10-Q 1 f10q0923_halloffame.htm QUARTERLY REPORT

 

 

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 September 30, 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) 458-9176

(Registrant’s telephone number, including area code)

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class   Trading Symbol(s)   Name of each exchange on which
registered
Common Stock, $0.0001 par value per share   HOFV   Nasdaq Capital Market
Warrants to purchase 0.064578 shares of Common Stock   HOFVW   Nasdaq Capital Market

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S–T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non–accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b–2 of the Exchange Act.

 

Large accelerated filer ☐ Accelerated filer ☐
Non–accelerated filer Smaller reporting company
  Emerging growth company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b–2 of the Exchange Act).

 

Yes ☐ No

 

As of November 9, 2023, there were 6,435,197 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 September 30, 2023 (unaudited) and December 31, 2022   1
Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2023 and 2022 (unaudited)   2
Condensed Consolidated Statement of Changes in Stockholders’ Equity for the three and nine months ended September 30, 2023 and 2022 (unaudited)   3
Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 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   46
Item 3. Quantitative and qualitative disclosures about market risk   57
Item 4. Controls and procedures   57
     
PART II. OTHER INFORMATION   58
Item 1. Legal proceedings   58
Item 1A. Risk factors   58
Item 2. Unregistered sales of equity securities and use of proceeds   58
Item 3. Defaults upon senior securities   58
Item 4. Mine safety disclosures   58
Item 5. Other information   58
Item 6. Exhibits   59

 

i

 

 

PART I. FINANCIAL INFORMATION

 

Item 1. Financial Statements

 

HALL OF FAME RESORT & ENTERTAINMENT COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

 

   As of 
   September 30,
2023
   December 31,
2022
 
   (unaudited)     
Assets        
Cash  $4,307,380   $26,016,547 
Restricted cash   7,451,901    7,499,835 
Investments held to maturity   -    17,033,515 
Investments available for sale   5,751,000    4,067,754 
Accounts receivable, net   3,747,010    1,811,143 
Prepaid expenses and other assets   3,465,269    3,340,342 
Property and equipment, net   368,023,204    248,826,853 
Right-of-use lease assets   7,423,884    7,562,048 
Project development costs   46,891,983    140,138,924 
Total assets  $447,061,631   $456,296,961 
           
Liabilities and stockholders’ equity          
Liabilities          
Notes payable, net  $202,307,981   $171,315,860 
Accounts payable and accrued expenses   21,834,713    17,575,683 
Due to affiliate   1,252,361    855,485 
Warrant liability   404,000    911,000 
Financing liability   61,953,243    60,087,907 
Derivative liability - interest rate swap   -    200,000 
Operating lease liability   3,425,314    3,413,210 
Other liabilities   11,714,574    10,679,704 
Total liabilities   302,892,186    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 September 30, 2023 and December 31, 2022   -    - 
           
Series B convertible preferred stock, $0.0001 par value; 15,200 shares designated; 200 shares issued and outstanding at September 30, 2023 and December 31, 2022; liquidation preference of $222,011 as of
September 30, 2023
   -    - 
           
Series C convertible preferred stock, $0.0001 par value; 15,000 shares designated; 15,000 shares issued and outstanding at September 30, 2023 and  December 31, 2022; liquidation preference of $15,707,500 as of September 30, 2023   2    2 
           
Common stock, $0.0001 par value; 300,000,000 shares authorized; 5,674,969 and 5,604,869 shares issued and outstanding at September 30, 2023 and December 31, 2022, respectively   567    560 
Additional paid-in capital   341,597,930    339,038,466 
Accumulated deficit   (196,480,832)   (146,898,343)
Total equity attributable to HOFRE   145,117,667    192,140,685 
Non-controlling interest   (948,222)   (882,573)
Total equity   144,169,445    191,258,112 
Total liabilities and stockholders’ equity  $447,061,631   $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
September 30,
   For the Nine Months Ended
September 30,
 
