UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
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, 2023
☐ ☐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 Number 001-38363
______________
GORDON POINTE ACQUISITION CORP.Commission file number: 001–38363
HALL OF FAME RESORT & ENTERTAINMENT COMPANY
(Exact name of Registrantregistrant as Specifiedspecified in Its Charter)its charter)
| Delaware | ||
(State or
| (
|
2014 Champions Gateway
Canton, OH 44708
(Address of principal executive offices)
(330) 754–3427
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
| each class | |||||
| Trading Symbol(s) | Name of each exchange on which registered | ||||
| HOFV | Nasdaq Capital Market | ||||
| HOFVW | Nasdaq Capital Market |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the 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 ☐ | ||||||
| Non–accelerated filer ☒ | Smaller reporting company ☒ | ||||||
| Emerging growth company | ☒ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-212b–2 of the Exchange Act). Yes ☒ No ☐
Yes ☐ No ☒
As of May 11, 2018,August 8, 2023, there were 12,500,0005,671,676 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, 2023 | December 31, 2022 | |||||||
| (unaudited) | ||||||||
| Assets | ||||||||
| Cash | $ | 9,307,494 | $ | 26,016,547 | ||||
| Restricted cash | 7,543,499 | 7,499,835 | ||||||
| Investments held to maturity | 12,359,877 | 17,033,515 | ||||||
| Investments available for sale | 5,751,000 | 4,067,754 | ||||||
| Accounts receivable, net | 2,640,961 | 1,811,143 | ||||||
| Prepaid expenses and other assets | 3,338,375 | 3,340,342 | ||||||
| Property and equipment, net | 370,936,371 | 248,826,853 | ||||||
| Right-of-use lease assets | 7,471,745 | 7,562,048 | ||||||
| Project development costs | 31,779,847 | 140,138,924 | ||||||
| Total assets | $ | 451,129,169 | $ | 456,296,961 | ||||
| Liabilities and stockholders’ equity | ||||||||
| Liabilities | ||||||||
| Notes payable, net | $ | 195,270,837 | $ | 171,315,860 | ||||
| Accounts payable and accrued expenses | 16,089,531 | 17,575,683 | ||||||
| Due to affiliate | 399,318 | 855,485 | ||||||
| Warrant liability | 1,372,000 | 911,000 | ||||||
| Financing liability | 61,299,829 | 60,087,907 | ||||||
| Derivative liability - interest rate swap | 240,000 | 200,000 | ||||||
| Operating lease liability | 3,422,174 | 3,413,210 | ||||||
| Other liabilities | 13,218,842 | 10,679,704 | ||||||
| Total liabilities | 291,312,531 | 265,038,849 | ||||||
| Commitments and contingencies (Note 6, 7, and 8) | ||||||||
| Stockholders’ equity | ||||||||
| Undesignated preferred stock, $0.0001 par value; 4,917,000 shares authorized; no shares issued or outstanding at June 30, 2023 and December 31, 2022 | - | - | ||||||
| Series B convertible preferred stock, $0.0001 par value; 15,200 shares designated; 200 shares issued and outstanding at June 30, 2023 and December 31, 2022; liquidation preference of $222,011 as of June 30, 2023 | - | - | ||||||
| Series C convertible preferred stock, $0.0001 par value; 15,000 shares designated; 15,000 shares issued and outstanding at June 30, 2023 and December 31, 2022; liquidation preference of $15,707,500 as of June 30, 2023 | 2 | 2 | ||||||
| Common stock, $0.0001 par value; 300,000,000 shares authorized; 5,667,446 and 5,604,869 shares issued and outstanding at June 30, 2023 and December 31, 2022, respectively | 566 | 560 | ||||||
| Additional paid-in capital | 340,814,772 | 339,038,466 | ||||||
| Accumulated deficit | (180,061,757 | ) | (146,898,343 | ) | ||||
| Total equity attributable to HOFRE | 160,753,583 | 192,140,685 | ||||||
| Non-controlling interest | (936,945 | ) | (882,573 | ) | ||||
| Total equity | 159,816,638 | 191,258,112 | ||||||
| Total liabilities and stockholders’ equity | $ | 451,129,169 | $ | 456,296,961 | ||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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, | |||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| Revenues | ||||||||||||||||
| Sponsorships, net of activation costs | $ | 691,236 | $ | 452,772 | $ | 1,364,711 | $ | 1,272,062 | ||||||||
| Event, rents and other revenues | 3,410,010 | 668,863 | 4,318,322 | 1,006,256 | ||||||||||||
| Hotel revenues | 2,026,031 | 1,563,900 | 3,564,677 | 2,513,741 | ||||||||||||
| Total revenues | 6,127,277 | 2,685,535 | 9,247,710 | 4,792,059 | ||||||||||||
| Operating expenses | ||||||||||||||||
| Operating expenses | 10,693,853 | 7,316,113 | 24,367,569 | 14,982,722 | ||||||||||||
| Hotel operating expenses | 1,587,620 | 1,316,150 | 3,046,823 | 2,469,262 | ||||||||||||
| Depreciation expense | 3,373,076 | 3,527,581 | 5,926,436 | 6,769,866 | ||||||||||||
| Total operating expenses | 15,654,549 | 12,159,844 | 33,340,828 | 24,221,850 | ||||||||||||
| Loss from operations | (9,527,272 | ) | (9,474,309 | ) | (24,093,118 | ) | (19,429,791 | ) | ||||||||
| Other income (expense) | ||||||||||||||||
| Interest expense, net | (4,404,146 | ) | (921,392 | ) | (8,036,783 | ) | (2,134,933 | ) | ||||||||
| Amortization of discount on note payable | (882,240 | ) | (1,122,324 | ) | (1,738,131 | ) | (2,478,298 | ) | ||||||||
| Change in fair value of warrant liability | (223,000 | ) | 2,423,000 | (461,000 | ) | 7,173,000 | ||||||||||
| Change in fair value of interest rate swap | 60,000 | - | (40,000 | ) | - | |||||||||||
| Change in fair value of securities available for sale | 1,683,246 | - | 1,683,246 | - | ||||||||||||
| Loss on extinguishment of debt | - | - | - | (148,472 | ) | |||||||||||
| Total other (expense) income | (3,766,140 | ) | 379,284 | (8,592,668 | ) | 2,411,297 | ||||||||||
| Net loss | $ | (13,293,412 | ) | $ | (9,095,025 | ) | $ | (32,685,786 | ) | $ | (17,018,494 | ) | ||||
| Preferred stock dividends | (266,000 | ) | (266,000 | ) | (532,000 | ) | (532,000 | ) | ||||||||
| Loss attributable to non-controlling interest | 5,795 | 158,592 | 54,372 | 235,964 | ||||||||||||
| Net loss attributable to HOFRE stockholders | $ | (13,553,617 | ) | $ | (9,202,433 | ) | $ | (33,163,414 | ) | $ | (17,314,530 | ) | ||||
| Net loss per share, basic and diluted | $ | (2.39 | ) | $ | (1.78 | ) | $ | (5.88 | ) | $ | (3.49 | ) | ||||
| Weighted average shares outstanding, basic and diluted | 5,660,385 | 5,183,035 | 5,644,822 | 4,964,029 | ||||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
GORDON POINTE ACQUISITION CORP.HALL OF FAME RESORT & ENTERTAINMENT COMPANY AND SUBSIDIARIES
CONDENSED STATEMENTCONSOLIDATED STATEMENTS OF CASH FLOWSCHANGES IN STOCKHOLDERS’ EQUITY
(Unaudited)FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2023 AND 2022
(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 | Accumulated | Total Equity Attributable to HOFRE | Non-controlling | Total Stockholders’ | |||||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | Capital | Deficit | Stockholders | Interest | Equity | ||||||||||||||||||||||||||||||||||
| Balance as of January 1, 2023 | 200 | $ | - | 15,000 | $ | 2 | 5,604,869 | $ | 560 | $ | 339,038,466 | $ | (146,898,343 | ) | $ | 192,140,685 | $ | (882,573 | ) | $ | 191,258,112 | |||||||||||||||||||||||
| Stock-based compensation on RSU and restricted stock awards | - | - | - | - | - | - | 651,034 | - | 651,034 | - | 651,034 | |||||||||||||||||||||||||||||||||
| Issuance of restricted stock awards | - | - | - | - | 6,207 | 1 | (1 | ) | - | - | - | - | ||||||||||||||||||||||||||||||||
| Vesting of restricted stock units | - | - | - | - | 46,255 | 5 | (5 | ) | - | - | - | - | ||||||||||||||||||||||||||||||||
| Cancellation of fractional shares | - | - | - | - | (10,433 | ) | (1 | ) | 1 | - | - | - | - | |||||||||||||||||||||||||||||||
| Preferred stock dividend | - | - | - | - | - | - | - | (266,000 | ) | (266,000 | ) | - | (266,000 | ) | ||||||||||||||||||||||||||||||
| Net loss | - | - | - | - | - | - | - | (19,343,797 | ) | (19,343,797 | ) | (48,577 | ) | (19,392,374 | ) | |||||||||||||||||||||||||||||
| Balance as of March 31, 2023 | 200 | $ | - | 15,000 | $ | 2 | 5,646,898 | $ | 565 | $ | 339,689,495 | $ | (166,508,140 | ) | $ | 173,181,922 | $ | (931,150 | ) | $ | 172,250,772 | |||||||||||||||||||||||
| Stock-based compensation on RSU and restricted stock awards | - | - | - | - | - | - | 1,086,017 | - | 1,086,017 | - | 1,086,017 | |||||||||||||||||||||||||||||||||
| Issuance of restricted stock awards | - | - | - | - | 4,881 | - | - | - | - | - | - | |||||||||||||||||||||||||||||||||
| Vesting of restricted stock units | - | - | - | - | 10,789 | 1 | (1 | ) | - | - | - | - | ||||||||||||||||||||||||||||||||
| Sale of shares under ATM | - | - | - | - | 4,878 | - | 39,261 | - | 39,261 | - | 39,261 | |||||||||||||||||||||||||||||||||
| Preferred stock dividends | - | - | - | - | - | - | - | (266,000 | ) | (266,000 | ) | - | (266,000 | ) | ||||||||||||||||||||||||||||||
| Net loss | - | - | - | - | - | - | - | (13,287,617 | ) | (13,287,617 | ) | (5,795 | ) | (13,293,412 | ) | |||||||||||||||||||||||||||||
| Balance as of June 30, 2023 | 200 | $ | - | 15,000 | $ | 2 | 5,667,446 | $ | 566 | $ | 340,814,772 | $ | (180,061,757 | ) | $ | 160,753,583 | $ | (936,945 | ) | $ | 159,816,638 | |||||||||||||||||||||||
| Balance as of January 1, 2022 | 15,200 | $ | 2 | - | $ | - | 4,434,662 | $ | 443 | $ | 305,126,404 | $ | (99,951,839 | ) | $ | 205,175,010 | $ | (596,766 | ) | $ | 204,578,244 | |||||||||||||||||||||||
| Stock-based compensation on RSU and restricted stock awards | - | - | - | - | - | - | 1,287,695 | - | 1,287,695 | - | 1,287,695 | |||||||||||||||||||||||||||||||||
| Stock-based compensation - common stock awards | - | - | - | - | 1,136 | - | 28,500 | - | 28,500 | - | 28,500 | |||||||||||||||||||||||||||||||||
| Issuance of restricted stock awards | - | - | - | - | 6,953 | 1 | (1 | ) | - | - | - | - | ||||||||||||||||||||||||||||||||
| Vesting of restricted stock units | - | - | - | - | 24,503 | 2 | (2 | ) | - | - | - | - | ||||||||||||||||||||||||||||||||
| Sale of shares under ATM | - | - | - | - | 571,908 | 57 | 14,234,875 | - | 14,234,932 | - | 14,234,932 | |||||||||||||||||||||||||||||||||
| Shares issued in connection with amendment of notes payable | - | - | - | - | 39,091 | 4 | 803,057 | - | 803,061 | - | 803,061 | |||||||||||||||||||||||||||||||||
| Warrants issued in connection with amendment of notes payable | - | - | - | - | - | - | 1,088,515 | - | 1,088,515 | - | 1,088,515 | |||||||||||||||||||||||||||||||||
| Modification of Series C and Series D warrants | - | - | - | - | - | - | 3,736,000 | - | 3,736,000 | - | 3,736,000 | |||||||||||||||||||||||||||||||||
| Series B preferred stock dividend | - | - | - | - | - | - | - | (266,000 | ) | (266,000 | ) | - | (266,000 | ) | ||||||||||||||||||||||||||||||
| Exchange of Series B preferred stock for Series C preferred stock | (15,000 | ) | (2 | ) | 15,000 | 2 | - | - | - | - | - | - | - | |||||||||||||||||||||||||||||||
| Net loss | - | - | - | - | - | - | - | (7,846,097 | ) | (7,846,097 | ) | (77,372 | ) | (7,923,469 | ) | |||||||||||||||||||||||||||||
| Balance as of March 31, 2022 | 200 | $ | - | 15,000 | $ | 2 | 5,078,253 | $ | 507 | $ | 326,305,043 | $ | (108,063,936 | ) | $ | 218,241,616 | $ | (674,138 | ) | $ | 217,567,478 | |||||||||||||||||||||||
| Stock-based compensation on RSU and restricted stock awards | - | - | - | - | - | - | 1,254,724 | - | 1,254,724 | - | 1,254,724 | |||||||||||||||||||||||||||||||||
| Issuance of restricted stock awards | - | - | - | - | 2,009 | - | - | - | - | - | - | |||||||||||||||||||||||||||||||||
| Vesting of restricted stock units | - | - | - | - | 105 | - | - | - | - | - | - | |||||||||||||||||||||||||||||||||
| Shares issued in connection with issuance of notes payable | - | - | - | - | 5,682 | 1 | 75,418 | - | 75,419 | - | 75,419 | |||||||||||||||||||||||||||||||||
| Warrants issued in connection with issuance of notes payable | - | - | - | - | - | - | 18,709 | - | 18,709 | - | 18,709 | |||||||||||||||||||||||||||||||||
| Sale of shares under ATM | - | - | - | - | 256,040 | 26 | 3,748,256 | - | 3,748,282 | - | 3,748,282 | |||||||||||||||||||||||||||||||||
| Preferred stock dividends | - | - | - | - | - | - | - | (266,000 | ) | (266,000 | ) | - | (266,000 | ) | ||||||||||||||||||||||||||||||
| Net loss | - | - | - | - | - | - | - | (8,936,433 | ) | (8,936,433 | ) | (158,592 | ) | (9,095,025 | ) | |||||||||||||||||||||||||||||
| Balance as of June 30, 2022 | 200 | $ | - | 15,000 | $ | 2 | 5,342,089 | $ | 534 | $ | 331,402,150 | $ | (117,266,369 | ) | $ | 214,136,317 | $ | (832,730 | ) | $ | 213,303,587 | |||||||||||||||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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, | ||||||||
| 2023 | 2022 | |||||||
| Cash Flows From Operating Activities | ||||||||
| Net loss | $ | (32,685,786 | ) | $ | (17,018,494 | ) | ||
| Adjustments to reconcile net loss to cash flows used in operating activities | ||||||||
| Depreciation expense | 5,926,436 | 6,769,866 | ||||||
| Amortization of note discounts | 1,738,131 | 2,478,298 | ||||||
| Accretion of financing liability | 3,399,422 | - | ||||||
| Impairment of film costs | 1,145,000 | - | ||||||
| Interest income on investments held to maturity | (508,610 | ) | - | |||||
| Interest paid in kind | 2,282,040 | 1,681,722 | ||||||
| Loss on extinguishment of debt | - | 148,472 | ||||||
| Change in fair value of interest rate swap | 40,000 | - | ||||||
| Change in fair value of warrant liability | 461,000 | (7,173,000 | ) | |||||
| Change in fair value of securities available for sale | (1,683,246 | ) | - | |||||
| Stock-based compensation expense | 1,737,051 | 2,570,919 | ||||||
| Non-cash operating lease expense | 258,416 | 90,876 | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | (829,818 | ) | (370,525 | ) | ||||
| Prepaid expenses and other assets | (1,143,033 | ) | 1,430,448 | |||||
| Accounts payable and accrued expenses | (1,743,958 | ) | 8,196,272 | |||||
| Operating leases | (159,149 | ) | 9,215 | |||||
| Due to affiliates | (456,167 | ) | 1,777,542 | |||||
| Other liabilities | 2,539,138 | 4,830,587 | ||||||
| Net cash (used in) provided by operating activities | (19,683,133 | ) | 5,422,198 | |||||
| Cash Flows From Investing Activities | ||||||||
| Investments in securities held to maturity | (64,606,946 | ) | - | |||||
| Proceeds from securities held to maturity | 69,815,000 | - | ||||||
| Additions to project development costs and property and equipment | (19,676,877 | ) | (40,022,805 | ) | ||||
| Net cash used in investing activities | (14,468,823 | ) | (40,022,805 | ) | ||||
| Cash Flows From Financing Activities | ||||||||
| Proceeds from notes payable | 22,270,339 | 20,714,311 | ||||||
| Repayments of notes payable | (783,191 | ) | (3,144,677 | ) | ||||
| Payment of financing costs | (1,552,342 | ) | (210,032 | ) | ||||
| Payment on financing liability | (2,187,500 | ) | - | |||||
| Payment of Series B dividends | (300,000 | ) | (300,000 | ) | ||||
| Proceeds from sale of common stock under ATM | 39,261 | 17,983,214 | ||||||
| Net cash provided by financing activities | 17,486,567 | 35,042,816 | ||||||
| Net decrease in cash and restricted cash | (16,665,389 | ) | 442,209 | |||||
| Cash and restricted cash, beginning of year | 33,516,382 | 17,388,040 | ||||||
| Cash and restricted cash, end of period | $ | 16,850,993 | $ | 17,830,249 | ||||
| Cash | $ | 9,307,494 | $ | 10,615,810 | ||||
| Restricted Cash | 7,543,499 | 7,214,439 | ||||||
| Total cash and restricted cash | $ | 16,850,993 | $ | 17,830,249 | ||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
HALL OF FAME RESORT & ENTERTAINMENT COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
| For the Six Months Ended June 30, | ||||||||
| 2023 | 2022 | |||||||
| Supplemental disclosure of cash flow information | ||||||||
| Cash paid during the year for interest | $ | 2,644,324 | $ | 3,520,404 | ||||
| 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 | ||||
| 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 | $ | 232,000 | ||||
| Shares issued in connection with amendment of notes payable | $ | - | $ | 803,061 | ||||
| Warrants issued in connection with amendment of notes payable | $ | - | $ | 1,088,515 | ||||
| Amounts due to affiliate exchanged for notes payable | $ | - | $ | 850,000 | ||||
| Shares issued in connection with issuance of notes payable | $ | - | $ | 75,419 | ||||
| Warrants issued in connection with issuance of notes payable | $ | - | $ | 18,709 | ||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
Hall of Fame Resort & Entertainment Company and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Note 1: Organization, Nature of Business, and Liquidity
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 businesses inowns the financial services technology sector or related financial services or technology sectors.Hall of Fame Village, a multi-use sports, entertainment, and media destination centered around the PFHOF’s campus. The Company is pursuing a differentiation strategy across three pillars, including destination-based assets, HOF Village Media Group, LLC (“Hall of Fame Village Media”), and gaming.
