Waterpark, LLC, as tenant (“Waterpark”), HOF Village Newco, LLC, as guarantor and pledgor, and HOF Village Stadium, LLC,
as mortgagor, entered into a second amendment (the “Second Amendment”) to the ground lease agreement for the waterpark
with HFAKOH001 LLC (“Landlord”), an affiliate of Blue Owl Real Estate Capital, LLC, to memorialize, among other things,
Landlord’s forbearance of base rent due for March and April of 2024, which was due on May 1, 2024. Under the Second
Amendment, there is no notice or cure period for the rent payment due on May 1, 2024. On May 10, 2024, the parties entered into a
third amendment to the lease agreement (as amended, “Waterpark Ground Lease”), to remove a sentence, effective May 1,
2024, that provided there shall be no notice or cure period for deferred rent due on May 1, 2024. Waterpark has not paid the
deferred base rent of $1,197,907 due May 1, 2024, which upon written notice from the Landlord, and after Waterpark’s
failure to cure within three days, would be an event of default under the Waterpark Ground Lease and would give Landlord the option
to, among other things, and to the extent permitted by applicable law, accelerate and recover all remaining payments owed under the
Waterpark Ground Lease. We are in negotiations with the Landlord and believe that we will be able to negotiate an amendment that
provides for extending the base rent forbearance payment date under the Waterpark Ground Lease or similar. However, until such time
that an amendment is executed, we can provide no assurance that we will be successful in these efforts.
Item 2. Management’s discussion and analysis of financial
condition and results of operations
This Quarterly Report on Form 10–Q contains
forward–looking statements that involve risks and uncertainties, as well as assumptions that, if they never materialize or prove
incorrect, could cause our results to differ materially from those expressed or implied by such forward–looking statements. The
statements contained herein that are not purely historical are forward–looking statements within the meaning of Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).
Forward–looking statements are often identified by the use of words such as, but not limited to, “will,” “anticipate,”
“estimates,” “should,” “expect,” “guidance,” “project,” “intend,”
“plan,” “strategy,” “believe” and similar expressions or variations intended to identify forward–looking
statements. These statements are based on the beliefs and assumptions of our management based on information currently available to management.
Factors that could cause or contribute to our results differing materially from those expressed or implied by forward–looking statements
include, but are not limited to, those identified below, and those discussed in the section titled “Risk Factors” included
in our Form 10-K for the fiscal year ended December 31, 2023 as filed with the Securities and Exchange Commission (“SEC”)
on March 25, 2024, and in our reports subsequently filed with the SEC. The forward–looking statements set forth herein speak only
as of the date of this report. Except as required by law, we undertake no obligation to update any forward–looking statements to
reflect events or circumstances after the date of such statements.
Unless the context otherwise requires, the
“Company”, “we,” “our,” “us” and similar terms refer to Hall of Fame Resort & Entertainment
Company, a Delaware corporation.
The following discussion should be read in
conjunction with the Company’s Form 10-K for the year ended December 31, 2023, filed with the SEC and the condensed consolidated
financial statements and accompanying notes included in Part I, Item 1 of this Form 10-Q.
Business Overview
We are a resort and entertainment company leveraging
the power and popularity of professional football and its legendary players in partnership with the National Football Museum, Inc., doing
business as the Pro Football Hall of Fame (“PFHOF”). We have created a diversified set of revenue streams through the development
of themed attractions, premier entertainment programming and sponsorships. We continue to pursue a diversified strategy across three business
verticals, including destination-based assets, the Media Company (defined below), and gaming. Headquartered in Canton, Ohio, we own the
Hall of Fame Village, which is a multi-use sports and entertainment destination centered around the PFHOF’s campus and the DoubleTree
by Hilton located in downtown Canton.
The strategic plan for Hall of Fame Village involves
three phases: Phase I, Phase II, and Phase III. Phase I of the Hall of Fame Village is operational, consisting of the Tom Benson Hall
of Fame Stadium, the ForeverLawn Sports Complex (ownership reduced to 20% as of January 11, 2024), and HOF Village Media Group, LLC (“Hall
of Fame Village Media” or the “Media Company”) and gaming (“Gold Summit Gaming”). The Tom Benson Hall of
Fame Stadium hosts multiple sports and entertainment events, including the National Football League (“NFL”) Hall of Fame Game,
Enshrinement and Concert for Legends during the annual Pro Football Hall of Fame Enshrinement Week. The ForeverLawn Sports Complex hosts
camps and tournaments for football players, as well as athletes from across the country in other sports such as lacrosse, rugby and soccer.
Hall of Fame Village Media leverages the sport
of professional football to produce exclusive programming. Hall of Fame Village Media has created short-form and long-form media entertainment
through multiple distribution channels. This includes The Perfect Ten, Inspired, The GOAT Code, and Next Man Up: NFL Alumni Academy.
Gold Summit Gaming has procured licenses through
the State of Ohio for both a physical sports betting operation and online sports betting platform. We have entered into an agreement with
BETR as our Mobile Management Services Provider. In addition, the gaming vertical hosts multiple eSports tournaments within the destination
along with other types of gaming tournaments.
We have developed new hospitality, attractions,
and corporate assets as part of our Phase II development plan. Phase II components of the Hall of Fame Village include the Constellation
Center for Excellence (an office building including retail and meeting space, that opened in November 2021), the Center for Performance
(a convention center/field house, that opened in August of 2022), the Play Action Plaza (completed in August of 2022), and the Fan Engagement
Zone (Retail Promenade), core and shell for Retail I was completed in August of 2022 and the core and shell of Retail II was completed
in November of 2022, two hotels (one on campus, to be constructed, and one in downtown Canton that opened in November 2020), and the Gameday
Bay Waterpark (currently under construction). Phase III expansion plans may include a potential mix of residential space, additional attractions,
entertainment, dining, merchandise and more.
Key Components of the Company’s Results
of Operations
Revenue
We generate revenue from various streams such
as sponsorship agreements, rents, events, exclusive programming, attractions and hotel and restaurant operations. The sponsorship arrangements,
in which the customer sponsors an asset or event and receives specified brand recognition and other benefits over a set period of time,
recognize revenue on a straight-line basis over the time period specified in the contract. Revenue for rents, cost recoveries, and events
are recognized at the time the respective event or service has been performed. Rental revenue for long term leases is recorded on a straight-line
basis over the term of the lease beginning on the commencement date.
Our owned hotel revenues primarily consist of
hotel room sales, revenue from accommodations sold in conjunction with other services (e.g., package reservations), food and beverage
sales, and other ancillary goods and services (e.g., parking) related to owned hotel property and events. Revenue is recognized when rooms
are occupied or goods and services have been delivered or rendered, respectively. Payment terms typically align with when the goods and
services are provided.
Restaurant revenue at Company-operated restaurants
is recognized when payment is tendered at the point of sale, net of sales tax, discounts and other sales related taxes.
Our media content and distribution revenue is recognized as content
is released. And our gaming license revenue is recognized over the term of the license agreement.
We expect our revenues to continue to increase
as we add in additional events and open our Gameday Bay Waterpark (under construction) and Hilton Tapestry Hotel (to be constructed).
Operating Expenses
Our operating expenses include production expenses,
personnel expenses, campus maintenance expenses, food and beverage cost of sales, hotel operating expenses, and depreciation expense.
These expenses have increased with completion of Phase II assets and we would expect these will continue to increase after completion
of the on-campus hotel, waterpark, and Phase III development.
Our operating expenses include the costs associated
with running and maintaining operational entertainment and destination assets such as the Tom Benson Hall of Fame Stadium, Center for
Excellence, Center for Performance and Play Action Plaza along with management and professional fees. Factors that will contribute to
increased operating expenses include: more of our Phase II assets becoming operational, the addition of events for top performers, and
sporting events.
Our depreciation expense includes the related
costs of owning and operating significant property and entertainment assets. These expenses have grown through completion of the Phase
I and Phase II development.
