UNITED STATES

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10–Q

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended SeptemberJune 30, 20212022

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ______________ to ______________

Commission file number: 001–38363001-38363

HALL OF FAME RESORT & ENTERTAINMENT COMPANY

(Exact name of registrant as specified in its charter)

Delaware84-3235695
(State or other jurisdiction of
incorporation or organization)		(I.R.S. Employer
Identification No.)

2626 Fulton Drive NW
Canton, OH		44718
(Address of principal executive offices)(Zip Code)

2626 Fulton Drive NW

Canton, OH 44718

(Address of principal executive offices)

(330) 458–9176

(Registrant’s telephone number, including area code)

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

Title of each classTrading Symbol(s)Name of each exchange on which
registered
Common Stock, $0.0001 par value per shareHOFVNasdaq Capital Market
Warrants to purchase 1.421333 shares of Common StockHOFVWNasdaq Capital Market

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

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

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

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

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

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

Yes ☐ No ☒

 

As of November 8, 2021,August 9, 2022, there were 95,444,809117,629,003 shares of the registrant’s Common Stock,stock, $0.0001 par value per share, issued and outstanding.

 

 

 

HALL OF FAME RESORT & ENTERTAINMENT COMPANY AND SUBSIDIARIES

FORM 10-Q

FOR THE QUARTER ENDED SEPTEMBER 30, 2021

TABLE OF CONTENTS

Page
PART I. FINANCIAL INFORMATION1
Item 1. Financial statements1
Condensed Consolidated Balance Sheets as of SeptemberJune 30, 20212022 (unaudited) and December 31, 202020211
Condensed Consolidated Statements of Operations for the three and ninesix months ended SeptemberJune 30, 2022 and 2021 and 2020 (unaudited)2
Condensed Consolidated StatementsStatement of Changes in Stockholders’ Equity for the three and ninesix months ended SeptemberJune 30, 2021 and September 30, 20202022 (unaudited)3
Condensed Consolidated Statements of Cash Flows for the ninesix months ended SeptemberJune 30, 2022 and 2021 and 2020 (unaudited)4
Notes to the Condensed Consolidated Financial Statements (unaudited)6
Item 2. Management’s discussion and analysis of financial condition and results of operations3743
Item 3. Quantitative and qualitative disclosures about market risk4653
Item 4. Controls and procedures4753
PART II. OTHER INFORMATION4854
Item 1. Legal proceedings4854
Item 1A. Risk factors4854
Item 2. Unregistered sales of equity securities and use of proceeds5156
Item 3. Defaults upon senior securities5157
Item 4. Mine safety disclosures5157
Item 5. Other information5157
Item 6. Exhibits5258

i

 

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

 

HALL OF FAME RESORT & ENTERTAINMENT COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

 

 As of:  As of 
 September 30,
2021		 December 31,
2020		  June 30,
2022		 December 31,
2021		 
 (unaudited)    (unaudited)   
Assets          
Cash $13,208,269  $7,145,661  $10,615,810  $10,282,983 
Restricted cash  15,281,917   32,907,800   7,214,439   7,105,057 
Accounts receivable, net  1,670,297   1,545,089   2,737,750   2,367,225 
Prepaid expenses and other assets  8,569,098   6,920,851   2,573,667   8,350,604 
Property and equipment, net  147,295,956   154,355,763   188,252,325   180,460,562 
Right of use asset  7,651,080   - 
Project development costs  146,483,370   107,969,139   158,722,100   128,721,480 
Total assets $332,508,907  $310,844,303  $377,767,171  $337,287,911 
                
Liabilities and stockholders' equity        
Liabilities and stockholders’ equity        
Liabilities                
Notes payable, net $84,357,100  $98,899,367  $122,930,044  $101,360,196 
Accounts payable and accrued expenses  18,060,862   20,538,190   23,651,149   12,120,891 
Due to affiliate  1,828,668   1,723,556   2,746,497   1,818,955 
Warrant liability  33,159,000   19,112,000   3,160,000   13,669,000 
Lease liability  3,404,682   - 
Other liabilities  4,258,328   5,489,469   8,571,212   3,740,625 
Total liabilities  141,663,958   145,762,582   164,463,584   132,709,667 
                
Commitments and contingencies (Note 6 and 7)        
Commitments and contingencies (Note 6, 7, and 8)        
                
Stockholders' equity        
Undesignated preferred stock, $0.0001 par value; 4,932,200 shares authorized; no shares issued or outstanding at September 30, 2021 and December 31, 2020  -   - 
Series B convertible preferred stock, $0.0001 par value; 15,200 shares designated; 15,200 and 0 shares issued and outstanding at September 30, 2021 and December 31, 2020, respectively  2   - 
Common stock, $0.0001 par value; 300,000,000 shares authorized; 95,226,262 and 64,091,266 shares issued and outstanding at September 30, 2021 and December 31, 2020, respectively  9,524   6,410 
Stockholders’ equity        
Undesignated preferred stock, $0.0001 par value; 4,932,200 shares authorized; no shares issued or outstanding at June 30, 2022 and December 31, 2021  -   - 
Series B convertible preferred stock, $0.0001 par value; 15,200 shares designated; 200 and 15,200 shares issued and outstanding at June 30, 2022 and December 31, 2021, respectively; liquidation preference of $215,011 as of June 30, 2022  -   2 
Series C convertible preferred stock, $0.0001 par value; 15,000 shares designated; 15,000 and 0 shares issued and outstanding at June 30, 2022 and December 31, 2021, respectively; liquidation preference of $15,632,500 as of June 30, 2022  2   - 
Common stock, $0.0001 par value; 300,000,000 shares authorized; 117,527,249 and 97,563,841 shares issued and outstanding at June 30, 2022 and December 31, 2021, respectively  11,753   9,756 
Additional paid-in capital  300,634,234   172,112,688   331,390,931   305,117,091 
Accumulated deficit  (109,301,084)  (6,840,871)  (117,266,369)  (99,951,839)
Total equity attributable to HOFRE  191,342,676   165,278,227   214,136,317   205,175,010 
Non-controlling interest  (497,727)  (196,506)  (832,730)  (596,766)
Total equity  190,844,949   165,081,721   213,303,587   204,578,244 
Total liabilities and stockholders' equity $332,508,907  $310,844,303 
Total liabilities and stockholders’ equity $377,767,171  $337,287,911 

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

 


1

 

 

HALL OF FAME RESORT & ENTERTAINMENT COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)

 

 For the Three Months Ended
September 30,		 For the Nine Months Ended
September 30,		 
 2021 2020 2021 2020  For the Three Months Ended
June 30,		 For the Six Months Ended
June 30,		 
          2022 2021 2022 2021 
Revenues                  
Sponsorships, net of activation costs $1,554,454  $1,564,250  $4,538,292  $4,886,106  $452,772  $1,508,402  $1,272,062  $2,983,838 
Rents and cost recoveries  181,892   103,244   278,853   420,681 
Event and other revenues  321,897   9,613   328,616   37,446 
Event, rents and cost recoveries  668,863   60,135   1,006,256   103,680 
Hotel revenues  1,423,713   -   2,615,273   -   1,563,900   795,222   2,513,741   1,191,560 
Total revenues  3,481,956   1,677,107   7,761,034   5,344,233   2,685,535   2,363,759   4,792,059   4,279,078 
                                
Operating expenses                                
Property operating expenses  8,933,714   8,987,167   21,162,494   18,099,436 
Operating expenses  6,799,280   6,219,781   14,325,979   12,228,780 
Hotel operating expenses  1,524,774   -   3,887,928   -   1,316,150   1,596,989   2,469,262   2,363,154 
Commission expense  224,293   199,668   651,543   1,257,648   516,833   260,583   656,743   427,250 
Impairment expense  1,748,448   -   1,748,448   - 
Depreciation expense  2,993,583   2,753,046   8,886,650   8,198,469   3,527,581   2,972,130   6,769,866   5,893,067 
Total operating expenses  15,424,812   11,939,881   36,337,063   27,555,553   12,159,844   11,049,483   24,221,850   20,912,251 
                                
Loss from operations  (11,942,856)  (10,262,774)  (28,576,029)  (22,211,320)  (9,474,309)  (8,685,724)  (19,429,791)  (16,633,173)
                                
Other income (expense)                                
Interest expense  (981,945)  (615,250)  (2,941,672)  (4,825,045)
Interest expense, net  (921,392)  (1,004,419)  (2,134,933)  (1,959,727)
Amortization of discount on note payable  (1,326,620)  (3,043,738)  (3,725,347)  (9,721,484)  (1,122,324)  (1,164,613)  (2,478,298)  (2,398,727)
Change in fair value of warrant liability  22,469,170   25,510,000   (67,565,942)  25,510,000   2,423,000   26,315,888   7,173,000   (90,035,112)
Business combination costs  -   (19,137,165)  -   (19,137,165)
Gain (loss) on forgiveness of debt  -   (877,976)  390,400   (877,976)
(Loss) gain on extinguishment of debt  -   -   (148,472)  390,400 
Total other income (expense)  20,160,605   1,835,871   (73,842,561)  (9,051,670)  379,284   24,146,856   2,411,297   (94,003,166)
                                
Net income (loss) $8,217,749  $(8,426,903) $(102,418,590) $(31,262,990)
Net (loss) income $(9,095,025) $15,461,132  $(17,018,494) $(110,636,339)
                                
Series B preferred stock dividends  (212,844)  -   (342,844)  -   (266,000)  (130,000)  (532,000)  (130,000)
Non-controlling interest  141,011   36,000   301,221   - 
Loss attributable to non-controlling interest  158,592   209,921   235,964   160,210 
                                
Net income (loss) attributable to HOFRE stockholders $8,145,916  $(8,390,903) $(102,460,213) $(31,262,990)
Net (loss) income attributable to HOFRE stockholders $(9,202,433) $15,541,053  $(17,314,530) $(110,606,129)
                                
Net income (loss) per share, basic $0.09  $(0.26) $(1.16) $(2.15)
Net (loss) income per share, basic $(0.08) $0.16  $(0.16) $(1.30)
                                
Weighted average shares outstanding, basic  95,044,250   32,576,553   88,382,322   14,548,887   113,997,493   94,397,222   109,194,639   84,978,294 
                                
Net loss per share, diluted $(0.08) $(0.26) $(1.16) $(2.15)
Net (loss) income per share, diluted $(0.08) $-  $(0.16) $(1.30)
                                
Weighted average shares outstanding, diluted  102,540,809   32,576,553   88,382,322   14,548,887   113,997,493   107,353,272   109,194,639   84,978,294 

  

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


2

 

 

HALL OF FAME RESORT & ENTERTAINMENT COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS'STOCKHOLDERS’ EQUITY

FOR THE THREE AND NINESIX MONTHS ENDED SEPTEMBERJUNE 30, 2022 AND 2021 and 2020

(unaudited)

 

 Series B Convertible Preferred stock Common Stock Additional
Paid-In		 Retained
Earnings
(Accumulated		 Total Equity Attributable
to HOFRE		 Non-
controlling		 Total Stockholders'  Series B
Convertible
Preferred stock		 Series C
Convertible
Preferred stock		 Common Stock Additional Paid-In Retained Earnings (Accumulated Total Equity Attributable to HOFRE Non-controlling Total Stockholders’ 
 Shares Amount Shares Amount Capital Deficit) Stockholders Interest Equity 
                   
Balance as of January 1, 2020  -  $-   5,436,000  $544  $-  $34,948,795  $34,949,339  $-  $34,949,339 
                                    
Net loss  -   -   -   -   -   (8,390,903)  (8,390,903)  -   (8,390,903)
                                    
Balance as of March 31, 2020  -  $-   5,436,000  $544  $-  $26,557,892  $26,558,436  $-  $26,558,436 
                                    
Contribution from members  -   -   -   -   -   3,699,000   3,699,000   -   3,699,000 
Net loss  -   -   -   -   -   (14,445,184)  (14,445,184)  -   (14,445,184)
                                    
Balance as of June 30, 2020  -  $-   5,436,000  $544  $-  $15,811,708  $15,812,252  $-  $15,812,252 
                                    
Conversion of the preferred equity loan  -   -   12,277,428   1,228   58,438,397  $-  $58,439,625  $-  $58,439,625 
Shares of common stock issued for accounts payable  -   -   2,803,396   280   23,425,881   -   23,426,161   -   23,426,161 
Business combination with GPAQ on July 1, 2020  -   -   6,027,428   602   494,179   -   494,781   -   494,781 
Shares of common stock issued in exchange of debt  -   -   5,280,083   528   38,007,218   -   38,007,746   -   38,007,746 
Stock-based compensation on restricted stock awards  -   -   715,929   72   2,772,733   -   2,772,805   -   2,772,805 
Stock-based compensation on restricted stock units  -   -   -   -   593,688   -   593,688   -   593,688 
Vesting of restricted stock units  -   -   176,514   18   (18)  -   -   -   - 
Stock-based compensation - common stock awards  -   -   25,000   3   195,997   -   196,000   -   196,000 
Contingent beneficial conversion feature on PIPE Notes  -   -   -   -   14,166,339   -   14,166,339   -   14,166,339 
Net loss  -   -   -   -   -   (8,390,903)  (8,390,903)  (36,000)  (8,426,903)
                                    
Balance as of September 30, 2020  -  $-   32,741,778  $3,275  $138,094,414  $7,420,805  $145,518,494  $(36,000) $145,482,494 
                                     Shares Amount Shares Amount Shares Amount Capital Deficit) Stockholders Interest Equity 
Balance as of January 1, 2021  -  $-   64,091,266   6,410   172,112,688  $(6,840,871) $165,278,227  $(196,506) $165,081,721   -  $-   -  $-   64,091,266  $6,410  $172,112,688  $(6,840,871) $165,278,227  $(196,506) $165,081,721 
                                                                                
Stock-based compensation on RSU and restricted stock awards  -   -   -   -   1,386,543   -   1,386,543   -   1,386,543 
Stock-based compensation on restricted stock units  -   -   -   -   -   -   1,386,543   -   1,386,543   -  $1,386,543 
February 12, 2021 Capital Raise, net of offering costs  -   -   12,244,897   1,224   27,560,774   -   27,561,998   -   27,561,998   -   -   -   -   12,244,897   1,224   27,560,774   -   27,561,998   -   27,561,998 
February 18, 2021 Overallotment, net of offering costs  -   -   1,836,734   184   4,184,814   -   4,184,998   -   4,184,998   -   -   -   -   1,836,734   184   4,184,814   -   4,184,998   -   4,184,998 
Exercise of Warrants  -   -   16,005,411   1,601   73,570,976   -   73,572,577   -   73,572,577   -   -   -   -   16,005,411   1,601   73,570,976   -   73,572,577   -   73,572,577 
Net loss  -   -   -   -   -   (126,147,182)  (126,147,182)  49,711   (126,097,471)
Net (loss) income  -   -   -   -   -   -   -   (126,147,182)  (126,147,182)  49,711   (126,097,471)
                                                                                
Balance as of March 31, 2021  -  $-   94,178,308   9,419   278,815,795  $(132,988,053) $145,837,161  $(146,795) $145,690,366   -  $-   -  $-   94,178,308  $9,419  $278,815,795  $(132,988,053) $145,837,161  $(146,795) $145,690,366 
                                                                                
Stock-based compensation on RSU and restricted stock awards  -   -   -   -   1,620,149   -   1,620,149   -   1,620,149   -   -   -   -   -   -   1,620,149   -   1,620,149   -   1,620,149 
Issuance of vested RSUs  -   -   24,028   2   (2)  -   -   -   -   -   -   -   -   24,028   2   (2)  -   -   -   - 
Exercise of Warrants  -   -   669,732   67   3,116,338   -   3,116,405   -   3,116,405 
Exercise of warrants  -   -   -   -   669,732   67   3,116,338   -   3,116,405   -   3,116,405 
Sale of Series B preferred stock and warrants  15,200   2   -   -   15,199,998   -   15,200,000   -   15,200,000   15,200   2.00   -   -   -   -   15,199,998   -   15,200,000   -   15,200,000 
Series B preferred stock dividends  -   -   -   -   -   (130,000)  (130,000)  -   (130,000)  -   -   -   -   -   -   -   (130,000)  (130,000)      (130,000)
Net income  -   -   -   -   -   15,671,053   15,671,053   (209,921)  15,461,132 
Net income (loss)  -   -   -   -   -   -   -   15,671,053   15,671,053   (209,921)  15,461,132 
                                                                                
Balance as of June 30, 2021  15,200  $2   94,872,068   9,488   298,752,278  $(117,447,000) $181,314,768  $(356,716) $180,958,052   15,200  $2   -  $-   94,872,068  $9,488  $298,752,278  $(117,447,000) $181,314,768  $(356,716) $180,958,052 
                                                                                
Balance as of January 1, 2022  15,200  $2   -  $-   97,563,841  $9,756  $305,117,091  $(99,951,839) $205,175,010  $(596,766) $204,578,244 
                                            
Stock-based compensation on RSU and restricted stock awards  -   -   -   -   1,494,332   -   1,494,332   -   1,494,332   -   -   -   -   -   -   1,287,695   -   1,287,695   -   1,287,695 
Stock-based compensation - common stock awards  -   -   25,000   3   72,497   -   72,500   -   72,500   -   -   -   -   25,000   3   28,497   -   28,500   -   28,500 
Issuance of vested restricted stock awards  -   -   50,393   5   (5)  -   -   -   - 
Issuance of restricted stock awards  -   -   -   -   152,971   15   (15)  -   -   -   - 
Vesting of restricted stock units  -   -   178,801   18   (18)  -   -   -   -   -   -   -   -   539,058   54   (54)  -   -   -   - 
Exercise of Warrants  -   -   100,000   10   315,150   -   315,160   -   315,160 
Series B preferred stock dividends  -   -   -   -   -   (212,844)  (212,844)  -   (212,844)
Net income  -   -   -   -   -   8,358,760   8,358,760   (141,011)  8,217,749 
Sale of shares under ATM  -   -   -   -   12,581,986   1,258   14,233,674   -   14,234,932   -   14,234,932 
Shares issued in connection with amendment of notes payable  -   -   -   -   860,000   86   802,975   -   803,061   -   803,061 
Warrants issued in connection with amendment of notes payable  -   -   -   -   -   -   1,088,515   -   1,088,515   -   1,088,515 
Modification of Series C and Series D warrants  -   -   -   -   -   -   3,736,000   -   3,736,000   -   3,736,000 
Preferred stock dividends  -   -   -   -   -   -   -   (266,000)  (266,000)  -   (266,000)
Exchange of Series B preferred stock for Series C preferred stock  (15,000)  (2)  15,000   2   -   -   -   -   -   -   - 
Net loss  -   -   -   -   -   -   -   (7,846,097)  (7,846,097)  (77,372)  (7,923,469)
                                                                                
Balance as of September 30, 2021  15,200  $2   95,226,262   9,524   300,634,234  $(109,301,084) $191,342,676  $(497,727) $190,844,949 
Balance as of March 31, 2022  200  $-   15,000  $2   111,722,856  $11,172  $326,294,378  $(108,063,936) $218,241,616  $(674,138) $217,567,478 
                                            
Stock-based compensation on RSU and restricted stock awards  -   -   -   -   -   -   1,254,724   -   1,254,724   -   1,254,724 
Issuance of restricted stock awards  -   -   -   -   44,197   5   (5)  -   -   -   - 
Vesting of restricted stock units  -   -   -   -   2,319   -   -   -   -   -   - 
Shares issued in connection with issuance of notes payable  -   -   -   -   125,000   13   75,406   -   75,419   -   75,419 
Warrants issued in connection with issuance of notes payable  -   -   -   -   -   -   18,709   -   18,709   -   18,709 
Sale of shares under ATM  -   -   -   -   5,632,877   563   3,747,719   -   3,748,282   -   3,748,282 
Preferred stock dividends  -   -   -   -   -   -   -   (266,000)  (266,000)  -   (266,000)
Net loss  -   -   -   -   -   -   -   (8,936,433)  (8,936,433)  (158,592)  (9,095,025)
                                            
Balance as of June 30, 2022  200  $-   15,000  $2   117,527,249  $11,753  $331,390,931  $(117,266,369) $214,136,317  $(832,730) $213,303,587 

 

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


3

 

 

HALL OF FAME RESORT & ENTERTAINMENT COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

 

 For the Nine Months Ended
September 30,		  For the Six Months Ended
June 30,		 
 2021 2020  2022 2021 
Cash Flows From Operating Activities          
Net loss $(102,418,590) $(31,262,990) $(17,018,494) $(110,636,339)
Adjustments to reconcile net loss to cash flows used in operating activities          
Depreciation expense 8,886,648 8,198,469  6,769,866 5,893,067 
Amortization of note discounts 3,725,349 9,721,484  2,478,298 2,398,727 
Interest paid in kind  1,500,382 3,135,035  1,681,722 952,012 
Impairment expense 1,748,448   
(Gain) loss on forgiveness of debt (390,400) 877,976 
Loss (gain) on extinguishment of debt 148,472 (390,400)
Change in fair value of warrant liability 67,565,942 (25,510,000) (7,173,000) 90,035,112 
Stock-based compensation expense 4,573,524 3,562,493  2,570,919 3,006,692 
Amortization of right of use asset 90,876 - 
Changes in operating assets and liabilities:          
Accounts receivable (125,208) 102,922  (370,525) 675,668 
Prepaid expenses and other assets (1,648,247) (4,525,057) 1,430,448 (2,033,495)
Accounts payable and accrued expenses (2,537,410) 15,517,286  8,196,272 (2,060,008)
Operating leases 9,215  - 
Due to affiliates 105,112 (9,126,691) 1,777,542 178,436 
Other liabilities  (1,231,141)  4,090,150   4,830,587  (275,640)
Net cash used in operating activities (20,245,591) (25,218,923)
Net cash provided by (used in) operating activities 5,422,198 (12,256,168)
          
Cash Flows From Investing Activities          
Additions to project development costs and property and equipment (42,328,949) (28,085,048)  (40,022,805)  (26,098,120)
Proceeds from business combination  -  31,034,781 
Net cash (used in) provided by investing activities (42,328,949) 2,949,733 
Net cash used in investing activities (40,022,805) (26,098,120)
          
Cash Flows From Financing Activities          
Proceeds from notes payable 6,900,000 65,039,642  20,714,311 6,000,000 
Repayments of notes payable (25,762,598) (26,113,861) (3,144,677) (4,309,947)
Payment of financing costs (515,000) (1,428,992) (210,032) (15,000)
Proceeds from sale of Series B preferred stock and warrants - 15,200,000 
Proceeds from equity raises - 31,746,996 
Proceeds from exercise of warrants - 23,346,870 
Payment of Series B dividends (43,333) -  (300,000) - 
Proceeds from sale of Series B preferred stock and warrants 15,200,000 - 
Proceeds from equity raises, net of offering costs 31,746,996 - 
Proceeds from exercise of warrants  23,485,200  - 
Proceeds from sale of common stock under ATM  17,983,214  - 
Net cash provided by financing activities 51,011,265 37,496,789  35,042,816 71,968,919 
          
Net (decrease) increase in cash and restricted cash (11,563,275) 15,227,599 
Net increase in cash and restricted cash 442,209 33,614,631 
          
Cash and restricted cash, beginning of period  40,053,461  8,614,592 
Cash and restricted cash, beginning of year  17,388,040  40,053,461 
          
Cash and restricted cash, end of period $28,490,186 $23,842,191  $17,830,249 $73,668,092 
          
Cash $13,208,269 $7,924,636  $10,615,810 $61,908,208 
Restricted Cash  15,281,917  15,917,555   7,214,439  11,759,884 
Total cash and restricted cash $28,490,186 $23,842,191  $17,830,249 $73,668,092 

 

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


4

 

 

HALL OF FAME RESORT & ENTERTAINMENT COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

 

  For the Nine Months Ended
September 30,		 
  2021  2020 
Supplemental disclosure of cash flow information      
Cash paid during the year for interest $2,358,770  $4,878,254 
Cash paid for income taxes $-  $- 
         
Non-cash investing and financing activities        
Project development cost acquired through accounts payable and accrued expenses, net $239,429  $5,495,260 
Settlement of warrant liability $53,518,942  $- 
Non-cash contribution from PFHOF in shared services agreement $-  $3,699,000 
Accrued dividends $299,511  $- 
Conversion of the preferred equity loan to common equity $-  $58,439,625 
Shares of common stock issued for accounts payable $-  $23,426,161 
Shares of common stock issued in exchange of debt $-  $38,007,746 
Conversion of GPAQ Sponsor Loan into convertible PIPE debt $-  $500,000 
Contingent beneficial conversion feature on PIPE Notes $-  $14,166,339 
  For the Six Months Ended
June 30,		 
  2022  2021 
Supplemental disclosure of cash flow information      
Cash paid during the year for interest $3,520,404  $1,702,523 
Cash paid for income taxes $-  $- 
         
Non-cash investing and financing activities        
Project development cost acquired through accounts payable and accrued expenses, net $4,539,444  $5,782,496 
Settlement of warrant liability $-  $53,342,112 
Amendment of Series C warrant liability for equity classification $3,336,000  $- 
Amendment of Series C and D warrants $400,000  $- 
Initial value of right of use asset upon adoption of ASC 842 $7,741,955  $- 
Accrued Series B preferred stock dividends $232,000  $130,000 
Amounts due to affiliate exchanged for note payable $850,000  $- 
Shares issued in connection with amendment of notes payable $803,061  $- 
Warrants issued in connection with amendment of notes payable $1,088,515  $- 
Shares issued in connection with issuance of notes payable $75,419  $- 
Warrants issued in connection with issuance of notes payable $18,709  $- 

 

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


5

 

 

Hall of Fame Resort & Entertainment Company and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

 

Note 1: Organization and Nature of Business

 

Organization and Nature of Business

 

Hall of Fame Resort & Entertainment Company, a Delaware corporation (together with its subsidiaries, unless the context indicates otherwise, the “Company” or “HOFRE”), was incorporated in Delaware as GPAQ Acquisition Holdings, Inc., a wholly owned subsidiary of our legal predecessor, Gordon Pointe Acquisition Corp. (“GPAQ”), a special purpose acquisition company.

 

On July 1, 2020, the Company consummated a business combination with HOF Village, LLC, a Delaware limited liability company (“HOF Village”), pursuant to an Agreement and Plan of Merger dated September 16, 2019 (as amended on November 6, 2019, March 10, 2020 and May 22, 2020, the “Merger Agreement”), by and among the Company, GPAQ, GPAQ Acquiror Merger Sub, Inc., a Delaware corporation (“Acquiror Merger Sub”), GPAQ Company Merger Sub, LLC, a Delaware limited liability company (“Company Merger Sub”), HOF Village and HOF Village Newco, LLC, a Delaware limited liability company (“Newco”). The transactions contemplated by the Merger Agreement are referred to as the “Business Combination”.Combination.”