At March 31, 2018,The Company has entered into multiple agreements with PFHOF, and certain government entities, which outline the rights and obligations of each of the parties with regard to the property on which the Hall of Fame Village sits, portions of which are owned by the Company and portions of which are net leased to the Company by government and quasi-governmental entities (see Note 9 for additional information). Under these agreements, the PFHOF and the lessor entities are entitled to use portions of the Hall of Fame Village on a direct-cost basis.
Reverse Stock Split
On December 27, 2022, the Company effectuated a reverse stock split of its shares of common stock at a ratio of 1-for-22. See Note 5, Stockholders’ Equity, for additional information. As a result, the number of shares and income (loss) per share disclosed throughout this Quarterly Report on Form 10-Q have been retrospectively adjusted to reflect the reverse stock split.
Hall of Fame Resort & Entertainment Company and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Note 1: Organization, Nature of Business, and Liquidity (continued)
Liquidity and Going Concern
The Company has sustained recurring losses through June 30, 2023 and the Company’s accumulated deficit was $180,061,757 as of such date. Since inception, the Company’s operations have been funded principally through the issuance of debt and equity. As of June 30, 2023, the Company had not yet commenced operations. All activityapproximately $9.3 million of unrestricted cash, $7.5 million of restricted cash, and $12.4 million of liquid investments held to maturity, consisting of U.S. treasury securities. The Company has approximately $59.3 million of debt coming due through August 10, 2024. The Company may extend the maturity of up to $42.1 million principal of debt until March 31, 2018 relates to2025 for a fee of one percent of the outstanding principal. These factors raise substantial doubt about the Company’s formation and its initial public offering (the “Initial Public Offering”), which is described below, and identifyingability to continue operations as a target company for a Business Combination.going concern.
The registration statementCompany has entered into the following financing transactions. See Note 4 for more information on these transactions.
In January 2023, the Company sold 2,400 shares of the Company’s Initial Public Offering was declared effective on January 24, 2018. 7.00% Series A Cumulative Redeemable Preferred Stock, par value $0.0001 per share for an aggregate purchase price of $2,400,000.
On January 30, 2018February 2, 2023, the Company consummatedreceived proceeds from the Initial Public Offeringissuance by Stark County Port Authority 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 proceeds of $125,000,000, which is described in Note 3.$18,100,000 principal amount Tax Increment Financing Revenue Bonds, Series 2023.
Simultaneously withOn May 2, 2023, the closingCompany issued 800 shares of the Initial Public Offering, the Company consummated the sale of 4,900,000 warrants (the “Private Placement Warrants”)Company’s 7.00% Series A Cumulative Redeemable Preferred Stock at a price of $1.00$1,000 per warrant in a private placement to Gordon Pointe Management, LLC (the “Sponsor”), generating gross proceedsshare for an aggregate purchase price 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 selected by the Company meeting the conditions of Rule 2a-7 of the Investment Company Act, as determined by the Company, until the earlier of: (i) the consummation of a Business Combination or (ii) the distribution of the Trust Account, as described below.
Transaction costs amounted to $7,552,731, consisting of $2,500,000 of underwriting fees, $4,375,000 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, the Company had approximately $470,000 of cash held outside of the trust account and available for working capital purposes as of March 31, 2018.$800,000.
The Company’s management has broad discretion with respectCompany expects that it will need to raise additional financing to accomplish its development plan over the specific application of the net proceeds of the Initial Public Offeringnext several years. The Company is seeking to obtain additional funding through debt, construction lending, and Private Placement Warrants, although substantially all of the net proceedsequity financing. There 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, the Company will only complete a Business Combination if 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 not to be required to register as an investment company under the Investment Company Act. There is 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 havescope of its planned development, which could harm its financial condition and operating results, or it may not be able to indemnify the Trust Account duecontinue to claims of creditors by endeavoringfund its ongoing operations. If management is unable to have all vendors, service providers (other thanexecute its planned debt and equity financing initiatives, these conditions raise substantial doubt about the Company’s independent auditors), prospective target businesses or other entities with whichability to continue as a going concern to sustain operations for at least one year from the Company does business, execute agreements withissuance of these condensed consolidated financial statements. The accompanying condensed consolidated financial statements do not include any adjustments that might result from the Company waiving any right, title, interest or claimoutcome of any kind in or to monies held in the Trust Account.these uncertainties.
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 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 as2022, 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 interim27, 2023. Operating results for the three and six months ended March 31, 2018June 30, 2023 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.
2023.
Consolidation
The condensed consolidated financial statements include the accounts and activity of the Company and its wholly owned subsidiaries. Investments in a variable interest entity in which the Company is not the primary beneficiary, or where the Company does not own a majority interest but has the ability to exercise significant influence over operating and financial policies, are accounted for using the equity method. All intercompany profits, transactions, and balances have been eliminated in consolidation.
The Company owns a 60% interest in Mountaineer GM, LLC (“Mountaineer”), whose results are consolidated into the Company’s results of operations. The portion of Mountaineer’s net income (loss) that is not attributable to the Company is included in non-controlling interest.
Reclassification
Certain financial statement line items of the Company’s historical presentation have been reclassified to conform to the corresponding financial statement line items in 2023. These reclassifications have no material impact on the historical operating loss, net loss, total assets, total liabilities, or Stockholders’ equity previously reported.
Hall of Fame Resort & Entertainment Company and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Note 2: Summary of Significant Accounting Policies (continued)
Emerging growth companyGrowth 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 December 31, 2023.
Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Securities Exchange Act)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 long-lived assets, potential impairment, accounting for debt modifications and extinguishments, 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.
Hall of Fame Resort & Entertainment Company and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Note 2: Summary of Significant Accounting Policies (continued)
Warrant Liability
The Company accounts for warrants for shares of the Company’s common stock, par value $0.0001 per share (“Common Stock”) that are not indexed to its own stock as liabilities at fair value on the balance sheet under U.S. GAAP. Such warrants are subject to remeasurement at each balance sheet date and any change in fair value is recognized as a component of other expense on the statements of operations. The Company will continue to adjust the liability for changes in fair value until the earlier of the exercise or expiration of such Common Stock warrants. At that time, the portion of the warrant liability related to such Common Stock warrants will be reclassified to additional paid-in capital.
Cash and 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, 2023 and December 31, 2017.2022, 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, 2023 and December 31, 2022 were $7,543,499 and $7,499,835, respectively.
At March 31, 2018, the assets held in the Trust Account were substantially held in U.S. Treasury Bills.
GORDON POINTE ACQUISITION CORP.
NOTES TO FINANCIAL STATEMENTS
March 31, 2018
(Unaudited)
Common stock subject to possible redemptionInvestments
The Company from time to time invests in debt and equity securities, including companies engaged in complementary businesses. All marketable equity and debt securities held by the Company are accounted for under ASC Topic 320, “Investments – Debt and Equity Securities.” As of June 30, 2023 and December 31, 2022, the Company held $12,359,877 and $17,033,515, respectively in securities to be held to maturity consisting of U.S government securities carried at amortized cost. The Company recognizes interest income on these securities ratably over their term utilizing the interest method.
As of June 30, 2023 and December 31, 2022, the Company also had $5,751,000 and $4,067,754, respectively in securities available for sale, which are marked to market value at each reporting period.
Hall of Fame Resort & Entertainment Company and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Note 2: Summary of Significant Accounting Policies (continued)
Accounts Receivable
Accounts receivable are generally amounts due under sponsorship and other agreements. Accounts receivable are reviewed for delinquencies on a case-by-case basis and are considered delinquent when the sponsor or customer has missed a scheduled payment. Interest is not charged on delinquencies.
The carrying amount of accounts receivable is reduced by an allowance that reflects management’s best estimate of the amounts that will not be collected. Management individually reviews all delinquent accounts receivable balances and based on an assessment of current creditworthiness, estimates the portion, if any, of the balance that will not be collected. As of June 30, 2023 and December 31, 2022, the Company has recorded an allowance for its common stock subjectcredit losses of $7,911,440 and $5,575,700, respectively.
Deferred Financing Costs
Costs incurred in obtaining financing are capitalized and amortized to possible redemptionadditions in accordance withproject development costs during the guidance inconstruction period over the term of the related loans, without regard for any extension options until the project or portion thereof is considered substantially complete. Upon substantial completion of the project or portion thereof, such costs are amortized as interest expense over the term of the related loan. Any unamortized costs are shown as an offset to “Notes Payable, net” on the accompanying condensed consolidated balance sheets.
Upon an extinguishment of debt (or a modification that is treated as an extinguishment), the remaining deferred financing costs are expensed against “Loss on Extinguishment of Debt”.
Hall of Fame Resort & Entertainment Company and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Note 2: Summary of Significant Accounting Policies (continued)
Revenue Recognition
The Company follows the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”) 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 holder or subjectCompany 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 redemption upon the occurrence of uncertain events not solely withinperformance obligations in the Company’s control) is classified as temporary equity. At all other times, common stock is classified as stockholders’ equity. The Company’s common stock features certain redemption rights that are considered to be outside ofcontract; and (v) recognize revenue when (or as) the Company’s control and subject to occurrence of uncertain future events. Accordingly, at March 31, 2018, common stock subject to possible redemption is presented at redemption value as temporary equity, outside of the stockholders’ equity section of the Company’s balance sheet.
Income taxesentity satisfies a performance obligation.
The Company compliesgenerates revenues from various streams such as sponsorship agreements, rents, events, and hotel and restaurant operations. The sponsorship arrangements, in which the customer sponsors a play area or event and receives specified brand recognition and other benefits over a set period of time, recognize revenue on a straight-line basis over the time period specified in the contract. The excess of amounts contractually due over the amounts of sponsorship revenue recognized are included in other liabilities on the accompanying condensed consolidated balance sheets. Contractually due but unpaid sponsorship revenue are included in accounts receivable on the accompanying condensed consolidated balance sheets. Refer to Note 6 for more details. Revenue for short-term rentals, and events are recognized at the time the respective event or service has been performed. Rental revenue for long term leases is recorded on a straight-line basis over the term of the lease beginning on the commencement date.
A performance obligation is a promise in a contract to transfer a distinct good or service to a customer. If the contract does not specify the revenue by performance obligation, the Company allocates the transaction price to each performance obligation based on its relative standalone selling price. Such prices are generally determined using prices charged to customers or using the Company’s expected cost plus margin. Revenue is recognized as the Company’s performance obligations are satisfied. If consideration is received in advance of the Company’s performance, including amounts which are refundable, recognition of revenue is deferred until the performance obligation is satisfied or amounts are no longer refundable.
The Company’s owned hotel revenues primarily consist of hotel room sales, revenue from accommodations sold in conjunction with other services (e.g., package reservations), food and beverage sales, and other ancillary goods and services (e.g., parking) related to owned hotel properties. Revenue is recognized when rooms are occupied or goods and services have been delivered or rendered, respectively. Payment terms typically align with when the accountinggoods and reporting requirementsservices are provided. Although the transaction prices of ASC Topic 740 “Incomehotel room sales, goods, and other services are generally fixed and based on the respective room reservation or other agreement, an estimate to reduce the transaction price is required if a discount is expected to be provided to the customer. For package reservations, the transaction price is allocated to the performance obligations within the package based on the estimated standalone selling price of each component.
Restaurant revenue at Company-operated restaurants is recognized when payment is tendered at the point of sale, net of sales tax, discounts and other sales related taxes.
Hall of Fame Resort & Entertainment Company and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Note 2: Summary of Significant Accounting Policies (continued)
Income Taxes” which require
The Company utilizes 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, 2023 and December 31, 2022, no liability for unrecognized tax benefits was required to be reported.
The Company’s policy for recording interest and penalties relatedassociated with tax audits is to unrecognized tax benefitsrecord such items as income tax expense. Asa component of March 31, 2018, thereoperating expenses on the Company’s condensed consolidated statements of operations. There were no unrecognized tax benefitsamounts incurred for penalties and no amounts accruedinterest for interestthe three and penalties.six months ended June 30, 2023 and 2022. 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 compliance with federal, statesuch returns for the years 2019 through 2022 remain subject to examination.
Hall of Fame Resort & Entertainment Company and city tax laws. Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Note 2: Summary of Significant Accounting Policies (continued)
Film and Media Costs
The Company capitalizes all costs to develop films and related media as an asset, included in “project development costs” on the Company’s managementcondensed consolidated balance sheets. The costs for each film or media will be expensed over the expected release period. During the three months ended June 30, 2023 the Company recorded $0 and in film and media costs. During the six months ended June 30, 2023 and 2022, the Company recorded $1,305,000 and $0 in film and media costs, respectively, including impairment of $1,145,000 and $0, respectively, as the Company does not expect thatanticipate recovering these costs. The impairment in Film and Media Costs is included in operating expenses on the total amountCompany’s condensed consolidated statements of unrecognized tax benefits will materially change over the next twelve months.operations.
On December 22, 2017Accounting for Real Estate Investments
Upon the U.S. Tax Cutsacquisition of real estate properties, a determination is made as to whether the acquisition meets the criteria to be accounted for as an asset or business combination. The determination is primarily based on whether the assets acquired and Jobs Actliabilities assumed meet the definition of 2017 (“Tax Reform”) was signed into law. As a resultbusiness. The determination of Tax Reform,whether the U.S. statutory tax rate was lowered from 35%assets acquired and liabilities assumed meet the definition of a business include a single or similar asset threshold. In applying the single or similar asset threshold, if substantially all the fair value of the gross assets acquired is concentrated in a single identifiable asset or group of similar identifiable assets, the assets acquired and liabilities assumed are not considered a business. Most of the Company’s acquisitions meet the single or similar asset threshold due to 21% effective January 1, 2018, amongthe fact that substantially all the fair value of the gross assets acquired is attributable to the real estate acquired.
Acquired real estate properties accounted for as asset acquisitions are recorded at cost, including acquisition and closing costs. The Company allocates the cost of real estate properties to the tangible and intangible assets and liabilities acquired based on their estimated relative fair values. The Company determines the fair value of tangible assets, such as land, building, furniture, fixtures, and equipment, using a combination of internal valuation techniques that consider comparable market transactions, replacement costs, and other changes. ASC Topic 740 requires companiesavailable information and fair value estimates provided by third-party valuation specialists, depending upon the circumstances of the acquisition. The Company determines the fair value of identified intangible assets or liabilities, which typically relate to recognizein-place leases, using a combination of internal valuation techniques that consider the effectterms of tax law changesthe in-place leases, current market data for comparable leases, and fair value estimates provided by third-party valuation specialists, depending upon the circumstances of the acquisition.
If a transaction is determined to be a business combination, the assets acquired, liabilities assumed, and any identified intangibles are recorded at their estimated fair values on the transaction date, and transaction costs are expensed in the period incurred.
Hall of enactment; therefore,Fame Resort & Entertainment Company and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Note 2: Summary of Significant Accounting Policies (continued)
Fair Value Measurement
The Company follows FASB’s ASC 820–10, Fair Value Measurement, to measure the Company was requiredfair value of its financial instruments and non-financial instruments and to revalueincorporate disclosures about fair value of its deferred taxfinancial instruments. ASC 820–10 establishes a framework for measuring fair value and expands disclosures about fair value measurements. To increase consistency and comparability in fair value measurements and related disclosures, ASC 820–10 establishes a fair value hierarchy which prioritizes the inputs to valuation techniques used to measure fair value into three broad levels.
The three levels of fair value hierarchy defined by ASC 820–10-20 are described below:
| Level 1 | Quoted market prices available in active markets for identical assets or liabilities as of the reporting date. | |
| Level 2 | Pricing inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date. | |
| Level 3 | Pricing inputs that are generally unobservable inputs and not corroborated by market data. |
Financial assets or liabilities are considered Level 3 when their fair values are determined using pricing models, discounted cash flow methodologies, or similar techniques and at least one significant model assumption or input is unobservable.
The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. If the inputs used to measure the financial assets and liabilities 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 carrying amount of the Company’s notes payable is considered to approximate their fair value based on the borrowing rates currently available to the Company for loans with similar terms and maturities.
Hall of Fame Resort & Entertainment Company and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Note 2: Summary of Significant Accounting Policies (continued)
Fair Value Measurement (continued)
The Company uses the fair value hierarchy to measure the fair value of its warrant liabilities, investments available for sale and interest rate swaps. The Company revalues its financial instruments at every reporting period. The Company recognizes gains or losses on the change in fair value of the warrant liabilities as “change in fair value of warrant liability” in the condensed consolidated statements of operations. The Company recognizes gains or losses on the change in fair value of the investments available for sale as “change in fair value of investments available for sale” in the condensed consolidated statements of operations. The Company recognizes gains or losses on the change in fair value of the interest rate swap as “change in fair value of interest rate swap” in the condensed consolidated statements of operations.
