UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
☒ ☒Quarterly Report Pursuant to SectionQUARTERLY REPORT PURSUANT TO SECTION 13 orOR 15(d) of the Securities Exchange Act ofOF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2018June 30, 2022
☐ ☐Transition Report Pursuant to SectionTRANSITION REPORT PURSUANT TO SECTION 13 orOR 15(d) of the Securities Exchange Act ofOF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______________ to ______________
Commission File Numberfile number: 001-38363
GORDON POINTE ACQUISITION CORP.HALL OF FAME RESORT & ENTERTAINMENT COMPANY
(Exact name of Registrantregistrant as Specifiedspecified in Its Charter)its charter)
| Delaware | ||
(State or
| (
|
2626 Fulton Drive NW
Canton, OH 44718
(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 1.421333 shares of Common Stock | ||||
| HOFVW | ||||
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 pastpreceding 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 and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-TS–T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-acceleratednon–accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company”company,” and “emerging growth company” in Rule 12b-212b–2 of the Exchange Act.
| Large accelerated filer ☐ | 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-212b–2 of the Exchange Act).
Yes ☒☐ No ☐☒
As of May 11, 2018,August 9, 2022, there were 12,500,000117,629,003 shares of the Company’s Class A commonregistrant’s Common stock, $0.0001 par value $0.0001 per share, and 3,125,000 shares of the Company’s Class F common stock, par value $0.0001 per share, issued and outstanding.
GORDON POINTE ACQUISITION CORP.HALL OF FAME RESORT & ENTERTAINMENT COMPANY AND SUBSIDIARIES
FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 2018
TABLE OF CONTENTS
i
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
GORDON POINTE ACQUISITION CORP.HALL OF FAME RESORT & ENTERTAINMENT COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
| March 31, 2018 | December 31, 2017 | |||||||
| (Unaudited) | ||||||||
| ASSETS | ||||||||
| Current Assets | ||||||||
| Cash | $ | 466,060 | $ | 3,193 | ||||
| Prepaid expenses | 83,692 | — | ||||||
| Total Current Assets | 549,752 | 3,193 | ||||||
| Deferred offering costs | — | 331,623 | ||||||
| Marketable securities held in Trust Account | 126,525,276 | — | ||||||
| Total Assets | $ | 127,075,028 | $ | 334,816 | ||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Current liabilities | ||||||||
| Accounts payable and accrued expenses | $ | 124,193 | $ | 2,294 | ||||
| Income taxes payable | 9,531 | — | ||||||
| Accrued offering costs | — | 254,731 | ||||||
| Advances from related party | 88,095 | 55,207 | ||||||
| Total Current Liabilities | 221,819 | 312,232 | ||||||
| Deferred underwriting fees | 4,375,000 | — | ||||||
| Deferred legal fee payable | 72,500 | — | ||||||
| Total Liabilities | 4,669,319 | 312,232 | ||||||
| Commitments | ||||||||
| Common stock subject to possible redemption, 11,603,176 and -0- shares at redemption value as of March 31, 2018 and December 31, 2017, respectively | 117,405,703 | — | ||||||
| Stockholders’ Equity | ||||||||
| Preferred stock, $0.0001 par value; 5,000,000 authorized; -0- issued and outstanding | — | — | ||||||
| Class A Common stock, $0.0001 par value; 40,000,000 shares authorized; 896,824 and -0- issued and outstanding (excluding 11,603,176 and -0- shares subjection to possible redemption) as of March 31, 2018 and December 31, 2017, respectively | 89 | — | ||||||
| Class F Common stock, $0.0001 par value; 5,000,000 shares authorized; 3,125,000 and 3,593,750 shares issued and outstanding as of March 31, 2018 and December 31, 2017, respectively | 313 | 359 | ||||||
| Additional paid-in capital | 4,966,164 | 24,641 | ||||||
| Retained earnings/(accumulated deficit) | 33,440 | (2,416 | ) | |||||
| Total Stockholders’ Equity | 5,000,006 | 22,584 | ||||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | 127,075,028 | $ | 334,816 | ||||
| As of | ||||||||
| June 30, 2022 | December 31, 2021 | |||||||
| (unaudited) | ||||||||
| Assets | ||||||||
| Cash | $ | 10,615,810 | $ | 10,282,983 | ||||
| Restricted cash | 7,214,439 | 7,105,057 | ||||||
| Accounts receivable, net | 2,737,750 | 2,367,225 | ||||||
| Prepaid expenses and other assets | 2,573,667 | 8,350,604 | ||||||
| Property and equipment, net | 188,252,325 | 180,460,562 | ||||||
| Right of use asset | 7,651,080 | - | ||||||
| Project development costs | 158,722,100 | 128,721,480 | ||||||
| Total assets | $ | 377,767,171 | $ | 337,287,911 | ||||
| Liabilities and stockholders’ equity | ||||||||
| Liabilities | ||||||||
| Notes payable, net | $ | 122,930,044 | $ | 101,360,196 | ||||
| Accounts payable and accrued expenses | 23,651,149 | 12,120,891 | ||||||
| Due to affiliate | 2,746,497 | 1,818,955 | ||||||
| Warrant liability | 3,160,000 | 13,669,000 | ||||||
| Lease liability | 3,404,682 | - | ||||||
| Other liabilities | 8,571,212 | 3,740,625 | ||||||
| Total liabilities | 164,463,584 | 132,709,667 | ||||||
| Commitments and contingencies (Note 6, 7, and 8) | ||||||||
| Stockholders’ equity | ||||||||
| Undesignated preferred stock, $0.0001 par value; 4,932,200 shares authorized; no shares issued or outstanding at June 30, 2022 and December 31, 2021 | - | - | ||||||
| Series B convertible preferred stock, $0.0001 par value; 15,200 shares designated; 200 and 15,200 shares issued and outstanding at June 30, 2022 and December 31, 2021, respectively; liquidation preference of $215,011 as of June 30, 2022 | - | 2 | ||||||
| Series C convertible preferred stock, $0.0001 par value; 15,000 shares designated; 15,000 and 0 shares issued and outstanding at June 30, 2022 and December 31, 2021, respectively; liquidation preference of $15,632,500 as of June 30, 2022 | 2 | - | ||||||
| Common stock, $0.0001 par value; 300,000,000 shares authorized; 117,527,249 and 97,563,841 shares issued and outstanding at June 30, 2022 and December 31, 2021, respectively | 11,753 | 9,756 | ||||||
| Additional paid-in capital | 331,390,931 | 305,117,091 | ||||||
| Accumulated deficit | (117,266,369 | ) | (99,951,839 | ) | ||||
| Total equity attributable to HOFRE | 214,136,317 | 205,175,010 | ||||||
| Non-controlling interest | (832,730 | ) | (596,766 | ) | ||||
| Total equity | 213,303,587 | 204,578,244 | ||||||
| Total liabilities and stockholders’ equity | $ | 377,767,171 | $ | 337,287,911 | ||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
1
GORDON POINTE ACQUISITION CORP.HALL OF FAME RESORT & ENTERTAINMENT COMPANY AND SUBSIDIARIES
CONDENSED STATEMENTCONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)(unaudited)
| Three Months Ended March 31, 2018 | ||||
| Operating costs | $ | 229,889 | ||
| Loss from operations | (229,889 | ) | ||
| Other income (expense): | ||||
| Interest income | 292,038 | |||
| Unrealized loss on marketable securities held in Trust Account | (16,762 | ) | ||
| Other income, net | 275,276 | |||
| Income before provision for income taxes | 45,387 | |||
| Provision for income taxes | (9,531 | ) | ||
| Net income | $ | 35,856 | ||
| Weighted average shares outstanding, basic and diluted(1) | 3,711,062 | |||
| Basic and diluted net loss per common share(2) | $ | (0.05 | ) | |
| For the Three Months Ended June 30, | For the Six Months Ended June 30, | |||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| Revenues | ||||||||||||||||
| Sponsorships, net of activation costs | $ | 452,772 | $ | 1,508,402 | $ | 1,272,062 | $ | 2,983,838 | ||||||||
| Event, rents and cost recoveries | 668,863 | 60,135 | 1,006,256 | 103,680 | ||||||||||||
| Hotel revenues | 1,563,900 | 795,222 | 2,513,741 | 1,191,560 | ||||||||||||
| Total revenues | 2,685,535 | 2,363,759 | 4,792,059 | 4,279,078 | ||||||||||||
| Operating expenses | ||||||||||||||||
| Operating expenses | 6,799,280 | 6,219,781 | 14,325,979 | 12,228,780 | ||||||||||||
| Hotel operating expenses | 1,316,150 | 1,596,989 | 2,469,262 | 2,363,154 | ||||||||||||
| Commission expense | 516,833 | 260,583 | 656,743 | 427,250 | ||||||||||||
| Depreciation expense | 3,527,581 | 2,972,130 | 6,769,866 | 5,893,067 | ||||||||||||
| Total operating expenses | 12,159,844 | 11,049,483 | 24,221,850 | 20,912,251 | ||||||||||||
| Loss from operations | (9,474,309 | ) | (8,685,724 | ) | (19,429,791 | ) | (16,633,173 | ) | ||||||||
| Other income (expense) | ||||||||||||||||
| Interest expense, net | (921,392 | ) | (1,004,419 | ) | (2,134,933 | ) | (1,959,727 | ) | ||||||||
| Amortization of discount on note payable | (1,122,324 | ) | (1,164,613 | ) | (2,478,298 | ) | (2,398,727 | ) | ||||||||
| Change in fair value of warrant liability | 2,423,000 | 26,315,888 | 7,173,000 | (90,035,112 | ) | |||||||||||
| (Loss) gain on extinguishment of debt | - | - | (148,472 | ) | 390,400 | |||||||||||
| Total other income (expense) | 379,284 | 24,146,856 | 2,411,297 | (94,003,166 | ) | |||||||||||
| Net (loss) income | $ | (9,095,025 | ) | $ | 15,461,132 | $ | (17,018,494 | ) | $ | (110,636,339 | ) | |||||
| Series B preferred stock dividends | (266,000 | ) | (130,000 | ) | (532,000 | ) | (130,000 | ) | ||||||||
| Loss attributable to non-controlling interest | 158,592 | 209,921 | 235,964 | 160,210 | ||||||||||||
| Net (loss) income attributable to HOFRE stockholders | $ | (9,202,433 | ) | $ | 15,541,053 | $ | (17,314,530 | ) | $ | (110,606,129 | ) | |||||
| Net (loss) income per share, basic | $ | (0.08 | ) | $ | 0.16 | $ | (0.16 | ) | $ | (1.30 | ) | |||||
| Weighted average shares outstanding, basic | 113,997,493 | 94,397,222 | 109,194,639 | 84,978,294 | ||||||||||||
| Net (loss) income per share, diluted | $ | (0.08 | ) | $ | - | $ | (0.16 | ) | $ | (1.30 | ) | |||||
| Weighted average shares outstanding, diluted | 113,997,493 | 107,353,272 | 109,194,639 | 84,978,294 | ||||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
2
GORDON POINTE ACQUISITION CORP.HALL OF FAME RESORT & ENTERTAINMENT COMPANY AND SUBSIDIARIES
CONDENSED STATEMENTCONSOLIDATED STATEMENTS OF CASH FLOWSCHANGES IN STOCKHOLDERS’ EQUITY
(Unaudited)FOR THE SIX MONTHS ENDED JUNE 30, 2022 AND 2021
(unaudited)
| Three Months Ended March 31, 2018 | ||||
| Cash Flows from Operating Activities: | ||||
| Net income | $ | 35,856 | ||
| Adjustments to reconcile net income to net cash used in operating activities: | ||||
| Interest earned on marketable securities held in Trust Account | (292,038 | ) | ||
| Unrealized loss on marketable securities held in Trust Account | 16,762 | |||
| Changes in operating assets and liabilities: | ||||
| Prepaid expenses | (83,692 | ) | ||
| Accounts payable and accrued expenses | 121,899 | |||
| Income taxes payable | 9,531 | |||
| Net cash used in operating activities | (191,682 | ) | ||
| Cash Flows from Investing Activities: | ||||
| Investment of cash in Trust Account | (126,250,000 | ) | ||
| Net cash used in investing activities | (126,250,000 | ) | ||
| Cash Flows from Financing Activities: | ||||
| Proceeds from sale of Units, net of underwriting discounts paid | 122,500,000 | |||
| Proceeds from sale of Private Placement Warrants | 4,900,000 | |||
| Advances from related party | 88,095 | |||
| Repayment of advances from related party | (55,207 | ) | ||
| Payment of offering costs | (528,339 | ) | ||
| Net cash provided by financing activities | 126,904,549 | |||
| Net Change in Cash | 462,867 | |||
| Cash – Beginning | 3,193 | |||
| Cash – Ending | $ | 466,060 | ||
| Non-Cash Investing and Financing activities: | ||||
| Initial classification of common stock subject to possible redemption | $ | 117,371,161 | ||
| Change in value of common stock subject to possible redemption | $ | 34,542 | ||
| Deferred underwriting fees | $ | 4,375,000 | ||
| Deferred legal fee payable | $ | 72,500 | ||
| Series B Convertible Preferred stock | Series C Convertible Preferred stock | Common Stock | Additional Paid-In | Retained Earnings (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, 2021 | - | $ | - | - | $ | - | 64,091,266 | $ | 6,410 | $ | 172,112,688 | $ | (6,840,871 | ) | $ | 165,278,227 | $ | (196,506 | ) | $ | 165,081,721 | |||||||||||||||||||||||
| Stock-based compensation on restricted stock units | - | - | - | - | - | - | 1,386,543 | - | 1,386,543 | - | $ | 1,386,543 | ||||||||||||||||||||||||||||||||
| February 12, 2021 Capital Raise, net of offering costs | - | - | - | - | 12,244,897 | 1,224 | 27,560,774 | - | 27,561,998 | - | 27,561,998 | |||||||||||||||||||||||||||||||||
| February 18, 2021 Overallotment, net of offering costs | - | - | - | - | 1,836,734 | 184 | 4,184,814 | - | 4,184,998 | - | 4,184,998 | |||||||||||||||||||||||||||||||||
| Exercise of Warrants | - | - | - | - | 16,005,411 | 1,601 | 73,570,976 | - | 73,572,577 | - | 73,572,577 | |||||||||||||||||||||||||||||||||
| Net (loss) income | - | - | - | - | - | - | - | (126,147,182 | ) | (126,147,182 | ) | 49,711 | (126,097,471 | ) | ||||||||||||||||||||||||||||||
| Balance as of March 31, 2021 | - | $ | - | - | $ | - | 94,178,308 | $ | 9,419 | $ | 278,815,795 | $ | (132,988,053 | ) | $ | 145,837,161 | $ | (146,795 | ) | $ | 145,690,366 | |||||||||||||||||||||||
| Stock-based compensation on RSU and restricted stock awards | - | - | - | - | - | - | 1,620,149 | - | 1,620,149 | - | 1,620,149 | |||||||||||||||||||||||||||||||||
| Issuance of vested RSUs | - | - | - | - | 24,028 | 2 | (2 | ) | - | - | - | - | ||||||||||||||||||||||||||||||||
| Exercise of warrants | - | - | - | - | 669,732 | 67 | 3,116,338 | - | 3,116,405 | - | 3,116,405 | |||||||||||||||||||||||||||||||||
| Sale of Series B preferred stock and warrants | 15,200 | 2.00 | - | - | - | - | 15,199,998 | - | 15,200,000 | - | 15,200,000 | |||||||||||||||||||||||||||||||||
| Series B preferred stock dividends | - | - | - | - | - | - | - | (130,000 | ) | (130,000 | ) | (130,000 | ) | |||||||||||||||||||||||||||||||
| Net income (loss) | - | - | - | - | - | - | - | 15,671,053 | 15,671,053 | (209,921 | ) | 15,461,132 | ||||||||||||||||||||||||||||||||
| Balance as of June 30, 2021 | 15,200 | $ | 2 | - | $ | - | 94,872,068 | $ | 9,488 | $ | 298,752,278 | $ | (117,447,000 | ) | $ | 181,314,768 | $ | (356,716 | ) | $ | 180,958,052 | |||||||||||||||||||||||
| Balance as of January 1, 2022 | 15,200 | $ | 2 | - | $ | - | 97,563,841 | $ | 9,756 | $ | 305,117,091 | $ | (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 | - | - | - | - | 25,000 | 3 | 28,497 | - | 28,500 | - | 28,500 | |||||||||||||||||||||||||||||||||
| Issuance of restricted stock awards | - | - | - | - | 152,971 | 15 | (15 | ) | - | - | - | - | ||||||||||||||||||||||||||||||||
| Vesting of restricted stock units | - | - | - | - | 539,058 | 54 | (54 | ) | - | - | - | - | ||||||||||||||||||||||||||||||||
| Sale of shares under ATM | - | - | - | - | 12,581,986 | 1,258 | 14,233,674 | - | 14,234,932 | - | 14,234,932 | |||||||||||||||||||||||||||||||||
| Shares issued in connection with amendment of notes payable | - | - | - | - | 860,000 | 86 | 802,975 | - | 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 | |||||||||||||||||||||||||||||||||
| Preferred stock dividends | - | - | - | - | - | - | - | (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 | 111,722,856 | $ | 11,172 | $ | 326,294,378 | $ | (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 | - | - | - | - | 44,197 | 5 | (5 | ) | - | - | - | - | ||||||||||||||||||||||||||||||||
| Vesting of restricted stock units | - | - | - | - | 2,319 | - | - | - | - | - | - | |||||||||||||||||||||||||||||||||
| Shares issued in connection with issuance of notes payable | - | - | - | - | 125,000 | 13 | 75,406 | - | 75,419 | - | 75,419 | |||||||||||||||||||||||||||||||||
| Warrants issued in connection with issuance of notes payable | - | - | - | - | - | - | 18,709 | - | 18,709 | - | 18,709 | |||||||||||||||||||||||||||||||||
| Sale of shares under ATM | - | - | - | - | 5,632,877 | 563 | 3,747,719 | - | 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 | 117,527,249 | $ | 11,753 | $ | 331,390,931 | $ | (117,266,369 | ) | $ | 214,136,317 | $ | (832,730 | ) | $ | 213,303,587 | |||||||||||||||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
3
GORDON POINTE ACQUISITION CORP.HALL OF FAME RESORT & ENTERTAINMENT COMPANY AND SUBSIDIARIES
NOTES TO FINANCIALCONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
March 31, 2018(unaudited)
| For the Six Months Ended June 30, | ||||||||
| 2022 | 2021 | |||||||
| Cash Flows From Operating Activities | ||||||||
| Net loss | $ | (17,018,494 | ) | $ | (110,636,339 | ) | ||
| Adjustments to reconcile net loss to cash flows used in operating activities | ||||||||
| Depreciation expense | 6,769,866 | 5,893,067 | ||||||
| Amortization of note discounts | 2,478,298 | 2,398,727 | ||||||
| Interest paid in kind | 1,681,722 | 952,012 | ||||||
| Loss (gain) on extinguishment of debt | 148,472 | (390,400 | ) | |||||
| Change in fair value of warrant liability | (7,173,000 | ) | 90,035,112 | |||||
| Stock-based compensation expense | 2,570,919 | 3,006,692 | ||||||
| Amortization of right of use asset | 90,876 | - | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | (370,525 | ) | 675,668 | |||||
| Prepaid expenses and other assets | 1,430,448 | (2,033,495 | ) | |||||
| Accounts payable and accrued expenses | 8,196,272 | (2,060,008 | ) | |||||
| Operating leases | 9,215 | - | ||||||
| Due to affiliates | 1,777,542 | 178,436 | ||||||
| Other liabilities | 4,830,587 | (275,640 | ) | |||||
| Net cash provided by (used in) operating activities | 5,422,198 | (12,256,168 | ) | |||||
| Cash Flows From Investing Activities | ||||||||
| Additions to project development costs and property and equipment | (40,022,805 | ) | (26,098,120 | ) | ||||
| Net cash used in investing activities | (40,022,805 | ) | (26,098,120 | ) | ||||
| Cash Flows From Financing Activities | ||||||||
| Proceeds from notes payable | 20,714,311 | 6,000,000 | ||||||
| Repayments of notes payable | (3,144,677 | ) | (4,309,947 | ) | ||||
| Payment of financing costs | (210,032 | ) | (15,000 | ) | ||||
| Proceeds from sale of Series B preferred stock and warrants | - | 15,200,000 | ||||||
| Proceeds from equity raises | - | 31,746,996 | ||||||
| Proceeds from exercise of warrants | - | 23,346,870 | ||||||
| Payment of Series B dividends | (300,000 | ) | - | |||||
| Proceeds from sale of common stock under ATM | 17,983,214 | - | ||||||
| Net cash provided by financing activities | 35,042,816 | 71,968,919 | ||||||
| Net increase in cash and restricted cash | 442,209 | 33,614,631 | ||||||
| Cash and restricted cash, beginning of year | 17,388,040 | 40,053,461 | ||||||
| Cash and restricted cash, end of period | $ | 17,830,249 | $ | 73,668,092 | ||||
| Cash | $ | 10,615,810 | $ | 61,908,208 | ||||
| Restricted Cash | 7,214,439 | 11,759,884 | ||||||
| Total cash and restricted cash | $ | 17,830,249 | $ | 73,668,092 | ||||
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 Six Months Ended June 30, | ||||||||
| 2022 | 2021 | |||||||
| Supplemental disclosure of cash flow information | ||||||||
| Cash paid during the year for interest | $ | 3,520,404 | $ | 1,702,523 | ||||
| Cash paid for income taxes | $ | - | $ | - | ||||
| Non-cash investing and financing activities | ||||||||
| Project development cost acquired through accounts payable and accrued expenses, net | $ | 4,539,444 | $ | 5,782,496 | ||||
| Settlement of warrant liability | $ | - | $ | 53,342,112 | ||||
| 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 | $ | 232,000 | $ | 130,000 | ||||
| Amounts due to affiliate exchanged for note payable | $ | 850,000 | $ | - | ||||
| Shares issued in connection with amendment of notes payable | $ | 803,061 | $ | - | ||||
| Warrants issued in connection with amendment of notes payable | $ | 1,088,515 | $ | - | ||||
| 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 and Nature of Business
NOTE 1. DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONSOrganization 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. (the “Company”(“GPAQ”), is a blank check company incorporated in Delaware on April 12, 2017. Thespecial purpose acquisition company.