   2023   2022   2023   2022 
                 
Revenues                
Sponsorships, net of activation costs  $689,753   $748,033   $2,054,464   $2,020,095 
Event, rents and other revenues   5,763,583    5,320,309    10,081,905    6,326,565 
Hotel revenues   2,291,493    2,058,687    5,856,170    4,572,428 
Total revenues   8,744,829    8,127,029    17,992,539    12,919,088 
                     
Operating expenses                    
Operating expenses   12,409,390    14,070,498    36,776,959    29,053,220 
Hotel operating expenses   1,814,053    1,809,635    4,860,876    4,278,897 
Depreciation expense   4,559,899    2,650,719    10,486,335    9,420,585 
Total operating expenses   18,783,342    18,530,852    52,124,170    42,752,702 
                     
Loss from operations   (10,038,513)   (10,403,823)   (34,131,631)   (29,833,614)
                     
Other income (expense)                    
Interest expense, net   (6,026,801)   (1,670,377)   (14,063,584)   (3,805,310)
Amortization of discount on note payable   (1,419,684)   (1,132,440)   (3,157,815)   (3,610,738)
Other income   148,796    537,158    148,796    537,158 
Change in fair value of warrant liability   968,000    1,838,000    507,000    9,011,000 
Change in fair value of interest rate swap   203,850    (128,000)   163,850    (128,000)
Change in fair value of investments available for sale   -    -    1,683,246    - 
Loss on extinguishment of debt   -    -    -    (148,472)
Total other (expense) income   (6,125,839)   (555,659)   (14,718,507)   1,855,638 
                     
Net loss  $(16,164,352)  $(10,959,482)  $(48,850,138)  $(27,977,976)
                     
Preferred stock dividends   (266,000)   (266,000)   (798,000)   (798,000)
Loss attributable to non-controlling interest   11,277    101,202    65,649    337,166 
                     
Net loss attributable to HOFRE stockholders  $(16,419,075)  $(11,124,280)  $(49,582,489)  $(28,438,810)
                     
Net loss per share, basic and diluted  $(2.89)  $(2.07)  $(8.77)  $(5.57)
                     
Weighted average shares outstanding, basic and diluted   5,672,602    5,383,462    5,654,184    5,105,744 

 

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 NINE MONTHS ENDED SEPTEMBER 30, 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, restricted stock awards, and performance share units     -       -       -       -       -       -       651,034       -       651,034       -       651,034  
Issuance of restricted stock awards     -       -       -       -       6,207       1       (1 )     -       -       -       -  
Vesting of restricted stock units, net of 8,741 shares withheld for taxes     -       -       -       -       46,255       5       (5 )     -       -       -       -  
Cancellation of fractional shares     -       -       -       -       (10,433 )     (1 )     1       -       -       -       -  
Preferred stock dividend     -       -       -       -       -       -       -       (266,000 )     (266,000 )     -       (266,000 )
Net loss     -       -       -       -       -       -       -       (19,343,797 )     (19,343,797 )     (48,577 )     (19,392,374 )
                                                                                         
Balance as of March 31, 2023     200     $ -       15,000     $ 2       5,646,898     $ 565     $ 339,689,495     $ (166,508,140 )   $ 173,181,922     $ (931,150 )   $ 172,250,772  
                                                                                         
Stock-based compensation on RSU, restricted stock awards, and performance share units     -       -       -       -       -       -       1,086,017       -       1,086,017       -       1,086,017  
Issuance of restricted stock awards     -       -       -       -       4,881       -       -       -       -       -       -  
Vesting of restricted stock units, net of 5,012 shares withheld for taxes     -       -       -       -       10,789       1       (1 )     -       -       -       -  
Sale of shares under ATM     -       -       -       -       4,878       -       39,261       -       39,261       -       39,261  
Preferred stock dividends     -       -       -       -       -       -       -       (266,000 )     (266,000 )     -       (266,000 )
Net loss     -       -       -       -       -       -       -       (13,287,617 )     (13,287,617 )     (5,795 )     (13,293,412 )
                                                                                         
Balance as of June 30, 2023     200     $ -       15,000     $ 2       5,667,446     $ 566     $ 340,814,772     $ (180,061,757 )   $ 160,753,583     $ (936,945 )   $ 159,816,638  
                                                                                         