Recent Developments
Amendment Number 10 to Term Loan Agreement
On January 11, 2024, Hall of Fame Resort &
Entertainment Company, HOF Village Newco, LLC (“HOF Village”) and HOF Village Youth Fields, LLC (“HOFV YF”) entered
into Amendment Number 10 to Term Loan Agreement (“Amendment Number 10”) with CH Capital Lending, LLC (“Lender”), an
affiliate of our director Stuart Lichter.
Amendment Number 10, and the related amendments
described below, were entered as a condition of closing the Transaction, defined below, to (i) release HOFV YF from certain debt instruments
with Lender, IRG, LLC, a Nevada limited liability company, JKP Financial, LLC, a Delaware limited liability company, and Midwest Lender
Fund, LLC, a Delaware limited liability company; (ii) partially release a mortgage by CH Capital Lending, LLC releasing the leasehold
property owned by HOFV YF from the mortgage; and (iii) release collateral owned by HOFV YF from the security agreement.
Amendment Number 10 also memorializes the outstanding
principal amount of $6,142,308 after applying proceeds from the Transaction and adding $4,400,000 back to the outstanding principal amount
for funds immediately advanced to the Company resulting in a new loan amount of $10,542,308. Additionally, the Company and HOF Village
irrevocably instructed the Purchaser (defined below) in the Transaction to deliver the Holdback Amount (defined below), if any, owing
to HOF Village pursuant to the Transaction to Lender for and on behalf of the Company.
Second Amendment to Second Amended and Restated Secured
Cognovit Promissory Note
On January 11, 2024, the Company and HOF Village
entered into a Second Amendment to Second Amended and Restated Secured Cognovit Promissory Note (“Second Amendment to Second A&R
Secured Cognovit Promissory Note with CH Capital Lending, LLC (“Lender”), an affiliate of our director Stuart Lichter.
The Second Amendment to Second A&R Secured
Cognovit Promissory Note was entered to (i) credit $8,126,633 in proceeds from the closing of the Transaction toward the principal amount
of $14,268,942 resulting in a balance of approximately $6,142,308; (ii) add $4,400,000 to the outstanding principal amount for funds immediately
advanced to the Company resulting in a new loan amount of $10,542,308 with all other terms, covenants and conditions of the Note, the
Loan Agreement and other Loan Documents remaining as originally written.
Amendment Number 11 to Term Loan Agreement
On January 17, 2024, the Company amended its Term
Loan Agreement with CH Capital Lending, LLC to document a $2,200,000 advance to Borrower resulting in an increase of the principal amount
of the loan to $12,751,934. The Promissory Note was amended to reflect the increase of the outstanding principal balance.
Amendment Number 12 to Term Loan Agreement
On February 1, 2024, the Company amended its Term
Loan Agreement with CH Capital Lending, LLC to document an $800,000 advance to Borrower resulting in an increase of the principal amount
of the loan to $13,690,442. To the extent monetary references in prior amendments to the underlying Note and Loan Agreement are inconsistent
with monetary references in this amendment, Borrower and Lender agreed such references in prior amendments are the result of minor computational
error plus the addition of accrued interest through January 31, 2024. The Promissory Note was amended to reflect the increase of the outstanding
principal balance.
Amendment Number 13 to Term Loan Agreement
On February 28, 2024, the Company amended its
Term Loan Agreement with CH Capital Lending, LLC to document a $726,634 advance to Borrower resulting in an increase of the principal
amount of the loan to $14,417,076. The Promissory Note was amended to reflect the increase of the outstanding principal balance.
Omnibus Extension of Certain IRG-Related Debt Instruments
On April 7, 2024, the Company and HOF Village
Newco, LLC (collectively “Borrower”) entered into a formal omnibus extension of certain debt instruments, effective March
31, 2024, with CH Capital Lending, LLC, IRG, LLC, JKP Financial, LLC and Midwest Lender Fund, LLC (collectively “Lenders”).
Borrower and Lenders agreed to extend the maturity date from March 31, 2024 to March 31, 2025. The impacted agreements, dated effective
November 7, 2022, include the (i) Joinder and First Amended and Restated Secured Cognovit Promissory Note payable to CH Capital Lending,
LLC; (ii) Second Amended and Restated Secured Promissory Note payable to CH Capital Lending, LLC; (iii) Joinder and Second Amended and
Restated Secured Cognovit Promissory Note payable to IRG, LLC; (iv) Secured Cognovit Promissory Note payable to JKP Financial, LLC (v)
Joinder and Second Amended and Restated Secured Cognovit Promissory Note payable to JKP Financial, LLC; and (vi) Secured Cognovit Promissory
Note payable to Midwest Lender Fund, LLC. Stuart Lichter, a director of the Company, is President of IRG, LLC and Midwest Lender Fund,
LLC and a director of CH Capital Lending, LLC.
First Amendment to Waterpark Ground Lease
On February 23, 2024, HOF Village Waterpark, LLC
(“Tenant”) entered into a first amendment to lease agreement with HFAKOH001 LLC (“Landlord”) to amend the existing
waterpark ground lease to reflect: (a) Landlord’s tenant allowance for the benefit of the Tenant in the amount of $2,500,000, which
was funded and shall be used as follows: (i) $1,903,005 for the purpose of paying real estate taxes and other assessments; (ii) $388,679
for February rent due; and (iii) $208,316 which may be used by the Tenant for the purpose of construction of new improvements, by stadium
mortgagor for the purpose of paying taxes and assessments, or guarantor for the purpose of paying necessary operating expenses; (b) an
increase in the base rent; (c) the Tenant’s pledge pursuant to a pledge agreement of its twenty percent (20%) beneficial membership
interest in Sandlot HOFV Canton SC, LLC (“Sports Complex Entity”); and (d) the Company’s issuance of a Series H Common
Stock Purchase Warrant to Landlord to purchase 890,313 shares of the Company’s common stock, par value $0.0001 per share.
Second and Third Amendment to the Waterpark Ground Lease
On February 29, 2024, HOF Village Waterpark,
LLC, as tenant (“Waterpark”), HOF Village Newco, LLC, as guarantor and pledgor, and HOF Village Stadium, LLC, as mortgagor,
entered into a second amendment (the “Second Amendment”) to the ground lease agreement for the waterpark with HFAKOH001 LLC
(“Landlord”), an affiliate of Blue Owl Real Estate Capital, LLC, to memorialize, among other things, Landlord’s forbearance
of base rent due for March and April of 2024, which was due on May 1, 2024. Under the Second Amendment, there is no notice or cure
period for the rent payment due on May 1, 2024. On May 10, 2024, the parties entered into a third amendment to the lease agreement (as
amended, “Waterpark Ground Lease”), to remove a sentence, effective May 1, 2024, that provided there shall be no notice or
cure period for deferred rent due on May 1, 2024. Waterpark has not paid the deferred base rent of $1,197,907 due May 1, 2024, which
upon written notice from the Landlord, and after Waterpark’s failure to cure within three days, would be an event of default under
the Waterpark Ground Lease and would give Landlord the option to, among other things, and to the extent permitted by applicable law, accelerate
and recover all remaining payments owed under the Waterpark Ground Lease. We are in negotiations with the Landlord and believe that we
will be able to negotiate an amendment that provides for extending the base rent forbearance payment date under the Waterpark Ground Lease
or similar. However, until such time that an amendment is executed, we can provide no assurance that we will be successful in these efforts.
Sale to Sandlot;
Strategic Partnership for Youth Sports Programming at the Hall of Fame Village
On January 11, 2024,
HOF Village completed a strategic partnership with Josh Harris and David Blitzer to elevate and expand youth sports programming at the
ForeverLawn Sports Complex. The partnership will increase the strength and reach of both parties and demonstrates a commitment to use
the power of sports to inspire, educate, and uplift youth. The programming will extend to HOF Village’s Center for Performance.
HOF Village completed
the sale to Sandlot Facilities, LLC (“Sandlot”) of 80% of a newly formed limited liability company named Sandlot HOFV Canton
SC, LLC (“Sports Complex Newco”), to which the Company, HOF Village and HOF Village Youth Fields, LLC had contributed the
ForeverLawn Sports Complex business prior to closing for a $10 million purchase price.