 

The Company is a resort and entertainment company leveraging the power and popularity of professional football and its legendary players in partnership with the National Football Museum, Inc., doing business as the Pro Football Hall of Fame (“PFHOF”). Headquartered in Canton, Ohio, the Company owns the Hall of Fame Village powered by Johnson Controls, a multi-use sports, entertainment, and media destination centered around the PFHOF’s campus. The Company is pursuing a differentiation strategy across three pillars, including destination-based assets, HOF Village Media Group, LLC (“Hall of Fame Village Media”), and gaming (including the fantasy football league in which wethe Company acquired a majority stake in 2020). The Company is located in the only tourism development district in the state of Ohio.

 

The Company has entered into several agreements with PFHOF, an affiliate of the Company, 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 powered by Johnson Controls sits, portions of which are owned by the Company and portions of which are net leased to the Company by the government and quasi-governmental entities (see Note 79 for additional information). Under these agreements, the PFHOF and the governmentlessor entities are entitled to use portions of the Hall of Fame Village powered by Johnson Controls on a direct-cost basis.

 

COVID-19

 

Since 2020, the world has been and continues to be, impacted by the novel coronavirus (“COVID-19”) pandemic. The COVID-19 pandemic and measures to prevent its spread have impacted the Company’s business in a number of ways, most significantly with regard to a reduction in the number of events and attendance at events at Tom Benson Hall of Fame Stadium and National Youth Football andForeverLawn Sports Complex, which has also negatively impactsimpacted the Company’s ability to sell sponsorships. Also,Further, the Company opened its newly renovated DoubleTree by Hilton in Canton in November 2020, but the occupancy rateCOVID-19 pandemic has beencaused a number of supply chain disruptions, which have negatively impacted by the pandemic.Company’s ability to obtain the materials needed to complete constructionas well as increases in the costs of materials and labor. The continued impact of these disruptions and the ultimate extent of their adverse impact on the Company’s financial and operating results will continue to be dictated by the length of time that such disruptions continue, which will, in turn, depend on the currently unpredictable duration and severity of the impacts of the COVID-19 pandemic, and among other things, the impact of governmental actions imposed in response to the COVID-19 pandemic as well as individuals’ and companies’ risk tolerance regarding health matters going forward and developing strain mutations.

 


6

 

 

Hall of Fame Resort & Entertainment Company and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

 

Note 1: Organization and Nature of Business (continued)

 

Liquidity and Going Concern

 

The Company has sustained recurring losses and negative cash flows from operations through SeptemberJune 30, 2021. In addition, the Company has significant debt obligations maturing in the 12 month period subsequent to the date these unaudited condensed consolidated financial statements are issued.2022. Since inception, the Company’s operations have been funded principally through the issuance of debt and equity. As of SeptemberJune 30, 2021,2022, the Company had approximately $13$11 million of unrestricted cash and cash equivalents and $15$7 million of restricted cash, respectively. These conditions initially raise substantial doubt regarding the Company’s ability to continue as a going concern. However, the Company believes that management’s plans alleviate such substantial doubt. Management’s plans include raising additional capital, including debt, construction lending, and equity financing or, if necessary, reducing the scope of planned development.cash.

 

During February 2021,On March 1, 2022, the Company received approximately $34.5 million gross proceeds fromand ErieBank agreed to extend the issuanceMKG DoubleTree Loan (as defined in Note 4) in principal amount of shares$15,300,000 to September 13, 2023. See Note 4, Notes Payable, for more information on this transaction.

On March 1, 2022, the Company executed a series of transactions with affiliates of Industrial Realty Group, LLC, a Nevada limited liability company that is controlled by the Company’s director Stuart Lichter (“IRG”), and JKP Financial, LLC (“JKP”), whereby the IRG affiliates and JKP extended certain of the Company’s common stock, par valuedebt in aggregate principal amount of $0.0001 per share (“Common Stock”), before offering costs.$22,853,831 to March 31, 2024. See Note 4, Notes Payable, for more information on this transaction.

 

On June 4, 2021,16, 2022, the Company completedentered into a private placementloan agreement with CH Capital Lending, LLC, for a purchase price of $15 million (i) 15,000 shares of 7.00% Series B Convertible Preferred Stock (the “Series B Preferred Stock”), which are convertible into sharesis an affiliate of the Company’s Common Stock, having an aggregate liquidation preference of $15 million plus any accrued but unpaid dividendsdirector Stuart Lichter (“CH Capital Lending”), whereby CH Capital Lending agreed to the date of payment, and (ii) 2,450,980 warrants, with a term of three years, exercisable six months after issuance, each exercisable for one share of Common Stock at an exercise price of $6.90 per share, subject to certain adjustments (the “Series D Warrants”). Also on June 4, 2021,lend the Company closed a securities purchase agreement with another purchaser for 200 shares of Series B Preferred Stock and 32,680 Series D Warrants in exchange for $200,000.$10,500,000.

 

On each of August 12, 2021 and September 22, 2021,June 16, 2022, the Company issuedentered into a loan agreement with Stark Community Foundation, whereby Stark Community Foundation agreed to American Capital Center, LLC (the “Investor”) 900 shares (the “Series A Shares”)lend to the Company $5,000,000, of 7.00% Series A Cumulative Redeemable Preferred Stock (“Series A Preferred Stock”) at a price of $1,000 per sharewhich $2,500,000 has been provided to the Company to date. See Stark Community Foundation Loan under Note 4, Notes Payable, for an aggregate purchase price of $900,000. The Company will pay the Investor an origination fee of 2% of the aggregate purchase price.more information on this transaction.

 

On September 30, 2021,July 1, 2022, the Company entered into an Equity DistributionEnergy Project Cooperative Agreement (the “Equity Distribution“EPC Agreement”) with Wedbush SecuritiesCanton Regional Energy Special Improvement District, Inc., SPH Canton St, LLC, an affiliate of Stonehill Strategic Capital, LLC and Maxim Group LLC with respect to an atCity of Canton, Ohio. Under the market offering program (“ATM”) under whichEPC Agreement, 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. No shares had been sold under the Equity Distribution Agreement through September 30, 2021. From the October 1 through November 10, 2021, approximately 202,489 shares were sold resultingwas provided $33,387,844 in net proceeds to the Company totaling approximately $512,273. The remaining availability under the Equity Distribution Agreement as of the date of filing ofProperty Assessed Clean Energy (“PACE”) financing. See Note 12, Subsequent Events, for more information on this report is approximately $49.5 million.transaction.

 


Hall of Fame Resort & Entertainment Company and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Note 1: Organization and Nature of Business (continued)

Liquidity and Going Concern (continued)

The Company believes that, as a result of the Company’s demonstrated historical ability to finance and refinance debt, the transactions described above and its current ongoing negotiations, it will have sufficient cash and future financing to meet its funding requirements over the next twelve months.12 months from the issuance of these unaudited condensed consolidated financial statements. Notwithstanding, the Company expects that it will need to raise additional financing to accomplish its development plan over the next several years. The Company is seeking to obtain additional funding through debt, construction lending, and equity financing. There are no assurances that the Company will be able to raise capital on terms acceptable to the Company or at all, or that cash flows generated from its operations will be sufficient to meet its current operating costs. If the Company is unable to obtain sufficient amounts of additional capital, it may be required to reduce the scope of its planned development, which could harm its financial condition and operating results.

 

7

Hall of Fame Resort & Entertainment Company and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Note 2: Summary of Significant Accounting Policies

 

Basis of Presentation

 

The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and Rule 10 of SEC Regulation S–X.S-X under the Securities Act of 1933, as amended (the “Securities Act”). Accordingly, they do not include all of the information and notes required by U.S. GAAP. However, in the opinion of the management of the Company, all adjustments necessary for a fair presentation of the financial position and operating results have been included in these statements. These unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Form 10-K/A10-K for the year ended December 31, 2020,2021, filed on May 12, 2021.March 14, 2022. Operating results for the three and ninesix months ended SeptemberJune 30, 20212022 are not necessarily indicative of the results that may be expected for any subsequent quarters or for the year ending December 31, 2021.2022.

 

Consolidation

 

The unaudited condensed consolidated financial statements include the accounts and activity of the Company and its wholly owned subsidiaries. Investments in a variable interest entity in which the Company is not the primary beneficiary, or where the Company does not own a majority interest but has the ability to exercise significant influence over operating and financial policies, are accounted for using the equity method. All intercompany profits, transactions, and balances have been eliminated in consolidation.

 

The Company owns a 60% interest in Mountaineer GM, LLC (“Mountaineer”), whose results are consolidated into the Company’s results of operations. The Company acquired 60% of the equity interests in Mountaineer for a purchase price of $100 from one of its related parties. The portion of Mountaineer’s net income (loss) that is not attributable to the Company is included in non-controlling interest.

 


Hall of Fame Resort & Entertainment Company and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Note 2: Summary of Significant Accounting Policies (continued)

Emerging Growth Company

 

The Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act, of 1933, as amended, (the “Securities Act”), as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), and it. It may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. The Company will cease to be an emerging growth company on January 30, 2023.

 

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

 

Use of Estimates

 

The preparation of the unaudited condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the unaudited condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. The most significant estimates and assumptions for the Company relate to bad debt, depreciation, costs capitalized to project development costs, useful lives of assets, stock-based compensation, and fair value of financial instruments and estimates and assumptions used to measure impairment.(including the fair value of the Company’s warrant liability). Management adjusts such estimates when facts and circumstances dictate. Actual results could differ from those estimates.

 

8

Hall of Fame Resort & Entertainment Company and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Note 2: Summary of Significant Accounting Policies (continued)

Warrant Liability

 

The Company accounts for warrants for shares of the Company’s common stock, par value $0.0001 per share (“Common StockStock”) that are not indexed to its own stock under U.S. GAAP as liabilities at fair value on the balance sheet.sheet under U.S. GAAP. Such warrants are subject to remeasurement at each balance sheet date and any change in fair value is recognized as a component of other expense on the statement of operations. The Company will continue to adjust the liability for changes in fair value until the earlier of the exercise or expiration of such Common Stock warrants. At that time, the portion of the warrant liability related to such Common Stock warrants will be reclassified to additional paid-in capital.

 

Cash and Restricted Cash


The Company considers all highly liquid investments with an original maturity of three months or less when purchased, to be cash equivalents. There were no cash equivalents as of June 30, 2022 and December 31, 2021, respectively. The Company maintains its cash and escrow accounts at national financial institutions. The balances, at times, may exceed federally insured limits.

Restricted cash includes escrow reserve accounts for capital improvements and debt service as required under certain of the Company’s debt agreements. The balances as of June 30, 2022 and December 31, 2021 were $7,214,439 and $7,105,057, respectively.

Accounts Receivable

Accounts receivable are generally amounts due under sponsorship and other agreements. Accounts receivable are reviewed for delinquencies on a case-by-case basis and are considered delinquent when the sponsor or debtor has missed a scheduled payment. Interest is not charged on delinquencies.

The carrying amount of accounts receivable is reduced by an allowance that reflects management’s best estimate of the amounts that will not be collected. Management individually reviews all delinquent accounts receivable balances and based on an assessment of current creditworthiness, estimates the portion, if any, of the balance that will not be collected. As of June 30, 2022 and December 31, 2021, the Company has recorded an allowance for doubtful accounts of $2,125,000 and $0, respectively.

9

 

 

Hall of Fame Resort & Entertainment Company and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

 

Note 2: Summary of Significant Accounting Policies (continued)

 

Property and Equipment and Project Development Costs

Property and equipment are recorded at historical cost and are depreciated using the straight-line method over the estimated useful lives of the assets. During the construction period, the Company capitalizes all costs related to the development of the Hall of Fame Village powered by Johnson Controls. Project development costs include predevelopment costs, amortization of finance costs, real estate taxes, insurance, and other project costs incurred during the period of development. The capitalization of costs began during the preconstruction period, which the Company defines as activities that are necessary to the development of the project. The Company ceases cost capitalization when a portion of the project is held available for occupancy and placed into service. This usually occurs upon substantial completion of all costs necessary to bring a portion of the project to the condition needed for its intended use, but no later than one year from the completion of major construction activity. The Company will continue to capitalize only those costs associated with the portion still under construction. Capitalization will also cease if activities necessary for the development of the project have been suspended. As of September 30, 2021, the second two phases of the project remained subject to such capitalization.

The Company reviews its property and equipment and projects under development for impairment whenever events or changes indicate that the carrying value of the long-lived assets may not be fully recoverable. In cases where the Company does not expect to recover its carrying costs, an impairment charge is recorded.

The Company measures and records impairment losses on its long-lived assets when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than their carrying amount. Considerable judgment by management is necessary to estimate undiscounted future operating cash flows and fair values and, accordingly, actual results could vary significantly from such estimates. In August 2021, management determined that previously capitalized costs for the construction of the Center for Performance should be written off because of significant changes to the plans for the project that render certain of the current capitalized costs no longer of use for the Center for Performance. Management reviewed its capitalized costs and identified the costs that had no future benefit. As a result, in the third quarter of 2021, the Company recorded a $1,748,448 charge as an impairment of project development costs within the accompanying statement of operations.


Hall of Fame Resort & Entertainment Company and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Note 2: Summary of Significant Accounting Policies (continued)

Net Income (Loss) Per Common Share

Basic net income (loss) per common share is computed by dividing net income (loss) by the weighted average number of common shares outstanding during the periods.

Diluted net income (loss) per share is computed by dividing the net income (loss) by the weighted average number of common shares outstanding during the period, adjusted for the Company’s potentially dilutive Common Stock equivalent shares, which include incremental common shares issuable upon (i) the exercise of outstanding stock options and warrants, (ii) vesting of restricted stock units and restricted stock awards, (iii) conversion of preferred stock, and (iv) the conversion of convertible notes are only included in the calculation of diluted net loss per share when their effect is dilutive.

For the three months ended September 30, 2021, the Company calculated net income (loss) per share, diluted, as follows:

  For the
Three Months
Ended
September 30, 
2021		 
Numerator for net income per share   
Net income attributable to Common Stock – basic $8,145,916 
Reverse: change in fair value of warrant liabilities  (16,363,170)
Net loss available to common stockholders – diluted $(8,217,254)
     
Denominator for net income per share    
Weighted average shares outstanding – basic  95,044,250 
Warrants to purchase shares of common stock, treasury method  7,496,560 
Weighted average shares outstanding – diluted  102,540,809 
     
Net income per share – basic $0.09 
     
Net loss per share – diluted $(0.08)

For the nine months ended September 30, 2021, and for the three and nine months ended September 30, 2020, the Company was in a loss position and therefore all potentially dilutive securities would be anti-dilutive and the calculations are presented on the accompanying condensed consolidated statements of operations.


Hall of Fame Resort & Entertainment Company and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Note 2: Summary of Significant Accounting Policies (continued)

Net Income (Loss) Per Common Share (continued)

For the three and nine months ended September 30, 2021 and 2020, the following outstanding Common Stock equivalents have been excluded from the calculation of net income (loss) per share because their impact would be anti-dilutive.

  For the Three Months Ended
September 30,		  For the Nine Months Ended
September 30,		 
  2021  2020  2021  2020 
Warrants to purchase shares of Common Stock  27,214,854   24,731,194   41,012,349   24,731,194 
Unvested restricted stock awards  238,643   477,286   238,643   477,286 
Unvested restricted stock units to be settled in shares of Common Stock  2,869,754   749,720   2,869,754   749,720 
Shares of Common Stock issuable upon conversion of convertible notes  3,401,180   3,079,639   3,401,180   3,079,639 
Shares of Common Stock issuable upon conversion of Series B Preferred Stock  4,967,320   -   4,967,320   - 
Total anti-dilutive securities  38,691,751   29,037,839   52,489,246   29,037,839 

Revenue Recognition

 

The Company follows the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”) 606, Revenue with Contracts with Customers, to properly recognize revenue. Under ASC 606, revenue is recognized when a customer obtains control of promised goods or services, in an amount that reflects the consideration which the entity expects to receive in exchange for those goods or services. To determine revenue recognition for arrangements that an entity determines are within the scope of ASC 606, the Company performs the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the entity satisfies a performance obligation.

 

The Company generates revenues from various streams such as sponsorship agreements, rents, cost recoveries, events, hotel operation, Hall of Fantasy League, and through the sale of non-fungible tokens. The sponsorship arrangements, in which the customer sponsors a play area or event and receives specified brand recognition and other benefits over a set period of time, recognize revenue on a straight-line basis over the time period specified in the contract. The excess of amounts contractually due over the amounts of sponsorship revenue recognized are included in other liabilities on the accompanying condensed consolidated balance sheets. Contractually due but unpaid sponsorship revenue are included in accounts receivable on the accompanying condensed consolidated balance sheet. Refer to Note 6 for more details. Revenue for rents, cost recoveries, and events are recognized at the time the respective event or service has been performed. Rental revenue for long term leases is recorded on a straight-line basis over the term of the lease beginning on the commencement date.

 


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 (continued)

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

 

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

 

10

Hall of Fame Resort & Entertainment Company and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Note 2: Summary of Significant Accounting Policies (continued)

Income Taxes

The Company utilizes an asset and liability approach for financial accounting and reporting for income taxes. The provision for income taxes is based upon income or loss after adjustment for those permanent items that are not considered in the determination of taxable income. Deferred income taxes represent the tax effects of differences between the financial reporting and tax basis of the Company’s assets and liabilities at the enacted tax rates in effect for the years in which the differences are expected to reverse.

The Company evaluates the recoverability of deferred tax assets and establishes a valuation allowance when it is more likely than not that some portion or all the deferred tax assets will not be realized. Management makes judgments as to the interpretation of the tax laws that might be challenged upon an audit and cause changes to previous estimates of tax liability. In management’s opinion, adequate provisions for income taxes have been made. If actual taxable income by tax jurisdiction varies from estimates, additional allowances or reversals of reserves may be necessary.

Tax benefits are recognized only for tax positions that are more likely than not to be sustained upon examination by tax authorities. The amount recognized is measured as the largest amount of benefit that is greater than 50 percent likely to be realized upon settlement. A liability for “unrecognized tax benefits” is recorded for any tax benefits claimed in the Company’s tax returns that do not meet these recognition and measurement standards. As of June 30, 2022 and December 31, 2021, no liability for unrecognized tax benefits was required to be reported.

The Company’s policy for recording interest and penalties associated with tax audits is to record such items as a component of general and administrative expense. There were no amounts incurred for penalties and interest during the three or six months ended June 30, 2022 and 2021. The Company does not expect its uncertain tax position to change during the next twelve months. Management is currently unaware of any issues under review that could result in significant payments, accruals or material deviations from its position. The Company’s effective tax rates of zero differ from the statutory rate for the years presented primarily due to the Company’s net operating loss, which was fully reserved for all years presented.

The Company has identified its United States tax return and its state tax return in Ohio as its “major” tax jurisdictions, and such returns for the years 2018 through 2021 remain subject to examination.

Advertising

 

The Company expenses all advertising and marketing costs as they are incurred and records them as “property operating“Operating expenses” on the Company’s unaudited condensed consolidated statements of operations. Total advertising and marketing costs for the three months ended SeptemberJune 30, 2022 and 2021 were $374,256 and 2020 were $125,042 and $45,976,$72,016, respectively and were $472,916 and $313,571 for the ninesix months ended SeptemberJune 30, 2022 and 2021 were $399,346 and 2020,347,874, respectively.

 

11

Hall of Fame Resort & Entertainment Company and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Note 2: Summary of Significant Accounting Policies (continued)

Software Development Costs

 

The Company recognizes all costs incurred to establish technological feasibility of a computer software product to be sold, leased, or otherwise marketed as research and development costs. Prior to the point of reaching technological feasibility, all costs shall be charged to expenseexpensed when incurred. Once the development of the product establishes technological feasibility, the Company will begin capitalizing these costs. Management exercises its judgement in determining when technological feasibility is established based on when a product design and working model have been completed and the completeness of the working model and its consistency with the product design have been confirmed through testing.

 


Hall of Fame Resort & Entertainment CompanyFilm and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Note 2: Summary of Significant Accounting Policies (continued)

Accounting for Real Estate InvestmentsMedia Costs

 

Upon the acquisition of real estate properties, a determination is made asThe Company capitalizes all costs to whether the acquisition meets the criteria to be accounted fordevelop films and related media as an asset, or business combination. The determination is primarily basedincluded in “project development costs” on whether the assets acquired and liabilities assumed meet the definition of a business. The determination of whether the assets acquired and liabilities assumed meet the definition of a business include a single or similar asset threshold. In applying the single or similar asset threshold, if substantially all the fair value of the gross assets acquired is concentrated in a single identifiable asset or group of similar identifiable assets, the assets acquired and liabilities assumed are not considered a business. Most of the Company’s acquisitions meetcondensed consolidated balance sheet. The costs for each film or media will be expensed over the single or similar asset threshold due to the fact that substantially all the fair value of the gross assets acquired is attributable to the real estate acquired.

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

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

 

Fair Value Measurement

 

The Company follows FASB’s ASC 820–10, Fair Value Measurement, to measure the fair value of its financial instruments and to incorporate disclosures about fair value of its financial instruments. ASC 820–10 establishes a framework for measuring fair value and expands disclosures about fair value measurements. To increase consistency and comparability in fair value measurements and related disclosures, ASC 820–10 establishes a fair value hierarchy which prioritizes the inputs to valuation techniques used to measure fair value into three broad levels.

  


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 three levels of fair value hierarchy defined by ASC 820–1010-20 are described below:

 

Level 1 

Quoted market prices available in active markets for identical assets or liabilities as of the

reporting date.

   
Level 2 

Pricing inputs other than quoted prices in active markets included in Level 1, which are either

directly or indirectly observable as of the reporting date.

   
Level 3 Pricing inputs that are generally unobservable inputs and not corroborated by market data.

 

Financial assets or liabilities are considered Level 3 when their fair values are determined using pricing models, discounted cash flow methodologies, or similar techniques and at least one significant model assumption or input is unobservable.

 

The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. If the inputs used to measure the financial assets and liabilities fall within more than one level described above, the categorization is based on the lowest level input that is significant to the fair value measurement of the instrument.

 

The carrying amounts of the Company’s financial assets and liabilities, such as cash, prepaid expenses and other current assets, accounts payable, and accrued expenses approximate their fair values due to the short-term nature of these instruments.

 

The Company uses Levels 1 and 3 of the fair value hierarchy to measure the fair value of its warrant liabilities. The Company revalues such liabilities at every reporting period and recognizes gains or losses ason the change in fair value of the warrant liabilities as “change in fair value of warrant liabilities” in the unaudited condensed consolidated statements of operations that are attributable to the change in the fair value of the warrant liabilities.operations.

 

The following table provides the financial liabilities measured on a recurring basis and reported at fair value on the balance sheet as of SeptemberJune 30, 20212022 and December 31, 20202021 and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value:

 

 Level September 30,
2021		 December 31,
2020		  Level June 30, 2022 December 31,
2021		 
Warrant liabilities – Public Series A Warrants 1 $10,794,000  $4,130,000   1  $2,706,000  $4,617,000 
Warrant liabilities – Private Series A Warrants 3  570,000   420,000   3   10,000   110,000 
Warrant liabilities – Series B Warrants 3  5,918,000   9,781,000   3   444,000   2,416,000 
Warrant liabilities – Series C Warrants 3  15,877,000   4,781,000   3   -   6,526,000 
Fair value of aggregate warrant liabilities   $33,159,000  $19,112,000     $3,160,000  $13,669,000 

 


12

 

 

Hall of Fame Resort & Entertainment Company and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

 

Note 2: Summary of Significant Accounting Policies (continued)

 

Fair Value Measurement (continued)

 

The Series A Warrants issued to the previous shareholders of GPAQ (the “Public Series A Warrants”) are classified as Level 1 due to the use of an observable market quote in the active market. Level 3 financial liabilities consist of the Series A Warrants issued to the sponsors of GPAQ (the “Private Series A Warrants”), the Series B Warrants issued in the Company’s November 2020 follow-on public offering, and the Series C Warrants issued in the Company’s December 2020 private placement (“Series C Warrants”), for which there is no current market for these securities, and the determination of fair value requires significant judgment or estimation. Changes in fair value measurement categorized within Level 3 of the fair value hierarchy are analyzed each period based on changes in estimates or assumptions and recorded appropriately.

 

Subsequent measurement

 

The following table presents the changes in fair value of the warrant liabilities:

 

  Public
Series A
Warrants		  Private
Series A
Warrants		  Series B
Warrants		  Series C
Warrants		  Total
Warrant
Liability		 
Fair value as of January 1, 2021 $4,130,000  $420,000  $9,781,000  $4,781,000  $19,112,000 
                     
Settlement of warrants, exercised  -   -   (53,518,942)  -   (53,518,942)
Change in fair value, exercised  -   -   43,070,206   -   43,070,206 
Change in fair value, outstanding  6,664,000   150,000   6,585,736   11,096,000   24,495,736 
                     
Fair value as of September 30, 2021 $10,794,000  $570,000  $5,918,000  $15,877,000  $33,159,000 
  Public Series A Warrants  Private Series A Warrants  Series B Warrants  Series C Warrants  Total Warrant Liability 
Fair value as of December 31, 2021 $4,617,000  $110,000  $2,416,000  $6,526,000  $13,669,000 
                     
Amendment of warrants to equity classification  -   -   -   (3,336,000)  (3,336,000)
Change in fair value  (1,911,000)  (100,000)  (1,972,000)  (3,190,000)  (7,173,000)
                     
Fair value as of June 30, 2022 $2,706,000  $10,000  $444,000  $-  $3,160,000 

 

On March 1, 2022, the Company and CH Capital Lending amended the Series C Warrants. The Amended and Restated Series C Warrants extend the term of the Series C Warrants to March 1, 2027. The exercise price of $1.40 per share was not modified, but the amendments subject the exercise price to a weighted-average antidilution adjustment. The amendments also remove certain provisions that previously caused the Series C Warrants to be accounted for as a liability.


The key inputs into the Black Scholes valuation model for the Level 3 valuations as of June 30, 2022 and December 31, 2021 are as follows:

  June 30, 2022  March 1,
2022		  December 31, 2021 
  Private Series A Warrants  Series B Warrants  Series C Warrants  Private Series A Warrants  Series B Warrants  Series C Warrants 
Term (years)  3.0   3.4   3.8   3.5   3.9   4.0 
Stock price $0.59  $0.59  $1.01  $1.52  $1.52  $1.52 
Exercise price $11.50  $1.40  $1.40  $11.50  $1.40  $1.40 
Dividend yield  0.0%  0.0%  0.0%  0.0%  0.0%  0.0%
Expected volatility  59.9%  57.6%  54.7%  50.6%  50.6%  50.6%
Risk free interest rate  3.0%  3.0%  1.5%  1.3%  1.3%  1.3%
                         
Number of shares  2,103,573   3,760,570   10,036,925   2,103,573   3,760,570   10,036,925 
Value (per share) $0.005  $0.12  $0.33  $0.05  $0.64  $0.65 

13

 

 

Hall of Fame Resort & Entertainment Company and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

 

Note 2: Summary of Significant Accounting Policies (continued)

 

Fair Value Measurement (continued)Net Income (Loss) Per Common Share

 

Subsequent measurement (continued)

Basic net income (loss) per common share is computed by dividing net income (loss) by the weighted average number of common shares outstanding during the periods.