The following table provides the financial liabilities measured on a recurring basis and reported at fair value on the balance sheets as of June 30, 2023 and December 31, 2022 and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value:
| June 30, | December 31, | |||||||||||
| Level | 2023 | 2022 | ||||||||||
| Warrant liabilities – Public Series A Warrants | 1 | $ | 844,000 | $ | 748,000 | |||||||
| Warrant liabilities – Private Series A Warrants | 3 | 10,000 | - | |||||||||
| Warrant liabilities – Series B Warrants | 3 | 518,000 | 163,000 | |||||||||
| Fair value of aggregate warrant liabilities | $ | 1,372,000 | $ | 911,000 | ||||||||
| Fair value of interest rate swap liability | 2 | $ | 240,000 | $ | 200,000 | |||||||
| Investments available for sale | 3 | $ | 5,751,000 | $ | 4,067,754 | |||||||
The Series A Warrants issued to the previous shareholders of GPAQ (the “Public Series A Warrants”) are classified as Level 1 due to the use of an observable market quote in the active market. Level 3 financial liabilities consist of the Series A Warrants issued to the sponsors of GPAQ (the “Private Series A Warrants”) and the Series B Warrants issued in the Company’s November 2020 follow-on public offering, for which there is no current market for these securities, and the determination of fair value requires significant judgment or estimation. Changes in fair value measurement categorized within Level 3 of the fair value hierarchy are analyzed each period based on changes in estimates or assumptions and recorded appropriately.
Hall of Fame Resort & Entertainment Company and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Note 2: Summary of Significant Accounting Policies (continued)
Fair Value Measurement (continued)
Subsequent measurement
The following table presents the changes in fair value of the warrant liabilities:
| Public Series A Warrants | Private Series A Warrants | Series B Warrants | Total Warrant Liability | |||||||||||||
| Fair value as of December 31, 2022 | $ | 748,000 | $ | - | $ | 163,000 | $ | 911,000 | ||||||||
| Change in fair value | 96,000 | 10,000 | 355,000 | 461,000 | ||||||||||||
| Fair value as of June 30, 2023 | $ | 844,000 | $ | 10,000 | $ | 518,000 | $ | 1,372,000 | ||||||||
The key inputs into the Black Scholes valuation model for the Level 3 valuations as of June 30, 2023 and December 31, 2022 are as follows:
| June 30, 2023 | December 31, 2022 | |||||||||||||||
| Private Series A Warrants | Series B Warrants | Private Series A Warrants | Series B Warrants | |||||||||||||
| Term (years) | 2.0 | 2.4 | 2.5 | 2.9 | ||||||||||||
| Stock price | $ | 10.45 | $ | 10.45 | $ | 8.06 | $ | 8.06 | ||||||||
| Exercise price | $ | 253.11 | $ | 30.81 | $ | 253.11 | $ | 30.81 | ||||||||
| Dividend yield | 0.0 | % | 0.0 | % | 0.0 | % | 0.0 | % | ||||||||
| Expected volatility | 77.47 | % | 91.34 | % | 52.27 | % | 63.86 | % | ||||||||
| Risk free interest rate | 4.49 | % | 4.49 | % | 4.22 | % | 4.22 | % | ||||||||
| Number of shares | 95,576 | 170,862 | 95,576 | 170,862 | ||||||||||||
The valuation of the investments available for sale were based on sales of similar equity instruments in the time periods near to the measurement dates.
Hall of Fame Resort & Entertainment Company and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Note 2: Summary of Significant Accounting Policies (continued)
Net Loss Per Common Share
Basic net loss per common share is computed by dividing net loss by the weighted average number of common shares outstanding forduring the period, excluding sharesperiods.
Diluted net loss per share is computed by dividing the net loss by the weighted average number of common stock subject to forfeiture.shares outstanding during the period. The Company applies the two-class method in calculating earnings per share. Shares ofCompany’s potentially dilutive common stock subject to possible redemption at March 31, 2018,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 not currently redeemableonly included in the calculation of diluted net loss per share when their effect is dilutive.
For the three and six months ended June 30, 2023 and 2022, the Company was in a loss position and therefore all potentially dilutive securities would be anti-dilutive and the calculations are not redeemable at fair value,presented on the accompanying condensed consolidated statements of operations.
As of June 30, 2023 and 2022, the following outstanding common stock equivalents have been excluded from the calculation of basicnet loss per share since such shares, if redeemed, only participate inbecause their pro rata shareimpact would be anti-dilutive.
For the | ||||||||
| 2023 | 2022 | |||||||
| Warrants to purchase shares of Common Stock | 2,003,649 | 2,006,243 | ||||||
| Unvested restricted stock awards | - | 10,847 | ||||||
| Unvested restricted stock units to be settled in shares of Common Stock | 163,922 | 133,145 | ||||||
| Shares of Common Stock issuable upon conversion of convertible notes | 3,477,322 | 1,094,942 | ||||||
| Shares of Common Stock issuable upon conversion of Series B Preferred Stock | 2,971 | 2,971 | ||||||
| Shares of Common Stock issuable upon conversion of Series C Preferred Stock | 454,545 | 454,545 | ||||||
| Total potentially dilutive securities | 6,102,409 | 3,702,693 | ||||||
Hall of Fame Resort & Entertainment Company and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Note 3: Property and Equipment
Property and equipment consists of the following:
| Useful Life | June 30, 2023 | December 31, 2022 | ||||||||
| Land | $ | 27,724,961 | $ | 12,414,473 | ||||||
| Land improvements | 25 years | 52,849,615 | 51,808,296 | |||||||
| Building and improvements | 15 to 39 years | 345,620,875 | 239,068,974 | |||||||
| Equipment | 5 to 10 years | 12,344,492 | 7,212,246 | |||||||
| Property and equipment, gross | 438,539,943 | 310,503,989 | ||||||||
| Less: accumulated depreciation | (67,603,572 | ) | (61,677,136 | ) | ||||||
| Property and equipment, net | $ | 370,936,371 | $ | 248,826,853 | ||||||
| Project development costs | $ | 31,779,847 | $ | 140,138,924 | ||||||
For the three months ended June 30, 2023 and 2022, the Company recorded depreciation expense of $3,373,076 and $3,527,581, respectively, and for the six months ended June 30, 2023 and 2022, of $5,926,436 and 6,769,866, respectively. For the six months ended June 30, 2023 and 2022, the Company incurred $19,676,877 and $40,022,805 of capitalized project development costs, respectively.
For the six months ended June 30, 2023 and 2022, the Company transferred $127,045,169 and $0 from Project development costs to Property and Equipment, respectively.
Included in project development costs are film development costs of $200,000 and $982,000 as of June 30, 2023 and December 31, 2022, respectively.
Hall of Fame Resort & Entertainment Company and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Note 4: Notes Payable, net
Notes payable, net consisted of the following at June 30, 2023(1):
| Debt discount and deferred financing | Interest Rate | Maturity | ||||||||||||||||||||
| Gross | costs | Net | Stated | Effective | Date | |||||||||||||||||
| Preferred equity loan(2) | $ | 6,800,000 | $ | - | $ | 6,800,000 | 7.00 | % | 7.00 | % | Various | |||||||||||
| City of Canton Loan(3) | 3,425,000 | (4,749 | ) | 3,420,251 | 0.50 | % | 0.53 | % | 7/1/2027 | |||||||||||||
| New Market/SCF | 2,999,989 | - | 2,999,989 | 4.00 | % | 4.00 | % | 12/30/2024 | ||||||||||||||
| JKP Capital Loan(5)(6) | 9,367,890 | - | 9,367,890 | 12.50 | % | 12.50 | % | 3/31/2024 | ||||||||||||||
| MKG DoubleTree Loan(7) | 15,300,000 | - | 15,300,000 | 10.00 | % | 10.00 | % | 9/13/2023 | ||||||||||||||
| Convertible PIPE Notes | 27,868,206 | (6,452,215 | ) | 21,415,991 | 10.00 | % | 24.40 | % | 3/31/2025 | |||||||||||||
| Canton Cooperative Agreement | 2,570,000 | (164,861 | ) | 2,405,139 | 3.85 | % | 5.35 | % | 5/15/2040 | |||||||||||||
| CH Capital Loan(5)(6)(8) | 9,048,146 | - | 9,048,146 | 12.50 | % | 12.50 | % | 3/31/2024 | ||||||||||||||
| Constellation EME #2(4) | 3,049,642 | - | 3,049,642 | 5.93 | % | 5.93 | % | 4/30/2026 | ||||||||||||||
| IRG Split Note(5)(6)(9) | 4,400,702 | - | 4,400,702 | 12.50 | % | 12.50 | % | 3/31/2024 | ||||||||||||||
| JKP Split Note(5)(6)(9) | 4,400,702 | - | 4,400,702 | 12.50 | % | 12.50 | % | 3/31/2024 | ||||||||||||||
| ErieBank Loan | 19,888,626 | (503,601 | ) | 19,385,025 | 9.25 | % | 9.49 | % | 12/15/2034 | |||||||||||||
| PACE Equity Loan | 8,104,871 | (270,576 | ) | 7,834,295 | 6.05 | % | 6.18 | % | 7/31/2047 | |||||||||||||
| PACE Equity CFP | 2,984,572 | (26,252 | ) | 2,958,320 | 6.05 | % | 6.10 | % | 7/31/2046 | |||||||||||||
| CFP Loan(6)(10) | 4,119,019 | - | 4,119,019 | 12.50 | % | 12.50 | % | 3/31/2024 | ||||||||||||||
| Stark County Community Foundation | 5,000,000 | - | 5,000,000 | 6.00 | % | 6.00 | % | 5/31/2029 | ||||||||||||||
| CH Capital Bridge Loan(6) | 10,724,551 | - | 10,724,551 | 12.50 | % | 12.50 | % | 3/31/2024 | ||||||||||||||
| Stadium PACE Loan | 33,387,844 | (4,042,020 | ) | 29,345,824 | 6.00 | % | 6.51 | % | 1/1/2049 | |||||||||||||
| Stark County Infrastructure Loan | 5,000,000 | - | 5,000,000 | 6.00 | % | 6.00 | % | 8/31/2029 | ||||||||||||||
| City of Canton Infrastructure Loan | 5,000,000 | (10,820 | ) | 4,989,180 | 6.00 | % | 6.04 | % | 6/30/2029 | |||||||||||||
| TDD Bonds | 7,425,000 | (661,989 | ) | 6,763,011 | 5.41 | % | 5.78 | % | 12/1/2046 | |||||||||||||
| TIF(11) | 18,100,000 | (1,556,840 | ) | 16,543,160 | 6.375 | % | 6.71 | % | 12/30/2048 | |||||||||||||
| Total | $ | 208,964,760 | $ | (13,693,923 | ) | $ | 195,270,837 | |||||||||||||||
Hall of Fame Resort & Entertainment Company and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Note 4: Notes Payable, net (continued)
Notes payable, net consisted of the following at December 31, 2022:
| Gross | Debt discount and deferred financing costs | Net | ||||||||||
| Preferred equity loan(2) | $ | 3,600,000 | $ | - | $ | 3,600,000 | ||||||
| City of Canton Loan(3) | 3,450,000 | (5,333 | ) | 3,444,667 | ||||||||
| New Market/SCF | 2,999,989 | - | 2,999,989 | |||||||||
| JKP Capital loan(5)(6) | 9,158,711 | - | 9,158,711 | |||||||||
| MKG DoubleTree Loan(7) | 15,300,000 | - | 15,300,000 | |||||||||
| Convertible PIPE Notes | 26,525,360 | (8,097,564 | ) | 18,427,796 | ||||||||
| Canton Cooperative Agreement | 2,620,000 | (168,254 | ) | 2,451,746 | ||||||||
| CH Capital Loan(5)(6)(8) | 8,846,106 | - | 8,846,106 | |||||||||
| Constellation EME #2(4) | 3,536,738 | - | 3,536,738 | |||||||||
| IRG Split Note(5)(6)(9) | 4,302,437 | - | 4,302,437 | |||||||||
| JKP Split Note (5)(6)(9) | 4,302,437 | - | 4,302,437 | |||||||||
| ErieBank Loan | 19,465,282 | (536,106 | ) | 18,929,176 | ||||||||
| PACE Equity Loan | 8,250,966 | (273,031 | ) | 7,977,935 | ||||||||
| PACE Equity CFP | 2,437,578 | (27,586 | ) | 2,409,992 | ||||||||
| CFP Loan(6)(10) | 4,027,045 | - | 4,027,045 | |||||||||
| Stark County Community Foundation | 5,000,000 | - | 5,000,000 | |||||||||
| CH Capital Bridge Loan(6) | 10,485,079 | - | 10,485,079 | |||||||||
| Stadium PACE Loan | 33,387,844 | (4,091,382 | ) | 29,296,462 | ||||||||
| Stark County Infrastructure Loan | 5,000,000 | - | 5,000,000 | |||||||||
| City of Canton Infrastructure Loan | 5,000,000 | (11,572 | ) | 4,988,428 | ||||||||
| TDD Bonds | 7,500,000 | (668,884 | ) | 6,831,116 | ||||||||
| Total | $ | 185,195,572 | $ | (13,879,712 | ) | $ | 171,315,860 | |||||
During the three months ended June 30, 2023 and 2022, the Company recorded amortization of note discounts of $882,240 and $1,122,324, respectively. During the six months ended June 30, 2023 and 2022, the Company recorded amortization of note discounts of $1,738,131 and $2,478,298, respectively.
During the six months ended June 30, 2023 and 2022, the Company recorded paid-in-kind interest of $2,282,040 and $1,681,722, respectively.
See below footnotes for the Company’s notes payable:
| (1) | The Company’s notes payable are subject to certain customary financial and non-financial covenants. As of June 30, 2023 and December 31, 2022 the Company was in compliance with all of its notes payable covenants. Many of the Company’s notes payable are secured by the Company’s developed and undeveloped land and other assets. | |
| (2) | The Company had 3,600 and 1,800 shares of Series A Preferred Stock outstanding and 52,800 and 52,800 shares of Series A Preferred Stock authorized as of June 30, 2023 and December 31, 2022, respectively. The Series A Preferred Stock is required to be redeemed for cash after five years from the date of issuance. | |
| (3) | The Company has the option to extend the loan’s maturity date for three years, to July 1, 2030, if the Company meets certain criteria in terms of the hotel occupancy level and maintaining certain financial ratios. | |
| (4) | The Company also has a sponsorship agreement with Constellation New Energy, Inc., the lender of the Constellation EME #2 note. |
Hall of Fame Resort & Entertainment Company and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Note 4: Notes Payable, net (continued)
| (5) | On March 1, 2022, the Company entered into amendments to certain of its IRG and IRG-affiliated notes payable. See discussion below for the accounting and assumptions used in the transactions. | |
| (6) | On November 7, 2022, the Company entered into amendments to certain of its IRG and IRG-affiliated notes payable. See discussion below for the accounting and assumptions used in the transactions. | |
| (7) | On March 1, 2022, HOF Village Hotel II, LLC, a subsidiary of the Company, entered into an amendment to the MKG DoubleTree Loan with the Company’s director, Stuart Lichter, as guarantor, and ErieBank, a division of CNB Bank, a wholly owned subsidiary of CNB Financial Corporation, as lender, which extended the maturity to September 13, 2023. The Company accounted for this amendment as a modification, and expensed approximately $38,000 in loan modification costs. The Company is currently in the process of refinancing this loan prior to its maturity date. | |
| (8) | On March 1, 2022, CH Capital Lending purchased and acquired, the Company’s $7.4 million Aquarian Mortgage Loan (as thereafter amended and acquired by CH Capital Lending, the “CH Capital Loan”). | |
| (9) | On March 1, 2022, pursuant to an Assignment of Promissory Note, dated March 1, 2022, IRG assigned (a) a one-half (½) interest in the IRG Note to IRG (the “IRG Split Note”) and (b) a one-half (½) interest in the IRG Note to JKP (the “JKP Split Note”). See “IRG Split Note” and “JKP Split Note”, below. | |
| (10) | See “CFP Loan”, below, for a description of the loan along with the valuation assumptions used to value the warrants issued in connection with the loan. | |
| (11) | See “TIF Loan”, below, for a description of the loan. |
Accrued Interest on Notes Payable
As of June 30, 2023 and December 31, 2022, accrued interest on notes payable, were as follows:
| June 30, 2023 | December 31, 2022 | |||||||
| Preferred equity loan | $ | 131,931 | $ | 64,575 | ||||
| City of Canton Loan | 1,586 | 1,555 | ||||||
| New Market/SCF | 60,333 | - | ||||||
| MKG DoubleTree Loan | 273,594 | 121,656 | ||||||
| Canton Cooperative Agreement | 57,739 | 48,708 | ||||||
| CH Capital Loan | 60,036 | 55,328 | ||||||
| IRG Split Note | 28,490 | 28,490 | ||||||
| JKP Split Note | 35,138 | 35,138 | ||||||
| ErieBank Loan | 163,222 | 140,394 | ||||||
| PACE Equity Loan | 211,615 | 213,842 | ||||||
| CFP Loan | 5,245 | 5,245 | ||||||
| Stark County Community Foundation | 150,834 | - | ||||||
| CH Capital Bridge Loan | - | 70,659 | ||||||
| Stadium PACE Loan | 166,939 | 166,939 | ||||||
| TDD Bonds | 13,533 | 13,533 | ||||||
| TIF | - | - | ||||||
| Total | $ | 1,360,235 | $ | 966,062 | ||||
The amounts above were included in “accounts payable and accrued expenses” on the Company’s condensed consolidated balance sheets.
Hall of Fame Resort & Entertainment Company and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Note 4: Notes Payable, net (continued)
TIF Loan
For the Company, the Development Finance Authority of Summit County (“DFA Summit”) offered a private placement of $10,030,000 in taxable development revenue bonds, Series 2018. The bond proceeds are to reimburse the developer for costs of certain public improvements at the Hall of Fame Village, which are eligible uses of tax-incremental funding (“TIF”) proceeds.