Stock-based compensation on RSU and restricted stock awards and performance share units     -       -       -       -       -       -       783,159       -       783,159       -       783,159  
Issuance of restricted stock awards     -       -       -       -       4,230       1       (1 )     -       -       -       -  
Vesting of restricted stock units, net of 696 shares withheld for taxes     -       -       -       -       3,293       -       -       -       -       -       -  
Preferred stock dividends     -       -       -       -       -       -       -       (266,000 )     (266,000 )     -       (266,000 )
Net loss     -       -       -       -       -       -       -       (16,153,075 )     (16,153,075 )     (11,277 )     (16,164,352 )
                                                                                         
Balance as of September 30, 2023     200     $ -       15,000     $ 2       5,674,969     $ 567     $ 341,597,930     $ (196,480,832 )   $ 145,117,667     $ (948,222 )   $ 144,169,445  
                                                                                         
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  
                                                                                         
Stock-based compensation on RSU and restricted stock awards     -       -       -       -       -       -       1,254,724       -       1,254,724       -       1,254,724  
Issuance of restricted stock awards     -       -       -       -       2,009       -       -       -       -       -       -  
Vesting of restricted stock units     -       -       -       -       105       -       -       -       -       -       -  
Shares issued in connection with issuance of notes payable     -       -       -       -       5,682       1       75,418       -       75,419       -       75,419  
Warrants issued in connection with issuance of notes payable     -       -       -       -       -       -       18,709       -       18,709       -       18,709  
Sale of shares under ATM     -       -       -       -       256,040       26       3,748,256       -       3,748,282       -       3,748,282  
Preferred stock dividends     -       -       -       -       -       -       -       (266,000 )     (266,000 )     -       (266,000 )
Net loss     -       -       -       -       -       -       -       (8,936,433 )     (8,936,433 )     (158,592 )     (9,095,025 )
                                                                                         
Balance as of June 30, 2022     200     $ -       15,000     $ 2       5,342,089     $ 534     $ 331,402,150     $ (117,266,369 )   $ 214,136,317     $ (832,730 )   $ 213,303,587  
                                                                                         
Stock-based compensation on RSU and restricted stock awards     -       -       -       -       -       -       706,960       -       706,960       -       706,960  
Issuance of restricted stock awards     -       -       -       -       2,085       -       -       -       -       -       -  
Vesting of restricted stock units, net of 6,244 shares withheld for taxes     -       -       -       -       4,951       -       -       -       -       -       -  
Sale of shares under ATM     -       -       -       -       160,058       16       2,420,287       -       2,420,303       -       2,420,303  
Preferred stock dividends     -       -       -       -       -       -       -       (266,000 )     (266,000 )     -       (266,000 )
Net loss     -       -       -       -       -       -       -       (10,858,280 )     (10,858,280 )     (101,202 )     (10,959,482 )
                                                                                         
Balance as of September 30, 2022     200     $ -       15,000     $ 2       5,509,183     $ 550     $ 334,529,397     $ (128,390,649 )   $ 206,139,300     $ (933,932 )   $ 205,205,368  

 

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 Nine Months Ended
September 30,
 
   2023   2022 
Cash Flows From Operating Activities        
Net loss   (48,850,138)  $(27,977,976)
Adjustments to reconcile net loss to cash flows (used in) provided by operating activities          
Depreciation expense   10,486,335    9,420,585 
Amortization of note discounts   3,157,815    3,610,738 
Amortization of financing liability   5,146,586    - 
Recognition and impairment of film costs   1,305,000    - 
Interest income on investments held to maturity   (563,652)   - 
Interest paid in kind   4,334,790    2,659,044 
Loss on extinguishment of debt   -    148,472 
Gain on sale of asset   (148,796)   - 
Change in fair value of interest rate swap   (163,850)   128,000 
Change in fair value of warrant liability   (507,000)   (9,011,000)
Change in fair value of investments available for sale   (1,683,246)   - 
Stock-based compensation expense   2,520,210    3,277,879 
Non-cash operating lease expense   390,502    134,111 
Changes in operating assets and liabilities:          
Accounts receivable   (1,935,867)   (1,201,990)
Prepaid expenses and other assets   (124,927)   719,172 
Accounts payable and accrued expenses   5,838,427    16,092,721 
Operating leases   (240,234)   13,436 
Due to affiliates   396,876    2,740,818 
Other liabilities   1,034,870    1,659,949 
Net cash (used in) provided by operating activities   (19,606,299)   2,413,959 
           
