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, 2023

 

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) 754–3427

(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 11, 2023, there were 5,657,002 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

 

  Page
PART I. FINANCIAL INFORMATION 1
Item 1. Financial statements 1
Condensed Consolidated Balance Sheets as of March 31, 2023 (unaudited) and December 31, 2022 1
Condensed Consolidated Statements of Operations for the three months ended March 31, 2023 and 2022 (unaudited) 2
Condensed Consolidated Statement of Changes in Stockholders’ Equity for the three months ended March 31, 2023 and 2022 (unaudited) 3
Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2023 and 2022 (unaudited) 4
Notes to the Condensed Consolidated Financial Statements (unaudited) 6
Item 2. Management’s discussion and analysis of financial condition and results of operations 48
Item 3. Quantitative and qualitative disclosures about market risk 56
Item 4. Controls and procedures 56
   
PART II. OTHER INFORMATION 57
Item 1. Legal proceedings 57
Item 1A. Risk factors 57
Item 2. Unregistered sales of equity securities and use of proceeds 57
Item 3. Defaults upon senior securities 57
Item 4. Mine safety disclosures 57
Item 5. Other information 57
Item 6. Exhibits 58
   

SIGNATURES

60

 

i

 

 

PART I. FINANCIAL INFORMATION

 

Item 1. Financial Statements

 

HALL OF FAME RESORT & ENTERTAINMENT COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

 

   As of 
   March 31, 2023   December 31, 2022 
   (unaudited)     
Assets        
Cash  $7,395,025   $26,016,547 
Restricted cash   7,305,895    7,499,835 
Investments held to maturity   32,307,038    17,033,515 
Investments available for sale   4,067,754    4,067,754 
Accounts receivable, net   2,699,883    1,811,143 
Prepaid expenses and other assets   3,783,582    3,340,342 
Property and equipment, net   252,820,233    248,826,853 
Right-of-use lease assets   7,516,840    7,562,048 
Project development costs   143,271,191    140,138,924 
Total assets  $461,167,441   $456,296,961 
           
Liabilities and stockholders’ equity          
Liabilities          
Notes payable, net  $191,949,469   $171,315,860 
Accounts payable and accrued expenses   16,816,623    17,575,683 
Due to affiliate   744,582    855,485 
Warrant liability   1,149,000    911,000 
Financing liability   60,675,230    60,087,907 
Derivative liability - interest rate swap   300,000    200,000 
Operating lease liability   3,417,637    3,413,210 
Other liabilities   13,864,128    10,679,704 
Total liabilities   288,916,669    265,038,849 
           
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, 2023 and December 31, 2022      
 -
        
 -
  
Series B convertible preferred stock, $0.0001 par value; 15,200 shares designated; 200 shares issued and outstanding at March 31, 2023 and December 31, 2022;
     
 -
        
 -
  
liquidation preference of $222,011 as of March 31, 2023          
Series C convertible preferred stock, $0.0001 par value; 15,000 shares designated; 15,000 shares issued and outstanding at March 31, 2023 and December 31, 2022;
       2           2   
liquidation preference of $15,707,500 as of March 31, 2023          
Common stock, $0.0001 par value; 300,000,000 shares authorized; 5,646,898 and 5,604,869 shares issued and outstanding at March 31, 2023 and December 31, 2022, respectively        565           560   
Additional paid-in capital   339,689,495    339,038,466 
Accumulated deficit   (166,508,140)   (146,898,343)
Total equity attributable to HOFRE   173,181,922    192,140,685 
Non-controlling interest   (931,150)   (882,573)
Total equity   172,250,772    191,258,112 
Total liabilities and stockholders’ equity  $461,167,441   $456,296,961 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 

1

 

 

HALL OF FAME RESORT & ENTERTAINMENT COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)

 

   For the Three Months Ended March 31, 
   2023   2022 
Revenues        
Sponsorships, net of activation costs  $673,475   $819,290 
Event, rents and cost recoveries   908,312    337,393 
Hotel revenues   1,538,646    949,841 
Total revenues   3,120,433    2,106,524 
           
Operating expenses          
Operating expenses   13,673,716    7,666,609 
Hotel operating expenses   1,459,203    1,153,112 
Depreciation expense   2,553,360    3,242,285 
Total operating expenses   17,686,279    12,062,006 
           
Loss from operations   (14,565,846)   (9,955,482)
           
Other income (expense)          
Interest expense, net   (3,632,637)   (1,213,541)
Amortization of discount on note payable   (855,891)   (1,355,974)
Change in fair value of warrant liability   (238,000)   4,750,000 
Change in fair value of interest rate swap   (100,000)   
-
 
Loss on extinguishment of debt   
-
    (148,472)
Total other (expense) income   (4,826,528)   2,032,013 
           
Net loss  $(19,392,374)  $(7,923,469)
           
Preferred stock dividends   (266,000)   (266,000)
Income attributable to non-controlling interest   48,577    77,372 
           
Net loss attributable to HOFRE stockholders  $(19,609,797)  $(8,112,097)
           
Net loss per share, basic and diluted
  $(3.48)  $(1.71)
           
Weighted average shares outstanding, basic and diluted
   5,629,086    4,745,022 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 

2

 

 

HALL OF FAME RESORT & ENTERTAINMENT COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

FOR THE THREE MONTHS ENDED MARCH 31, 2023 AND 2022

(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, 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   -    -    -    -    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 
                                                        
Balance as of January 1, 2022   15,200   $2    -   $-    4,434,662   $443   $305,126,404   $(99,951,839)  $205,175,010   $(596,766)  $204,578,244 
                                                        
Stock-based compensation on RSU and restricted stock awards   -    -    -    -    -    -    1,287,695    -    1,287,695    -    1,287,695 
Stock-based compensation - common stock awards   -    -    -    -    1,136    -    28,500    -    28,500    -    28,500 
Issuance of restricted stock awards   -    -    -    -    6,953    1    (1)   -    -    -    - 
Vesting of restricted stock units   -    -    -    -    24,503    2    (2)   -    -    -    - 
Sale of shares under ATM   -    -    -    -    571,908    57    14,234,875    -    14,234,932    -    14,234,932 
Shares issued in connection with amendment of notes payable   -    -    -    -    39,091    4    803,057    -    803,061    -    803,061 
Warrants issued in connection with amendment of notes payable   -    -    -    -    -    -    1,088,515    -    1,088,515    -    1,088,515 
Modification of Series C and Series D warrants   -    -    -    -    -    -    3,736,000    -    3,736,000    -    3,736,000 
Series B preferred stock dividend   -    -    -    -    -    -    -    (266,000)   (266,000)   -    (266,000)
Exchange of Series B preferred stock for Series C preferred stock   (15,000)   (2)   15,000    2    -    -    -    -    -    -    - 
Net loss   -    -    -    -    -    -    -    (7,846,097)   (7,846,097)   (77,372)   (7,923,469)
Balance as of March 31, 2022   200   $-    15,000   $2    5,078,253   $507   $326,305,043   $(108,063,936)  $218,241,616   $(674,138)  $217,567,478 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 

3

 

 

HALL OF FAME RESORT & ENTERTAINMENT COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

 

   For the Three Months Ended March 31, 
   2023   2022 
Cash Flows From Operating Activities        
Net loss  $(19,392,374)  $(7,923,469)
Adjustments to reconcile net loss to cash flows used in operating activities          
Depreciation expense   2,553,360    3,242,285 
Amortization of note discounts   855,891    1,355,974 
Amortization of financing liability   1,681,073    
-
 
Impairment of film costs   1,145,000    
-
 
Interest income on investments held to maturity   (273,523)   
-
 
Interest paid in kind   1,127,491    718,294 
Loss (gain) on extinguishment of debt   
-
    148,472 
Change in fair value of interest rate swap   100,000    
-
 
Change in fair value of warrant liability   238,000    (4,750,000)
Stock-based compensation expense   651,034    1,316,195 
Non-cash operating lease expense   128,143    128,976 
Changes in operating assets and liabilities:          
Accounts receivable   (888,740)   48,782 
Prepaid expenses and other assets   (1,588,240)   451,139 
Accounts payable and accrued expenses   (875,060)   4,588,788 
Operating leases   (78,508)   (157,549)
Due to affiliates   (110,903)   1,776,606 
Other liabilities   3,184,424    1,623,200 
Net cash (used in) provided by operating activities   (11,542,932)   2,567,693 
           
Cash Flows From Investing Activities          
Investments in securities held to maturity   (30,021,129)   
-
 
Proceeds from securities held to maturity   15,021,129    
-
 
Additions to project development costs and property and equipment   (9,679,007)   (19,739,267)
Net cash used in investing activities   (24,679,007)   (19,739,267)
           
Cash Flows From Financing Activities          
Proceeds from notes payable   20,500,000    1,817,603 
Repayments of notes payable   (312,431)   (1,508,437)
Payment of financing costs   (1,537,342)   (153,901)
Payment on financing lease   (1,093,750)   
-
 
Proceeds from exercise of warrants   
-
    
-
 
Payment of Series B dividends   (150,000)   (150,000)
Proceeds from sale of common stock under ATM   
-
    12,531,505 
Net cash provided by financing activities   17,406,477    12,536,770 
           
Net decrease in cash and restricted cash   (18,815,462)   (4,634,804)
           
Cash and restricted cash, beginning of year   33,516,382    17,388,040 
           
Cash and restricted cash, end of period  $14,700,920   $12,753,236 
           
Cash  $7,395,025   $26,016,547 
Restricted Cash   7,305,895    7,499,835 
Total cash and restricted cash  $14,700,920   $33,516,382 

 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 

4

 

 

HALL OF FAME RESORT & ENTERTAINMENT COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

 

   For the Three Months Ended March 31, 
   2023   2022 
Supplemental disclosure of cash flow information        
Cash paid during the year for interest  $2,644,324   $1,961,644 
Cash paid for income taxes  $
-
   $
-
 
           
Non-cash investing and financing activities          
Project development cost acquired through accounts payable and accrued expenses, net  $
-
   $592,232 
Amendment of Series C warrant liability for equity classification  $
-
   $3,336,000 
Amendment of Series C and D warrants  $
-
   $400,000 
Initial value of right of use asset upon adoption of ASC 842  $
-
   $7,741,955 
Accrued Series B preferred stock dividends  $116,000   $116,000 
ATM proceeds receivable  $
-
   $1,703,427 
Shares issued in connection with amendment of notes payable  $
-
   $803,061 
Warrants issued in connection with amendment of notes payable  $
-
   $1,088,515 
Amounts due to affiliate exchanged for notes payable  $
-
   $850,000 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 

5

 

 

Hall of Fame Resort & Entertainment Company and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

 

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 Hall of Fame Village, a multi-use sports, entertainment, and media destination centered around the PFHOF’s campus. The Company is pursuing a differentiation strategy across three pillars, including destination-based assets, HOF Village Media Group, LLC (“Hall of Fame Village Media”), and gaming. The Company is located in the only tourism development district in the state of Ohio.

 

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.

 

Reverse Stock Split

 

On December 27, 2022, the Company effectuated a reverse stock split of its shares of common stock at a ratio of 1-for-22. See Note 5, Stockholders’ Equity, for additional information. As a result, the number of shares and income (loss) per share disclosed throughout this Quarterly Report on Form 10-Q have been retrospectively adjusted to reflect the reverse stock split.

 

6

 

 

Hall of Fame Resort & Entertainment Company and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

 

Note 1: Organization, Nature of Business, and Liquidity (continued)

 

Liquidity and Going Concern

 

The Company has sustained recurring losses through March 31, 2023. Since inception, the Company’s operations have been funded principally through the issuance of debt and equity. As of March 31, 2023, the Company had approximately $7.4 million of unrestricted cash, $7.3 million of restricted cash, and $32.3 million of liquid investments held to maturity, consisting primarily of U.S. treasury securities. The Company has approximately $58.6 million of debt principal coming due through May 15, 2024. For a fee of one percent of the principal, the Company may extend the maturity of up to $41.6 million principal of debt until March 31, 2025. These factors raise substantial doubt about the Company’s ability to continue operations as a going concern.

 

The Company has entered into the following two financing transactions during the three months ended March 31, 2023. See Note 4 for more information on these transactions.