The term of the TIF requires the Company to make installment payments through July 31, 2048. The current imputed interest rate is 5.2%, which runs through July 31, 2028. The imputed interest rate then increases to 6.6% through July 31, 2038 and finally increases to 7.7% through the remainder of the TIF. The Company is required to make payments on the TIF semi-annually in June and December each year.
On December 27, 2022, the Company paid $9.7 million to reacquire the TIF bonds related to the Stadium PACE agreement. In January 2023, the DFA Summit issued new bonds as TIF proceeds.
On February 2, 2023, the Company received proceeds from the issuance on such date by Stark County Port Authority (“Port Authority”) of $18,100,000 principal amount Tax Increment Financing (“TIF”) Revenue Bonds, Series 2023 (“2023 Bonds”). Of the $18,100,000 principal amount, approximately $6.8 million was used to reimburse the Company for a portion of the cost of certain roadway improvements within the Hall of Fame Village grounds, approximately $8.6 million was used to pay off the Development Finance Authority of Summit County (“DFA”) Revenue Bonds, Series 2018 ( “2018 Bonds”) that had been acquired by the Company in December 2022 pursuant to a previously disclosed arrangement (such that the Company received the payoff of the 2018 Bonds), approximately $1.2 million was used to pay costs of issuance of the 2023 Bonds, and approximately $.9 million was used to fund a debt service reserve held by The Huntington National Bank (“2023 Bond Trustee”), as trustee for the 2023 Bonds. The maturity date of the 2023 Bonds is December 30, 2048. The interest rate on the 2023 Bonds is 6.375%. Interest payments are due on the 2023 Bonds semi-annually on June 30 and December 30 of each year, commencing June 30, 2023.
In connection with the issuance of the 2023 Bonds by the Port Authority, the Company transferred ownership of a portion of the roadway and related improvements within Hall of Fame Village grounds to the Port Authority. The Company maintains management rights and maintenance obligations with regard to such roadway pursuant to a Maintenance and Management Agreement among the Port Authority, the Company and the Company’s subsidiary, Newco.
Hall of Fame Resort & Entertainment Company and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Note 4: Notes Payable, net (continued)
TIF Loan (continued)
The 2023 Bonds will be repaid by the Port Authority from statutory service payments in lieu of taxes paid by the Company in connection with the Company’s Tom Benson Hall of Fame Stadium, ForeverLawn Sports Complex, Constellation Center for Excellence, Center for Performance, Retail I property, Retail II property, Play Action Plaza and an interior private roadway, net of the portion payable to Canton City School District and Plain Local School District and net of administrative fees of Stark County and the City of Canton, and from minimum service payments levied against those parcels excluding the Stadium and Sports Complex. Net statutory service payments are assigned by the City of Canton to the Port Authority for payment of the 2023 Bonds pursuant to a Cooperative Agreement among the Port Authority, City of Canton, the Company and Newco, and then pledged by the Port Authority to the 2023 Bond Trustee for payment of the 2023 Bonds pursuant to a Trust Account earnings. Indenture between the Port Authority and the 2023 Bond Trustee. Minimum service payments are a lien on the parcels under certain TIF declarations and supplements thereto, and are paid by the Company to the 2023 Bond Trustee.
The Company and Newco are required to make payments (“Developer Shortfall Payments”) to the extent the above described net statutory service payments and minimum service payments actually paid are not sufficient to pay the scheduled debt service on the 2023 Bonds, and entered into a guaranty of payment of minimum service payments under a Minimum Payment Guaranty until certain performance criteria (debt service coverage of 1.05x for the 2023 Bonds for three consecutive years) are met. In addition, a member of the Company’s board of directors, Stuart Lichter, individually and with his trust, guaranteed Developer Shortfall Payments until debt service coverage of 1.0x for the 2023 Bonds for three consecutive years are met.
To the extent statutory service payments and minimum service payments exceed the amounts required for debt service on the 2023 Bonds, the excess paid will first increase and/or restore the 2023 Bonds fund reserve to a maximum of 10% of the original principal amount of the 2023 Bonds (i.e. $1,810,000) and then to redeem the 2023 Bonds, with the amount paid applied to the principal balance of the 2023 Bonds. The 2023 Bonds fund reserve (initially 5% (i.e., $905,000) subject to increase up to 10%) mentioned above will be maintained to be used for payment of debt service and administrative fees if there are insufficient funds generated from the statutory service payments, minimum service payments and Developer Shortfall Payments, and, to the extent unused, make the final 2023 Bonds payment of debt service.
Hall of Fame Resort & Entertainment Company and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Note 4: Notes Payable, net (continued)
November 7, 2022 Refinancing Transactions
On November 7, 2022, the Company and IRG a entered into a letter agreement (the “IRG Letter Agreement”) whereby IRG agreed that IRG’s affiliates and related parties (“IRG Affiliate Lenders”) will provide the Company and its subsidiaries with certain financial support described below in exchange for certain consideration described below. The financial support provided under the IRG Letter Agreement consists of the following (“IRG Financial Support”):
| (a) | Extend the CH Capital Bridge Loan maturity to March 31, 2024 | |
| (b) | Release the first position mortgage lien on the Tom Benson Hall of Fame Stadium | |
| (c) | Provide a $28 million financing commitment for the Company’s Hilton Tapestry Hotel | |
| (d) | Provide a completion guarantee for the Company’s waterpark | |
| (e) | Amend IRG loans to provide an optional one-year extension of maturity option to March 31, 2025 for a one percent fee |
In exchange, the Company agreed in the IRG Letter Agreement to:
| (a) | Issue 90,909 shares to IRG and pay $4,500,000 in cash out of the Oak Street financing (See Note 12) | |
| (b) | Increase interest rate on all IRG loans to 12.5% per annum | |
| (c) | Make all IRG loans convertible at $12.77 per share | |
| (d) | Modify the Series C through Series G Warrants to be exercisable at $12.77 per share |
In the IRG Letter Agreement, IRG and the Company agreed to comply with all federal and state securities laws and Nasdaq listing rules and to insert “blocker” provisions for the above-described re-pricing of the warrants and the conversion provisions, such that the total cumulative number of shares of Common Stock that may be issued to IRG and its affiliated and related parties pursuant to the IRG Letter Agreement may not exceed the requirements of Nasdaq Listing Rule 5635(d) (“Nasdaq 19.99% Cap”), except that such limitation will not apply following approval of the Company’s stockholders. In addition, the provisions of the IRG Letter Agreement are limited by Nasdaq Listing Rule 5635(c), subject to approval of the Company’s stockholders. On June 7, 2023, the stockholders of the Company approved (i) issuance of shares of Common Stock in excess of the Nasdaq 19.99% Cap to IRG Affiliate Lenders with respect to transactions described in the IRG Letter Agreement; and (ii) the issuance to an entity wholly owned by a director of additional shares of Common Stock issuable upon the conversion of certain convertible debt and the exercise of certain warrants described in the IRG Letter Agreement.
Hall of Fame Resort & Entertainment Company and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Note 4: Notes Payable, net (continued)
CFP Loan
On April 27, 2022, Midwest Lender Fund, LLC, a limited liability company wholly owned by our director Stuart Lichter (“MLF”), loaned $4,000,000 (the “CFP Loan”) to HOF Village Center for Performance, LLC (“HOF Village CFP”). Interest accrues on the outstanding balance of the CFP Loan at 6.5% per annum, compounded monthly. The CFP Loan matures on April 30, 2023 or if HOF Village CFP exercises its extension option, April 30, 2024. The CFP Loan is secured by a mortgage encumbering the Center for Performance.
As part of the consideration for making the Loan, on June 8, 2022 following stockholder approval, the Company issued to MLF: (A) 5,681 shares (the “Commitment Fee Shares”) of Common Stock, and (B) a warrant to purchase 5,681 shares of Common Stock (“Series G Warrants”). The exercise price of the Series G Warrants will be $33 per share. The Series G Warrants will become exercisable one year after issuance, subject to certain terms and conditions set forth in the Series G Warrants. Unexercised Series G Warrants will expire five years after issuance. The exercise price of the Series G Warrants will be subject to a weighted-average antidilution adjustment.
On November 7, 2022, the Company further amended the CFP Loan in order to add an extension option that the Company may exercise at any time in order to extend the CFP Loan to March 31, 2025. In exchange for the amendment, the interest rate of the CFP Loan was increased to 12.5% per annum.
Huntington Loan
On September 27, 2022, HOF Village Retail I, LLC and HOF Village Retail II, LLC, subsidiaries of the Company, as borrowers (the “Subsidiary Borrowers”), entered into a loan agreement with The Huntington National Bank, pursuant to which the lender agreed to loan up to $10,000,000 to the Subsidiary Borrowers, which may be drawn upon the Project achieving certain debt service coverage ratios. Under the Note, the outstanding amount of the Loan bears interest at a per annum rate equal to the Term SOFR (as defined in the Note) plus a margin ranging from 2.60% to 3.50% per annum.
The Loan matures on September 27, 2024 (the “Initial Maturity Date”). However, Subsidiary Borrowers have the option (the “Extension Option”) to extend the Initial Maturity Date for an additional thirty six (36) months.
As of June 30, 2023, the Company has not considereddrawn under the loan agreement.
Additionally, in connection with the Huntington Loan, on September 27, 2022, the Company entered into an interest rate swap agreement with a notional amount of $10 million to hedge a portion of the Company’s outstanding Secured Overnight Financing Rate (“SOFR”) debt with a fixed interest rate of 4.0%. The effective date of the interest rate swap is October 1, 2024 and the termination date is September 27, 2027.
Hall of Fame Resort & Entertainment Company and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Note 4: Notes Payable, net (continued)
Future Minimum Principal Payments
The minimum required principal payments on notes payable outstanding as of June 30, 2023 are as follows:
| For the years ending December 31, | Amount | |||
| 2023 (six months) | $ | 15,961,612 | ||
| 2024 | 47,393,467 | |||
| 2025 | 32,220,218 | |||
| 2026 | 3,628,667 | |||
| 2027 | 7,465,957 | |||
| Thereafter | 102,294,839 | |||
| Total Gross Principal Payments | $ | 208,964,760 | ||
| Less: Debt discount and deferred financing costs | (13,693,923 | ) | ||
| Total Net Principal Payments | $ | 195,270,837 | ||
Hall of Fame Resort & Entertainment Company and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Note 5: Stockholders’ Equity
Reverse Stock Split
On September 29, 2022, our stockholders approved amendments to our Amended and Restated Certificate of Incorporation to effect a reverse stock split of warrants soldour shares of common stock, and our Board approved a final reverse stock split ratio of 1-for-22. The reverse stock split became effective on December 27, 2022. On the effective date, every 22 shares of issued and outstanding common stock were combined and converted into one issued and outstanding share of common stock. Fractional shares were cancelled, and stockholders received cash in lieu thereof in the Initial Public Offering and private placement to purchase 17,400,000aggregate amount of $118,344.
The number of authorized shares of Class A common stock inand the calculation of diluted losspar value per share sinceof common stock remains unchanged. A proportionate adjustment was also made to the exercisemaximum number of shares of common stock issuable under the warrants is contingent upon the occurrenceHall of future events. Fame Resort & Entertainment Company Amended 2020 Omnibus Incentive Plan (the “Plan”).
As a result, diluted lossthe number of shares and income (loss) per common share isdisclosed throughout this Report on Form 10-Q have been retrospectively adjusted to reflect the same as basic loss per common share for the periods.reverse stock split.
Where applicable, the disclosures below have been adjusted to reflect the 1-for-22 reverse stock split effective December 27, 2022.
Authorized Capital
On November 3, 2020, the Company’s stockholders approved an amendment to the Company’s charter to increase the authorized shares of Common Stock from 100,000,000 to 300,000,000. Consequently, the Company’s charter allows the Company to issue up to 300,000,000 shares of Common Stock and to issue and designate its rights, without stockholder approval, of up to 5,000,000 shares of preferred stock, par value $0.0001.
Series A Preferred Stock Designation
On October 8, 2020, the Company filed a Certificate of Designations with the Secretary of State of the State of Delaware to establish preferences, limitations, and relative rights of the Series A Preferred Stock. The number of authorized shares of Series A Preferred Stock is 52,800. The Series A Preferred Stock is mandatorily redeemable, and therefore classified as a liability on the Company’s condensed consolidated balance sheets within Notes Payable, net.
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 5: Stockholders’ Equity (continued)
2020 Omnibus Incentive Plan
ReconciliationOn July 1, 2020, the Company’s omnibus incentive plan (the “2020 Omnibus Incentive Plan”) became effective immediately. The 2020 Omnibus Incentive Plan was previously approved by the Company’s stockholders and Board of Net Loss perDirectors. Subject to adjustment, the maximum number of shares of Common ShareStock authorized for issuance under the 2020 Omnibus Incentive Plan was 82,397 shares. On June 2, 2021, the Company held its 2021 Annual Meeting whereby the Company’s stockholders approved an amendment to the 2020 Omnibus Incentive Plan to increase by 181,818 the number of shares of Common Stock, that will be available for issuance under the 2020 Omnibus Incentive Plan. On June 7, 2023, the Company’s stockholders further approved an amendment to increase by 275,000 the number of shares available under the 2020 Omnibus Incentive Plan. As of June 30, 2023, 272,264 shares remained available for issuance under the 2020 Omnibus Incentive Plan.
Equity Distribution Agreement
On September 30, 2021, the Company entered into an Equity Distribution Agreement with Wedbush Securities Inc. and Maxim Group LLC with respect to an at-the-market offering program under which the Company may, from time to time, offer and sell shares of the Company’s Common Stock having an aggregate offering price of up to $50 million. From January 1 through June 30, 2023, there were 4,878 shares sold. The remaining availability under the Equity Distribution Agreement as of June 30, 2023 was approximately $25.9 million.
Issuance of Restricted Stock Awards
The Company’s net income is adjustedactivity in restricted Common Stock was as follows for the portionsix months ended June 30, 2023:
| Number of shares | Weighted average grant date fair value | |||||||
| Non–vested at January 1, 2023 | - | $ | - | |||||
| Granted | 11,088 | $ | 8.16 | |||||
| Vested | (11,088 | ) | $ | 8.16 | ||||
| Non–vested at June 30, 2023 | - | $ | ||||||
For the three months ended June 30, 2023 and 2022, stock-based compensation related to restricted stock awards was $46,272 and $720,703, respectively. For the six months ended June 30, 2023 and 2022, stock-based compensation related to restricted stock awards was $96,929 and $1,453,460, respectively. Stock-based compensation related to restricted stock awards was included as a component of income that is attributable to common stock subject to possible redemption, as these shares only participate“Operating expenses” in the incomecondensed consolidated statements of operations. As of June 30, 2023, unamortized stock-based compensation costs related to restricted share arrangements were $0.
Hall of Fame Resort & Entertainment Company and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Note 5: Stockholders’ Equity (continued)
Issuance of Restricted Stock Units
During the six months ended June 30, 2023, the Company granted an aggregate of 108,571 Restricted Stock Units (“RSUs”) to its employees and directors, of which 102,539 were granted under the 2020 Omnibus Incentive Plan and 6,032 were granted as inducement awards. The RSUs were valued at the value of the Trust AccountCompany’s Common Stock on the date of grant, which approximated $14.17 per share for these awards. The RSUs granted to employees vest one third on the first anniversary of their grant, one third on the second anniversary of their grant, and notone third on the lossesthird anniversary of their grant. The RSUs granted to directors vest one year from the Company. Accordingly, basic and diluted net loss per common share is calculated as follows:
| 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 | ) | |
Concentrationdate of credit risk
Financial instruments that potentially subject the Company to concentration of credit risk consist of a cash account in a financial institution which, at times may exceed the Federal depository insurance coverage of $250,000. At March 31, 2018, the Company had not experienced losses on this account and management believes the Company is not exposed to significant risks on such account.
Fair value of financial instrumentsgrant.
The Company’s activity in RSUs was as follows for the six months ended June 30, 2023:
| Number of shares | Weighted average grant date fair value | |||||||
| Non–vested at January 1, 2023 | 134,799 | $ | 28.74 | |||||
| Granted | 108,571 | $ | 14.17 | |||||
| Vested | (70,797 | ) | $ | 27.31 | ||||
| Forfeited | (8,651 | ) | $ | 14.80 | ||||
| Non–vested at June 30, 2023 | 163,922 | $ | 20.44 | |||||
For the three months ended June 30, 2023 and 2022, the Company recorded $742,665 and $586,547, respectively, in stock-based compensation expense related to restricted stock units. For the six months ended June 30, 2023 and 2022, the Company recorded $1,343,041 and $1,088,959, respectively, in stock-based compensation expense related to restricted stock units. Stock-based compensation expense is a component of “Operating expenses” in the condensed consolidated statements of operations. As of June 30, 2023, unamortized stock-based compensation costs related to restricted stock units were $5,327,159 and will be recognized over a weighted average period of 1.57 years.
Warrants
The Company’s warrant activity was as follows for the six months ended June 30, 2023:
| Number of Shares | Weighted Average Exercise Price (USD) | Weighted Average Contractual Life (years) | Intrinsic Value (USD) | |||||||||||||
| Outstanding - January 1, 2023 | 2,003,649 | $ | 149.09 | 2.86 | $ | - | ||||||||||
| Outstanding – June 30, 2023 | 2,003,649 | $ | 149.09 | 2.36 | $ | - | ||||||||||
| Exercisable – June 30, 2023 | 2,003,649 | $ | 149.09 | 2.36 | $ | - | ||||||||||
Hall of Fame Resort & Entertainment Company and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Note 5: Stockholders’ Equity (continued)
Amended and Restated Series C Warrants
On March 1, 2022, in connection with the amendment to the IRG Split Note (as described in Note 4), the Company amended its Series C Warrants to extend the term of the Series C Warrants to March 1, 2027. The exercise price of $30.80 per share was not amended, but the amendments subject the exercise price to a weighted-average antidilution adjustment. The amendments also remove certain provisions regarding fundamental transactions, which subsequently allowed the Series C Warrants to be derecognized as a liability and classified as equity.