 

Diluted net income (loss) per share is computed by dividing the net loss by the weighted average number of common shares outstanding during the period. The key inputs intoCompany’s potentially dilutive common stock equivalent shares, which include incremental common shares issuable upon (i) the Black Scholes valuation model forexercise of outstanding stock options and warrants, (ii) vesting of restricted stock units and restricted stock awards, and (iii) conversion of preferred stock, are only included in the Level 3 valuations ascalculation of Septemberdiluted net loss per share when their effect is dilutive.

For the three months ended June 30, 2021, and December 31, 2020 arethe Company calculated net income per share, diluted, as follows:

 

  September 30, 2021  December 31, 2020 
  Private
Series A
Warrants		  Series B
Warrants		  Series C
Warrants		  Private
Series A
Warrants		  Series B
Warrants		  Series C
Warrants		 
Term (years)  3.8   4.1   4.2   4.5   4.9   5.0 
Stock price $2.65  $2.65  $2.65  $1.23  $1.23  $1.23 
Exercise price $11.50  $1.40  $1.40  $11.50  $1.40  $1.40 
Dividend yield  0.0%  0.0%  0.0%  0.0%  0.0%  0.0%
Expected volatility  49.9%  49.9%  49.9%  70.7%  49.5%  49.5%
Risk free interest rate  1.0%  1.0%  1.0%  0.3%  0.3%  0.3%
                         
Number of shares  2,103,573   3,760,570   10,036,925   1,480,000   20,535,713   10,036,925 
Value (per share) $0.27  $1.57  $1.58  $0.28  $0.48  $0.48 
  For the Three Months Ended June 30,
2021		 
Numerator for net income per share    
Net income attributable to common stock – basic $15,541,053 
Reverse: change in fair value of warrant liabilities  (15,025,888)
Net income available to common stockholders – diluted $515,165 
     
Denominator for net income per share    
Weighted average shares outstanding – basic  94,397,222 
Unvested restricted stock awards  477,286 
Unvested restricted stock units  3,220,972 
Warrants to purchase shares of common stock, treasury method  9,257,792 
Weighted average shares outstanding – diluted  107,353,272 
     
Net income per share – basic $0.16 
     
Net income per share – diluted $0.00 

 

For the three and six months ended June 30, 2022, and for the six months ended June 30, 2021, the Company was in a loss position and therefore all potentially dilutive securities would be anti-dilutive and the calculations are presented on the accompanying condensed consolidated statements of operations.


14

 

 

Hall of Fame Resort & Entertainment Company and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

 

Note 2: Summary of Significant Accounting Policies (continued)

  

Net Income (Loss) Per Common Share (continued)

At June 30, 2022 and 2021, the following outstanding common stock equivalents have been excluded from the calculation of net loss per share because their impact would be anti-dilutive.

  For the Three Months Ended June 30,  For the Six Months Ended June 30, 
  2022  2021  2022  2021 
Warrants to purchase shares of Common Stock  44,137,349   27,214,854   44,137,349   41,112,349 
Unvested restricted stock awards  238,643   -   238,643   477,286 
Unvested restricted stock units to be settled in shares of Common Stock  2,929,187   -   2,929,187   3,220,972 
Shares of Common Stock issuable upon conversion of convertible notes  24,088,729   3,321,706   24,088,729   3,321,706 
Shares of Common Stock issuable upon conversion of Series B Preferred Stock  65,359   -   65,359   - 
Shares of Common Stock issuable upon conversion of Series C Preferred Stock  10,000,000   -   10,000,000   - 
Total potentially dilutive securities  81,459,267   30,536,560   81,459,267   48,132,313 

Recent Accounting PronouncementsStandards

 

In February 2016, FASB issued Accounting Standards Update (“ASU”) No. 2016-02, Leases (Topic 842), as modified by subsequently issued ASU Nos. 2018-01, 2018-10, 2018-11, 2018-20, and 2019-01 (collectively “ASU 2016-02”). ASU 2016-02 requires recognition of right-of-use assets and lease liabilities on the balance sheet. In June 2020, FASB issued ASU 2020-05, further extending the effective date by one year making it effective for the Company for annual periods beginning after December 15, 2021 and interim periods within fiscal years beginning after December 15, 2022, with early adoption permitted. Most prominent among the changes in ASU 2016-02 is the lessees’ recognition of a right-of-use asset and a lease liability for operating leases. The right-of-use asset and lease liability are initially measured based on the present value of committed lease payments. Leases are classified as either finance or operating, with classification affecting the pattern of expense recognition. Expenses related to operating leases are recognized on a straight-line basis, while those related to financing leases are recognized under a front-loaded approach in which interest expense and amortization of the right-of-use asset are presented separately in the statement of operations. As the Company is an emerging growth company and following private company deadlines, the Company has an additional deferral under this ASU to adopt beginning after December 15, 2021. Similarly, lessors are required to classify leases as sales-type, finance, or operating with classification affecting the pattern of income recognition. As the Company is an emerging growth company and following private company deadlines, the Company implemented this ASU beginning on January 1, 2022.

 

Classification for both lessees and lessors is based on an assessment of whether risks and rewards as well as substantive control have been transferred through a lease contract. ASU 2016-02 also requires qualitative and quantitative disclosures to assess the amount, timing, and uncertainty of cash flows arising from leases. The Company is currently evaluating the impact of the pending adoption of this new standard on its condensed consolidated financial statements.

 

15

Hall of Fame Resort & Entertainment Company and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Note 2: Summary of Significant Accounting Policies (continued)

Recent Accounting Standards (continued)

In March 2019, the FASB issued ASU 2019-01, Leases (Topic 842): Codification Improvements, which requires an entity (a lessee or lessor) to provide transition disclosures under Topic 250 upon adoption of Topic 842. In February 2020, the FASB issued ASU 2020-02, Financial Instruments – Credit Losses (Topic 326): Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 119 and Update to SEC Section on Effective Date Related to Accounting Standards Update No. 2016-02, Leases. The ASU adds and amends SEC paragraphs in the ASC to reflect the issuance of SEC Staff Accounting Bulletin No. 119 related to the new credit losses standard and comments by the SEC staff related to the revised effective date of the new leases standard. This new standard is effective for fiscal years beginning after December 15, 2021, including interim periods within fiscal years beginning after December 15, 2022. EarlyUpon the adoption of ASC 842 on January 1, 2022, the Company recognized a right of use asset of approximately $7.7 million and corresponding lease liability of approximately $3.4 million. The initial recognition of the ROU asset included the reclassification of approximately $4.4 million of prepaid rent as of January 1, 2022. See Note 11 for additional disclosure regarding the Company’s right of use assets and lease liabilities.

In May 2021, the FASB issued ASU No. 2021-04, Earnings Per Share (Topic 260), Debt—Modifications and Extinguishments (Subtopic 470-50), Compensation—Stock Compensation (Topic 718), and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40) Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options. ASU 2021-04 addresses issuer’s accounting for certain modifications or exchanges of freestanding equity-classified written call options. ASU 2021-04 is effective for fiscal years beginning after December 15, 2021 and interim periods within those fiscal years, which is fiscal 2023 for us, with early adoption permitted. The Company is currently evaluatingadopted this ASU on January 1, 2022, which did not have a significant impact on the impact of the pending adoption of this new standard on its condensed consolidatedCompany’s financial statements.

 

In August 2020, the FASB issued ASU No. 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity, (ASU 2020-06). The amendmentswhich amends the accounting standards for convertible debt instruments that may be settled entirely or partially in cash upon conversion. ASU No. 2020-06 simplifyeliminates requirements to separately account for liability and equity components of such convertible debt instruments and eliminates the accountingability to use the treasury stock method for calculating diluted earnings per share for convertible instruments by removing major separation modelswhose principal amount may be settled using shares. Instead, ASU No. 2020-06 requires (i) the entire amount of the security to be presented as a liability on the balance sheet and removing certain settlement condition qualifiers(ii) application of the “if-converted” method for calculating diluted earnings per share. The required use of the derivatives scope exception for contracts in an entity’s own equity, and simplify“if-converted” method will not impact the relatedCompany’s diluted net incomeearnings per share calculation for both Subtopics.as long as the Company is in a net loss position. The guidance in ASU No. 2020-06 is effectiverequired for fiscal years, andannual reporting periods, including interim periods within those fiscal years,annual periods, beginning after December 15, 2023,2021, for smaller reporting companies, as defined by the SEC.public business entities. Early adoption is permitted, but no earlier than fiscal yearsannual reporting periods beginning after December 15, 2020, including interim periods within those fiscal years.annual reporting periods. The Company is evaluatingearly adopted this guidance for the impact of this ASUfiscal year beginning January 1, 2022, and did so on its consolidated financial statements and disclosures.a modified retrospective basis, without requiring any adjustments.

 


16

 

 

Hall of Fame Resort & Entertainment Company and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

 

Note 2: Summary of Significant Accounting Policies (continued)

 

Subsequent Events

 

Subsequent events have been evaluated through November 10, 2021,August 11, 2022, the date the condensed consolidated financial statements were issued. Except for as disclosed in Notes 1 and 4,12, no other events have been identified requiring disclosure or recording.

 

Note 3: Property and Equipment

 

Property and equipment consists of the following:

 

 Useful Life September 30,
2021		 December 31,
2020		  Useful Life June 30,
2022		 December 31,
2021		 
Land   $2,300,564  $535,954    $4,186,090  $4,186,090 
Land improvements 25 years  31,078,211   31,078,211  25 years  31,194,623   31,194,623 
Building and improvements 15 to 39 years  157,913,580   158,020,145  15 to 39 years  206,307,167   192,384,530 
Equipment 5 to 10 years  2,334,678   2,165,882  5 to 10 years  2,977,886   2,338,894 
Property and equipment, gross    193,627,033   191,800,192     244,665,766   230,104,137 
                    
Less: accumulated depreciation    (46,331,077)  (37,444,429)    (56,413,441)  (49,643,575)
Property and equipment, net   $147,295,956  $154,355,763    $188,252,325  $180,460,562 
                    
Project development costs   $146,483,370  $107,969,139    $158,722,100  $128,721,480 

 

For the three months ended SeptemberJune 30, 20212022 and 2020,2021, the Company recorded depreciation expense of $2,993,581$3,527,581 and $2,753,046,$2,972,130, respectively, and for the ninesix months ended SeptemberJune 30, 2022 and 2021, of $6,769,866 and 2020, depreciation expense was $8,886,648 and $8,198,469,$5,893,067, respectively. For the ninesix months ended SeptemberJune 30, 20212022 and 2020,2021, the Company incurred $39,514,231$42,920,667 and $33,423,918$18,626,781 of capitalized project development costs, respectively.

Included in project development costs are film development costs of $464,000 and $464,000 as of June 30, 2022 and December 31, 2021, respectively.

 


17

 

 

Hall of Fame Resort & Entertainment Company and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

 

Note 4: Notes Payable, net

 

Notes payable, net consisted of the following at SeptemberJune 30, 2021:2022:

 

 Gross Discount Net Interest
Rate		 Maturity
Date		 Gross Discount Net Interest Rate Maturity Date
TIF loan $9,554,000  $(1,625,436) $7,928,564   5.20% 7/31/2048 $9,345,000  $(1,583,943) $7,761,057   5.20% 7/31/2048
Preferred equity loan  3,600,000   -   3,600,000   7.00% Various beginning 10/9/2025  3,600,000   -   3,600,000   7.00% Various
City of Canton Loan  3,500,000   (6,805)  3,493,195   5.00% 7/1/2027  3,500,000   (5,925)  3,494,075   5.00% 7/1/2027
New Market/SCF  2,999,989   -   2,999,989   4.00% 12/30/2024  2,999,989   -   2,999,989   4.00% 12/30/2024
Constellation EME  6,485,023   -   6,485,023   6.05% 12/31/2022  2,639,242   -   2,639,242   6.05% 12/31/2022
JKP Capital loan  6,953,831   (4,921)  6,948,910   12.00% 12/2/2021
JKP Capital Loan  8,733,428   (608,880)  8,124,548   12.00% 3/31/2024
MKG DoubleTree Loan  15,300,000   (139,411)  15,160,589   5.00% 

3/13/2022

  15,300,000   -   15,300,000   6.55% 9/13/2023
Convertible PIPE Notes  23,468,143   (11,886,265)  11,581,878   10.00% 3/31/2025  25,288,079   (9,663,632)  15,624,447   10.00% 3/31/2025
Canton Cooperative Agreement  2,670,000   (176,450)  2,493,550   3.85% 5/15/2040  2,670,000   (171,581)  2,498,419   3.85% 5/15/2040
Aquarian Mortgage Loan  20,000,000   (1,008,537)  18,991,463   10.00% 

3/1/2022

CH Capital Loan  8,462,640   (844,218)  7,618,422   12.00% 3/31/2024
Constellation EME #2  4,673,939   -   4,673,939   5.93% 4/30/2026  4,005,064   -   4,005,064   5.93% 4/30/2026
IRG Split Note  4,273,543   (334,615)  3,938,928   8.00% 3/31/2024
JKP Split Note  4,273,543   (292,355)  3,981,188   8.00% 3/31/2024
ErieBank Loan  17,039,912   (567,889)  16,472,023   5.75% 6/15/2034
PACE Equity Loan  8,250,966   (276,713)  7,974,253   6.05% 12/31/2046
PACE Equity CFP  27,586   (27,586)  -   6.05% 12/31/2046
CFP Loan  4,000,000   (101,611)  3,898,389   6.50% 4/30/2023
Stark County Community Foundation  2,500,000   -   2,500,000   6.00% 5/31/2029
CH Capital Bridge Loan  10,500,000   -   10,500,000   12.00% 9/10/2022
Total $99,204,925  $(14,847,825) $84,357,100        $137,408,992  $(14,478,948) $122,930,044       

 

Notes payable, net consisted of the following at December 31, 2020:2021:

 

  Gross  Discount  Net 
TIF loan $9,654,000  $(1,666,725) $7,987,275 
Syndicated unsecured term loan  170,090   -   170,090 
Preferred equity loan  1,800,000   -   1,800,000 
Naming rights securitization loan  1,821,559   (113,762)  1,707,797 
City of Canton Loan  3,500,000   (7,681)  3,492,319 
New Market/SCF  2,999,989   -   2,999,989 
Constellation EME  9,900,000   -   9,900,000 
Paycheck protection plan loan  390,400   -   390,400 
JKP Capital loan  6,953,831   (13,887)  6,939,944 
MKG DoubleTree Loan  15,300,000   (443,435)  14,856,565 
Convertible PIPE Notes  21,797,670   (13,475,202)  8,322,468 
Canton Cooperative Agreement  2,670,000   (181,177)  2,488,823 
Aquarian Mortgage Loan  40,000,000   (2,156,303)  37,843,697 
Total $116,957,539  $(18,058,172) $98,899,367 

During the three months ended September 30, 2021 and 2020, the Company recorded amortization of note discounts of $1,326,620 and $3,043,738, respectively, and for the nine months ended September 30, 2021 and 2020, amortization of note discounts was $3,725,347 and $9,721,484, respectively. During the three months ended September 30, 2021 and 2020, the Company recorded paid-in-kind interest of $548,370 and $1,488,224, respectively. During the nine months ended September 30, 2021 and 2020, the Company recorded paid-in-kind interest of $1,500,382 and $3,135,035, respectively.

  Gross  Discount  Net 
TIF loan $9,451,000  $(1,611,476) $7,839,524 
Preferred equity loan  3,600,000   -   3,600,000 
City of Canton Loan  3,500,000   (6,509)  3,493,491 
New Market/SCF  2,999,989   -   2,999,989 
Constellation EME  5,227,639   -   5,227,639 
JKP Capital loan  6,953,831   -   6,953,831 
MKG DoubleTree Loan  15,300,000   (83,939)  15,216,061 
Convertible PIPE Notes  24,059,749   (11,168,630)  12,891,119 
Canton Cooperative Agreement  2,670,000   (174,843)  2,495,157 
Aquarian Mortgage Loan  7,400,000   (439,418)  6,960,582 
Constellation EME #2  4,455,346   -   4,455,346 
IRG Note  8,500,000   -   8,500,000 
ErieBank Loan  13,353,186   (598,966)  12,754,220 
PACE Equity Loan  8,250,966   (277,729)  7,973,237 
Total $115,721,706  $(14,361,510) $101,360,196 

 


18

 

 

Hall of Fame Resort & Entertainment Company and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

 

Note 4: Notes Payable, net (continued)

 

During the three months ended June 30, 2022 and 2021, the Company recorded amortization of note discounts of $1,122,324 and $1,164,613, respectively, and for the six months ended June 30, 2022 and 2021, of $2,478,298 and $2,398,727, respectively. During the three months ended June 30, 2022 and 2021, the Company recorded paid-in-kind interest of $963,428 and $741,243, respectively. During the six months ended June 30, 2022 and 2021, the Company recorded paid-in-kind interest of $1,681,722 and $952,012, respectively.

Accrued Interest on Notes Payable

As of June 30, 2022 and December 31, 2021, accrued interest on notes payable, were as follows:

  June 30, 2022  December 31,
2021		 
TIF loan $33,159  $22,208 
Preferred equity loan  48,825   203,350 
New Market/SCF  17,833   89,682 
Constellation EME  13,142   - 
City of Canton Loan  1,484   5,979 
JKP Capital Note  -   1,251,395 
Canton Cooperative Agreement  39,511   39,416 
CH Capital Loan  55,652   - 
IRG Split Note  28,490   - 
JKP Split Note  28,490   - 
ErieBank Loan  31,910   26,706 
PACE Equity Loan  284,242   30,824 
Stark Community Foundation  5,834   - 
CH Capital Bridge Loan  38,000   - 
Total $626,572  $1,669,560 

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

For more information on the notes payable above, please see Note 4 of the Company’s Annual Report on Form 10-K/A,10-K, as filed on May 12, 2021.March 14, 2022.

 

Accrued Interest on Notes Payable

As of September 30, 2021 and December 31, 2020, accrued interest on notes payable, were as follows:

  September 30,
2021		  December 31,
2020		 
TIF loan $140,883  $- 
Preferred equity loan  140,350   27,125 
New Market/SCF  67,077   - 
Constellation EME  -   248,832 
Paycheck protection plan loan  -   2,706 
City of Canton Loan  1,507   4,472 
JKP Capital Note  1,042,654   416,836 
MKG Doubletree loan  -   67,716 
Canton Cooperative Agreement  69,520   20,593 
Aquarian Mortgage Loan  -   333,333 
Total $1,461,991  $1,121,613 

The amounts above were included in accounts payable and accrued expenses and other liabilities on the Company’s unaudited condensed consolidated balance sheet, as follows:

  September 30,
2021		  December 31,
2020		 
Accounts payable and accrued expenses $1,321,641  $1,094,488 
Other liabilities  140,350   27,125 
  $1,461,991  $1,121,613 

7.00% Series A Cumulative Redeemable Preferred Stock (“Preferred Equity Loan”)

On April 1, 2021, the Company received $900,000 in advance of a subscription agreement to purchase shares of 7.00% Series A Cumulative Redeemable Preferred Stock (“Series A Preferred Stock”). On August 12, 2021, the Company entered into a subscription agreement with American Capital Center, LLC (the “Investor”) to issue to the Investor 900 shares of Series A Preferred Stock at a price of $1,000 per share for an aggregate purchase price of $900,000.

On September 22, 2021, the Company issued an additional 900 shares of Series A Preferred Stock to the Investor at a price of $1,000 per share for an aggregate purchase price of $900,000.

The Company had 3,600 and 1,800 shares of Series A Preferred Stock outstanding and 52,800 and 52,800 shares of Series A Preferred Stock authorized as of September 30, 2021 and December 31, 2020, respectively. The Series A Preferred Stock is required to be redeemed in cash after five years from the date of issuance and is recorded in “Notes payable, net” on the Company’s unaudited condensed consolidated balance sheet.


19

 

 

Hall of Fame Resort & Entertainment Company and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

 

Note 4: Notes Payable, net (continued)

 

Paycheck Protection ProgramJKP Capital Loan

 

On April 22,June 24, 2020, the Company obtainedHOF Village and HOFV Hotel II executed a Paycheck Protection Program Loanloan evidenced by a promissory note (the “JKP Capital Loan”) in favor of JKP Financial, LLC (“PPP Loan”JKP”) for $390,400.the principal sum of $7,000,000. The PPPJKP Capital Loan hadbears interest at a fixed interest rate of 1%12% per annum and requiredmatured on December 2, 2021, on which date all unpaid principal and accrued and unpaid interest is due. The JKP Capital Loan is secured by the Company to make 18 monthly payments beginning on November 22, 2020, with a maturity date of April 22, 2022, subject to debt forgiveness provisions from the Small Business Association. On February 1, 2021, the Company obtained notice from the Small Business Association that the full outstanding amount of the PPP Loan was forgiven. During the nine months ended September 30, 2021, the Company recognized the forgiveness of the PPP Loan as “Gain on forgiveness of debt”membership interests in the Company’s unaudited condensed consolidated statement of operations.

Convertible PIPE NotesHOFV Hotel II held by HOF Village.

 

On JulyMarch 1, 2020, concurrently with2022, the closingCompany amended the JKP Capital Loan. The Second Amendment to JKP Capital Loan (i) revises the outstanding principal balance of the Business Combination,JKP Capital Loan to include interest that has accrued and has not been paid as of March 1, 2022, and (ii) extends the Company entered into a Note Purchase Agreement (the “Note Purchase Agreement”) with certain funds managed by Magnetar Financial, LLC and other purchasers (together, the “Purchasers”), pursuant to which the Company agreed to issue and sell to the Purchasers in a private placement (the “Private Placement”) $20,721,293 in aggregate principal amountmaturity of the Company’s 8.00% Convertible Notes due 2025 (the “PIPE Notes”). Interest on PIPE Notes is payable quarterly in either cash or an increase inJKP Capital Loan to March 31, 2024, and (iii) amends the principal amount of PIPE Notes (“PIK Interest”). If the Company pays interest as PIK Interest, the interest rate for such payment is 10%, rather than 8%. PursuantJKP Capital Loan to the terms of the Note Purchase Agreement, the PIPE Notes may be convertedconvertible into shares of Common Stock at a conversion price equalof $1.09 per share, subject to $6.90 per share. There are also Note Redemption Warrants that may beadjustment. The conversion price is subject to a weighted-average antidilution adjustment.

As part of the consideration for the Second Amendment to JKP Capital Loan, the Company issued in a transaction exempt from registration pursuant to the Note Purchase Agreement upon redemptionSection 4(a)(2) of the PIPE Notes that will be exercisable for a number ofSecurities Act: (i) 280,000 shares of Common Stock to be determined at the time any such warrant is issued. The exercise price per shareJKP and (ii) a Series F Warrant to purchase 1,000,000 shares of Common Stock of any warrant will be equal to the conversion price of the PIPE Notes at the time such warrant is issued pursuant to the Note Purchase Agreement.

Constellation EME #2

On February 1, 2021, the Company entered into a loan facility with Constellation whereby it may borrow up to $5,100,000 (the “Constellation EME #2”). The proceeds of the Constellation EME #2 are to be held in escrow by a custodian to fund future development costs. The proceeds will be released from escrow as development costs are incurred. The maturity date is April 30, 2026, and payments are due in 60 monthly installments totaling $6,185,716, with an effective interest rate of 8.7%.JKP.

 

The Company also hasaccounted for this transaction as an extinguishment, given that a sponsorshipsubstantive conversion feature was added to the JKP Capital Loan. The Company recorded the relative fair value of the shares of Common Stock and Series F Warrants as a discount against the JKP Capital Loan. The following assumptions were used to calculate the fair value of Series F Warrants:

Term (years)  5.0 
Stock price $1.01 
Exercise price $1.09 
Dividend yield  0.0%
Expected volatility  51.2%
Risk free interest rate  1.6%
Number of shares  1,000,000 

20

Hall of Fame Resort & Entertainment Company and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Note 4: Notes Payable, net (continued)

MKG DoubleTree Loan

On September 14, 2020, the Company entered into a construction loan agreement with Constellation. ReferErie Bank, a wholly owned subsidiary of CNB Financial Corporation, a Pennsylvania corporation, as lender. The Company has applied and been approved for a first mortgage loan for $15.3 million (“MKG DoubleTree Loan”) with a variable interest rate of 1.75% plus the prime commercial rate, at which no time can it drop below 5%, for the purpose of renovating the McKinley Grand Hotel in the City of Canton, Ohio. The initial maturity date is 18 months after the exercised loan date, March 13, 2022, and the agreement includes an extended maturity date of September 13, 2022, should HOFRE need more time with an extension fee of 0.1% of the then outstanding principal balance. The MKG DoubleTree Loan has certain financial covenants whereby the Company must maintain a minimum tangible net worth of $5,000,000 and minimum liquidity of not less than $2,000,000. These covenants are to Note 6be tested annually based upon the financial statements at the end of each fiscal year. 

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 additional information.this amendment as a modification, and expensed approximately $38,000 in loan modification costs.

 

CH Capital Loan (formerly known as Aquarian Mortgage LoanLoan)

 

On December 1, 2020, the Company entered into a mortgage loan (the “Aquarian Mortgage Loan”) with Aquarian Credit Funding, LLC (“Aquarian”), as administrative agent and with Investors Heritage Life Insurance Company and Lincoln Benefit Life Company, as lenders, for $40,000,000 of gross proceeds. The Aquarian Mortgage Loan bears interest at 10% per annum. Upon the occurrence and during the continuance of an event of default, Aquarian may, at its option, take such action, without notice or demand, that Aquarian deems advisable to protect and enforce its rights against the Company, including declaring the debt to become immediately due and payable.

 


Hall of Fame Resort & Entertainment Company and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Note 4: Notes Payable, net (continued)

Aquarian Mortgage Loan (continued)

On August 30, 2021, the Company and Aquarian amended the terms of the Aquarian Mortgage Loan whereby the Company paid $20 million to Lincoln Benefit Life Company. In accordance with such payment, Lincoln Benefit Life Company was removed as a lender and the aggregate principal of the Aquarian Mortgage Loan was reduced to $20 million as of September 30, 2021. The Company and Aquarian also agreed to extend the maturity date of the Aquarian Mortgage Loan to March 1,31, 2022. In connection with such extension,

On December 15, 2021, the Company paid to Aquarian $500,000, which was recorded as a deferred financing cost and will be amortized over the remaining termrepaid approximately $13 million of the Aquarian Mortgage Loan. No other material terms of

On March 1, 2022, CH Capital Lending purchased and acquired, the Company’s $7.4 million Aquarian Mortgage Loan changed.(as thereafter amended and acquired by CH Capital Lending, the “CH Capital Loan”).