 

In January 2023, the Company sold 2,400 shares of the Company’s 7.00% Series A Cumulative Redeemable Preferred Stock, par value $0.0001 per share for an aggregate purchase price of $2,400,000.

 

On February 2, 2023, the Company received proceeds from the issuance by Stark County Port Authority of $18,100,000 principal amount Tax Increment Financing Revenue Bonds, Series 2023.

 

Following the end of the quarter covered by this Quarterly Report on Form 10-Q, on May 2, 2023, the Company issued 800 shares of the Company’s 7.00% Series A Cumulated Redeemable Preferred Stock at a price of $1,000 per share for an aggregate purchase price of $800,000. (See Note 13 Subsequent Events) 

  

The Company expects that it will need to raise additional financing to accomplish its development plan over the next several years. 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. If management is unable to execute its planned debt and equity financing initiatives, these conditions raise substantial doubt about the Company’s 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.

 

7

 

 

Hall of Fame Resort & Entertainment Company and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

 

Note 2: Summary of Significant Accounting Policies

 

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, 2022, filed on March 27, 2023. Operating results for the three months ended March 31, 2023 are not necessarily indicative of the results that may be expected for any subsequent quarters or for the year ending December 31, 2023.

 

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.

 

Reclassification

 

Certain financial statement line items of the Company’s historical presentation have been reclassified to conform to the corresponding financial statement line items in 2023. These reclassifications have no material impact on the historical operating loss, net loss, total assets, total liabilities, or Stockholders’ equity previously reported.

 

8

 

 

Hall of Fame Resort & Entertainment Company and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

 

Note 2: Summary of Significant Accounting Policies (continued)

 

Emerging Growth Company

 

The Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). It may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. The Company will cease to be an emerging growth company on December 31, 2023.

 

Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Securities Exchange Act of 1934, as amended) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies, but any such election to opt out is irrevocable. The Company has elected not to opt out of such an extended transition period which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of the Company’s financial statements with another public company which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.

 

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 bad debt, depreciation, costs capitalized to project development costs, useful lives of long-lived assets, potential impairment, accounting for debt modifications and extinguishments, evaluating the Company’s sale-leaseback transactions, 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.

 

9

 

 

Hall of Fame Resort & Entertainment Company and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

 

Note 2: Summary of Significant Accounting Policies (continued) 

 

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, 2023 and December 31, 2022, 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, 2023 and December 31, 2022 were $7,305,895 and $7,499,835, respectively.

 

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.” As of March 31, 2023 and December 31, 2022, the Company held $32,307,038 and $17,033,515, respectively in securities to be held to maturity consisting of U.S government securities carried at amortized cost. The Company recognizes interest income on these securities ratably over their term utilizing the interest method.

 

As of March 31, 2023 and December 31, 2022, the Company also had $4,067,754 and $4,067,754, respectively in securities available for sale, which are marked to market value at each reporting period.

 

10

 

 

Hall of Fame Resort & Entertainment Company and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

 

Note 2: Summary of Significant Accounting Policies (continued) 

 

Accounts Receivable

 

Accounts receivable are generally amounts due under sponsorship and other agreements. Accounts receivable are reviewed for delinquencies on a case-by-case basis and are considered delinquent when the sponsor or debtor 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. As of March 31, 2023 and December 31, 2022, the Company has recorded an allowance for doubtful accounts of $6,761,975 and $5,575,700, 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 over the term of the related loan. Any unamortized costs are shown as an offset to “Notes Payable, net” on the accompanying condensed consolidated balance sheets.

 

Upon an extinguishment of debt (or a modification that is treated as an extinguishment), the remaining deferred financing costs are expensed against “Loss on Extinguishment of Debt”.

11

 

 

Hall of Fame Resort & Entertainment Company and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

 

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, cost recoveries, events, and hotel operation. 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 condensed consolidated balance sheets. Contractually due but unpaid sponsorship revenue are included in accounts receivable on the accompanying condensed consolidated balance sheets. Refer to Note 6 for more details. 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.

 

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.

  

12

 

 

Hall of Fame Resort & Entertainment Company and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

 

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 percent 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, 2023 and December 31, 2022, 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 condensed consolidated statements of operations. There were no amounts incurred for penalties and interest for the three months ended March 31, 2023 and 2022. 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 2019 through 2022 remain subject to examination.

 

13

 

 

Hall of Fame Resort & Entertainment Company and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

 

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, 2023 the Company recorded $1,305,000 in film and media costs, including impairment of $1,145,000, as the Company does not anticipate recovering these costs. The impairment in Film and Media Costs is included in operating expenses on the Company’s condensed consolidated statements of operations.

 

Accounting for Real Estate Investments

 

Upon the acquisition of real estate properties, a determination is made as to whether the acquisition meets the criteria to be accounted for as an asset or business combination. The determination is primarily based on whether the assets acquired and liabilities assumed meet the definition of a business. The determination of whether the assets acquired and liabilities assumed meet the definition of a business include a single or similar asset threshold. In applying the single or similar asset threshold, if substantially all the fair value of the gross assets acquired is concentrated in a single identifiable asset or group of similar identifiable assets, the assets acquired and liabilities assumed are not considered a business. Most of the Company’s acquisitions meet the single or similar asset threshold due to the fact that substantially all the fair value of the gross assets acquired is attributable to the real estate acquired.

 

Acquired real estate properties accounted for as asset acquisitions are recorded at cost, including acquisition and closing costs. The Company allocates the cost of real estate properties to the tangible and intangible assets and liabilities acquired based on their estimated relative fair values. The Company determines the fair value of tangible assets, such as land, building, furniture, fixtures, and equipment, using a combination of internal valuation techniques that consider comparable market transactions, replacement costs, and other available information and fair value estimates provided by third-party valuation specialists, depending upon the circumstances of the acquisition. The Company determines the fair value of identified intangible assets or liabilities, which typically relate to in-place leases, using a combination of internal valuation techniques that consider the terms of the in-place leases, current market data for comparable leases, and fair value estimates provided by third-party valuation specialists, depending upon the circumstances of the acquisition.

 

If a transaction is determined to be a business combination, the assets acquired, liabilities assumed, and any identified intangibles are recorded at their estimated fair values on the transaction date, and transaction costs are expensed in the period incurred.

 

14

 

 

Hall of Fame Resort & Entertainment Company and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

 

Note 2: Summary of Significant Accounting Policies (continued)

 

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, 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 is considered to approximate their fair value based on the borrowing rates currently available to the Company for loans with similar terms and maturities.

 

15

 

 

Hall of Fame Resort & Entertainment Company and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

 

Note 2: Summary of Significant Accounting Policies (continued)

 

Fair Value Measurement (continued)

 

The Company uses Levels 1 and 3 of the fair value hierarchy to measure the fair value of its warrant liabilities, investments available for sale and interest rate swaps. 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 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 balance sheets as of March 31, 2023 and December 31, 2022 and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value:

 

      March 31,   December 31, 
   Level  2023   2022 
Warrant liabilities – Public Series A Warrants  1  $1,059,000   $748,000 
Warrant liabilities – Private Series A Warrants  3   
-
    
-
 
Warrant liabilities – Series B Warrants  3   90,000    163,000 
Fair value of aggregate warrant liabilities     $1,149,000   $911,000 
              
Fair value of interest rate swap liability  2  $300,000   $200,000 
              
Investments available for sale  3  $4,067,754   $4,067,754 

 

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.

 

16

 

 

Hall of Fame Resort & Entertainment Company and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

 

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
   Total
Warrant
Liability
 
Fair value as of December 31, 2022  $748,000   $
       -
   $163,000   $911,000 
Change in fair value   311,000    
-
    (73,000)   238,000 
Fair value as of March 31, 2023  $1,059,000   $
      -
   $90,000   $1, 149,000 

 

The key inputs into the Black Scholes valuation model for the Level 3 valuations as of March 31, 2023 and December 31, 2022 are as follows:

 

   March 31, 2023   December 31, 2022 
   Private
Series A
Warrants
   Series B
Warrants
   Private
Series A
Warrants
   Series B
Warrants
 
Term (years)   2.3    2.6    2.5    2.9 
Stock price  $9.15   $9.15   $8.06   $8.06 
Exercise price  $253.11   $30.81   $253.11   $30.81 
Dividend yield   0.0%   0.0%   0.0%   0.0%
Expected volatility   49.60%   51.36%   52.27%   63.86%
Risk free interest rate   3.81%   3.81%   4.22%   4.22%
                     
Number of shares   95,576    170,862    95,576    170,862 

 

The valuation of the investments available for sale were based on sales of similar equity instruments in the time periods near to the measurement dates.

 

17

 

 

Hall of Fame Resort & Entertainment Company and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

 

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, 2023 and 2022, the Company was in a loss position and therefore all potentially dilutive securities would be anti-dilutive and the calculations are presented on the accompanying condensed consolidated statements of operations.

 

As of March 31, 2023 and 2022, 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, 
   2023   2022 
Warrants to purchase shares of Common Stock   2,003,649    2,000,561 
Unvested restricted stock awards   
-
    10,847 
Unvested restricted stock units to be settled in shares of Common Stock   173,450    127,816 
Shares of Common Stock issuable upon conversion of convertible notes   3,435,659    1,077,591 
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   454,545    454,545 
Total potentially dilutive securities   6,070,274    3,674,331 

 

18

 

 

Hall of Fame Resort & Entertainment Company and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

 

Note 3: Property and Equipment

 

Property and equipment consists of the following:

 

   Useful Life  March 31,
2023
   December 31,
2022
 
Land     $12,414,473   $12,414,473 
Land improvements  25 years   51,807,569    51,808,296 
Building and improvements  15 to 39 years   242,742,676    239,068,974 
Equipment  5 to 10 years   10,086,336    7,212,246 
Property and equipment, gross      317,051,054    310,503,989 
              
Less: accumulated depreciation      (64,230,821)   (61,677,136)
Property and equipment, net     $252,820,233   $248,826,853 
              
Project development costs     $143,271,191   $140,138,924 

 

For the three months ended March 31, 2023 and 2022, the Company recorded depreciation expense of $2,553,360 and $3,242,285, respectively. For the three months ended March 31, 2023 and 2022, the Company incurred $9,163,643 and $16,905,966 of capitalized project development costs, respectively.

 

For the three months ended March 31, 2023 and 2022, the Company transferred $6,031,376 and $0 from Project development costs to Property and Equipment, respectively.

 

Included in project development costs are film development costs of $200,000 and $982,000 as of March 31, 2023 and December 31, 2022, respectively.

 

19

 

 

Hall of Fame Resort & Entertainment Company and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

 

Note 4: Notes Payable, net

 

Notes payable, net consisted of the following at March 31, 2023(1):

 

       Debt discount and deferred financing       Interest Rate   Maturity
   Gross  

costs

   Net   Stated   Effective   Date
Preferred equity loan(2)  $6,000,000   $
-
   $6,000,000    7.00%   7.00%  Various
City of Canton Loan(3)   3,450,000    (5,043)   3,444,957    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(5)(6)   9,262,133    
-
    9,262,133    12.50%   12.50%  3/31/2024
MKG DoubleTree Loan(7)   15,300,000    
-
    15,300,000    9.75%   9.75%  9/13/2023
Convertible PIPE Notes   27,188,494    (7,284,798)   19,903,695    10.00%   24.40%  3/31/2025
Canton Cooperative Agreement   2,620,000    (166,566)   2,453,434    3.85%   5.35%  5/15/2040
CH Capital Loan(5)(6)(8)   8,945,999    
-
    8,945,999    12.50%   12.50%  3/31/2024
Constellation EME #2(4)   3,295,583    
-
    3,295,583    5.93%   5.93%  4/30/2026
IRG Split Note(5)(6)(9)   4,351,021    
-
    4,351,021    12.50%   12.50%  3/31/2024
JKP Split Note(5)(6)(9)   4,351,021    
-
    4,351,021    12.50%   12.50%  3/31/2024
ErieBank Loan   19,465,282    (519,944)   18,945,338    9.00%   9.24%  12/15/2034
PACE Equity Loan   8,179,690    (271,813)   7,907,877    6.05%   6.18%  7/31/2047
PACE Equity CFP   2,437,578    (26,924)   2,410,654    6.05%   6.10%  7/31/2046
CFP Loan(6)(10)   4,072,519    
-
    4,072,519    12.50%   12.50%  3/31/2024
Stark County Community Foundation   5,000,000    
-
    5,000,000    6.00%   6.00%  5/31/2029
CH Capital Bridge Loan(6)   10,603,479    
-
    10,603,479    12.50%   12.50%  3/31/2024
Stadium PACE Loan   33,387,844    (4,046,531)   29,341,313    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    (11,199)   4,988,801    6.00%   6.04%  6/30/2029
TDD Bonds   7,500,000    (665,460)   6,834,541    5.41%   5.78%  12/1/2046
TIF   18,100,000    (1,562,885)   16,537,115    6.375%   6.71%  12/30/2048
Total  $206,510,632   $(14,561,163)  $191,949,469              