The Company accounted for this modification as a cost of the IRG Split Note, whereby the Company calculated the incremental fair value of the Company’s assetsSeries C Warrants and liabilities, which qualifyrecorded them as financial instruments under ASC Topic 820, “Fair Value Measurements and Disclosures,” approximatesa discount against the carrying amounts represented in the accompanying financial statements, primarily due to their short-term nature.IRG Split Note.
Recently issued accounting standardsOn November 7, 2022, the Company further amended the Series C Warrants to reduce the exercise price to $12.77 per share as part of the IRG Letter Agreement. See Note 4 for more information.
Management does not believe that any recently issued, but not yet effective, accounting pronouncements, if currently adopted, would have a material effect onThe following assumptions were used to calculate the Company’s condensed financial statements.fair value of Series C Warrants in connection with the modifications:
| Original Series C Warrants | March 1, 2022 Modification | November 7, 2022 Modification | ||||||||||
| Term (years) | 3.8 | 5.0 | 3.1 | |||||||||
| Stock price | $ | 22.22 | $ | 22.22 | $ | 14.52 | ||||||
| Exercise price | $ | 30.80 | $ | 30.80 | $ | 12.77 | ||||||
| Dividend yield | 0.0 | % | 0.0 | % | 0.0 | % | ||||||
| Expected volatility | 54.7 | % | 50.8 | % | 63.9 | % | ||||||
| Risk free interest rate | 1.5 | % | 1.5 | % | 4.8 | % | ||||||
| Number of shares | 455,867 | 455,867 | 455,867 | |||||||||
| Aggregate fair value | $ | 3,336,000 | $ | 3,648,000 | $ | 3,230,000 | ||||||
Hall of Fame Resort & Entertainment Company and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Note 5: Stockholders’ Equity (continued)
Amended and Restated Series D Warrants issue to CH Capital Lending
NOTE 3. INITIAL PUBLIC OFFERINGOn March 1, 2022, in connection with the amendment to the CH Capital Loan (as described in Note 4), the Company amended the Series D Warrants issued to CH Capital Lending to extend the term of such Series D Warrants to March 1, 2027. The exercise price of $151.80 per share was not amended, but the amendments subject the exercise price to a weighted-average antidilution adjustment.
On November 7, 2022, the Company further amended the Series C Warrants to reduce the exercise price to $12.77 per share as part of the IRG Letter Agreement. See Note 4 for more information.
The following assumptions were used to calculate the fair value of Series D Warrants in connection with the modifications:
| Original Series D Warrants | March 1, 2022 Modification | November 7, 2022 Modification | ||||||||||
| Term (years) | 3.8 | 3.8 | 3.1 | |||||||||
| Stock price | $ | 22.22 | $ | 22.22 | $ | 14.52 | ||||||
| Exercise price | $ | 151.80 | $ | 151.80 | $ | 12.77 | ||||||
| Dividend yield | 0.0 | % | 0.0 | % | 0.0 | % | ||||||
| Expected volatility | 63.5 | % | 50.8 | % | 63.9 | % | ||||||
| Risk free interest rate | 1.3 | % | 1.6 | % | 4.8 | % | ||||||
| Number of shares | 111,321 | 111,321 | 111,321 | |||||||||
| Aggregate fair value | $ | 50,000 | $ | 138,000 | $ | 910,000 | ||||||
7.00% Series A Cumulative Redeemable Preferred Stock
On January 30, 2018, pursuant to the Initial Public Offering,12, 2023, the Company sold 12,500,000 unitsissued to ADC LCR Hall of Fame Manager II, LLC (the “Series A Preferred Investor”) 1,600 shares of the Company’s 7.00% Series A Cumulative Redeemable Preferred Stock, par value $0.0001 per share (“Series A Preferred Stock”), at a purchase price of $10.00$1,000 per Unit. Each Unit consists of one share of Class A common stock and one warrant (“Public Warrant”). Each Public Warrant entitles the holder to purchase one share of Class A common stock at an exercise price of $11.50 (see Note 7).
NOTE 4. PRIVATE PLACEMENT
Simultaneously with the Initial Public Offering, the Sponsor purchased an aggregate of 4,900,000 Private Placement Warrants at $1.00 per Private Placement Warrant, for an aggregate purchase price of $4,900,000. Each Private Placement Warrant is exercisable to purchase one share of Class A common stock at an exercise price of $11.50. The proceeds from the Private Placement Warrants were added to the proceeds from the Initial Public Offering held in the Trust Account. 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 to the requirements of applicable law) and the Private Placement Warrants will expire worthless. There will be no redemption rights or liquidating distributions from 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 exercise of the Private Placement Warrants are not transferable, assignable or saleable until 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 by the Company and exercisable by such holders on the same basis as the Public Warrants.
GORDON POINTE ACQUISITION CORP.
NOTES TO FINANCIAL STATEMENTS
March 31, 2018
(Unaudited)
NOTE 5. RELATED PARTY TRANSACTIONS
Founder Shares
$1,600,000. On April 12, 2017,January 23, 2023, the Company issued an aggregate of 3,593,750to the Series A Preferred Investor 800 additional shares of Class F common stock to the Sponsor (“Founder Shares”)Company’s Series A Preferred Stock at a price of $1,000 per share for an aggregate purchase price of $25,000.$800,000. Additionally, on May 2, 2023, the Company issued to the Series A Preferred Investor 800 shares of the Company’s 7.00% Series A Cumulative Redeemable Preferred Stock, par value $0.0001 per share (“Series A Preferred Stock”), at a price of $1,000 per share for an aggregate purchase price of $800,000. The Founder Shares will automatically convertCompany paid the Series A Preferred Investor an origination fee of 2% of the aggregate purchase price for each issuance. The issuance and sale of the shares to the Series A Preferred Investor is exempt from registration pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”). The Series A Preferred Stock is not convertible into ClassCommon Stock. The Series A Preferred Investor has represented to the Company that it is an “accredited investor” as defined in Rule 501 of the Securities Act and that the shares are being acquired for investment purposes and not with a view to, or for sale in connection with, any distribution thereof.
Hall of Fame Resort & Entertainment Company and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Note 5: Stockholders’ Equity (continued)
Compliance with Nasdaq Minimum Bid Requirement
As previously reported, on May 24, 2022, the Company received a deficiency letter from the Listing Qualifications Department (the “Staff”) of the Nasdaq Stock Market (“Nasdaq”) notifying the Company that for the last 30 consecutive business days the bid price for the Company’s common stock, uponpar value $0.0001 per share (“Common Stock”), had closed below the consummationminimum requirement for continued inclusion on the Nasdaq Capital Market pursuant to Nasdaq Listing Rule 5550(a)(2) (the “Minimum Bid Requirement”).
On January 11, 2023, the Company received written notice from the Staff of a Business Combination on a one-for-one basis,Nasdaq informing the Company that it has regained compliance with the Minimum Bid Requirement because Nasdaq has determined that for 10 consecutive business days, the closing bid price of the Company’s Common Stock was at or above the Minimum Bid Requirement. Accordingly, Nasdaq has advised that the matter is now closed.
Hall of Fame Resort & Entertainment Company 2023 Inducement Plan
On January 24, 2023, the Company’s board of directors adopted the Hall of Fame Resort & Entertainment Company 2023 Inducement Plan (the “Inducement Plan”). The Inducement Plan is not subject to adjustmentsstockholder approval. The aggregate number of shares of Common Stock that may be issued or transferred pursuant to awards covered by the Plan (including existing inducement awards amended to be subject to the Inducement Plan) is 110,000. Awards covered by the Inducement Plan include only inducement grants under Nasdaq Listing Rule 5635(c)(4).
Note 6: Sponsorship Revenue and Associated Commitments
Johnson Controls, Inc.
On July 2, 2020, the Company entered into an Amended and Restated Sponsorship and Naming Rights Agreement (the “Naming Rights Agreement”) among Newco, PFHOF and Johnson Controls, Inc. (“JCI” or “Johnson Controls”), that amended and restated the Sponsorship and Naming Rights Agreement, dated as describedof 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 Note 7. The 3,593,750 Founder Shares includedone agreement year to be $750,000; and (iii) renamed the “Johnson Controls Hall of Fame Village” to “Hall of Fame Village”. This is a prospective change, which the Company reflected beginning in the third quarter of 2020.
JCI has a right to terminate the Naming Rights Agreement if the Company does not provide evidence to JCI by October 31, 2021 that it has secured sufficient debt and equity financing to complete Phase II, or if Phase II is not open for business by January 2, 2024, in each case subject to day-for-day extension due to force majeure and a notice and cure period. In addition, under the Naming Rights Agreement JCI’s obligation to make sponsorship payments to the Company may be suspended commencing on December 31, 2020, if the Company has not provided evidence reasonably satisfactory to JCI on or before December 31, 2020, subject to day-for-day extension due to force majeure, that the Company has secured sufficient debt and equity financing to complete Phase II.
Additionally, on October 9, 2020, Newco, entered into a Technology as a Service Agreement (the “TAAS Agreement”) with JCI. Pursuant to the TAAS Agreement, JCI will provide certain services related to the construction and development of the Hall of Fame Village (the “Project”), including, but not limited to, (i) design assist consulting, equipment sales and turn-key installation services in respect of specified systems to be constructed as part of Phase 2 and Phase 3 of the Project and (ii) maintenance and lifecycle services in respect of certain systems constructed as part of Phase 1, and to be constructed as part of Phase 2 and Phase 3, of the Project. Under the terms of the TAAS Agreement, Newco has agreed to pay JCI up to an aggregate of up to 468,750 shares subject to forfeitureapproximately $217 million for services rendered by JCI over the Sponsor to 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%term of the Company’s issued and outstanding 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 outstanding as of March 31, 2018.TAAS Agreement.
The Initial Stockholders have agreed notTAAS 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, transfer, assign or selland 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.
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)
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 their Founder Shares untilJCI’s rights and remedies in respect thereof, including reasonable attorney fees.
Also on May 10, 2022, the earlierCompany received from JCI a notice of (i) one year aftertermination (“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 consummationNaming 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 a Business Combination,its covenants and agreements, which require Newco to provide evidence reasonably satisfactory to JCI on or (ii) the date on which the last sales price of the Company’s common stock equals or exceeds $12.00 per share (as adjusted for stock splits, stock dividends, reorganizationsbefore October 31, 2021, subject to day-for-day extension due to force majeure, that Newco has secured sufficient debt 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 subsequentequity financing to a Business Combination, the Company consummates a subsequent liquidation, merger, stock exchange, reorganization or other similar transaction which results in all of the Company’s stockholders having the right to exchange their common stock for cash, securities or other property.
Related Party Advances
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 Agreementcomplete 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 Company anticipates that resolution of the dispute regarding the Naming Rights Agreement will include the TAAS Agreement. The parties participated in mediation in November 2022, but were unable to reach a resolution. On January 24, 2023, Newco filed a demand for arbitration, asserting claims against JCI for breach of contract, breach of the implied duty of good faith and fair dealing, and unjust enrichment. On February 16, 2023, JCI filed its response, generally denying Newco’s allegations and asserting counterclaims for breach of contract, breach of the implied covenant of good faith and fair dealing, and unjust enrichment. On March 9, 2023, Newco filed its response to JCI’s counterclaims, generally denying JCI’s allegations. A panel of three arbitrators has been constituted to hear and determine the dispute. The Company presently anticipates that the arbitration hearing will be held during the fourth quarter of 2023 in Ohio. The ultimate outcome of this dispute cannot presently be determined. However, in management’s opinion, the likelihood of a material adverse outcome is remote. Accordingly, adjustments, if any, that might result from the resolution of this matter have not been reflected in the accompanying condensed consolidated financial statements. During the year ended December 31, 2022, the Company suspended its revenue recognition until the dispute is resolved and has recorded an allowance against the amounts due as of June 30, 2023 and December 31, 2022 in the amount of $7,187,500 and $4,812,500, respectively. The balances due under the Naming Rights Agreement as of June 30, 2023 and December 31, 2022 amounted to $8,697,917 and $6,635,417 respectively.
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, the ability to be the exclusive provider of a certain category of product, and advertising on our website and other benefits as detailed in the agreements.
As of June 30, 2023, scheduled future cash to be received under the agreements, excluding the Johnson Controls Naming Rights Agreement, is as follows:
Year ending December 31,
| 2023 (six months) | $ | 1,079,250 | ||
| 2024 | 2,426,265 | |||
| 2025 | 2,287,265 | |||
| 2026 | 2,017,265 | |||
| 2027 | 1,757,265 | |||
| Thereafter | 4,514,528 | |||
| Total | $ | 14,081,838 |
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, 2023 and 2022, the Company recognized $691,236 and $452,772 of net sponsorship revenue, respectively, and for the six months ended June 30, 2023 and 2022, $1,364,711 and $1,272,062, respectively.
Note 7: Other Commitments
Management Agreement with Crestline Hotels & Resorts
On October 22, 2019, the Company entered into ana management agreement whereby, commencing on January 30, 2018 throughwith Crestline Hotels & Resorts (“Crestline”). The Company appointed and engaged Crestline as the earlierCompany’s exclusive agent to supervise, direct, and control management and operation of the consummationDoubleTree Canton Downtown Hotel. In consideration of a Business Combination or the Company’s liquidation,services performed by Crestline, the Company will pay an affiliateagreed to the greater of: 2.75% of gross revenues (which increased from 2% in the beginning of the Sponsor a monthly feeagreement) or $10,000 per month in base management fees and other operating expenses. The agreement will be terminated on the fifth anniversary of $10,000 for office space, utilities and administrative support.the commencement date, or October 22, 2024. For the three months ended March 31, 2018,June 30, 2023 and 2022, the Company incurred $20,000$55,251 and $32,844, respectively in management fees, and for these services.the six months ended June 30, 2023 and 2022, $100,751 and $62,844, respectively.
Hall of Fame Resort & Entertainment Company and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Note 7: Other Commitments (continued)
Constellation EME Express Equipment Services Program
Related Party LoansOn February 1, 2021, the Company entered into a contract with Constellation whereby Constellation will sell and/or deliver materials and equipment purchased by the Company. The Company is required to provide $2,000,000 to an escrow account held by Constellation, representing adequate assurance of future performance. Constellation will invoice the Company in 60 monthly installments, which began in April 2021 for $103,095. Additionally, the Company has one note payable with Constellation. See Note 4 for more information.
In orderSports Betting Agreements
On July 14, 2022, Newco entered into an Online Market Access Agreement with Instabet, Inc. doing business as betr (“BETR”), pursuant to finance transaction costswhich BETR will serve as a Mobile Management Services Provider (as defined under applicable Ohio gaming law) wherein BETR will host, operate and support a branded online sports betting service in connectionOhio, subject to procurement of all necessary licenses. The initial term of the Online Market Access Agreement is ten years.
As part of this agreement, Newco will receive a limited equity interest in BETR and certain revenue sharing, along with the opportunity for sponsorship and cross-marketing. The limited equity interest was in the form of penny warrants valued at $4,000,000. The grant date value of these warrants were recorded as deferred revenue (within Other Liabilities on the condensed consolidated Balance Sheets) and will be amortized over the life of the sports betting agreement.
On November 2, 2022, the Company secured conditional approval from the state for mobile and retail sports betting. The Ohio Casino Control Commission provided the required authorization for HOFV to gain licensing for a Business Combination,physical sports betting operation – called a sportsbook – as well as an online sports betting platform, under Ohio’s sports betting law HB29. As of January 1, 2023, sports betting is legal in Ohio for anyone in the Sponsor,state that is of legal betting age. The conditional approval requires that the Company accept bets under both the mobile and retail sports books prior to December 31, 2023. The Company satisfied that condition for the mobile sports book. However, the Company does not currently have a sports betting partner for its retail sports book. If the Company does not take an in-person sports bet through an approved retail partner at its designated facility by December 31, 2023, or otherwise obtain a waiver to this requirement, then the Ohio Casino Control Commission may take administrative actions to revoke 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 Compensationretail license.
During the quarterthree and six months ended March 31, 2018,June 30, 2023, the Company agreedrecognized revenue of $262,500 related 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.online sports betting agreement.
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 7: Other Commitments (continued)
Other Liabilities
Registration RightsOther liabilities consisted of the following at June 30, 2023 and December 31, 2022:
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.
| June 30, 2023 | December 31, 2022 | |||||||
| Activation fund reserves | $ | 3,652,119 | $ | 3,511,185 | ||||
| Deferred revenue | 9,276,086 | 6,867,970 | ||||||
| Deposits and other liabilities | 290,637 | 300,549 | ||||||
| Total | $ | 13,218,842 | $ | 10,679,704 | ||||
Underwriters AgreementOther Commitments
The underwriterCompany has other commitments, as disclosed in Notes 6, 8 and 9 within these condensed consolidated footnotes.
Note 8: Contingencies
During the normal course of its business, the Company is entitledsubject to a deferred fee of threeoccasional legal proceedings and one-half percent (3.5%) of the gross proceeds of the Initial Public Offering,claims. The Company does not have any pending litigation that, separately 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, in connection with the closing of the Initial Public Offering, the Company became obligated to pay its attorneys a deferred legal fee of $72,500 upon consummation of a Business Combination. Accordingly, the Company recorded $72,500 as deferred legal payableaggregate, would, in the accompanying condensed balance sheet at March 31, 2018.opinion of management, have a material adverse effect on its results of operations, financial condition, or cash flows.