21

Hall of Fame Resort & Entertainment Company and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Note 4: Notes Payable, net (continued)

CH Capital Loan (formerly known as Aquarian Mortgage Loan) (continued)

On March 1, 2022, immediately after CH Capital Lending became the lender and administrative agent under the CH Capital Loan, the maturity date of the Term Loan was extended to March 31, 2024. Also under the amendment, the Term Loan was made convertible into shares of Common Stock at a conversion price of $1.50 per share, subject to adjustment. The conversion price is subject to a weighted-average antidilution adjustment. Certain current and historical fees and expenses were added to the principal amount of the CH Capital Loan so that the new principal amount is $8,347,839. The interest rate was increased from 10% to 12%. Of such 12% per annum interest: (i) 8% per annum shall be payable monthly and (ii) 4% per annum shall accumulate and be payable on the maturity date.

As part of the consideration for the amendment: (i) the Company issued in a transaction exempt from registration pursuant to Section 4(a)(2) of the Securities Act: (A) 330,000 shares of Common Stock to CH Capital Lending, and (B) a warrant to purchase 1,000,000 shares of Common Stock (“Series E Warrant”) to CH Capital Lending, (ii) the Company was required to, subject to approval of its board of directors, create a series of preferred stock, to be known as 7.00% Series C Convertible Preferred Stock (“Series C Preferred Stock”), and, upon the request of CH Capital Lending, exchange each share of the Company’s Series B Convertible Preferred Stock, that is held by CH Capital Lending for one share of Series C Preferred Stock, and (iii) the Company and CH Capital Lending amended and restated the Series C Warrants and Series D Warrants that the Company issued to CH Capital Lending.

The Series E Warrants have an exercise price of $1.50 per share, subject to adjustment. The exercise price is subject to a weighted-average antidilution adjustment. The Series E Warrants may be exercised from and after March 1, 2023, subject to certain terms and conditions set forth in the Series E Warrants. Unexercised Series E Warrants will expire on March 1, 2027. The Series E Warrants shall be cancelled without any further action on the part of the Company or the holder, in the event that the Company repays in full on or before March 1, 2023, the CH Capital Loan.

The Company accounted for this transaction as an extinguishment, given that a substantive conversion feature was added to the CH Capital Loan. The Company recorded the relative fair value of the shares of Common Stock and Series E Warrants as a discount against the CH Capital Loan. The following assumptions were used to calculate the fair value of Series E Warrants:

Term (years)  5.0 
Stock price $1.01 
Exercise price $1.50 
Dividend yield  0.0%
Expected volatility  51.2%
Risk free interest rate  1.6%
Number of shares  1,000,000 

22

Hall of Fame Resort & Entertainment Company and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Note 4: Notes Payable, net (continued)

IRG Note

On November 23, 2021, the Company, and IRG entered into a promissory note (the “IRG Note”) pursuant to which IRG made a loan to the Company in the aggregate amount of $8,500,000. Interest will accrue on the outstanding balance of the Note at a rate of 8% per annum, compounded monthly. The Company will pay interest to IRG under the Note on the first day of each month, in arrears. The Note has a maturity date of June 30, 2022.

On March 1, 2022, pursuant to an Assignment of Promissory Note, dated March 1, 2022, IRG assigned (a) a one-half (½) interest in the IRG Note to IRG (the “IRG Split Note”) and (b) a one-half (½) interest in the IRG Note to JKP (the “JKP Split Note”). See “IRG Split Note” and “JKP Split Note,” below.

IRG Split Note

On March 1, 2022, the Company entered into a First Amended and Restated Promissory Note with IRG, which amended and restated the IRG Split Note (the “Amended IRG Split Note). The Amended IRG Split Note extended the maturity to March 31, 2024. Under the Amended IRG Split Note, the principal and accrued interest are convertible into shares of Common Stock at a conversion price of $1.50 per share, subject to adjustment. The conversion price is subject to a weighted-average antidilution adjustment. The principal amount of the Amended IRG Split Note is $4,273,543.

As part of the consideration for the Amended IRG Split Note, the Company issued in a transaction exempt from registration pursuant to Section 4(a)(2) of the Securities Act: (i) 125,000 shares of Common Stock to IRG, LLC, and (ii) a Series E Warrant to purchase 500,000 shares of Common Stock to IRG.

The Series E Warrants shall be cancelled without any further action on the part of the Company or the holder, in the event that the Company repays in full, on or before March 1, 2023, the Amended IRG Split Note.

The Company accounted for this transaction as an extinguishment, given that a substantive conversion feature was added to the Amended IRG Split Note. The Company recorded the relative fair value of the shares of Common Stock and Series E Warrants as a discount against the JKP Capital Loan. The following assumptions were used to calculate the fair value of Series E Warrants:

Term (years)  5.0 
Stock price $1.01 
Exercise price $1.50 
Dividend yield  0.0%
Expected volatility  51.2%
Risk free interest rate  1.6%
Number of shares  500,000 

23

Hall of Fame Resort & Entertainment Company and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Note 4: Notes Payable, net (continued)

JKP Split Note

On March 1, 2022, the Company entered into a First Amended and Restated Promissory Note with JKP, which amended and restated the JKP Split Note (the “Amended JKP Split Note”). The Amended JKP Split Note extended the maturity to March 31, 2024. Under the Amended JKP Split Note, the principal and accrued interest are convertible into shares of Common Stock at a conversion price of $1.09 per share, subject to adjustment. The conversion price is subject to a weighted-average antidilution adjustment. The principal amount of the Amended JKP Split Note is $4,273,543.

As part of the consideration for the Amended JKP Split Note, the Company issued in a transaction exempt from registration pursuant to Section 4(a)(2) of the Securities Act: (i) 125,000 shares of Common Stock to JKP, and (ii) a Series F Warrant to purchase 500,000 shares of Common Stock to JKP.

The Series F Warrants have an exercise price of $1.09 per share, subject to adjustment. The exercise price is subject to a weighted-average antidilution adjustment. The Series F Note Warrants may be exercised from and after March 1, 2022, subject to certain terms and conditions set forth in the Series F Warrants. Unexercised Series F Warrants will expire on March 1, 2027.

The Company accounted for this transaction as an extinguishment, given that a substantive conversion feature was added to the Amended JKP Split Note. The Company recorded the relative fair value of the shares of Common Stock and Series F Warrants as a discount against the Amended JKP Split Note. The following assumptions were used to calculate the fair value of Series F Warrants:

Term (years)  5.0 
Stock price $1.01 
Exercise price $1.09 
Dividend yield  0.0%
Expected volatility  51.2%
Risk free interest rate  1.6%
Number of shares  500,000 

24

Hall of Fame Resort & Entertainment Company and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Note 4: Notes Payable, net (continued)

CFP Loan

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

As part of the consideration for making the Loan, on June 8, 2022, the Company issued to MLF: (A) 125,000 shares (the “Commitment Fee Shares”) of Common Stock, and (B) a warrant to purchase 125,000 shares of Common Stock (“Series G Warrants”). The exercise price of the Series G Warrants will be $1.50 per share. The Series G Warrants will become exercisable one year after issuance, subject to certain terms and conditions set forth in the Series G Warrants. Unexercised Series G Warrants will expire five years after issuance. The exercise price of the Series G Warrants will be subject to a weighted-average antidilution adjustment.

The Company recorded the relative fair value of the shares of Common Stock and Series G Warrants as a discount against the CFP Loan. The following assumptions were used to calculate the fair value of Series G Warrants:

Term (years)  5.0 
Stock price $0.62 
Exercise price $1.50 
Dividend yield  0.0%
Expected volatility  52.4%
Risk free interest rate  3.0%
Number of shares  125,000 

PACE Financing

On April 28, 2022, the City of Canton, in coordination with the Canton Regional Energy Special Improvement District, approved legislation that will enable the Company to receive $3,200,000 in Property Assessed Clean Energy (“PACE”) financing in conjunction with the implementation of various energy-efficient improvements at the Center for Performance. Through June 30, 2022, the Company received $27,586 on this financing.

Stark Community Foundation Loan

On June 16, 2022, the Company entered into a loan agreement with Stark pursuant to which Stark agreed to lend $5,000,000 to the Company. Of this amount, the Company borrowed $2,500,000 (the “SCF Loan”) through June 30, 2022. The interest rate applicable to the SCF Loan is 6.0% annum. Interest payments are paid annually on December 31 of each year. The SCF Loan is unsecured and matures on May 31, 2029. The Company may prepay the SCF Loan without penalty.

Events of default under the loan include without limitation: (i) a payment default, (ii) the Company’s failure to complete the infrastructure development for Phase II on or before December 31, 2024, and (iii) the Company’s failure, following notice from Stark, to comply with any non-monetary covenant contained in the loan agreement. Upon the occurrence of an event of default under the Business Loan Agreement: (a) interest due will increase by 5% per annum; and (b) Stark may, at its option, declare the Company’s obligations under the Business Loan Agreement to be immediately due and payable.

The loan agreement contains customary affirmative and negative covenants for this type of loan, including without limitation (i) affirmative covenants, including furnish Stark with such financial statements and other related information at such frequencies and in such detail as Stark may reasonably request and use all SCF Loan proceeds solely for the infrastructure development for the construction of Phase II, and (ii) negative covenants, including restrictions on additional indebtedness, prepayment of other indebtedness, transactions with related parties, additional liens, mergers and acquisitions, and standard prohibitions on change of control.

25

Hall of Fame Resort & Entertainment Company and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Note 4: Notes Payable, net (continued)

CH Capital Bridge Loan

On June 16, 2022, The Company and its subsidiaries HOF Village Retail I, LLC and HOF Village Retail II, LLC, as borrowers (the “Borrowers”), borrowed $10,500,000 (the “CH Capital Bridge Loan”) from CH Capital Lending. The CH Capital Bridge Loan is evidenced by a Promissory Note issued by the Borrowers to CH Capital Lending. Interest accrues on the Note at 12% per annum, compounded monthly. The maturity date of the Note is September 10, 2022. Borrowers have the right to prepay all or any portion of the principal amount of the Note at any time before the maturity date without penalty. Under the Note, the net proceeds of a financing that occurs after the date of the Note shall be used to prepay the Note. The Note is secured by: (i) a mortgage on real property on which the Company is building its Fan Engagement Zone (an 82,000-square-foot promenade located strategically within the campus footprint, which will include restaurants, retailers and experiential offerings) and (ii) a pledge and security interest in all of the membership interests of HOF Village Waterpark, LLC, and HOF Village Hotel I, LLC held by Newco, each of which is direct or indirect wholly-owned subsidiary of the Company.

Upon the occurrence of an event of default under the Note, including without limitation Borrowers’ failure to pay, on or before the due date any amount owing to CH Capital Lending under the Note or Borrowers’ failure, following notice from CH Capital Lending, to comply with any non-monetary covenant contained in the CH Capital Bridge Loan, (i) interest due will increase by 5% per annum; and (ii) CH Capital Lending may, at its option, declare Borrowers’ obligations under the Note to be immediately due and payable.

 

Future Minimum Principal Payments

 

The minimum required principal payments on notes payable outstanding as of SeptemberJune 30, 20212022 are as follows:

 

For the years ending December 31, Amount  Amount 
2021 (three months) $8,429,807 
2022  41,810,248 
2022 (six months) $13,815,568 
2023  1,448,706   16,889,801 
2024  4,596,932   34,524,169 
2025  28,704,965   31,051,820 
2026  1,397,073 
Thereafter  14,214,267   39,730,561 
Total Gross Principal Payments $99,204,925  $137,408,992 
        
Less: Discount  (14,847,825)  (14,478,948)
        
Total Net Principal Payments $84,357,100  $122,930,044 

 

The Company has various debt covenants that require certain financial information to be met. If the Company does not meet the requirements of the debt covenants, the Company will be responsible for paying the full outstanding amount of the note immediately. As of SeptemberJune 30, 2021,2022, the Company was in compliance with all relevant debt covenants.

 

26

Hall of Fame Resort & Entertainment Company and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Note 5: Stockholders’ Equity

 

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.

 


Hall of Fame Resort & Entertainment Company and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Note 5: Stockholders’ Equity (continued)

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.

 

Series B Preferred Stock Designation

 

On May 13, 2021, the Company filed a Certificate of Designations with the Secretary of State of the State of Delaware to establish preferences, limitations, and relative rights of the 7.00% Series B Preferred Stock (as defined below). The number of authorized shares of Series B Preferred Stock is 15,200.

 

7.00% Series B Convertible Preferred Stock

The Company had 15,200200 and 015,200 shares of 7.00% Series B Convertible Preferred Stock (“Series B Preferred Stock”) outstanding and 15,200 and 015,200 shares authorized as of SeptemberJune 30, 20212022 and December 31, 2020,2021, respectively. On the third anniversary of the date on which shares of Series B Preferred Stock are first issued (the “Automatic Conversion Date”), each share of Series B Preferred Stock, except to the extent previously converted pursuant to an Optional Conversion (as defined below), shall automatically be converted into shares of Common Stock (the “Automatic Conversion”). At any time following the date on which shares of Series B Preferred Stock are first issued, and from time to time prior to the Automatic Conversion Date, each holder of Series B Preferred Stock shall have the right, but not the obligation, to elect to convert all or any portion of such holder’s shares of Series B Preferred Stock into shares of Common Stock, on terms similar to the Automatic Conversion (any such conversion, an “Optional Conversion”).

 

27

Hall of Fame Resort & Entertainment Company and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Note 5: Stockholders’ Equity, (continued)

7.00% Series C Convertible Preferred Stock

On March 28, 2022, the Company filed a Certificate of Designations with the Secretary of State of the State of Delaware to establish preferences, limitations, and relative rights of its Series C Preferred Stock. The number of authorized shares of Series C Preferred Stock is 15,000.

On March 28, 2022, in accordance with the previously announced Amendment Number 6 to Term Loan Agreement by and among the Company and CH Capital Lending, the Company entered into a Securities Exchange Agreement (the “Exchange Agreement”) with CH Capital Lending, pursuant to which the Company exchanged in a private placement (the “Private Placement”) each share of the Company’s Series B Convertible Preferred Stock, that is held by CH Capital Lending for one share of the Company’s Series C Preferred Stock, resulting in the issuance of 15,000 shares of Series C Preferred Stock to CH Capital Lending. The Series C Preferred Stock is convertible into shares of the Company’s common stock. The shares of Series B Preferred Stock exchanged, and the Series C Preferred Stock acquired, have an aggregate liquidation preference of $15 million plus any accrued but unpaid dividends to the date of payment.

2020 Omnibus Incentive Plan

 

On July 1, 2020, in connection with the closing of the Business Combination, the Company’s omnibus incentive plan (the “2020 Omnibus Incentive Plan”) became effective immediately upon the closing of the Business Combination. The 2020 Omnibus Incentive Plan was previously approved by the Company’s stockholders and Board of Directors. Subject to adjustment, the maximum number of shares of Common Stock authorized for issuance under the 2020 Omnibus Incentive Plan was 1,812,727 shares. On June 2, 2021, the Company held its 2021 Annual Meeting whereby the Company’s stockholders approved an amendment to the 2020 Omnibus Incentive Plan to increase by four million the number of shares of Common Stock, par value $0.0001 per share, of the Company that will be available for issuance under the 2020 Omnibus Incentive Plan, resulting in a maximum of 5,812,727 shares that can be issued under the amended 2020 Omnibus Inventive Plan. The amendment to the 2020 Omnibus Incentive Plan was previously approved by the Board of Directors of the Company, and the amended 2020 Omnibus Incentive Plan became effective on June 2, 2021. As of SeptemberJune 30, 2021, 2,503,2472022, 2,154,595 shares remained available for issuance under the 2020 Omnibus Incentive Plan.

 


28

 

 

Hall of Fame Resort & Entertainment Company and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

 

Note 5: Stockholders’ Equity, (continued)

 

Equity Distribution Agreement

 

On September 30, 2021, the Company entered into an Equity Distribution Agreement with Wedbush Securities Inc. and Maxim Group LLC with respect to an at the marketat-the-market offering program (“ATM”) 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. No shares had been sold under the Equity Distribution Agreement through September 30, 2021. From the OctoberJanuary 1 through November 10, 2021,June 30, 2022, approximately 202,48918.2 million shares were sold resulting in net proceeds to the Company totaling approximately $512,273.$17.9 million. The remaining availability under the Equity Distribution Agreement as of the date of filing of this report isJune 30, 2022 was approximately $49.5$28.1 million.

 

Issuance of Restricted Stock Awards

  

The Company’s activity in restricted Common Stock was as follows for the ninesix months ended SeptemberJune 30, 2021:2022:

 

 Number of
shares		 Weighted
average
grant date
fair value		  Number of shares Weighted
average
grant date
fair value		 
Non–vested at January 1, 2021  477,286  $9.30 
Non–vested at January 1, 2022  238,643  $9.31 
Granted  50,393  $4.41   197,168  $1.19 
Vested  (289,036) $8.44   (197,168) $1.19 
Non–vested at September 30, 2021  238,643  $9.30 
Non–vested at June 30, 2022  238,643  $9.31 

 

For the three months ended SeptemberJune 30, 20212022 and 2020, the Company recorded $554,547 and $2,772,733, respectively, in employee and director2021, stock-based compensation expense forrelated to restricted stock awards. Forawards was $720,703 and $673,005, respectively, and for the ninesix months ended SeptemberJune 30, 2022 and 2021, $1,453,460 and 2020, $1,885,723 and $2,772,733,$1,227,551, respectively. Of the 2020 employee and director stock-based compensation expense, $2,218,187 is included as a component of business combination costs on the Company’s condensed consolidated statement of operations. As of SeptemberJune 30, 2021,2022, unamortized stock-based compensation costs related to restricted share arrangements were $1,663,640$12,161 and will be recognized over a weighted average period of 0.70.1 years.

 


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 ninesix months ended SeptemberJune 30, 2021,2022, the Company granted an aggregate of 1,734,1971,836,668 Restricted Stock Units (“RSUs”) to its employees and directors, of which 522,541 were granted under the 2020 Omnibus Incentive Plan.Plan and 1,314,127 were granted as inducement awards. The RSUs were valued at the value of the Company’s Common Stock on the date of grant, which was a range of $1.98$0.55 to $5.29$1.16 for these awards. The RSUs granted to employees vest one third on the first anniversary of their grant, one third on the second anniversary of their grant, and one third on the third anniversary of their grant. The RSUs granted to directors vest one year from the date of grant.

The Company’s activity in RSUs was as follows for the nine months ended September 30, 2021:

  Number of
shares		  Weighted
average
grant date
fair value		 
Non–vested at January 1, 2021  1,499,933  $              2.49 
Granted  1,734,197  $2.00 
Vested  (338,060) $3.31 
Forfeited  (26,316) $1.98 
Non–vested at September 30, 2021  2,869,754  $2.12 

For the three months ended September 30, 2021 and 2020, the Company recorded $848,108 and $593,760, respectively, in employee and director stock-based compensation expense, and for the nine months ended September 30, 2021 and 2020, $2,615,301 and $593,760, respectively. Employee and director stock-based compensation expense is a component of “Property operating expenses” in the unaudited condensed consolidated statement of operations. As of September 30, 2021, unamortized stock-based compensation costs related to restricted stock units were $4,018,279 and will be recognized over a weighted average period of 1.6 years.


Hall of Fame Resort & Entertainment Company and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Note 5: Stockholders’ Equity (continued)

Warrants

 

The Company’s warrant activity was as follows for the nine months ended September 30, 2021:

  Number of
Shares		  Weighted
Average
Exercise
Price (USD)		  Weighted
Average
Contractual
Life (years)		  Intrinsic
Value (USD)		 
Outstanding - January 1, 2021  55,303,832  $5.92   4.73     
Granted  2,483,660  $6.90         
Exercised  (16,775,143) $1.40         
Outstanding – September 30, 2021  41,012,349  $7.82   3.84  $17,246,869 
Exercisable – September 30, 2021  38,528,689  $7.88   3.92  $17,246,869 

During the nine months ended September 30, 2021, warrants to purchase 16,775,143 shares of Common Stock were exercised with an exercise price of $1.40 per share. These exercises resulted in cash proceeds to the Company of $23,485,200 and the settlement of the Company’s warrant liability of $53,518,942.

February 2021 Public Offering and Over-allotment

On February 12, 2021, the Company closed its public offering of 12,244,897 shares of Common Stock at a public offering price of $2.45 per share pursuant to the terms of the underwriting agreement between the Company and Maxim Group LLC, entered into on February 9, 2021 (the “Underwriting Agreement”). On February 18, 2021, the Company closed the sale of an additional 1,836,734 shares of Common Stock at $2.45 per share pursuant to the exercise of the underwriters’ over-allotment option in connection with its public offering that closed on February 12, 2021. Under the terms of the Underwriting Agreement, each of the Company’s executive officers, directors, and stockholders owning more than 5% of the outstanding Common Stock, signed lock-up agreements pursuant to which each agreed, subject to certain exceptions, not to transact in the Common Stock for a period of 90 days following February 12, 2021. Gross proceeds including the over-allotment, before underwriting discounts and commissions and estimated offering expenses, are approximately $34.5 million.


29

 

 

Hall of Fame Resort & Entertainment Company and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

 

Note 5: Stockholders’ Equity, (continued)

 

Private PlacementIssuance of PreferredRestricted Stock Units (continued)

The Company’s activity in RSUs was as follows for the six months ended June 30, 2022:

  Number of
shares		  Weighted average
grant date
fair value		 
Non–vested at January 1, 2022  2,207,337  $2.34 
Granted  1,836,668  $0.95 
Vested  (541,377) $2.00 
Forfeited  (573,442) $2.50 
Non–vested at June 30, 2022  2,929,186  $1.48 

For the three months ended June 30, 2022 and Warrants2021, the Company recorded $586,547 and $947,144, respectively, in employee and director stock-based compensation expense, and for the six months ended June 30, 2022 and 2021, $1,088,959 and $1,779,141, respectively. Employee and director stock-based compensation expense is a component of “Operating expenses” in the condensed consolidated statement of operations. As of June 30, 2022, unamortized stock-based compensation costs related to Purchase Common Stockrestricted stock units were $3,178,424 and will be recognized over a weighted average period of 1.1 years.

Warrants

The Company’s warrant activity was as follows for the six months ended June 30, 2022:

  Number of Shares  Weighted Average Exercise Price (USD)  Weighted Average Contractual Life (years)  Intrinsic Value (USD) 
Outstanding - January 1, 2022  41,012,349  $7.82   3.59          
Granted  3,125,000  $1.30         
Outstanding – June 30, 2022  44,137,349  $7.36   3.36  $- 
Exercisable – June 30, 2022  42,512,349  $7.59   3.31  $- 

Amended and Restated Series C Warrants

 

On June 4, 2021,March 1, 2022, in accordanceconnection with the previously announced Securities Purchase Agreement, dated May 13, 2021, betweenamendment to the IRG Split Note (as described in Note 4), the Company amended its Series C Warrants to extend the term of the Series C Warrants to March 1, 2027. The exercise price of $1.40 per share remains unchanged, but the amendments subject the exercise price to a weighted-average antidilution adjustment. The amendments also remove certain provisions regarding fundamental transactions, which subsequently allowed the Series C Warrants to be derecognized as a liability and classified as equity.

30

Hall of Fame Resort & Entertainment Company and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Note 5: Stockholders’ Equity, (continued)

Amended and Restated Series C Warrants (continued)

The Company accounted for this modification as a cost of the IRG LLC,Split Note, whereby the Company calculated the incremental fair value of the Series C Warrants and recorded them as assigned bya discount against the IRG LLCSplit Note. The following assumptions were used to calculate the fair value of Series C Warrants immediately before and after modification:

  Original Series C
Warrants		  Modified Series C
Warrants		 
Term (years)  3.8   5.0 
Stock price $1.01  $1.01 
Exercise price $1.40  $1.40 
Dividend yield  0.0%  0.0%
Expected volatility  54.7%  50.8%
Risk free interest rate  1.5%  1.5%
Number of shares  10,036,925   10,036,925 
Aggregate fair value $3,336,000  $3,648,000 

Amended and Restated Series D Warrants issue to CH Capital Lending LLC, and

On March 1, 2022, in connection with the binding term sheet dated January 28, 2021,amendment to the CH Capital Loan (as described in Note 4), the Company amended the Series D Warrants issued and sold to CH Capital Lending LLC for a purchase priceto extend the term of $15 million in a private placement (the “New Private Placement”) (i) 15,000 shares of Series B Preferred Stock, which are convertible into shares of Common Stock, having an aggregate liquidation preference of $15 million plus any accrued but unpaid dividends to the date of payment, and (ii) 2,450,980such Series D Warrants with a term of three years, exercisable six months after issuance, each exercisable for one share of Common Stock at anto March 1, 2027. The exercise price of $6.90 per share remains unchanged, but the amendments subject the exercise price to certain adjustments. Also on June 4, 2021,a weighted-average antidilution adjustment.

The Company accounted for this modification as a cost of the CH Capital Loan, whereby the Company closedcalculated the incremental fair value of the Series D Warrants and recorded them as a securities purchase agreement with another purchaser for 200 sharesdiscount against the CH Capital Loan. The following assumptions were used to calculate the fair value of Series B Preferred StockD Warrants immediately before and 32,680 Series D Warrants.after modification:

  Original Series D
Warrants		  Modified Series D
Warrants		 
Term (years)  2.3   5.0 
Stock price $1.01  $1.01 
Exercise price $6.90  $6.90 
Dividend yield  0.0%  0.0%
Expected volatility  63.5%  50.8%
Risk free interest rate  1.3%  1.6%
Number of shares  2,450,980   2,450,980 
Aggregate fair value $50,000  $138,000 

31

Hall of Fame Resort & Entertainment Company and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

 

Note 6: Sponsorship Revenue and Associated Commitments

 

Johnson Controls, Inc.

 

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

 

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

 

Additionally, on October 9, 2020, Newco, entered into a Technology as a Service Agreement (the “TAAS Agreement”) with JCI. Pursuant to the TAAS Agreement, JCI will provide certain services related to the construction and development of the Hall of Fame Village powered by JCI (the “Project”), including, but not limited to, (i) design assist consulting, equipment sales and turn-key installation services in respect of specified systems to be constructed as part of Phase 2 and Phase 3 of the Project and (ii) maintenance and lifecycle services in respect of certain systems constructed as part of Phase 1, and to be constructed as part of Phase 2 and Phase 3, of the Project. Under the terms of the TAAS Agreement, Newco has agreed to pay JCI up to an aggregate of approximately $217 million for services rendered by JCI over the term of the TAAS Agreement. As of SeptemberJune 30, 2022 and December 31, 2021, scheduled future cash to be receivedapproximately $195 million and required activation spend$199 million, respectively, was remaining under the non-cancellable period of the Amended Sponsorship Agreement are as follows:TAAS Agreement.