On July 1, 2020, the Company was formed for the purpose of effectingconsummated a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses or assets (a “Business Combination”HOF Village, LLC, a Delaware limited liability company (“HOF Village”). Although, 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 not limited to a particular industry or geographic region for purposesresort and entertainment company leveraging the power and popularity of consummating a Business Combination,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 intends to focus on businessesowns the Hall of Fame Village powered by Johnson Controls, 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 (including the fantasy football league in which the Company acquired a majority stake in 2020). The Company is located in the financial services technology sector or related financial services or technology sectors.only tourism development district in the state of Ohio.
At March 31, 2018,The Company has entered into several agreements with PFHOF, an affiliate of the Company, had not yet commenced operations. All activity through March 31, 2018 relatesand certain government entities, which outline the rights and obligations of each of the parties with regard to the Company’s formation and its initial public offering (the “Initial Public Offering”),property on which is described below, and identifying a target company for a Business Combination.
The registration statement for the Company’s Initial Public Offering was declared effective on January 24, 2018. On January 30, 2018 the Company consummated the Initial Public OfferingHall of 12,500,000 units (the “Units” and, with respect to the Class A common stock included in the Units offered, the “Public Shares”), generating gross proceedsFame Village powered by Johnson Controls sits, portions of $125,000,000, which is described in Note 3.
Simultaneously with the closing of the Initial Public Offering, the Company consummated the sale of 4,900,000 warrants (the “Private Placement Warrants”) at a price of $1.00 per warrant in a private placement to Gordon Pointe Management, LLC (the “Sponsor”), generating gross proceeds of $4,900,000, which is described in Note 4.
Following the closing of the Initial Public Offering on January 30, 2018, an amount of $126,250,000 ($10.10 per Unit) from the net proceeds of the sale of the Units in the Initial Public Offering and the Private Placement Warrants was placed in a trust account (the “Trust Account”) which may be invested in U.S. government securities, within the meaning set forth in Section 2(a)(16) of the Investment Company Act of 1940, as amended (the “Investment Company Act”), with a maturity of 180 days or less or in any open-ended investment company that holds itself out as a money market fund selectedare owned by the Company meetingand portions of which are net leased to the conditions of Rule 2a-7Company 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 Investment Company Act, as determinedHall of Fame Village powered by Johnson Controls on a direct-cost basis.
COVID-19
Since 2020, the world has been impacted by the Company, untilnovel coronavirus (“COVID-19”) pandemic. The COVID-19 pandemic and measures to prevent its spread have impacted the earlier of: (i)Company’s business in a number of ways, most significantly with regard to a reduction in the consummationnumber of events and attendance at events at Tom Benson Hall of Fame Stadium and ForeverLawn Sports Complex, which has also negatively impacted the Company’s ability to sell sponsorships. Further, the COVID-19 pandemic has caused a Business Combination or (ii)number of supply chain disruptions, which have negatively impacted the distributionCompany’s ability to obtain the materials needed to complete constructionas well as increases in the costs of materials and labor. The continued impact of these disruptions and the ultimate extent of their adverse impact on the Company’s financial and operating results will continue to be dictated by the length of time that such disruptions continue, which will, in turn, depend on the currently unpredictable duration and severity of the Trust Account,impacts of the COVID-19 pandemic, and among other things, the impact of governmental actions imposed in response to the COVID-19 pandemic as described below.well as individuals’ and companies’ risk tolerance regarding health matters going forward and developing strain mutations.
Transaction costs amounted
6
Hall of Fame Resort & Entertainment Company and Subsidiaries
Notes to $7,552,731, consistingCondensed Consolidated Financial Statements
(Unaudited)
Note 1: Organization and Nature of $2,500,000Business (continued)
Liquidity
The Company has sustained recurring losses and negative cash flows from operations through June 30, 2022. Since inception, the Company’s operations have been funded principally through the issuance of underwriting fees, $4,375,000debt and equity. As of deferred underwriting fees (see Note 6) and $677,731 of other costs. Approximately $1.1 million was originally deposited into the cash held outside of the Trust immediately after the IPO. Following the payment of certain transaction expenses,June 30, 2022, the Company had approximately $470,000$11 million of unrestricted cash held outsideand cash equivalents and $7 million of restricted cash.
On March 1, 2022, the Company and ErieBank agreed to extend the MKG DoubleTree Loan (as defined in Note 4) in principal amount of $15,300,000 to September 13, 2023. See Note 4, Notes Payable, for more information on this transaction.
On March 1, 2022, the Company executed a series of transactions with affiliates of Industrial Realty Group, LLC, a Nevada limited liability company that is controlled by the Company’s director Stuart Lichter (“IRG”), and JKP Financial, LLC (“JKP”), whereby the IRG affiliates and JKP extended certain of the trust account and available for working capital purposes asCompany’s debt in aggregate principal amount of $22,853,831 to March 31, 2018.2024. See Note 4, Notes Payable, for more information on this transaction.
TheOn June 16, 2022, the Company entered into a loan agreement with CH Capital Lending, LLC, which is an affiliate of the Company’s management has broad discretiondirector Stuart Lichter (“CH Capital Lending”), whereby CH Capital Lending agreed to lend the Company $10,500,000.
On June 16, 2022, the Company entered into a loan agreement with respectStark Community Foundation, whereby Stark Community Foundation agreed to lend to the specific applicationCompany $5,000,000, of which $2,500,000 has been provided to the Company to date. See Stark Community Foundation Loan under Note 4, Notes Payable, for more information on this transaction.
On July 1, 2022, the Company entered into an Energy Project Cooperative Agreement (the “EPC Agreement”) with Canton Regional Energy Special Improvement District, Inc., SPH Canton St, LLC, an affiliate of Stonehill Strategic Capital, LLC and City of Canton, Ohio. Under the EPC Agreement, the Company was provided $33,387,844 in Property Assessed Clean Energy (“PACE”) financing. See Note 12, Subsequent Events, for more information on this transaction.
The Company believes that, as a result of the net proceedsCompany’s demonstrated historical ability to finance and refinance debt, the transactions described above and its current ongoing negotiations, it will have sufficient cash and future financing to meet its funding requirements over the next 12 months from the issuance of the Initial Public Offering and Private Placement Warrants, although substantially all of the net proceeds are intended to be applied generally toward consummating a Business Combination. The Company’s initial Business Combination must be with one or more target businesses that together have a fair market value equal to at least 80% of the balance in the Trust Account (excluding any deferred underwriting commissions and taxes payable on the income earned on the Trust Account) at the time of the signing an agreement to enter into a Business Combination. However,these unaudited condensed consolidated financial statements. Notwithstanding, the Company expects that it will only complete a Business Combination ifneed to raise additional financing to accomplish its development plan over the post-Business Combination company owns or acquires 50% or more of the outstanding voting securities of the target or otherwise acquires a controlling interest in the target sufficient for it notnext several years. The Company is seeking to be required to register as an investment company under the Investment Company Act.obtain additional funding through debt, construction lending, and equity financing. There isare no assuranceassurances that the Company will be able to successfully effect a Business Combination.
The Company will provide its stockholders with the opportunity to redeem all or a portion of their Public Shares upon the completion of a Business Combination either (i) in connection with a stockholder meeting called to approve the Business Combination or (ii) by means of a tender offer. The decision as to whether the Company will seek stockholder approval of a Business Combination or conduct a tender offer will be made by the Company, solely in its discretion. The stockholders will be entitled to redeem their shares for a pro rata portion of the amount thenraise capital on deposit in the Trust Account ($10.10 per share, plus any pro rata interest earned on the funds held in the Trust Account and not previously releasedterms acceptable to the Company to payor at all, or that cash flows generated from its tax obligations). The per share amount to be distributed to stockholders who redeem their shares will not be reduced by the deferred underwriting commissions the Company will pay to the underwriter (see Note 6).
GORDON POINTE ACQUISITION CORP.
NOTES TO FINANCIAL STATEMENTS
March 31, 2018
(Unaudited)
The Company will proceed with a Business Combination if the Company has net tangible assets of at least $5,000,001 upon such consummation of a Business Combination and, if the Company seeks stockholder approval, a majority of the outstanding shares voted are voted in favor of the Business Combination. If a stockholder vote is not required by law and the Company does not decide to hold a stockholder vote for business or other legal reasons, the Company will, pursuant to its Amended and Restated Certificate of Incorporation, conduct the redemptions pursuant to the tender offer rules of the Securities and Exchange Commission (“SEC”), and file tender offer documents with the SEC prior to completing a Business Combination. If, however, a stockholder approval of the transaction is required by law, or the Company decides to obtain stockholder approval for business or other legal reasons, the Company will offer to redeem shares in conjunction with a proxy solicitation pursuant to the proxy rules and not pursuant to the tender offer rules. If the Company seeks stockholder approval in connection with a Business Combination, the Sponsor, officers and directors (the “Initial Stockholders”) have agreed to vote their Founder Shares (as defined in Note 5), and any Public Shares held by them in favor of approving a Business Combination. Additionally, each public stockholder may elect to redeem their Public Shares irrespective of whether they vote for or against the proposed transaction.
Notwithstanding the foregoing, the Company’s Amended and Restated Certificate of Incorporation provides that a public stockholder, together with any affiliate of such stockholder or any other person with whom such stockholder is acting in concert or as a “group” (as defined under Section 13 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)),operations will be restricted from redeemingsufficient to meet its shares with respect to an aggregate of 20% or more of the Class A common stock sold in the Initial Public Offering.
The Company will have until July 30, 2019 to consummate a Business Combination (the “Combination Period”).current operating costs. If the Company is unable to complete a Business Combination within the Combination Period, the Company will (i) cease all operations except for the purposeobtain sufficient amounts of winding up, (ii) as promptly as reasonably possible but no more than ten business days thereafter, redeem 100% of the outstanding Public Shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account, including interest earned (less amounts previously released to pay taxes and less interest to pay dissolution expenses of up to $100,000), divided by the number of then outstanding Public Shares, which redemption will completely extinguish public stockholders’ rights as stockholders (including the right to receive further liquidation distributions, if any), subject to applicable law, and (iii) as promptly as reasonably possible following such redemption, subject to the approval of the remaining stockholders and the Company’s board of directors, proceed to commence a voluntary liquidation and thereby a formal dissolution of the Company, subject in each case to its obligations to provide for claims of creditors and the requirements of applicable law.
The Initial Stockholders have agreed to (i) waive their conversion rights with respect to their Founder Shares and Public Shares in connection with the consummation of a Business Combination, (ii) to waive their rights to liquidating distributions from the Trust Account with respect to their Founder Shares if the Company fails to consummate a Business Combination within the Combination Period and (iii) not to propose an amendment to the Company’s Amended and Restated Certificate of Incorporation that would affect the substance or timing of the Company’s obligation to redeem 100% of its Public Shares if the Company does not complete a Business Combination, unless the Company provides the public stockholders with the opportunity to redeem their shares in conjunction with any such amendment. However, the Initial Stockholders willadditional capital, it may be entitled to liquidating distributions with respect to any Public Shares acquired if the Company fails to consummate a Business Combination or liquidates within the Combination Period. The underwriter and legal counsel have agreed to waive their rights to deferred underwriting commissions held in the Trust Account in the event the Company does not consummate a Business Combination within the Combination Period and, in such event, such amounts will be included with the funds held in the Trust Account that will be available to fund the redemption of the Public Shares. In the event of such distribution, it is possible that the per share value of the residual assets remaining available for distribution (including Trust Account assets) will be less than the $10.10 per Unit in the Initial Public Offering. In order to protect the amounts held in the Trust Account, the Sponsor has agreed to be liable to the Company if and to the extent any claims by a vendor for services rendered or products sold to the Company, or a prospective target business with which the Company has discussed entering into a transaction agreement, reduce the amount of funds in the Trust Account. This liability will not apply with respect to any claims by a third party who executed a waiver of any right, title, interest or claim of any kind in or to any monies held in the Trust Account or to any claims under the Company’s indemnity of the underwriter of the Initial Public Offering against certain liabilities, including liabilities under the Securities Act of 1933, as amended (the “Securities Act”). Moreover, in the event that an executed waiver is deemed to be unenforceable against a third party, the Sponsor will not be responsible to the extent of any liability for such third party claims. The Company will seekrequired to reduce the possibility that the Sponsor will have to indemnify the Trust Account due to claimsscope of creditors by endeavoring to have all vendors, service providers (other than the Company’s independent auditors), prospective target businesses or other entities withits planned development, which the Company does business, execute agreements with the Company waiving any right, title, interest or claim of any kind in or to monies held in the Trust Account.could harm its financial condition and operating results.
7
GORDON POINTE ACQUISITION CORP.Hall of Fame Resort & Entertainment Company and Subsidiaries
NOTES TO FINANCIAL STATEMENTSNotes to Condensed Consolidated Financial Statements
March 31, 2018
(Unaudited)
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESNote 2: Summary of Significant Accounting Policies
Basis of presentationPresentation
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 in accordance with the instructions to Form 10-Q and ArticleRule 10 of Regulation S-X ofunder the Securities and Exchange CommissionAct of 1933, as amended (the “SEC”“Securities Act”). Certain information or footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted, pursuant to the rules and regulations of the SEC for interim financial reporting. Accordingly, they do not include all of the information and footnotes necessary for a comprehensive presentation of financial position, results of operations, or cash flows. Innotes required by U.S. GAAP. However, in the opinion of the management of the accompanying unaudited condensed financial statements includeCompany, all adjustments consisting of a normal recurring nature, which are necessary for a fair presentation of the financial position and operating results and cash flows for the periods presented.
The accompanyinghave 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 Annual Report on Form 10-K for the periodyear ended December 31, 2017 as2021, filed with the SEC on March 30, 2018, which contains the audited financial statements and notes thereto. The financial information as of December 31, 2017 is derived from the audited financial statements presented in the Company’s Annual Report on Form 10-K for the period ended December 31, 2017. The interim14, 2022. Operating results for the three and six months ended March 31, 2018June 30, 2022 are not necessarily indicative of the results tothat may be expected for any subsequent quarters or for the year ending December 31, 2018 or for any future interim periods.
2022.
Emerging growth companyConsolidation
The unaudited 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.
Emerging Growth Company
The Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act, of 1933, as amended, (the “Securities Act”), as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), and it. 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 January 30, 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)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 estimatesEstimates
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.
Making The most significant estimates requires managementand assumptions for the Company relate to exercise significant judgment. It is at least reasonably possible thatbad debt, depreciation, costs capitalized to project development costs, useful lives of assets, stock-based compensation, and fair value of financial instruments (including the estimatefair value of the effect of a condition, situation or set ofCompany’s warrant liability). Management adjusts such estimates when facts and circumstances that existed at the date of the financial statements, which management considered in formulating its estimate, could change in the near term due to one or more future confirming events. Accordingly, the actualdictate. Actual results could differ significantly from those estimates.
8
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 statement 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 cash equivalentsRestricted Cash
The Company considers all short-termhighly liquid investments with an original maturity of three months or less when purchased, to be cash equivalents. The Company did not have anyThere were no cash equivalents as of March 31, 2018June 30, 2022 and December 31, 2017.2021, respectively. The Company maintains its cash and escrow accounts at national financial institutions. The balances, at times, may exceed federally insured limits.
Marketable Securities held in Trust AccountRestricted 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 June 30, 2022 and December 31, 2021 were $7,214,439 and $7,105,057, respectively.
At March 31, 2018, the assets held in the Trust Account were substantially held in U.S. Treasury Bills. 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 June 30, 2022 and December 31, 2021, the Company has recorded an allowance for doubtful accounts of $2,125,000 and $0, respectively.
9
GORDON POINTE ACQUISITION CORP.Hall of Fame Resort & Entertainment Company and Subsidiaries
NOTES TO FINANCIAL STATEMENTSNotes to Condensed Consolidated Financial Statements
March 31, 2018
(Unaudited)
Note 2: Summary of Significant Accounting Policies (continued)
Revenue Recognition
Common stock subject to possible redemption
The Company accounts for its common stock subject to possible redemption in accordance withfollows the guidance inFinancial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”) Topic 480 “Distinguishing Liabilities from Equity.” Common stock subject 606, Revenue with Contracts with Customers, to mandatory redemptionproperly recognize revenue. Under ASC 606, revenue is classified asrecognized when a liability instrument and is measured at fair value. Conditionally redeemable common stock (including common stockcustomer obtains control of promised goods or services, in an amount that features redemption rightsreflects 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 either within the controlscope 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, hotel operation, Hall of Fantasy League, and through the sale of non-fungible tokens. 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 sheet. 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 holderlease beginning on the commencement date.
A performance obligation is a promise in a contract to transfer a distinct good or subjectservice to redemption upona customer. If the occurrence of uncertain eventscontract does not solely withinspecify 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 control)expected cost plus margin. Revenue is classifiedrecognized as temporary equity. At all other times, common stockthe Company’s performance obligations are satisfied. If consideration is classified as stockholders’ equity. The Company’s common stock features certain redemption rights that are considered to be outsidereceived in advance of the Company’s control and subject to occurrenceperformance, including amounts which are refundable, recognition of uncertain future events. Accordingly, at March 31, 2018, common stock subject to possible redemptionrevenue is presented at redemption value as temporary equity, outside ofdeferred until the stockholders’ equity section of the Company’s balance sheet.performance obligation is satisfied or amounts are no longer refundable.
Income taxesThe 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.
10
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 complies with the accounting and reporting requirements of ASC Topic 740 “Income Taxes,” which requireutilizes an asset and liability approach tofor 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 assets and liabilities are computed foreffects of differences between the financial statementreporting and tax basesbasis of the Company’s assets and liabilities that will result in future taxable or deductible amounts, based onat the enacted tax laws and rates applicable toin effect for the periodsyears in which the differences are expected to affect taxable income. Valuation allowances are established, when necessary, to reducereverse.
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 amount expectedinterpretation 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 realized.necessary.
ASC Topic 740 prescribes a recognition threshold and a measurement attributeTax benefits are recognized only for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more-likely-than-notthat are more likely than not to be sustained upon examination by taxingtax authorities. The Company recognizes accruedamount 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 June 30, 2022 and December 31, 2021, no liability for unrecognized tax benefits was required to be reported.
The Company’s policy for recording interest and penalties relatedassociated with tax audits is to unrecognized tax benefitsrecord such items as income taxa component of general and administrative expense. As of March 31, 2018, thereThere were no unrecognized tax benefitsamounts incurred for penalties and no amounts accrued for interest during the three or six months ended June 30, 2022 and penalties.2021. The Company does not expect its uncertain tax position to change during the next twelve months. Management is currently not awareunaware of any issues under review that could result in significant payments, accruals or material deviationdeviations 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 may be subject to potential examination by federal,has identified its United States tax return and its state and city taxing authoritiestax return in the areas of income taxes. These potential examinations may include questioning the timing and amount of deductions, the nexus of income among variousOhio as its “major” tax jurisdictions, and compliancesuch returns for the years 2018 through 2021 remain subject to examination.
Advertising
The Company expenses all advertising and marketing costs as they are incurred and records them as “Operating expenses” on the Company’s condensed consolidated statements of operations. Total advertising and marketing costs for the three months ended June 30, 2022 and 2021 were $374,256 and $72,016, respectively and for the six months ended June 30, 2022 and 2021 were $399,346 and 347,874, respectively.
11
Hall of Fame Resort & Entertainment Company and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Note 2: Summary of Significant Accounting Policies (continued)
Software Development Costs
The Company recognizes all costs incurred to establish technological feasibility of a computer software product to be sold, leased, or otherwise marketed as research and development costs. Prior to the point of reaching technological feasibility, all costs shall be expensed when incurred. Once the development of the product establishes technological feasibility, the Company will begin capitalizing these costs. Management exercises its judgement in determining when technological feasibility is established based on when a product design and working model have been completed and the completeness of the working model and its consistency with federal, statethe product design have been confirmed through testing.
Film and city tax laws. 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 management does not expect that the total amount of unrecognized tax benefitscondensed consolidated balance sheet. The costs for each film or media will materially changebe expensed over the next twelve months.expected release period.
On December 22, 2017Fair Value Measurement
The Company follows FASB’s ASC 820–10, Fair Value Measurement, to measure the U.S. Tax Cutsfair value of its financial instruments and Jobs Actto incorporate disclosures about fair value of 2017 (“Tax Reform”) was signedits 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 law. As a resultthree broad levels.