NOTE 7. STOCKHOLDERS’ EQUITYNote 9: Related-Party Transactions
Preferred Stock — The Company is authorizedDue to issue 5,000,000 sharesAffiliates
Due to affiliates consisted of preferred stock with a par value of $0.0001 per share with such designation, rights and preferences as may be determined from time to time by the Company’s Board of Directors. At March 31, 2018following at June 30, 2023 and December 31, 2017, there were no shares2022:
| June 30, 2023 | December 31, 2022 | |||||||
| Due to IRG Member | $ | - | $ | 345,253 | ||||
| Due to PFHOF | 399,318 | 510,232 | ||||||
| Total | $ | 399,318 | $ | 855,485 | ||||
IRG Canton Village Member, LLC, a member of preferred stock issued or outstanding.HOF Village, LLC controlled by our director Stuart Lichter (the “IRG Member”) and an affiliate, provides certain supporting services to the Company. As noted in the Operating Agreement of HOF Village, LLC, an affiliate of the IRG Member, IRG Canton Village Manager, LLC, the manager of HOF Village, LLC controlled by our director Stuart Lichter, may earn a master developer fee calculated as 4.0% of development costs incurred for the Hall of Fame Village, including, but not limited to site assembly, construction supervision, and project financing. These development costs incurred are netted against certain costs incurred for general project management.
The due to related party amounts in the table above are non-interest bearing advances from an affiliate of IRG Member due on demand.
The amounts above due to PFHOF relate to advances to and from PFHOF, including costs for onsite sponsorship activation, sponsorship sales support, shared services, event tickets, and expense reimbursements.
Hall of Fame Resort & Entertainment Company and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Note 9: Related-Party Transactions (continued)
Global License Agreement
Class A Common Stock—
Effective April 8, 2022, Newco and PFHOF, entered into a Global License Agreement (the “Global License Agreement”). The Global License Agreement consolidates and replaces the First Amended and Restated License Agreement, the Amended and Restated Media License Agreement, and the Branding Agreement the parties had previously entered into. The Global License Agreement sets forth the terms under which PFHOF licenses certain marks and works to Newco and its affiliates to exploit existing PFHOF works and to create new works. The Global License Agreement grants Newco and its affiliates an exclusive right and license to use the PFHOF marks in conjunction with theme-based entertainment and attractions within the City of Canton, Ohio; youth sports programs, subject to certain exclusions; e-gaming and video games; and sports betting. The Global License Agreement also grants Newco and its affiliates a non-exclusive license to use the PFHOF marks and works in other areas of use, with a right of first refusal, subject to specified exclusions. The Global License Agreement acknowledges the existence of agreements in effect between PFHOF and certain third parties that provide for certain restrictions on the rights of PFHOF, which affects the rights that can be granted to Newco and its affiliates. These restrictions include, but are not limited to, such third parties having co-exclusive rights to exploit content based on the PFHOF enshrinement ceremonies and other enshrinement events. The Global License Agreement requires Newco to pay PFHOF an annual license fee of $900,000 in the first contract year, inclusive of calendar years 2021 and 2022; an annual license fee of $600,000 in each of contract years two through six; and an annual license fee of $750,000 per year starting in contract year seven through the end of the initial term. The Global License Agreement also provides for an additional license royalty payment by Newco to PFHOF for certain usage above specified financial thresholds, as well as a commitment to support PFHOF museum attendance through Newco’s and its affiliates’ ticket sales for certain concerts and youth sports tournaments. The Global License Agreement has an initial term through December 31, 2036, subject to automatic renewal for successive five-year terms, unless timely notice of non-renewal is provided by either party.
The future minimum payments under this agreement as of June 30, 2023 are as follows:
| For the years ending December 31, | Amount | |||
| 2023 (six months) | $ | 300,000 | ||
| 2024 | 600,000 | |||
| 2025 | 600,000 | |||
| 2026 | 600,000 | |||
| 2027 | 600,000 | |||
| Thereafter | 6,750,000 | |||
| Total Gross Principal Payments | $ | 9,450,000 | ||
During the three months ended June 30, 2023 and 2022, the Company paid $0 and $318,750 of the annual license fee, respectively, and for the six months ended June 30, 2023 and 2022, $300,000 and $318,750, respectively.
Hall of Fame Resort & Entertainment Company and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Note 9: Related-Party Transactions (continued)
Hotel Construction Loan Commitment Letter
On November 3, 2022, the Company entered into a Commitment Letter (the “Hotel Construction Loan Commitment Letter”), by and among the Company, as guarantor, HOF Village Hotel WP, LLC (“Hotel”), an indirect wholly owned subsidiary of the Company, as borrower, and Industrial Realty Group, Inc. (“IRGInc”), as lender. Stuart Lichter, a director of the Company, is President and Chairman of the Board of Industrial Realty Group, LLC (“IRGLLC”). Pursuant to the terms of the Hotel Construction Loan Commitment Letter, IRGInc committed to provide, or to arrange for one of IRGInc’s affiliates to provide, a loan of $28,000,000 (the “Hotel Construction Loan”) to finance a portion of Hotel’s costs and expenses in connection with the ground-up development of a 180-room family hotel (the “Hotel Project”) on approximately 1.64 acres of land located in the Hall of Fame Village, Canton, Ohio (the “Hotel Property”), adjacent to the Waterpark Property. The commitment to provide the Hotel Construction Loan is subject to certain conditions, including the execution and delivery of definitive documentation with respect to the Hotel Construction Loan.
The Hotel Construction Loan will have a two-year term with one option to extend for twelve months, subject to standard extension conditions. The collateral for the Hotel Construction Loan will include, without limitation: (a) a first priority perfected mortgage encumbering the Hotel Property; (b) a first priority perfected assignment of leases and rents with respect to the Hotel Property; (c) a first priority perfected assignment of all permits, licenses, entitlements, approvals, and contracts with respect to the Hotel Property; (d) UCC-1 financing statements (all personal property, fixture filing and accounts and reserves); (e) equity pledge; and (f) all other agreements and assurances customary in similar financings by IRGInc. The Hotel Construction Loan will bear interest at a variable rate per annum equal to the one-month Term SOFR plus 6%, subject to a SOFR floor equal to the greater of (i) 4% and (ii) prevailing SOFR at closing of the Hotel Construction Loan. Payments of interest only will be made during the initial two-year term, with a payments of principal and interest based on a 25-year amortization during the extension term, if applicable. Hotel will pay 1% of the Hotel Construction Loan amount as an origination fee, payable in full at closing. The Hotel Construction Loan definitive documentation will have representations, warranties and events of default usual and customary for such type of loan.
IRG Financial Support and Consideration
On November 7, 2022, the Company entered into a letter agreement (the “IRG Letter Agreement”) with IRGLLC, pursuant to which IRGLLC agreed that IRGLLC and IRGLLC’s affiliates and related parties will provide the Company and its subsidiaries with certain financial support described below in exchange for certain consideration described below.
The financial support provided under the IRG Letter Agreement consists of the following (the “IRG Financial Support”):
Waterpark Construction Financing Facilitation. IRGLLC agreed that its affiliate CH Capital Lending, LLC (“CHCL”), would help facilitate the closing of financing with Oak Street with regard to construction of the Waterpark Project, by among other things, releasing CHCL’s first mortgage lien on the Stadium Leasehold Interests and pledge of membership interests in HOFV Stadium. In addition, IRGLLC agreed to provide a completion guaranty to facilitate other needed financing for the Waterpark Project, as required.
Hall of Fame Resort & Entertainment Company and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Note 9: Related-Party Transactions (continued)
IRG Financial Support and Consideration (continued)
Extension of CHCL Bridge Loan. IRGLLC agreed that CHCL would extend to March 31, 2024 the maturity of the promissory note dated June 16, 2022, issued by the Company, HOF Village Retail I, LLC and HOF Village Retail II, LLC, as borrowers, to CHCL, as lender (the “Bridge Loan”).
Provide One Year Extension Option for All IRG Affiliate Lender Loans. All loans from affiliates and related parties of IRGLLC (“IRG Affiliate Lenders”) will be amended to provide for an optional one-year extension of their maturity until March 31, 2025 for a one percent extension fee, which is payable if and when an IRG Affiliate Lender loan is extended. The IRG Affiliate Lender loans consist of the following: (i) Bridge Loan, with an existing modified maturity date of March 31, 2024; (ii) the term loan, payable to CHCL, with an existing maturity of March 31, 2024; (iii) the first amended and restated promissory note, dated March 1, 2022, payable to IRG, LLC, with an existing maturity of March 31, 2024; (iv) the first amended and restated promissory note, dated March 1, 2022, payable to JKP Financial, LLC, with an existing maturity of March 31, 2024; (v) the Secured Cognovit Promissory Note, dated as of June 19, 2020, assigned June 30, 2020 and amended December 1, 2020 and March 1, 2022, payable to JKP Financial, LLC, with an existing maturity of March 31, 2024; and (vi) the promissory note, dated April 27, 2022, payable to Midwest Lender Fund, LLC (“MLF”), with an existing maturity of April 30, 2023, and with an option to extend the maturity until March 31, 2024.
Tapestry Hotel Construction Financing Commitment Letter. IRGLLC agreed to provide a commitment for financing the Hotel Project, as set forth in the Hotel Construction Loan Commitment Letter.
In consideration of the IRG Financial Support to be received by the Company and its subsidiaries, the Company agreed in the IRG Letter Agreement to provide the following consideration to IRGLLC and the IRG Affiliate Lenders:
The Company is authorizedagreed to make a payment of $4,500,000 as a fee for providing the completion guaranty and other IRG Financial Support described above, payable to CHCL to be held in trust for the IRG Affiliate Lenders, to be allocated as the IRG Affiliate Lenders shall determine. The Company also agreed to issue 40,000,00090,909 shares of common stock, with a par value of $0.0001 per share. Holdersshare (“Common Stock”) to the IRG Affiliate Lenders, to be allocated as the IRG Affiliate Lenders shall determine, in reliance upon an exemption from the registration requirements of the Securities Act of 1933, as amended, pursuant to Section 4(a)(2) thereof, as a transaction by an issuer not involving any public offering.
The Company agreed to modify the IRG Affiliate Lender loans as follows: (i) all IRG Affiliate Lender loans will bear interest at 12.5% per annum, compounded monthly, with payment required monthly at 8% per annum, and with the remaining interest accrued and deferred until maturity; (ii) the price at which the principal and accumulated and unpaid interest under the IRG Affiliated Lender loans is convertible into shares of Common Stock will be reset to a price equal to $12.77 per share; (iii) the Company and its subsidiaries will record a blanket junior mortgage on all real estate owned or leased by the Company and its subsidiaries, whether fee or leasehold estates, other than those parcels for which existing lenders prohibit junior financing; (iv) the Company agreed to acknowledge an existing pledge of the Company’s Class A common stock are entitled100% membership interest in HOFV Newco and reflect that such pledge secures all amounts due under the IRG Affiliate Lender Loans; (v) all IRG Affiliate Lender loans will be cross-collateralized and cross-defaulted; (vi) the Company and its subsidiaries will covenant not to one voteassign, pledge, mortgage, encumber or hypothecate any of the underlying assets, membership interests in affiliated entities or IP rights without IRGLLC’s written consent; (vii) prior development fees owed by the Company to IRGLLC will be accrued and added to the Bridge Loan, and future development fees owed by the Company to IRGLLC will be paid as when due; and (viii) the Company will pay to IRGLLC 25% of all contractual dispute cash settlements collected by the Company with regard to existing contractual disputes in settlement discussions, which shall be applied to outstanding IRG Affiliate Lender loans, first against accrued interest and other charges and then against principal.
The Company agreed to modify the Series C through Series G warrants held by IRG Affiliate Lenders as follows: (i) the exercise price of the Series C through Series G warrants held by IRG Affiliate Lenders will be reset to Market Price; and (ii) the warrant expiration dates of the Series C through Series G warrants held by IRG Affiliate Lenders will be extended by two years from their current expiration dates.
Hall of Fame Resort & Entertainment Company and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Note 9: Related-Party Transactions (continued)
IRG Financial Support and Consideration (continued)
In the IRG Letter Agreement, IRGLLC and the Company agreed to comply with all federal and state securities laws and Nasdaq listing rules and to insert “blocker” provisions for each share. At March 31, 2018the above-described re-pricing of the warrants and December 31, 2017, there were 896,824 and -0-the conversion provisions, such that the total cumulative number of shares of common stockCommon Stock that may be issued to IRGLLC and outstanding, (excluding 11,603,176its affiliated and -0- sharesrelated parties pursuant to the IRG Letter Agreement may not exceed the requirements of common stock subject to possible redemption)Nasdaq Listing Rule 5635(d) (“Nasdaq 19.99% Cap”), 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. Holdersexcept that such limitation will not apply following approval of the Company’s Class F common stockstockholders. In addition, the provisions of the IRG Letter Agreement are entitled to one vote for each share. At March 31, 2018 and December 31, 2017, there were 3,125,000 and 3,593,750limited by Nasdaq Listing Rule 5635(c). On June 7, 2023, the stockholders of the Company approved (i) issuance of shares of common stock issued and outstanding, of which -0- and 468,750 shares were subject to forfeiture, respectively.
The shares of Class F common stock will automatically convert into shares of Class A common stock at the time of a Business Combination on a one-for-one basis, subject to adjustment as follows. In the case that additional shares of Class A common stock, or equity-linked securities, are issued or deemed issuedCommon Stock in excess of the amounts offeredNasdaq 19.99% Cap to IRG Affiliate Lenders with respect to transactions described in the Initial Public Offering in connection withIRG Letter Agreement; and (ii) the closingissuance to an entity wholly owned by a director of a Business Combination, the ratio at whichadditional 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 stockCommon Stock issuable upon the conversion of all sharescertain convertible debt and the exercise of Class F common stock will equal,certain warrants described 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.IRG Letter Agreement.
Note 10: Concentrations
GORDON POINTE ACQUISITION CORP.
NOTES TO FINANCIAL STATEMENTS
March 31, 2018
(Unaudited)For the three months ended June 30, 2023, two customers represented approximately 42.3% and 18.0% of the Company’s sponsorship revenue. For the three months ended June 30, 2022, two customers represented approximately 65% and 28% of the Company’s sponsorship revenue. No other customer represented more than 10% of sponsorship revenue.
HoldersFor the six months ended June 30, 2023, two customers represented approximately 42.6% and 18.2% of Class A common stockthe Company’s sponsorship revenue. For the six months ended June 30, 2022, two customers represented approximately 45.7% and Class F common stock will vote together as a single class on all matters submitted to a vote19.5% of stockholders except as required by law.the Company’s sponsorship revenue. No other customer represented more than 10% of sponsorship revenue.
Warrants— No fractional shares will be issued upon exerciseAs of June 30, 2023, one customer represented approximately 84.0% of the Public Warrants. The Public Warrants will become exercisable on the laterCompany’s sponsorship accounts receivable. As of (a) 30 days after the completion of a Business Combination or (b) 12 months from the closingDecember 31, 2022, one customer represented approximately 94.4% of the Initial Public Offering; providedCompany’s sponsorship accounts receivable. No other customer represented more than 10% of outstanding accounts receivable.
At any point in each case thattime, the Company has an effective registration statement undercan have funds in their operating accounts and restricted cash accounts that are with third-party financial institutions. These balances in the Securities Act coveringU.S. may exceed the shares of common stock issuable upon exercise of the Public Warrants and a current prospectus relating to them is available. The Company has agreed that as soon as practicable, but in no event later than 15 business days after the closing of a Business Combination,Federal Deposit Insurance Corporation insurance limits. While the Company will use its best efforts to file withmonitors the SEC a registration statement forcash balances in their operating accounts, these cash and restricted cash balances could be impacted if the registration, underunderlying financial institutions fail or other adverse conditions in the Securities Act, of the shares of Class A common stock issuable upon exercise of the Public Warrants. The Company will use its best efforts 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 is 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.financial markets occurs.
Note 11: Leases
The Company may redeemhas entered into operating leases as the Public Warrants (except with respect to the Private Placement Warrants):
If the Company calls the Public Warrantslessee primarily 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.ground leases under its stadium, sports complex, and parking facilities.
At the inception of a contract the Company assesses whether the contract is, or contains, a lease. The exercise price and numberCompany’s assessment is based on: (i) whether the contract involves the use of shares of Class A common stock issuable upon exercisea distinct identified asset, (ii) whether the Company obtained the right to substantially all the economic benefit from the use of the warrants may be adjusted in certain circumstances including inasset throughout 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 willperiod, and (iii) whether the Company be requiredhas the right to net cash settledirect 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 outsideuse of the Trust Account with the respectasset. Leases entered into prior to such warrants. Accordingly, the warrants may expire worthless.January 1, 2022, which were accounted for under ASC 840, were not reassessed for classification.
NOTE 8. FAIR VALUE MEASUREMENTS
The Company followsFor operating leases, the guidance in ASC 820 for its financial assetslease liability is initially and liabilities that are re-measured and reportedsubsequently measured 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.
GORDON POINTE ACQUISITION CORP.
NOTES TO FINANCIAL STATEMENTS
March 31, 2018
(Unaudited)
The fairthe 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 lease payments allocated between a reduction of the lease liability and interest expense.