 

  Unrestricted  Activation  Total 
2021 (three months) $937,500  $187,500  $1,125,000 
Total $937,500  $187,500  $1,125,000 

As services are provided, the Company is recognizing revenue on a straight-line basis over the expected term of the Amended Sponsorship Agreement. During the three months ended September 30, 2021 and 2020, the Company recognized $1,130,708 and $1,133,708 of net sponsorship revenue related to this deal, and for the nine months ended September 30, 2021 and 2020, $3,364,155 and $3,608,402, respectively.


32

 

 

Hall of Fame Resort & Entertainment Company and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

 

Note 6: Sponsorship Revenue and Associated Commitments (continued)

 

First Data Merchant Services LLCJohnson Controls, Inc. (continued)

 

In December 2018, the Company and PFHOF entered into an 8-year licensing agreement with First Data Merchant Services LLC (“First Data”) and Santander Bank. As of SeptemberJune 30, 2021,2022, scheduled future cash to be received under the agreementNaming Rights Agreement is as follows:

 

Year ending December 31,    
2021 (three months) $- 
2022  150,000 
 Unrestricted Activation Total 
2022 (six months) $4,000,000  $750,000  $4,750,000 
2023  150,000   4,000,000   750,000   4,750,000 
2024  150,000   4,250,000   750,000   5,000,000 
2025  150,000   4,250,000   750,000   5,000,000 
Thereafter  150,000   39,781,251   6,750,000   46,531,251 
                
Total $750,000  $56,281,251  $9,750,000  $66,031,251 

 

As services are provided, the Company is recognizing revenue on a straight-line basis over the expected term of the agreement.Amended Sponsorship Agreement. During the three and six months ended SeptemberJune 30, 2021, and 2020, the Company recognized $37,449$1,121,385 and $37,449$2,230,447, respectively, of net sponsorship revenue related to the Naming Rights Agreement.

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

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

The Company disputes that it is in default under either the TAAS Agreement or the Naming Rights Agreement. The Company believes JCI is in breach of the Naming Rights Agreement and the TAAS Agreement due to their failure to make certain payments in accordance with the Naming Rights Agreement, and, on May 16, 2022, provided notice to JCI of these breaches. The Company is pursuing dispute resolution pursuant to the terms of the Naming Rights Agreement to simultaneously defend against JCI’s allegations and pursue its own claims. The ultimate outcome of this deal,dispute cannot presently be determined. However, in management’s opinion, the likelihood of a material adverse outcome is remote. Accordingly, adjustments, if any, that might result from the resolution of this matter have not been reflected in the accompanying condensed consolidated financial statements. During the three and for the ninesix months ended SeptemberJune 30, 20212022, the Company suspended its revenue recognition until the dispute is resolved and 2020, $111,126 and $111,533, respectively. Ashas recorded an allowance against the amounts due as of SeptemberJune 30, 20212022 in the amount of $2,125,000. The balances due under the Naming Rights Agreement as of June 30, 2022 and December 31, 2020, accounts receivable from First Data totaled $02021 amounted to $4,010,417 and $58,141,$1,885,417, respectively.

 


33

 

 

Hall of Fame Resort & Entertainment Company and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

 

Note 6: Sponsorship Revenue and Associated Commitments (continued)

 

Constellation NewEnergy, Inc.

On December 19, 2018, the Company and PFHOF entered into a sponsorship and services agreement with Constellation (the “ConstellationOther Sponsorship Agreement”) whereby Constellation and its affiliates will provide the gas and electric needs in exchange for certain sponsorship rights. The original term of the Company’s Constellation Sponsorship Agreement was through December 31, 2028. However, in June 2020, the Company entered into an amended contract with Constellation which extended the term of the Constellation Sponsorship Agreement through December 31, 2029.Revenue

 

The ConstellationCompany 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 Agreement providesagreements may contain multiple elements, which provide several distinct benefits to the sponsor over the term of the agreement and can be for certaina single or multi-year term. These agreements provide sponsors various rights to Constellationsuch as venue naming rights, signage within our venues, and its employeess to benefit from the relationship with the Company from discounted pricing, marketing efforts,advertising on our website and other benefits as detailed in the agreement. The Constellation Sponsorship Agreement also provides for Constellation to pay sponsorship income and to provide activation fee funds. Activation fee funds are to be used in the year received and do not roll forward for future years as unspent funds. The amounts are due by March 31 of the year to which they apply, which is represented in the chart below.

The Constellation Sponsorship Agreement includes certain contingencies reducing the sponsorship fee amount owed by Constellation if construction is not on pace with the timeframe noted in the Constellation Sponsorship Agreement.

The Company also has a note payable with Constellation. Refer to Note 4 for additional information.agreements.

 

As of SeptemberJune 30, 2021,2022, scheduled future cash to be received and required activation spend under the Constellation Sponsorshipagreements, excluding the Johnson Controls Naming Rights Agreement, areis as follows:

 

  Unrestricted  Activation  Total 
2021 (three months) $-  $-  $- 
2022  1,396,000   200,000   1,596,000 
2023  1,423,220   200,000   1,623,220 
2024  1,257,265   166,000   1,423,265 
2025  1,257,265   166,000   1,423,265 
Thereafter  5,029,057   664,000   5,693,057 
             
Total $10,362,807  $1,396,000  $11,758,807 

Year ending December 31,

2022 (six months) $762,000 
2023  2,744,220 
2024  2,406,265 
2025  2,317,265 
2026  2,167,265 
Thereafter  6,271,792 
     
Total $16,668,807 

 

As services are provided, the Company is recognizing revenue on a straight-line basis over the expected term of the Constellation Sponsorship Agreement.agreement. During the three months ended SeptemberJune 30, 20212022 and 2020,2021, the Company recognized $295,591$452,772 and $295,591, respectively,$1,508,402 of net sponsorship revenue, related to this deal,respectively, and for the ninesix months ended SeptemberJune 30, 2022 and 2021, $1,272,062 and 2020, $877,133 and $949,064,$2,983,838, respectively. Accounts receivable from Constellation totaled $679,000 and $1,101,867 at September 30, 2021 and December 31, 2020, respectively.

 


34

 

 

Hall of Fame Resort & Entertainment Company and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

 

Note 6: Sponsorship Revenue and Associated Commitments (continued)

Turf Nation, Inc.

During October 2018, the Company entered into a 5-year sponsorship agreement with Turf Nation, Inc. (“Turf Nation”). Under the terms of the agreement, the Company will receive payments over the term based on the sale of Turf Nation products based on rates defined in the sponsorship agreement. The minimum guaranteed fee per year beginning in 2020 is $50,000 per year.

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 September 30, 2021 and 2020, the Company recognized $15,115 and $15,115, respectively, of net sponsorship revenue related to this deal, and for the nine months ended September 30, 2021 and 2020, $44,852 and $45,016, respectively. Accounts receivable from Turf Nation totaled $176,944 and $132,092 at September 30, 2021 and December 31, 2020, respectively.

Note 7: Other Commitments

 

Canton City School District

 

The Company has entered into cooperative agreements with certain governmental entities that support the development of the project overall, where the Company is an active participant in the agreement activity, and the Company would benefit from the success of the activity.

 

The Company had a commitment to the Canton City School District (“CCSD”) to provide a replacement for their Football Operations Center (“FOC”) and to construct a Heritage Project (“Heritage”). The commitment was defined in the Operations and Use Agreement for HOF Village Complex dated February 26, 2016.

 

Lessor Commitments


As of June 30, 2022, the Company’s Constellation Center for Excellence and retail facilities were partially leased including leases by the Company’s subsidiaries. The future minimum lease commitments under this lease, excluding leases of the Company’s subsidiaries, are as follows:

Year ending December 31:

2022 (six months) $24,200 
2023  246,761 
2024  239,266 
2025  233,183 
2026  220,866 
Thereafter  846,636 
     
Total $1,810,912 

Employment Agreements

The Company has employment agreements with many of its key executive officers that usually have terms between one and three years.

35

 

 

Hall of Fame Resort & Entertainment Company and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

 

Note 7: Other Commitments (continued)

 

Project and Ground Leases

Three wholly owned subsidiaries of the Company have project leases with the Stark County Port Authority to lease project improvements and ground leased property at the Tom Benson Hall of Fame Stadium, youth fields, and parking areas. On November 25, 2020, the Company entered into an amendment to its Stark County Port Authority lease, whereby the lease term was extended from January 31, 2056 to September 30, 2114. The future minimum lease commitments under non-cancellable operating leases described below reflect the amendment that was entered into on November 25, 2020, excluding the amounts yet to be paid from escrow for the FOC noted above, as follows:

Year ending December 31:

2021 (three months) $77,975 
2022  321,900 
2023  321,900 
2024  321,900 
2025  321,900 
Thereafter  41,320,800 
     
Total $42,686,375 

Rent expense on operating leases totaled $81,927 and $104,366 during the three months ended September 30, 2021 and 2020, respectively, and for the nine months ended September 30, 2021 and 2020, $245,091 and $310,829 respectively, and is recorded as a component of “Property operating expenses” on the Company’s unaudited condensed consolidated statement of operations.


Hall of Fame Resort & Entertainment Company and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Note 7: Other Commitments (continued)

Stadium Management Agreement

On September 1, 2019, the Company entered into a Service Agreement with SMG to manage the Tom Benson Hall of Fame Stadium operations. Under that agreement, the Company incurs an annual management fee of $200,000. Management fee expense for the three months ended September 30, 2021 and 2020 was $50,000 and for the nine months ended September 30, 2021 and 2020 was $150,000 which is included in “Property operating expenses” on the Company’s unaudited condensed consolidated statements of operations. The agreement term shall end on December 31, 2022. On November 2, 2021, the Company and SMG agreed to terminate the Service Agreement. In connection with such termination, the Company will pay to SMG $76,370 prior to November 16, 2021.

On November 2, 2021, the Company and ASM Global entered into a new booking services agreement, whereby ASM Global will bring concerts, festivals, and other special events to the Tom Benson Hall of Fame Stadium. ASM Global will receive a portion of all ticket sales for events booked, along with reimbursement of direct expenses.

Employment Agreements

The Company has employment agreements with many of its key executive officers that usually have terms between one year and three years.

Management Agreement with Crestline Hotels & Resorts

 

On October 22, 2019, the Company entered into a management agreement with Crestline Hotels & Resorts (“Crestline”). The Company appointed and engaged Crestline as the Company’s exclusive agent to supervise, direct, and control management and operation of the DoubleTree Canton Downtown Hotel. In consideration of the services performed by Crestline, the Company agreed to the greater of: 2% of gross revenues or $10,000 per month in base management fees and other operating expenses. The agreement will be terminated on the fifth anniversary of the commencement date, or October 22, 2024. For the three months ended SeptemberJune 30, 20212022 and 2020,2021, the Company paid and incurred $30,000$32,844 and $0,$30,000, respectively in management fees, respectively, and for the ninesix months ended SeptemberJune 30, 2022 and 2021, $62,844 and 2020, $90,000 and $0,$60,000, respectively.

 

Constellation EME Express Equipment Services Program

 

On February 1, 2021, the Company entered into a contract with Constellation whereby Constellation will sell and/or deliver materials and equipment purchased by the Company. The Company is required to provide $2,000,000 to an escrow account held by Constellation, representing adequate assurance of future performance. Constellation will invoice the Company in 60 monthly installments, which began in April 2021 for $103,095. Additionally, the Company has 2two notes payable with Constellation. See Note 4 for more information.

Other Liabilities

Other liabilities consisted of the following at June 30, 2022 and December 31, 2021:

  June 30,
2022		  December 31,
2021		 
Activation fund reserves $3,629,085  $3,537,347 
Deferred sponsorship revenue  3,387,224   203,278 
Other liabilities  1,554,903   - 
Total $8,571,212  $3,740,625 

 

Note 8: Contingencies

 

During the normal course of its business, the Company is subject to occasional legal proceedings and claims. The Company does not have any pending litigation that, separately or in the aggregate, would, in the opinion of management, have a material adverse effect on its results of operations, financial condition, or cash flows.

 


36

 

 

Hall of Fame Resort & Entertainment Company and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

 

Note 9: Related-Party Transactions

 

Due to Affiliates

 

Due to affiliates consisted of the following at SeptemberJune 30, 20212022 and December 31, 2020:2021:

 

 September 30,
2021		 December 31,
2020		  June 30,
2022		 December 31,
2021		 
Due to IRG Member $1,420,960  $1,456,521  $1,770,390  $1,041,847 
Due to IRG Affiliate  140,762   140,180   116,900   116,900 
Due to PFHOF  266,946   126,855   859,207   660,208 
Total $1,828,668  $1,723,556  $2,746,497  $1,818,955 

 

IRG Canton Village Member, LLC, a member of HOF Village, LLC controlled by our director Stuart Lichter (the “IRG Member”) and an affiliate, provides certain supporting services to the Company. As noted in the Operating Agreement of HOF Village, LLC, an affiliate of the IRG Member, IRG Canton Village Manager, LLC, the manager of HOF Village, LLC controlled by our director Stuart Lichter, may earn a master developer fee calculated as 4.0% of development costs incurred for the Hall of Fame Village powered by Johnson Controls, including, but not limited to site assembly, construction supervision, and project financing. These development costs incurred are netted against certain costs incurred for general project management.

 

For the three months ended September 30, 2021 and 2020, costs incurred under these arrangements were $0 and $677,359, respectively, and for the nine months ended September 30, 2021 and 2020, costs incurred were $0 and $886,305, respectively, which were included in “Project development costs” on the condensed consolidated balance sheets.

The amounts due to the IRG Member above are for development fees, human resources support, and the Company’s engagement with them to identify and obtain naming rights sponsorships and other entitlement partners for the Company. The Company and IRG Member have an arrangement whereby the Company pays IRG Member $15,000 per month plus commissions. For both the three months ended September 30, 2021 and 2020, the Company incurred $45,000 in costs to this affiliate, and for the nine months ended September 30, 2021 and 2020, the Company incurred $135,000 for both periods.

The due to related party amounts in the table above are non-interest bearing advances from an affiliate of IRG Member due on demand. The Company is currently in discussions with this affiliate to establish repayment terms of these advances. However, there could be no assurance that the Company and IRG Member will come to terms acceptable to both parties.

 

On January 13, 2020, the Company secured $9.9 million in financing from Constellation through its Efficiency Made Easy (“EME”) program to implement energy efficient measures and to finance the construction of the Constellation Center for Excellence and other enhancements, as part of Phase II development. The Hanover Insurance Company provided a guarantee bond to guarantee the Company’s payment obligations under the financing, and Stuart Lichter and two trusts affiliated with Mr. Lichter have agreed to indemnify The Hanover Insurance Company for payments made under the guarantee bond.

 

The amounts above due to PFHOF relate to advances to and from PFHOF, including costs for onsite sponsorship activation, sponsorship sales support, shared services, event tickets, and expense reimbursements.

 


Hall of Fame Resort & Entertainment Company and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Note 9: Related-Party Transactions (continued)

License Agreement

 

On March 10, 2016, the Company entered into a license agreement with PFHOF, whereby the Company has the ability to license and use certain intellectual property from PFHOF in exchange for the Company paying a fee based on certain sponsorship revenues and expenses. On December 11, 2018, the license agreement was amended to change the calculation of the fee to be 20% of eligible sponsorship revenue. The license agreement was further amended in a First Amended and Restated License Agreement, dated September 16, 2019. The license agreement expires on December 31, 2033. During the three months ended September 30, 2021 and 2020, the Company recognized expenses of $139,000 and $525,733, respectively, and for the nine months ended September 30, 2021 and 2020, $349,442 and $992,955, respectively, which are included in “Property operating expenses” on the Company’s unaudited condensed consolidated statements of operations.

 

37

Hall of Fame Resort & Entertainment Company and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Note 9: Related-Party Transactions (continued)

Media License Agreement

 

On November 11, 2019, the Company entered into a Media License Agreement with PFHOF. On July 1, 2020, the Company entered into an Amended and Restated Media License Agreement that terminates on December 31, 2034. In consideration of a license to use certain intellectual property of PFHOF, the Company agreed to pay PFHOF minimum guaranteed license fees of $1,250,000 each year during the term. After the first five years of the agreement, the minimum guarantee shall increase by 3% on a year-over-year basis. The first annual minimum payment was due July 1, 2021, which was not paid by December 31, 2021. The Company has not yet made this payment and is in the process of renegotiating this agreement with PFHOF. The Company believes that it is not probable that it will have to pay the $1,250,000 minimum payment, and as such has not accrued such amount. During the three months ended September 30, 2021, the Company paid $50,000 to PFHOF as a payment to be applied to the agreement in the process of renegotiation. There can be no assurances thatOn April 12, 2022, the Company and PFHOF will reach a favorable agreement. There were no other license fees incurred during the three and nine months ended September 30, 2021 and 2020 underterminated the Media License Agreement.Agreement and entered into a new license agreement.

 

Other Liabilities

Other liabilities consisted of the following at September 30, 2021 and December 31, 2020:

  September 30,
2021		  December 31,
2020		 
Activation fund reserves $3,472,502  $3,780,343 
Deferred revenue  785,826   1,709,126 
Total $4,258,328  $5,489,469 


Hall of Fame Resort & Entertainment Company and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Note 9: Related-Party Transactions (continued)

Purchase of Real Property from PFHOF

 

On February 3, 2021, the Company purchased certain parcels of real property from PFHOF, located at the site of the Hall of Fame Village powered by Johnson Controls, for $1.75 million. In connection with the purchase, the Company granted certain easements to PFHOF to ensure accessibility to the PFHOF museum.

 

Shared Services Agreement with PFHOF

 

On March 9, 2021, the Company entered into an additional Shared Services Agreement with PFHOF, which supplements the existing Shared Services Agreement by, among other things, providing for the sharing of costs for activities relating to shared services.

38

Hall of Fame Resort & Entertainment Company and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Note 9: Related-Party Transactions (continued)

Global License Agreement

Effective April 8, 2022, Newco and PFHOF, entered into a Global License Agreement (the “Global License Agreement”). The Global License Agreement consolidates and replaces the First Amended and Restated License Agreement, the Amended and Restated Media License Agreement, and the Branding Agreement the parties had previously entered into. The Global License Agreement sets forth the terms under which PFHOF licenses certain marks and works to Newco and its affiliates to exploit existing PFHOF works and to create new works. The Global License Agreement grants Newco and its affiliates an exclusive right and license to use the PFHOF marks in conjunction with theme-based entertainment and attractions within the City of Canton, Ohio; youth sports programs, subject to certain exclusions; e-gaming and video games; and sports betting. The Global License Agreement also grants Newco and its affiliates a non-exclusive license to use the PFHOF marks and works in other areas of use, with a 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, 2022 are as follows:

For the years ending December 31, Amount 
2022 (six months) $581,250 
2023  600,000 
2024  600,000 
2025  600,000 
2026  600,000 
Thereafter  7,350,000 
Total Gross Principal Payments $10,331,250 

During the three months ended June 30, 2022 and 2021, the Company paid $318,750 and $0 of the annual license fee, respectively, and for the six months ended June 30, 2022 and 2021, $318,750 and $0, respectively.

 

Note 10: Concentrations

 

For the three months ended SeptemberJune 30, 2021, 1 customer2022, 2 customers represented approximately 33%65% and 28% of the Company’s totalsponsorship revenue. For the three months ended September 30, 2020, 2 customers represented approximately 68% and 18% of the Company’s total revenue. For the nine months ended SeptemberJune 30, 2021, 2 customers represented approximately 43%47% and 11%12% of the Company’s totalsponsorship revenue. For the ninesix months ended SeptemberJune 30, 2020,2022, 2 customers represented approximately 74%45.7% and 19%19.5% of the Company’s totalsponsorship revenue. At SeptemberFor the six months ended June 30, 2021, 3 customers represented approximately 41%, 16%, and 11% of the Company’s accounts receivable. At December 31, 2020, 2 customers represented approximately 71%74.8% and 15%19.5% of the Company’s sponsorship revenue.

As of June 30, 2022, 1 customer represented approximately 85% of the Company’s sponsorship accounts receivable. As of December 31, 2021, 1 customer represented approximately 88% of the Company’s sponsorship accounts receivable.

 

At any point in time, the Company can have funds in their operating accounts and restricted cash accounts that are with third partythird-party financial institutions. These balances in the U.S. may exceed the Federal Deposit Insurance Corporation insurance limits. While the Company monitors the cash balances in their operating accounts, these cash and restricted cash balances could be impacted if the underlying financial institutions fail or other adverse conditions in the financial markets occurs.

 


39

 

 

Hall of Fame Resort & Entertainment Company and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Note 11: ROU Assets and Lease Liabilities

The Company has entered into operating leases as the lessee primarily for ground leases under its stadium, sports complex, and parking facilities. On January 1, 2022 (“Effective Date”), the Company adopted FASB Accounting Standards Codification, or ASC, Topic 842, Leases (“ASC 842”), which increases transparency and comparability by recognizing a lessee’s rights and obligations resulting from leases by recording them on the balance sheet as lease assets and lease liabilities. The new guidance requires the recognition of the right-of-use (“ROU”) assets and related operating and finance lease liabilities on the balance sheet. The Company adopted the new guidance using the modified retrospective approach on January 1, 2022. As a result, the consolidated balance sheet as of December 31, 2021 was not restated and is not comparative.

The adoption of ASC 842 resulted in the recognition of operating ROU assets of $7,741,946 and operating lease liabilities of $3,383,807 on the Company’s condensed consolidated balance sheet as of January 1, 2022. The initial recognition of the ROU asset included the reclassification of $4,358,139 of prepaid rent as of January 1, 2022.

The Company elected the package of practical expedients permitted within the standard, which allow an entity to forgo reassessing (i) whether a contract contains a lease, (ii) classification of leases, and (iii) whether capitalized costs associated with a lease meet the definition of initial direct costs. Also, the Company elected the expedient allowing an entity to use hindsight to determine the lease term and impairment of ROU assets and the expedient to allow the Company to not have to separate lease and non-lease components. The Company has also elected the short-term lease accounting policy under which the Company would not recognize a lease liability or ROU asset for any lease that at the commencement date has a lease term of twelve months or less and does not include a purchase option that the Company is more than reasonably certain to exercise.

For contracts entered into on or after the Effective Date, at the inception of a contract the Company will assess whether the contract is, or contains, a lease. The Company’s assessment is based on: (i) whether the contract involves the use of a distinct identified asset, (ii) whether the Company obtained the right to substantially all the economic benefit from the use of the asset throughout the period, and (iii) whether the Company has the right to direct the use of the asset. Leases entered into prior to January 1, 2022, which were accounted for under ASC 840, were not reassessed for classification.

40

Hall of Fame Resort & Entertainment Company and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Note 11: ROU Assets and Lease Liabilities (continued)

For operating leases, the lease liability is initially and subsequently measured at the present value of the unpaid lease payments. For finance leases, the lease liability is initially measured in the same manner and date as for operating leases, and is subsequently presented at amortized cost using the effective interest method. The Company generally uses its incremental borrowing rate as the discount rate for leases, unless an interest rate is implicitly stated in the lease. The present value of the lease payments is calculated using the incremental borrowing rate for operating and finance leases, which was determined using a portfolio approach based on the rate of interest that the Company would have to pay to borrow an amount equal to the lease payments on a collateralized basis over a similar term. The lease term for all of the Company’s leases includes the noncancelable period of the lease plus any additional periods covered by either a Company option to extend the lease that the Company is reasonably certain to exercise, or an option to extend the lease controlled by the lessor. All ROU assets are reviewed periodically for impairment.

Lease expense for operating leases consists of the lease payments plus any initial direct costs and is recognized on a straight-line basis over the lease term. Lease expense for finance leases consists of the amortization of the asset on a straight-line basis over the shorter of the lease term or its useful life and interest expense determined on an amortized cost basis, with the lease payments allocated between a reduction of the lease liability and interest expense. 

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

  June 30,  December 31, 
  2022  2021 
Operating leases:      
Right-of-use assets $7,651,080  $               – 
Lease liability  3,404,682   – 
Finance leases:        
Right-of-use assets  –   – 
Lease liability  –   – 

Other information related to leases is presented below:

Six Months Ended June 30, 2022   
Operating lease cost $258,184 
Other information:    
Operating cash flows from operating leases  158,083 
Weighted-average remaining lease term – operating leases (in years)  92.03 
Weighted-average discount rate – operating leases  10.0%

41

Hall of Fame Resort & Entertainment Company and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Note 11: ROU Assets and Lease Liabilities (continued)

As of June 30, 2022, the annual minimum lease payments of our operating lease liabilities were as follows:

For The Years Ending December 31,   
2022 (six months) $167,035 
2023  333,004 
2024  311,900 
2025  311,900 
2026  311,900 
Thereafter  41,436,900 
Total future minimum lease payments, undiscounted  42,872,639 
Less: imputed interest  (39,467,957)
Present value of future minimum lease payments $3,404,682 

Note 12: Subsequent Events

PACE Financing

On July 1, 2022, HOF Village Stadium, LLC (the “Lessee”), a wholly-owned subsidiary of the Company that leases the Tom Benson Hall of Fame Stadium (“Stadium”) from Stark County Port Authority, entered into the EPC Agreement with Canton Regional Energy Special Improvement District, Inc. (the “ESID”), SPH Canton St, LLC, an affiliate of Stonehill Strategic Capital, LLC (“Investor”), and City of Canton, Ohio.

Under the EPC Agreement, the Investor provided $33,387,844 (the “Project Advance”) PACE financing to finance the costs of the special energy improvement projects at the Stadium described in the Canton Regional Energy Special Improvement District Project Plan that have been completed (as supplemented, the “Plan”). Of the Project Advance, $29,565,729 was disbursed to Lessee, $3,221,927 was retained by Investor as capitalized interest, and $600,187 was used to pay closing costs. Pursuant to the EPC Agreement, the Lessee agreed to make special assessment payments in an aggregate amount that will provide revenues sufficient to repay the Project Advance plus interest and certain costs (the “Special Assessments”). The Special Assessments have been levied in the amounts necessary to amortize the Project Advance, together with interest at the annual rate of 6.0% and a $6,542 semi-annual administrative fee to the ESID over 50 semi-annual payments of $1,314,913 to be collected beginning approximately on January 31, 2024 and continuing through approximately July 31, 2048.

In connection with entering into the EPC Agreement, the Company obtained the consent and agreement of Cuyahoga River Capital LLC (“CRC”), pursuant to an agreement, dated June 27, 2022 (the “Consent Agreement”). CRC holds 100% of the interest in the Development Finance Authority of Summit County Tax-Exempt Development Revenue Bonds, Series 2018 (Hall of Fame Village - Stadium and Youth Fields TIF Project), issued in the original principal amount of $10,030,000 the “Series 2018 Bonds”). Pursuant to the Consent Agreement, upon the closing of the EPC Agreement the Company deposited $9,895,197 into a bank account at The Huntington National Bank (“Huntington”) subject to a deposit account control agreement (the “DACA”) executed by Huntington and CRC as secured party (the “Pledged Account”). Under the Consent Agreement, in the event the Series 2018 Bonds are outstanding on December 29, 2022, the Company will repurchase the Series 2018 Bonds. The Company granted CRC a lien on the Pledged Account to secure the Company’s obligations under the Consent Agreement. In the event the Series 2018 Bonds are redeemed and/or defeased prior to December 29, 2022, upon such redemption or defeasance the Consent Agreement shall automatically terminate, and CRC shall instruct Huntington to release the DACA.