Cash Flows From Investing Activities          
Investments in securities held to maturity   (71,947,597)   - 
Proceeds from securities held to maturity   89,470,392    - 
Proceeds from sale of property and equipment   241,691    - 
Additions to project development costs and property and equipment   (37,833,640)   (77,862,339)
Net cash used in investing activities   (20,069,154)   (77,862,339)
           
Cash Flows From Financing Activities          
Proceeds from notes payable   24,270,339    68,807,100 
Repayments of notes payable   (1,069,800)   (8,238,479)
Payment of financing costs   (1,554,048)   (5,447,177)
Payment on financing lease   (3,281,250)   - 
Payment of Series B dividends   (450,000)   (450,000)
Payment for repurchase of interest rate swap   (36,150)   - 
Proceeds from failed sale leaseback   -    15,588,519 
Proceeds from sale of common stock under ATM   39,261    20,403,517 
Net cash provided by financing activities   17,918,352    90,663,480 
           
Net (decrease) increase in cash and restricted cash   (21,757,101)   15,215,100 
           
Cash and restricted cash, beginning of year   33,516,382    17,388,040 
           
Cash and restricted cash, end of period  $11,759,281   $32,603,140 
           
Cash  $4,307,380   $15,913,191 
Restricted Cash   7,451,901    16,689,949 
Total cash and restricted cash  $11,759,281   $32,603,140 

  

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 Nine Months Ended
September 30,
 
    2023     2022  
Supplemental disclosure of cash flow information            
Cash paid during the year for interest   $ 6,553,721     $ 4,466,500  
Cash paid for income taxes   $ -     $ -  
                 
Non-cash investing and financing activities                
                 
Project development cost acquired through accounts payable and accrued expenses, net   $ -     $ 334,658  
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   $ 348,000     $ 348,000  
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  
Shares issued in connection with issuance of notes payable   $ -     $ 75,419  
Warrants issued in connection with issuance of notes payable   $ -     $ 18,709  

  

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 DoubleTree by Hilton located in downtown Canton and the Hall of Fame Village, which is a multi-use sports, entertainment, and media destination centered around the PFHOF’s campus. The Company is pursuing a differentiation strategy across three pillars, including destination-based assets, HOF Village Media Group, LLC (“Hall of Fame Village Media”), and gaming.

 

The Company has entered into multiple agreements with PFHOF, and certain government entities, which outline the rights and obligations of each of the parties with regard to the property on which the Hall of Fame Village sits, portions of which are owned by the Company and portions of which are net leased to the Company by government and quasi-governmental entities (see Note 9 for additional information). Under these agreements, the PFHOF and the lessor entities are entitled to use portions of the Hall of Fame Village on a direct-cost basis.

 

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 September 30, 2023 and the Company’s accumulated deficit was $196,480,832 as of such date. Since inception, the Company’s operations have been funded principally through the issuance of debt and equity. As of September 30, 2023, the Company had approximately $4.3 million of unrestricted cash and $7.5 million of restricted cash. The Company has approximately $51.2 million of debt coming due through November 14, 2024. The Company may extend the maturity of up to $42.1 million principal of debt until March 31, 2025 for a fee of one percent of the outstanding principal. These factors raise substantial doubt about the Company’s ability to continue operations as a going concern.

 

The Company has entered into the following financing transactions. 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.

 

On May 2, 2023, the Company issued 800 shares of the Company’s 7.00% Series A Cumulative Redeemable Preferred Stock at a price of $1,000 per share for an aggregate purchase price of $800,000.

 

On September 21, 2023, CH Capital Lending, LLC succeeded to the rights and obligations of The Huntington National Bank (“HNB”) under the Loan Agreement and the Company borrowed $2,000,000 for the purpose of paying the costs of construction of the Hall of Fame Village Waterpark.