Hall of Fame Resort & Entertainment Company and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Note 11: Leases (continued)
The Company’s operating leases are comprised primarily of ground leases and equipment leases. Balance sheet information related to our leases is presented below:
| June 30, | December 31, | |||||||
| 2023 | 2022 | |||||||
| Operating leases: | ||||||||
| Right-of-use assets | $ | 7,471,745 | $ | 7,562,048 | ||||
| Lease liability | 3,422,174 | 3,413,210 | ||||||
| Finance leases: | ||||||||
| Right-of-use assets | - | - | ||||||
| Lease liability | - | - | ||||||
Other information related to leases is presented below:
| Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | |||||||
| Operating lease cost | $ | 258,416 | $ | 258,184 | ||||
| Other information: | ||||||||
| Operating cash flows from operating leases | $ | 159,149 | $ | 158,083 | ||||
| Weighted-average remaining lease term – operating leases (in years) | 91.2 | 92.03 | ||||||
| Weighted-average discount rate – operating leases | 10.0 | % | 10.0 | % | ||||
As of June 30, 2023, the annual minimum lease payments of our operating lease liabilities were as follows:
| For The Years Ending December 31, | ||||
| 2023 (six months) | $ | 159,149 | ||
| 2024 | 311,900 | |||
| 2025 | 311,900 | |||
| 2026 | 311,900 | |||
| 2027 | 311,900 | |||
| Thereafter | 41,125,000 | |||
| Total future minimum lease payments, undiscounted | 42,531,749 | |||
| Less: imputed interest | (39,109,575 | ) | ||
| Present value of future minimum lease payments | $ | 3,422,174 | ||
Hall of Fame Resort & Entertainment Company and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Note 11: Leases (continued)
Lessor Commitments
As of June 30, 2023, the Company’s Constellation Center for Excellence and retail facilities were partially leased including leases by the Company’s subsidiaries. During the three months ended June 30, 2023 and 2022, the Company recorded $82,611 and $6,200 of lease revenue, respectively and for the six months ended June 30, 2023 and 2022, the Company recorded $177,151 and $14,318 of lease revenue, respectively. The future minimum lease commitments under these leases, excluding leases of the Company’s subsidiaries, are as follows:
Year ending December 31:
| 2023 (six months) | $ | 328,369 | ||
| 2024 | 645,438 | |||
| 2025 | 641,542 | |||
| 2026 | 640,962 | |||
| 2027 | 619,495 | |||
| Thereafter | 2,972,365 | |||
| Total | $ | 5,848,171 |
Note 12: Financing Liability
On September 27, 2022 the Company sold the land under the Company’s Fan Engagement Zone to Twain. Simultaneously, the Company entered into a lease agreement with Twain (the sale of the assets or paid in connectionproperty and simultaneous leaseback is referred to as the “Sale-Leaseback”). The Sale-Leaseback is repayable over a 99-year term. Under the terms of the lease agreement, the Company’s initial base rent is approximately $307,125 per quarter, with annual increases of approximately 2% each year of the term.
On November 7, 2022, HOFV Waterpark sold the land under the Company’s future waterpark. Simultaneously, the Company entered into a lease agreement with the transferbuyer of the liabilities inproperty. The Sale-Leaseback for the waterpark is repayable over a 99-year term. Under the terms of the leaseback agreement, the Company’s initial base rent is $4,375,000 per annum, payable monthly, with customary escalations over the lease term. On November 7, 2022, Oak Street and HOFV Waterpark also entered into a Purchase Option Agreement (the “Purchase Option Agreement”), pursuant to which HOFV Waterpark is granted an orderly transaction between market participants atoption to purchase the measurement date. In connectionWaterpark Property back from Oak Street that can be exercised during the period beginning on December 1, 2027 and ending on November 30, 2034 (the “Option Period”).
The Company accounted for the Sale-Leaseback transactions with measuringTwain and Oak Street as financing transactions with the purchaser of the property. The Company concluded the lease agreements both met the qualifications to be classified as finance leases due to the significance of the present value of the lease payments, using a discount rate of 10.25% to reflect the Company’s incremental borrowing rate, compared to the fair value of its assets and liabilities, the Company seeks to maximizeleased property as of the use of observable inputs (market data obtained from independent sources) and to minimize the use of unobservable inputs (internal assumptions about how market participants would price assets and liabilities). The following fair value hierarchy is used to classify assets and liabilities based on the observable inputs and unobservable inputs used in order to value the assets and liabilities:lease commencement date.
The following table presents information aboutpresence of a finance-type lease in the Company’s assetssale-leaseback transactions indicates that control of the land under the Fan Engagement Zone and HOFV Waterpark has not transferred to the buyer/lessor and, as such, the transactions were both deemed a failed sale-leaseback and must be accounted for as a financing arrangement. As a result of this determination, the Company is viewed as having received the sales proceeds from the buyer/lessor in the form of a hypothetical loan collateralized by its leased land. The hypothetical loan is payable as principal and interest in the form of “lease payments” to the buyer/lessor. As such, the Company will not derecognize the property from its books for accounting purposes until the lease ends.
Hall of Fame Resort & Entertainment Company and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Note 12: Financing Liability (continued)
As of June 30, 2023, the carrying value of the financing liability was $61,299,829, representing $2,201,892,776 in remaining payments under the leases, net of a discount of $2,140,592,947. The lease payments are measured at fair value onsplit between a recurring basis atreduction of principal and March 31, 2018 andinterest expense using the effective interest rate method.
As of December 31, 2017, and indicates2022, the faircarrying value hierarchy of the valuation inputsfinancing liability was $60,087,907, representing $2,204,080,276 in remaining payments under 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 EVENTSleases, net of a discount of $2,143,992,369. The monthly lease payments are split between a reduction of principal and interest expense using the effective interest rate method.
The Company evaluated subsequent events and transactions that occurredhas a right to re-purchase the land from Twain at any time on or after the balance sheet date upSeptember 27, 2025 at a fixed price according to the lease. Oak Street and HOFV Waterpark also entered into a purchase option agreement, pursuant to which HOFV Waterpark is granted an option to purchase the waterpark property back from Oak Street that can be exercised during the period beginning on December 1, 2027 and ending on November 30, 2034.
Remaining future cash payments related to the financing liability, for the fiscal years ending December 31 are as follows:
| 2023 (six months) | $ | 1,832,031 | ||
| 2024 | 4,672,544 | |||
| 2025 | 5,865,396 | |||
| 2026 | 6,005,734 | |||
| 2027 | 6,149,455 | |||
| Thereafter | 2,177,367,616 | |||
| Total Minimum Liability Payments | 2,201,892,776 | |||
| Imputed Interest | (2,140,592,947 | ) | ||
| Total | $ | 61,299,829 |
Note 13: Subsequent Events
Subsequent events have been evaluated through August 10, 2023, the date that the condensed consolidated financial statements were issued. Based upon this review,Except as disclosed below, no events have been identified requiring disclosure or recording.
Pro Football Hall of Fame Purchase Agreement
On August 1, 2023, the Company did not identify any subsequent eventsand PFHOF entered into a real estate purchase agreement, where by the Company agreed to sell to PFHOF certain real estate in exchange for $250,000. There are certain other customary conditions that would have required adjustment or disclosure inmust be satisfied prior to the condensed financial statements.closing of the transaction.
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
This Quarterly Report on Form 10–Q contains forward–looking statements that involve risks and uncertainties, as well as assumptions that, if they never materialize or prove incorrect, could cause our results to differ materially from those expressed or implied by such forward–looking statements. The statements contained herein that are not purely historical are forward–looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Forward–looking statements are often identified by the use of words such as, but not limited to, “will,” “anticipate,” “estimates,” “should,” “expect,” “guidance,” “project,” “intend,” “plan,” “strategy,” “believe” and similar expressions or variations intended to identify forward–looking statements. These statements are based on the beliefs and assumptions of our management based on information currently available to management. Factors that could cause or contribute to our results differing materially from those expressed or implied by forward–looking statements include, but are not limited to, those identified below, and those discussed in the section titled “Risk Factors” included in our Form 10-K for the fiscal year ended December 31, 2022 as filed with the Securities and Exchange Commission (“SEC”) on March 27, 2023, and in our reports subsequently filed with the SEC. The forward–looking statements set forth herein speak only as of the date of this report. Except as required by law, we undertake no obligation to update any forward–looking statements to reflect events or circumstances after the date of such statements.
Unless the context otherwise requires, the “Company”, “we,” “our,” “us” and similar terms refer to Hall of Fame Resort & Entertainment Company, a Delaware corporation.
The following discussion should be read in conjunction with the unauditedCompany’s Form 10-K for the year ended December 31, 2022, filed with the SEC and the condensed consolidated financial statements and theaccompanying notes thereto contained elsewhere in this report. Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties.
Cautionary note regarding forward-looking statements
All statements other than statements of historical fact included in Part I, Item 1 of this Quarterly Report on Form 10-Q10-Q.
Business Overview
We are a resort and entertainment company leveraging the power and popularity of professional football and its legendary players in partnership with the National Football Museum, Inc., doing business as the Pro Football Hall of Fame (“PFHOF”). Headquartered in Canton, Ohio, we own the Hall of Fame Village, a multi-use sports and entertainment destination centered around the PFHOF’s campus. We are creating a diversified set of revenue streams through developing themed attractions, premier entertainment programming and sponsorships. We are pursuing a diversified strategy across three pillars, including without limitation, statements under this “Management’s Discussiondestination-based assets, the Media Company, and Analysisgaming.
The strategic plan has been developed into three phases: Phase I, Phase II, and Phase III. Phase I of Financial Conditionthe Hall of Fame Village is operational, consisting of the Tom Benson Hall of Fame Stadium, the ForeverLawn Sports Complex, and ResultsHOF Village Media Group, LLC (“Hall of Operations” regarding the Company’s financial position, business strategy and the plans and objectives of management for future operations, are forward-looking statements. When used in this Quarterly Report on Form 10-Q, words such as “anticipate,” “believe,” “estimate,” “expect,” “intend” and similar expressions, as they relate to usFame Village Media” or the Company’s management, identify forward-looking statements. Such forward-looking statements are based on“Media Company”). The Tom Benson Hall of Fame Stadium hosts multiple sports and entertainment events, including the beliefsNFL Hall of management,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 assumptions madeathletes from across the country in other sports such as lacrosse, rugby and soccer. Hall of Fame Village Media leverages the sport of professional football to produce exclusive programming. For example, licensing the extensive content controlled by the PFHOF.
We have developed new hospitality, attraction and corporate assets as part of our Phase II development plan. Phase II components of the Hall of Fame Village include the Constellation Center for Excellence (an office building including retail and meeting space, that opened in November 2021), the Center for Performance (a convention center/field house, that opened in August of 2022), the Play Action Plaza (completed in August of 2022), and the Fan Engagement Zone (Retail Promenade), core and shell for Retail I was completed in August of 2022 and the core and shell of Retail II was completed in November of 2022, two hotels (one on campus and one in downtown Canton that opened in November 2020), and the Hall of Fame Indoor Waterpark. The on-campus hotel and waterpark are expected to open in the fourth quarter of 2024. Phase III expansion plans may include a potential mix of residential space, additional attractions, entertainment, dining, merchandise and more.
Key Components of the Company’s Results of Operations
Revenue
We generate revenue from various streams such as sponsorship agreements, rents, events, and hotel and restaurant operations. The sponsorship arrangements, in which the customer sponsors an asset or event and receives specified brand recognition and other benefits over a set period of time, recognize revenue on a straight-line basis over the time period specified in the contract. Revenue for rents, cost recoveries, and events are recognized at the time the respective event or service has been performed. Rental revenue for long term leases is recorded on a straight-line basis over the term of the lease beginning on the commencement date.
Our owned hotel revenues primarily consist of hotel room sales, revenue from accommodations sold in conjunction with other services (e.g., package reservations), food and beverage sales, and other ancillary goods and services (e.g., parking) related to owned hotel 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.
Restaurant revenue at Company-operated restaurants is recognized when payment is tendered at the point of sale, net of sales tax, discounts and other sales related taxes.
Operating Expenses
Our operating expenses include operating expenses, hotel operating expenses, and depreciation expense. These expenses have increased with completion of Phase II assets and would expect to continue to increase with completion of the on-campus hotel, waterpark, and Phase III development.
Our operating expenses include the costs associated with running and maintaining operational entertainment and destination assets such as the Tom Benson Hall of Fame Stadium and the ForeverLawn Sports Complex along within management and professional fees. Factors that will contribute to increased operating expenses include: more of our Phase II assets becoming operational, the addition of events for top performers, and sporting events.
Our depreciation expense includes the related costs of owning and operating significant property and entertainment assets. These expenses have grown as through completion of the Phase I and Phase II development.
Recent Developments
Dispute Regarding Naming Rights Agreement with Johnson Controls
The Company is in a dispute with JCI regarding the Naming Rights Agreement. The Company is pursuing dispute resolution pursuant to the terms of the Naming Rights Agreement to simultaneously defend against JCI’s allegations and pursue its own claims. The parties participated in mediation in November 2022, but were unable to reach a resolution. On January 24, 2023, Newco filed a demand for arbitration, asserting claims against JCI for breach of contract, breach of the implied duty of good faith and fair dealing, and unjust enrichment. On February 16, 2023, JCI filed its response, generally denying Newco’s allegations and asserting counterclaims for breach of contract, breach of the implied covenant of good faith and fair dealing, and unjust enrichment. On March 9, 2023, Newco filed its response to JCI’s counterclaims, generally denying JCI’s allegations. A panel of three arbitrators has been constituted to hear and determine the dispute. The Company anticipates that the hearing will be held during the fourth quarter of 2023 in Ohio. The ultimate outcome of this dispute cannot presently be determined. However, in management’s opinion, the likelihood of a material adverse outcome is remote. Accordingly, adjustments, if any, that might result from the resolution of this matter have not been reflected in the accompanying condensed consolidated financial statements. During the year ended December 31, 2022, the Company suspended its revenue recognition until the dispute is resolved and has recorded an allowance against the amounts due as of June 30, 2023 and December 31, 2022 in the amount of $7,187,500 and $4,812,500, respectively. The balances due under the Naming Rights Agreement as of June 30, 2023 and December 31, 2022 amounted to $8,697,917 and $6,635,417, respectively.
See Note 6: Sponsorship Revenue and Associated Commitments – Johnson Controls, Inc., for additional information currently availablerelating to this dispute.
Amendment of Michael Crawford’s Employment Agreement
On April 17, 2023, Michael Crawford, President and Chief Executive Officer of the Company, voluntarily determined to reduce his base salary by $50,000 for each of fiscal years 2023-2026. Mr. Crawford decided to take the salary reduction as part of a focus on lowering Company costs. The voluntary salary reduction was effective May 1, 2023.
Appointment of Class A Director
On June 8, 2023, the Board of Directors of the Company appointed Mr. Jerome Bettis as a Class A director to fill a vacancy. As Class A director, Mr. Bettis’ initial term expires at the 2024 Annual Meeting of Stockholders. The Board determined that Mr. Bettis qualifies as an independent director in accordance with the Nasdaq listing rules. Mr. Bettis’ compensation as a director will be consistent with the compensation policies applicable to the Company’s management. Actual results could differ materially from those contemplated byother independent directors, as described in the forward-looking statements as a result of certain factors detailed in our filingsCompany’s definitive proxy statement on Schedule 14A filed with the SEC. All subsequent written or oral forward-looking statements attributable to us or persons acting on the Company’s behalf are qualified in their entirety by this paragraph.
Overview
We are a blank check company incorporatedU.S. Securities and Exchange Commission on April 12, 2017 as a Delaware corporation and formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses (a “Business Combination”). We completed our Initial Public Offering on January 30, 2018. Under the terms of our Initial Public Offering, we will have until July 30, 2019 to complete a Business Combination.25, 2023.
Since the date of the Initial Public Offering, we have started to contact businesses, intermediaries and other third parties to evaluate a number of targets that may be candidates for a possible Business Combination. Although we will continue to review a number of opportunities to enter into a Business Combination, we are not able to determine at this time whether we will complete a Business Combination within the allotted 18-month timeframe. We intend to effectuate our initial Business Combination using cash from the proceeds of the Initial Public Offering and the private placement of the Private Placement Warrants, our capital stock, debt or a combination of cash, stock and debt.
Results of Operations
Our entire activity from inception up to January 30, 2018 was in preparation for our Initial Public Offering. Since our Initial Public Offering, our activity has been limited toThe following table sets forth information comparing the evaluationcomponents of Business Combination candidates, and we will not be generating any operating revenues until the closing and completion of our initial Business Combination. We expect to incur increased expenses as a result of being a public company (for legal, financial reporting, accounting and auditing compliance), as well asnet loss for due diligence expenses.
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, 2023 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 $9,531.2022:
Liquidity and Capital Resources
| For the Three Months Ended June 30, | ||||||||
| 2023 | 2022 | |||||||
| Revenues | ||||||||
| Sponsorships, net of activation costs | $ | 691,236 | $ | 452,772 | ||||
| Event, rents and other revenue | 3,410,010 | 668,863 | ||||||
| Hotel revenues | 2,026,031 | 1,563,900 | ||||||
| Total revenues | 6,127,277 | 2,685,535 | ||||||
| Operating expenses | ||||||||
| Operating expenses | 10,693,853 | 7,316,113 | ||||||
| Hotel operating expenses | 1,587,620 | 1,316,150 | ||||||
| Depreciation expense | 3,373,076 | 3,527,581 | ||||||
| Total operating expenses | 15,654,549 | 12,159,844 | ||||||
| Loss from operations | (9,527,272 | ) | (9,474,309 | ) | ||||
| Other income (expense) | ||||||||
| Interest expense, net | (4,404,146 | ) | (921,392 | ) | ||||
| Amortization of discount on note payable | (882,240 | ) | (1,122,324 | ) | ||||
| Change in fair value of warrant liability | (223,000 | ) | 2,423,000 | |||||
| Change in fair value of interest rate swap | 60,000 | - | ||||||
| Change in fair value of securities available for sale | 1,683,246 | - | ||||||
| Total other (expense) income | (3,766,140 | ) | 379,284 | |||||
| Net loss | $ | (13,293,412 | ) | $ | (9,095,025 | ) | ||
| Series B preferred stock dividends | (266,000 | ) | (266,000 | ) | ||||
| Loss attributable to non-controlling interest | 5,795 | 158,592 | ||||||
| Net loss attributable to HOFRE stockholders | $ | (13,553,617 | ) | $ | (9,202,433 | ) | ||
| Net loss per share – basic | $ | (2.39 | ) | $ | (1.78 | ) | ||
| Weighted average shares outstanding, basic and diluted | 5,660,385 | 5,183,035 | ||||||
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.
Three Months Ended June 30, 2023 as Compared to the Three Months Ended June 30, 2022
Following 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 available for working capital purposes.Sponsorship Revenues
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.
ForSponsorship revenues totaled $691,236 for the three months ended June 30, 2023 as compared to $452,772 for the three months ended June 30, 2022, representing an increase of $238,464, or 52.7%. This increase was primarily driven by the Company gaining new sponsorships.