CH Capital Loan Amendment

On August 5, 2022, the Company and CH Capital amended the CH Capital Loan to increase the principal amount of the loan to reflect (a) certain legal and other fees incurred as part of the previous amendment on March 1, 2022; and (b) to reflect paid-in-kind interest through July 31, 2022. The amount of the principal was increased to $8,751,763.

Sports Betting Agreements

On July 14, 2022, Newco entered into an Online Market Access Agreement with Instabet, Inc. (“Instabet”), pursuant to which Instabet will serve as a Mobile Management Services Provider (as defined under applicable Ohio gaming law) wherein Instabet will host, operate and support a branded online sports betting service in Ohio, subject to procurement of all necessary licenses. The initial term of the Online Market Access Agreement is ten years. As part of this agreement, Newco will receive a limited equity interest in Instabet and certain revenue sharing, along with the opportunity for sponsorship and cross-marketing.

On July 29, 2022, Newco entered into a Retail Sports Gaming Services Agreement with RSI OH, LLC, (“RSI”), pursuant to which RSI will serve as a land-based Management Services Provider (as defined under applicable Ohio gaming law) wherein RSI will operate a retail sports betting location in the Fan Engagement Zone at the Hall of Fame Village, subject to procurement of all necessary licenses. The initial term of the Retail Sports Gaming Services Agreement is ten years. As part of this agreement, Newco will receive sponsorship fees and certain revenue sharing.

42

Item 2. Management’s discussion and analysis of financial condition and results of operations

This Quarterly Report on Form 10–Q contains forward–looking statements that involve risks and uncertainties, as well as assumptions that, if they never materialize or prove incorrect, could cause our results to differ materially from those expressed or implied by such forward–looking statements. The statements contained herein that are not purely historical are forward–looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Forward–looking statements are often identified by the use of words such as, but not limited to, “anticipate,” “estimates,” “should,” “expect,” “guidance,” “project,” “intend,” “plan,” “believe,”“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. Such forward–looking statements are subject to risks, uncertainties and other important factors that could cause actual results and the timing of certain events to differ materially from future results expressed or implied by such forward–looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those identified below, and those discussed in the section titled “Risk Factors” included in our Form 10-K/A10-K for the fiscal year ended December 31, 20202021 as filed with the Securities and Exchange Commission (“SEC”) on May 12, 2021, as updated by the risk factors disclosed under the heading “Item 1A. Risk Factors” in this Quarterly Report on Form 10-Q,March 14, 2022, in addition to other public reports we 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.

Business Overview

The Company isWe 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.Fame (“PFHOF”). Headquartered in Canton, Ohio, we own the Hall of Fame Village powered by Johnson Controls, a multi-use sports and entertainment destination centered around the Pro Football HallPFHOF’s campus. We expect to create a diversified set of Fame campus. The Company is pursuing a differentiation strategy across three pillars, including destination-based assets, HOF Village Media (defined below),revenue streams through developing themed attractions, premier entertainment programming and gaming (including the fantasy football league in which we acquired a majority stake in 2020).sponsorships. The strategic plan has been developed in three phases of growth.growth: Phase I, Phase II, and Phase III.

The first phasePhase I of the Hall of Fame Village powered by Johnson Controls is operational, consisting of the Tom Benson Hall of Fame Stadium, the National Youth Football &ForeverLawn Sports Complex, and HOF Village Media Group, LLC (“Hall of Fame Village Media” or the “Media Company”). In 2016, the Company substantially completed the Tom Benson Hall of Fame Stadium, a sports and entertainment venue with a seating capacity of approximately 23,000, with continued development of the end zones in 2021. The Tom Benson Hall of Fame Stadium hosts multiple sports and entertainment events, including the NFL Hall of Fame Game, Enshrinement and the Concert for Legends during the annual Pro Football Hall of Fame Enshrinement Week. In 2016, the Company opened the National Football &The ForeverLawn Sports Complex which consists of eight full-sized, multi-use regulation football fields, five of which have been completed in Phase I. The facility hosts camps and tournaments for football players, as well as athletes from across the country in other sports such as lacrosse, rugby and soccer. In 2017, the Company formed HOFHall of Fame Village Media leveragingleverages the sport of professional football to produce exclusive programming by licensing the extensive content controlled by the Pro Football Hall of Fame,PFHOF as well as new programming assets developed from live events such as youth tournaments, camps and sporting events held at the National Football &ForeverLawn Sports Complex and the Tom Benson Hall of Fame Stadium.

The Company isWe are developing new hospitality, attraction and corporate assets surrounding the Pro Football Hall of Fame Museum as part of aour Phase II development plan. PlansPhase II plans for future components of the Hall of Fame Village powered by Johnson Controls include two hotels (one on campus and one in downtown Canton that was opened in Q4November 2020), the Hall of Fame Indoor Waterpark, the Constellation Center for Excellence (an office building including retail and meeting space)space, that opened in October 2021), the Center for Performance (a convention center/field house), the Play Action Plaza, and the Hall of Fame Retail Promenade (to be calledPromenade. We are pursuing a differentiation strategy across three pillars, including destination-based assets, the Fan Engagement Zone)Media Company, and gaming (including the fantasy football league we acquired a majority stake in 2020 and both retail and online sports betting partnerships). Phase III expansion plans may include a potential mix of residential space, additional attractions, entertainment, dining, merchandise and more.

Key Components of the Company’s Results of Operations

Revenue

We generate revenues from various streams such as sponsorship agreements, rents, cost recoveries, events, hotel operations, Hall of Fantasy League, and through the sale of non-fungible tokens. The sponsorship arrangements, in which the customer sponsors a play area or event and receives specified brand recognition and other benefits over a set period of time, recognize revenue on a straight-line basis over the time period specified in the contract. Revenue for rents, cost recoveries, and events are recognized at the time the respective event or service has been performed. Rental revenue for long term leases is recorded on a straight-line basis over the term of the lease beginning on the commencement date.


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Key ComponentsOur 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 Company’s Results of Operationsgoods and services are provided.

Revenue

The Company’s sponsorship revenue is derived from its agreements with third parties such as Johnson Controls and Constellation NewEnergy. These sponsorship agreements are generally multi-year agreements to provide cash or some other type of benefit to the Company. Some agreements require the Company to use a portion of the sponsorship revenue to incur marketing and other activation costs associated with the agreement, and this revenue is shown net of those associated costs. Additionally, the Company’s Tom Benson Hall of Fame Stadium is used to host premier entertainment and sports events to generate event revenues. In addition to top entertainers, the stadium is used to host a variety of sporting events, including high school, college, and professional football games throughout the year. The Company plans to continue to expand programming where applicable for its live event business. The Company receives revenue from the DoubleTree by Hilton in Canton, Ohio (the “DoubleTree Hotel”). The Company’s other revenue is derived primarily from rents and cost reimbursement.

Operating Expenses

The Company’sOur operating expenses include property operating expenses, depreciation expense and other operating expenses. These expenses have increased in connection with putting the Company’sour first phase into operation and the Company expectswe expect these expenses to continue to increase with the Company’sour growth.

The Company’sOur property operating expenses include the costs associated with running its operational entertainment and destination assets such as the Tom Benson Hall of Fame Stadium and the YouthForeverLawn Sports Complex. As more of the Company’sour Phase II assets become operational and additional events for top performers and sporting events are held, the Company expectswe expect these expenses to continue to increase with the Company’sour development.

Other operating expenses include items such as management fees, commission expense and professional fees. The Company expectsWe expect these expenses to continue to increase with the Company’sour growth.

The Company’sOur depreciation expense includes the related costs to owning and operating significant property and entertainment assets. These expenses have grown as the Companywe have completed Phase I development and the assets associated with Phase I became operational. The Company expectsWe expect these expenses to continue to grow as Phase II and III assets are developed and become operational.

Impact of COVID-19

Since early 2020, the world has been and continues to be, impacted by the novel coronavirus (COVID-19) pandemic. The COVID-19 pandemic and measures to prevent its spread have impacted our business in a number of ways, most significantly with regard to a reduction in the number of events and attendance at events at Tom Benson Hall of Fame Stadium and National Youth Football andForeverLawn Sports Complex, which has also negatively impacted our ability to sell sponsorships. Further, the COVID-19 pandemic has caused a number of supply chain disruptions, which negatively impacts our ability to sell sponsorships. Also, we opened our newly renovated DoubleTree Hotelobtain the materials needed to complete construction as well as increases in November 2020, but the occupancy rate has been negatively impacted by the pandemic.costs of materials and labor. The continued impact of these disruptions and the ultimate extent of their adverse impact on our financial and operating results will continue to be dictated by the length of time that such disruptions continue, which will, in turn, depend on the currently unpredictableunknowable duration and severity of the impacts of the COVID-19 pandemic, and among other things, the impact of governmental actions imposed in response to the COVID-19 as well aspandemic and individuals’ and companies’ risk tolerance regarding health matters going forward and developing strain mutations.

Recent Developments

Dispute Regarding Naming Rights Agreement with Johnson Controls

The Naming Rights Agreement is scheduled to expire on December 31, 2034 but provides termination rights both to (a) HOF Village Newco, LLC, a wholly-owned subsidiary of the Company (“Newco”), and PFHOF, and (b) Johnson Controls, which may be exercised in the event the other party, among other things, breaches any of its covenants and agreements under the Naming Rights Agreement beyond certain notice and cure periods. Additionally, Johnson Controls has a right to terminate the Naming Rights Agreement if (i) we do not provide evidence to Johnson Controls by October 31, 2021, that we have secured sufficient debt and equity financing to complete Phase II, subject to day-for-day extension due to force majeure and a notice and cure period, (ii) Phase II is not open for business by January 2, 2024, subject to day-for-day extension due to force majeure and a notice and cure period or (iii) Newco is in default beyond applicable notice and cure periods under certain agreements, such as the Technology as a Service Agreement with Johnson Controls (the “TAAS Agreement”), among others. There can be no assurance that Phase II will be open for business by January 2, 2024. In addition, under the Naming Rights Agreement, Johnson Controls’ obligation to make sponsorship payments to Newco may be suspended if Newco has not provided evidence reasonably satisfactory to Johnson Controls on or before December 31, 2020, that Newco has secured sufficient debt and equity financing to complete Phase II, subject to day-for-day extension due to force majeure. 


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We are in dispute with Johnson Controls for Johnson Controls’ failure to make certain payments under the Naming Rights Agreement. We are currently in discussions with Johnson Controls to settle this dispute. However, there can be no assurances that the amounts due will be settled in accordance with the original terms of the Naming Rights Agreement. Therefore, during the three and six months ended June 30, 2022, we suspended our revenue recognition until the dispute is resolved and have recorded an allowance against the amounts due as of June 30, 2022 in the amount of $2,125,000. The balances due under the Naming Rights Agreement as of June 30, 2022 and December 31, 2021 amounted to $4,010,417 and $1,885,417, respectively.

We anticipate this dispute will be resolved pursuant to the dispute resolution section of the Naming Rights Agreement, which provides for: (1) thirty (30) days of good faith negotiation to attempt to resolve such dispute, followed by (2) referral of the dispute to an independent facilitator or mediator for non-binding mediation; and (3) if the mediation is unsuccessful within sixty (60) days of the commencement of such non-binding mediation, any party may, by notice to all other parties, then refer the dispute to binding arbitration in the State of Ohio.

In addition to the Naming Rights Agreement, Newco is party to a Technology as a Service Agreement dated October 9, 2020 with Johnson Controls (the “TAAS Agreement”). Pursuant to the TAAS Agreement, Johnson Controls will provide certain services related to the construction and development of the Hall of Fame Village powered by Johnson Controls (the “Project”).

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

 

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

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

We dispute that we are in default under either the TAAS Agreement or the Naming Rights Agreement. We believe Johnson Controls is in breach of the Naming Rights Agreement and the TAAS Agreement, and, on May 16, 2022, provided notice to Johnson Controls of these breaches. We are pursuing dispute resolution pursuant to the terms of the Naming Rights Agreement to simultaneously defend against Johnson Controls’ allegations and pursue our own claims. The ultimate outcome of this dispute cannot presently be determined. However, in management’s opinion, the likelihood of a material adverse outcome is remote. Accordingly, adjustments, if any, that might result from the resolution of this matter have not been reflected in the accompanying condensed consolidated financial statements.

Global License Agreement with PFHOF

Effective April 8, 2022, Newco and PFHOF entered into a Global License Agreement (the “Global License Agreement”). The Global License Agreement consolidates and replaces the First Amended and Restated License Agreement, the Amended and Restated Media License Agreement, and the Branding Agreement the parties had previously entered into. The Global License Agreement sets forth the terms under which PFHOF licenses certain marks and works to Newco and its affiliates to exploit existing PFHOF works and to create new works. The Global License Agreement grants Newco and its affiliates an exclusive right and license to use the PFHOF marks in conjunction with theme-based entertainment and attractions within the City of Canton, Ohio; youth sports programs, subject to certain exclusions; e-gaming and video games; and sports betting. The Global License Agreement also grants Newco and its affiliates a non-exclusive license to use the PFHOF marks and works in other areas of use, with a right of first refusal, subject to specified exclusions. The Global License Agreement acknowledges the existence of agreements in effect between PFHOF and certain third parties that provide for certain restrictions on the rights of PFHOF, which affects the rights that can be granted to Newco and its affiliates. These restrictions include, but are not limited to, such third parties having co-exclusive rights to exploit content based on the PFHOF enshrinement ceremonies and other 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.

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HOF Village CFP Loan

On April 27, 2022, Midwest Lender Fund, LLC, a limited liability company wholly owned by our director Stuart Lichter (“Lender”), loaned $4,000,000 (the “Loan”) to HOF Village Center For Performance, LLC (“HOF Village CFP”), which Loan is evidenced by a promissory note issued by HOF Village CFP to Lender (the “Note”). Interest accrues on the outstanding balance of the Note at 6.5% per annum, compounded monthly. The Note matures on April 30, 2023 or if HOF Village CFP exercises its extension option, April 30, 2024. The Note is secured by a mortgage encumbering the Center For Performance. Lender made the Loan to HOF Village CFP in accordance with a previously disclosed letter agreement, dated March 1, 2022, between Hall of Fame Resort & Entertainment Company (the “Company”) and Stuart Lichter, which was amended April 16, 2022, and amended and assigned by Stuart Lichter to Lender April 26, 2022 (the “Letter Agreement”).

As part of the consideration for making the Loan, we issued to Lender: (A) 125,000 shares (the “Commitment Fee Shares”) of our common stock, par value $0.0001 per share (“Common Stock”), and (B) a Series G warrant (the “Series G Warrants”) to purchase 125,000 shares of Common Stock (the “Warrant Shares”). The exercise price of the Series G Warrants is $1.50 per share. The Series G Warrants are exercisable one year after issuance, subject to certain terms and conditions set forth in the Series G Warrants. Unexercised Series G Warrants will expire five years after issuance. The exercise price of the Series G Warrants are subject to a weighted-average antidilution adjustment.

PACE Financing

On April 28, 2022, the City of Canton, in coordination with the Canton Regional Energy Special Improvement District, approved legislation that will enable us draw up to $3.2 million in Property Assessed Clean Energy (“PACE”) financing in conjunction with the implementation of various energy-efficient improvements at the Center for Performance. Through June 30, 2022, we received $27,586 on this financing.

Stark Community Foundation Loan

On June 16, 2022, we entered into a loan agreement with Stark Community Foundation, Inc. (“Stark”) pursuant to which Stark agreed to lend us $5,000,000, and through June 30, 2022 we borrowed $2,500,000 (the “SCF Loan”). The interest rate applicable to the SCF Loan is 6.0% annum. Interest payments are paid annually on December 31st of each year. The SCF Loan is unsecured and matures on May 31, 2029. We may prepay the SCF Loan without penalty.

Events of default under the loan include without limitation: (i) a payment default, (ii) our failure to complete the infrastructure development for Phase II on or before December 31, 2024, and (iii) our failure, following notice from Stark, to comply with any non-monetary covenant contained in the loan agreement. Upon the occurrence of an event of default under the Business Loan Agreement: (a) interest due will increase by 5% per annum; and (b) Stark may, at its option, declare our obligations under the Business Loan Agreement to be immediately due and payable.

The Business Loan Agreement contains customary affirmative and negative covenants for this type of loan, including without limitation (i) affirmative covenants, including furnish Stark with such financial statements and other related information at such frequencies and in such detail as Stark may reasonably request and use all SCF Loan proceeds solely for the infrastructure development for the construction of Phase II, and (ii) negative covenants, including restrictions on additional indebtedness, prepayment of other indebtedness, transactions with related parties, additional liens, mergers and acquisitions, and standard prohibitions on change of control.

CH Capital Bridge Loan

On June 16, 2022, we entered into an agreement to borrow $10,500,000 (the “CH Capital Bridge Loan”) from CH Capital Lending, LLC, which is an affiliate of our director Stuart Lichter (“CH Capital”). The CH Capital Bridge Loan is evidenced by a Promissory Note issued by us to CH Capital. Interest accrues at 12% per annum, compounded monthly. The maturity date is September 10, 2022. We have the right to prepay all or any portion of the principal amount at any time before the maturity date without penalty. Under the CH Capital Bridge Loan, the net proceeds of a financing that occurs after the date of the CH Capital Bridge Loan shall be used to prepay the loan. The CH Capital Bridge Loan is secured by: (i) a mortgage on real property on which we are building our Fan Engagement Zone (an 82,000-square-foot promenade located strategically within the campus footprint, which will include restaurants, retailers and experiential offerings) and (ii) a pledge and security interest in all of the membership interests of HOF Village Waterpark, LLC, and HOF Village Hotel I, LLC held by HOF Village Newco, LLC, each of which is direct or indirect wholly-owned subsidiary of the Company.

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Upon the occurrence of an event of default under the CH Capital Bridge Loan, including without limitation our failure to pay, on or before the due date any amount owing to CH Capital under the loan or our failure, following notice from CH Capital, to comply with any non-monetary covenant contained in the loan, (i) interest due will increase by 5% per annum; and (ii) CH Capital may, at its option, declare our obligations under the loan to be immediately due and payable.

In connection with entering into the CH Capital Bridge Loan, we paid customary fees and expenses.

PACE Financing

On July 1, 2022, HOF Village Stadium, LLC, entered into an Energy Project Cooperative Agreement with Canton Regional Energy Special Improvement District, Inc., SPH Canton St, LLC, an affiliate of Stonehill Strategic Capital, LLC (“SPH”), and City of Canton, Ohio (the “EPC Agreement”).

Under the EPC Agreement, SPH provided $33,387,844 property assessed clean energy financing to finance the costs of the special energy improvement projects at the Stadium described in the Canton Regional Energy Special Improvement District Project Plan that have been completed (as supplemented, the “Plan”). Of the amount received, $29,565,729 was disbursed to us, $3,221,927 was retained by SPH as capitalized interest, and $600,187 was used to pay closing costs. Pursuant to the EPC Agreement, we agreed to make special assessment payments in an aggregate amount that will provide revenues sufficient to repay the amount received plus interest and certain costs. The EPC Agreement bears interest at the annual rate of 6.0% and we will pay a $6,542 semi-annual administrative fee to the ESID over 50 semi-annual payments of $1,314,913 to be collected beginning approximately on January 31, 2024, and continuing through approximately July 31, 2048.

In connection with entering into the EPC Agreement, we obtained the consent and agreement of Cuyahoga River Capital LLC, pursuant to an agreement, dated June 27, 2022. CRC holds 100% of the interest in the Development Finance Authority of Summit County Tax-Exempt Development Revenue Bonds, Series 2018 (Hall of Fame Village - Stadium and Youth Fields TIF Project), issued in the original principal amount of $10,030,000 the “Series 2018 Bonds”). Pursuant to the Consent Agreement, upon the closing of the EPC Agreement the Company deposited $9,895,197 into a bank account at The Huntington National Bank subject to a deposit account control agreement executed by Huntington and CRC as secured party. Under the Consent Agreement, in the event the Series 2018 Bonds are outstanding on December 29, 2022, we will repurchase the Series 2018 Bonds. We granted CRC a lien on the Pledged Account to secure our obligation under the Consent Agreement. In the event the Series 2018 Bonds are redeemed and/or defeased prior to December 29, 2022, upon such redemption or defeasance the Consent Agreement shall automatically terminate, and CRC shall instruct Huntington to release the DACA.

Sports Betting Agreements

On July 14, 2022, Newco entered into an Online Market Access Agreement with Instabet, Inc. (“Instabet”), pursuant to which Instabet will serve as a Mobile Management Services Provider (as defined under applicable Ohio gaming law) wherein Instabet will host, operate and support a branded online sports betting service in Ohio, subject to procurement of all necessary licenses. The initial term of the Online Market Access Agreement is ten years. As part of this agreement, Newco will receive a limited equity interest in Instabet and certain revenue sharing, along with the opportunity for sponsorship and cross-marketing.

On July 29, 2022, Newco entered into a Retail Sports Gaming Services Agreement with RSI OH, LLC, (“RSI”), pursuant to which RSI will serve as a land-based Management Services Provider (as defined under applicable Ohio gaming law) wherein RSI will operate a retail sports betting location in the Fan Engagement Zone at the Hall of Fame Village, subject to procurement of all necessary licenses. The initial term of the Retail Sports Gaming Services Agreement is ten years. As part of this agreement, Newco will receive sponsorship fees and certain revenue sharing.

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Results of Operations

The following table sets forth information comparing the components of net income (loss)loss for the three months ended SeptemberJune 30, 20212022 and the comparable period in 2020:2021:

  For the Three Months Ended
September 30,		 
  2021  2020 
       
Revenues      
Sponsorships, net of activation costs $1,554,454  $1,564,250 
Rents and cost recoveries  181,892   103,244 
Event and other revenues  321,897   9,613 
Hotel revenues  1,423,713   - 
Total revenues $3,481,956  $1,677,107 
         
Operating expenses        
Property operating expenses  8,933,714   8,987,167 
Hotel operating expenses  1,524,774   - 
Commission expense  224,293   199,668 
Impairment expense  1,748,448     
Depreciation expense  2,993,583   2,753,046 
Total operating expenses $15,424,812  $11,939,881 
         
Loss from operations  (11,942,856)  (10,262,774)
         
Other income (expense)        
Interest expense  (981,945)  (615,250)
Amortization of discount on note payable  (1,326,620)  (3,043,738)
Change in fair value of warrant liability  22,469,170   25,510,000 
Business combination costs  -   (19,137,165)
Loss on forgiveness of debt  -   (877,976)
Total other income $20,160,605  $1,835,871 
         
Net income (loss) $8,217,749  $(8,426,903)
         
Series B preferred stock dividends  (212,844)  - 
Non-controlling interest  141,011   36,000 
         
Net income (loss) attributable to HOFRE stockholders $8,145,916  $(8,390,903)
         
Net income (loss) per share – basic $0.09  $(0.26)
         
Weighted average shares outstanding – basic  95,044,250   32,576,553 
         
Net loss per share – diluted $(0.08) $(0.26)
         
Weighted average shares outstanding – diluted  102,540,809   32,576,553 

  For the Three Months Ended June 30, 
  2022  2021 
       
Revenues      
Sponsorships, net of activation costs $452,772  $1,508,402 
Event, rents and cost recoveries  668,863   60,135 
Hotel revenues  1,563,900   795,222 
Total revenues  2,685,535   2,363,759 
         
Operating expenses        
Operating expenses  6,799,280   6,219,781 
Hotel operating expenses  1,316,150   1,596,989 
Commission expense  516,833   260,583 
Depreciation expense  3,527,581   2,972,130 
Total operating expenses  12,159,844   11,049,483 
         
Loss from operations  (9,474,309)  (8,865,724)
         
Other income (expense)        
Interest expense, net  (921,392)  (1,004,419)
Amortization of discount on note payable  (1,122,324)  (1,164,613)
Change in fair value of warrant liability  2,423,000   26,315,888 
Total other income  379,284   24,146,856 
         
Net (loss) income $(9,095,025) $15,461,132 
         
Series B preferred stock dividends  (266,000)  (130,000)
Non-controlling interest  158,592   209,921 
         
Net (loss) income attributable to HOFRE stockholders $(9,202,433) $15,541,053 
         
Net (loss) income per share – basic $(0.08) $0.16 
         
Weighted average shares outstanding, basic  113,997,493   94,397,222 
         
Net (loss) income per share – diluted $(0.08) $- 
         
Weighted average shares outstanding, diluted  113,997,493   107,353,272 


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Three Months Ended SeptemberJune 30, 20212022 as Compared to the Three Months Ended SeptemberJune 30, 20202021

Sponsorship Revenues

The Company’s sponsorshipSponsorship revenues were $1,554,454totaled $452,772 for the three months ended SeptemberJune 30, 20212022 as compared to $1,564,250$1,508,402 for the three months ended SeptemberJune 30, 2020, for2021, representing a decrease of $9,796$1,055,630, or 1%. This decrease was primarily due to the amendment of the Company’s sponsorship agreement with Johnson Controls, Inc.

Rents and cost recoveries

The Company’s revenue from rents and cost recoveries was $181,892 for the three months ended September 30, 2021 compared to $103,244 for the three months ended September 30, 2020, for an increase of $78,648 or 76%70.0%. This decrease was primarily driven by an increase in events in 2021 due toour pausing the decreaserecognition of COVID-19 restrictions.revenue on the JCI sponsorship agreement while a dispute with Johnson Controls is resolved. For additional information, see “Dispute Regarding Naming Rights Agreement with Johnson Controls” above. 

Event, rents and other revenuescost recoveries

The Company’s revenueRevenue from eventsevent, rents and other sourcescost recoveries was $321,897$668,863 for the three months ended SeptemberJune 30, 20212022 compared to $9,613$60,135 for the three months ended SeptemberJune 30, 2020,2021, for an increase of $312,284$608,728, or 3,249%1012.3%. This increase was primarily driven by $34,000the resumption of many sports and other tournaments in revenues from salesour ForeverLawn Sports Complex, our hosting of the Company’s NFTs, along with an increase of revenue from the Company’s hosting of enshrinement weekUSFL semifinals and other events.tournaments in our Tom Benson Hall of Fame Stadium, as well as the opening of the Constellation Center for Excellence.

Hotel Revenues

The Company’s hotelHotel revenue was $1,423,713$1,563,900 for the three months ended SeptemberJune 30, 2022 compared to $795,222 from the three months ended June 30, 2021 comparedfor an increase of $768,678, or 96.7%. This was driven by resumption of travel and conferences that had previously been paused due to $0the COVID-19 pandemic.