The three levels of Tax Reform,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 U.S. statutory tax rate was lowered from 35%highest priority to 21% effective January 1, 2018, among other changes. ASC Topic 740 requires companiesquoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to recognizeunobservable inputs. If the effect of tax law changes ininputs used to measure the period of enactment; therefore, the Company was required to revalue its deferred taxfinancial assets and liabilities atfall within more than one level described above, the new rate. The SEC issued Staff Accounting Bulletin No. 118 (“SAB 118”)categorization is based on the lowest level input that is significant to address the applicationfair value measurement of GAAP in situations when a registrant does not have the necessary information available, prepared, or analyzed (including computations) in reasonable detail to complete the accounting for certain tax effects of Tax Reform.instrument.
Net loss per common shareThe 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 Company uses Levels 1 and 3 of the fair value hierarchy to measure the fair value of its warrant liabilities. The Company revalues such liabilities at every reporting period and recognizes gains or losses on the change in fair value of the warrant liabilities as “change in fair value of warrant liabilities” 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 sheet as of June 30, 2022 and December 31, 2021 and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value:
| Level | June 30, 2022 | December 31, 2021 | ||||||||||
| Warrant liabilities – Public Series A Warrants | 1 | $ | 2,706,000 | $ | 4,617,000 | |||||||
| Warrant liabilities – Private Series A Warrants | 3 | 10,000 | 110,000 | |||||||||
| Warrant liabilities – Series B Warrants | 3 | 444,000 | 2,416,000 | |||||||||
| Warrant liabilities – Series C Warrants | 3 | - | 6,526,000 | |||||||||
| Fair value of aggregate warrant liabilities | $ | 3,160,000 | $ | 13,669,000 | ||||||||
12
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 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”), the Series B Warrants issued in the Company’s November 2020 follow-on public offering, and the Series C Warrants issued in the Company’s December 2020 private placement (“Series C Warrants”), 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 | Series C Warrants | Total Warrant Liability | ||||||||||||||||
| Fair value as of December 31, 2021 | $ | 4,617,000 | $ | 110,000 | $ | 2,416,000 | $ | 6,526,000 | $ | 13,669,000 | ||||||||||
| Amendment of warrants to equity classification | - | - | - | (3,336,000 | ) | (3,336,000 | ) | |||||||||||||
| Change in fair value | (1,911,000 | ) | (100,000 | ) | (1,972,000 | ) | (3,190,000 | ) | (7,173,000 | ) | ||||||||||
| Fair value as of June 30, 2022 | $ | 2,706,000 | $ | 10,000 | $ | 444,000 | $ | - | $ | 3,160,000 | ||||||||||
On March 1, 2022, the Company and CH Capital Lending amended the Series C Warrants. The Amended and Restated Series C Warrants extend the term of the Series C Warrants to March 1, 2027. The exercise price of $1.40 per share was not modified, but the amendments subject the exercise price to a weighted-average antidilution adjustment. The amendments also remove certain provisions that previously caused the Series C Warrants to be accounted for as a liability.
The key inputs into the Black Scholes valuation model for the Level 3 valuations as of June 30, 2022 and December 31, 2021 are as follows:
| June 30, 2022 | March 1, 2022 | December 31, 2021 | ||||||||||||||||||||||
| Private Series A Warrants | Series B Warrants | Series C Warrants | Private Series A Warrants | Series B Warrants | Series C Warrants | |||||||||||||||||||
| Term (years) | 3.0 | 3.4 | 3.8 | 3.5 | 3.9 | 4.0 | ||||||||||||||||||
| Stock price | $ | 0.59 | $ | 0.59 | $ | 1.01 | $ | 1.52 | $ | 1.52 | $ | 1.52 | ||||||||||||
| Exercise price | $ | 11.50 | $ | 1.40 | $ | 1.40 | $ | 11.50 | $ | 1.40 | $ | 1.40 | ||||||||||||
| Dividend yield | 0.0 | % | 0.0 | % | 0.0 | % | 0.0 | % | 0.0 | % | 0.0 | % | ||||||||||||
| Expected volatility | 59.9 | % | 57.6 | % | 54.7 | % | 50.6 | % | 50.6 | % | 50.6 | % | ||||||||||||
| Risk free interest rate | 3.0 | % | 3.0 | % | 1.5 | % | 1.3 | % | 1.3 | % | 1.3 | % | ||||||||||||
| Number of shares | 2,103,573 | 3,760,570 | 10,036,925 | 2,103,573 | 3,760,570 | 10,036,925 | ||||||||||||||||||
| Value (per share) | $ | 0.005 | $ | 0.12 | $ | 0.33 | $ | 0.05 | $ | 0.64 | $ | 0.65 | ||||||||||||
13
Hall of Fame Resort & Entertainment Company and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Note 2: Summary of Significant Accounting Policies (continued)
Net lossIncome (Loss) Per Common Share
Basic net income (loss) per common share is computed by dividing net income (loss) by the weighted average number of common shares outstanding during the periods.
Diluted net income (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 June 30, 2021, the Company calculated net income per share, diluted, as follows:
| For the Three Months Ended June 30, 2021 | ||||
| Numerator for net income per share | ||||
| Net income attributable to common stock – basic | $ | 15,541,053 | ||
| Reverse: change in fair value of warrant liabilities | (15,025,888 | ) | ||
| Net income available to common stockholders – diluted | $ | 515,165 | ||
| Denominator for net income per share | ||||
| Weighted average shares outstanding – basic | 94,397,222 | |||
| Unvested restricted stock awards | 477,286 | |||
| Unvested restricted stock units | 3,220,972 | |||
| Warrants to purchase shares of common stock, treasury method | 9,257,792 | |||
| Weighted average shares outstanding – diluted | 107,353,272 | |||
| Net income per share – basic | $ | 0.16 | ||
| Net income per share – diluted | $ | 0.00 | ||
For the three and six months ended June 30, 2022, and for the period, excluding sharessix months ended June 30, 2021, 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.
14
Hall of Fame Resort & Entertainment Company and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Note 2: Summary of Significant Accounting Policies (continued)
Net Income (Loss) Per Common Share (continued)
At June 30, 2022 and 2021, the following outstanding common stock subject to forfeiture. The Company applies the two-class method in calculating earnings per share. Shares of common stock subject to possible redemption at March 31, 2018, which are not currently redeemable and are not redeemable at fair value,equivalents have been excluded from the calculation of basicnet loss per share since such shares, if redeemed, only participatebecause their impact would be anti-dilutive.
| For the Three Months Ended June 30, | For the Six Months Ended June 30, | |||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| Warrants to purchase shares of Common Stock | 44,137,349 | 27,214,854 | 44,137,349 | 41,112,349 | ||||||||||||
| Unvested restricted stock awards | 238,643 | - | 238,643 | 477,286 | ||||||||||||
| Unvested restricted stock units to be settled in shares of Common Stock | 2,929,187 | - | 2,929,187 | 3,220,972 | ||||||||||||
| Shares of Common Stock issuable upon conversion of convertible notes | 24,088,729 | 3,321,706 | 24,088,729 | 3,321,706 | ||||||||||||
| Shares of Common Stock issuable upon conversion of Series B Preferred Stock | 65,359 | - | 65,359 | - | ||||||||||||
| Shares of Common Stock issuable upon conversion of Series C Preferred Stock | 10,000,000 | - | 10,000,000 | - | ||||||||||||
| Total potentially dilutive securities | 81,459,267 | 30,536,560 | 81,459,267 | 48,132,313 | ||||||||||||
Recent Accounting Standards
In February 2016, FASB issued Accounting Standards Update (“ASU”) No. 2016-02, Leases (Topic 842), as modified by subsequently issued ASU Nos. 2018-01, 2018-10, 2018-11, 2018-20, and 2019-01 (collectively “ASU 2016-02”). ASU 2016-02 requires recognition of right-of-use assets and lease liabilities on the balance sheet. In June 2020, FASB issued ASU 2020-05, further extending the effective date by one year making it effective for the Company for annual periods beginning after December 15, 2021 and interim periods within fiscal years beginning after December 15, 2022, with early adoption permitted. Most prominent among the changes in their pro rata shareASU 2016-02 is the lessees’ recognition of a right-of-use asset and a lease liability for operating leases. The right-of-use asset and lease liability are initially measured based on the present value of committed lease payments. Leases are classified as either finance or operating, with classification affecting the pattern of expense recognition. Expenses related to operating leases are recognized on a straight-line basis, while those related to financing leases are recognized under a front-loaded approach in which interest expense and amortization of the Trust Account earnings. The Company has not considered the effect of warrants soldright-of-use asset are presented separately in the Initial Public Offeringstatement of operations. Similarly, lessors are required to classify leases as sales-type, finance, or operating with classification affecting the pattern of income recognition. As the Company is an emerging growth company and following private placement to purchase 17,400,000 shares of Class A common stock incompany deadlines, the calculation of diluted loss per share, since the exercise of the warrants is contingent upon the occurrence of future events. As a result, diluted loss per common share is the same as basic loss per common share for the periods.Company implemented this ASU beginning on January 1, 2022.
Classification for both lessees and lessors is based on an assessment of whether risks and rewards as well as substantive control have been transferred through a lease contract. ASU 2016-02 also requires qualitative and quantitative disclosures to assess the amount, timing, and uncertainty of cash flows arising from leases.
15
GORDON POINTE ACQUISITION CORP.Hall of Fame Resort & Entertainment Company and Subsidiaries
NOTES TO FINANCIAL STATEMENTSNotes to Condensed Consolidated Financial Statements
(Unaudited)
Note 2: Summary of Significant Accounting Policies (continued)
Recent Accounting Standards (continued)
In March 31, 2018
(Unaudited)2019, the FASB issued ASU 2019-01, Leases (Topic 842): Codification Improvements, which requires an entity (a lessee or lessor) to provide transition disclosures under Topic 250 upon adoption of Topic 842. In February 2020, the FASB issued ASU 2020-02, Financial Instruments – Credit Losses (Topic 326): Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 119 and Update to SEC Section on Effective Date Related to Accounting Standards Update No. 2016-02, Leases. The ASU adds and amends SEC paragraphs in the ASC to reflect the issuance of SEC Staff Accounting Bulletin No. 119 related to the new credit losses standard and comments by the SEC staff related to the revised effective date of the new leases standard. This new standard is effective for fiscal years beginning after December 15, 2021, including interim periods within fiscal years beginning after December 15, 2022. Upon the adoption of ASC 842 on January 1, 2022, the Company recognized a right of use asset of approximately $7.7 million and corresponding lease liability of approximately $3.4 million. The initial recognition of the ROU asset included the reclassification of approximately $4.4 million of prepaid rent as of January 1, 2022. See Note 11 for additional disclosure regarding the Company’s right of use assets and lease liabilities.
ReconciliationIn May 2021, the FASB issued ASU No. 2021-04, Earnings Per Share (Topic 260), Debt—Modifications and Extinguishments (Subtopic 470-50), Compensation—Stock Compensation (Topic 718), and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40) Issuer’s Accounting for Certain Modifications or Exchanges of Net Loss per Common ShareFreestanding Equity-Classified Written Call Options. ASU 2021-04 addresses issuer’s accounting for certain modifications or exchanges of freestanding equity-classified written call options. ASU 2021-04 is effective for fiscal years beginning after December 15, 2021 and interim periods within those fiscal years, which is fiscal 2023 for us, with early adoption permitted. The Company adopted this ASU on January 1, 2022, which did not have a significant impact on the Company’s financial statements.
In August 2020, the FASB issued ASU No. 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity, which amends the accounting standards for convertible debt instruments that may be settled entirely or partially in cash upon conversion. ASU No. 2020-06 eliminates requirements to separately account for liability and equity components of such convertible debt instruments and eliminates the ability to use the treasury stock method for calculating diluted earnings per share for convertible instruments whose principal amount may be settled using shares. Instead, ASU No. 2020-06 requires (i) the entire amount of the security to be presented as a liability on the balance sheet and (ii) application of the “if-converted” method for calculating diluted earnings per share. The required use of the “if-converted” method will not impact the Company’s diluted earnings per share as long as the Company is in a net incomeloss position. The guidance in ASU No. 2020-06 is adjustedrequired for annual reporting periods, including interim periods within those annual periods, beginning after December 15, 2021, for public business entities. Early adoption is permitted, but no earlier than annual reporting periods beginning after December 15, 2020, including interim periods within those annual reporting periods. The Company early adopted this guidance for the portionfiscal year beginning January 1, 2022, and did so on a modified retrospective basis, without requiring any adjustments.
16
Hall of income that is attributableFame Resort & Entertainment Company and Subsidiaries
Notes to common stock subject to possible redemption,Condensed Consolidated Financial Statements
(Unaudited)
Note 2: Summary of Significant Accounting Policies (continued)
Subsequent Events
Subsequent events have been evaluated through August 11, 2022, the date the condensed consolidated financial statements were issued. Except for as these shares only participatedisclosed in the incomeNotes 1 and 12, no other events have been identified requiring disclosure or recording.
Note 3: Property and Equipment
Property and equipment consists of the Trust Accountfollowing:
| Useful Life | June 30, 2022 | December 31, 2021 | ||||||||
| Land | $ | 4,186,090 | $ | 4,186,090 | ||||||
| Land improvements | 25 years | 31,194,623 | 31,194,623 | |||||||
| Building and improvements | 15 to 39 years | 206,307,167 | 192,384,530 | |||||||
| Equipment | 5 to 10 years | 2,977,886 | 2,338,894 | |||||||
| Property and equipment, gross | 244,665,766 | 230,104,137 | ||||||||
| Less: accumulated depreciation | (56,413,441 | ) | (49,643,575 | ) | ||||||
| Property and equipment, net | $ | 188,252,325 | $ | 180,460,562 | ||||||
| Project development costs | $ | 158,722,100 | $ | 128,721,480 | ||||||
For the three months ended June 30, 2022 and not2021, the lossesCompany recorded depreciation expense of $3,527,581 and $2,972,130, respectively, and for the six months ended June 30, 2022 and 2021, of $6,769,866 and $5,893,067, respectively. For the six months ended June 30, 2022 and 2021, the Company incurred $42,920,667 and $18,626,781 of capitalized project development costs, respectively.
Included in project development costs are film development costs of $464,000 and $464,000 as of June 30, 2022 and December 31, 2021, respectively.
17
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 Company. Accordingly, basicfollowing at June 30, 2022:
| Gross | Discount | Net | Interest Rate | Maturity Date | ||||||||||||||
| TIF loan | $ | 9,345,000 | $ | (1,583,943 | ) | $ | 7,761,057 | 5.20 | % | 7/31/2048 | ||||||||
| Preferred equity loan | 3,600,000 | - | 3,600,000 | 7.00 | % | Various | ||||||||||||
| City of Canton Loan | 3,500,000 | (5,925 | ) | 3,494,075 | 5.00 | % | 7/1/2027 | |||||||||||
| New Market/SCF | 2,999,989 | - | 2,999,989 | 4.00 | % | 12/30/2024 | ||||||||||||
| Constellation EME | 2,639,242 | - | 2,639,242 | 6.05 | % | 12/31/2022 | ||||||||||||
| JKP Capital Loan | 8,733,428 | (608,880 | ) | 8,124,548 | 12.00 | % | 3/31/2024 | |||||||||||
| MKG DoubleTree Loan | 15,300,000 | - | 15,300,000 | 6.55 | % | 9/13/2023 | ||||||||||||
| Convertible PIPE Notes | 25,288,079 | (9,663,632 | ) | 15,624,447 | 10.00 | % | 3/31/2025 | |||||||||||
| Canton Cooperative Agreement | 2,670,000 | (171,581 | ) | 2,498,419 | 3.85 | % | 5/15/2040 | |||||||||||
| CH Capital Loan | 8,462,640 | (844,218 | ) | 7,618,422 | 12.00 | % | 3/31/2024 | |||||||||||
| Constellation EME #2 | 4,005,064 | - | 4,005,064 | 5.93 | % | 4/30/2026 | ||||||||||||
| IRG Split Note | 4,273,543 | (334,615 | ) | 3,938,928 | 8.00 | % | 3/31/2024 | |||||||||||
| JKP Split Note | 4,273,543 | (292,355 | ) | 3,981,188 | 8.00 | % | 3/31/2024 | |||||||||||
| ErieBank Loan | 17,039,912 | (567,889 | ) | 16,472,023 | 5.75 | % | 6/15/2034 | |||||||||||
| PACE Equity Loan | 8,250,966 | (276,713 | ) | 7,974,253 | 6.05 | % | 12/31/2046 | |||||||||||
| PACE Equity CFP | 27,586 | (27,586 | ) | - | 6.05 | % | 12/31/2046 | |||||||||||
| CFP Loan | 4,000,000 | (101,611 | ) | 3,898,389 | 6.50 | % | 4/30/2023 | |||||||||||
| Stark County Community Foundation | 2,500,000 | - | 2,500,000 | 6.00 | % | 5/31/2029 | ||||||||||||
| CH Capital Bridge Loan | 10,500,000 | - | 10,500,000 | 12.00 | % | 9/10/2022 | ||||||||||||
| Total | $ | 137,408,992 | $ | (14,478,948 | ) | $ | 122,930,044 | |||||||||||
Notes payable, net consisted of the following at December 31, 2021:
| Gross | Discount | Net | ||||||||||
| TIF loan | $ | 9,451,000 | $ | (1,611,476 | ) | $ | 7,839,524 | |||||
| Preferred equity loan | 3,600,000 | - | 3,600,000 | |||||||||
| City of Canton Loan | 3,500,000 | (6,509 | ) | 3,493,491 | ||||||||
| New Market/SCF | 2,999,989 | - | 2,999,989 | |||||||||
| Constellation EME | 5,227,639 | - | 5,227,639 | |||||||||
| JKP Capital loan | 6,953,831 | - | 6,953,831 | |||||||||
| MKG DoubleTree Loan | 15,300,000 | (83,939 | ) | 15,216,061 | ||||||||
| Convertible PIPE Notes | 24,059,749 | (11,168,630 | ) | 12,891,119 | ||||||||
| Canton Cooperative Agreement | 2,670,000 | (174,843 | ) | 2,495,157 | ||||||||
| Aquarian Mortgage Loan | 7,400,000 | (439,418 | ) | 6,960,582 | ||||||||
| Constellation EME #2 | 4,455,346 | - | 4,455,346 | |||||||||
| IRG Note | 8,500,000 | - | 8,500,000 | |||||||||
| ErieBank Loan | 13,353,186 | (598,966 | ) | 12,754,220 | ||||||||
| PACE Equity Loan | 8,250,966 | (277,729 | ) | 7,973,237 | ||||||||
| Total | $ | 115,721,706 | $ | (14,361,510 | ) | $ | 101,360,196 | |||||
18
Hall of Fame Resort & Entertainment Company and dilutedSubsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Note 4: Notes Payable, net loss per common share is calculated(continued)
During the three months ended June 30, 2022 and 2021, the Company recorded amortization of note discounts of $1,122,324 and $1,164,613, respectively, and for the six months ended June 30, 2022 and 2021, of $2,478,298 and $2,398,727, respectively. During the three months ended June 30, 2022 and 2021, the Company recorded paid-in-kind interest of $963,428 and $741,243, respectively. During the six months ended June 30, 2022 and 2021, the Company recorded paid-in-kind interest of $1,681,722 and $952,012, respectively.
Accrued Interest on Notes Payable
As of June 30, 2022 and December 31, 2021, accrued interest on notes payable, were as follows:
| June 30, 2022 | December 31, 2021 | |||||||
| TIF loan | $ | 33,159 | $ | 22,208 | ||||
| Preferred equity loan | 48,825 | 203,350 | ||||||
| New Market/SCF | 17,833 | 89,682 | ||||||
| Constellation EME | 13,142 | - | ||||||
| City of Canton Loan | 1,484 | 5,979 | ||||||
| JKP Capital Note | - | 1,251,395 | ||||||
| Canton Cooperative Agreement | 39,511 | 39,416 | ||||||
| CH Capital Loan | 55,652 | - | ||||||
| IRG Split Note | 28,490 | - | ||||||
| JKP Split Note | 28,490 | - | ||||||
| ErieBank Loan | 31,910 | 26,706 | ||||||
| PACE Equity Loan | 284,242 | 30,824 | ||||||
| Stark Community Foundation | 5,834 | - | ||||||
| CH Capital Bridge Loan | 38,000 | - | ||||||
| Total | $ | 626,572 | $ | 1,669,560 | ||||
The amounts above were included in “accounts payable and accrued expenses” on the Company’s consolidated balance sheets.
| Three Months Ended March 31, | ||||
| 2018 | ||||
| Net income | $ | 35,856 | ||
| Less: Income attributable to common stock subject to redemption | (213,632 | ) | ||
| Adjusted net loss | $ | (177,776 | ) | |
| Weighted average shares outstanding, basic and diluted | 3,711,062 | |||
| Basic and diluted net loss per common share | $ | (0.05 | ) | |
ConcentrationFor more information on the notes payable above, please see Note 4 of credit riskthe Company’s Annual Report on Form 10-K, as filed on March 14, 2022.
19
Hall of Fame Resort & Entertainment Company and Subsidiaries
Notes to Condensed Consolidated Financial instruments that potentially subjectStatements
(Unaudited)
Note 4: Notes Payable, net (continued)
JKP Capital Loan
On June 24, 2020, HOF Village and HOFV Hotel II executed a loan evidenced by a promissory note (the “JKP Capital Loan”) in favor of JKP Financial, LLC (“JKP”) for the principal sum of $7,000,000. The JKP Capital Loan bears interest at a rate of 12% per annum and matured on December 2, 2021, on which date all unpaid principal and accrued and unpaid interest is due. The JKP Capital Loan is secured by the membership interests in HOFV Hotel II held by HOF Village.