Event, rents and other revenues
Revenue from event, rents and other revenues was $3,410,010 for the three months ended June 30, 2023 compared to $668,863 for the three months ended June 30, 2022, for an increase of $2,741,147, or 409.8%. This increase was primarily driven by an increase in event revenue, an increase in food and beverage sales, and an increase in revenue from short term rentals. These increases were the result of the hosting of the USFL, certain concerts and other events in our Tom Benson Hall of Fame Stadium, the resumption of many sports and other tournaments in our ForeverLawn Sports Complex, as well as revenue associated with the opening of our Don Shula’s American Kitchen restaurant.
Hotel Revenues
Hotel revenue was $2,026,031 for the three months ended June 30, 2023 compared to $1,563,900 from the three months ended June 30, 2022 for an increase of $462,131, or 29.5%. This was driven by an increase in guest stays and conferences at the hotel and an increase in the average daily rate.
Operating Expenses
Operating expense was $10,693,853 for the three months ended June 30, 2023 compared to $7,316,113 for the three months ended June 30, 2022, for an increase of $3,377,740, or 46.2%. This increase was primarily driven by higher personnel and related benefits costs, the timing of recognition for certain compensation-related expenses and an increase in production fees for our events and media productions.
Hotel Operating Expenses
Hotel operating expense was $1,587,620 for the three months ended June 30, 2023 compared to $1,316,150 for the three months ended June 30, 2022 for an increase of $271,470, or 20.6%. This increase was primarily driven by an increase in hotel occupancy and higher associated operating costs.
Depreciation Expense
Depreciation expense was $3,373,076 for the three months ended June 30, 2023 compared to $3,527,581 for the three months ended June 30, 2022, for a decrease of $154,505, or 4.4%. The decrease in depreciation expense is primarily the result of certain large assets becoming fully depreciated in 2022.
Interest Expense
Total interest expense was $4,404,146 for the three months ended June 30, 2023 compared to $921,392 for the three months ended June 30, 2022, for an increase of $3,482,754, or 378%. The increase in total interest expense was primarily due to an increase in the amount of total debt outstanding, a decrease in the proportion of debt that is capitalized for ongoing construction projects, and an increase in average interest rates.
Amortization of Debt Discount
Total amortization of debt discount was $882,240 for the three months ended June 30, 2023, compared to $1,122,324 for the three months ended June 30, 2022, for a decrease of $240,084, or 21.4%. The decrease is primarily due to the removal of discounts from IRG-related debt upon the modification of the debt in November 2022.
Change in Fair Value of Warrant Liability
The change in fair value warrant liability represents a loss of $223,000 for the three months ended June 30, 2023 compared to a gain of $2,423,000 for the three months ended June 30, 2022, for a decrease of $2,646,000 or 109.2%. The decrease in change in fair value of warrant liability was due primarily to a change in our stock price.
Change in Fair Value of Interest Rate Swap
The change in fair value of interest rate swap was $60,000 for the three months ended June 30, 2023. This was due to the change in fair value of the interest rate swap entered into in connection with an agreement with Huntington Bank.
Change in Fair Value of Securities Available for Sale
The change in fair value of securities available for sale was $1,683,246 for the three months ended June 30, 2023. This was due to the change in fair value of our penny warrants granted to us from our online sports betting partner.
Six Months Ended June 30, 2023 as Compared to the Six Months Ended June 30, 2022
| For the Six Months Ended June 30, | ||||||||
| 2023 | 2022 | |||||||
| Revenues | ||||||||
| Sponsorships, net of activation costs | $ | 1,364,711 | $ | 1,272,062 | ||||
| Event, rents and other revenues | 4,318,322 | 1,006,256 | ||||||
| Hotel revenues | 3,564,677 | 2,513,741 | ||||||
| Total revenues | 9,247,710 | 4,792,059 | ||||||
| Operating expenses | ||||||||
| Operating expenses | 24,367,569 | 14,982,722 | ||||||
| Hotel operating expenses | 3,046,823 | 2,469,262 | ||||||
| Depreciation expense | 5,926,436 | 6,769,866 | ||||||
| Total operating expenses | 33,340,828 | 24,221,850 | ||||||
| Loss from operations | (24,093,118 | ) | (19,429,791 | ) | ||||
| Other expense | ||||||||
| Interest expense, net | (8,036,783 | ) | (2,134,933 | ) | ||||
| Amortization of discount on note payable | (1,738,131 | ) | (2,478,298 | ) | ||||
| Change in fair value of warrant liability | (461,000 | ) | 7,173,000 | |||||
| Change in fair value of interest rate swap | (40,000 | ) | - | |||||
| Change in fair value of securities available for sale | 1,683,246 | - | ||||||
| Loss on extinguishment of debt | - | (148,472 | ) | |||||
| Total other (expense) income | (8,592,668 | ) | 2,411,297 | |||||
| Net loss | $ | (32,685,786 | ) | $ | (17,018,494 | ) | ||
| Series B preferred stock dividends | (532,000 | ) | (532,000 | ) | ||||
| Loss attributable to non-controlling interest | 54,372 | 235,964 | ||||||
| Net loss attributable to HOFRE stockholders | $ | (33,163,414 | ) | $ | (17,314,530 | ) | ||
| Net loss per share – basic and diluted | $ | (5.88 | ) | $ | (3.49 | ) | ||
| Weighted average shares outstanding, basic and diluted | 5,644,822 | 4,964,029 | ||||||
Sponsorship Revenues
Sponsorship revenues totaled $1,364,711 for the six months ended June 30, 2023 as compared to $1,272,062 for the six months ended June 30, 2022, for an increase of $92,649, or 7.3%. This increase was primarily driven by the Company gaining new sponsorships.
Event, rents and other revenues
Revenue from event, rents and other revenues was $4,318,322 for the six months ended June 30, 2023 compared to $1,006,256 for the six months ended June 30, 2022, for an increase of $3,312,066, or 329.1%. This increase was primarily driven by an increase in events revenue, an increase in food and beverage sales, and higher revenue received from short term rentals. These increases were the result of the hosting of the USFL, concerts, and other events in our Tom Benson Hall of Fame Stadium, the resumption of many sports and other tournaments in our ForeverLawn Sports Complex, as well as revenue associated with the opening of our Don Shula’s American Kitchen restaurant.
Hotel Revenues
Hotel revenue was $3,564,677 for the six months ended June 30, 2023 compared to $2,513,741 from the six months ended June 30, 2022 for an increase of $1,050,936, or 41.8%. This increase was driven by increased occupancy and average daily rates.
Operating Expenses
Operating expense was $24,367,569 for the six months ended June 30, 2023 compared to $14,982,722 for the six months ended June 30, 2022, for an increase of $9,384,847, or 62.6%. This increase was driven by higher personnel and related benefits costs, the timing of recognition of certain compensation-related expenses, an increase in production and related costs for our events and media productions, and an increase in accounting, auditing and professional fees.
Hotel Operating Expenses
Hotel operating expense was $3,046,823 for the six months ended June 30, 2023 compared to $2,469,262 for the six months ended June 30, 2022 for an increase of $577,561, or 23.4%. This increase was driven by increased occupancy and higher related operating expenses.
Depreciation Expense
Depreciation expense was $5,926,436 for the six months ended June 30, 2023 compared to $6,769,866 for the six months ended June 30, 2022, for a decrease of $843,430, or 12.5%. The decrease was primarily the result of a large asset reaching full depreciation during 2022.
Interest Expense
Total interest expense was $8,036,783 for the six months ended June 30, 2023 compared to $2,134,933 for the six months ended June 30, 2022, for an increase of $5,901,850, or 276%. 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 $1,738,131 for the six months ended June 30, 2023 compared to $2,478,298 for the six months ended June 30, 2022, for a decrease of $740,167, or 29.9%. The decrease is primarily due to the removal of discounts from IRG-related debt upon the modification of the debt in November 2022.
Change in Fair Value of Warrant Liability
The change in fair value warrant liability represents a loss of $461,000 for the six months ended June 30, 2023 compared to a gain of $7,173,000 for the six months ended June 30, 2022, for a change of $7,634,000 or 106.4%. The change in fair value of warrant liability was primarily due to a change in our stock price.
Loss on Extinguishment of Debt
Loss on extinguishment of debt was $0 for the six months ended June 30, 2023, as compared to a loss of $148,472 for the six months ended June 30, 2022. The loss on extinguishment of debt is due to the refinancing of many of our debt instruments in March 2022.
Change in Fair Value of Interest Rate Swap
The change in fair value of interest rate swap was $(40,000) for the six months ended June 30, 2023. This was due to the change in fair value of the interest rate swap entered into in connection with an agreement with Huntington Bank.
Change in Fair Value of Securities Available for Sale
The change in fair value of securities available for sale was $1,683,246 for the six months ended June 30, 2023. This was due to the change in fair value of our penny warrants granted to us from our online sports betting partner.
Liquidity and Capital Resources
We have sustained recurring losses through June 30, 2023 and our accumulated deficit was $180,061,757 as of such date. Since inception, our operations have been funded principally through the issuance of debt and equity. As of June 30, 2023, we had approximately $9.3 million of unrestricted cash and $7.5 million of restricted cash, and $12.4 million of liquid investments held to maturity consisting of U.S. Treasury securities. Through August 10, 2024, we have $59.3 million in debt principal payments coming due. For a fee of one percent of the principal, we may extend the maturity of up to $42.1 million principal of debt until March 31, 2018,2025.
We expect that we will need to raise additional financing to accomplish our development plan over the next several years. We are seeking to obtain additional funding through debt, construction lending, and equity financing. There are no assurances that we will be able to raise capital on terms acceptable to the Company or at all, or that cash flows generated from its operations will be sufficient to meet its current operating costs. If we are unable to obtain sufficient amounts of additional capital, we may be required to reduce the scope of our planned development, which could harm its financial condition and operating results, or we may not be able to continue to fund our ongoing operations. If management is unable to execute its planned debt and equity financing initiatives, these conditions raise substantial doubt about our ability to continue as a going concern to sustain operations for at least one year from the issuance of these condensed consolidated financial statements. The accompanying condensed consolidated financial statements do not include any adjustments that might result from the outcome of these uncertainties.
Cash Flows
Since inception, we have primarily used our available cash to fund its project development expenditures. The following table sets forth a summary of cash flows for the periods presented:
| For the Three Months Ended June 30, | ||||||||
| 2023 | 2022 | |||||||
| Cash (used in) provided by: | ||||||||
| Operating Activities | $ | (19,683,133 | ) | $ | 5,422,198 | |||
| Investing Activities | (14,468,823 | ) | (40,022,805 | ) | ||||
| Financing Activities | 17,486,567 | 35,042,816 | ||||||
| Net decrease in cash and restricted cash | $ | (16,665,389 | ) | $ | 442,209 | |||
Cash Flows for the Six Months Ended June 30, 2023 as Compared to the Six Months Ended June 30, 2022
Operating Activities
Net cash used in operating activities was $191,682, consisting$19,683,133 during the six months ended June 30, 2023, which consisted primarily of interest earned on marketable securities held in the Trust Accountour net loss of $292,038,$32,685,786, offset by netnon-cash depreciation expense of $5,926,436, amortization of note discounts of $1,738,131, accretion of financing liability of $3,399,422, impairment of film costs of $1,145,000, interest income on investments held to maturity of $35,856$508,610, payment-in-kind interest rolled into debt of $2,282,040, a change in fair value of interest rate swap of $40,000, a change in fair value of warrant liability of $461,000 and an unrealized loss on marketableincrease in a change of fair value of securities held in our Trust Accountavailable for sales of $16,762. Changes$1,683,246, stock-based compensation expense of $1,737,051 and a non-cash operating lease expense of $258,416. The changes in operating assets and liabilities provided $47,738consisted of cash from operating activities.an increase in accounts receivable of $829,818, an increase in prepaid expenses and other assets of $1,143,033, an increase in accounts payable and accrued expenses of $1,743,958, a decrease in due to affiliates of $456,167, and an increase in other liabilities of $2,539,138.
We intendNet 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 use substantially allaffiliates of the funds held$1,777,542, and an increase 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 interest from the trust account to pay franchise and income taxes. To the extent that our capital stock or debt isother liabilities of $4,830,587.
Investing Activities
Net cash used in whole orinvesting activities was $14,468,823 during the six months ended June 30, 2023 which consisted of investments in part, as consideration to complete our initial Business Combination,treasury securities of $64,606,946, proceeds from treasury securities of $69,815,000, and investments in project development costs of $19,676,877.
Net cash used in investing activities was $40,022,805 during the remaining 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 Accountsix months ended June 30, 2022, which consisted primarily to identify and evaluate target businesses, perform business due diligence on prospective target businesses, travel to and from the offices, plants or similar locations of prospective target businesses or their representatives or owners, review corporate documents and material agreements of prospective target businesses, and structure, negotiate and complete a Business Combination.
During the quarter ended March 31, 2018, we agreed to pay each of our independent directors an annual retainerproject development costs.
Financing Activities
Net cash provided by financing activities was $17,486,567 during the six months ended June 30, 2023. This consisted primarily of $20,000 (pro-rated for interim periods$22,270,339 in proceeds from notes payable, offset by $783,191 in repayments of service) for their service as membersnotes payable, $2,187,500 in payments of our Board, for which,sale leaseback arrangements and $1,552,342 in addition to general matterspayment 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. 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.financing costs.
In order to fund working capital deficiencies and/or finance transaction costs in connection with an initial Business Combination, our Sponsor or an affiliateNet cash provided by financing activities was $35,042,816 during the six months ended June 30, 2022. This consisted primarily 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$20,714,311 in proceeds from notes payable and $17,983,214 of proceeds from equity raises under our Trust Account would be used for such repayment. Up to $1,500,000ATM, offset by $3,144,677 in repayments of such loans may be convertible into warrants, at a pricenotes payable, and $210,032 in payment 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.financing costs.
Off-Balance Sheet Arrangements
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, 2023.
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 unaudited condensed 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 unaudited condensed consolidated 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 unaudited condensed consolidated 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:policies please refer to Note 2 to our Unaudited Condensed Consolidated Financial Statements.
Common Stock subject to possible redemption
We account for 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.
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.qualitative disclosures about market risk
Following the consummation of our Initial Public Offering, we invested the funds held in the Trust Account in money 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.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, 2023, 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, 2023, no change in ourchanges to the Company’s 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 isare reasonably likely to materially affect, ourthe Company’s internal control over financial reporting.
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. The Company does not have any pending litigation that, separately or in the aggregate, would, in the opinion of management, have a material adverse effect on its results of operations, financial condition, or cash flows.
Item 1A. Risk Factors.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 factorsyear ended December 31, 2022, which could result in a significant or material adverse effect onadversely affect our business, financial condition, results of operations, or financial condition. Additional risk factors not presently known to us or that we currently deem immaterial may also impaircash flows, and the trading price of our business or results of operations.
As of the date of this Quarterly Report on Form 10-Q, therecommon 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, 2022 except as follows:
Our business plan requires additional liquidity and capital resources that might not be available on terms that are favorable to us, or at all.
We have sustained recurring losses through June 30, 2023 and our accumulated deficit was $180,061,757 as of such date. Since inception, our operations have been funded principally through the issuance of debt and equity. As of June 30, 2023, we had approximately $9.3 million of unrestricted cash and $7.5 million of restricted cash, and $12.4 million of liquid investments held to maturity consisting of U.S. Treasury securities. Through August 10, 2024, we have $59.3 million in debt principal payments coming due. For a fee of one percent of the principal, the Company may extend the maturity of up to $42.1 million principal of debt until March 30, 201831, 2025.
While our strategy assumes that we will receive sufficient capital to have sufficient working capital, we currently do not have available cash and cash flows from operations to provide us with adequate liquidity for the SEC, however,near-term or foreseeable future. Our current projected liabilities exceed our current cash projections and we have very limited cash flow from current operations. We therefore will require additional capital and/or cash flow from future operations to fund the Company, our debt service obligations and our ongoing business. There is no assurance that we will be able to raise sufficient additional capital or generate sufficient future cash flow from our future operations to fund the Hall of Fame Village, our debt service obligations or our ongoing business. If the amount of capital we are able to raise, together with any income from future operations, is not sufficient to satisfy our liquidity and capital needs, including funding our current debt obligations, we may disclose changesbe required to abandon or alter our plans for the Company. The Company may have to raise additional capital through the equity market, which could result in substantial dilution to existing stockholders. If management is unable to execute its planned debt and equity financing initiatives, these conditions raise substantial doubt about our ability to continue to sustain operations for at least one year from the issuance of our condensed consolidated financial statements for the quarter ended June 30, 2023 included in this quarterly report on Form 10-Q. The accompanying condensed consolidated financial statements do not include any adjustments that might result from the outcome of these uncertainties.
Our ability to obtain necessary financing may be impaired by factors such factorsas the health of and access to capital markets, our limited track record and the limited historical financial information available, or disclosethe substantial doubt about our ability to continue as a going concern. Any additional factors from time to time incapital raised through the sale of additional shares of our future filings withcapital stock, convertible debt or other equity may dilute the SEC.ownership percentage of our stockholders.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
In conjunction with the closing of our Initial Public Offering, we completed the private sale of an aggregate of 4,900,000 Private Placement Warrants to our Sponsor at a 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 Placement Warrants will be redeemable by us and exercisable by the holders on the same basis as the Warrants.
The sales of the aboveequity 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 Placement 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.
For a description of the use of proceeds generated in our Initial Public Offering, see Part I, Item 2 of this Form 10-Q.
None.
Item 3. Defaults Upon Senior Securities.upon senior securities
NoneNone.
Item 4. Mine Safety Disclosures.safety disclosures
Not Applicable.applicable.
Item 5. Other Information.information
None.
Item 6. Exhibits.Exhibits
| Inline XBRL Taxonomy Extension Schema Document | ||
| 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 |
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: August 10, 2023 | ||
| By: | ||
| President and Chief Executive Officer | ||
| (Principal Executive Officer) | ||
| Date: August 10, 2023 | By: | /s/ Benjamin Lee |
| Benjamin Lee | ||
| Chief Financial Officer | ||
| (Principal Financial and Accounting Officer) |
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