 

The Company expects that it will need to raise additional financing to accomplish its development plan and fund its working capital. The Company is seeking to obtain additional funding through debt, construction lending, and equity financing. There are no assurances that the Company will be able to raise capital on terms acceptable to the Company or at all, or that cash flows generated from its operations will be sufficient to meet its current operating costs. If the Company is unable to obtain sufficient amounts of additional capital, it may be required to reduce the scope of its planned development, which could harm its financial condition and operating results, or it may not be able to continue to fund its ongoing operations. 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 and nine months ended September 30, 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 credit losses, depreciation, costs capitalized to project development costs, useful lives of long-lived assets, potential impairment, accounting for debt modifications and extinguishments, 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 income (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 September 30, 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 September 30, 2023 and December 31, 2022 were $7,451,901 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 September 30, 2023 and December 31, 2022, the Company held $0 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 September 30, 2023 and December 31, 2022, the Company also had $5,751,000 and $4,067,754, respectively in securities available for sale, which are marked to market value at each reporting period.

 

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 customer has missed a scheduled payment. Interest is not charged on delinquencies.

 

The carrying amount of accounts receivable is reduced by an allowance that reflects management’s best estimate of the amounts that will not be collected. Management individually reviews all delinquent accounts receivable balances and based on an assessment of current creditworthiness, estimates the portion, if any, of the balance that will not be collected. As of September 30, 2023 and December 31, 2022, the Company has recorded an allowance for credit losses of $9,140,320 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”.

 

10

 

 

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, events, and hotel and restaurant operations. The sponsorship arrangements, in which the customer sponsors a play area or event and receives specified brand recognition and other benefits over a set period of time, recognize revenue on a straight-line basis over the time period specified in the contract. The excess of amounts contractually due over the amounts of sponsorship revenue recognized are included in other liabilities on the accompanying 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 short-term rentals, and events are recognized at the time the respective event or service has been performed. Rental revenue for long term leases is recorded on a straight-line basis over the term of the lease beginning on the commencement date.

 

A performance obligation is a promise in a contract to transfer a distinct good or service to a customer. If the contract does not specify the revenue by performance obligation, the Company allocates the transaction price to each performance obligation based on its relative standalone selling price. Such prices are generally determined using prices charged to customers or using the Company’s expected cost plus margin. Revenue is recognized as the Company’s performance obligations are satisfied. If consideration is received in advance of the Company’s performance, including amounts which are refundable, recognition of revenue is deferred until the performance obligation is satisfied or amounts are no longer refundable.

 

The Company’s owned hotel revenues primarily consist of hotel room sales, revenue from accommodations sold in conjunction with other services (e.g., package reservations), food and beverage sales, and other ancillary goods and services (e.g., parking) related to owned hotel properties. Revenue is recognized when rooms are occupied or goods and services have been delivered or rendered, respectively. Payment terms typically align with when the goods and services are provided. Although the transaction prices of hotel room sales, goods, and other services are generally fixed and based on the respective room reservation or other agreement, an estimate to reduce the transaction price is required if a discount is expected to be provided to the customer. For package reservations, the transaction price is allocated to the performance obligations within the package based on the estimated standalone selling price of each component.

 

Restaurant revenue at Company-operated restaurants is recognized when payment is tendered at the point of sale, net of sales tax, discounts and other sales related taxes.

 

11

 

 

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 September 30, 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 and nine months ended September 30, 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.

 

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 September 30, 2023, the Company recorded $0 in film and media costs. During the nine months ended September 30, 2023 and 2022, the Company recorded $1,305,000 and $0 in film and media costs, respectively, including impairment of $1,145,000 and $0, respectively, 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.

 

12

 

 

Hall of Fame Resort & Entertainment Company and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

 

Note 2: Summary of Significant Accounting Policies (continued)

 

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.

 

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.