On March 1, 2022, the Company amended the JKP Capital Loan. The Second Amendment to concentrationJKP Capital Loan (i) revises the outstanding principal balance of credit risk consistthe JKP Capital Loan to include interest that has accrued and has not been paid as of March 1, 2022, and (ii) extends the maturity of the JKP Capital Loan to March 31, 2024, and (iii) amends the JKP Capital Loan to be convertible into shares of Common Stock at a cash accountconversion price of $1.09 per share, subject to adjustment. The conversion price is subject to a weighted-average antidilution adjustment.
As part of the consideration for the Second Amendment to JKP Capital Loan, the Company issued in a financial institution which, at times may exceedtransaction exempt from registration pursuant to Section 4(a)(2) of the Federal depository insurance coverageSecurities Act: (i) 280,000 shares of $250,000. At March 31, 2018, the Company had not experienced losses on this accountCommon Stock to JKP and management believes the Company is not exposed(ii) a Series F Warrant to significant risks on such account.
Fair valuepurchase 1,000,000 shares of financial instrumentsCommon Stock to JKP.
The Company accounted for this transaction as an extinguishment, given that a substantive conversion feature was added to the JKP Capital Loan. The Company recorded the relative fair value of the Company’s assetsshares of Common Stock and liabilities,Series F Warrants as a discount against the JKP Capital Loan. The following assumptions were used to calculate the fair value of Series F Warrants:
| Term (years) | 5.0 | |||
| Stock price | $ | 1.01 | ||
| Exercise price | $ | 1.09 | ||
| Dividend yield | 0.0 | % | ||
| Expected volatility | 51.2 | % | ||
| Risk free interest rate | 1.6 | % | ||
| Number of shares | 1,000,000 |
20
Hall of Fame Resort & Entertainment Company and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Note 4: Notes Payable, net (continued)
MKG DoubleTree Loan
On September 14, 2020, the Company entered into a construction loan agreement with Erie Bank, a wholly owned subsidiary of CNB Financial Corporation, a Pennsylvania corporation, as lender. The Company has applied and been approved for a first mortgage loan for $15.3 million (“MKG DoubleTree Loan”) with a variable interest rate of 1.75% plus the prime commercial rate, at which qualify as financial instruments under ASC Topic 820, “Fair Value Measurements and Disclosures,” approximatesno time can it drop below 5%, for the carrying amounts representedpurpose of renovating the McKinley Grand Hotel in the accompanyingCity of Canton, Ohio. The initial maturity date is 18 months after the exercised loan date, March 13, 2022, and the agreement includes an extended maturity date of September 13, 2022, should HOFRE need more time with an extension fee of 0.1% of the then outstanding principal balance. The MKG DoubleTree Loan has certain financial covenants whereby the Company must maintain a minimum tangible net worth of $5,000,000 and minimum liquidity of not less than $2,000,000. These covenants are to be tested annually based upon the financial statements primarily due to their short-term nature.at the end of each fiscal year.
Recently issued accounting standardsOn 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.
Management does not believeCH Capital Loan (formerly known as Aquarian Mortgage Loan)
On December 1, 2020, the Company entered into a mortgage loan (the “Aquarian Mortgage Loan”) with Aquarian Credit Funding, LLC (“Aquarian”), as administrative agent and with Investors Heritage Life Insurance Company and Lincoln Benefit Life Company, as lenders, for $40,000,000 of gross proceeds. The Aquarian Mortgage Loan bears interest at 10% per annum. Upon the occurrence and during the continuance of an event of default, Aquarian may, at its option, take such action, without notice or demand, that any recently issued, but not yet effective, accounting pronouncements, if currently adopted, would haveAquarian deems advisable to protect and enforce its rights against the Company, including declaring the debt to become immediately due and payable.
On August 30, 2021, the Company and Aquarian amended the terms of the Aquarian Mortgage Loan whereby the Company paid $20 million to Lincoln Benefit Life Company. In accordance with such payment, Lincoln Benefit Life Company was removed as a material effectlender and the aggregate principal of the Aquarian Mortgage Loan was reduced to $20 million as of September 30, 2021. The Company and Aquarian also agreed to extend the maturity date of the Aquarian Mortgage Loan to March 31, 2022.
On December 15, 2021, the Company repaid approximately $13 million of the Aquarian Mortgage Loan.
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”).
21
Hall of Fame Resort & Entertainment Company and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Note 4: Notes Payable, net (continued)
CH Capital Loan (formerly known as Aquarian Mortgage Loan) (continued)
On March 1, 2022, immediately after CH Capital Lending became the lender and administrative agent under the CH Capital Loan, the maturity date of the Term Loan was extended to March 31, 2024. Also under the amendment, the Term Loan was made convertible into shares of Common Stock at a conversion price of $1.50 per share, subject to adjustment. The conversion price is subject to a weighted-average antidilution adjustment. Certain current and historical fees and expenses were added to the principal amount of the CH Capital Loan so that the new principal amount is $8,347,839. The interest rate was increased from 10% to 12%. Of such 12% per annum interest: (i) 8% per annum shall be payable monthly and (ii) 4% per annum shall accumulate and be payable on the Company’s condensed financial statements.maturity date.
NOTE 3. INITIAL PUBLIC OFFERING
On January 30, 2018,As part of the consideration for the amendment: (i) the Company issued in a transaction exempt from registration pursuant to Section 4(a)(2) of the Initial Public Offering,Securities Act: (A) 330,000 shares of Common Stock to CH Capital Lending, and (B) a warrant to purchase 1,000,000 shares of Common Stock (“Series E Warrant”) to CH Capital Lending, (ii) the Company sold 12,500,000 units atwas required to, subject to approval of its board of directors, create a purchase priceseries of $10.00 per Unit. Each Unit consistspreferred stock, to be known as 7.00% Series C Convertible Preferred Stock (“Series C Preferred Stock”), and, upon the request of CH Capital Lending, exchange each share of the Company’s Series B Convertible Preferred Stock, that is held by CH Capital Lending for one share of Class A common stockSeries C Preferred Stock, and one warrant (“Public Warrant”). Each Public Warrant entitles(iii) the holderCompany and CH Capital Lending amended and restated the Series C Warrants and Series D Warrants that the Company issued to purchase one share of Class A common stock atCH Capital Lending.
The Series E Warrants have an exercise price of $11.50 (see Note 7).$1.50 per share, subject to adjustment. The exercise price is subject to a weighted-average antidilution adjustment. The Series E Warrants may be exercised from and after March 1, 2023, subject to certain terms and conditions set forth in the Series E Warrants. Unexercised Series E Warrants will expire on March 1, 2027. The Series E Warrants shall be cancelled without any further action on the part of the Company or the holder, in the event that the Company repays in full on or before March 1, 2023, the CH Capital Loan.
NOTE 4. PRIVATE PLACEMENTThe Company accounted for this transaction as an extinguishment, given that a substantive conversion feature was added to the CH Capital Loan. The Company recorded the relative fair value of the shares of Common Stock and Series E Warrants as a discount against the CH Capital Loan. The following assumptions were used to calculate the fair value of Series E Warrants:
| Term (years) | 5.0 | |||
| Stock price | $ | 1.01 | ||
| Exercise price | $ | 1.50 | ||
| Dividend yield | 0.0 | % | ||
| Expected volatility | 51.2 | % | ||
| Risk free interest rate | 1.6 | % | ||
| Number of shares | 1,000,000 |
Simultaneously
22
Hall of Fame Resort & Entertainment Company and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Note 4: Notes Payable, net (continued)
IRG Note
On November 23, 2021, the Company, and IRG entered into a promissory note (the “IRG Note”) pursuant to which IRG made a loan to the Company in the aggregate amount of $8,500,000. Interest will accrue on the outstanding balance of the Note at a rate of 8% per annum, compounded monthly. The Company will pay interest to IRG under the Note on the first day of each month, in arrears. The Note has a maturity date of June 30, 2022.
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.
IRG Split Note
On March 1, 2022, the Company entered into a First Amended and Restated Promissory Note with IRG, which amended and restated the Initial Public Offering,IRG Split Note (the “Amended IRG Split Note). The Amended IRG Split Note extended the Sponsor purchased an aggregatematurity to March 31, 2024. Under the Amended IRG Split Note, the principal and accrued interest are convertible into shares of 4,900,000 Private Placement WarrantsCommon Stock at $1.00 per Private Placement Warrant, for an aggregate purchasea conversion price of $4,900,000. Each Private Placement$1.50 per share, subject to adjustment. The conversion price is subject to a weighted-average antidilution adjustment. The principal amount of the Amended IRG Split Note is $4,273,543.
As part of the consideration for the Amended IRG Split Note, the Company issued in a transaction exempt from registration pursuant to Section 4(a)(2) of the Securities Act: (i) 125,000 shares of Common Stock to IRG, LLC, and (ii) a Series E Warrant is exercisable to purchase one500,000 shares of Common Stock to IRG.
The Series E Warrants shall be cancelled without any further action on the part of the Company or the holder, in the event that the Company repays in full, on or before March 1, 2023, the Amended IRG Split Note.
The Company accounted for this transaction as an extinguishment, given that a substantive conversion feature was added to the Amended IRG Split Note. The Company recorded the relative fair value of the shares of Common Stock and Series E Warrants as a discount against the JKP Capital Loan. The following assumptions were used to calculate the fair value of Series E Warrants:
| Term (years) | 5.0 | |||
| Stock price | $ | 1.01 | ||
| Exercise price | $ | 1.50 | ||
| Dividend yield | 0.0 | % | ||
| Expected volatility | 51.2 | % | ||
| Risk free interest rate | 1.6 | % | ||
| Number of shares | 500,000 |
23
Hall of Fame Resort & Entertainment Company and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Note 4: Notes Payable, net (continued)
JKP Split Note
On March 1, 2022, the Company entered into a First Amended and Restated Promissory Note with JKP, which amended and restated the JKP Split Note (the “Amended JKP Split Note”). The Amended JKP Split Note extended the maturity to March 31, 2024. Under the Amended JKP Split Note, the principal and accrued interest are convertible into shares of Common Stock at a conversion price of $1.09 per share, subject to adjustment. The conversion price is subject to a weighted-average antidilution adjustment. The principal amount of Class A common stock atthe Amended JKP Split Note is $4,273,543.
As part of the consideration for the Amended JKP Split Note, the Company issued in a transaction exempt from registration pursuant to Section 4(a)(2) of the Securities Act: (i) 125,000 shares of Common Stock to JKP, and (ii) a Series F Warrant to purchase 500,000 shares of Common Stock to JKP.
The Series F Warrants have an exercise price of $11.50.$1.09 per share, subject to adjustment. The proceedsexercise price is subject to a weighted-average antidilution adjustment. The Series F Note Warrants may be exercised from and after March 1, 2022, subject to certain terms and conditions set forth in the Private PlacementSeries F Warrants. Unexercised Series F Warrants werewill expire on March 1, 2027.
The Company accounted for this transaction as an extinguishment, given that a substantive conversion feature was added to the proceeds fromAmended JKP Split Note. The Company recorded the Initial Public Offering heldrelative fair value of the shares of Common Stock and Series F Warrants as a discount against the Amended JKP Split Note. The following assumptions were used to calculate the fair value of Series F Warrants:
| Term (years) | 5.0 | |||
| Stock price | $ | 1.01 | ||
| Exercise price | $ | 1.09 | ||
| Dividend yield | 0.0 | % | ||
| Expected volatility | 51.2 | % | ||
| Risk free interest rate | 1.6 | % | ||
| Number of shares | 500,000 |
24
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, the Company issued to MLF: (A) 125,000 shares (the “Commitment Fee Shares”) of Common Stock, and (B) a warrant to purchase 125,000 shares of Common Stock (“Series G Warrants”). The exercise price of the Series G Warrants will be $1.50 per share. The Series G Warrants will become exercisable one year after issuance, subject to certain terms and conditions set forth in the Trust Account.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.
The Company recorded the relative fair value of the shares of Common Stock and Series G Warrants as a discount against the CFP Loan. The following assumptions were used to calculate the fair value of Series G Warrants:
| Term (years) | 5.0 | |||
| Stock price | $ | 0.62 | ||
| Exercise price | $ | 1.50 | ||
| Dividend yield | 0.0 | % | ||
| Expected volatility | 52.4 | % | ||
| Risk free interest rate | 3.0 | % | ||
| Number of shares | 125,000 |
PACE Financing
On April 28, 2022, the City of Canton, in coordination with the Canton Regional Energy Special Improvement District, approved legislation that will enable the Company to receive $3,200,000 in Property Assessed Clean Energy (“PACE”) financing in conjunction with the implementation of various energy-efficient improvements at the Center for Performance. Through June 30, 2022, the Company received $27,586 on this financing.
Stark Community Foundation Loan
On June 16, 2022, the Company entered into a loan agreement with Stark pursuant to which Stark agreed to lend $5,000,000 to the Company. Of this amount, the Company borrowed $2,500,000 (the “SCF Loan”) through June 30, 2022. The interest rate applicable to the SCF Loan is 6.0% annum. Interest payments are paid annually on December 31 of each year. The SCF Loan is unsecured and matures on May 31, 2029. The Company may prepay the SCF Loan without penalty.
Events of default under the loan include without limitation: (i) a payment default, (ii) the Company’s failure to complete the infrastructure development for Phase II on or before December 31, 2024, and (iii) the Company’s failure, following notice from Stark, to comply with any non-monetary covenant contained in the loan agreement. Upon the occurrence of an event of default under the Business Loan Agreement: (a) interest due will increase by 5% per annum; and (b) Stark may, at its option, declare the Company’s obligations under the Business Loan Agreement to be immediately due and payable.
The loan agreement contains customary affirmative and negative covenants for this type of loan, including without limitation (i) affirmative covenants, including furnish Stark with such financial statements and other related information at such frequencies and in such detail as Stark may reasonably request and use all SCF Loan proceeds solely for the infrastructure development for the construction of Phase II, and (ii) negative covenants, including restrictions on additional indebtedness, prepayment of other indebtedness, transactions with related parties, additional liens, mergers and acquisitions, and standard prohibitions on change of control.
25
Hall of Fame Resort & Entertainment Company and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Note 4: Notes Payable, net (continued)
CH Capital Bridge Loan
On June 16, 2022, The Company and its subsidiaries HOF Village Retail I, LLC and HOF Village Retail II, LLC, as borrowers (the “Borrowers”), borrowed $10,500,000 (the “CH Capital Bridge Loan”) from CH Capital Lending. The CH Capital Bridge Loan is evidenced by a Promissory Note issued by the Borrowers to CH Capital Lending. Interest accrues on the Note at 12% per annum, compounded monthly. The maturity date of the Note is September 10, 2022. Borrowers have the right to prepay all or any portion of the principal amount of the Note at any time before the maturity date without penalty. Under the Note, the net proceeds of a financing that occurs after the date of the Note shall be used to prepay the Note. The Note is secured by: (i) a mortgage on real property on which the Company is building its Fan Engagement Zone (an 82,000-square-foot promenade located strategically within the campus footprint, which will include restaurants, retailers and experiential offerings) and (ii) a pledge and security interest in all of the membership interests of HOF Village Waterpark, LLC, and HOF Village Hotel I, LLC held by Newco, each of which is direct or indirect wholly-owned subsidiary of the Company.
Upon the occurrence of an event of default under the Note, including without limitation Borrowers’ failure to pay, on or before the due date any amount owing to CH Capital Lending under the Note or Borrowers’ failure, following notice from CH Capital Lending, to comply with any non-monetary covenant contained in the CH Capital Bridge Loan, (i) interest due will increase by 5% per annum; and (ii) CH Capital Lending may, at its option, declare Borrowers’ obligations under the Note to be immediately due and payable.
Future Minimum Principal Payments
The minimum required principal payments on notes payable outstanding as of June 30, 2022 are as follows:
| For the years ending December 31, | Amount | |||
| 2022 (six months) | $ | 13,815,568 | ||
| 2023 | 16,889,801 | |||
| 2024 | 34,524,169 | |||
| 2025 | 31,051,820 | |||
| 2026 | 1,397,073 | |||
| Thereafter | 39,730,561 | |||
| Total Gross Principal Payments | $ | 137,408,992 | ||
| Less: Discount | (14,478,948 | ) | ||
| Total Net Principal Payments | $ | 122,930,044 | ||
The Company has various debt covenants that require certain financial information to be met. If the Company does not complete a Business Combination within the Combination Period, the proceeds of the sale of the Private Placement Warrants will be used to fund the redemption of the Public Shares (subject tomeet the requirements of applicable law) and the Private Placement Warrants will expire worthless. Theredebt covenants, the Company will be no redemption rights or liquidating distributions fromresponsible for paying the Trust Account with respect to the Private Placement Warrants.
The Private Placement Warrants are identical to the Public Warrants underlying the Units sold in the Initial Public Offering, except that the Private Placement Warrants and the Class A common stock issuable upon the exercisefull outstanding amount of the Private Placement Warrants are not transferable, assignable or saleable untilnote immediately. As of June 30, days after the completion of a Business Combination, subject to certain limited exceptions. Additionally, the Private Placement Warrants will be non-redeemable so long as they are held by the initial purchasers or their permitted transferees. The Private Placement Warrants may also be exercised by the initial purchasers and their permitted transferees for cash or on a cashless basis. If the Private Placement Warrants are held by someone other than the initial purchasers or their permitted transferees, the Private Placement Warrants will be redeemable by2022, the Company and exercisable by such holders on the same basis as the Public Warrants.was in compliance with all relevant debt covenants.
26
GORDON POINTE ACQUISITION CORP.Hall of Fame Resort & Entertainment Company and Subsidiaries
NOTES TO FINANCIAL STATEMENTSNotes to Condensed Consolidated Financial Statements
March 31, 2018
(Unaudited)
Note 5: Stockholders’ Equity
NOTE 5. RELATED PARTY TRANSACTIONSAuthorized Capital
Founder Shares
On April 12, 2017,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 issued an aggregate of 3,593,750to issue up to 300,000,000 shares of Class F common stockCommon Stock and to the Sponsor (“Founder Shares”) for an aggregate purchase price of $25,000. The Founder Shares will automatically convert into Class A common stock upon the consummation of a Business Combination on a one-for-one basis, subject to adjustments as described in Note 7. The 3,593,750 Founder Shares included an aggregateissue and designate its rights, without stockholder approval, of up to 468,7505,000,000 shares subject to forfeiture byof preferred stock, par value $0.0001.
Series A Preferred Stock Designation
On October 8, 2020, the Sponsor toCompany filed a Certificate of Designations with the extent that the underwriter’s over-allotment was not exercised in full or in part, so that the Initial Stockholders would own, on an as-converted basis, 20%Secretary of State of the Company’s issuedState 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.
Series B Preferred Stock Designation
On May 13, 2021, 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 7.00% Series B Preferred Stock (as defined below). The number of authorized shares of Series B Preferred Stock is 15,200.
The Company had 200 and 15,200 shares of 7.00% Series B Convertible Preferred Stock (“Series B Preferred Stock”) outstanding and 15,200 and 15,200 shares after the Initial Public Offering. The underwriters’ election to exercise their over-allotment option expired unexercised on March 12, 2018 and, as a result, 468,750 Founder Shares were forfeited, resulting in 3,125,000 Founder Shares outstandingauthorized as of MarchJune 30, 2022 and December 31, 2018.
The Initial Stockholders have agreed not to transfer, assign or sell any2021, respectively. On the third anniversary of their Founder Shares until the earlier of (i) one year after the date of the consummation of a Business Combination, or (ii) the date on which shares of Series B Preferred Stock are first issued (the “Automatic Conversion Date”), each share of Series B Preferred Stock, except to the last sales priceextent previously converted pursuant to an Optional Conversion (as defined below), shall automatically be converted into shares of Common Stock (the “Automatic Conversion”). At any time following the date on which shares of Series B Preferred Stock are first issued, and from time to time prior to the Automatic Conversion Date, each holder of Series B Preferred Stock shall have the right, but not the obligation, to elect to convert all or any portion of such holder’s shares of Series B Preferred Stock into shares of Common Stock, on terms similar to the Automatic Conversion (any such conversion, an “Optional Conversion”).
27
Hall of Fame Resort & Entertainment Company and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Note 5: Stockholders’ Equity, (continued)
7.00% Series C Convertible Preferred Stock
On March 28, 2022, 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 its Series C Preferred Stock. The number of authorized shares of Series C Preferred Stock is 15,000.
On March 28, 2022, in accordance with the previously announced Amendment Number 6 to Term Loan Agreement by and among the Company and CH Capital Lending, the Company entered into a Securities Exchange Agreement (the “Exchange Agreement”) with CH Capital Lending, pursuant to which the Company exchanged in a private placement (the “Private Placement”) each share of the Company’s Series B Convertible Preferred Stock, that is held by CH Capital Lending for one share of the Company’s Series C Preferred Stock, resulting in the issuance of 15,000 shares of Series C Preferred Stock to CH Capital Lending. The Series C Preferred Stock is convertible into shares of the Company’s common stock equals or exceeds $12.00 per share (as adjusted for stock splits, stockstock. The shares of Series B Preferred Stock exchanged, and the Series C Preferred Stock acquired, have an aggregate liquidation preference of $15 million plus any accrued but unpaid dividends reorganizations and recapitalizations) for any 20 trading days within any 30-trading day period commencing 150 days after a Business Combination, or earlier, in each case, if subsequent to a Business Combination, the Company consummates a subsequent liquidation, merger, stock exchange, reorganization or other similar transaction which results in alldate of the Company’s stockholders having the right to exchange their common stock for cash, securities or other property.payment.