The Transaction occurred
pursuant to the terms of the previously disclosed Membership Interest Purchase Agreement, dated December 22, 2023 (the “Purchase
Agreement”), among the Company, HOF Village, Sandlot and Sandlot Youth Sports Holdings, LLC (“Purchaser Guarantor”).
Under the Purchase Agreement, Sandlot held back $1.5 million of the Purchase Price (the “Holdback Amount”) to secure certain
indemnification obligations of the Company and HOF Village, which holdback will be released by Sandlot for HOF Village in three $500,000
increments at 6, 12 and 18 months after the January 11, 2024 closing date of the Transaction (the “Closing”), subject to post-Closing
adjustment of the Purchase Price and any indemnification claims pursuant to the Purchase Agreement.
ErieBank Release of Cash Pledge
On December 15, 2021, the HOF Village Center for
Excellence, LLC (“HOFV CFE”), a wholly-owned subsidiary of the Company, entered into a Loan Agreement with ErieBank, a division
of CNB Bank, a wholly owned subsidiary of CNB Financial Corporation (“ErieBank”), pursuant to which HOFV CFE borrowed $22,040,000 (“ErieBank
Loan”) in conjunction with the construction of the Center for Excellence. Pursuant to the terms of the ErieBank Loan, ErieBank held
back a portion of the loan proceeds pending HOFV CFE’s satisfaction of certain disbursement conditions.
On March 15, 2024, ErieBank agreed to release
a portion of the held back amount to HOFV CFE with $1,830,000 being released to HOFV CFE for its use in the ongoing construction
of the waterpark project and $2,000,000 being applied to reduce the underlying loan commitment from $22,040,000 to $20,040,000.
In addition, the parties agreed the loan will convert to a term loan on June 15, 2024 with the expiration of the interest-only period.
The fixed rate will be based on the five-year Federal Home Loan Bank of Pittsburgh rate plus 2.65% per annum pursuant to the existing
loan documents.
Amendment No. 2 to the Equity Distribution Agreement
On April 8, 2024, the Company and Wedbush Securities
Inc. (“Wedbush”) and Maxim Group LLC (“Maxim” and, together with Wedbush, the “Agents”) entered into
an Amendment No. 2 to the Equity Distribution Agreement, dated as of September 30, 2021, as amended by Amendment No. 1 dated October 6,
2023, among the Company and Wedbush and Maxim (the “Equity Distribution Agreement Amendment”) pursuant to which the Company
may offer and sell shares of Common Stock from time to time through Wedbush and Maxim in an “at the market offering” (the
“ATM Facility”). The Equity Distribution Agreement Amendment was effective immediately and increased the compensation to which
the Agents are entitled from up to 2.0% to up to 4.0% of the aggregate gross offering proceeds of the shares of Common Stock sold pursuant
to the equity distribution agreement. As part of the Equity Distribution Agreement Amendment, the Company also agreed to reimburse the
Agents for certain specified expenses, including the reasonable fees and disbursements of its legal counsel not to exceed an agreed upon
cap. The Company will have the ability to offer and sell the remaining shares of Common Stock that are covered by the ATM Facility having
a maximum aggregate gross sales price of up to $14,661,873.
Results of Operations
The following table sets forth information comparing
the components of net loss for the three months ended March 31, 2024 and the comparable period in 2023:
| |
For the Three Months Ended March 31, | |
| |
2024 | | |
2023 | |
Revenues | |
| | |
| |
Sponsorships, net of activation costs | |
$ | 859,731 | | |
$ | 673,475 | |
Event, rents, restaurant and other revenue | |
| 2,054,877 | | |
| 908,312 | |
Hotel revenues | |
| 1,276,707 | | |
| 1,538,646 | |
Total revenues | |
| 4,191,315 | | |
| 3,120,433 | |
| |
| | | |
| | |
Operating expenses | |
| | | |
| | |
Operating expenses | |
| 6,150,364 | | |
| 12,528,716 | |
Hotel operating expenses | |
| 974,432 | | |
| 1,459,203 | |
Impairment expense | |
| - | | |
| 1,145,000 | |
Depreciation expense | |
| 4,158,750 | | |
| 2,553,360 | |
Total operating expenses | |
| 11,283,546 | | |
| 17,686,279 | |
| |
| | | |
| | |
Loss from operations | |
| (7,092,231 | ) | |
| (14,565,846 | ) |
| |
| | | |
| | |
Other income (expense) | |
| | | |
| | |
Interest expense, net | |
| (6,521,534 | ) | |
| (3,632,637 | ) |
Amortization of discount on note payable | |
| (955,322 | ) | |
| (855,891 | ) |
Change in fair value of warrant liability | |
| 49,000 | | |
| (238,000 | ) |
Change in fair value of interest rate swap | |
| - | | |
| (100,000 | ) |
Loss on sale of asset | |
| (140,041 | ) | |
| - | |
Income from equity method investments | |
| 29,952 | | |
| - | |
Total other expense | |
| (7,537,945 | ) | |
| (4,826,528 | ) |
| |
| | | |
| | |
Net loss | |
$ | (14,630,176 | ) | |
$ | (19,392,374 | ) |
| |
| | | |
| | |
Preferred stock dividends | |
| (266,000 | ) | |
| (266,000 | ) |
Loss attributable to
non-controlling interest | |
| 8,588 | | |
| 48,577 | |
| |
| | | |
| | |
Net loss attributable to HOFRE stockholders | |
$ | (14,887,588 | ) | |
$ | (19,609,797 | ) |
| |
| | | |
| | |
Net loss per share, basic and diluted | |
$ | (2.30 | ) | |
$ | (3.48 | ) |
| |
| | | |
| | |
Weighted average shares outstanding, basic and diluted | |
| 6,486,044 | | |
| 5,629,086 | |
Three Months Ended March 31, 2024
as Compared to the Three Months Ended March 31, 2023
Sponsorship Revenues
Sponsorship revenues totaled $859,731 for the
three months ended March 31, 2024, as compared to $673,475 for the three months ended March 31, 2023, representing an increase of $186,256,
or 27.7%. This increase was primarily driven by additional sponsorships and a change in the mix of the Company’s sponsorships.
Event, rents, restaurant and other revenues
Revenue from event, rents, restaurant and other
revenues was $2,054,877 for the three months ended March 31, 2024, compared to $908,312 for the three months ended March 31, 2023, for
an increase of $1,146,565, or 126.2%. The increase was primarily due to an increase in revenue from food & beverage sales, short-
and long-term rentals, and parking.
Hotel Revenues
Hotel revenue was $1,276,707 for the three months
ended March 31, 2024, compared to $1,538,646 from the three months ended March 31, 2023 for a decrease of $261,939, or 17.0%. This decrease
was driven by a decrease in hotel occupancy and lower average daily rate at the hotel.
Operating Expenses
Operating expense was $6,150,364 for the three
months ended March 31, 2024, compared to $12,528,716 for the three months ended March 31, 2023, for a decrease of $6,378,352, or 50.9%.
This decrease was primarily driven by a decrease in production fees for our events and media productions, a decrease in personnel and
related benefits costs, as well as a decrease in professional fees.
Hotel Operating Expenses
Hotel operating expense was $974,432 for the three
months ended March 31, 2024, compared to $1,459,203 for the three months ended March 31, 2023, for a decrease of $484,771, or 33.2%. This
decrease was primarily driven by a decrease in hotel occupancy.
Impairment Expense
Impairment expense was $0 for the three months ended March 31, 2024,
compared to $1,145,000 for the three months ended March 31, 2023. The impairment expense for 2023 was due to an impairment of the film
costs.
Depreciation Expense
Depreciation expense was $4,158,750 for the three
months ended March 31, 2024, compared to $2,553,360 for the three months ended March 31, 2023, for an increase of $1,605,390, or 62.9%.