 

20

 

 

Hall of Fame Resort & Entertainment Company and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

 

Note 4: Notes Payable, net (continued)

 

Notes payable, net consisted of the following at December 31, 2022:

 

   Gross   Debt discount and deferred financing costs   Net 
Preferred equity loan(2)   3,600,000    
-
    3,600,000 
City of Canton Loan(3)   3,450,000    (5,333)   3,444,667 
New Market/SCF   2,999,989    
-
    2,999,989 
JKP Capital loan(5)(6)   9,158,711    
-
    9,158,711 
MKG DoubleTree Loan(7)   15,300,000    
-
    15,300,000 
Convertible PIPE Notes   26,525,360    (8,097,564)   18,427,796 
Canton Cooperative Agreement   2,620,000    (168,254)   2,451,746 
CH Capital Loan(5)(6)(8)   8,846,106    
-
    8,846,106 
Constellation EME #2(4)   3,536,738    
-
    3,536,738 
IRG Split Note(5)(6)(9)   4,302,437    
-
    4,302,437 
JKP Split Note (5)(6)(9)   4,302,437    
-
    4,302,437 
ErieBank Loan   19,465,282    (536,106)   18,929,176 
PACE Equity Loan   8,250,966    (273,031)   7,977,935 
PACE Equity CFP   2,437,578    (27,586)   2,409,992 
CFP Loan(6)(10)   4,027,045    
-
    4,027,045 
Stark County Community Foundation   5,000,000    
-
    5,000,000 
CH Capital Bridge Loan(6)   10,485,079    
-
    10,485,079 
Stadium PACE Loan   33,387,844    (4,091,382)   29,296,462 
Stark County Infrastructure Loan   5,000,000    
-
    5,000,000 
City of Canton Infrastructure Loan   5,000,000    (11,572)   4,988,428 
TDD Bonds   7,500,000    (668,884)   6,831,116 
Total  $185,195,572   $(13,879,712)  $171,315,860 

 

During the three months ended March 31, 2023 and 2022, the Company recorded amortization of note discounts of $855,891 and $1,355,974, respectively.

 

During three months ended March 31, 2023 and 2022, the Company recorded paid-in-kind interest of $1,127,491 and $718,294, respectively.

 

See below footnotes for the Company’s notes payable:

 

(1)The Company’s notes payable are subject to certain customary financial and non-financial covenants. As of March 31, 2023 and 2022 the Company was in compliance with all of its notes payable covenants. Many of the Company’s notes payable are secured by the Company’s developed and undeveloped land and other assets.
(2)The Company had 3,600 and 1,800 shares of Series A Preferred Stock outstanding and 52,800 and 52,800 shares of Series A Preferred Stock authorized as of March 31, 2023 and December 31, 2022, respectively. The Series A Preferred Stock is required to be redeemed for cash after five years from the date of issuance.
(3)The Company has the option to extend the loan’s maturity date for three years, to July 1, 2030, if the Company meets certain criteria in terms of the hotel occupancy level and maintaining certain financial ratios.
(4)The Company also has a sponsorship agreement with Constellation New Energy, Inc., the lender of the Constellation EME #2 note.

 

21

 

 

Hall of Fame Resort & Entertainment Company and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

 

Note 4: Notes Payable, net (continued)

 

(5)On March 1, 2022, the Company entered into amendments to certain of its IRG and IRG-affiliated notes payable. See discussion below for the accounting and assumptions used in the transactions.
(6)On November 7, 2022, the Company entered into amendments to certain of its IRG and IRG-affiliated notes payable. See discussion below for the accounting and assumptions used in the transactions.
(7)On March 1, 2022, HOF Village Hotel II, LLC, a subsidiary of the Company, entered into an amendment to the MKG DoubleTree Loan with the Company’s director, Stuart Lichter, as guarantor, and ErieBank, a division of CNB Bank, a wholly owned subsidiary of CNB Financial Corporation, as lender, which extended the maturity to September 13, 2023. The Company accounted for this amendment as a modification, and expensed approximately $38,000 in loan modification costs.
(8)On March 1, 2022, CH Capital Lending purchased and acquired, the Company’s $7.4 million Aquarian Mortgage Loan (as thereafter amended and acquired by CH Capital Lending, the “CH Capital Loan”).
(9)On March 1, 2022, pursuant to an Assignment of Promissory Note, dated March 1, 2022, IRG assigned (a) a one-half (½) interest in the IRG Note to IRG (the “IRG Split Note”) and (b) a one-half (½) interest in the IRG Note to JKP (the “JKP Split Note”). See “IRG Split Note” and “JKP Split Note”, below.
(10)See “CFP Loan”, below, for a description of the loan along with the valuation assumptions used to value the warrants issued in connection with the loan.
(11)See “TIF Loan”, below, for a description of the loan.

 

Accrued Interest on Notes Payable

 

As of March 31, 2023 and December 31, 2022, accrued interest on notes payable, were as follows:

 

   March 31, 2023   December 31, 2022 
Preferred equity loan  $131,931   $64,575 
City of Canton Loan   1,586    1,555 
New Market/SCF   30,000    
-
 
MKG DoubleTree Loan   127,500    121,656 
Canton Cooperative Agreement   78,535    48,708 
CH Capital Loan   60,036    55,328 
IRG Split Note   41,553    28,490 
JKP Split Note   48,201    35,138 
ErieBank Loan   157,343    140,394 
PACE Equity Loan   87,898    213,842 
CFP Loan   6,042    5,245 
Stark County Community Foundation   75,000    - 
CH Capital Bridge Loan   -    70,659 
Stadium PACE Loan   166,939    166,939 
TDD Bonds   115,026    13,533 
TIF   185,902    - 
Total  $1,313,492   $966,062 

 

The amounts above were included in accounts payable and accrued expenses on the Company’s condensed consolidated balance sheets.

 

22

 

 

Hall of Fame Resort & Entertainment Company and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

 

Note 4: Notes Payable, net (continued)

 

March 1, 2022 Refinancing Transactions

 

On March 1, 2022, the Company amended certain of its IRG and IRG-affiliate held loans. This included the IRG Split Note, the JKP Split Note, the CH Capital Loan, and the JKP Capital Loan. The amendments (i) revised the outstanding principal balance of the loans to include interest that has accrued and has not been paid as of March 1, 2022 in the aggregate amount of $1,437,459, and (ii) extends the maturity of the loans to March 31, 2024, and (iii) amends the loans to be convertible into shares of Common Stock at a conversion price of $30.80 per share ($23.98 per share for the JKP Split Note and JKP Capital Loan), subject to adjustment. The conversion price is subject to a weighted-average anti-dilution adjustment.

 

As part of the consideration for the amendments, the Company issued an aggregate of 39,091 shares of common stock, amended the Series C Warrants and Series D Warrants, and issued Series E Warrants and Series F Warrants.

 

TIF Loan

 

For the Company, the Development Finance Authority of Summit County (“DFA Summit”) offered a private placement of $10,030,000 in taxable development revenue bonds, Series 2018. The bond proceeds are to reimburse the developer for costs of certain public improvements at the Hall of Fame Village, which are eligible uses of tax-incremental funding (“TIF”) proceeds.

 

The term of the TIF requires the Company to make installment payments through July 31, 2048. The current imputed interest rate is 5.2%, which runs through July 31, 2028. The imputed interest rate then increases to 6.6% through July 31, 2038 and finally increases to 7.7% through the remainder of the TIF. The Company is required to make payments on the TIF semi-annually in June and December each year.

 

On December 27, 2022, the Company paid $9.7 million to reacquire the TIF bonds related to the Stadium PACE agreement. In January 2023, the DFA Summit issued new bonds as TIF proceeds.

 

23

 

 

Hall of Fame Resort & Entertainment Company and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

 

Note 4: Notes Payable, net (continued)

 

TIF Loan (continued)

 

On February 2, 2023, the Company received proceeds from the issuance on such date by Stark County Port Authority (“Port Authority”) of $18,100,000 principal amount Tax Increment Financing (“TIF”) Revenue Bonds, Series 2023 (“2023 Bonds”). Of the $18,100,000 principal amount, approximately $6.8 million was used to reimburse the Company for a portion of the cost of certain roadway improvements within the Hall of Fame Village grounds, approximately $8.6 million was used to pay off the Development Finance Authority of Summit County (“DFA”) Revenue Bonds, Series 2018 ( “2018 Bonds”) that had been acquired by the Company in December 2022 pursuant to a previously disclosed arrangement (such that the Company received the payoff of the 2018 Bonds), approximately $1.2 million was used to pay costs of issuance of the 2023 Bonds, and approximately $.9 million was used to fund a debt service reserve held by The Huntington National Bank (“2023 Bond Trustee”), as trustee for the 2023 Bonds. The maturity date of the 2023 Bonds is December 30, 2048. The interest rate on the 2023 Bonds is 6.375%. Interest payments are due on the 2023 Bonds semi-annually on June 30 and December 30 of each year, commencing June 30, 2023.

 

In connection with the issuance of the 2023 Bonds by the Port Authority, the Company transferred ownership of a portion of the roadway and related improvements within Hall of Fame Village grounds to the Port Authority. The Company maintains management rights and maintenance obligations with regard to such roadway pursuant to a Maintenance and Management Agreement among the Port Authority, the Company and the Company’s subsidiary, Newco.

 

The 2023 Bonds will be repaid by the Port Authority from statutory service payments in lieu of taxes paid by the Company in connection with the Company’s Tom Benson Hall of Fame Stadium, ForeverLawn Sports Complex, Constellation Center for Excellence, Center for Performance, Retail I property, Retail II property, Play Action Plaza and an interior private roadway, net of the portion payable to Canton City School District and Plain Local School District and net of administrative fees of Stark County and the City of Canton, and from minimum service payments levied against those parcels excluding the Stadium and Youth Fields. Net statutory service payments are assigned by the City of Canton to the Port Authority for payment of the 2023 Bonds pursuant to a Cooperative Agreement among the Port Authority, City of Canton, the Company and Newco, and then pledged by the Port Authority to the 2023 Bond Trustee for payment of the 2023 Bonds pursuant to a Trust Indenture between the Port Authority and the 2023 Bond Trustee. Minimum service payments are a lien on the parcels under certain TIF declarations and supplements thereto, and are paid by the Company to the 2023 Bond Trustee.

 

24

 

 

Hall of Fame Resort & Entertainment Company and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

 

Note 4: Notes Payable, net (continued)

 

November 7, 2022 Refinancing Transactions

 

On November 7, 2022, the Company and IRG a entered into a letter agreement (the “IRG Letter Agreement”) whereby IRG agreed that IRG’s affiliates and related parties (“IRG Affiliate Lenders”) 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 (“IRG Financial Support”):

 

(a)Extend the CH Capital Bridge Loan maturity to March 31, 2024
(b)Release the first position mortgage lien on the Tom Benson Hall of Fame Stadium
(c)Provide a financing commitment for the Company’s Hilton Tapestry Hotel
(d)Provide a completion guarantee for the Company’s waterpark
(e)Amend IRG loans to provide an optional one-year extension of maturity option to March 31, 2025 for a one percent fee

 

In exchange, the Company agreed in the IRG Letter Agreement to:

 

(a)Issue 90,909 shares to IRG and pay $4,500,000 in cash out of the Oak Street financing (See Note 12)
(b)Increase interest rate on all IRG loans to 12.5% per annum
(c)Make all IRG loans convertible at $12.77 per share
(d)Modify the Series C through Series G Warrants to be exercisable at $12.77 per share

 

In the IRG Letter Agreement, IRG 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 IRG 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 (defined below). In addition, the provisions of the IRG Letter Agreement are limited by Nasdaq Listing Rule 5635(c).