Related Party Advances2020 Omnibus Incentive Plan
Through March 31, 2018, the Sponsor advanced an aggregate of $143,302 for costs associated with the Initial Public Offering. The advances are non-interest bearing, unsecured and due on demand. As of March 31, 2018 and December 31, 2017, there were $88,095 and $55,207 of outstanding advances from related party, respectively.
Administrative Services Agreement
The Company entered into an agreement whereby, commencing on January 30, 2018 through the earlier of the consummation of a Business Combination or the Company’s liquidation, the Company will pay an affiliate of the Sponsor a monthly fee of $10,000 for office space, utilities and administrative support. For the three months ended March 31, 2018, the Company incurred $20,000 in fees for these services.
Related Party Loans
In order to finance transaction costs in connection with a Business Combination, the Sponsor, the Company’s officers and directors may, but are not obligated to, loan the Company funds from time to time or at any time, as may be required (the “Working Capital Loans”). Each Working Capital Loan would be evidenced by a promissory note. The Working Capital Loans would either be paid upon consummation of a Business Combination, without interest, or, at the holder’s discretion, up to $1,500,000 of the Working Capital Loans may be converted into warrants at a price of $1.00 per warrant. The warrants would be identical to the Private Placement Warrants.
NOTE 6. COMMITMENTS AND CONTINGENCIES
Director Compensation
During the quarter ended March 31, 2018, the Company agreed to pay each of its independent directors an annual retainer of $20,000 (pro-rated for interim periods of service) for their service as members of the Company’s Board, for which, in addition to general matters of corporate governance and oversight, the Company expects its Board members to assist the Company in the identification and evaluation of industries and particular businesses that are, in the reasonable judgment of the Board, suitable acquisition targets for the Company, as well as assisting the Company in the review and analysis of alternative Business Combinations. In addition, the Company has agreed to pay each independent director a telephonic meeting fee of $1,000 or in-person meeting fee of $1,500 for each meeting attended by such independent director. The Company has also agreed to pay the Chairperson of the Audit Committee an annual retainer of $7,500 and the Chairperson of the Compensation Committee an annual retainer of $5,000. The fees will be deferred and become payable only if the Company consummates a Business Combination. If a Business Combination does not occur, the Company will not be required to pay these contingent fees.
GORDON POINTE ACQUISITION CORP.
NOTES TO FINANCIAL STATEMENTS
March 31, 2018
(Unaudited)
Registration Rights
Pursuant to a registration rights agreement entered into on January 24, 2018, the holders of the Founder Shares, Private Placement Warrants (and their underlying securities) and the warrants that may be issued upon conversion of the Working Capital Loans (and their underlying securities) are entitled to registration rights. The holders of a majority of these securities are entitled to make up to three demands, excluding short form demands, that the Company register such securities. In addition, the holders have certain “piggy-back” registration rights with respect to registration statements filed subsequent to the completion of a Business Combination and rights to require the Company to register for resale such securities pursuant to Rule 415 under the Securities Act. However, the registration rights agreement provides that the Company will not permit any registration statement filed under the Securities Act to become effective until termination of the applicable lock-up period. The Company will bear the expenses incurred in connection with the filing of any such registration statements.
Underwriters Agreement
The underwriter is entitled to a deferred fee of three and one-half percent (3.5%) of the gross proceeds of the Initial Public Offering, or $4,375,000. The deferred fee will be paid in cash upon the closing of a Business Combination from the amounts held in the Trust Account, subject to the terms of the underwriting agreement.
Deferred Legal Fee
On January 30, 2018,July 1, 2020, in connection with the closing of the Initial Public Offering,Business Combination, the Company’s omnibus incentive plan (the “2020 Omnibus Incentive Plan”) became effective immediately upon the closing of the Business Combination. 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 1,812,727 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 four million the number of shares of Common Stock, that will be available for issuance under the 2020 Omnibus Incentive Plan, resulting in a maximum of 5,812,727 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 obligatedeffective on June 2, 2021. As of June 30, 2022, 2,154,595 shares remained available for issuance under the 2020 Omnibus Incentive Plan.
28
Hall of Fame Resort & Entertainment Company and Subsidiaries
Notes to payCondensed Consolidated Financial Statements
(Unaudited)
Note 5: Stockholders’ Equity, (continued)
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 June 30, 2022, approximately 18.2 million shares were sold resulting in net proceeds to the Company totaling approximately $17.9 million. The remaining availability under the Equity Distribution Agreement as of June 30, 2022 was approximately $28.1 million.
Issuance of Restricted Stock Awards
The Company’s activity in restricted Common Stock was as follows for the six months ended June 30, 2022:
| Number of shares | Weighted average grant date fair value | |||||||
| Non–vested at January 1, 2022 | 238,643 | $ | 9.31 | |||||
| Granted | 197,168 | $ | 1.19 | |||||
| Vested | (197,168 | ) | $ | 1.19 | ||||
| Non–vested at June 30, 2022 | 238,643 | $ | 9.31 | |||||
For the three months ended June 30, 2022 and 2021, stock-based compensation related to restricted stock awards was $720,703 and $673,005, respectively, and for the six months ended June 30, 2022 and 2021, $1,453,460 and $1,227,551, respectively. As of June 30, 2022, unamortized stock-based compensation costs related to restricted share arrangements were $12,161 and will be recognized over a weighted average period of 0.1 years.
Issuance of Restricted Stock Units
During the six months ended June 30, 2022, the Company granted an aggregate of 1,836,668 Restricted Stock Units (“RSUs”) to its attorneysemployees and directors, of which 522,541 were granted under the 2020 Omnibus Incentive Plan and 1,314,127 were granted as inducement awards. The RSUs were valued at the value of the Company’s Common Stock on the date of grant, which was a deferred legal feerange of $72,500 upon consummation$0.55 to $1.16 for these awards. The RSUs granted to employees vest one third on the first anniversary of a Business Combination. Accordingly,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.
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 (continued)
The Company’s activity in RSUs was as follows for the six months ended June 30, 2022:
| Number of shares | Weighted average grant date fair value | |||||||
| Non–vested at January 1, 2022 | 2,207,337 | $ | 2.34 | |||||
| Granted | 1,836,668 | $ | 0.95 | |||||
| Vested | (541,377 | ) | $ | 2.00 | ||||
| Forfeited | (573,442 | ) | $ | 2.50 | ||||
| Non–vested at June 30, 2022 | 2,929,186 | $ | 1.48 | |||||
For the three months ended June 30, 2022 and 2021, the Company recorded $72,500$586,547 and $947,144, respectively, in employee and director stock-based compensation expense, and for the six months ended June 30, 2022 and 2021, $1,088,959 and $1,779,141, respectively. Employee and director stock-based compensation expense is a component of “Operating expenses” in the condensed consolidated statement of operations. As of June 30, 2022, unamortized stock-based compensation costs related to restricted stock units were $3,178,424 and will be recognized over a weighted average period of 1.1 years.
Warrants
The Company’s warrant activity was as deferred legalfollows for the six months ended June 30, 2022:
| Number of Shares | Weighted Average Exercise Price (USD) | Weighted Average Contractual Life (years) | Intrinsic Value (USD) | |||||||||||||
| Outstanding - January 1, 2022 | 41,012,349 | $ | 7.82 | 3.59 | ||||||||||||
| Granted | 3,125,000 | $ | 1.30 | |||||||||||||
| Outstanding – June 30, 2022 | 44,137,349 | $ | 7.36 | 3.36 | $ | - | ||||||||||
| Exercisable – June 30, 2022 | 42,512,349 | $ | 7.59 | 3.31 | $ | - | ||||||||||
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 $1.40 per share remains unchanged, 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.
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 (continued)
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. The following assumptions were used to calculate the fair value of Series C Warrants immediately before and after modification:
| Original Series C Warrants | Modified Series C Warrants | |||||||
| Term (years) | 3.8 | 5.0 | ||||||
| Stock price | $ | 1.01 | $ | 1.01 | ||||
| Exercise price | $ | 1.40 | $ | 1.40 | ||||
| Dividend yield | 0.0 | % | 0.0 | % | ||||
| Expected volatility | 54.7 | % | 50.8 | % | ||||
| Risk free interest rate | 1.5 | % | 1.5 | % | ||||
| Number of shares | 10,036,925 | 10,036,925 | ||||||
| Aggregate fair value | $ | 3,336,000 | $ | 3,648,000 | ||||
Amended and Restated Series D Warrants issue to CH Capital Lending
On March 1, 2022, in connection with the amendment to the CH Capital Loan (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 $6.90 per share remains unchanged, but the amendments subject the exercise price to a weighted-average antidilution adjustment.
The Company accounted for this modification as a cost of the CH Capital Loan, whereby the Company calculated the incremental fair value of the Series D Warrants and recorded them as a discount against the CH Capital Loan. The following assumptions were used to calculate the fair value of Series D Warrants immediately before and after modification:
| Original Series D Warrants | Modified Series D Warrants | |||||||
| Term (years) | 2.3 | 5.0 | ||||||
| Stock price | $ | 1.01 | $ | 1.01 | ||||
| Exercise price | $ | 6.90 | $ | 6.90 | ||||
| Dividend yield | 0.0 | % | 0.0 | % | ||||
| Expected volatility | 63.5 | % | 50.8 | % | ||||
| Risk free interest rate | 1.3 | % | 1.6 | % | ||||
| Number of shares | 2,450,980 | 2,450,980 | ||||||
| Aggregate fair value | $ | 50,000 | $ | 138,000 | ||||
31
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”), 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 powered by Johnson Controls”. 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 powered by JCI (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 has agreed to pay JCI up to an aggregate of approximately $217 million for services rendered by JCI over the term of the TAAS Agreement. As of June 30, 2022 and December 31, 2021, approximately $195 million and $199 million, respectively, was remaining under the TAAS Agreement.
32
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)
As of June 30, 2022, scheduled future cash to be received under the Naming Rights Agreement is as follows:
| Unrestricted | Activation | Total | ||||||||||
| 2022 (six months) | $ | 4,000,000 | $ | 750,000 | $ | 4,750,000 | ||||||
| 2023 | 4,000,000 | 750,000 | 4,750,000 | |||||||||
| 2024 | 4,250,000 | 750,000 | 5,000,000 | |||||||||
| 2025 | 4,250,000 | 750,000 | 5,000,000 | |||||||||
| Thereafter | 39,781,251 | 6,750,000 | 46,531,251 | |||||||||
| Total | $ | 56,281,251 | $ | 9,750,000 | $ | 66,031,251 | ||||||
As services are provided, the Company is recognizing revenue on a straight-line basis over the expected term of the Amended Sponsorship Agreement. During the three and six months ended June 30, 2021, the Company recognized $1,121,385 and $2,230,447, respectively, of net sponsorship revenue related to the Naming Rights 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 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 balance sheetconsolidated financial statements. During the three and six months ended June 30, 2022, the Company suspended its revenue recognition until the dispute is resolved and has recorded an allowance against the amounts due as of June 30, 2022 in the amount of $2,125,000. The balances due under the Naming Rights Agreement as of June 30, 2022 and December 31, 2021 amounted to $4,010,417 and $1,885,417, respectively.
33
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
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, and advertising on our website and other benefits as detailed in the agreements.
As of June 30, 2022, scheduled future cash to be received under the agreements, excluding the Johnson Controls Naming Rights Agreement, is as follows:
Year ending December 31,
| 2022 (six months) | $ | 762,000 | ||
| 2023 | 2,744,220 | |||
| 2024 | 2,406,265 | |||
| 2025 | 2,317,265 | |||
| 2026 | 2,167,265 | |||
| Thereafter | 6,271,792 | |||
| Total | $ | 16,668,807 |
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 June 30, 2022 and 2021, the Company recognized $452,772 and $1,508,402 of net sponsorship revenue, respectively, and for the six months ended June 30, 2022 and 2021, $1,272,062 and $2,983,838, respectively.
34
Hall of Fame Resort & Entertainment Company and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Note 7: Other Commitments
Canton City School District
The Company has entered into cooperative agreements with certain governmental entities that support the development of the project overall, where the Company is an active participant in the agreement activity, and the Company would benefit from the success of the activity.
The Company had a commitment to the Canton City School District (“CCSD”) to provide a replacement for their Football Operations Center (“FOC”) and to construct a Heritage Project (“Heritage”). The commitment was defined in the Operations and Use Agreement for HOF Village Complex dated February 26, 2016.
Lessor Commitments
As of June 30, 2022, the Company’s Constellation Center for Excellence and retail facilities were partially leased including leases by the Company’s subsidiaries. The future minimum lease commitments under this lease, excluding leases of the Company’s subsidiaries, are as follows:
Year ending December 31:
| 2022 (six months) | $ | 24,200 | ||
| 2023 | 246,761 | |||
| 2024 | 239,266 | |||
| 2025 | 233,183 | |||
| 2026 | 220,866 | |||
| Thereafter | 846,636 | |||
| Total | $ | 1,810,912 |
Employment Agreements
The Company has employment agreements with many of its key executive officers that usually have terms between one and three years.
35
Hall of Fame Resort & Entertainment Company and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Note 7: Other Commitments (continued)
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 June 30, 2022 and 2021, the Company paid and incurred $32,844 and $30,000, respectively in management fees, and for the six months ended June 30, 2022 and 2021, $62,844 and $60,000, respectively.
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 two notes payable with Constellation. See Note 4 for more information.
Other Liabilities
Other liabilities consisted of the following at MarchJune 30, 2022 and December 31, 2018.2021:
| June 30, 2022 | December 31, 2021 | |||||||
| Activation fund reserves | $ | 3,629,085 | $ | 3,537,347 | ||||
| Deferred sponsorship revenue | 3,387,224 | 203,278 | ||||||
| Other liabilities | 1,554,903 | - | ||||||
| Total | $ | 8,571,212 | $ | 3,740,625 | ||||
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.
36
Hall of Fame Resort & Entertainment Company and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
NOTE 7. STOCKHOLDERS’ EQUITYNote 9: Related-Party Transactions
Preferred Stock —Due to Affiliates
Due to affiliates consisted of the following at June 30, 2022 and December 31, 2021:
| June 30, 2022 | December 31, 2021 | |||||||
| Due to IRG Member | $ | 1,770,390 | $ | 1,041,847 | ||||
| Due to IRG Affiliate | 116,900 | 116,900 | ||||||
| Due to PFHOF | 859,207 | 660,208 | ||||||
| Total | $ | 2,746,497 | $ | 1,818,955 | ||||
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 powered by Johnson Controls, 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 Company is authorizedcurrently in discussions with this affiliate to issue 5,000,000 sharesestablish repayment terms of preferred stockthese advances. However, there could be no assurance that the Company and IRG Member will come to terms acceptable to both parties.
On January 13, 2020, the Company secured $9.9 million in financing from Constellation through its Efficiency Made Easy (“EME”) program to implement energy efficient measures and to finance the construction of the Constellation Center for Excellence and other enhancements, as part of Phase II development. The Hanover Insurance Company provided a guarantee bond to guarantee the Company’s payment obligations under the financing, and Stuart Lichter and two trusts affiliated with Mr. Lichter have agreed to indemnify The Hanover Insurance Company for payments made under the guarantee bond.
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.
License Agreement
On March 10, 2016, the Company entered into a license agreement with PFHOF, whereby the Company has the ability to license and use certain intellectual property from PFHOF in exchange for the Company paying a fee based on certain sponsorship revenues and expenses. On December 11, 2018, the license agreement was amended to change the calculation of the fee to be 20% of eligible sponsorship revenue. The license agreement was further amended in a First Amended and Restated License Agreement, dated September 16, 2019. The license agreement expires on December 31, 2033.
37
Hall of Fame Resort & Entertainment Company and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Note 9: Related-Party Transactions (continued)
Media License Agreement
On November 11, 2019, the Company entered into a Media License Agreement with PFHOF. On July 1, 2020, the Company entered into an Amended and Restated Media License Agreement that terminates on December 31, 2034. In consideration of a license to use certain intellectual property of PFHOF, the Company agreed to pay PFHOF minimum guaranteed license fees of $1,250,000 each year during the term. After the first five years of the agreement, the minimum guarantee shall increase by 3% on a year-over-year basis. The first annual minimum payment was due July 1, 2021, which was not paid by December 31, 2021. On April 12, 2022, the Company and PFHOF terminated the Media License Agreement and entered into a new license agreement.
Purchase of Real Property from PFHOF
On February 3, 2021, the Company purchased certain parcels of real property from PFHOF, located at the site of the Hall of Fame Village powered by Johnson Controls, for $1.75 million. In connection with the purchase, the Company granted certain easements to PFHOF to ensure accessibility to the PFHOF museum.
Shared Services Agreement with PFHOF
On March 9, 2021, the Company entered into an additional Shared Services Agreement with PFHOF, which supplements the existing Shared Services Agreement by, among other things, providing for the sharing of costs for activities relating to shared services.
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 par valueright of $0.0001first 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 share with such designation, rightsyear 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 preferences as may be determined from time to time by the Company’s Board of Directors. At March 31, 2018its affiliates’ ticket sales for certain concerts and youth sports tournaments. The Global License Agreement has an initial term through December 31, 2017, there were no shares2036, subject to automatic renewal for successive five-year terms, unless timely notice of preferred stock issued or outstanding.non-renewal is provided by either party.
Class A Common Stock— The future minimum payments under this agreement as of June 30, 2022 are as follows:
| For the years ending December 31, | Amount | |||
| 2022 (six months) | $ | 581,250 | ||
| 2023 | 600,000 | |||
| 2024 | 600,000 | |||
| 2025 | 600,000 | |||
| 2026 | 600,000 | |||
| Thereafter | 7,350,000 | |||
| Total Gross Principal Payments | $ | 10,331,250 | ||
During the three months ended June 30, 2022 and 2021, the Company is authorized to issue 40,000,000 sharespaid $318,750 and $0 of common stock with a par value of $0.0001 per share. Holdersthe annual license fee, respectively, and for the six months ended June 30, 2022 and 2021, $318,750 and $0, respectively.
Note 10: Concentrations
For the three months ended June 30, 2022, 2 customers represented approximately 65% and 28% of the Company’s Class A common stock are entitled to one vote for each share. At March 31, 2018sponsorship revenue. For the three months ended June 30, 2021, 2 customers represented approximately 47% and December 31, 2017, there were 896,824 and -0- shares of common stock issued and outstanding, (excluding 11,603,176 and -0- shares of common stock subject to possible redemption), respectively.
Class F Common Stock — The Company is authorized to issue 5,000,000 shares of common stock with a par value of $0.0001 per share. Holders12% of the Company’s Class F common stock are entitled to one vote for each share. At March 31, 2018sponsorship revenue. For the six months ended June 30, 2022, 2 customers represented approximately 45.7% and 19.5% of the Company’s sponsorship revenue. For the six months ended June 30, 2021, 2 customers represented approximately 74.8% and 19.5% of the Company’s sponsorship revenue.
As of June 30, 2022, 1 customer represented approximately 85% of the Company’s sponsorship accounts receivable. As of December 31, 2017, there were 3,125,000 and 3,593,750 shares2021, 1 customer represented approximately 88% of common stock issued and outstanding, of which -0- and 468,750 shares were subject to forfeiture, respectively.the Company’s sponsorship accounts receivable.
The shares of Class F common stock will automatically convert into shares of Class A common stock atAt any point in time, the time of a Business Combination on a one-for-one basis, subject to adjustment as follows. In the caseCompany can have funds in their operating accounts and restricted cash accounts that additional shares of Class A common stock, or equity-linked securities, are issued or deemed issued in excess of the amounts offeredwith third-party financial institutions. These balances in the Initial Public OfferingU.S. may exceed the Federal Deposit Insurance Corporation insurance limits. While the Company monitors the cash balances in connection withtheir operating accounts, these cash and restricted cash balances could be impacted if the closing of a Business Combination, the ratio at which shares of Class F common stock shall convert into shares of Class A common stock will be adjusted so that the number of shares of Class A common stock issuable upon conversion of all shares of Class F common stock will equal,underlying financial institutions fail or other adverse conditions in the aggregate, on an as-converted basis, 20% of the total number of all shares of common stock outstanding upon completion of the Initial Public Offering plus all shares of Class A common stock and equity-linked securities issued or deemed issued in connection with a Business Combination, excluding any shares or equity-linked securities issued, or to be issued, to any seller in a Business Combination.financial markets occurs.
39
GORDON POINTE ACQUISITION CORP.
NOTES TO FINANCIAL STATEMENTSHall of Fame Resort & Entertainment Company and Subsidiaries
March 31, 2018Notes to Condensed Consolidated Financial Statements
(Unaudited)
Note 11: ROU Assets and Lease Liabilities
HoldersThe Company has entered into operating leases as the lessee primarily for ground leases under its stadium, sports complex, and parking facilities. On January 1, 2022 (“Effective Date”), the Company adopted FASB Accounting Standards Codification, or ASC, Topic 842, Leases (“ASC 842”), which increases transparency and comparability by recognizing a lessee’s rights and obligations resulting from leases by recording them on the balance sheet as lease assets and lease liabilities. The new guidance requires the recognition of Class A common stockthe right-of-use (“ROU”) assets and Class F common stock will vote togetherrelated operating and finance lease liabilities on the balance sheet. The Company adopted the new guidance using the modified retrospective approach on January 1, 2022. As a result, the consolidated balance sheet as a single class on all matters submitted to a vote of stockholders except as required by law.December 31, 2021 was not restated and is not comparative.
Warrants— No fractional shares will be issued upon exerciseThe adoption of ASC 842 resulted in the recognition of operating ROU assets of $7,741,946 and operating lease liabilities of $3,383,807 on the Company’s condensed consolidated balance sheet as of January 1, 2022. The initial recognition of the Public Warrants. ROU asset included the reclassification of $4,358,139 of prepaid rent as of January 1, 2022.