The increase in depreciation expense is primarily the result of the completion of additional major assets being put into service.
Interest Expense
Total interest expense was $6,521,534 for the
three months ended March 31, 2024, compared to $3,632,637 for the three months ended March 31, 2023, for an increase of $2,888,897, or
79.5%. The increase in total interest expense was primarily due to an increase in the amount of total debt outstanding, a decrease in
the proportion of debt that is capitalized for ongoing construction projects.
Amortization of Debt Discount
Total amortization of debt discount was $955,322
for the three months ended March 31, 2024, compared to $855,891 for the three months ended March 31, 2023, for an increase of $99,431,
or 11.6%. The increase is primarily due to additional debt.
Change in Fair Value of Warrant Liability
The change in fair value warrant liability was $49,000 for the three
months ended March 31, 2024, compared to $238,000 for the three months ended March 31, 2023, for an increase of $287,000 or 120.6%. The
increase in change in fair value of warrant liability was due primarily to a change in our stock price.
Change in Fair Value
of Interest Rate Swap
The change in fair value
of interest rate swap was $0 and $100,000 for the three months ended March 31, 2024 and 2023, respectively. The decrease was due to the
change in fair value of the interest rate swap entered into in connection with an agreement with Huntington Bank.
Loss on sale of asset
The loss on sale of asset
was $140,041 for the three months ended March 31, 2024, compared to $0 for the three months ended March 31, 2023. The loss on sale of
asset was due to the Sandlot arrangement, which was entered into on January 11, 2024.
Income from equity method investments
The income from equity method investments
was $29,952 for the three months ended March 31, 2024, compared to $0 for the three months ended March 31, 2023. The income from equity
method investments was due to the Sandlot arrangement, which was entered into on January 11, 2024.
Liquidity and Capital Resources
We have sustained recurring losses through March
31, 2024, and our accumulated deficit was $231.5 million as of such date. Since inception, the Company’s operations have been funded
principally through the issuance of debt and equity. As of March 31, 2024, we had approximately $2.7 million of unrestricted cash and
$4.2 million of restricted cash. Through May 14, 2025, we have $90.6 million in debt principal payments coming due. During the three months
ended March 31, 2024, the Company used cash for operating activities of $2.5 million. On May 10, 2024, the Company amended its waterpark ground lease to provide for a cure period resulting from the Company not making a payment
due in May 2024.
We expect that we will need to raise additional
financing to accomplish our development plan and fund our working capital. We are seeking to obtain additional funding through debt, construction
lending, and equity financing. There are no assurances that we will be able to raise capital on terms acceptable to the Company or at
all, or that cash flows generated from its operations will be sufficient to meet its current operating costs. If we are unable to obtain
sufficient amounts of additional capital, we may be required to reduce the scope of our planned development, which could harm our financial
condition and operating results, or we may not be able to continue to fund our ongoing operations. These conditions raise substantial
doubt about our ability to continue as a going concern to sustain operations for at least one year from the issuance of these condensed
consolidated financial statements. The accompanying condensed consolidated financial statements do not include any adjustments that might
result from the outcome of these uncertainties.
Cash Flows
Since inception, we have primarily used our available
cash to fund our project development expenditures. The following table sets forth a summary of cash flows for the periods presented:
| |
For the Three Months Ended March 31, | |
| |
2024 | | |
2023 | |
Cash (used in) provided by: | |
| | |
| |
Operating Activities | |
$ | (2,476,875 | ) | |
$ | (11,542,932 | ) |
Investing Activities | |
| (2,967,807 | ) | |
| (24,679,007 | ) |
Financing Activities | |
| 512,766 | | |
| 17,406,477 | |
Net decrease in cash and restricted cash | |
$ | (4,931,916 | ) | |
$ | (18,815,462 | ) |
Cash Flows for the Three Months Ended March 31, 2024 as Compared
to the Three Months Ended March 31, 2023
Operating Activities
Net cash used in operating activities was $2.5
million for the three months ended March 31, 2024, a decrease of $9.1 million from the same period in the prior year. The decrease in
cash used in operating activities was primarily attributable to a $4.7 million decrease in net loss between the two periods.
Investing Activities
Net cash used in investing activities was $3.0 million
during the three months ended March 31, 2024, a decrease of $21.7 million from the same period last year. The decrease was attributable
to $15 million invested in treasury bills during the three months ended March 31, 2023, an increase of $1.4 million in capital spending
on project development, offset by an increase $8.1 million received from the sale of assets.
Financing Activities
Net cash provided by financing activities was $0.5
million during the three months ended March 31, 2024, a decrease of $16.9 million from the same period last year. The decrease was primarily
attributable to a decrease of $11.8 million in notes payable proceeds, an increase of $10.6 million in repayments of notes payable, offset
by $3.5 million in proceeds from our financing liability.
Off-Balance Sheet Arrangements
We did not have any off-balance sheet arrangements
as of March 31, 2024.
Critical Accounting Policies and Significant
Judgments and Estimates
This discussion and analysis of our financial
condition and results of operations is based on our unaudited condensed consolidated financial statements, which have been prepared in
accordance with generally accepted accounting principles in the United States of America, or U.S. GAAP. The preparation of these unaudited
condensed consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and
liabilities, disclosure of contingent assets and liabilities at the date of the unaudited condensed consolidated financial statements
and the reported amounts of revenue and expenses during the reported periods. In accordance with U.S. GAAP, we base our estimates on historical
experience and on various other assumptions we believe are reasonable under the circumstances. Actual results may differ from these estimates
under different assumptions or conditions.
For information on our significant accounting
policies please refer to Note 2 to our Unaudited Condensed Consolidated Financial Statements.
Item 3. Quantitative and qualitative disclosures about market risk
Not applicable.
Item 4. Controls and procedures
Evaluation of Disclosure Controls and
Procedures
We have established disclosure
controls and procedures to ensure that the information required to be disclosed by us in the reports that we file or submit under the
Securities Exchange Act of 1934 (“Exchange Act”) is recorded, processed, summarized, and reported within the time periods
specified in SEC rules and forms and that such information is accumulated and made known to the officers who certify our financial reports
and to other members of senior management and the Board of Directors as appropriate to allow timely decisions regarding required disclosure.
In designing and evaluating our disclosure controls and procedures, we recognize that any controls and procedures, no matter how well
designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and we are required to apply
our judgment in evaluating the cost-benefit relationship of our disclosure controls and procedures.
In connection with the
preparation of our consolidated financial statements for the year ended December 31, 2023, we concluded there was a material weakness
in our internal control over financial reporting related to the precise and timely review and analysis of information used to prepare
our financial statements and disclosures in accordance with U.S. GAAP. We are taking steps to remediate this material weakness in internal
control over financial reporting; however, we are not yet able to determine whether the steps we are taking will fully remediate the material
weakness.
Because of the material weakness in our internal control over
financial reporting as previously disclosed, our principal executive officer and interim principal accounting officer concluded that,
as of March 31, 2024, our disclosure controls and procedures were not effective at the reasonable assurance level. Our management, including
our principal executive officer and interim principal accounting officer, have concluded that, notwithstanding the material weakness in
our internal control over financial reporting, the condensed consolidated financial statements in this Quarterly Report on Form 10-Q fairly
present, in all material respects, our financial position, results of operations and cash flows for the periods presented in conformity
with U.S. GAAP.
Changes in Internal
Control over Financial Reporting
During the quarter ended March 31, 2024, the Company
put into effect additional controls to remediate the Company’s material weakness and put into place a plan to test those additional
controls. There have been no other changes to the Company’s internal control over financial reporting that has materially affected,
or is reasonably likely to materially affect, the Company’s internal control over financial reporting.
PART II. OTHER INFORMATION
Item 1. Legal proceedings
During the normal course of its business, the
Company is subject to occasional legal proceedings and claims. The Company does not have any pending litigation that, separately or in
the aggregate, would, in the opinion of management, have a material adverse effect on its results of operations, financial condition,
or cash flows.