 

13

 

 

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 the fair value hierarchy to measure the fair value of its warrant liabilities, investments available for sale and interest rate swap. The Company revalues its financial instruments at every reporting period. The Company recognizes gains or losses on the change in fair value of the warrant liabilities as “change in fair value of warrant liability” in the condensed consolidated statements of operations. The Company recognizes gains or losses on the change in fair value of the investments available for sale as “change in fair value of investments available for sale” in the condensed consolidated statements of operations. The Company recognizes gains or losses on the change in fair value of the interest rate swap as “change in fair value of interest rate swap” in the condensed consolidated statements of operations.

 

The following table provides the financial liabilities measured on a recurring basis and reported at fair value on the balance sheets as of September 30, 2023 and December 31, 2022 and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value:

 

       September 30,   December 31, 
   Level   2023   2022 
Warrant liabilities – Public Series A Warrants   1   $328,000   $748,000 
Warrant liabilities – Private Series A Warrants   3    -    - 
Warrant liabilities – Series B Warrants   3    76,000    163,000 
Fair value of aggregate warrant liabilities       $404,000   $911,000 
                
Fair value of interest rate swap liability   2   $-   $200,000 
                
Investments available for sale   3   $5,751,000   $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.

 

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   (420,000)   -    (87,000)   (507,000)
                     
Fair value as of September 30, 2023  $328,000   $-   $76,000   $404,000 

 

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 (continued)

 

The key inputs into the Black Scholes valuation model for the Level 3 valuations as of September 30, 2023 and December 31, 2022 are as follows:

 

   September 30, 2023   December 31, 2022 
   Private
Series A
Warrants
   Series B
Warrants
   Private
Series A
Warrants
   Series B
Warrants
 
Term (years)   1.8    2.1    2.5    2.9 
Stock price  $5.82   $5.82   $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   76.36%   75.31%   52.27%   63.86%
Risk free interest rate   5.03%   5.03%   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.

 

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 and nine months ended September 30, 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 September 30, 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 and
Nine Months Ended
September 30,
 
   2023   2022 
Warrants to purchase shares of Common Stock   2,003,649    2,006,243 
Unvested restricted stock units to be settled in shares of Common Stock   163,922    127,981 
Shares of Common Stock issuable upon conversion of convertible notes   3,588,102    1,117,687 
Shares of Common Stock issuable upon conversion of Series B Preferred Stock   2,971    2,971 
Shares of Common Stock issuable upon conversion of Series C Preferred Stock   454,408    454,545 
Total potentially dilutive securities   6,213,052    3,709,427 

 

15

 

 

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   September 30,
2023
    December 31,
2022
 
Land       $ 27,651,699     $ 12,414,473  
Land improvements   25 years     52,978,397       51,808,296  
Building and improvements   15 to 39 years     346,319,607       239,068,974  
Equipment   5 to 10 years     13,236,972       7,212,246  
Property and equipment, gross         440,186,675       310,503,989  
                     
Less: accumulated depreciation         (72,163,471 )     (61,677,136 )
Property and equipment, net       $ 368,023,204     $ 248,826,853  
Project development costs       $ 46,891,983     $ 140,138,924  

  

For the three months ended September 30, 2023 and 2022, the Company recorded depreciation expense of $4,559,899 and $2,650,719, respectively, and for the nine months ended September 30, 2023 and 2022, of $10,486,335 and $9,420,585, respectively. For the nine months ended September 30, 2023 and 2022, the Company incurred $33,174,328 and $52,560,589 of capitalized project development costs, respectively.

 

For the nine months ended September 30, 2023 and 2022, the Company transferred $127,953,961 and $27,687,727 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 September 30, 2023 and December 31, 2022, respectively.