The Public Warrants will become exercisable onCompany elected the laterpackage of (a) 30 days afterpractical expedients permitted within the completionstandard, which allow an entity to forgo reassessing (i) whether a contract contains a lease, (ii) classification of leases, and (iii) whether capitalized costs associated with a Business Combinationlease meet the definition of initial direct costs. Also, the Company elected the expedient allowing an entity to use hindsight to determine the lease term and impairment of ROU assets and the expedient to allow the Company to not have to separate lease and non-lease components. The Company has also elected the short-term lease accounting policy under which the Company would not recognize a lease liability or (b) 12ROU asset for any lease that at the commencement date has a lease term of twelve months from the closing of the Initial Public Offering; provided in each caseor less and does not include a purchase option that the Company has an effective registration statement under the Securities Act covering the shares of common stock issuable upon exercise of the Public Warrants and a current prospectus relatingis more than reasonably certain to them is available. The Company has agreed that as soon as practicable, but in no event later than 15 business daysexercise.
For contracts entered into on or after the closingEffective Date, at the inception of a Business Combination,contract the Company will assess whether the contract is, or contains, a lease. The Company’s assessment is based on: (i) whether the contract involves the use its best effortsof a distinct identified asset, (ii) whether the Company obtained the right to file withsubstantially all the SEC a registration statement foreconomic benefit from the registration, under the Securities Act,use of the shares of Class A common stock issuable upon exerciseasset throughout the period, and (iii) whether the Company has the right to direct the use of the Public Warrants. The Company will use its best effortsasset. Leases entered into prior to cause the same to become effective and to maintain the effectiveness of such registration statement, and a current prospectus relating thereto, until the expiration of the Public Warrants in accordance with the provisions of the warrant agreement. Notwithstanding the foregoing, if a registration statement covering the shares of Class A common stock issuable upon exercise of the Public Warrants isJanuary 1, 2022, which were accounted for under ASC 840, were not effective within a specified period following the consummation of Business Combination, warrant holders may, until such time as there is an effective registration statement and during any period when the Company shall have failed to maintain an effective registration statement, exercise warrants on a cashless basis pursuant to the exemption provided by Section 3(a)(9) of the Securities Act, provided that such exemption is available. If that exemption, or another exemption, is not available, holders will not be able to exercise their warrants on a cashless basis. The Public Warrants will expire five years after the completion of a Business Combination or earlier upon redemption or liquidation.reassessed for classification.
The Company may redeem the Public Warrants (except with respect to the Private Placement Warrants):
If the Company calls the Public Warrants for redemption, management will have the option to require all holders that wish to exercise the Public Warrants to do so on a “cashless basis,” as described in the warrant agreement.
The exercise price and number of shares of Class A common stock issuable upon exercise of the warrants may be adjusted in certain circumstances including in the event of a stock dividend, or recapitalization, reorganization, merger or consolidation. However, the warrants will not be adjusted for issuance of Class A common stock at a price below its exercise price. Additionally, in no event will the Company be required to net cash settle the warrants. If the Company is unable to complete a Business Combination within the Combination Period and the Company liquidates the funds held in the Trust Account, holders of warrants will not receive any of such funds with respect to their warrants, nor will they receive any distribution from the Company’s assets held outside of the Trust Account with the respect to such warrants. Accordingly, the warrants may expire worthless.
NOTE 8. FAIR VALUE MEASUREMENTS
The Company follows the guidance in ASC 820 for its financial assets and liabilities that are re-measured and reported at fair value at each reporting period, and non-financial assets and liabilities that are re-measured and reported at fair value at least annually.
40
GORDON POINTE ACQUISITION CORP.Hall of Fame Resort & Entertainment Company and Subsidiaries
NOTES TO FINANCIAL STATEMENTSNotes to Condensed Consolidated Financial Statements
March 31, 2018
(Unaudited)
The fairNote 11: ROU Assets and Lease Liabilities (continued)
For operating leases, the lease liability is initially and subsequently measured at the present value of the Company’s financial assetsunpaid lease payments. For finance leases, the lease liability is initially measured in the same manner and liabilities reflects management’s estimatedate 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 amountsthe 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 received in connectionto 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 salelease payments allocated between a reduction of the assets or paid in connection withlease liability and interest expense.
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):
| June 30, | December 31, | |||||||
| 2022 | 2021 | |||||||
| Operating leases: | ||||||||
| Right-of-use assets | $ | 7,651,080 | $ | – | ||||
| Lease liability | 3,404,682 | – | ||||||
| Finance leases: | ||||||||
| Right-of-use assets | – | – | ||||||
| Lease liability | – | – | ||||||
Other information related to leases is presented below:
| Six Months Ended June 30, 2022 | ||||
| Operating lease cost | $ | 258,184 | ||
| Other information: | ||||
| Operating cash flows from operating leases | 158,083 | |||
| Weighted-average remaining lease term – operating leases (in years) | 92.03 | |||
| Weighted-average discount rate – operating leases | 10.0 | % | ||
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Hall of Fame Resort & Entertainment Company and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Note 11: ROU Assets and Lease Liabilities (continued)
As of June 30, 2022, the transferannual minimum lease payments of our operating lease liabilities were as follows:
| For The Years Ending December 31, | ||||
| 2022 (six months) | $ | 167,035 | ||
| 2023 | 333,004 | |||
| 2024 | 311,900 | |||
| 2025 | 311,900 | |||
| 2026 | 311,900 | |||
| Thereafter | 41,436,900 | |||
| Total future minimum lease payments, undiscounted | 42,872,639 | |||
| Less: imputed interest | (39,467,957 | ) | ||
| Present value of future minimum lease payments | $ | 3,404,682 | ||
Note 12: Subsequent Events
PACE Financing
On July 1, 2022, HOF Village Stadium, LLC (the “Lessee”), a wholly-owned subsidiary of the liabilitiesCompany that leases the Tom Benson Hall of Fame Stadium (“Stadium”) from Stark County Port Authority, entered into the EPC Agreement with Canton Regional Energy Special Improvement District, Inc. (the “ESID”), SPH Canton St, LLC, an affiliate of Stonehill Strategic Capital, LLC (“Investor”), and City of Canton, Ohio.
Under the EPC Agreement, the Investor provided $33,387,844 (the “Project Advance”) PACE financing to finance the costs of the special energy improvement projects at the Stadium described in the Canton Regional Energy Special Improvement District Project Plan that have been completed (as supplemented, the “Plan”). Of the Project Advance, $29,565,729 was disbursed to Lessee, $3,221,927 was retained by Investor as capitalized interest, and $600,187 was used to pay closing costs. Pursuant to the EPC Agreement, the Lessee agreed to make special assessment payments in an orderly transaction between market participantsaggregate amount that will provide revenues sufficient to repay the Project Advance plus interest and certain costs (the “Special Assessments”). The Special Assessments have been levied in the amounts necessary to amortize the Project Advance, together with interest at the measurement date. annual rate of 6.0% and a $6,542 semi-annual administrative fee to the ESID over 50 semi-annual payments of $1,314,913 to be collected beginning approximately on January 31, 2024 and continuing through approximately July 31, 2048.
In connection with measuringentering into the fair value of its assets and liabilities,EPC Agreement, the Company seeksobtained the consent and agreement of Cuyahoga River Capital LLC (“CRC”), pursuant to maximizean agreement, dated June 27, 2022 (the “Consent Agreement”). CRC holds 100% of the useinterest in the Development Finance Authority of observable inputs (market data obtained from independent sources)Summit County Tax-Exempt Development Revenue Bonds, Series 2018 (Hall of Fame Village - Stadium and Youth Fields TIF Project), issued in the original principal amount of $10,030,000 the “Series 2018 Bonds”). Pursuant to minimize the useConsent Agreement, upon the closing of unobservable inputs (internal assumptions about how market participants would price assetsthe EPC Agreement the Company deposited $9,895,197 into a bank account at The Huntington National Bank (“Huntington”) subject to a deposit account control agreement (the “DACA”) executed by Huntington and liabilities)CRC as secured party (the “Pledged Account”). Under the Consent Agreement, in the event the Series 2018 Bonds are outstanding on December 29, 2022, the Company will repurchase the Series 2018 Bonds. The following fair value hierarchy is used to classify assets and liabilities basedCompany granted CRC a lien on the observable inputs and unobservable inputs used in orderPledged Account to value the assets and liabilities:
The following table presents information aboutsecure the Company’s assets thatobligations under the Consent Agreement. In the event the Series 2018 Bonds are measured at fair value on a recurring basis atredeemed and/or defeased prior to December 29, 2022, upon such redemption or defeasance the Consent Agreement shall automatically terminate, and March 31, 2018 and December 31, 2017, and indicatesCRC shall instruct Huntington to release the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value:
| Description | Level | March 31, 2018 | December 31, 2017 | |||||||||
| Assets: | ||||||||||||
| Marketable securities held in Trust Account | 1 | $ | 126,525,276 | $ | — | |||||||
NOTE 9. SUBSEQUENT EVENTS
The Company evaluated subsequent events and transactions that occurred after the balance sheet date up to the date that the condensed financial statements were issued. Based upon this review, the Company did not identify any subsequent events that would have required adjustment or disclosure in the condensed financial statements.DACA.
CH Capital Loan Amendment
On August 5, 2022, the Company and CH Capital amended the CH Capital Loan to increase the principal amount of the loan to reflect (a) certain legal and other fees incurred as part of the previous amendment on March 1, 2022; and (b) to reflect paid-in-kind interest through July 31, 2022. The amount of the principal was increased to $8,751,763.
Sports Betting Agreements
On July 14, 2022, Newco entered into an Online Market Access Agreement with Instabet, Inc. (“Instabet”), pursuant to which Instabet will serve as a Mobile Management Services Provider (as defined under applicable Ohio gaming law) wherein Instabet 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 Instabet and certain revenue sharing, along with the opportunity for sponsorship and cross-marketing.
On July 29, 2022, Newco entered into a Retail Sports Gaming Services Agreement with RSI OH, LLC, (“RSI”), pursuant to which RSI will serve as a land-based Management Services Provider (as defined under applicable Ohio gaming law) wherein RSI will operate a retail sports betting location in the Fan Engagement Zone at the Hall of Fame Village, subject to procurement of all necessary licenses. The initial term of the Retail Sports Gaming Services Agreement is ten years. As part of this agreement, Newco will receive sponsorship fees and certain revenue sharing.
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
References to the “Company,” “our,” “us” or “we” refer to Gordon Pointe Acquisition Corp. The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with the unaudited condensed financial statements and the notes thereto contained elsewhere in this report. Certain information contained in the discussion and analysis set forth below includes forward-looking
This Quarterly Report on Form 10–Q contains forward–looking statements that involve risks and uncertainties.
Cautionary note regarding forward-lookinguncertainties, 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
All contained herein that are not purely historical are forward–looking statements other thanwithin 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 of historical fact included in this Quarterly Report on Form 10-Q including, without limitation, statements under this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” regardingare often identified by the Company’s financial position, business strategy and the plans and objectivesuse of management for future operations, are forward-looking statements. When used in this Quarterly Report on Form 10-Q, words such as, but not limited to, “anticipate,” “believe,“estimates,” “estimate,“should,” “expect,” “intend”“guidance,” “project,” “intend,” “plan,” “believe” and similar expressions as they relateor variations intended to us or the Company’s management, identify forward-lookingforward–looking statements. Such forward-lookingThese statements are based on the beliefs and assumptions of our management as well as assumptions made by, andbased on information currently available to management. Such forward–looking statements are subject to risks, uncertainties and other important factors that could cause actual results and the Company’s management. Actual results couldtiming of certain events to differ materially from future results expressed or implied by such forward–looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those contemplated byidentified below, and those discussed in the forward-looking statements as a result of certain factors detailedsection titled “Risk Factors” included in our filingsForm 10-K for the fiscal year ended December 31, 2021 as filed with the Securities and Exchange Commission (“SEC”) on March 14, 2022, in addition to other public reports we filed with the SEC. All subsequent writtenThe 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 oral forward-looking statements attributablecircumstances after the date of such statements.
Unless the context otherwise requires, the “Company”, “we,” “our,” “us” and similar terms refer to us or persons acting on the Company’s behalf are qualified in their entirety by this paragraph.Hall of Fame Resort & Entertainment Company, a Delaware corporation.
Business Overview
We are a blank checkresort and entertainment company incorporatedleveraging 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 powered by Johnson Controls, 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. 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 powered by Johnson Controls 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 by 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 surrounding the Pro Football Hall of Fame Museum as part of our Phase II development plan. Phase II plans for future components of the Hall of Fame Village powered by Johnson Controls include two hotels (one on April 12, 2017campus 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 October 2021), the Center for Performance (a convention center/field house), the Play Action Plaza, and the Hall of Fame Retail Promenade. We are pursuing a differentiation strategy across three pillars, including destination-based assets, the Media Company, and gaming (including the fantasy football league we acquired a majority stake in 2020 and both retail and online sports betting partnerships). 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 revenues from various streams such as sponsorship agreements, rents, cost recoveries, events, hotel operations, Hall of Fantasy League, and through the sale of non-fungible tokens. 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 property operating expenses, depreciation expense and other operating expenses. These expenses have increased in connection with putting our first phase into operation and we expect these expenses to continue to increase with our growth.
Our property operating expenses include the costs associated with running its operational entertainment and destination assets such as the Tom Benson Hall of Fame Stadium and the ForeverLawn Sports Complex. As more of our Phase II assets become operational and additional events for top performers and sporting events are held, we expect these expenses to continue to increase with our development.
Other operating expenses include items such as management fees, commission expense and professional fees. We expect these expenses to continue to increase with our growth.
Our depreciation expense includes the related costs to owning and operating significant property and entertainment assets. These expenses have grown as we have completed Phase I development and the assets associated with Phase I became operational. We expect these expenses to continue to grow as Phase II and III assets are developed and become operational.
Impact of COVID-19
Since 2020, the world has been impacted by the novel coronavirus (COVID-19) pandemic. The COVID-19 pandemic and measures to prevent its spread have impacted our business in a number of ways, most significantly with regard to a reduction in the number of events and attendance at events at Tom Benson Hall of Fame Stadium and ForeverLawn Sports Complex, which has also negatively impacted our ability to sell sponsorships. Further, the COVID-19 pandemic has caused a number of supply chain disruptions, which negatively impacts our ability to obtain the materials needed to complete construction as well as increases in the costs of materials and labor. The continued impact of these disruptions and the ultimate extent of their adverse impact on our financial and operating results will continue to be dictated by the length of time that such disruptions continue, which will, in turn, depend on the currently unknowable duration and severity of the impacts of the COVID-19 pandemic, and among other things, the impact of governmental actions imposed in response to the COVID-19 pandemic and individuals’ and companies’ risk tolerance regarding health matters going forward and developing strain mutations.
Recent Developments
Dispute Regarding Naming Rights Agreement with Johnson Controls
The Naming Rights Agreement is scheduled to expire on December 31, 2034 but provides termination rights both to (a) HOF Village Newco, LLC, a wholly-owned subsidiary of the Company (“Newco”), and PFHOF, and (b) Johnson Controls, which may be exercised in the event the other party, among other things, breaches any of its covenants and agreements under the Naming Rights Agreement beyond certain notice and cure periods. Additionally, Johnson Controls has a right to terminate the Naming Rights Agreement if (i) we do not provide evidence to Johnson Controls by October 31, 2021, that we have secured sufficient debt and equity financing to complete Phase II, subject to day-for-day extension due to force majeure and a notice and cure period, (ii) Phase II is not open for business by January 2, 2024, subject to day-for-day extension due to force majeure and a notice and cure period or (iii) Newco is in default beyond applicable notice and cure periods under certain agreements, such as the Technology as a Delaware corporationService Agreement with Johnson Controls (the “TAAS Agreement”), among others. There can be no assurance that Phase II will be open for business by January 2, 2024. In addition, under the Naming Rights Agreement, Johnson Controls’ obligation to make sponsorship payments to Newco may be suspended if Newco has not provided evidence reasonably satisfactory to Johnson Controls on or before December 31, 2020, that Newco has secured sufficient debt and formedequity financing to complete Phase II, subject to day-for-day extension due to force majeure.
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We are in dispute with Johnson Controls for Johnson Controls’ failure to make certain payments under the Naming Rights Agreement. We are currently in discussions with Johnson Controls to settle this dispute. However, there can be no assurances that the amounts due will be settled in accordance with the original terms of the Naming Rights Agreement. Therefore, during the three and six months ended June 30, 2022, we suspended our revenue recognition until the dispute is resolved and have recorded an allowance against the amounts due as of June 30, 2022 in the amount of $2,125,000. The balances due under the Naming Rights Agreement as of June 30, 2022 and December 31, 2021 amounted to $4,010,417 and $1,885,417, respectively.
We anticipate this dispute will be resolved pursuant to the dispute resolution section of the Naming Rights Agreement, which provides for: (1) thirty (30) days of good faith negotiation to attempt to resolve such dispute, followed by (2) referral of the dispute to an independent facilitator or mediator for non-binding mediation; and (3) if the mediation is unsuccessful within sixty (60) days of the commencement of such non-binding mediation, any party may, by notice to all other parties, then refer the dispute to binding arbitration in the State of Ohio.
In addition to the Naming Rights Agreement, Newco is party to a Technology as a Service Agreement dated October 9, 2020 with Johnson Controls (the “TAAS Agreement”). Pursuant to the TAAS Agreement, Johnson Controls will provide certain services related to the construction and development of the Hall of Fame Village powered by Johnson Controls (the “Project”).
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 purposeProject. We anticipate that resolution of effectingthe dispute regarding the Naming Rights Agreement will include the TAAS Agreement.
On May 10, 2022, we received from Johnson Controls a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses (a “Business Combination”notice of termination (the “TAAS Notice”). We completed of the TAAS Agreement effective immediately. The TAAS Notice states that termination of the TAAS Agreement by Johnson Controls is due to our Initial Public Offeringalleged breach of its payment obligations. Additionally, Johnson Controls in the TAAS Notice demands the amount which is the sum of: (i) all past due payments and any other amounts owed by us 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 Johnson Controls directly resulting from the alleged default by us and the exercise of Johnson Controls’ rights and remedies in respect thereof, including reasonable attorney fees.
Also on JanuaryMay 10, 2022, we received from Johnson Controls 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 Johnson Controls is due to Johnson Controls’ concurrent termination of the TAAS Agreement. The Naming Rights Notice further states that we must pay Johnson Controls, within 30 2018. Under the terms of our Initial Public Offering, we will have until July 30, 2019 to complete a Business Combination.
Sincedays following the date of the Initial Public Offering,Naming Rights Notice, $4,750,000. We have not made such payment to date. The Naming Rights Notice states that we are also in breach of its covenants and agreements, which required us to provide evidence reasonably satisfactory to Johnson Controls on or before October 31, 2021, subject to day-for-day extension due to force majeure, that we have startedsecured sufficient debt and equity financing to contact businesses, intermediariescomplete Phase II.
We dispute that we are in default under either the TAAS Agreement or the Naming Rights Agreement. We believe Johnson Controls is in breach of the Naming Rights Agreement and the TAAS Agreement, and, on May 16, 2022, provided notice to Johnson Controls of these breaches. We are pursuing dispute resolution pursuant to the terms of the Naming Rights Agreement to simultaneously defend against Johnson Controls’ allegations and pursue our own claims. 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.
Global License Agreement with PFHOF
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 third partiesenshrinement events. The Global License Agreement requires Newco to evaluatepay 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 numbercommitment 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 targetsnon-renewal is provided by either party.
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HOF Village CFP Loan
On April 27, 2022, Midwest Lender Fund, LLC, a limited liability company wholly owned by our director Stuart Lichter (“Lender”), loaned $4,000,000 (the “Loan”) to HOF Village Center For Performance, LLC (“HOF Village CFP”), which Loan is evidenced by a promissory note issued by HOF Village CFP to Lender (the “Note”). Interest accrues on the outstanding balance of the Note at 6.5% per annum, compounded monthly. The Note matures on April 30, 2023 or if HOF Village CFP exercises its extension option, April 30, 2024. The Note is secured by a mortgage encumbering the Center For Performance. Lender made the Loan to HOF Village CFP in accordance with a previously disclosed letter agreement, dated March 1, 2022, between Hall of Fame Resort & Entertainment Company (the “Company”) and Stuart Lichter, which was amended April 16, 2022, and amended and assigned by Stuart Lichter to Lender April 26, 2022 (the “Letter Agreement”).
As part of the consideration for making the Loan, we issued to Lender: (A) 125,000 shares (the “Commitment Fee Shares”) of our common stock, par value $0.0001 per share (“Common Stock”), and (B) a Series G warrant (the “Series G Warrants”) to purchase 125,000 shares of Common Stock (the “Warrant Shares”). The exercise price of the Series G Warrants is $1.50 per share. The Series G Warrants are 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 are subject to a weighted-average antidilution adjustment.
PACE Financing
On April 28, 2022, the City of Canton, in coordination with the Canton Regional Energy Special Improvement District, approved legislation that may be candidateswill enable us draw up to $3.2 million in Property Assessed Clean Energy (“PACE”) financing in conjunction with the implementation of various energy-efficient improvements at the Center for a possible Business Combination. AlthoughPerformance. Through June 30, 2022, we will continue to review a number of opportunities to enterreceived $27,586 on this financing.