Item 1A. Risk factors
Our operations and financial results are subject
to various risks and uncertainties, including those described in Part I, Item 1A, “Risk Factors” in our Annual Report on Form
10-K for the year ended December 31, 2023, which could adversely affect our business, financial condition, results of operations, cash
flows, and the trading price of our common and capital stock. There have been no material changes to our risk factors since our Annual
Report on Form 10-K for the year ended December 31, 2023, other than:
Our director Stuart Lichter and certain
of his affiliates that hold securities of the Company disclosed in a Schedule 13D amendment they are exploring the possibility of making
a proposal to effect an extraordinary corporate transaction with the Company, such as a merger, reorganization or go-private transaction,
restructuring of the Company’s debt, or other material changes to the Company’s business or corporate and financial structure.
Our director Stuart Lichter and certain of his
affiliates that hold securities of the Company (the “Schedule 13D Reporting Persons”) disclosed in a Schedule 13D amendment
filed with the SEC on May 2, 2024, that they, working with advisors, are presently engaging in discussions with the Company, other stockholders,
lenders and/or other persons to explore the possibility of making a proposal to effect an extraordinary corporate transaction, such as
a merger, reorganization or go-private transaction, restructuring of the Company’s debt, or other material changes to the Company’s
business or corporate and financial structure.
No assurances can be given regarding the terms
and details of any proposal that is made by the Schedule 13D Reporting Persons, that any proposal will be made by the Schedule 13D Reporting
Persons or any affiliated person or group, that any proposal made by the Schedule 13D Reporting Persons regarding a proposed transaction
will be accepted by the Company and/or stockholders of the Company, that definitive documentation relating to any such transaction will
be executed, or that a transaction will be consummated in accordance with that documentation, if at all.
Depending on various factors, including the Company’s
financial position, strategic direction and competitive position, actions taken by the Board, price levels of the Company’s securities,
strategic options available to the Company, other investment opportunities available to the Schedule 13D Reporting Persons, conditions
in the securities markets and general economic and industry conditions, the Schedule 13D Reporting Persons may take such actions with
respect to the investment in the Company as the Schedule 13D Reporting Persons deem appropriate. As disclosed by the Scheduled 13D Reporting
Persons in their Schedule 13D amendment, these actions may include: (i) proposing or considering an extraordinary transaction with the
Company as described above; (ii) acquiring additional shares of Common Stock and/or other equity, debt, notes, other securities, or derivative
or other instruments that are based upon or relate to securities of the Company (collectively, “Securities”) in the
open market or otherwise; (iii) disposing of any or all of their Securities in the open market or otherwise; (iv) engaging in
hedging or similar transactions with respect to the Securities; or (v) or one or more of the other actions described in subsections (a)
through (j) of Item 4 of Schedule 13D.
Although the foregoing reflects the present plans
disclosed by the Schedule 13D Reporting Persons in their Schedule 13D amendment, the foregoing is subject to change at any time, and the
Schedule 13D Reporting Persons may change their plans and intentions with respect to the Company and the Securities, including in connection
with any of the discussions and evaluations of the Company and its business described.
Speculation regarding the outcome of the Schedule
13D Reporting Persons’ evaluation creates uncertainty for our visitors, partners and employees, which could negatively impact operations,
make it difficult to attract and retain employees and distract management’s focus from executing on other strategic initiatives.
Item 2. Unregistered sales of equity securities
and use of proceeds
January 11, 2024, Amendment of 2020 Convertible
Term Loan to Advance $4,400,000
On January 11, 2024, the Company, HOF Village
and HOFV YF entered into Amendment Number 10 to Term Loan Agreement (“Amendment Number 10”) with CH Capital Lending, LLC (“CHCL),
an affiliate of our director Stuart Lichter, which amends that Term Loan Agreement dated December 1, 2020, as previously amended (the
“2020 Convertible Term Loan”). Amendment Number 10, among other things, memorializes (i) the outstanding principal amount
of $6,142,308 after applying proceeds from the Transaction and (ii) adding $4,400,000 back to the outstanding principal amount for
funds immediately advanced to the Company, resulting in a new principal loan amount of $10,542,308, which is also reflected in a Second
Amendment to Second Amended and Restated Secured Cognovit Promissory Note under the 2020 Convertible Term Loan. The 2020 Convertible Term
Loan is convertible into shares of the Company’s common stock, par value $0.0001 per share (“Common Stock”), at a conversion
price equal to $3.64 pers share. The amendment of the 2020 Convertible Term Loan to advance additional principal is exempt from registration
under the Securities Act of 1933, as amended (the “Securities Act”), in reliance on the exemptions provided by Section 4(a)(2)
under the Securities Act.
On January 11, 2024, HOF Village completed the
sale to Sandlot Facilities, LLC for a $10 million purchase price, subject to adjustment, of 80% of a newly formed limited liability company
named Sandlot HOFV Canton SC, LLC, to which the Company, HOF Village and HOF Village Youth Fields, LLC had contributed the ForeverLawn
Sports Complex business prior to closing (the “Transaction”).
January 17, 2024,
Amendment of 2020 Convertible Term Loan to Advance $2,200,000
On January 17, 2024,
the Company and HOF Village entered into Amendment Number 11 to Term Loan Agreement (“Amendment Number 11”) with CHCL, which
amends the 2020 Convertible Term Loan. Amendment Number 11 was entered to advance $2,200,000 to the Company resulting in an increase of
the principal amount of the loan to a total of $12,751,934, which is also reflected in a Third Amendment to Second Amended and Restated
Secured Cognovit Promissory Note. The 2020 Convertible Term Loan is convertible into shares of Common Stock at a conversion price equal
to $3.64 pers share. The amendment of the 2020 Convertible Term Loan to advance additional principal is exempt from registration under
the Securities Act, in reliance on the exemptions provided by Section 4(a)(2) under the Securities Act.
February 1, 2024,
Amendment of 2020 Convertible Term Loan to Advance $800,000
On February 1, 2024,
the Company and HOF Village entered into Amendment Number 12 to Term Loan Agreement (“Amendment Number 12”) with CHCL, which
amends the 2020 Convertible Term Loan. Amendment Number 12 was entered to advance $800,000 to the Company resulting in an increase of
the principal amount of the loan to a total of $13,690,442, which is also reflected in a Third Amendment to Second Amended and Restated
Secured Cognovit Promissory Note. The 2020 Convertible Term Loan is convertible into shares of Common Stock at a conversion price equal
to $3.64 pers share. The amendment of the 2020 Convertible Term Loan to advance additional principal is exempt from registration under
the Securities Act, in reliance on the exemptions provided by Section 4(a)(2) under the Securities Act.
February 28, 2024,
Amendment of 2020 Convertible Term Loan to Advance $726,634
On February 28, 2024,
the Company and HOF Village entered into Amendment Number 13 to Term Loan Agreement (“Amendment Number 13”) with CHCL, which
amends the 2020 Convertible Term Loan. Amendment Number 13 was entered to advance $726,634 to the Company resulting in an increase of
the principal amount of the loan to a total of $14,417,076, which is also reflected in a Third Amendment to Second Amended and Restated
Secured Cognovit Promissory Note. The 2020 Convertible Term Loan is convertible into shares of Common Stock at a conversion price equal
to $3.64 pers share. The amendment of the 2020 Convertible Term Loan to advance additional principal is exempt from registration under
the Securities Act, in reliance on the exemptions provided by Section 4(a)(2) under the Securities Act.
Nasdaq 19.99% Cap
The Company and CHCL
agreed that the total cumulative number of shares of Common Stock that may be issued to CHCL under the 2020 Convertible Loan and under
the Loan Agreement dated September 27, 2022, as amended (the “2022 Convertible Term Loan”) may not exceed the requirements
of Nasdaq Listing Rule 5635(d) (“Nasdaq 19.99% Cap”), except that such limitation will not apply following Approval (defined
below). If the number of shares of Common Stock issued to CHCL under the 2020 Convertible Term Loan and the 2022 Convertible Term Loan
reaches the Nasdaq 19.99% Cap, so as not to violate the 20% limit established in Nasdaq Listing Rule 5635(d), the Company, at its election,
will use reasonable commercial efforts to obtain stockholder approval of the 2020 Convertible Term Loan and the 2022 Convertible Term
Loan and the issuance of additional shares of Common Stock upon the conversion of the portion of the 2020 Convertible Term Loan and the
2022 Convertible Term Loan, if necessary, in accordance with the requirements of Nasdaq Listing Rule 5635(d) (the “Approval”).