Operating Expenses

Operating expense was $6,799,280 for the three months ended SeptemberJune 30, 2020. This was driven by the opening of the DoubleTree Hotel in November 2020.

Property Operating Expenses

The Company’s property operating expense was $8,933,7142022 compared to $6,219,781 for the three months ended SeptemberJune 30, 2021, comparedfor an increase of $579,499, or 9.3%. This increase was driven by an increase in payroll and related costs of approximately $650,000 due to $8,987,167increased headcount, an increase in event expenses of approximately $398,000, and an increase in insurance expense of approximately $224,000, partially offset by a decrease in stock-based compensation expense of approximately $446,000.

Hotel Operating Expenses

Hotel operating expense was $1,316,150 for the three months ended SeptemberJune 30, 2020, for a decrease of $53,453 or 1%. This decrease was predominately the result of a decrease in stock-based compensation of $1.9 million, offset by increases in the Company’s operating expenses.

Hotel Operating Expenses

The Company’s hotel operating expense was $1,524,7742022 compared to $1,596,989 for the three months ended SeptemberJune 30, 2021 comparedfor a decrease of $280,839, or 17.6%. This was driven by $486,000 in interest on a loan that was subsequently moved to $0interest expense offset by an increase in operating expenses due to increased revenue.

Commission Expense

Commission expense was $516,833 for the three months ended SeptemberJune 30, 2020. This increase was driven by the Company incurring operating expenses related2022 compared to the DoubleTree Hotel opening in November 2020.


Commission Expense

The Company’s commission expense was $224,293$260,583 for the three months ended SeptemberJune 30, 2021, compared to $199,668 for the three months ended September 30, 2020, for an increase of $24,625$256,250, or 12%98.3%. The increase in commission expense iswas primarily the result of final prior year commissions’ fees paid in the first quarter of 2021 per the agreements in place at that time.driven by payments incurred for commissions on our Constellation New Energy sponsorship agreement.

Depreciation Expense

The Company’s depreciationDepreciation expense was $2,993,583$3,527,581 for the three months ended SeptemberJune 30, 20212022 compared to $2,753,046$2,972,130 for the three months ended SeptemberJune 30, 2020,2021, for an increase of $240,537$555,451, or 9%18.7%. The increase in depreciation expense is primarily the result of additional depreciation expense incurred due to the DoubleTree Hotel opening of the Constellation Center for Excellence in November 2020.the fourth quarter of 2021.

ImpairmentInterest Expense

The Company’s impairmentTotal interest expense of $1,748,448was $921,392 for the three months ended SeptemberJune 30, 2021, was due2022 compared to an impairment of project development costs due to a change in plans for Company’s Center for Performance, which caused the Company to abandon previous plans that will not benefit the current plan.

Interest Expense

The Company’s total interest expense was $981,945$1,004,419 for the three months ended SeptemberJune 30, 2021, comparedfor a decrease of $83,027, or 8.3%. The decrease in total interest expense was primarily due to $615,250an increase in the proportion of debt that is capitalized for ongoing construction projects.

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Amortization of Debt Discount

Total amortization of debt discount was $1,122,324 for the three months ended SeptemberJune 30, 2020,2022, compared to $1,164,613 for the three months ended June 30, 2021, for a decrease of $42,289, or 3.6%. The decrease in total amortization of debt discount was primarily due to an increase in the proportion of debt that is capitalized for ongoing construction projects.

Change in Fair Value of Warrant Liability

The change in fair value warrant liability represents a gain of $2,423,000 for the three months ended June 30, 2022 compared to $26,315,888 for the three months ended June 30, 2021, for a decrease of $23,892,888 or 91%. The decrease in change in fair value of warrant liability was due primarily to a decrease in our stock price.

Six Months Ended June 30, 2022 as Compared to the Six Months Ended June 30, 2021

  For the Six Months Ended
June 30,		 
  2022  2021 
       
Revenues      
Sponsorships, net of activation costs $1,272,062  $2,983,838 
Event, rents and cost recoveries  1,006,256   103,680 
Hotel revenues  2,513,741   1,191,560 
Total revenues  4,792,059   4,279,078 
         
Operating expenses        
Operating expenses  14,325,979   12,228,780 
Hotel operating expenses  2,469,262   2,363,154 
Commission expense  656,743   427,250 
Depreciation expense  6,769,866   5,893,067 
Total operating expenses  24,221,850   20,912,251 
         
Loss from operations  (19,429,791)  (16,633,173)
         
Other expense        
Interest expense, net  (2,134,933)  (1,959,727)
Amortization of discount on note payable  (2,478,298)  (2,398,727)
Change in fair value of warrant liability  7,173,000   (90,035,112)
(Loss) gain on extinguishment of debt  (148,472)  390,400 
Total other income (expense)  2,411,297   (94,003,166)
         
Net loss $(17,018,494) $(110,636,339)
         
Series B preferred stock dividends  (532,000)  (130,000)
Non-controlling interest  235,964   160,210 
         
Net loss attributable to HOFRE stockholders $(17,314,530) $(110,606,129)
         
Net loss per share – basic and diluted $(0.16) $(1.30)
         
Weighted average shares outstanding, basic and diluted  109,194,639   84,978,294 

50

Sponsorship Revenues

Sponsorship revenues totaled $1,272,062 for the six months ended June 30, 2022 as compared to $2,983,838 for the six months ended June 30, 2021, for a decrease of $1,711,776, or 57.4%. This decrease was primarily driven by our pausing the recognition of revenue on the JCI sponsorship agreement while a dispute with Johnson Controls is resolved. For additional information, see “Dispute Regarding Naming Rights Agreement with Johnson Controls” above. 

Event, rents and cost recoveries

Revenue from event, rents and cost recoveries was $1,006,256 for the six months ended June 30, 2022 compared to $103,680 for the six months ended June 30, 2021, for an increase of $366,695$902,576, or 60%870.5%. This increase was primarily driven by the resumption of many sports and other tournaments in our ForeverLawn Sports Complex, the hosting of the USFL semifinals and other events in our Tom Benson Hall of Fame Stadium, as well as the opening of the Constellation Center for Excellence. 

Hotel Revenues

Hotel revenue was $2,513,741 for the six months ended June 30, 2022 compared to $1,191,560 from the six months ended June 30, 2021 for an increase of $1,322,181, or 111.0%. This increase was driven by resumption of travel and conferences that had previously been paused due to the COVID-19 pandemic.

Operating Expenses

Operating expense was $14,325,979 for the six months ended June 30, 2022 compared to $12,228,780 for the six months ended June 30, 2021, for an increase of $2,097,199, or 17.1%. This increase was driven by an increase in legal and professional fees of approximately $250,000, an increase in payroll and related costs of approximately $1.0 million due to increased headcount, an increase in event expenses of $449,000 and an increase in insurance expense of approximately $344,000, partially offset by a decrease in stock-based compensation of approximately $563,000.

Hotel Operating Expenses

Hotel operating expense was $2,469,262 for the six months ended June 30, 2022 compared to $2,363,154 for the six months ended June 30, 2021 for an increase of $106,108, or 4.5%. This increase was driven by resumption of travel and conferences that had previously been paused due to COVID-19.

Commission Expense

Commission expense was $656,743 for the six months ended June 30, 2022 compared to $427,250 for the six months ended June 30, 2021, for an increase of $229,493, or 53.7%. The increase in commission expense was primarily driven by payments incurred for commissions on our Constellation New Energy sponsorship agreement.

Depreciation Expense

Depreciation expense was $6,769,866 for the six months ended June 30, 2022 compared to $5,893,067 for the six months ended June 30, 2021, for an increase of $876,799, or 14.9%. The increase was primarily the result of additional depreciation expense incurred due to the opening of the Constellation Center for Excellence in the fourth quarter of 2021.

Interest Expense

Total interest expense was $2,134,933 for the six months ended June 30, 2022 compared to $1,959,727 for the six months ended June 30, 2021, for an increase of $175,206, or 8.9%. The increase in total interest expense is primarily due to anthe increase in the Company’s notes payable.our total debt outstanding, as well as a mix of higher interest rate loans.

Amortization of Debt Discount

Total amortization of debt discount was $2,478,298 for the six months ended June 30, 2022 compared to $2,398,727 for the six months ended June 30, 2021, for an increase of $79,571, or 3.3%. The Company’sincrease in total amortization of debt discount was $1,326,620 for the three months ended September 30, 2021, compared to $3,043,738 for the three months ended September 30, 2020, for a decrease of $1,717,118 or 56%. The decrease in total amortization of debt discount is primarily due to the prepayment of a portion of the Company’s note payable with Aquarian.an increase in our total debt outstanding.

51

Change in Fair Value of Warrant Liability

The Company’s change in fair value warrant liability wasrepresents a gain of $22,469,170$7,173,000 for the threesix months ended SeptemberJune 30, 2022 compared to a loss of $90,035,112 for the six months ended June 30, 2021, for a change of $97,208,112 or 108%. The change in fair value of warrant liability was primarily due to a decrease in our stock price.

(Loss) Gain on Extinguishment of Debt

Loss on extinguishment of debt was $148,472 for the six months ended June 30, 2022, as compared to a gain of $25,510,000 for the three months ended September 30, 2020. The change in fair value is determined primarily by changes in the fair value of the Company’s Common Stock, which has declined in the quarter ending September 30, 2021.

Business Combination Costs

The Company’s business combination costs were $0 for the three months ended September 30, 2021 compared to $19,137,165 for the three months ended September 30, 2020. The Company’s business combination costs were incurred in connection with its Business Combination on July 1, 2020 with GPAQ. The business combination costs consisted of $2,218,187 related to our CEO’s restricted stock award in which one-third vested on July 2, 2020 in conjunction with the closing of the business combination, a $200,000 cash bonus to our CEO, and other legal and professional fees incurred in the Business Combination.


Nine Months Ended September 30, 2021 as Compared to the Nine Months Ended September 30, 2020

The following table sets forth information comparing the components of net loss for the nine months ended September 30, 2021 and the comparable period in 2020:

  For the Nine Months Ended
September 30,		 
  2021  2020 
Revenues      
Sponsorships, net of activation costs $4,538,292  $4,886,106 
Rents and cost recoveries  278,853   420,681 
Event revenues  328,616   37,446 
Hotel revenues  2,615,273   - 
Total revenues $7,761,034  $5,344,233 
         
Operating expenses        
Property operating expenses  21,162,494   18,099,436 
Hotel operating expenses  3,887,928   - 
Commission expense  651,543   1,257,648 
Impairment expense  1,748,448     
Depreciation expense  8,886,650   8,198,469 
Total operating expenses $36,337,063  $27,555,553 
         
Loss from operations  (28,576,029)  (22,211,320)
         
Other expense        
Interest expense  (2,941,672)  (4,825,045)
Amortization of discount on note payable  (3,725,347)  (9,721,484)
Change in fair value of warrant liability  (67,565,942)  25,510,000 
Business combination costs  -   (19,137,165)
Gain (loss) on forgiveness of debt  390,400   (877,976)
Total other expense $(73,842,561) $9,051,670 
         
Net loss $(102,418,590) $(31,262,990)
         
Series B preferred dividends  (342,844)  - 
Non-controlling interest  301,221   - 
         
Net loss attributable to HOFRE stockholders $(102,460,213) $(31,262,990)
         
Net loss per share – basic and diluted $(1.16) $(2.15)
         
Weighted average shares outstanding, basic and diluted  88,382,322   14,548,887 

Sponsorship Revenues

The Company’s sponsorship revenues were $4,538,292 for the nine months ended September 30, 2021 compared to $4,886,106 for the nine months ended September 30, 2020, for a decrease of $347,814 or 7%. This decrease was primarily driven by the cancellation of a smaller sponsorship agreement as well as the impact of revisions to two sponsorship agreements effective in the third quarter of 2020.

Rents and cost recoveries

The Company’s revenue from rents and cost recoveries was $278,853 for the nine months ended September 30, 2021 compared to $420,681 for the nine months ended September 30, 2020, for a decrease of $141,828, or 34%. This decrease was primarily driven by the decreased utilization of the Company’s youth fields.


Event and other revenues

The Company’s revenue from events and other sources was $328,616 for the nine months ended September 30, 2021 compared to $37,446 for the nine months ended September 30, 2020, for an increase of $291,170 or 778%. This increase was primarily driven by $34,000 in revenues from sales of the Company’s NFTs, along with an increase of revenue from the Company’s hosting of enshrinement week and other events.

Hotel Revenues

The Company’s hotel revenue was $2,615,273 for the nine months ended September 30, 2021 compared to $0 from the nine months ended September 30, 2020. This was driven by the opening of the DoubleTree Hotel in November 2020.

Property Operating Expenses

The Company’s property operating expense was $21,162,494 for the nine months ended September 30, 2021 compared to $18,099,436 for the nine months ended September 30, 2020, for an increase of $3,063,058 or 17%. This increase was driven by the lifting of some COVID-19 restrictions in the first half of 2021 and the return to more normal property operations.

Hotel Operating Expenses

The Company’s hotel operating expense was $3,887,928 for the nine months ended September 30, 2021 compared to $0 for the nine months ended September 30, 2020. This increase was driven by the Company incurring operating expenses related to the DoubleTree Hotel opening in November 2020.

Commission Expense

The Company’s commission expense was $651,543 for the nine months ended September 30, 2021 compared to $1,257,648 for the nine months ended September 30, 2020, for a decrease of $606,105 or 48%. The decrease in commission expense is primarily the result of final prior year commissions’ fees paid in the first quarter of 2020 per the agreements in place at that time.

Depreciation Expense

The Company’s depreciation expense was $8,886,650 for the nine months ended September 30, 2021 compared to $8,198,469 for the nine months ended September 30, 2020, for an increase of $688,181 or 8%. The increase in depreciation expense is primarily the result of additional depreciation expense incurred due to the DoubleTree Hotel opening in November 2021.

Impairment Expense

The Company’s impairment expense of $1,748,448 for the nine months ended September 30, 2021, was due to an impairment of project development costs due to a change in plans for Company’s Center for Performance, which caused the Company to abandon previous plans that will not benefit the current plan.

Interest Expense

The Company’s total interest expense was $2,941,672 for the nine months ended September 30, 2021 compared to $4,825,045 for the nine months ended September 30, 2020, for a decrease of $1,883,373 or 39%. The decrease in total interest expense is primarily due to extinguishment of select debt instruments at the close of the Business Combination and the cancellation of a note we owed IRG in exchange for issuance of shares of the Company’s Common Stock and Series C Warrants in December 2020, as well as changes in interest rates and certain interest expense due to affiliate that was waived under a revised agreement on June 30, 2020.


Amortization of Debt Discount

The Company’s total amortization of debt discount was $3,725,347 for the nine months ended September 30, 2021 compared to $9,721,484 for the nine months ended September 30, 2020, for a decrease of $5,996,137, or 62%. The decrease in total amortization of debt discount is primarily due to the conversion of the Company’s various outstanding notes payable throughout the second half of 2020.

Change in Fair Value of Warrant Liability

The Company’s change in fair value warrant liability was a loss of $67,565,942 for the nine months ended September 30, 2021 compared to a gain of $25,510,000 for the nine months ended September 30, 2020. The change in fair value is determined by changes in the fair value of the Company’s Common Stock, which has increased in the nine months ending September 30, 2021.

Business Combination Costs

The Company’s business combination costs were $0 for the nine months ended September 30, 2021, as compared to $19,137,165 for the nine months ended September 30, 2020. The Company’s business combination costs were incurred in connection with its business combination on July 1, 2020 with GPAQ. The business combination costs consisted of $2,218,187 related to our CEO’s restricted stock award in which one-third vested on July 2, 2020 in conjunction with the closing of the business combination, a $200,000 cash bonus to our CEO, and other legal and professional fees incurred in the Business Combination.

Gain on Forgiveness of Debt

The Company’s gain on forgiveness of debt was $390,400 for the ninesix months ended SeptemberJune 30, 2021, as compared to a2021. The loss of $877,976 for the nine months ended September 30, 2020. The gain on forgivenessextinguishment of debt is due to the forgiveness of the Company’sour Paycheck Protection Program Loan during the first quarter of 2021.2021 and the refinancing of many of our debt instruments in the first quarter of 2022.

Liquidity and Capital Resources

The Company hasWe have sustained recurring losses and negative cash flows from operations through SeptemberJune 30, 2021. In addition, the Company has significant debt obligations maturing in the 12-month period subsequent to the date these unaudited condensed consolidated financial statements are issued.2022. Since inception, the Company’sour operations have been funded principally through the issuance of debt and equity. As of SeptemberJune 30, 2021, the Company2022, we had approximately $13.2$11 million of unrestricted cash and $15.3$7 million of restricted cash, respectively. This conditions initially raise substantial doubt regarding the Company’s abilityA majority of our restricted cash may be released to continue as a going concern. However,us upon achieving certain occupancy and other targets sets by certain of our lenders.

On March 1, 2022, the Company believes that management’s plans alleviate such substantial doubt. Management’s plans include raising additional capital, including debt, construction lending, and equity financing or, if necessary, reducingErieBank agreed to extend the scopeMKG DoubleTree Loan in principal amount of planned development.$15,300,000 to September 13, 2023.

During February 2021, the Company received approximately $34.5 million gross proceeds from the issuanceOn March 1, 2022, we executed a series of sharestransactions with Industrial Realty Group, LLC, a Nevada limited liability company controlled by our director Stuart Lichter (“IRG”) and its affiliates and JKP Financial LLC (“JKP”), whereby IRG and JKP extended certain of its Common Stock, before offering costs.our debt in aggregate principal amount of $22,853,831 to March 31, 2024.

On June 4, 2021, the Company completed16, 2022, we entered into a private placementloan agreement with CH Capital Lending LLC, pursuant to which is an affiliate of the Company sold toCompany’s director Stuart Lichter (“CH Capital Lending”), whereby CH Capital Lending LLC for a purchase price of $15.0 million (i) 15,000 shares of 7.00% Series B Convertible Preferred Stock (the “Series B Preferred Stock”), which are convertible into shares of the Company’s Common Stock, having an aggregate liquidation preference of $15.0 million plus any accrued but unpaid dividendsagreed to the date of payment, and (ii) 2,450,980 warrants, with a term of three years, exercisable six months after issuance, each exercisable for one share of Common Stock at an exercise price of $6.90 per share, subject to certain adjustments (the “Series D Warrants”). Also on June 4, 2021, the Company closed a securities purchase agreement with another purchaser for 200 shares of Series B Preferred Stock and 32,680 Series D Warrants in exchange for $200,000.lend us $10,500,000.

On eachJune 16, 2022, we entered into a loan agreement with Stark Community Foundation, whereby Stark Community Foundation agreed to lend to us $5,000,000, of August 12, 2021 and September 22, 2021, the Company issued to American Capital Center, LLC (the “Investor”) 900 shares (the “Series A Shares”) of 7.00% Series A Cumulative Redeemable Preferred Stock (“Series A Preferred Stock”) at a price of $1,000 per share for an aggregate purchase price of $900,000. The Company will pay the Investor an origination fee of 2% of the aggregate purchase price.which we’ve drawn $2,500,000.

On September 30, 2021, the CompanyJuly 1, 2022, we entered into an Equity DistributionEnergy Project Cooperative Agreement (the “Equity Distribution“EPC Agreement”) with Wedbush SecuritiesCanton Regional Energy Special Improvement District, Inc., SPH Canton St, LLC, an affiliate of Stonehill Strategic Capital, LLC and Maxim Group LLC with respect to an atCity of Canton, Ohio. Under the market offering programEPC Agreement, we were provided $33,387,844 in Property Assessed Clean Energy (“ATM”PACE”) 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. No shares had been sold under the Equity Distribution Agreement through September 30, 2021. From the October 1 through November 10, 2021, approximately 202,489 shares were sold resulting in net proceeds to the Company totaling approximately $512,273. The remaining availability under the Equity Distribution Agreement as of the date of filing of this report is approximately $49.5 million.financing.


The Company believesWe believe that, as a result ofour demonstrated historical ability to finance and refinance debt, the transactions described above and its current ongoing negotiations, it will havecurrently has sufficient cash and future financing to meet its funding requirements over the next twelve months.year. Notwithstanding, the Company expectswe expect that it will need to raise additional financing to accomplish its development plan over the next several years. The Company isWe are seeking to obtain additional funding through debt, construction lending, and equity financing. There are no assurances that the Companywe will be able to raise capital on terms that are acceptable to the Company or at all, or that cash flows generated from its operations will be sufficient to meet its current operating costs. If the Company iswe are unable to obtain sufficient amounts of additional capital, it may be required to reduce the scope of its planned development, which could harm its financial condition and operating results.

Cash Flows

 

Since inception, the Company haswe have primarily used itsour available cash to fund its project development expenditures. The following table sets forth a summary of cash flows for the periods presented:

  

  For the Nine Months Ended
September 30,		 
  2021  2020 
Cash (used in) provided by:      
Operating activities $(20,245,591) $(25,218,923)
Investing activities  (42,328,949)  2,949,733 
Financing activities  51,011,265   37,496,789 
Net (decrease) increase in cash and restricted cash $(11,563,275) $15,227,599 
  For the Six Months Ended
June 30,		 
  2022  2021 
Cash (used in) provided by:      
Operating Activities $5,422,198  $(12,256,168)
Investing Activities  (40,022,805)  (26,098,120)
Financing Activities  35,042,816   71,968,919 
Net (decrease) increase in cash and restricted $442,209  $33,614,631 

 

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Cash Flows for the NineSix Months Ended SeptemberJune 30, 20212022 as Compared to the NineSix Months Ended SeptemberJune 30, 20202021

Operating Activities

Net cash used inprovided by operating activities was $20,245,591 for$5,422,198 during the ninesix months ended SeptemberJune 30, 2021,2022, which consisted primarily of the Company’sour net loss of $102,418,590,$17,018,494, offset by non-cash depreciation expense of $8,886,648,$6,769,866, amortization of note discounts of $3,725,349,$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 $4,573,524, non-cash impairment expense of $1,748,448,$2,570,919, and a change in fair value of warrant liability of $67,565,942.$7,173,000. The changes in operating assets and liabilities consisted of an increase in accounts receivable of $370,525, a decrease in prepaid expenses and other assets of $1,430,448, an increase in accounts payable and accrued expenses of $8,196,272, an increase in due to affiliates of $1,777,542, and an increase in other liabilities of $4,830,587.

Net cash used in operating activities was $12,256,168 during the six months ended June 30, 2021, which consisted primarily of our net loss of $110,636,339, offset by non-cash depreciation expense of $5,893,067, amortization of note discounts of $2,398,727, stock-based compensation expense of $3,006,692, and a change in fair value of warrant liability of $90,035,112. The changes in operating assets and liabilities consisted primarily of an increasea decrease in accounts receivable of $125,208,$675,668, an increase in prepaid expenses and other assets of $1,648,247,$2,033,495, and a decrease in accounts payable and accrued expenses of $2,537,410.$2,060,008.   

Net cash used in operating activities was $25,218,923 during the nine months ended September 30, 2020, which consisted primarily of a net loss of $31,262,990, offset by non-cash depreciation expense of $8,198,469, amortization of note discounts of $9,721,484, payment-in-kind interest rolled into debt of $3,135,035, a decrease in accounts receivable of $102,922, an increase in prepaid expenses and other assets of $4,525,057, an increase in accounts payable and accrued expenses of $15,517,286, a decrease in due to affiliates of $9,126,691, and an increase in other liabilities of $4,090,150.

Investing Activities

Net cash used in investing activities was $42,328,949$40,022,805 and $26,098,120 during the ninesix months ended SeptemberJune 30, 2022 and 2021, as opposed to net cash provided by investing activities of $2,949,733 during the nine months ended September 30, 2020. Cash used in investing activitiesrespectively, which consisted primarily of cash used forour project development costs and property and equipment.costs.

Financing Activities 

Net cash provided by financing activities was $51,011,265$35,042,816 during the ninesix months ended SeptemberJune 30, 2022. This consisted primarily of $20,714,311 in proceeds from notes payable and $17,983,214 of proceeds from equity raises under our ATM, offset by $3,144,677 in repayments of notes payable, and $210,032 in payment of financing costs.

Net cash provided by financing activities was $71,968,919 during the six months ended June 30, 2021, which consisted primarily of $6,900,000$6,000,000 in proceeds from notes payable, $15,200,000 in proceeds from the sale of Series B Preferred Stock,preferred stock, $31,746,996 of proceeds from equity raises, and $23,485,200$23,346,870 of proceeds from the exercise of warrants, offset by $25,762,598$4,309,947 in repayments of notes payable, and $515,000$15,000 in payment of financing costs.

Net cash provided by financing activities was $37,496,789 during the nine months ended September 30, 2020, which consisted primarily of $65,039,642 in borrowings on loans payable, partially offset by $26,113,861 of repayments on loans payable, and $1,428,992 in payment of financing costs.


Contractual Obligations and Commitments

The following is a summary of the contractual obligations, which includes interest as of September 30, 2021 and the effect such obligations are expected to have on the liquidity and cash flows in future periods:

  Total  Less than
1 Year		  1-3 Years  3-5 Years  More than
5 Years		 
Notes payable commitments $99,204,925  $48,637,215  $4,145,539  $32,879,171  $13,543,000 
Project and ground leases  4,686,375   321,900   643,800   643,800   3,076,875 
Total $103,891,300  $48,959,115  $4,789,339  $33,522,971  $16,619,875 

The Company has various debt covenants that require certain financial information to be met. If the Company does not meet the requirements of the debt covenants, the Company will be responsible for paying the full outstanding amount of the note immediately. As of September 30, 2021, we were in compliance with all relevant debt covenants.  

Off-Balance Sheet Arrangements

The CompanyWe did not have any off-balance sheet arrangements as of SeptemberJune 30, 2021.2022.

Critical Accounting Policies and Significant Judgments and Estimates

This discussion and analysis of the Company’sour financial condition and results of operations is based on the Company’s unaudited condensedour consolidated financial statements, which have been prepared in accordance with generally accepted accounting principles in the United States of America, or U.S. GAAP. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reported periods. In accordance with U.S. GAAP, the Company bases itswe base our estimates on historical experience and on various other assumptions the Company believeswe believe are reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions.

For information on the Company’sour significant accounting policies please refer to Note 2 to the Company’s unaudited condensed consolidated financial statements.our Consolidated Financial Statements.

Item 3. Quantitative and qualitative disclosures about market risk

Not applicable.


Item 4. Controls and procedures

Evaluation of Disclosure Controls and Procedures

We have established disclosure controls and procedures to ensure that the information required to be disclosed by the Companyus in the reports that it fileswe file or submitssubmit under the Securities Exchange Act of 1934 (“Exchange Act”) is recorded, processed, summarized, and reported within the time periods specified in SEC rules and forms and that such information is accumulated and made known to the officers who certify the Company’sour financial reports and to other members of senior management and the Board of Directors as appropriate to allow timely decisions regarding required disclosure.