Stark Community Foundation Loan
On June 16, 2022, we entered into a loan agreement with Stark Community Foundation, Inc. (“Stark”) pursuant to which Stark agreed to lend us $5,000,000, and through June 30, 2022 we borrowed $2,500,000 (the “SCF Loan”). The interest rate applicable to the SCF Loan is 6.0% annum. Interest payments are paid annually on December 31st of each year. The SCF Loan is unsecured and matures on May 31, 2029. We may prepay the SCF Loan without penalty.
Events of default under the loan include without limitation: (i) a payment default, (ii) our failure to complete the infrastructure development for Phase II on or before December 31, 2024, and (iii) our failure, following notice from Stark, to comply with any non-monetary covenant contained in the loan agreement. Upon the occurrence of an event of default under the Business Combination,Loan Agreement: (a) interest due will increase by 5% per annum; and (b) Stark may, at its option, declare our obligations under the Business Loan Agreement to be immediately due and payable.
The Business Loan Agreement contains customary affirmative and negative covenants for this type of loan, including without limitation (i) affirmative covenants, including furnish Stark with such financial statements and other related information at such frequencies and in such detail as Stark may reasonably request and use all SCF Loan proceeds solely for the infrastructure development for the construction of Phase II, and (ii) negative covenants, including restrictions on additional indebtedness, prepayment of other indebtedness, transactions with related parties, additional liens, mergers and acquisitions, and standard prohibitions on change of control.
CH Capital Bridge Loan
On June 16, 2022, we entered into an agreement to borrow $10,500,000 (the “CH Capital Bridge Loan”) from CH Capital Lending, LLC, which is an affiliate of our director Stuart Lichter (“CH Capital”). The CH Capital Bridge Loan is evidenced by a Promissory Note issued by us to CH Capital. Interest accrues at 12% per annum, compounded monthly. The maturity date is September 10, 2022. We have the right to prepay all or any portion of the principal amount at any time before the maturity date without penalty. Under the CH Capital Bridge Loan, the net proceeds of a financing that occurs after the date of the CH Capital Bridge Loan shall be used to prepay the loan. The CH Capital Bridge Loan is secured by: (i) a mortgage on real property on which we are not able to determine at this time whether we will complete a Business Combinationbuilding our Fan Engagement Zone (an 82,000-square-foot promenade located strategically within the allotted 18-month timeframe. We intend to effectuate our initial Business Combination using cash from the proceedscampus footprint, which will include restaurants, retailers and experiential offerings) and (ii) a pledge and security interest in all of the Initial Public Offeringmembership interests of HOF Village Waterpark, LLC, and the private placementHOF Village Hotel I, LLC held by HOF Village Newco, LLC, each of which is direct or indirect wholly-owned subsidiary of the Private Placement Warrants,Company.
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Upon the occurrence of an event of default under the CH Capital Bridge Loan, including without limitation our capital stock, debtfailure to pay, on or a combinationbefore the due date any amount owing to CH Capital under the loan or our failure, following notice from CH Capital, to comply with any non-monetary covenant contained in the loan, (i) interest due will increase by 5% per annum; and (ii) CH Capital may, at its option, declare our obligations under the loan to be immediately due and payable.
In connection with entering into the CH Capital Bridge Loan, we paid customary fees and expenses.
PACE Financing
On July 1, 2022, HOF Village Stadium, LLC, entered into an Energy Project Cooperative Agreement with Canton Regional Energy Special Improvement District, Inc., SPH Canton St, LLC, an affiliate of cash, stockStonehill Strategic Capital, LLC (“SPH”), and debt.City of Canton, Ohio (the “EPC Agreement”).
ResultsUnder the EPC Agreement, SPH provided $33,387,844 property assessed clean energy financing to finance the costs of Operations
Our entire activity from inception upthe special energy improvement projects at the Stadium described in the Canton Regional Energy Special Improvement District Project Plan that have been completed (as supplemented, the “Plan”). Of the amount received, $29,565,729 was disbursed to January 30, 2018us, $3,221,927 was in preparation for our Initial Public Offering. Since our Initial Public Offering, our activity has been limitedretained by SPH as capitalized interest, and $600,187 was used to pay closing costs. Pursuant to the evaluationEPC Agreement, we agreed to make special assessment payments in an aggregate amount that will provide revenues sufficient to repay the amount received plus interest and certain costs. The EPC Agreement bears interest at the annual rate of Business Combination candidates,6.0% and we will notpay a $6,542 semi-annual administrative fee to the ESID over 50 semi-annual payments of $1,314,913 to be generating any operating revenues untilcollected beginning approximately on January 31, 2024, and continuing through approximately July 31, 2048.
In connection with entering into the EPC Agreement, we obtained the consent and agreement of Cuyahoga River Capital LLC, pursuant to an agreement, dated June 27, 2022. CRC holds 100% of the interest in the Development Finance Authority of Summit County Tax-Exempt Development Revenue Bonds, Series 2018 (Hall of Fame Village - Stadium and Youth Fields TIF Project), issued in the original principal amount of $10,030,000 the “Series 2018 Bonds”). Pursuant to the Consent Agreement, upon the closing of the EPC Agreement the Company deposited $9,895,197 into a bank account at The Huntington National Bank subject to a deposit account control agreement executed by Huntington and completion ofCRC as secured party. Under the Consent Agreement, in the event the Series 2018 Bonds are outstanding on December 29, 2022, we will repurchase the Series 2018 Bonds. We granted CRC a lien on the Pledged Account to secure our initial Business Combination. We expectobligation under the Consent Agreement. In the event the Series 2018 Bonds are redeemed and/or defeased prior to incur increased expensesDecember 29, 2022, upon such redemption or defeasance the Consent Agreement shall automatically terminate, and CRC shall instruct Huntington to release the DACA.
Sports Betting Agreements
On July 14, 2022, Newco entered into an Online Market Access Agreement with Instabet, Inc. (“Instabet”), pursuant to which Instabet will serve as a resultMobile Management Services Provider (as defined under applicable Ohio gaming law) wherein Instabet will host, operate and support a branded online sports betting service in Ohio, subject to procurement of beingall necessary licenses. The initial term of the Online Market Access Agreement is ten years. As part of this agreement, Newco will receive a public company (for legal, financial reporting, accountinglimited equity interest in Instabet and auditing compliance), as well ascertain revenue sharing, along with the opportunity for due diligence expenses. sponsorship and cross-marketing.
ForOn July 29, 2022, Newco entered into a Retail Sports Gaming Services Agreement with RSI OH, LLC, (“RSI”), pursuant to which RSI will serve as a land-based Management Services Provider (as defined under applicable Ohio gaming law) wherein RSI will operate a retail sports betting location in the Fan Engagement Zone at the Hall of Fame Village, subject to procurement of all necessary licenses. The initial term of the Retail Sports Gaming Services Agreement is ten years. As part of this agreement, Newco will receive sponsorship fees and certain revenue sharing.
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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, 2018, we had net income of $35,856, which consists of interest income on marketable securities heldJune 30, 2022 and the comparable period in the Trust Account of $292,038, offset by operating costs of $229,889, an unrealized loss on marketable securities held in our Trust Account of $16,762, and a provision for income taxes of $9,531.2021:
Liquidity and Capital Resources
Prior to the completion of the Initial Public Offering, our liquidity needs were satisfied through receipt of $25,000 from the sale of Founder Shares to our sponsor, Gordon Pointe Management, LLC (“Sponsor”), and from advances from our Sponsor.
Through March 31, 2018, the Sponsor advanced an aggregate of $143,302 for costs associated with the Initial Public Offering. The advances are non-interest bearing, unsecured and due on demand. As of March 31, 2018, there were $88,095 of outstanding advances from related parties.
On January 30, 2018, we consummated the Initial Public Offering of 12,500,000 Units at a price of $10.00 per Unit generating gross proceeds of $125,000,000. Simultaneously with the closing of the Initial Public Offering, we consummated the sale of 4,900,000 Private Placement Warrants to our Sponsor at a price of $1.00 per warrant, generating gross proceeds of $4,900,000.
| For the Three Months Ended June 30, | ||||||||
| 2022 | 2021 | |||||||
| Revenues | ||||||||
| Sponsorships, net of activation costs | $ | 452,772 | $ | 1,508,402 | ||||
| Event, rents and cost recoveries | 668,863 | 60,135 | ||||||
| Hotel revenues | 1,563,900 | 795,222 | ||||||
| Total revenues | 2,685,535 | 2,363,759 | ||||||
| Operating expenses | ||||||||
| Operating expenses | 6,799,280 | 6,219,781 | ||||||
| Hotel operating expenses | 1,316,150 | 1,596,989 | ||||||
| Commission expense | 516,833 | 260,583 | ||||||
| Depreciation expense | 3,527,581 | 2,972,130 | ||||||
| Total operating expenses | 12,159,844 | 11,049,483 | ||||||
| Loss from operations | (9,474,309 | ) | (8,865,724 | ) | ||||
| Other income (expense) | ||||||||
| Interest expense, net | (921,392 | ) | (1,004,419 | ) | ||||
| Amortization of discount on note payable | (1,122,324 | ) | (1,164,613 | ) | ||||
| Change in fair value of warrant liability | 2,423,000 | 26,315,888 | ||||||
| Total other income | 379,284 | 24,146,856 | ||||||
| Net (loss) income | $ | (9,095,025 | ) | $ | 15,461,132 | |||
| Series B preferred stock dividends | (266,000 | ) | (130,000 | ) | ||||
| Non-controlling interest | 158,592 | 209,921 | ||||||
| Net (loss) income attributable to HOFRE stockholders | $ | (9,202,433 | ) | $ | 15,541,053 | |||
| Net (loss) income per share – basic | $ | (0.08 | ) | $ | 0.16 | |||
| Weighted average shares outstanding, basic | 113,997,493 | 94,397,222 | ||||||
| Net (loss) income per share – diluted | $ | (0.08 | ) | $ | - | |||
| Weighted average shares outstanding, diluted | 113,997,493 | 107,353,272 | ||||||
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FollowingThree Months Ended June 30, 2022 as Compared to the Initial Public Offering and the sale of the Private Placement Warrants, a total of $126,250,000 was placed in a Trust Account and, following the payment of certain transaction expenses, we had approximately $470,000 of cash held outside of the trust account and availableThree Months Ended June 30, 2021
Sponsorship Revenues
Sponsorship revenues totaled $452,772 for working capital purposes.
As of March 31, 2018, we had marketable securities held in the Trust Account of $126,525,276 (including approximately $275,000 of interest income, net of unrealized losses) consisting of U.S. treasury bills with a maturity of 180 days or less. Interest income on the balance in the Trust Account may be used by us to pay taxes and up to $100,000 of dissolution expenses. Through March 31, 2018, we did not withdraw any funds from the interest earned on the Trust Account.
For the three months ended June 30, 2022 as compared to $1,508,402 for the three months ended June 30, 2021, representing a decrease of $1,055,630, or 70.0%. This decrease was primarily driven by our pausing the recognition of revenue on the JCI sponsorship agreement while a dispute with Johnson Controls is resolved. For additional information, see “Dispute Regarding Naming Rights Agreement with Johnson Controls” above.
Event, rents and cost recoveries
Revenue from event, rents and cost recoveries was $668,863 for the three months ended June 30, 2022 compared to $60,135 for the three months ended June 30, 2021, for an increase of $608,728, or 1012.3%. This increase was primarily driven by the resumption of many sports and other tournaments in our ForeverLawn Sports Complex, our hosting of the USFL semifinals and other tournaments in our Tom Benson Hall of Fame Stadium, as well as the opening of the Constellation Center for Excellence.
Hotel Revenues
Hotel revenue was $1,563,900 for the three months ended June 30, 2022 compared to $795,222 from the three months ended June 30, 2021 for an increase of $768,678, or 96.7%. This was driven by resumption of travel and conferences that had previously been paused due to the COVID-19 pandemic.
Operating Expenses
Operating expense was $6,799,280 for the three months ended June 30, 2022 compared to $6,219,781 for the three months ended June 30, 2021, for an increase of $579,499, or 9.3%. This increase was driven by an increase in payroll and related costs of approximately $650,000 due to increased headcount, an increase in event expenses of approximately $398,000, and an increase in insurance expense of approximately $224,000, partially offset by a decrease in stock-based compensation expense of approximately $446,000.
Hotel Operating Expenses
Hotel operating expense was $1,316,150 for the three months ended June 30, 2022 compared to $1,596,989 for the three months ended June 30, 2021 for a decrease of $280,839, or 17.6%. This was driven by $486,000 in interest on a loan that was subsequently moved to interest expense offset by an increase in operating expenses due to increased revenue.
Commission Expense
Commission expense was $516,833 for the three months ended June 30, 2022 compared to $260,583 for the three months ended June 30, 2021, for an increase of $256,250, or 98.3%. The increase in commission expense was primarily driven by payments incurred for commissions on our Constellation New Energy sponsorship agreement.
Depreciation Expense
Depreciation expense was $3,527,581 for the three months ended June 30, 2022 compared to $2,972,130 for the three months ended June 30, 2021, for an increase of $555,451, or 18.7%. The increase in depreciation expense is primarily the result of additional depreciation expense incurred due to the opening of the Constellation Center for Excellence in the fourth quarter of 2021.
Interest Expense
Total interest expense was $921,392 for the three months ended June 30, 2022 compared to $1,004,419 for the three months ended June 30, 2021, for a decrease of $83,027, or 8.3%. The decrease in total interest expense was primarily due to an increase in the proportion of debt that is capitalized for ongoing construction projects.
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Amortization of Debt Discount
Total amortization of debt discount was $1,122,324 for the three months ended June 30, 2022, compared to $1,164,613 for the three months ended June 30, 2021, for a decrease of $42,289, or 3.6%. The decrease in total amortization of debt discount was primarily due to an increase in the proportion of debt that is capitalized for ongoing construction projects.
Change in Fair Value of Warrant Liability
The change in fair value warrant liability represents a gain of $2,423,000 for the three months ended June 30, 2022 compared to $26,315,888 for the three months ended June 30, 2021, for a decrease of $23,892,888 or 91%. The decrease in change in fair value of warrant liability was due primarily to a decrease in our stock price.
Six Months Ended June 30, 2022 as Compared to the Six Months Ended June 30, 2021
| For the Six Months Ended June 30, | ||||||||
| 2022 | 2021 | |||||||
| Revenues | ||||||||
| Sponsorships, net of activation costs | $ | 1,272,062 | $ | 2,983,838 | ||||
| Event, rents and cost recoveries | 1,006,256 | 103,680 | ||||||
| Hotel revenues | 2,513,741 | 1,191,560 | ||||||
| Total revenues | 4,792,059 | 4,279,078 | ||||||
| Operating expenses | ||||||||
| Operating expenses | 14,325,979 | 12,228,780 | ||||||
| Hotel operating expenses | 2,469,262 | 2,363,154 | ||||||
| Commission expense | 656,743 | 427,250 | ||||||
| Depreciation expense | 6,769,866 | 5,893,067 | ||||||
| Total operating expenses | 24,221,850 | 20,912,251 | ||||||
| Loss from operations | (19,429,791 | ) | (16,633,173 | ) | ||||
| Other expense | ||||||||
| Interest expense, net | (2,134,933 | ) | (1,959,727 | ) | ||||
| Amortization of discount on note payable | (2,478,298 | ) | (2,398,727 | ) | ||||
| Change in fair value of warrant liability | 7,173,000 | (90,035,112 | ) | |||||
| (Loss) gain on extinguishment of debt | (148,472 | ) | 390,400 | |||||
| Total other income (expense) | 2,411,297 | (94,003,166 | ) | |||||
| Net loss | $ | (17,018,494 | ) | $ | (110,636,339 | ) | ||
| Series B preferred stock dividends | (532,000 | ) | (130,000 | ) | ||||
| Non-controlling interest | 235,964 | 160,210 | ||||||
| Net loss attributable to HOFRE stockholders | $ | (17,314,530 | ) | $ | (110,606,129 | ) | ||
| Net loss per share – basic and diluted | $ | (0.16 | ) | $ | (1.30 | ) | ||
| Weighted average shares outstanding, basic and diluted | 109,194,639 | 84,978,294 | ||||||
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Sponsorship Revenues
Sponsorship revenues totaled $1,272,062 for the six months ended June 30, 2022 as compared to $2,983,838 for the six months ended June 30, 2021, for a decrease of $1,711,776, or 57.4%. This decrease was primarily driven by our pausing the recognition of revenue on the JCI sponsorship agreement while a dispute with Johnson Controls is resolved. For additional information, see “Dispute Regarding Naming Rights Agreement with Johnson Controls” above.
Event, rents and cost recoveries
Revenue from event, rents and cost recoveries was $1,006,256 for the six months ended June 30, 2022 compared to $103,680 for the six months ended June 30, 2021, for an increase of $902,576, or 870.5%. This increase was primarily driven by the resumption of many sports and other tournaments in our ForeverLawn Sports Complex, the hosting of the USFL semifinals and other events in our Tom Benson Hall of Fame Stadium, as well as the opening of the Constellation Center for Excellence.
Hotel Revenues
Hotel revenue was $2,513,741 for the six months ended June 30, 2022 compared to $1,191,560 from the six months ended June 30, 2021 for an increase of $1,322,181, or 111.0%. This increase was driven by resumption of travel and conferences that had previously been paused due to the COVID-19 pandemic.
Operating Expenses
Operating expense was $14,325,979 for the six months ended June 30, 2022 compared to $12,228,780 for the six months ended June 30, 2021, for an increase of $2,097,199, or 17.1%. This increase was driven by an increase in legal and professional fees of approximately $250,000, an increase in payroll and related costs of approximately $1.0 million due to increased headcount, an increase in event expenses of $449,000 and an increase in insurance expense of approximately $344,000, partially offset by a decrease in stock-based compensation of approximately $563,000.
Hotel Operating Expenses
Hotel operating expense was $2,469,262 for the six months ended June 30, 2022 compared to $2,363,154 for the six months ended June 30, 2021 for an increase of $106,108, or 4.5%. This increase was driven by resumption of travel and conferences that had previously been paused due to COVID-19.
Commission Expense
Commission expense was $656,743 for the six months ended June 30, 2022 compared to $427,250 for the six months ended June 30, 2021, for an increase of $229,493, or 53.7%. The increase in commission expense was primarily driven by payments incurred for commissions on our Constellation New Energy sponsorship agreement.
Depreciation Expense
Depreciation expense was $6,769,866 for the six months ended June 30, 2022 compared to $5,893,067 for the six months ended June 30, 2021, for an increase of $876,799, or 14.9%. The increase was primarily the result of additional depreciation expense incurred due to the opening of the Constellation Center for Excellence in the fourth quarter of 2021.
Interest Expense
Total interest expense was $2,134,933 for the six months ended June 30, 2022 compared to $1,959,727 for the six months ended June 30, 2021, for an increase of $175,206, or 8.9%. The increase in total interest expense is primarily due to the increase in our total debt outstanding, as well as a mix of higher interest rate loans.
Amortization of Debt Discount
Total amortization of debt discount was $2,478,298 for the six months ended June 30, 2022 compared to $2,398,727 for the six months ended June 30, 2021, for an increase of $79,571, or 3.3%. The increase in total amortization of debt discount was primarily due to an increase in our total debt outstanding.
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Change in Fair Value of Warrant Liability
The change in fair value warrant liability represents a gain of $7,173,000 for the six months ended June 30, 2022 compared to a loss of $90,035,112 for the six months ended June 30, 2021, for a change of $97,208,112 or 108%. The change in fair value of warrant liability was primarily due to a decrease in our stock price.
(Loss) Gain on Extinguishment of Debt
Loss on extinguishment of debt was $148,472 for the six months ended June 30, 2022, as compared to a gain of $390,400 for the six months ended June 30, 2021. The loss on extinguishment of debt is due to the forgiveness of our Paycheck Protection Program Loan during the first quarter of 2021 and the refinancing of many of our debt instruments in the first quarter of 2022.
Liquidity and Capital Resources
We have sustained recurring losses and negative cash flows from operations through June 30, 2022. Since inception, our operations have been funded principally through the issuance of debt and equity. As of June 30, 2022, we had approximately $11 million of unrestricted cash and $7 million of restricted cash, respectively. A majority of our restricted cash may be released to us upon achieving certain occupancy and other targets sets by certain of our lenders.
On March 1, 2022, the Company and ErieBank agreed to extend the MKG DoubleTree Loan in principal amount of $15,300,000 to September 13, 2023.
On March 1, 2022, we executed a series of transactions with Industrial Realty Group, LLC, a Nevada limited liability company controlled by our director Stuart Lichter (“IRG”) and its affiliates and JKP Financial LLC (“JKP”), whereby IRG and JKP extended certain of our debt in aggregate principal amount of $22,853,831 to March 31, 2018,2024.
On June 16, 2022, we entered into a loan agreement with CH Capital Lending LLC, which is an affiliate of the Company’s director Stuart Lichter (“CH Capital Lending”), whereby CH Capital Lending agreed to lend us $10,500,000.
On June 16, 2022, we entered into a loan agreement with Stark Community Foundation, whereby Stark Community Foundation agreed to lend to us $5,000,000, of which we’ve drawn $2,500,000.
On July 1, 2022, we entered into an Energy Project Cooperative Agreement (the “EPC Agreement”) with Canton Regional Energy Special Improvement District, Inc., SPH Canton St, LLC, an affiliate of Stonehill Strategic Capital, LLC and City of Canton, Ohio. Under the EPC Agreement, we were provided $33,387,844 in Property Assessed Clean Energy (“PACE”) financing.