Item 3. Defaults upon senior securities
None.
Item 4. Mine safety disclosures
Not applicable.
Item 5. Other information
On February 29, 2024, HOF Village Waterpark, LLC, as tenant (“Waterpark”),
HOF Village Newco, LLC, as guarantor and pledgor, and HOF Village Stadium, LLC, as mortgagor, entered into a second amendment (the “Second
Amendment”) to the ground lease agreement for the waterpark with HFAKOH001 LLC (“Landlord”), an affiliate of Blue Owl
Real Estate Capital, LLC, to memorialize, among other things, Landlord’s forbearance of base rent due for March and April of 2024,
which was due on May 1, 2024. Under the Second Amendment, there is no notice or cure period for the rent payment due on May 1, 2024. On
May 10, 2024, the parties entered into a third amendment to the lease agreement (as amended, “Waterpark Ground Lease”), to
remove a sentence, effective May 1, 2024, that provided there shall be no notice or cure period for deferred rent due on May 1, 2024 (Exhibit
10.15 to this Form 10-Q). Waterpark has not paid the deferred base rent of $1,197,907 due May 1, 2024, which upon written notice from
the Landlord, and after Waterpark’s failure to cure within three days, would be an event of default under the Waterpark Ground Lease
and would give Landlord the option to, among other things, and to the extent permitted by applicable law, accelerate and recover all remaining
payments owed under the Waterpark Ground Lease. We are in negotiations with the Landlord and believe that we will be able to negotiate
an amendment that provides for extending the base rent forbearance payment date under the Waterpark Ground Lease or similar. However,
until such time that an amendment is executed, we can provide no assurance that we will be successful in these efforts.
Item 6. Exhibits
Exhibit No. |
|
Document |
1.1 |
|
Amendment No. 2 to Equity Distribution Agreement, dated April 8, 2024, by and among Hall of Fame Resort & Entertainment Company, and Maxim Group LLC and Wedbush Securities Inc. (incorporated by reference to Exhibit 1.1 of the Company’s Form 8-K (001-38363), filed with the Commission on April 8, 2024) |
10.1 |
|
Amendment Number 10 to Term Loan Agreement, dated January 11, 2024 by Hall of Fame Resort & Entertainment Company, HOF Village Newco, LLC, HOF Village Youth Fields, LLC, collectively as borrower, and CH Capital Lending, LLC, as administrative agent and lender (incorporated by reference to Exhibit 10.1 of the Company’s Form 8-K (001-38363), filed with the Commission on January 18, 2024) |
10.2 |
|
Second Amendment to Second Amended and Restated Secured Cognovit Promissory Note, dated January 11, 2024 by Hall of Fame Resort & Entertainment Company, HOF Village Newco, LLC, HOF Village Youth Fields, LLC, collectively as borrower, and CH Capital Lending, LLC, as lender (incorporated by reference to Exhibit 10.2 of the Company’s Form 8-K (001-38363), filed with the Commission on January 18, 2024) |
10.3 |
|
Sixth Amendment to and Spreader of Pledge and Security Agreement, dated January 11, 2024 by Hall of Fame Resort & Entertainment Company, HOF Village Newco, LLC, HOF Village Youth Fields, LLC, collectively as grantor, and CH Capital Lending, LLC as administrative agent/collateral agent and IRG, LLC, JKP Financial, LLC, and Midwest Lender Fund, LLC, collectively secured parties (incorporated by reference to Exhibit 10.3 of the Company’s Form 8-K (001-38363), filed with the Commission on January 18, 2024) |
10.4 |
|
Fourth Amendment to and Spreader of Open-End Fee and Leasehold Mortgage, Assignment of Leases and Rents, Security Agreement and Fixture Filing, dated January 11, 2024 by HOF Village Youth Fields, LLC, HOF Village Parking, LLC, HOF Village Newco, LLC, collectively as grantor, and CH Capital Lending, LLC as administrative agent or secured party (incorporated by reference to Exhibit 10.4 of the Company’s Form 8-K (001-38363), filed with the Commission on January 18, 2024) |
10.5 |
|
Partial Release of Mortgage, dated January 11, 2024 by CH Capital Lending, LLC as administrative agent or secured party (incorporated by reference to Exhibit 10.5 of the Company’s Form 8-K (001-38363), filed with the Commission on January 18, 2024) |
10.6 |
|
Omnibus Release of Youth Fields Borrower from Certain Debt Instruments, dated January 11, 2024 by CH Capital Lending, LLC as administrative agent and IRG, LLC, JKP Financial, LLC and Midwest Lender Fund, LLC, collectively Lenders for the benefit of HOF Village Youth Fields, LLC (incorporated by reference to Exhibit 10.6 of the Company’s Form 8-K (001-38363), filed with the Commission on January 18, 2024) |
10.7 |
|
Amendment Number 11 to Term Loan Agreement, dated January 17, 2024 by Hall of Fame Resort & Entertainment Company and HOF Village Newco, LLC, collectively as borrower, and CH Capital Lending, LLC, as administrative agent and lender (incorporated by reference to Exhibit 10.7 of the Company’s Form 8-K (001-38363), filed with the Commission on January 18, 2024) |
10.8 |
|
Third Amendment to Second Amended and Restated Secured Cognovit Promissory Note, dated January 17, 2024 by Hall of Fame Resort & Entertainment Company and HOF Village Newco, LLC, collectively as borrower, and CH Capital Lending, LLC, as administrative agent and lender (incorporated by reference to Exhibit 10.8 of the Company’s Form 8-K (001-38363), filed with the Commission on January 18, 2024) |
10.9 |
|
First Amendment to Lease Agreement, dated February 23, 2024, among HFAKOH001 LLC, as landlord, HOF Village Waterpark, LLC, as tenant, HOF Village Newco, LLC, as guarantor and HOF Village Stadium, LLC, as mortgagor (incorporated by reference to Exhibit 10.1 of the Company’s Form 8-K (001-38363), filed with the Commission on February 29, 2024) |
10.10 |
|
Pledge and Security Agreement, dated February 23, 2024, between HOF Village Newco, LLC, as pledgor and HFAKOH001 LLC, as pledgee (incorporated by reference to Exhibit 10.2 of the Company’s Form 8-K (001-38363), filed with the Commission on February 29, 2024) |
10.11 |
|
Series H Common Stock Purchase Warrant, dated February 23, 2024, by Hall of Fame Resort & Entertainment Company for the benefit of HFAKOH001 LLC, as holder (incorporated by reference to Exhibit 10.3 of the Company’s Form 8-K (001-38363), filed with the Commission on February 29, 2024) |
10.12 |
|
Second Amendment to Lease Agreement, dated February 29, 2024, among HFAKOH001 LLC, as landlord, HOF Village Waterpark, LLC, as tenant, HOF Village Newco, LLC, as guarantor and HOF Village Stadium, LLC, as mortgagor (incorporated by reference to Exhibit 10.4 of the Company’s Form 8-K (001-38363), filed with the Commission on February 29, 2024) |
10.13 |
|
Open-End Mortgage, Assignment of Leases and Rents, Security Agreement and Fixture Filing, dated February 29, 2024, by HOF Village Newco, LLC, as mortgagor, for the benefit of HFAKOH001 LLC, as mortgagee (incorporated by reference to Exhibit 10.5 of the Company’s Form 8-K (001-38363), filed with the Commission on February 29, 2024) |
10.14 |
|
Omnibus Extension of Debt Instruments, dated April 7, 2024, by and among Hall of Fame Resort & Entertainment Company, HOF Village Newco, LLC, as borrowers, and CH Capital Lending, LLC, IRG, LLC, JKP Financial, LLC, and Midwest Lender Fund, LLC as lenders (incorporated by reference to Exhibit 10.1 of the Company’s Form 8-K (001-38363), filed with the Commission on April 8, 2024) |
10.15* |
|
Third Amendment to Lease Agreement, dated May 10, 2024, among HFAKOH001
LLC, as landlord, HOF Village Waterpark, LLC, as tenant, HOF Village Newco, LLC, as guarantor and HOF Village Stadium, LLC, as mortgagor |
31.1* |
|
Certification of Chief Executive Officer and Interim Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