Based on their evaluation as of SeptemberJune 30, 2021,2022, the principal executive officer and principal financial officer of the Company have concluded that the Company’sour disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) are effective.

Changes in Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Exchange Act Rule 13a-15(f) and 15d-15(f). Internal control over financial reporting is a process used to provide reasonable assurance regarding the reliability of our financial reporting and the preparation of our financial statements for external purposes in accordance with generally accepted accounting principles in the United States. Internal control over financial reporting includes policies and procedures that pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets; provide reasonable assurance that transactions are recorded as necessary to permit preparation of our financial statements in accordance with generally accepted accounting principles in the United States, and that our receipts and expenditures are being made only in accordance with the authorization of our board of directors and management; and provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on our financial statements.

During the quarter ended SeptemberJune 30, 2021,2022, there were no material changes to the Company’sin our internal control over financial reporting. 


53

 

PART II. OTHER INFORMATION

 

Item 1. Legal proceedings

 

During the normal course of its business, the Company is subject to occasional legal proceedings and claims. The Company does not have any pending litigation that separately or in aggregate, will, in the opinion of management, based on currently available information have a material adverse effect on its results of operations, financial condition or cash flows.

 

Item 1A. Risk factors

 

Our operations and financial results are subject to various risks and uncertainties, including those described in Part I, Item 1A, “Risk Factors” in our Annual Report on Form 10-K/A10-K for the year ended December 31, 2020,2021, as updated by those described in Part II, Item 1A. “Risk Factors” in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2022, which could adversely affect our business, financial condition, results of operations, cash flows, and the trading price of our common and capital stock. Except as set forth below, as of the date of this Quarterly Report, thereThere have been no material changes to our risk factors previously disclosed insince our Exchange Act Reports.Annual Report on Form 10-K for the year ended December 31, 2021, as updated by our Form 10-Q for the quarter ended March 31, 2022, except as follows:

 

The maturity date of the Term Loan, which is secured by substantially all of our assets, is March 1, 2022. There can be no assurance that we will be ableWe rely on sponsorship contracts to repay the obligation upon maturity to avoid a default.generate revenues.

 

We will receive a portion of our annual revenues from sponsorship agreements for various content, media and live events produced at Hall of Fame Village powered by Johnson Controls such as title, official product and promotional partner sponsorships, billboards, signs and other media. We are partycontinuously in negotiations with existing sponsors and actively seeking new sponsors as there is significant competition for sponsorships. Some of our live events may not secure a title sponsor, may not secure a sufficient number of sponsorships on favorable terms, or may not secure sponsorships sufficiently enough in advance of an event, which may lead to a term loanevent cancellations or otherwise adversely affect the revenue generated from such events.

The certain amended and restated sponsorship and naming rights agreement, (as amended, the “Term Loan Agreement”), dated as of December 1,July 2, 2020 (the “Effective Date”“Naming Rights Agreement”), by and among HOF Village, PFHOF and Johnson Controls is scheduled to expire on December 31, 2034, but provides termination rights both to (a) HOF Village and PFHOF and (b) Johnson Controls, which may be exercised in the Company, Newco,event the other party, among other things, breaches any of its covenants and agreements under the Naming Rights Agreement beyond certain of Newco’s subsidiaries, as borrowers (collectively,notice and cure periods. Additionally, Johnson Controls has a right to terminate the “Borrowers”),Naming Rights Agreement if (i) we do not provide evidence to Johnson Controls by October 31, 2021, that we have secured sufficient debt and Aquarian Credit Funding LLC (“Aquarian”), as lead arranger, administrative agent, collateral agent, and representative of the lenders party thereto (the “Lenders”), as amended by Amendment Number 1 dated January 28, 2021 (“Loan Amendment No. 1”), Amendment Number 2 dated February 15, 2021 (“Loan Amendment No. 2”), Amendment No. 3 dated August 30, 2021 (“Loan Amendment No. 3”), and Amendment No. 4 dated August 30, 2021 (“Loan Amendment No. 4”), pursuantequity financing to which we borrowed from the Lenders (the “Term Loan”) originally $40 million. In connection with the closing of Amendment No. 3, the Borrowers prepaid (in addition to certain interest) $20.0 million (the “Prepayment”) in respect of the $40.0 million existing outstanding principal balance of the Term Loan resulting in an updated outstanding principal balance of the Term Loan of $20.0 million. The term of the Term Loan Agreement is 15 months from the Effective Date (the “Term”). The Term Loan bears interest at a fixed rate equal to 10.0% per annum, payable monthly in advance on the outstanding amount of the Term Loan during the Term. We have provided collateral in connection with the Term Loan, including, with certain exceptions: (i) a perfected, first priority security interest in all our real and intangible property, including cash and accounts (perfected through account control agreements), contracts, intellectual property, leases, plans and specifications, permits, licenses, approvals, entitlements, and development rights; (ii) a perfected first priority pledge of 100% of the portion of the ownership interests in our subsidiaries; and (iii) a first mortgage, an assignment of leases and rents, and environmental indemnity covering the property owned by the Borrowers (collateral protection to include other customary documentation, including but not limited to deeds in lieu and cognovits,complete Phase II, subject to prior exhaustion of all customaryday-for-day extension due to force majeure and a notice and cure period, (ii) Phase II is not open for business by January 2, 2024 subject to day-for-day extension due to force majeure and a notice and cure period, or (iii) HOF Village is in default beyond applicable notice and cure periods inunder certain agreements, such as the event of default,Technology as detailed in the Term Loan documents).a Service Agreement with Johnson Controls (the “TAAS Agreement”), among others. There can be no assurance that wePhase II will be ableopen for business by January 2, 2024. In addition, under the Naming Rights Agreement Johnson Controls’ obligation to repay the Term Loan upon maturitymake sponsorship payments to avoid a default.Newco may be suspended if Newco has not provided evidence reasonably satisfactory to Johnson Controls on or before December 31, 2020, subject to day-for-day extension due to Force Majeure, that Newco has secured sufficient debt and equity financing to complete Phase II.

 

Loan Amendment No. 1 and Loan Amendment No. 2 extended from January 30, 2021 to February 28, 2021 the deadline (the “Delivery Date”) the Company has to deliver (i) fully executed “springing” or “soft lockbox” control agreements with respect to certain accounts of the Borrowers and (ii) evidence reasonably satisfactory to Aquarian, as administrative agent under the Term Loan Agreement (the “Administrative Agent”), that a Borrower is now the sole beneficiary of certain accounts which have not been closed (as permitted in Section 6.16 of the Term Loan Agreement), in each case priorIn addition to the Delivery Date. With respectNaming Rights Agreement, Newco is party to Loan Amendment No. 3, the Borrowers made the Prepayment by prepaying in its entirety the Promissory Note, dated December 1, 2020, made by Borrowers to Lincoln Lender in connection with the Term Loan Agreement. Amendment No. 3 amended the Term Loan Agreement to remove Lincoln Benefit Life Company (“Lincoln Lender”),a Technology as a Lender in connectionService Agreement dated October 9, 2020 with the Borrowers’ repayment of Lincoln Lender. Under Amendment Number 3, each of Administrative Agent and Investors Heritage Life Insurance Company (“Remaining Lender”Johnson Controls (the “TAAS Agreement”) acknowledge and agree that, notwithstanding that the Term Loan Agreement requires that prepayments shall be pro rata, as between the Lenders, in connection with the Borrowers’ repayment in full of Lincoln Lender, Remaining Lender will not require a simultaneous pro rata repayment of amounts it is owed under the Term Loan Agreement. Amendment No. 4 makes certain changes. Pursuant to the amended Term LoanTAAS Agreement, including among other things: (i) extending the maturity of the Term Loan to March 1, 2022, and (ii) removing a deadline for the Company to obtain a commitment for financing of Phase II of the Company’s development plan. In connection with the extension of the maturity of the Term Loan, the Company deposited interest for the extended term in the Interest Reserve Account (as defined in the amended Term Loan Agreement). Amendment No. 4 also includes consent of the Administrative Agent and Lenders to the Borrowers entering intoJohnson Controls will provide certain agreements with the Stark County Port Authority asservices related to the final phaseconstruction and development of the youth fields constructionHall of Fame Village powered by Johnson Controls (the “Project”), including, but not limited to, (i) design assist consulting, equipment sales and the constructionturn-key installation services in respect of specified systems to be constructed as part of Phase 2 and Phase 3 of the Constellation Center for Excellence, bothProject and (ii) maintenance and lifecycle services in respect of which are continuationscertain systems constructed as part of Phase 1, and to be constructed as part of Phase 2 and Phase 3, of the ongoing efforts to realize sales tax savings forProject. Under the project using the customary leaseback structure currently in place for the youth fields and other componentsterms of the Company’s development project.TAAS Agreement, Newco has agreed to pay Johnson Controls up to an aggregate of approximately $217 million for services rendered by Johnson Controls over the term of the TAAS Agreement. As of June 30, 2022 and December 31, 2021, approximately $195 million and $199 million, respectively, was remaining under the TAAS Agreement.

 


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The Term LoanTAAS Agreement contains customary affirmativeprovides that in respect of the Naming Rights Agreement, Johnson Controls and negative covenants for this type of loan, including without limitationNewco intend, acknowledge and understand that: (i) affirmative covenants, includingNewco’s performance under the maintenance of certain key contracts and content rights, adherenceTAAS Agreement is essential to, a detailed cash flow forecast including a hard cost and a soft cost construction budget,condition to Johnson Controls’ performance under, the Naming Rights Agreement and (ii) negative covenants, including restrictions on additional indebtedness, prepaymentJohnson Controls’ performance under the Naming Rights Agreement is essential to, and a condition to Newco’s performance under, the TAAS Agreement. In the TAAS Agreement, Johnson Controls and Newco represent, warrant and agree that the transactions agreements and obligations contemplated under the TAAS Agreement and the Naming Rights Agreement are intended to be, and shall be, interrelated, integrated and indivisible, together being essential to consummating a single underlying transaction necessary for the Project. The Company anticipates that resolution of the dispute regarding the Naming Right Agreement will include the TAAS Agreement.

On May 10, 2022, the Company received from JCI a notice of termination (the “TAAS Notice”) of the TAAS Agreement effective immediately. The TAAS Notice states that termination of the TAAS Agreement by JCI is due to Newco’s alleged breach of its payment obligations. Additionally, JCI in the TAAS Notice demands the amount which is the sum of: (i) all past due payments and any other indebtedness, transactions with related parties, additional liens, dividends, investmentsamounts owed by Newco under the TAAS Agreement; (ii) all commercially reasonable and advances, sales of assets, capital expenditures, mergersdocumented subcontractor breakage and acquisitions,demobilization costs; and standard prohibitions on change of control. Additionally,(iii) all commercially reasonable and documented direct losses incurred by JCI directly resulting from the Effective Date until repaymentalleged default by the Company and the exercise of JCI’s rights and remedies in respect thereof, including reasonable attorney fees.

Also on May 10, 2022, the Company received from JCI a notice of termination (“Naming Rights Notice”) of the Term Loan, weName 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 maintain,pay JCI, within 30 days following the date of the Naming Rights Notice, $4,750,000. The Company has not made such payment to date. The Naming Rights Notice states that Newco is also in an account controlled by Aquarian (the “Proceeds Account”), cashbreach of its covenants and cash equivalents equalagreements, which require Newco to at least $7.5 million (the “Liquidity Covenant”). Subjectprovide evidence reasonably satisfactory to stated exceptions, we must deposit all funds received byJCI on or before October 31, 2021, subject to day-for-day extension due to force majeure, that Newco has secured sufficient debt and equity financing to complete Phase II.

The Company disputes that it is in default under either the Borrowers duringTAAS Agreement or the Term fromNaming Rights Agreement. The Company believes JCI is in breach of the Naming Rights Agreement and the TAAS Agreement due to their failure to make certain payments in accordance with the Naming Rights Agreement, and, on May 16, 2022, provided notice to JCI of these breaches. The Company is pursuing dispute resolution pursuant to the terms of the Naming Rights Agreement to simultaneously defend against JCI’s allegations and pursue its own claims. The ultimate outcome of this dispute cannot presently be determined. However, in management’s opinion, the likelihood of a material adverse outcome is remote. Accordingly, adjustments, if any, and all sources into the Proceeds Account and must have Aquarian’s prior written approval to withdraw any amountsthat might result from the Proceeds Account, pursuant to a budget and schedule agreed upon by the parties. Asresolution of September 30, 2021, there was approximately $12.9 millionthis matter have not been reflected in the Proceeds Accountaccompanying condensed consolidated financial statements. During the three and $0.8 millionsix months ended June 30, 2022, the Company suspended its revenue recognition until the dispute is resolved and has recorded an allowance against the amounts due as of June 30, 2022 in the interest account. We are also requiredamount of $2,125,000. The balances due under the Naming Rights Agreement as of June 30, 2022 and December 31, 2021 amounted to prepay the outstanding balance of the Term Loan under certain circumstances$4,010,417 and the Lenders will have the right to approve certain types of transactions by us during the Term.$1,885,417, respectively.

The sponsorship and services agreement, dated as of December 19, 2018, as amended (the “Constellation Sponsorship Agreement”), by and among HOF Village, PFHOF and Constellation NewEnergy, Inc.,is scheduled to expire on December 31, 2029 but provides termination rights both to (a) HOF Village and PFHOF and (b) Constellation, which may be exercised if a party would suffer material damage to its reputation by association with the other party or if there is an event of default. An event of default under the Constellation Sponsorship Agreement includes a party’s failure to perform its material obligations for 60 days after receiving written notice from the other party and failure to cure such default; a party’s becoming insolvent or filing a voluntary petition in bankruptcy; a party’s being adjudged bankrupt; an involuntary petition under any bankruptcy or insolvency law being filed against a party; a party’s sale, assignment or transfer of all or substantially all of its assets (other than to an affiliate in the case of HOF Village or PFHOF). Additionally, Constellation has a right to terminate the Constellation Sponsorship Agreement effective as of December 31, 2023 for failure to recover its investment in the form of new business, if it provides written notice on or prior to December 1, 2022.

If we do not receive sufficient capital

Loss of our existing title sponsors or other major sponsorship agreements, including the Naming Rights Agreement and Constellation Sponsorship Agreement, or failure to substantially repay our indebtedness, our indebtedness maysecure sponsorship agreements in the future on favorable terms, could have a material adverse effect on our business, our financial condition and results of operationsoperations.

Our Common Stock may be delisted from the Nasdaq Capital Market if we cannot satisfy Nasdaq’s continued listing requirements, which could adversely impact the price and liquidity of our ability to secure additional financing in the future, and we may not be able to raise sufficient funds to repay our indebtedness.Common Stock.

 

As of September 30, 2021,On May 24, 2022, the Company’s capital structure includes debt and debt-like obligations consistingCompany received a deficiency letter (the “Notice”) from the Listing Qualifications Department (the “Staff”) of the following gross principal amounts:Nasdaq Stock Market, LLC (“Nasdaq”) notifying the Company that, for the last 30 consecutive business days, the bid price for the Common Stock had closed below $1.00 per share, which is the minimum bid price required to maintain continued listing on The Nasdaq Capital Market under Nasdaq Listing Rule 5550(a)(2) (the “Minimum Bid Requirement”).

 

●approximately $9.6 million of net indebtedness to Development Finance Authority of Summit County, Ohio, representing tax-increment financing proceeds;

●approximately $3.6 million of indebtedness outstanding pursuant to a 7.00% Series A Cumulative Redeemable Preferred Stock;

●approximately $3.0 million drawn on a loan facility of up to $3.0 million with New Market Project, Inc., the proceeds of which are to be used for the development of the McKinley Grand Hotel;

●approximately $3.5 million drawn on a loan facility of up to $3.5 million with the City of Canton, Ohio;

●approximately $6.5 million in financing from Constellation through its Efficiency Made Easy (“EME”) program;

●approximately $4.7 million in financing from Constellation through its Efficiency Made Easy (“EME 2”) program;

●approximately $7.0 million of indebtedness outstanding pursuant to a promissory note, by HOF Village in favor of JKP Financial, LLC;

●approximately $15.3 million of net indebtedness outstanding pursuant to a construction loan agreement with Erie Bank, the proceeds of which are to be used for the development of the McKinley Grand Hotel;


●approximately $23.5 million of net indebtedness representing Convertible PIPE Notes with Magnetar Financial, LLC;

●approximately $2.7 million of net indebtedness representing a cooperating agreement with DFA Summit, the City of Canton, Ohio, the Canton Regional Special Improvement District, Inc. and the U.S. Bank National Association for the construction of the Series 2020C Project; and

●approximately $20.0 million of net indebtedness outstanding pursuant to a promissory note in favor of Aquarian Credit Funding, LLC.

●If we do not have sufficient funds to repay our debt at maturity, our indebtedness could subject us to many risks that, if realized, would adversely affect us, including the following:

●our cash flows from operations would be insufficient to make required payments of principal and interest on the debt, and a failure to pay would likely result in acceleration of such debt and could result in cross accelerations or cross defaults on other debt;

●our debt may increase our vulnerability to adverse economic and industry conditions;

●to the extent that we generate and use any cash flow from operations to make payments on our debt, it will reduce our funds available for operations, development, capital expenditures and future investment opportunities or other purposes;

●debt covenants limit our ability to borrow additional amounts, including for working capital, capital expenditures, debt service requirements, executing our development plan and other purposes;

●restrictive debt covenants may limit our flexibility in operating our business, including limitations on our ability to make certain investments; incur additional indebtedness; create certain liens; incur obligations that restrict the ability of our subsidiaries to make payments to us; consolidate, merge or transfer all or substantially all of our assets; or enter into transactions with affiliates;

●to the extent that our indebtedness bears interest at a variable rate, we are exposed to the risk of increased interest rates;

●debt covenants may limit our subsidiaries’ ability to make distributions to us;

●causing an event of default under the Term Loan if it is not repaid in full at maturity; and

●if any debt is refinanced, the terms of any refinancing may not be as favorable as the terms of the debt being refinanced.

If we do not have sufficient fundsThe Notice has no immediate effect on the listing of the Common Stock. In accordance with Nasdaq Listing Rule 5810(c)(3)(A), the Company has 180 calendar days to repay our debtregain compliance with the Minimum Bid Requirement. To regain compliance, the closing bid price of the Common Stock must be at maturity, it may be necessary to refinanceleast $1.00 per share for a minimum of ten consecutive business days during this 180-day period, at which time the debt through additional debt or equity financings. If, at the time of any refinancing, prevailing interest rates or other factors result in a higher interest rate on such refinancing, increases in interest expense could adversely affect our cash flows and results of operations. If we are unable to refinance our debt on acceptable terms or at all, we may be forced to dispose of uncollateralized assets on disadvantageous terms, postpone investments in the development of our properties or the Hall of Fame Village powered by Johnson Controls or default on our debt. In addition,Staff will provide written notification to the extent we cannot meet any future debt service obligations, weCompany that it complies with the Minimum Bid Requirement, unless the Staff exercises its discretion to extend this ten-day period pursuant to Nasdaq Listing Rule 5810(c)(3)(H). The compliance period for the Company will risk losing some or all of our assets that are pledged to secure such obligations.expire on November 21, 2022.

 


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If the Company does not regain compliance with the Minimum Bid Requirement during the initial 180 calendar day period, the Company may be eligible for an additional 180 calendar day compliance period. To qualify, the Company would be required to meet the continued listing requirement for market value of publicly held shares and all other initial listing standards for The Nasdaq Capital Market, with the exception of the Minimum Bid Requirement, and would need to provide written notice of its intention to cure the deficiency during the second compliance period, by effecting a reverse stock split, if necessary. However, if it appears to the Staff that the Company will not be able to cure the deficiency, or if the Company does not meet the other listing standards, the Staff could provide notice that the Common Stock will become subject to delisting. In the event the Company receives notice that its Common Stock is being delisted, Nasdaq rules permit the Company to appeal any delisting determination by the Staff to a Hearings Panel (the “Panel”). The Company expects that its Common Stock would remain listed pending the Panel’s decision. However, there can be no assurance that, if the Company does appeal the delisting determination by the Staff to the Panel, that such appeal would be successful, or that the Company will be able to regain compliance with the Minimum Bid Requirement or maintain compliance with the other listing requirements.

 

Delisting from the Nasdaq Capital Market could make trading our Common Stock more difficult for investors, potentially leading to declines in our share price and liquidity. Without a Nasdaq Capital Market listing, stockholders may have a difficult time getting a quote for the sale or purchase of our stock, the sale or purchase of our stock would likely be made more difficult, and the trading volume and liquidity of our stock could decline. Delisting from the Nasdaq Capital Market could also result in negative publicity and could also make it more difficult for us to raise additional capital. The absence of such a listing may adversely affect the acceptance of our Common Stock as currency or the value accorded by other parties. Further, if we are delisted, we would also incur additional costs under state blue sky laws in connection with any sales of our securities. These requirements could severely limit the market liquidity of our Common Stock and the ability of our stockholders to sell our Common Stock in the secondary market. If our Common Stock is delisted by Nasdaq, our Common Stock may be eligible to trade on an over-the-counter quotation system, such as the OTCQB market, where an investor may find it more difficult to sell our stock or obtain accurate quotations as to the market value of our Common Stock. In the event our Common Stock is delisted from the Nasdaq Capital Market, we may not be able to list our Common Stock on another national securities exchange or obtain quotation on an over-the counter quotation system.

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

HOF Village CFP Loan

On each of August 12, 2021 and September 22, 2021,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 Company issued to American Capital Center, LLC (the “Investor”) 900 shares (the “Series A Shares”) of 7.00% Series A Cumulative Redeemable Preferred Stock (“Series A Preferred Stock”) at a price of $1,000 per share for an aggregate purchase price of $900,000. The Company will pay the Investor an origination fee of 2%outstanding balance of the aggregate purchase price.CFP Loan at 6.5% per annum, compounded monthly. The issuance and sale ofCFP 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 Series A Shares to the Investor is exempt from registration pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”). The Investor has represented to the Company that it is an “accredited investor” as defined in Rule 501 of the Securities Act and that the Series A Shares are being acquired for investment purposes and not with a view to, or for sale in connection with, any distribution thereof.Center For Performance.

 

Effective July 22, 2021,As part of the consideration for making the Loan, on June 8, 2022, the Company issued to BXPG LLC (“Brand X”) 25,000MLF: (A) 125,000 shares (the “Common Shares”) of Common Stock pursuant to the services agreement, dated as of June 16, 2020 (the “Services Agreement”), among HOF Village Newco, LLC, Mountaineer GM, LLC (“Mountaineer”) and Brand X and the amended and restated limited liability company agreement of Mountaineer, dated as of June 10, 2020 between HOF Village Newco, LLC and Michael Klein & Associates, Inc. Under the Services Agreement, Brand X provides services with regard to the Hall Of Fantasy League (“HOFL”), a fantasy league that allows it’s participants to experience a fantasy team with a community of shared stakeholders. The issuance and sale of the Common SharesStock, and (B) a Series G warrant (the “Series G Warrants”) to Brand X is exempt from registration pursuant to Section 4(a)(2)purchase 125,000 shares of Common Stock. The exercise price of the Securities Act. Brand X has represented underSeries G Warrants will be $1.50 per share. The Series G Warrants will become exercisable one year after issuance, subject to certain terms and conditions set forth in the Services Agreement that it is an “accredited investor” as defined in Rule 501Series G Warrants. Unexercised Series G Warrants will expire five years after issuance. The exercise price of the Securities Act and that the Common Shares are being acquired for investment purposes and not withSeries G Warrants will be subject to a view to, or for sale in connection with, any distribution thereof.weighted-average antidilution adjustment.

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Item 3. Defaults upon senior securities

 

None.

 

Item 4. Mine safety disclosures

 

Not applicable.

 

Item 5. Other information

 

None.

 


Item 6. Exhibits

 

3.110.1 Amended and Restated BylawsSeries G Warrant, dated June 8, 2022, issued by Hall of theFame Resort & Entertainment Company to Midwest Lender Fund, LLC (incorporated by reference to Exhibit 3.110.1 of the Company’s Form 8-K (001-38363), filed with the Commission on August 12, 2021)June 13, 2022)
10.110.2 Promissory Note, dated June 16, 2022, issued by Hall of Fame Resort & Entertainment Company, HOF Village Retail I, LLC and HOF Village Retail II, LLC to CH Capital Lending, LLC (incorporated by reference to Exhibit 10.1 of the Company’s Form 8-K (001-38363), filed with the Commission on June 17, 2022)
10.3Business Loan Agreement, dated June 16, 2022, between Hall of Fame Resort & Entertainment Company and Stark Community Foundation, Inc. (incorporated by reference to Exhibit 10.2 of the Company’s Form 8-K (001-38363), filed with the Commission on June 17, 2022)
10.4*Energy Project Cooperative Agreement, dated June 29, 2022, among HOF Village Stadium, LLC, Canton Regional Energy Special Improvement District, Inc., SPH Canton St, LLC, and City of Canton, Ohio
10.5Amendment Number 37 to Term Loan Agreement, dated as of August 30, 2021,5, 2022, among Hall of Fame Resort & Entertainment Company, HOF Village Newco, LLC, certain of its subsidiaries, Aquarian Credit Funding LLC. and the Lenders party theretoCH Capital Lending, LLC, as administrative agent and lender (incorporated by reference to Exhibit 10.110.9 of the Company’s Form 8-KS-3 Registration Statement (File No. 001-38363)333-266750), filed with the SECCommission on September 1, 2021)
10.2Amendment Number 4 to Term Loan Agreement, dated as of August 30, 2021 among Hall of Fame Resort & Entertainment Company, HOF Village Newco, LLC, certain of its subsidiaries, Aquarian Credit Funding LLC. and the Lenders party thereto (incorporated by reference to Exhibit 10.2 of the Company’s Form 8-K (File No. 001-38363), filed with the SEC on September 1, 2021)10, 2022)
10.3Equity Distribution Agreement, dated as of September 30, 2021, among Hall of Fame Resort & Entertainment Company, Wedbush Securities Inc. and Maxim Group LLC (incorporated by reference to Exhibit 1.1 of the Company’s Form 8-K (File No. 001-38363), filed with the SEC on September 30, 2021)
31.1* Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2* Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32* Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS* Interactive Data Files pursuant to Rule 405 of Regulation S-T formatted in Inline Extensible Business Reporting Language (“Inline XBRL”)
101.CAL* Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.SCH* Inline XBRL Taxonomy Extension Schema Document
101.DEF* Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB* Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE* Inline XBRL Taxonomy Extension Presentation Linkbase Document
104 Cover Page Interactive Data File (formatted in Inline XBRL and contained in Exhibit 101)

*Filed herewith

 


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SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

 HALL OF FAME RESORT & ENTERTAINMENT COMPANY
   
Date: November 10, 2021August 11, 2022By:/s/ Michael Crawford
  Michael Crawford
  Chief Executive Officer
  (Principal Executive Officer)

 

 

5358

 

 

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