We believe that, as a result our demonstrated historical ability to finance and refinance debt, the transactions described above and current ongoing negotiations, it currently has sufficient cash and future financing to meet its funding requirements over the next year. Notwithstanding, we expect that it will need to raise additional financing to accomplish its 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 that are acceptable 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, it may be required to reduce the scope of its planned development, which could harm its financial condition and operating results.
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 Six Months Ended June 30, | ||||||||
| 2022 | 2021 | |||||||
| Cash (used in) provided by: | ||||||||
| Operating Activities | $ | 5,422,198 | $ | (12,256,168 | ) | |||
| Investing Activities | (40,022,805 | ) | (26,098,120 | ) | ||||
| Financing Activities | 35,042,816 | 71,968,919 | ||||||
| Net (decrease) increase in cash and restricted | $ | 442,209 | $ | 33,614,631 | ||||
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Cash Flows for the Six Months Ended June 30, 2022 as Compared to the Six Months Ended June 30, 2021
Operating Activities
Net cash provided by operating activities was $5,422,198 during the six months ended June 30, 2022, which consisted primarily of our net loss of $17,018,494, offset by non-cash depreciation expense of $6,769,866, amortization of note discounts of $2,478,298, payment-in-kind interest rolled into debt of $1,681,722, a loss on forgiveness of debt of $148,472, stock-based compensation expense of $2,570,919, and a change in fair value of warrant liability of $7,173,000. The changes in operating assets and liabilities consisted of an increase in accounts receivable of $370,525, a decrease in prepaid expenses and other assets of $1,430,448, an increase in accounts payable and accrued expenses of $8,196,272, an increase in due to affiliates of $1,777,542, and an increase in other liabilities of $4,830,587.
Net cash used in operating activities was $191,682, consisting$12,256,168 during the six months ended June 30, 2021, which consisted primarily of interest earned on marketable securities held in the Trust Accountour net loss of $292,038,$110,636,339, offset by net incomenon-cash depreciation expense of $35,856$5,893,067, amortization of note discounts of $2,398,727, stock-based compensation expense of $3,006,692, and an unrealized loss on marketable securities helda change in our Trust Accountfair value of $16,762. Changeswarrant liability of $90,035,112. The changes in operating assets and liabilities consisted primarily of a decrease in accounts receivable of $675,668, an increase in prepaid expenses and other assets of $2,033,495, and a decrease in accounts payable and accrued expenses of $2,060,008.
Investing Activities
Net cash used in investing activities was $40,022,805 and $26,098,120 during the six months ended June 30, 2022 and 2021, respectively, which consisted primarily of our project development costs.
Financing Activities
Net cash provided $47,738by financing activities was $35,042,816 during the six months ended June 30, 2022. This consisted primarily of $20,714,311 in proceeds from notes payable and $17,983,214 of proceeds from equity raises under our ATM, offset by $3,144,677 in repayments of notes payable, and $210,032 in payment of financing costs.
Net cash provided by financing activities was $71,968,919 during the six months ended June 30, 2021, which consisted primarily of $6,000,000 in proceeds from operating activities.
We intend to use substantially all of the funds heldnotes payable, $15,200,000 in the Trust Account, including any amounts representing interest earned on the Trust Account (less deferred underwriting commissions) to complete our initial Business Combination. We may withdraw interestproceeds from the trust account to pay franchisesale of Series B preferred stock, $31,746,996 of proceeds from equity raises, and income taxes. To the extent that our capital stock or debt is used, in whole or in part, as consideration to complete our initial Business Combination, the remaining$23,346,870 of proceeds held in the Trust Account will be used as working capital to finance the operations of the target business or businesses, make other acquisitions and pursue our growth strategies.
As of March 31, 2018, we had cash of $466,060 held outside the Trust Account. We intend to use the funds held outside the Trust Account primarily to identify and evaluate target businesses, perform business due diligence on prospective target businesses, travel to and from the offices, plants or similar locationsexercise of prospective target businesses or their representatives or owners, review corporate documentswarrants, offset by $4,309,947 in repayments of notes payable, and material agreements$15,000 in payment of prospective target businesses, and structure, negotiate and complete a Business Combination.financing costs.
During the quarter ended March 31, 2018, we agreed to pay each of our independent directors an annual retainer of $20,000 (pro-rated for interim periods of service) for their service as members of our Board, for which, in addition to general matters of corporate governance and oversight, we expect our Board members to assist us in the identification and evaluation of industries and particular businesses that are, in the reasonable judgment of the Board, suitable acquisition targets for us, as well as assisting us in the review and analysis of alternative Business Combinations. In addition, we have agreed to pay each independent director a telephonic meeting fee of $1,000 or in-person meeting fee of $1,500 for each meeting attended by such independent director. Off-Balance Sheet Arrangements
We have also agreed to pay the Chairperson of the Audit Committee an annual retainer of $7,500 and the Chairperson of the Compensation Committee an annual retainer of $5,000. All such fees will be deferred and become payable on the consummation of a Business Combination.
In order to fund working capital deficiencies and/or finance transaction costs in connection with an initial Business Combination, our Sponsor or an affiliate of our Sponsor or certain of our officers and directors may, but are not obligated to, loan us funds as may be required. If we complete our initial Business Combination, we would repay such loaned amounts. In the event that our initial Business Combination does not close, we may use a portion of the working capital held outside the Trust Account to repay such loaned amounts but no proceeds from our Trust Account would be used for such repayment. Up to $1,500,000 of such loans may be convertible into warrants, at a price of $1.00 per warrant at the option of the lender. The warrants would be identical to the Private Placement Warrants, including as to exercise price, exercisability and exercise period.
We do not believe we will need to raise additional funds in order to meet the expenditures required for operating our business. However, if our estimates of the costs of identifying a target business, undertaking in-depth due diligence and negotiating an initial Business Combination are less than the actual amount necessary to do so, we may have insufficient funds available to operate our business prior to our Business Combination. Moreover, we may need to obtain additional financing either to complete our Business Combination or because we become obligated to redeem a significant number of our public shares upon completion of our Business Combination, in which case we may issue additional securities or incur debt in connection with such Business Combination. Subject to compliance with applicable securities laws, we would only complete such financing simultaneously with the completion of our Business Combination. If we are unable to complete our initial Business Combination because we dodid not have sufficient funds available to us, we will be forced to cease operations and liquidate the Trust Account. In addition, following our initial Business Combination, if cash on hand is insufficient, we may need to obtain additional financing in order to meet our obligations.
Off-balance sheet financing arrangements
We have no obligations, assets or liabilities which would be consideredany off-balance sheet arrangements as of March 31, 2018. We do not participate in transactions that create relationships with unconsolidated entities orJune 30, 2022.
Critical Accounting Policies and Significant Judgments and Estimates
This discussion and analysis of our financial partnerships, often referred to as variable interest entities,condition and results of operations is based on our consolidated financial statements, which would have been established forprepared in accordance with generally accepted accounting principles in the purposeUnited States of facilitating off-balance sheet arrangements. We have not entered into any off-balance sheet financing arrangements, established any special purpose entities, guaranteed any debtAmerica, or commitments of other entities, or purchased any non-financial assets.
Contractual obligations
We do not have any long-term debt, capital lease obligations, operating lease obligations or long-term liabilities other than an agreement to pay an affiliate of our Sponsor a monthly fee of $10,000 for office space, utilities and administrative support provided to the Company. We began incurring these fees on January 30, 2018 and will continue to incur these fees monthly until the earlier of the completion of the Business Combination and the Company’s liquidation.
Critical Accounting Policies
U.S. GAAP. The preparation of these financial statements and related disclosures in conformity with GAAP requires managementus 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 financial statements and incomethe reported amounts of revenue and expenses during the periods reported.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 could materiallymay differ from those estimates. The Company has identified the following criticalthese estimates under different assumptions or conditions.
For information on our significant accounting policy:
Common Stock subjectpolicies please refer to possible redemption
We account forNote 2 to our common stock subject to possible conversion in accordance with the guidance in ASC Topic 480 “Distinguishing Liabilities from Equity.” Common stock subject to mandatory redemption are classified as a liability instrument and are measured at fair value. Conditionally redeemable common stock (including common stocks that feature redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within our control) are classified as temporary equity. At all other times, common stocks are classified as stockholders’ equity. Our common stocks feature certain redemption rights that are considered to be outside of our control and subject to occurrence of uncertain future events. Accordingly, at March 31, 2018, the common stock subject to possible redemption is presented at redemption value as temporary equity, outside of the stockholders’ equity section of our balance sheet.Consolidated Financial Statements.
Recent accounting pronouncements
Management does not believe that any recently issued, but not yet effective, accounting pronouncements, if currently adopted, would have a material effect on the Company’s financial statements.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Following the consummation of our Initial Public Offering, we invested the funds held in the Trust Account in moneyqualitative disclosures about market funds meeting certain conditions under Rule 2a-7 under the Investment Company Act, which invest solely in United States Treasuries. Due to the short-term nature of the money market fund’s investments, we do not believe that there will be an associated material exposure to interest rate risk.risk
Not applicable.
Item 4. Controls and Procedures.procedures
Evaluation of Disclosure Controls and Procedures
DisclosureWe have established disclosure controls and procedures are controls and other procedures that are designed to ensure that the information required to be disclosed by us in ourthe reports filedthat we file or submittedsubmit under the Securities Exchange Act of 1934 (“Exchange Act”) is recorded, processed, summarized, and reported within the time periods specified in the SEC’sSEC rules and forms. Disclosure controlsforms and procedures include, without limitation, controls and procedures designed to ensure that such information required to be disclosed in company reports filed or submitted under the Exchange Act is accumulated and communicatedmade known to the officers who certify our financial reports and to other members of senior management including our Chief Executive Officer and Chief Financial Officer,the Board of Directors as appropriate to allow timely decisions regarding required disclosure.
As required by Rules 13a-15Based on their evaluation as of June 30, 2022, the principal executive officer and 15d-15 under the Exchange Act, our Chief Executive Officer and Chief Financial Officer carried out an evaluationprincipal financial officer of the effectiveness of the design and operation of our disclosure controls and procedures as of March 31, 2018. Based upon their evaluation, our Chief Executive Officer and Chief Financial OfficerCompany have concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) wereare effective.
Changes in Internal Control over Financial Reporting
There has beenDuring the quarter ended June 30, 2022, there were no changechanges in our internal control over financial reporting that has occurred during the fiscal quarter of 2018 covered by this Quarterly Report on Form 10-Q that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
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PART II –II. OTHER INFORMATION
Item 1. Legal Proceedings.proceedings
None.During the normal course of its business, the Company is subject to occasional legal proceedings and claims.
Item 1A. Risk Factors.factors
Factors that could cause our actualOur operations and financial results are subject to differ materially fromvarious risks and uncertainties, including those described in this report are any of the risks describedPart I, Item 1A, “Risk Factors” in our Annual Report on Form 10-K filed withfor the SEC on March 30, 2018. Any of these factors could resultyear ended December 31, 2021, as updated by those described in a significant or material adverse effect onPart II, Item 1A. “Risk Factors” in our results of operations or financial condition. Additional risk factors not presently known to us or that we currently deem immaterial may also impair our business or results of operations.
As of the date of this Quarterly Report on Form 10-Q therefor the quarter ended March 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 theour risk factors disclosed insince our Annual Report on Form 10-K filedfor the year ended December 31, 2021, as updated by our Form 10-Q for the quarter ended March 31, 2022, except as follows:
We rely on Marchsponsorship contracts to generate revenues.
We will receive a portion of our annual revenues from sponsorship agreements for various content, media and live events produced at Hall of Fame Village powered by Johnson Controls such as title, official product and promotional partner sponsorships, billboards, signs and other media. We are continuously in negotiations with existing sponsors and actively seeking new sponsors as there is significant competition for sponsorships. Some of our live events may not secure a title sponsor, may not secure a sufficient number of sponsorships on favorable terms, or may not secure sponsorships sufficiently enough in advance of an event, which may lead to event cancellations or otherwise adversely affect the revenue generated from such events.
The certain amended and restated sponsorship and naming rights agreement, dated as of July 2, 2020 (the “Naming Rights Agreement”), by and among HOF Village, PFHOF and Johnson Controls is scheduled to expire on December 31, 2034, but provides termination rights both to (a) HOF Village and PFHOF and (b) Johnson Controls, which may be exercised in the event the other party, among other things, breaches any of its covenants and agreements under the Naming Rights Agreement beyond certain notice and cure periods. Additionally, Johnson Controls has a right to terminate the Naming Rights Agreement if (i) we do not provide evidence to Johnson Controls by October 31, 2021, that we have secured sufficient debt and equity financing to complete Phase II, subject to day-for-day extension due to force majeure and a notice and cure period, (ii) Phase II is not open for business by January 2, 2024 subject to day-for-day extension due to force majeure and a notice and cure period, or (iii) HOF Village is in default beyond applicable notice and cure periods under certain agreements, such as the Technology as a Service Agreement with Johnson Controls (the “TAAS Agreement”), among others. There can be no assurance that Phase II will be open for business by January 2, 2024. In addition, under the Naming Rights Agreement Johnson Controls’ obligation to make sponsorship payments to Newco may be suspended if Newco has not provided evidence reasonably satisfactory to Johnson Controls on or before December 31, 2020, subject to day-for-day extension due to Force Majeure, that Newco has secured sufficient debt and equity financing to complete Phase II.
In addition to the Naming Rights Agreement, Newco is party to a Technology as a Service Agreement dated October 9, 2020 with Johnson Controls (the “TAAS Agreement”). Pursuant to the TAAS Agreement, Johnson Controls will provide certain services related to the construction and development of the Hall of Fame Village powered by Johnson Controls (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 has agreed to pay Johnson Controls up to an aggregate of approximately $217 million for services rendered by Johnson Controls over the term of the TAAS Agreement. As of June 30, 20182022 and December 31, 2021, approximately $195 million and $199 million, respectively, was remaining under the TAAS Agreement.
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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 Right 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 SEC, however,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 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 three and six months ended June 30, 2022, the Company suspended its revenue recognition until the dispute is resolved and has recorded an allowance against the amounts due as of June 30, 2022 in the amount of $2,125,000. The balances due under the Naming Rights Agreement as of June 30, 2022 and December 31, 2021 amounted to $4,010,417 and $1,885,417, respectively.
The sponsorship and services agreement, dated as of December 19, 2018, as amended (the “Constellation Sponsorship Agreement”), by and among HOF Village, PFHOF and Constellation NewEnergy, Inc.,is scheduled to expire on December 31, 2029 but provides termination rights both to (a) HOF Village and PFHOF and (b) Constellation, which may be exercised if a party would suffer material damage to its reputation by association with the other party or if there is an event of default. An event of default under the Constellation Sponsorship Agreement includes a party’s failure to perform its material obligations for 60 days after receiving written notice from the other party and failure to cure such default; a party’s becoming insolvent or filing a voluntary petition in bankruptcy; a party’s being adjudged bankrupt; an involuntary petition under any bankruptcy or insolvency law being filed against a party; a party’s sale, assignment or transfer of all or substantially all of its assets (other than to an affiliate in the case of HOF Village or PFHOF). Additionally, Constellation has a right to terminate the Constellation Sponsorship Agreement effective as of December 31, 2023 for failure to recover its investment in the form of new business, if it provides written notice on or prior to December 1, 2022.
Loss of our existing title sponsors or other major sponsorship agreements, including the Naming Rights Agreement and Constellation Sponsorship Agreement, or failure to secure sponsorship agreements in the future on favorable terms, could have a material adverse effect on our business, financial condition and results of operations.
Our Common Stock may be delisted from the Nasdaq Capital Market if we cannot satisfy Nasdaq’s continued listing requirements, which could adversely impact the price and liquidity of our Common Stock.
On May 24, 2022, the Company received a deficiency letter (the “Notice”) from the Listing Qualifications Department (the “Staff”) of the Nasdaq Stock Market, LLC (“Nasdaq”) notifying the Company that, for the last 30 consecutive business days, the bid price for the Common Stock had closed below $1.00 per share, which is the minimum bid price required to maintain continued listing on The Nasdaq Capital Market under Nasdaq Listing Rule 5550(a)(2) (the “Minimum Bid Requirement”).
The Notice has no immediate effect on the listing of the Common Stock. In accordance with Nasdaq Listing Rule 5810(c)(3)(A), the Company has 180 calendar days to regain compliance with the Minimum Bid Requirement. To regain compliance, the closing bid price of the Common Stock must be at least $1.00 per share for a minimum of ten consecutive business days during this 180-day period, at which time the Staff will provide written notification to the Company that it complies with the Minimum Bid Requirement, unless the Staff exercises its discretion to extend this ten-day period pursuant to Nasdaq Listing Rule 5810(c)(3)(H). The compliance period for the Company will expire on November 21, 2022.
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If the Company does not regain compliance with the Minimum Bid Requirement during the initial 180 calendar day period, the Company may be eligible for an additional 180 calendar day compliance period. To qualify, the Company would be required to meet the continued listing requirement for market value of publicly held shares and all other initial listing standards for The Nasdaq Capital Market, with the exception of the Minimum Bid Requirement, and would need to provide written notice of its intention to cure the deficiency during the second compliance period, by effecting a reverse stock split, if necessary. However, if it appears to the Staff that the Company will not be able to cure the deficiency, or if the Company does not meet the other listing standards, the Staff could provide notice that the Common Stock will become subject to delisting. In the event the Company receives notice that its Common Stock is being delisted, Nasdaq rules permit the Company to appeal any delisting determination by the Staff to a Hearings Panel (the “Panel”). The Company expects that its Common Stock would remain listed pending the Panel’s decision. However, there can be no assurance that, if the Company does appeal the delisting determination by the Staff to the Panel, that such appeal would be successful, or that the Company will be able to regain compliance with the Minimum Bid Requirement or maintain compliance with the other listing requirements.
Delisting from the Nasdaq Capital Market could make trading our Common Stock more difficult for investors, potentially leading to declines in our share price and liquidity. Without a Nasdaq Capital Market listing, stockholders may have a difficult time getting a quote for the sale or purchase of our stock, the sale or purchase of our stock would likely be made more difficult, and the trading volume and liquidity of our stock could decline. Delisting from the Nasdaq Capital Market could also result in negative publicity and could also make it more difficult for us to raise additional capital. The absence of such a listing may adversely affect the acceptance of our Common Stock as currency or the value accorded by other parties. Further, if we are delisted, we would also incur additional costs under state blue sky laws in connection with any sales of our securities. These requirements could severely limit the market liquidity of our Common Stock and the ability of our stockholders to sell our Common Stock in the secondary market. If our Common Stock is delisted by Nasdaq, our Common Stock may be eligible to trade on an over-the-counter quotation system, such as the OTCQB market, where an investor may find it more difficult to sell our stock or obtain accurate quotations as to the market value of our Common Stock. In the event our Common Stock is delisted from the Nasdaq Capital Market, we may disclose changesnot be able to such factorslist our Common Stock on another national securities exchange or disclose additional factors from time to time in our future filings with the SEC.obtain quotation on an over-the counter quotation system.
Item 2. Unregistered Salessales of Equity Securitiesequity securities and Useuse of Proceeds.proceeds
In conjunction withHOF Village 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 closingoutstanding balance of our Initial Public Offering, we completed the private saleCFP 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 an aggregatethe consideration for making the Loan, on June 8, 2022, the Company issued to MLF: (A) 125,000 shares of 4,900,000 Private Placement Warrantsthe Common Stock, and (B) a Series G warrant (the “Series G Warrants”) to our Sponsor at apurchase 125,000 shares of Common Stock. The exercise price of $1.00 per Private Placement Warrant, generating total proceeds, before expenses, of $4,900,000. The Private Placement Warrants are substantially similar to the Warrants underlying the Units issued in our Initial Public Offering, except that the Private Placement Warrants may be net cash settled and are not redeemable so long as they are held by our Sponsor or its permitted transferees. If the Private Placement Warrants are held by holders other than our Sponsor or its permitted transferees, the Private PlacementSeries G Warrants will be redeemable by us$1.50 per share. The Series G Warrants will become exercisable one year after issuance, subject to certain terms and exercisable byconditions set forth in the holders on the same basis as theSeries G Warrants.
Unexercised Series G Warrants will expire five years after issuance. The salesexercise price of the above securities by the Company were exempt from registration under the Securities Act, in reliance on Section 4(a)(2) of the Securities Act as transactions by an issuer not involving a public offering. We did not pay any underwriting discounts or commissions in connection with the sale of the Private Placement Warrants.
Of the gross proceeds received from the Initial Public Offering and the Private PlacementSeries G Warrants a total of $126,250,000 was placed in the Trust Account.
We paid a total of $2,500,000 in underwriting discounts and commissions and $677,731 for other costs and expenses related to the Initial Public Offering. In addition, the underwriters agreed to defer $4,375,000 in underwriting discounts and commissions, and up to this amount will be payable upon consummation of the Business Combination.subject to a weighted-average antidilution adjustment.
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For a description of the use of proceeds generated in our Initial Public Offering, see Part I, Item 2 of this Form 10-Q.
Item 3. Defaults Upon Senior Securities.upon senior securities
NoneNone.
Item 4. Mine Safety Disclosures.safety disclosures
Not Applicable.applicable.
Item 5. Other Information.
None.
information
None.
Item 6. Exhibits.Exhibits
| Inline XBRL | ||
| 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.
** Furnished.
| * | Filed herewith |
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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.
| Date: | By: | /s/ |
| Michael Crawford | ||
| Chief Executive Officer | ||
| (Principal Executive Officer) | ||
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