 

25

 

 

Hall of Fame Resort & Entertainment Company and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

 

Note 4: Notes Payable, net (continued)

 

CFP Loan

 

On April 27, 2022, Midwest Lender Fund, LLC, a limited liability company wholly owned by our director Stuart Lichter (“MLF”), loaned $4,000,000 (the “CFP Loan”) to HOF Village Center for Performance, LLC (“HOF Village CFP”). Interest accrues on the outstanding balance of the CFP Loan at 6.5% per annum, compounded monthly. The CFP Loan matures on April 30, 2023 or if HOF Village CFP exercises its extension option, April 30, 2024. The CFP Loan is secured by a mortgage encumbering the Center for Performance.

 

As part of the consideration for making the Loan, on June 8, 2022 following stockholder approval, the Company issued to MLF: (A) 5,681 shares (the “Commitment Fee Shares”) of Common Stock, and (B) a warrant to purchase 5,681 shares of Common Stock (“Series G Warrants”). The exercise price of the Series G Warrants will be $33 per share. The Series G Warrants will become exercisable one year after issuance, subject to certain terms and conditions set forth in the Series G Warrants. Unexercised Series G Warrants will expire five years after issuance. The exercise price of the Series G Warrants will be subject to a weighted-average antidilution adjustment.

 

On November 7, 2022, the Company further amended the CFP Loan in order to add an extension option that the Company may exercise at any time in order to extend the CFP Loan to March 31, 2025. In exchange for the amendment, the interest rate of the CFP Loan was increased to 12.5% per annum.

 

Huntington Loan

 

On September 27, 2022, HOF Village Retail I, LLC and HOF Village Retail II, LLC, subsidiaries of the Company, as borrowers (the “Subsidiary Borrowers”), entered into a loan agreement with The Huntington National Bank, pursuant to which the lender agreed to loan up to $10,000,000 to the Subsidiary Borrowers, which may be drawn upon the Project achieving certain debt service coverage ratios. Under the Note, the outstanding amount of the Loan bears interest at a per annum rate equal to the Term SOFR (as defined in the Note) plus a margin ranging from 2.60% to 3.50% per annum.

 

The Loan matures on September 27, 2024 (the “Initial Maturity Date”). However, Subsidiary Borrowers have the option (the “Extension Option”) to extend the Initial Maturity Date for an additional thirty six (36) months.

 

As of March 31, 2023, the Company has not drawn under the loan agreement.

 

Additionally, in connection with the Huntington Loan, on September 27, 2022, the Company entered into an interest rate swap agreement with a notional amount of $10 million to hedge a portion of the Company’s outstanding Secured Overnight Financing Rate (“SOFR”) debt with a fixed interest rate of 4.0%. The effective date of the interest rate swap is October 1, 2024 and the termination date is September 27, 2027.

 

26

 

 

Hall of Fame Resort & Entertainment Company and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

 

Note 4: Notes Payable, net (continued)

 

Future Minimum Principal Payments

 

The minimum required principal payments on notes payable outstanding as of March 31, 2023 are as follows:

 

For the three months ending March 31,  Amount 
2023 (nine months)  $16,432,370 
2024   46,918,630 
2025   31,516,621 
2026   3,628,669 
2027   4,265,957 
Thereafter   103,748,385 
Total Gross Principal Payments  $206,510,632 
      

Less: Debt discount and deferred financing costs

   (14,561,163)
      
Total Net Principal Payments  $191,949,469 

 

27

 

 

Hall of Fame Resort & Entertainment Company and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

 

Note 5: Stockholders’ Equity

 

Reverse Stock Split

 

On September 29, 2022, our stockholders approved amendments to our Amended and Restated Certificate of Incorporation to effect a reverse stock split of our shares of common stock, and our Board approved a final reverse stock split ratio of 1-for-22. The reverse stock split became effective on December 27, 2022. On the effective date, every 22 shares of issued and outstanding common stock were combined and converted into one issued and outstanding share of common stock. Fractional shares were cancelled, and stockholders received cash in lieu thereof in the aggregate amount of $118,344.

 

The number of authorized shares of common stock and the par value per share of common stock remains unchanged. A proportionate adjustment was also made to the maximum number of shares of common stock issuable under the Hall of Fame Resort & Entertainment Company Amended 2020 Omnibus Incentive Plan (the “Plan”).

 

As a result, the number of shares and income (loss) per share disclosed throughout this Report on Form 10-Q have been retrospectively adjusted to reflect the reverse stock split.

 

Where applicable, the disclosures below have been adjusted to reflect the 1-for-22 reverse stock split effective December 27, 2022.

 

Authorized Capital

 

On November 3, 2020, the Company’s stockholders approved an amendment to the Company’s charter to increase the authorized shares of Common Stock from 100,000,000 to 300,000,000. Consequently, the Company’s charter allows the Company to issue up to 300,000,000 shares of Common Stock and to issue and designate its rights, without stockholder approval, of up to 5,000,000 shares of preferred stock, par value $0.0001.

 

Series A Preferred Stock Designation

 

On October 8, 2020, the Company filed a Certificate of Designations with the Secretary of State of the State of Delaware to establish preferences, limitations, and relative rights of the Series A Preferred Stock. The number of authorized shares of Series A Preferred Stock is 52,800. The Series A Preferred Stock is mandatorily redeemable, and therefore classified as a liability on the Company’s condensed consolidated balance sheets within Notes Payable, net.

 

28

 

 

Hall of Fame Resort & Entertainment Company and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

 

Note 5: Stockholders’ Equity (continued)

 

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, resulting in a maximum of 264,214 shares that can be issued under the amended 2020 Omnibus Inventive Plan. The amendment to the 2020 Omnibus Incentive Plan was previously approved by the Board of Directors of the Company, and the amended 2020 Omnibus Incentive Plan became effective on June 2, 2021. As of March 31, 2023, 6,938 shares remained available for issuance under the 2020 Omnibus Incentive 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 million. From January 1 through March 31, 2023, there were no shares sold. The remaining availability under the Equity Distribution Agreement as of March 31, 2023 was approximately $25.9 million.

 

Issuance of Restricted Stock Awards

  

The Company’s activity in restricted Common Stock was as follows for the three months ended March 31, 2023:

 

   Number of
shares
   Weighted
average
grant date
fair value
 
Non–vested at January 1, 2023   
-
   $
-
 
Granted   6,207   $8.16 
Vested   (6,207)  $8.16 
Non–vested at March 31, 2023   
-
   $ 

 

For the three months ended March 31, 2023 and 2022, stock-based compensation related to restricted stock awards was $50,657 and $732,757, respectively. Stock-based compensation related to restricted stock awards was included as a component of Operating expenses in the condensed consolidated statements of operations. As of March 31, 2023, unamortized stock-based compensation costs related to restricted share arrangements were $0.

 

29

 

 

Hall of Fame Resort & Entertainment Company and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

 

Note 5: Stockholders’ Equity (continued)

 

Issuance of Restricted Stock Units

 

During the three months ended March 31, 2023, the Company granted an aggregate of 99,615 Restricted Stock Units (“RSUs”) to its employees and directors, of which 96,875 were granted under the 2020 Omnibus Incentive Plan and 2,740 were granted as inducement awards. The RSUs were valued at the value of the Company’s Common Stock on the date of grant, which approximated $14.70 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, 2023:

 

   Number of
shares
   Weighted
average
grant date
fair value
 
Non–vested at January 1, 2023   134,799   $28.74 
Granted   99,615   $14.70 
Vested   (54,996)  $30.34 
Forfeited   (5,968)  $14.93 
Non–vested at March 31, 2023   173,450   $20.64 

 

For the three months ended March 31, 2023 and 2022, the Company recorded $600,377 and $502,412, respectively, in employee and director stock-based compensation expense. Employee and director stock-based compensation expense is a component of Operating expenses in the condensed consolidated statements of operations. As of March 31, 2023, unamortized stock-based compensation costs related to restricted stock units were $3,005,663 and will be recognized over a weighted average period of 2 years.

 

Warrants

 

The Company’s warrant activity was as follows for the three months ended March 31, 2023:

 

   Number of
Shares
   Weighted
Average
Exercise
Price (USD)
   Weighted
Average
Contractual
Life (years)
   Intrinsic
Value (USD)
 
Outstanding - January 1, 2023   2,003,649   $149.09    2.86   $- 
Outstanding – March 31, 2023   2,003,649   $149.09    2.61   $
          -
 
Exercisable – March 31, 2023   1,997,972   $149.48    2.61   $
       -
 

 

30

 

 

Hall of Fame Resort & Entertainment Company and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

 

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 (as described in Note 4), 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 more 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 

 

31

 

 

Hall of Fame Resort & Entertainment Company and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

 

Note 5: Stockholders’ Equity (continued)

 

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 (as described in Note 4), 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 C Warrants to reduce the exercise price to $12.77 per share as part of the IRG Letter Agreement. See Note 4 for more 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 

 

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 (the “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.

 

32

 

 

Hall of Fame Resort & Entertainment Company and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

 

Note 5: Stockholders’ Equity (continued)

 

Compliance with Nasdaq Minimum Bid Requirement

 

As previously reported, on May 24, 2022, the Company received a deficiency letter from the Listing Qualifications Department (the “Staff”) of the Nasdaq Stock Market (“Nasdaq”) notifying the Company that for the last 30 consecutive business days the bid price for the Company’s common stock, par value $0.0001 per share (“Common Stock”), had closed below the minimum requirement for continued inclusion on the Nasdaq Capital Market pursuant to Nasdaq Listing Rule 5550(a)(2) (the “Minimum Bid Requirement”).

 

On January 11, 2023, the Company received written notice from the Staff of Nasdaq informing the Company that it has regained compliance with the Minimum Bid Requirement because Nasdaq has determined that for 10 consecutive business days, the closing bid price of the Company’s Common Stock was at or above the Minimum Bid Requirement. Accordingly, Nasdaq has advised that the matter is now closed.

 

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).

 

 

33

 

 

Hall of Fame Resort & Entertainment Company and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

 

Note 6: Sponsorship Revenue and Associated Commitments

 

Johnson Controls, Inc.

 

On July 2, 2020, the Company entered into an Amended and Restated Sponsorship and Naming Rights Agreement (the “Naming Rights Agreement”) among Newco, PFHOF and Johnson Controls, Inc. (“JCI” or “Johnson Controls”), that amended and restated the Sponsorship and Naming Rights Agreement, dated as of November 17, 2016 (the “Original Sponsorship Agreement”). Among other things, the Amended Sponsorship Agreement: (i) reduced the total amount of fees payable to Newco during the term of the Amended Sponsorship Agreement from $135 million to $99 million; (ii) restricted the activation proceeds from rolling over from year to year with a maximum amount of activation proceeds in one agreement year to be $750,000; and (iii) renamed the “Johnson Controls Hall of Fame Village” to “Hall of Fame Village”. This is a prospective change, which the Company reflected beginning in the third quarter of 2020.

 

JCI has a right to terminate the Naming Rights Agreement if the Company does not provide evidence to JCI by October 31, 2021 that it has secured sufficient debt and equity financing to complete Phase II, or if Phase II is not open for business by January 2, 2024, in each case subject to day-for-day extension due to force majeure and a notice and cure period. In addition, under the Naming Rights Agreement JCI’s obligation to make sponsorship payments to the Company may be suspended commencing on December 31, 2020, if the Company has not provided evidence reasonably satisfactory to JCI on or before December 31, 2020, subject to day-for-day extension due to force majeure, that the Company has secured sufficient debt and equity financing to complete Phase II.

 

Additionally, on October 9, 2020, Newco, entered into a Technology as a Service Agreement (the “TAAS Agreement”) with JCI. Pursuant to the TAAS Agreement, JCI will provide certain services related to the construction and development of the Hall of Fame Village (the “Project”), including, but not limited to, (i) design assist consulting, equipment sales and turn-key installation services in respect of specified systems to be constructed as part of Phase 2 and Phase 3 of the Project and (ii) maintenance and lifecycle services in respect of certain systems constructed as part of Phase 1, and to be constructed as part of Phase 2 and Phase 3, of the Project. Under the terms of the TAAS Agreement, Newco agreed to pay JCI up to an aggregate of approximately $217 million for services rendered by JCI over the term of the TAAS Agreement.

 

34

 

 

Hall of Fame Resort & Entertainment Company and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

 

Note 6: Sponsorship Revenue and Associated Commitments (continued)

 

Johnson Controls, Inc. (continued)

 

The TAAS Agreement provides that in respect of the Naming Rights Agreement, Johnson Controls and Newco intend, acknowledge and understand that: (i) Newco’s performance under the TAAS Agreement is essential to, and a condition to Johnson Controls’ performance under, the Naming Rights Agreement; and (ii) Johnson Controls’ performance under the Naming Rights Agreement is essential to, and a condition to Newco’s performance under, the TAAS Agreement. In the TAAS Agreement, Johnson Controls and Newco represent, warrant and agree that the transactions agreements and obligations contemplated under the TAAS Agreement and the Naming Rights Agreement are intended to be, and shall be, interrelated, integrated and indivisible, together being essential to consummating a single underlying transaction necessary for the Project. The Company anticipates that resolution of the dispute regarding the Naming Rights Agreement will include the TAAS Agreement. 

 

On May 10, 2022, the Company received from JCI a notice of termination (the “TAAS Notice”) of the TAAS Agreement effective immediately. The TAAS Notice states that termination of the TAAS Agreement by JCI is due to Newco’s alleged breach of its payment obligations. Additionally, JCI in the TAAS Notice demands the amount which is the sum of: (i) all past due payments and any other amounts owed by Newco under the TAAS Agreement; (ii) all commercially reasonable and documented subcontractor breakage and demobilization costs; and (iii) all commercially reasonable and documented direct losses incurred by JCI directly resulting from the alleged default by the Company and the exercise of JCI’s rights and remedies in respect thereof, including reasonable attorney fees.

 

Also on May 10, 2022, the Company received from JCI a notice of termination (“Naming Rights Notice”) of the Name Rights Agreement, effective immediately. The Naming Rights Notice states that the termination of the Naming Rights Agreement by JCI is due to JCI’s concurrent termination of the TAAS Agreement. The Naming Rights Notice further states that the Company must pay JCI, within 30 days following the date of the Naming Rights Notice, $4,750,000. The Company has not made such payment to date. The Naming Rights Notice states that Newco is also in breach of its covenants and agreements, which require Newco to provide evidence reasonably satisfactory to JCI on or before October 31, 2021, subject to day-for-day extension due to force majeure, that Newco has secured sufficient debt and equity financing to complete Phase II.

 

The Company disputes that it is in default under either the TAAS Agreement or the Naming Rights Agreement. The Company believes JCI is in breach of the Naming Rights Agreement and the TAAS Agreement due to their failure to make certain payments in accordance with the Naming Rights Agreement, and, on May 16, 2022, provided notice to JCI of these breaches.

 

The Company is pursuing dispute resolution pursuant to the terms of the Naming Rights Agreement to simultaneously defend against JCI’s allegations and pursue its own claims. The parties participated in mediation in November 2022, but were unable to reach a resolution. On January 24, 2023, Newco filed a demand for arbitration with JAMS, asserting claims against JCI for breach of contract, breach of the implied duty of good faith and fair dealing, and unjust enrichment. On February 16, 2023, JCI filed its response, generally denying Newco’s allegations and asserting counterclaims for breach of contract, breach of the implied covenant of good faith and fair dealing, and unjust enrichment. On March 9, 2023, Newco filed its response to JCI’s counterclaims, generally denying JCI’s allegations. A panel of three arbitrators has been constituted to hear and determine the dispute. The Company presently anticipates that the arbitration hearing will be held during the fourth quarter of 2023 in Ohio. The ultimate outcome of this dispute cannot presently be determined. However, in management’s opinion, the likelihood of a material adverse outcome is remote. Accordingly, adjustments, if any, that might result from the resolution of this matter have not been reflected in the accompanying condensed consolidated financial statements. During the year ended December 31, 2022, the Company suspended its revenue recognition until the dispute is resolved and has recorded an allowance against the amounts due as of March 31, 2023 and December 31, 2022 in the amount of $6,000,000 and $4,812,500, respectively. The balances due under the Naming Rights Agreement as of March 31, 2023 and December 31, 2022 amounted to $7,822,917 and $6,635,417 respectively.

 

Other 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, advertising on our website and other benefits as detailed in the agreements.

 

35

 

 

Hall of Fame Resort & Entertainment Company and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

 

Note 6: Sponsorship Revenue and Associated Commitments (continued)

 

Other Sponsorship Revenue (continued)

 

As of March 31, 2023, scheduled future cash to be received under the agreements, excluding the Johnson Controls Naming Rights Agreement, is as follows:

 

Year ending December 31,

 

2023 (nine months)  $951,750 
2024   2,256,265 
2025   2,167,265 
2026   2,017,265 
2027   1,757,265 
Thereafter   4,514,529 
Total  $13,664,339 

 

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, 2023 and 2022, the Company recognized $673,475 and $819,290 of net sponsorship revenue, respectively.

  

36

 

 

Hall of Fame Resort & Entertainment Company and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

 

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. In consideration of the services performed by Crestline, the Company agreed to the greater of: 2% of gross revenues or $10,000 per month in base management fees and other operating expenses. The agreement will be terminated on the fifth anniversary of the commencement date, or October 22, 2024. For the three months ended March 31, 2023 and 2022, the Company paid and incurred $45,500 and $30,000, 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 provide $2,000,000 to 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 more information.

 

Online Sports Betting Agreement

 

On July 14, 2022, Newco 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 of all necessary licenses. The initial term of the Online Market Access Agreement is ten years.

 

As part of this agreement, Newco 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 valued at $4,000,000. The grant date value of these warrants were recorded as deferred revenue (within Other Liabilities on the condensed consolidated Balance Sheets) and will be amortized over the life of the sports betting agreement.

 

On November 2, 2022, the Company took the next step toward live sports betting by securing conditional approval from the state for mobile and retail sports books.

 

The Ohio Casino Control Commission provided the required authorization for HOFV to gain licensing for a physical sports operation – called a sportsbook – as well as an online betting platform, under Ohio’s sports betting law HB29. As of January 1, 2023, sports betting is legal in Ohio, for anyone in the state that is of legal betting age. 

 

37

 

 

Hall of Fame Resort & Entertainment Company and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

 

Note 7: Other Commitments (continued)

 

Other Liabilities

 

Other liabilities consisted of the following at March 31, 2023 and December 31, 2022:

 

   March 31, 2023   December 31, 2022 
Activation fund reserves  $3,692,820   $3,511,185 
Deferred revenue   9,787,961    6,867,970 
Deposits and other liabilities   383,347    300,549 
Total  $13,864,128   $10,679,704 

 

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, 2023 and December 31, 2022:

 

   March 31, 2023   December 31, 2022 
Due to IRG Member  $172,753   $345,253 
Due to PFHOF   571,829    510,232 
Total  $744,582   $855,485 

 

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.

 

38

 

 

Hall of Fame Resort & Entertainment Company and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

 

Note 9: Related-Party Transactions (continued)

 

Global License Agreement

 

Effective April 8, 2022, Newco 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 Newco and its affiliates to exploit existing PFHOF works and to create new works. The Global License Agreement grants Newco 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 Newco 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 Newco and its affiliates. 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 Newco 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 Newco to PFHOF for certain usage above specified financial thresholds, as well as a commitment to support PFHOF museum attendance through Newco’s and its affiliates’ ticket sales for certain concerts and youth sports tournaments. 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, 2023 are as follows:

 

For the years ending December 31,  Amount 
2023 (nine months)  $300,000 
2024   600,000 
2025   600,000 
2026   600,000 
2027   600,000 
Thereafter   6,750,000 
Total Gross Principal Payments  $9,450,000 

 

During the three months ended March 31, 2023 and 2022, the Company paid $300,000 and $0 of the annual license fee, respectively.

39

 

 

Hall of Fame Resort & Entertainment Company and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

 

Note 9: Related-Party Transactions (continued)

 

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 is subject to certain conditions, including the execution and delivery of definitive documentation with respect to the Hotel Construction Loan.

 

The Hotel Construction Loan will have a two-year term with one option to extend for twelve months, subject to standard extension conditions. The collateral for the Hotel Construction Loan will include, without limitation: (a) a first priority perfected mortgage encumbering the Hotel Property; (b) a first priority perfected assignment of leases and rents with respect to the Hotel Property; (c) a first priority perfected assignment of all permits, licenses, entitlements, approvals, and contracts with respect to the Hotel Property; (d) UCC-1 financing statements (all personal property, fixture filing and accounts and reserves); (e) equity pledge; and (f) all other agreements and assurances customary in similar financings by IRGInc. The Hotel Construction Loan will bear interest at a variable rate per annum equal to the one-month Term SOFR plus 6%, subject to a SOFR floor equal to the greater of (i) 4% and (ii) prevailing SOFR at closing of the Hotel Construction Loan. Payments of interest only will be made during the initial two-year term, with a payments of principal and interest based on a 25-year amortization during the extension term, if applicable. Hotel will pay 1% of the Hotel Construction Loan amount as an origination fee, payable in full at closing. The Hotel Construction Loan definitive documentation will have representations, warranties and events of default usual and customary for such type of loan.

 

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.

 

40

 

 

Hall of Fame Resort & Entertainment Company and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

 

Note 9: Related-Party Transactions (continued)

 

IRG Financial Support and Consideration (continued)

 

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.

 

41

 

 

Hall of Fame Resort & Entertainment Company and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

 

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 HOFV Newco 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.

 

42

 

 

Hall of Fame Resort & Entertainment Company and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

 

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 (defined below). In addition, the provisions of the IRG Letter Agreement are limited by Nasdaq Listing Rule 5635(c). If the number of shares of Common Stock issued to IRGLLC and its affiliated and related parties pursuant to the IRG Letter Agreement and the agreements modified thereunder exceeds the Nasdaq 19.99% Cap, then the Company will use reasonable efforts to obtain stockholder approval of the issuance of shares in excess of the Nasdaq 19.99% Cap, no later than the next stockholder meeting (the “Approval”).

 

Note 10: Concentrations

 

For the three months ended March 31, 2023, two customers represented approximately 42.9% and 18.3% of the Company’s sponsorship revenue. For the three months ended March 31, 2022, two customers represented approximately 35% and 15% of the Company’s sponsorship revenue. No other customer represented more than 10% of sponsorship revenue.

 

As of March 31, 2023, one customer represented approximately 83.5% of the Company’s sponsorship accounts receivable. As of December 31, 2022, one customer represented approximately 94.4% of the Company’s sponsorship accounts receivable. No other customer represented more than 10% of outstanding accounts receivable.

 

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.

 

43

 

 

Hall of Fame Resort & Entertainment Company and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

 

Note 11: Leases

 

The Company has entered into operating leases as the lessee primarily for ground leases under its stadium, sports complex, and parking facilities.

 

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 generally 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 ROU 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. 

 

44

 

 

Hall of Fame Resort & Entertainment Company and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

 

Note 11: Leases (continued)

 

The Company’s operating leases are comprised primarily of ground leases and equipment leases. Balance sheet information related to our leases is present below (ASC 842 was adopted on January 1, 2022):

 

   March 31,   December 31, 
   2023   2022 
Operating leases:        
Right-of-use assets  $7,516,840   $7,562,048 
Lease liability   3,417,637    3,413,210 
Finance leases:          
Right-of-use assets   
-
    
-
 
Lease liability   
-
    
-
 

 

Other information related to leases is presented below:

 

   Three Months
Ended
March 31,
2023
   Three Months
Ended
March 31,
2022
 
Operating lease cost  $128,143   $128,976 
Other information:          
Operating cash flows from operating leases   78,508    157,549 
Weighted-average remaining lease term – operating leases (in years)   91.2    88.2 
Weighted-average discount rate – operating leases   10.0%   10.0%

 

As of March 31, 2023, the annual minimum lease payments of our operating lease liabilities were as follows:

 

For The Years Ending December 31,    
2023 (nine months)  $238,723 
2024   311,900 
2025   311,900 
2026   311,900 
2027   311,900 
Thereafter   41,125,000 
Total future minimum lease payments, undiscounted   42,611,323 
Less: imputed interest   (39,193,686)
Present value of future minimum lease payments  $3,417,637 

 

45

 

 

Hall of Fame Resort & Entertainment Company and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

 

Note 11: Leases (continued)

 

Lessor Commitments

 

As of March 31, 2023, the Company’s Constellation Center for Excellence and retail facilities were partially leased including leases by the Company’s subsidiaries. During the three months ended March 31, 2023 and 2022, the Company recorded $94,540 and $8,118 of lease revenue, respectively. The future minimum lease commitments under these leases, excluding leases of the Company’s subsidiaries, are as follows:

 

Year ending December 31:

 

2023 (nine months)  $463,870 
2024   645,438 
2025   641,542 
2026   640,962 
2027   619,495 
Thereafter   2,972,365 
Total  $5,983,672 

  

Note 12: Financing Liability

 

On September 27, 2022 the Company sold the land under the Company’s Fan Engagement Zone with Twain. Simultaneously, the Company entered into a lease agreement with the 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.

 

On November 7, 2022, HOFV Waterpark sold the land under the Company’s future waterpark. Simultaneously, the Company entered into a lease agreement with the buyer of the property. 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-type 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.

 

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Hall of Fame Resort & Entertainment Company and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

 

Note 12: Financing Liability (continued)

 

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.

 

As of December 31, 2022, the carrying value of the financing liability was $60,087,907, representing $2,204,080,276 in remaining payments under the leases, net of a discount of $2,143,992,369. The monthly lease payments are split between a reduction of principal and interest expense using the effective interest rate method.

 

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. Oak Street and HOFV Waterpark also entered into a 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.

 

Remaining future cash payments related to the financing liability, for the fiscal years ending December 31 are as follows:

 

2023 (nine months)  $2,925,781 
2024   4,672,544 
2025   5,865,396 
2026   6,005,734 
2027   6,149,455 
Thereafter   2,177,367,616 
Total Minimum Liability Payments   2,202,986,526 
Imputed Interest   (2,142,311,296)
Total  $60,675,230 

 

Note 13: Subsequent Events

 

Subsequent events have been evaluated through May 15, 2023, the date the condensed consolidated financial statements were issued. Except for as disclosed below, no other events have been identified requiring disclosure or recording.

 

On May 2, 2023, the Hall of Fame Resort & Entertainment Company (the “Company”) issued to ADC LCR Hall of Fame Manager II, LLC (the “Investor”) 800 shares (the “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 $800,000. The Company paid the Investor an origination fee of 2% of the aggregate purchase price. The issuance and sale of the Shares to the Investor is exempt from registration pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”). 

 

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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, 2022 as filed with the Securities and Exchange Commission (“SEC”) on March 27, 2023, 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, 2022 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”). Headquartered in Canton, Ohio, we own the Hall of Fame Village, a multi-use sports and entertainment destination centered around the PFHOF’s campus. We expect to create a diversified set of revenue streams through developing themed attractions, premier entertainment programming and sponsorships. We are pursuing a differentiation strategy across three pillars, including destination-based assets, the Media Company, and gaming.

 

The strategic plan has been developed in three phases of growth: 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, and HOF Village Media Group, LLC (“Hall of Fame Village Media” or the “Media Company”). The Tom Benson Hall of Fame Stadium hosts multiple sports and entertainment events, including the 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. For example, licensing the extensive content controlled by the PFHOF as well as new programming assets developed from live events such as youth tournaments, camps and sporting events held at the ForeverLawn Sports Complex and the Tom Benson Hall of Fame Stadium.

 

We are developing new hospitality, attraction and corporate assets as part of our Phase II development plan. Phase II plans for future components of the Hall of Fame Village include two hotels (one on campus and one in downtown Canton that opened in November 2020), the Hall of Fame Indoor Waterpark, 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). 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, cost recoveries, events, and hotel 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. 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.

 

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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 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.

 

Operating Expenses

 

Our operating expenses include operating expenses, depreciation expense, and other operating expenses. These expenses have increased in connection with completing Phase I development. These expenses have increased with completion of Phase II assets and would expect to continue to increase with completion of the on campus hotel, waterpark, and Phase III.

 

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 and the ForeverLawn Sports Complex. 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 as through completion of the Phase I and Phase II development.

 

Other operating expenses include items such as management fees, commission expense, and professional fees.

 

Recent Developments

 

Dispute Regarding Naming Rights Agreement with Johnson Controls

 

The Company is in a dispute with JCI regarding the Naming Rights Agreement. The Company is pursuing dispute resolution pursuant to the terms of the Naming Rights Agreement to simultaneously defend against JCI’s allegations and pursue its own claims. The parties participated in mediation in November 2022, but were unable to reach a resolution. On January 24, 2023, Newco filed a demand for arbitration with JAMS, asserting claims against JCI for breach of contract, breach of the implied duty of good faith and fair dealing, and unjust enrichment. On February 16, 2023, JCI filed its response, generally denying Newco’s allegations and asserting counterclaims for breach of contract, breach of the implied covenant of good faith and fair dealing, and unjust enrichment. On March 9, 2023, Newco filed its response to JCI’s counterclaims, generally denying JCI’s allegations. A panel of three arbitrators has been constituted to hear and determine the dispute. The Company anticipates that the hearing will be held during the fourth quarter of 2023 in Ohio. The ultimate outcome of this dispute cannot presently be determined. However, in management’s opinion, the likelihood of a material adverse outcome is remote. Accordingly, adjustments, if any, that might result from the resolution of this matter have not been reflected in the accompanying consolidated financial statements. During the year ended December 31, 2022, the Company suspended its revenue recognition until the dispute is resolved and has recorded an allowance against the amounts due as of March 31, 2023 and December 31, 2022 in the amount of $6,000,000 and $4,812,500, respectively. The balances due under the Naming Rights Agreement as of March 31, 2023 and December 31, 2022 amounted to $7,822,917 and $6,635,417, respectively.

 

See Note 6: Sponsorship Revenue and Associated Commitments – Johnson Controls, Inc., for additional information relating to this dispute.

 

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 (the “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. On May 2, 2023, the Company issued an additional 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.

 

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Compliance with Nasdaq Minimum Bid Requirement

 

As previously reported, on May 24, 2022, the Company received a deficiency letter from the Listing Qualifications Department (the “Staff”) of the Nasdaq Stock Market (“Nasdaq”) notifying the Company that for the last 30 consecutive business days the bid price for the Company’s common stock, par value $0.0001 per share (“Common Stock”), had closed below the minimum requirement for continued inclusion on the Nasdaq Capital Market pursuant to Nasdaq Listing Rule 5550(a)(2) (the “Minimum Bid Requirement”).

 

On December 27, 2022, we effected the Reverse Stock Split to, among other things, increase our stock price to comply with the Nasdaq’s minimum bid price requirements (Nasdaq Listing Rule 5550(a)(2)).

 

On January 11, 2023, the Company received written notice from the Staff of Nasdaq informing the Company that it has regained compliance with the Minimum Bid Requirement because Nasdaq has determined that for 10 consecutive business days, the closing bid price of the Company’s Common Stock was at or above the Minimum Bid Requirement. Accordingly, Nasdaq has advised that the matter is now closed.

 

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).

 

$18,100,000 principal amount Tax Increment Financing (“TIF”) Revenue Bonds

 

On February 2, 2023, the Company received proceeds from the issuance on such date by Stark County Port Authority (“Port Authority”) of $18,100,000 principal amount Tax Increment Financing (“TIF”) Revenue Bonds, Series 2023 (“2023 Bonds”). Of the $18,100,000 principal amount, approximately $6.8 million was used to reimburse the Company for a portion of the cost of certain roadway improvements within the Hall of Fame Village grounds, approximately $8.6 million was used to pay off the Development Finance Authority of Summit County (“DFA”) Revenue Bonds, Series 2018 ( “2018 Bonds”) that had been acquired by the Company in December 2022 pursuant to a previously disclosed arrangement (such that the Company received the payoff of the 2018 Bonds), approximately $1.2 million was used to pay costs of issuance of the 2023 Bonds, and approximately $.9 million was used to fund a debt service reserve held by The Huntington National Bank (“2023 Bond Trustee”), as trustee for the 2023 Bonds. The maturity date of the 2023 Bonds is December 30, 2048. The interest rate on the 2023 Bonds is 6.375%. Interest payments are due on the 2023 Bonds semi-annually on June 30 and December 30 of each year, commencing June 30, 2023.

 

In connection with the issuance of the 2023 Bonds by the Port Authority, the Company transferred ownership of a portion of the roadway and related improvements within Hall of Fame Village grounds to the Port Authority. The Company maintains management rights and maintenance obligations with regard to such roadway pursuant to a Maintenance and Management Agreement among the Port Authority, the Company and the Company’s subsidiary, Newco.

 

The 2023 Bonds will be repaid by the Port Authority from statutory service payments in lieu of taxes paid by the Company in connection with the Company’s Tom Benson Hall of Fame Stadium, ForeverLawn Sports Complex, Constellation Center for Excellence, Center for Performance, Retail I property, Retail II property, Play Action Plaza and an interior private roadway, net of the portion payable to Canton City School District and Plain Local School District and net of administrative fees of Stark County and the City of Canton, and from minimum service payments levied against those parcels excluding the Stadium and Youth Fields. Net statutory service payments are assigned by the City of Canton to the Port Authority for payment of the 2023 Bonds pursuant to a Cooperative Agreement among the Port Authority, City of Canton, the Company and Newco, and then pledged by the Port Authority to the 2023 Bond Trustee for payment of the 2023 Bonds pursuant to a Trust Indenture between the Port Authority and the 2023 Bond Trustee. Minimum service payments are a lien on the parcels under certain TIF declarations and supplements thereto, and are paid by the Company to the 2023 Bond Trustee.

 

The Company and Newco are required to make payments (“Developer Shortfall Payments”) to the extent the above described net statutory service payments and minimum service payments actually paid are not sufficient to pay the scheduled debt service on the 2023 Bonds, and entered into a guaranty of payment of minimum service payments under a Minimum Payment Guaranty until certain performance criteria (debt service coverage of 1.05x for the 2023 Bonds for three consecutive years) are met. In addition, a member of the Company’s board of directors, Stuart Lichter, individually and with his trust, guaranteed Developer Shortfall Payments until debt service coverage of 1.0x for the 2023 Bonds for three consecutive years are met.

 

To the extent statutory service payments and minimum service payments exceed the amounts required for debt service on the 2023 Bonds, the excess paid will first increase and/or restore the 2023 Bonds fund reserve to a maximum of 10% of the original principal amount of the 2023 Bonds (i.e. $1,810,000) and then to redeem the 2023 Bonds, with the amount paid applied to the principal balance of the 2023 Bonds. The 2023 Bonds fund reserve (initially 5% (i.e., $905,000) subject to increase up to 10%) mentioned above will be maintained to be used for payment of debt service and administrative fees if there are insufficient funds generated from the statutory service payments, minimum service payments and Developer Shortfall Payments, and, to the extent unused, make the final 2023 Bonds payment of debt service.

 

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Industrial Realty Group, LLC Affiliate Lenders Transactions

 

As previously disclosed, on November 7, 2022, the Company entered into a letter agreement (the “IRG Letter Agreement”) with Industrial Realty Group, LLC (“IRGLLC”), pursuant to which IRGLLC agreed that IRGLLC and certain IRGLLC affiliates and related parties, which include CH Capital Lending, LLC (“CHCL”), IRG, LLC and JKP Financial, LLC (collectively, “IRG Affiliate Lenders”), will provide the Company and its subsidiaries, in exchange for certain specified consideration described below, the following financial support (the “IRG Financial Support”): (i) certain financial support for an indoor waterpark and a commitment for the financing of the ground-up development of a 180-room family hotel, (ii) an extension to March 31, 2024 of 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”), and (iii) amendment of all lending arrangements from IRG Affiliate Lenders 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. Stuart Lichter, a director of the Company, is President and Chairman of the Board of IRGLLC.

 

On March 17, 2023, pursuant to the IRG Letter Agreement the Company and certain of its subsidiaries signed amendments to (a) certain IRG Affiliate Lender credit arrangements (and entered into backup notes for two credit arrangements) and (b) warrants issued by the Company held by IRG Affiliate Lenders (collectively, defined as Transaction Documents below), effective as of November 7, 2022 (unless otherwise noted), as consideration for the IRG Financial Support. In particular, the Company amended the Series C through Series F warrants issued by the Company held by IRG Affiliate Lenders and, upon approval of the Company’s stockholders under Nasdaq Listing Rule 5635(c), will amend the Series G warrant, as follows: (i) the exercise price of the Series C through Series G warrants held by IRG Affiliate Lenders is reset to a price equal to 105% of the average Nasdaq official closing price of the Company’s Common Stock for the five trading days immediately preceding the date of the Oak Street closing of November 7, 2022, which price was $0.58 per share prior to the Reverse Stock Split (the “Market Price”); and (ii) the warrant expiration dates of the Series C through Series G warrants held by IRG Affiliate Lenders are extended by two years from their current expiration dates. In addition, the Company amended certain IRG Affiliate Lender credit arrangements (and entered into backup notes for two credit arrangements) that are Transaction Documents as follows: (i) all IRG Affiliate Lender loans 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 is reset to $12.77 per share of Common Stock (giving effect to the reverse stock split), subject to adjustment, including a weighted-average antidilution adjustment and subject in the case of loans to which Midwest Lender Fund, LLC is a party to approval of the Company’s stockholders under Nasdaq 5635(c); (iii) the Company and certain subsidiaries entered into a backup promissory note with each of JKP Financial, LLC and Midwest Lender Fund, LLC that provide benefits incremental to and offset by existing notes with such lenders; (iv) the Company agreed to acknowledge an existing pledge of the Company’s 100% membership interest in Newco and reflect that such pledge secures all amounts due under the IRG Affiliate Lender loans; (v) certain IRG Affiliate Lender loans were cross-collateralized and cross-defaulted; (vi) the Company and its subsidiaries covenanted not to assign, pledge, mortgage, encumber or hypothecate any of the underlying assets, membership interests in affiliated entities or intellectual property rights without the written consent of IRG Affiliate Lenders; (vii) prior development fees owed by the Company to IRG Affiliate Lenders were accrued and added to the Bridge Loan, and future development fees owed by the Company to IRG Affiliate Lenders will be paid as when due; and (viii) the Company agreed to pay to IRG Affiliate Lenders 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 amendment and restatement of the Series C through Series F warrants held by IRG Affiliate Lenders and the IRG Affiliate Lender loans (and entering into the two backup notes) and, upon approval of the Company’s stockholders under Nasdaq Listing Rule 5635(c), the Series G warrant and the effectiveness of the conversion provision in the backup promissory note issued to Midwest Lender Fund, LLC, are transactions exempt from registration pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”). Each of the IRG Affiliate Lenders has represented to the Company that it is an “accredited investor” as defined in Rule 501 of the Securities Act.

 

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Notwithstanding anything to the contrary contained in the Transaction Documents (defined below), the Company and the IRG Affiliate Lenders agreed that the total cumulative number of additional shares of Common Stock that may be issued to the IRG Affiliate Lenders under the Transaction Documents 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 the IRG Affiliate Lenders under the Transaction Documents reaches the Nasdaq 19.99% Cap, so as not to violate the 20% limit established in Listing Rule 5635(d), the Company, at its election, will use reasonable commercial efforts to obtain stockholder approval of the Transaction Documents and the issuance of additional shares of Common Stock thereunder, if necessary, in accordance with the requirements of Nasdaq Listing Rule 5635(d) (the “Approval”). For purposes hereof, “Transaction Documents” means the second amended and restated Series C warrant, the second amended and restated Series D Warrant, the two amended and restated Series E warrants, the two amended and restated Series F warrants, the amended and restated Series G warrant, the joinder and second amended and restated secured cognovit promissory note issued to JKP Financial, LLC, the joinder and second amended and restated secured cognovit promissory note issued to IRG, LLC, the backup joinder and first amended and restated secured cognovit promissory note with JKP Financial, LLC, the amendment number 8 to term loan agreement, the second amended and restated secured cognovit promissory note issued to CHCL in connection with the term loan agreement, the fourth amendment to and spreader of the pledge and security agreement under the term loan agreement, the second amendment to and spreader of the mortgage under the term loan agreement, the joinder and first amended and restated secured cognovit bridge promissory note issued to CHCL, and the backup promissory note issued to Midwest Lender Fund, LLC.

 

Under Nasdaq Listing Rule 5635(c), stockholder approval is required prior to the issuance of Common Stock in connection with certain non-public offerings involving the sale, issuance or potential issuance by a listed company of equity compensation. For this purpose, “equity compensation” includes Common Stock (and/or securities convertible into or exercisable for Common Stock) issued to our officers, directors, employees or consultants at a discount to the market value of the Common Stock, and “market value” is the closing bid price immediately preceding the time that the listed company enters into a binding agreement with such officer, director, employee or consultant to issue the equity compensation. Midwest Lender Fund, LLC is wholly-owned by our director Stuart Lichter. The amended and restated Series G warrant issued to Midwest Lender Fund, LLC and the backup promissory note issued to Midwest Lender Fund, LLC do not become effective unless and until approved by stockholders of the Company under Nasdaq Listing Rule 5635(c).

 

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Results of Operations

 

The following table sets forth information comparing the components of net loss for the three months ended March 31, 2023 and the comparable period in 2022:

 

   For the Three Months Ended March 31, 
   2023   2022 
Revenues    
Sponsorships, net of activation costs  $673,475   $819,290 
Event, rents and cost recoveries   908,312    337,393 
Hotel revenues   1,538,646    949,841 
Total revenues   3,120,433    2,106,524 
           
Operating expenses          
Operating expenses   13,673,716    7,666,609 
Hotel operating expenses   1,459,203    1,153,112 
Depreciation expense   2,553,360    3,242,285 
Total operating expenses   17,686,279    12,062,006 
           
Loss from operations   (14,565,846)   (9,955,482)
           
Other income (expense)          
Interest expense, net   (3,632,637)   (1,213,541)
Amortization of discount on note payable   (855,891)   (1,355,974)
Change in fair value of warrant liability   (238,000)   4,750,000 
Change in fair value of interest rate swap   (100,000)   - 
Loss on extinguishment of debt   -    (148,472)
Total other (expense) income   (4,826,528)   2,032,013 
           
Net loss  $(19,392,374)  $(7,923,469)
           
Series B preferred stock dividends   (266,000)   (266,000)
Non-controlling interest   48,577    77,372 
Net loss attributable to HOFRE stockholders  $(19,609,797)  $(8,112,097)
           
Net loss per share – basic  $(3.48)  $(1.71)
           
Weighted average shares outstanding, basic and diluted   5,629,086    4,745,022 

 

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Three Months Ended March 31, 2023 as Compared to the Three Months Ended March 31, 2022

 

Sponsorship Revenues

 

Sponsorship revenues totaled $673,475 for the three months ended March 31, 2023 as compared to $819,290 for the three months ended March 31, 2022, representing a decrease of $145,815, or 17.8%. This decrease was primarily driven by a change in our mix of sponsorship agreements.

 

Event, rents and cost recoveries

 

Revenue from event, rents and cost recoveries was $908,312 for the three months ended March 31, 2023 compared to $337,393 for the three months ended March 31, 2022, for an increase of $570,919, or 169.2%. This increase was primarily driven by an increase in events at the Center for Performance and Stadium, food commissions, rent from tenants in our Fan Engagement Zone and Center for Excellence as well as media revenue.

 

Hotel Revenues

 

Hotel revenue was $1,538,646 for the three months ended March 31, 2023 compared to $949,841 from the three months ended March 31, 2022 for an increase of $588,805, or 62%. This was driven by an increase in guest stays and conferences at the hotel.

 

Operating Expenses

 

Operating expense was $13,673,716 for the three months ended March 31, 2023 compared to $7,666,609 for the three months ended March 31, 2022, for an increase of $6,007,107, or 78.4%. This increase was primarily driven by a $2.5 million increase in payroll and related costs, $1.3 million in film costs (including related impairment), a $818,000 increase in real estate taxes, a $238,000 increase in advertising and marketing, and a $187,000 increase in show and event expenses.

 

Hotel Operating Expenses

 

Hotel operating expense was $1,459,203 for the three months ended March 31, 2023 compared to $1,153,112 for the three months ended March 31, 2022 for an increase of $306,091, or 26.5%. This increase was primarily driven by a $136,000 increase in hotel payroll and related costs, a $70,000 increase in food and beverage costs, and a $42,000 increase in franchise expenses.

 

Depreciation Expense

  

Depreciation expense was $2,553,360 for the three months ended March 31, 2023 compared to $3,242,285 for the three months ended March 31, 2022, for an decrease of $688,925, or 21.2%. The decrease in depreciation expense is primarily the result of certain large assets becoming fully depreciated in 2022.

  

Interest Expense

 

Total interest expense was $3,632,637 for the three months ended March 31, 2023 compared to $1,213,541 for the three months ended March 31, 2022, for a increase of $2,419,096, or 199.3%. The increase in total interest expense was primarily due to a decrease in the proportion of debt that is capitalized for ongoing construction projects.

 

Amortization of Debt Discount

 

Total amortization of debt discount was $855,891 for the three months ended March 31, 2023, compared to $1,355,974 for the three months ended March 31, 2022, for a decrease of $500,083, or 36.9%. The decrease is primarily due to the removal of discounts from IRG-related debt upon the modification of the debt in November 2022.

 

Change in Fair Value of Warrant Liability

 

The change in fair value warrant liability represents a loss of $238,000 for the three months ended March 31, 2023 compared to a gain of $4,750,000 for the three months ended March 31, 2022, for a decrease of $4,988,000 or 105%. The decrease in change in fair value of warrant liability was due primarily to a decrease in our stock price.

 

54

 

 

Liquidity and Capital Resources

 

We have sustained recurring losses through March 31, 2023. Since inception, our operations have been funded principally through the issuance of debt and equity. As of March 31, 2023, we had approximately $7.4 million of unrestricted cash and $7.3 million of restricted cash, and $32.3 million of liquid investments held to maturity consisting primarily of U.S. Treasury securities. Through May 15, 2024, we have $58.6 million in debt principal payments coming due. For a fee of one percent of the principal, we may extend the maturity of up to $41.6 million principal of debt until March 31, 2025.

 

We expect that we will need to raise additional financing to accomplish our development plan over the next several years. 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 its financial condition and operating results, or we may not be able to continue to fund our ongoing operations. If management is unable to execute its planned debt and equity financing initiatives, 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 its project development expenditures. The following table sets forth a summary of cash flows for the periods presented:

  

   For the Three Months Ended March 31, 
   2023   2022 
Cash (used in) provided by:        
Operating Activities  $(11,542,932)  $2,567,693 
Investing Activities   (24,679,007)   (19,739,267)
Financing Activities   17,406,477    12,536,770 
Net decrease in cash and restricted cash  $(18,815,462)  $(4,634,804)

  

Cash Flows for the Three Months Ended March 31, 2023 as Compared to the Three Months Ended March 31, 2022

 

Operating Activities

 

Net cash used in operating activities was $11,542,932 during the three months ended March 31, 2023, which consisted primarily of our net loss of $19,392,374, offset by non-cash depreciation expense of $2,553,360, amortization of note discounts of $855,891, payment-in-kind interest rolled into debt of $1,127,491, and stock-based compensation expense of $651,034. The changes in operating assets and liabilities consisted of an increase in accounts receivable of $888,740, an increase in prepaid expenses and other assets of $1,588,240, a decrease in accounts payable and accrued expenses of $875,060, a decrease in due to affiliates of $110,903, and an increase in other liabilities of $3,184,424.

 

Net cash provided by operating activities was $2,567,693 during the three months ended March 31, 2022. Net cash provided by operating activities was primarily driven by the Company’s net loss of $7,923,469, offset by non-cash depreciation expense of $3,242,285, amortization of note discounts of $1,355,974, payment-in-kind interest rolled into debt of $718,294, a loss on forgiveness of debt of $148,472, stock-based compensation expense of $1,316,195, and a change in fair value of warrant liability of $4,750,000. The changes in operating assets and liabilities consisted of a decrease in accounts receivable of $48,782, a decrease in prepaid expenses and other assets of $451,139, a decrease in accounts payable and accrued expenses of $4,588,788, an increase in due to affiliates of $1,776,606, and an increase in other liabilities of $1,623,200.

 

Investing Activities

 

Net cash used in investing activities was $24,679,007 during the three months ended March 31, 2023 which consisted of investments in treasury securities of $30,021,129, proceeds from treasury securities of $15,021,129, and investments in project development costs of $9,679,007.

 

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Net cash used in investing activities was $19,739,267 during the three months ended March 31, 2022, which consisted of our project development costs.

  

Financing Activities 

 

Net cash provided by financing activities was $17,406,477 during the three months ended March 31, 2023. This consisted primarily of $20,500,000 in proceeds from notes payable, offset by $312,431 in repayments of notes payable, $1,093,750 in payments of our sale leaseback arrangements and $1,537,342 in payment of financing costs.

 

Net cash provided by financing activities was $12,536,770 during the three months ended March 31, 2022. This consisted primarily of $1,817,603 in proceeds from notes payable and $12,531,505 of proceeds from equity raises under our ATM, offset by $1,508,437 in repayments of notes payable, and $153,901 in payment of financing costs.

 

Off-Balance Sheet Arrangements

 

We did not have any off-balance sheet arrangements as of March 31, 2023.

 

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.

 

Based on their evaluation as of March 31, 2023, the principal executive officer and principal financial officer of the Company have concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) are effective.

 

Changes in Internal Control over Financial Reporting

 

During the quarter ended March 31, 2023, there were no changes to the Company’s internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

 

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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, 2022, 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, 2022, except as follows:

 

Our business plan requires additional liquidity and capital resources that might not be available on terms that are favorable to us, or at all.

 

As of March 31, 2023, we had approximately $7.4 million of unrestricted cash and $7.3 million of restricted cash, and $32.3 million of liquid investments held to maturity consisting primarily of U.S. Treasury securities. Through May 15, 2024, we have $58.6 million in debt principal payments coming due. For a fee of one percent of the principal, the Company may extend the maturity of up to $41.6 million principal of debt until March 31, 2025.

 

While our strategy assumes that we will receive sufficient capital to have sufficient working capital, we currently do not have available cash and cash flows from operations to provide us with adequate liquidity for the near-term or foreseeable future. Our current projected liabilities exceed our current cash projections and we have very limited cash flow from current operations. We therefore will require additional capital and/or cash flow from future operations to fund the Company, our debt service obligations and our ongoing business. There is no assurance that we will be able to raise sufficient additional capital or generate sufficient future cash flow from our future operations to fund the Hall of Fame Village, our debt service obligations or our ongoing business. If the amount of capital we are able to raise, together with any income from future operations, is not sufficient to satisfy our liquidity and capital needs, including funding our current debt obligations, we may be required to abandon or alter our plans for the Company. The Company may have to raise additional capital through the equity market, which could result in substantial dilution to existing stockholders. If management is unable to execute its planned debt and equity financing initiatives, these conditions raise substantial doubt about our ability to continue to sustain operations for at least one year from the issuance of our condensed consolidated financial statements for the quarter ended March 31, 2023 included in this quarterly report on Form 10-Q.

 

Our ability to obtain necessary financing may be impaired by factors such as the health of and access to capital markets, our limited track record and the limited historical financial information available, or the substantial doubt about our ability to continue as a going concern. Any additional capital raised through the sale of additional shares of our capital stock, convertible debt or other equity may dilute the ownership percentage of our stockholders.

 

Item 2. Unregistered sales of equity securities and use of proceeds

 

None.

 

Item 3. Defaults upon senior securities

 

None.

 

Item 4. Mine safety disclosures

 

Not applicable.

 

Item 5. Other information

 

None.

 

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Item 6. Exhibits

 

4.1   Second Amended and Restated Series C Warrant (No. 2020 W-1), effective as of November 7, 2022, issued by Hall of Fame Resort & Entertainment Company to CH Capital Lending, LLC (incorporated by reference to Exhibit 10.1 of the Company’s Form 8-K (001-38363), filed with the Commission on March 22, 2023)
4.2   Second Amended and Restated Series D Warrant (Series D No. W-1), effective as of November 7, 2022, issued by Hall of Fame Resort & Entertainment Company to CH Capital Lending, LLC (incorporated by reference to Exhibit 10.2 of the Company’s Form 8-K (001-38363), filed with the Commission on March 22, 2023)
4.3   Amended and Restated Series E Warrant (Series E No. W-1), effective as of November 7, 2022, issued by Hall of Fame Resort & Entertainment Company to CH Capital Lending, LLC (incorporated by reference to Exhibit 10.3 of the Company’s Form 8-K (001-38363), filed with the Commission on March 22, 2023)
4.4   Amended and Restated Series E Warrant (Series E No. W-2), effective as of November 7, 2022, issued by Hall of Fame Resort & Entertainment Company to CH Capital Lending, LLC (incorporated by reference to Exhibit 10.4 of the Company’s Form 8-K (001-38363), filed with the Commission on March 22, 2023)
4.5   Amended and Restated Series F Warrant (Series F No. W-1), effective as of November 7, 2022, issued by Hall of Fame Resort & Entertainment Company to JKP Financial, LLC (incorporated by reference to Exhibit 10.5 of the Company’s Form 8-K (001-38363), filed with the Commission on March 22, 2023)
4.6   Amended and Restated Series F Warrant (Series F No. W-2), effective as of November 7, 2022, issued by Hall of Fame Resort & Entertainment Company to JKP Financial, LLC (incorporated by reference to Exhibit 10.6 of the Company’s Form 8-K (001-38363), filed with the Commission on March 22, 2023)
4.7   Amended and Restated Series G Warrant, dated as of November 7, 2022, issued by Hall of Fame Resort & Entertainment Company to Midwest Lender Fund, LLC (incorporated by reference to Exhibit 10.7 of the Company’s Form 8-K (001-38363), filed with the Commission on March 22, 2023)
10.1   Backup Joinder and First Amended and Restated Secured Cognovit Promissory Note, effective as of November 7, 2022, by and among Hall of Fame Resort & Entertainment Company, HOF Village Newco, LLC, HOF Village Youth Fields, LLC, as makers, and JKP Financial, LLC, as holder (incorporated by reference to Exhibit 10.8 of the Company’s Form 8-K (001-38363), filed with the Commission on March 22, 2023)
10.2   Amendment Number 8 to Term Loan Agreement, effective as of November 7, 2022, by Hall of Fame Resort & Entertainment Company, HOF Village Newco, LLC and HOF Village Youth Fields, LLC, as borrower, in favor of CH Capital Lending, LLC, as administrative agent and lender (incorporated by reference to Exhibit 10.9 of the Company’s Form 8-K (001-38363), filed with the Commission on March 22, 2023)
10.3   Joinder and Second Amended and Restated Secured COGNOVIT Promissory Note, effective as of November 7, 2022, issued by Hall of Fame Resort & Entertainment Company, HOF Village Newco, LLC and HOF Village Youth Fields, LLC to IRG, LLC (incorporated by reference to Exhibit 10.10 of the Company’s Form 8-K (001-38363), filed with the Commission on March 22, 2023)
10.4   Joinder and Second Amended and Restated Secured COGNOVIT Promissory Note, effective as of November 7, 2022, issued by Hall of Fame Resort & Entertainment Company, HOF Village Newco, LLC and HOF Village Youth Fields, LLC to JKP Financial, LLC (incorporated by reference to Exhibit 10.11 of the Company’s Form 8-K (001-38363), filed with the Commission on March 22, 2023)
10.5   Backup Promissory Note, effective as of November 7, 2022, issued by Hall of Fame Resort & Entertainment Company, HOF Village Newco, LLC, and HOF Village Youth Fields, LLC to Midwest Lender Fund, LLC (incorporated by reference to Exhibit 10.12 of the Company’s Form 8-K (001-38363), filed with the Commission on March 22, 2023)

 

58

 

 

10.6   Joinder and First Amended and Restated Promissory Note, effective as of November 7, 2022, issued by Hall of Fame Resort & Entertainment Company, HOF Village Newco, LLC, and HOF Village Youth Fields, LLC to CH Capital Lending, LLC (incorporated by reference to Exhibit 10.13 of the Company’s Form 8-K (001-38363), filed with the Commission on March 22, 2023)
10.7   Cooperative Tax Increment Financing Agreement, dated as of February 1, 2023, among Stark County Port Authority, the City of Canton, Ohio, Hall of Fame Resort & Entertainment Company and HOF Village Newco, LLC, and is joined by HOF Village Stadium, LLC, HOF Village Youth Fields, LLC, HOF Village Center for Excellence, LLC, HOF Village Center for Performance, LLC, HOF Village Retail I, LLC, and HOF Village Retail II, LLC (incorporated by reference to Exhibit 10.71 of the Company’s Annual Report on Form 10-K (File No. 001-38363) filed with the Commission on March 27, 2023)
10.8   Maintenance and Management Agreement (Stark Port Public Roadway), dated as of February 1, 2023, by and between the Stark County Port Authority and HOF Village Newco, LLC, and is joined by Hall of Fame Resort & Entertainment Company (incorporated by reference to Exhibit 10.72 of the Company’s Annual Report on Form 10-K (File No. 001-38363) filed with the Commission on March 27, 2023)
10.9   Minimum Payment Guaranty, dated as of February 2, 2023, by Hall of Fame Resort & Entertainment Company and HOF Village Newco, LLC, to the Stark County Port Authority and The Huntington National Bank (incorporated by reference to Exhibit 10.73 of the Company’s Annual Report on Form 10-K (File No. 001-38363) filed with the Commission on March 27, 2023)
10.10   Shortfall Payment Guaranty, dated as of February 2, 2023, by Stuart Lichter, as trustee of The Stuart Lichter Trust U/T/D dated November 13, 2011, and Stuart Lichter to the Stark County Port Authority and The Huntington National Bank (incorporated by reference to Exhibit 10.74 of the Company’s Annual Report on Form 10-K (File No. 001-38363) filed with the Commission on March 27, 2023)
10.11   Hall of Fame Resort & Entertainment Company 2023 Inducement Plan (incorporated by reference to Exhibit 99.1 of the Company’s Registration Statement on Form S-8 (File No. 333-270572) filed with the Commission on March 15, 2023)
10.12   Form of Restricted Stock Unit Award under Hall of Fame Resort & Entertainment Company 2023 Inducement Plan (incorporated by reference to Exhibit 99.2 of the Company’s Registration Statement on Form S-8 (File No. 333-270572) filed with the Commission on March 15, 2023)
31.1*   Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*   Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32*   Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS*   Interactive Data Files pursuant to Rule 405 of Regulation S-T formatted in Inline Extensible Business Reporting Language (“Inline XBRL”)
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)

 

* Filed herewith

 

59

 

 

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 15, 2023 By: /s/ Michael Crawford
    Michael Crawford
    President and Chief Executive Officer
    (Principal Executive Officer)
     
Date: May 15, 2023 By: /s/ Benjamin Lee
    Benjamin Lee
    Chief Financial Officer
    (Principal Financial and Accounting Officer)

 

 

 

60

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Exhibit 31.1

 

CERTIFICATION PURSUANT TO SARBANES–OXLEY ACT OF 2002

 

I, Michael Crawford, certify that:

 

1. I have reviewed this quarterly report on Form 10–Q of Hall of Fame Resort & Entertainment Company;

 

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a–15(e) and 15d–15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a–15(f) and 15d–15(f)) for the registrant and have:

 

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Date: May 15, 2023 By: /s/ Michael Crawford
    Michael Crawford
    Chief Executive Officer
    (Principal Executive Officer)

  

Exhibit 31.2

 

CERTIFICATION PURSUANT TO SARBANES–OXLEY ACT OF 2002

 

I, Benjamin Lee, certify that:

 

1. I have reviewed this quarterly report on Form 10–Q of Hall of Fame Resort & Entertainment Company;

 

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a–15(e) and 15d–15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a–15(f) and 15d–15(f)) for the registrant and have:

 

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Date: May 15, 2023 By: /s/ Benjamin Lee
    Benjamin Lee
    Chief Financial Officer
    (Principal Financial Officer)

Exhibit 32

 

CERTIFICATION PURSUANT TO SECTION 906
OF THE SARBANES–OXLEY ACT OF 2002

 

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, 2023 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:

 

  1. the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)); and
     
  2. the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

Date: May 15, 2023 By: /s/ Michael Crawford
    Michael Crawford
    Chief Executive Officer
    (Principal Executive Officer)

 

Date: May 15, 2023 By: /s/ Benjamin Lee
    Benjamin Lee
    Chief Financial Officer
    (Principal Financial Officer)