31.2* |
|
Certification of Interim Principal Accounting Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
32* |
|
Certification of Chief Executive Officer and Interim Principal Financial Officer and Interim Principal Accounting Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
101.CAL* |
|
Inline XBRL Taxonomy Extension Calculation Linkbase Document |
101.SCH* |
|
Inline XBRL Taxonomy Extension Schema Document |
101.DEF* |
|
Inline XBRL Taxonomy Extension Definition Linkbase Document |
101.LAB* |
|
Inline XBRL Taxonomy Extension Label Linkbase Document |
101.PRE* |
|
Inline XBRL Taxonomy Extension Presentation Linkbase Document |
104 |
|
Cover Page Interactive Data File (formatted in Inline XBRL and contained in Exhibit 101) |
SIGNATURES
Pursuant to the requirements
of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
|
HALL OF FAME RESORT & ENTERTAINMENT COMPANY |
|
|
|
Date: May 14, 2024 |
By: |
/s/ Michael Crawford |
|
|
Michael Crawford |
|
|
President and Chief Executive Officer |
|
|
(Principal Executive and Interim Principal Financial Officer) |
Date: May 14, 2024 |
By: |
/s/ John Van Buiten |
|
|
John Van Buiten |
|
|
Vice President of Accounting/Corporate Controller |
|
|
(Interim Principal Accounting Officer) |
53
10-Q
001-38363
2.30
3.48
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A. Landlord
and Tenant entered into that certain Lease Agreement dated as of November 7, 2022 (the “Original Lease”), as amended
by that certain First Amendment to Lease Agreement dated as of February 23, 2024 (the “First Lease Amendment”), as
further amended by that certain Second Amendment to Lease Agreement dated as of February 29, 2024 (the “Second Lease Amendment”;
the Original Lease, as amended by the First Lease Amendment and the Second Lease Amendment, and as may be further amended from time to
time, collectively, the “Lease”), with respect to the Premises (as defined in the Lease). All initial capitalized terms
not otherwise defined herein have the meanings assigned to such terms in the Lease.
B. In
connection with the Lease, Guarantor delivered to Landlord that certain Limited Recourse Carveout Guaranty dated as of November 7, 2022
(as amended from time to time, the “Guaranty”), and that certain Pledge and Security Agreement dated as of November
7, 2022 (as amended from time to time, the “Stadium Pledge”).
C. In
connection with the Lease and the Stadium Pledge, Stadium Mortgagor delivered to Landlord that certain Open-End Leasehold Mortgage, Assignment
of Leases and Rents, Security Agreement and Fixture Filing dated as of December 27, 2022, and recorded as of December 29, 2022, as Instrument
No. 202212290053025 with the Stark County, Ohio Recorder (as amended from time to time, the “Stadium Mortgage”). The
land, improvements, and other mortgaged property described in the Stadium Mortgage are referred to collectively herein as the “Stadium”.
D. In
connection with the First Lease Amendment, Guarantor delivered to Landlord (1) that certain Consent & Agreement dated as of February
23, 2024 (together with all amendments, restatements, amendments and restatements, replacements and other modifications from time to time,
the “Consent”), (2) that certain Pledge and Security Agreement dated as of February 23, 2024 (together with all amendments,
restatements, amendments and restatements, replacements and other modifications from time to time, the “Fields Pledge”),
(3) that certain Series H Common Stock Purchase Warrant dated as of February 23, 2024, relating to Hall of Fame Resort & Entertainment
Company (together with all amendments, restatements, amendments and restatements, replacements and other modifications from time to time,
the “Warrants”).
E. In
connection with the Second Lease Amendment, Guarantor delivered to Landlord that certain Open-End Mortgage, Assignment of Leases and Rents,
Security Agreement and Fixture Filing dated as of February 29, 2024, and recorded as of March 12, 2024, as Instrument No. 202403120007893
with the Stark County Recorder (the “Additional Parcels Mortgage”).
F. Landlord
and Tenant now desire to amend the Lease upon the terms and conditions contained herein.
NOW, THEREFORE, for Ten and
No/100 Dollars ($10.00) and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties
hereto hereby agree as follows:
1. Amendments.
Effective as of May 1, 2024:
2. Reservation
of Rights. Notwithstanding anything to the contrary herein, it has come to Landlord’s attention that Tenant may be in breach
of one or more of its obligations under the Lease, and this Amendment shall not be deemed or construed as a waiver or forbearance of any
such breach. Landlord hereby expressly reserves any and all of the rights, powers, privileges and remedies available to it, at law and/or
in equity, under the Lease and all other transaction documents relating to the Lease, including, without limitation, the Guaranty, the
Stadium Pledge, the Stadium Mortgage, the Fields Pledge, the Additional Parcels Mortgage, and the Warrants (collectively, the “Lease
Documents”). No failure to exercise or delay in exercising any right, power, privilege, or remedy shall constitute a waiver
of any such right, power, privilege, or remedy or preclude Landlord from exercising such right, power, privilege, or remedy in the future.
Notwithstanding the commencement or continuation of discussions or negotiations, the acceptance of payments, or the postponement or delay
in taking action or exercising rights or remedies, Landlord has not waived, and does not waive, the existence of any breach, default,
or event of default, or any rights or remedies available to Landlord. Please be advised that Landlord is not obligated in any way, and
has not agreed, to forbear from enforcing rights or remedies under the Lease Documents or under applicable law, all rights with respect
to which Landlord expressly reserves.
3. Representations
and Warranties of Tenant, Guarantor and Stadium Mortgagor. As of the Effective Date, each of Tenant, Guarantor, HOFRECO, and Stadium
Mortgagor represents and warrants to Landlord as follows:
(a) Each
of Tenant, Guarantor, HOFRECO, and Stadium Mortgagor is duly organized, validly existing, and in good standing under the laws of their
state of organization and are duly qualified as a foreign entities and are currently in good standing in each state in which such qualification
is required for the conduct of each of Tenant’s, Guarantor’s, HOFRECO’s, and Stadium Mortgagor’s business as it
is currently being conducted (including the State in which the Premises is located).
(b) Each
of Tenant, Guarantor, HOFRECO, and Stadium Mortgagor has the full authority and due capacity to execute, deliver, and perform this Amendment,
all documents, instruments and agreements heretofore delivered to Landlord, and all documents, instruments and agreements executed in
connection herewith to which they are a party. Such execution, delivery, and performance has been duly authorized as required under the
organizational documents of each of Tenant, Guarantor, HOFRECO, and Stadium Mortgagor, and the individuals and entities executing this
Amendment and all documents, instruments and agreements executed in connection herewith or heretofore delivered to Landlord on behalf
of each of Tenant, Guarantor, HOFRECO, and Stadium Mortgagor have been duly authorized and empowered to bind each such party by such execution.
(c) This
Amendment and all documents, instruments and agreements executed in connection herewith or heretofore delivered to Landlord have been
duly executed and delivered to Landlord by each of Tenant, Guarantor, HOFRECO, and Stadium Mortgagor, and are valid, binding, and enforceable
against each of them in accordance with its terms.