 

16

 

 

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 September 30, 2023(1):

 

       Debt discount
and deferred
financing
       Interest Rate   Maturity
   Gross   costs   Net   Stated   Effective   Date
Preferred equity loan(2)  $6,800,000   $-   $6,800,000    7.00%   7.00%  Various
City of Canton Loan(3)   3,387,500    (4,452)   3,383,048    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)   9,670,339    -    9,670,339    12.50%   12.50%  3/31/2024
MKG DoubleTree Loan(7)   15,300,000    -    15,300,000    10.25%   10.25%  10/13/2023
Convertible PIPE Notes   28,564,911    (5,597,283)   22,967,628    10.00%   24.40%  3/31/2025
Canton Cooperative Agreement   2,570,000    (163,139)   2,406,861    3.85%   5.35%  5/15/2040
CH Capital Loan(5)(6)(8)   9,340,269    -    9,340,269    12.50%   12.50%  3/31/2024
Constellation EME #2(4)   2,800,533    -    2,800,533    5.93%   5.93%  4/30/2026
IRG Split Note(5)(6)(9)   4,542,782    -    4,542,782    12.50%   12.50%  3/31/2024
JKP Split Note(5)(6)(9)   4,542,782    -    4,542,782    12.50%   12.50%  3/31/2024
ErieBank Loan   19,888,626    (487,073)   19,401,553    9.50%   9.74%  12/15/2034
PACE Equity Loan   8,104,871    (269,319)   7,835,552    6.05%   6.18%  7/31/2047
PACE Equity CFP   2,984,572    (25,570)   2,959,002    6.05%   6.10%  7/31/2046
CFP Loan(6)(10)   4,252,006    -    4,252,006    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)   11,068,877    -    11,068,877    12.50%   12.50%  3/31/2024
Stadium PACE Loan   33,387,844    (1,656,470)   31,731,374    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    (10,437)   4,989,563    6.00%   6.04%  6/30/2029
TDD Bonds   7,425,000    (658,471)   6,766,529    5.41%   5.78%  12/1/2046
TIF   18,100,000    (1,550,706)   16,549,294    6.375%   6.71%  12/30/2048
CH Capital Retail   2,000,000    -    2,000,000    8.8%   8.8%  9/27/2027
Total  $212,730,901   $(10,422,920)  $202,307,981              

 

17

 

 

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 September 30, 2023 and 2022, the Company recorded amortization of note discounts of $1,419,684 and $1,132,440, respectively. During the nine months ended September 30, 2023 and 2022, the Company recorded amortization of note discounts of $3,157,815 and $3,610,738, respectively.

 

During the nine months ended September 30, 2023 and 2022, the Company recorded paid-in-kind interest of $4,334,790 and $2,659,044, respectively.

 

18

 

 

Hall of Fame Resort & Entertainment Company and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

 

Note 4: Notes Payable, net (continued)

 

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 September 30, 2023 and 2022 the Company was in compliance with or has obtained waivers for 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 September 30, 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.

 

(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. In August 2023, the Company and CNB Bank further amended the loan to extend the maturity date to October 13, 2023 in order to facilitate a successful refinancing.  On October 12, 2023, the Company further amended this loan and extended its maturity date. See Note 13, Subsequent Events, for more information.

 

(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.

 

19

 

 

Hall of Fame Resort & Entertainment Company and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

 

Note 4: Notes Payable, net (continued)

 

Accrued Interest on Notes Payable

 

As of September 30, 2023 and December 31, 2022, accrued interest on notes payable, were as follows:

 

   September 30,
2023
   December 31,
2022
 
Preferred Equity Loan  $68,930   $64,575 
City of Canton Loan   1,596    1,555 
New Market/SCF   91,000    - 
MKG DoubleTree Loan   127,499    121,656 
Canton Cooperative Agreement   113,324    48,708 
CH Capital Loan   60,352    55,328 
IRG Split Note   28,490    28,490 
JKP Split Note   35,138    35,138 
ErieBank Loan   173,644    140,394 
PACE Equity CFE Loan   81,983    213,842 
CFP Loan   6,194    5,245 
Stark County Community Foundation   227,500    - 
CH Capital Bridge Loan   -    70,659 
Stadium PACE Loan   166,939    166,939 
TDD Bonds   114,012    13,533 
TIF   288,469    - 
CH Capital Retail   3,911    - 
Total  $1,588,981   $966,062 

 

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

 

20

 

 

Hall of Fame Resort & Entertainment Company and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

 

Note 4: Notes Payable, net (continued)

 

TIF Loan

 

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 Sports Complex. 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.

 

21

 

 

Hall of Fame Resort & Entertainment Company and Subsidiaries

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