(d) Neither
the execution and delivery of this Amendment, nor the documents, instruments and agreements executed in connection herewith or heretofore
delivered to Landlord, nor the performance of its terms and compliance with their conditions will conflict with or result in a breach
of any of the terms, conditions or provisions of or constitute a violation or default under any organizational document of either of Tenant,
Guarantor HOFRECO, or Stadium Mortgagor, or, to the actual knowledge of Tenant, Guarantor, HOFRECO, and Stadium Mortgagor, applicable
law, regulation, judgment, writ, order or decree to which either of Tenant, Guarantor, HOFRECO, or Stadium Mortgagor or any property of
either of Tenant, Guarantor, HOFRECO, or Stadium Mortgagor is subject.
(e) To
the actual knowledge of Tenant, Guarantor, HOFRECO, and Stadium Mortgagor, each of Tenant, Guarantor, HOFRECO, and Stadium Mortgagor is
in compliance in all material respects with all federal, state and local laws, rules, and regulations applicable to the Premises, the
property subject to the Stadium Mortgage, the collateral described in the Stadium Pledge, the property subject to the Additional Parcels
Mortgage, the collateral described in the Fields Pledge, the Warrants, and their operations, their businesses, and their finances.
4. Landlord
Release. As of the Effective Date, each of Tenant, Guarantor, HOFRECO, and Stadium Mortgagor, and their respective past, present
and future employees, agents, attorneys, representatives, successors and assigns, and all persons or entities claiming by, through or
under any of them (and their respective successors and assigns, collectively, the “HOF Releasing Parties”), hereby:
(a) acknowledges,
agrees and affirms that none of them possesses any claims, defenses, offsets, rights of recoupment or counterclaims of any kind or nature
against or with respect to the enforcement or administration of the Lease, the Stadium Pledge, the Stadium Mortgage, the Fields Pledge,
the Consent, the Warrant, the Additional Parcels Mortgage, and/or the Guaranty, or any knowledge of any facts or circumstances that might
give rise to or be the basis of any such claims, defenses, offsets, rights of recoupment or counterclaims;
(b) remises,
releases, acquits and forever discharges Landlord, and its predecessors in interest, affiliates, subsidiaries and assigns, and all of
their respective past, present and future shareholders, members, directors, managers, officers, employees, attorneys, advisers, consultants,
servicers, representatives or agents (collectively, the “Landlord Released Parties”) from any and all manner of debts,
accounts, bonds, warranties, representations, controversies, liabilities, obligations, expenses, damages, judgments, executions, actions,
claims, demands and causes of action of any nature whatsoever, whether at law or in equity, whether known or unknown, that any of the
HOF Releasing Parties now have or may hereafter have by reason of any act, omission, matter, cause or thing, from the beginning of the
world to and including the date this Amendment is executed and delivered by all parties hereto, except for those arising from any act
or omission that constituted actual fraud, willful misconduct or gross negligence by such Landlord Released Party (all of the foregoing
released claims are referred to as the “HOF Released Claims”);
(c) agrees
that it is the intention of each of the HOF Releasing Parties that the foregoing release shall be effective with respect to all matters,
past and present, known and unknown, suspected and unsuspected, and each of the HOF Releasing Parties realizes and acknowledges that factual
matters now unknown to it may have given or may hereafter give rise to losses, damages, liabilities, costs and expenses which are presently
unknown, unanticipated and unsuspected, and that each of the HOF Releasing Parties further agrees that the waivers and releases in this
Amendment have been negotiated and agreed upon in light of that realization and that each of the HOF Releasing Parties nevertheless hereby
intends to release, discharge and acquit the Landlord Released Parties from any such unknown losses, damages, liabilities, costs and expenses;
(d) agrees,
jointly and severally, to indemnify the Landlord Released Parties for, hold the Landlord Released Parties harmless from and against, and
undertake the defense of the Landlord Released Parties with respect to, all HOF Released Claims that each of the Releasing Parties may
assert with respect to any of the HOF Released Claims, despite the existence of the releases granted by the HOF Releasing Parties herein;
(e) acknowledges
that Landlord is specifically relying upon each of the HOF Releasing Parties’ acknowledgements and agreements in this Section in
executing this Amendment, and that in the absence of such agreements Landlord would be unwilling to agree to the modifications provided
for in this Amendment; and
(f) agrees
that all releases and discharges by each of the HOF Releasing Parties in this Amendment shall have the same effect as if each released
or discharged matter had been the subject of a legal proceeding, adjudicated to final judgment from which no appeal could be taken and
therein dismissed with prejudice.
5. Ratification.
(a) Each
of Tenant, Guarantor, HOFRECO, and Stadium Mortgagor hereby expressly, unconditionally, irrevocably and unequivocally (i) ratifies each
of their obligations under the Lease, the Guaranty, the Stadium Pledge, the Stadium Mortgage, the Fields Pledge, the Consent, the Additional
Parcels Mortgage, and the Warrants (the “Ratifying Parties Obligations”) and confirms that such Ratifying Parties Obligations,
and all waivers, covenants and agreements by each of Tenant, Guarantor, HOFRECO, and Stadium Mortgagor in the Lease, the Guaranty, the
Stadium Pledge, the Stadium Mortgage, the Fields Pledge, the Consent, the Additional Parcels Mortgage, and the Warrants remain in full
force and effect for the benefit of Landlord, (ii) reaffirms its continuing absolute liability for the payment and performance of all
of the Ratifying Parties Obligations, and (iii) confirms that such Ratifying Parties Obligations have not been modified or amended and
that each of Tenant’s, Guarantor’s, HOFRECO’s and Stadium Mortgagor’s liabilities under such Ratifying Parties
Obligations have not been limited, impaired or affected in any manner by any existing or previous event, fact or circumstance, in each
case subject to the terms of this Amendment.
(b) Except
as expressly provided herein, the Lease shall remain unchanged and in full force and effect; provided, that to the extent this Amendment
conflicts with the Lease, the provisions of this Amendment shall control. From and after the date hereof, the “Lease” shall
mean and refer to the Lease as amended by this Amendment.
6. Miscellaneous.
The provisions of this Amendment shall govern and control in the event of any conflict between this Amendment, on the one hand, and the
provisions of the Lease, the Guaranty, the Stadium Pledge, the Stadium Mortgage, the Fields Pledge, the Consent, the Additional Parcels
Mortgage, and/or the Warrants, on the other hand. The parties hereto, and each of them, agree to execute from time to time, any and all
documents reasonably requested by the others to carry out the intent of this Amendment. Wherever possible, each provision of this Amendment
shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Amendment shall be
prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of this Amendment. This Amendment shall be governed by the laws
of the State of Ohio. EACH OF THE PARTIES HERETO, BY ACCEPTANCE OF THIS AMENDMENT, HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE
LAW, THE RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM, WHETHER IN CONTRACT, TORT OR OTHERWISE, RELATING DIRECTLY OR
INDIRECTLY TO THIS AMENDMENT. This Amendment shall be binding upon and inure to the benefit of the parties hereto and their respective
successors and permitted assigns. Time is of the essence with respect to all agreements and obligations of each of Tenant, Guarantor,
and Stadium Mortgagor contained herein and in the Lease. The parties agree that this Amendment does not constitute Landlord’s written
notice of any default under Section 23 of the Lease and that Landlord has not otherwise provided such notice. This Amendment is solely
for the benefit of the parties hereto and no persons other than the parties hereto and the Landlord Released Parties shall be entitled
to claim or receive any benefit by reason of this Amendment.
7. Counterparts.
This Amendment may be executed in counterparts, each of which shall constitute an original, but all together shall constitute one and
the same instrument. Signatures to this Amendment delivered electronically via .pdf, .jpeg, .TIF, .TIFF, DocuSign or similar electronic
format shall be deemed an original signature and fully effective as such for all purposes.
IN WITNESS WHEREOF, the parties have executed this
Amendment as of the date first set forth above.
In connection with the Quarterly
Report of Hall of Fame Resort & Entertainment Company (the “Company”) on Form 10-Q for the quarter ended March 31, 2024
as filed with the Securities and Exchange Commission on the date hereof (the “Report”), each of the undersigned, in the capacities
and on the dates indicated below, hereby certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002, that: