The accompanying notes are an integral part of these unaudited condensed
consolidated financial statements.
The accompanying notes are an integral part of these unaudited condensed
consolidated financial statements.
The accompanying notes are an integral part of these unaudited condensed
consolidated financial statements.
The accompanying notes are an integral part of these unaudited condensed
consolidated financial statements.
The accompanying notes are an integral part of these unaudited condensed
consolidated financial statements.
Notes to Condensed Consolidated
Financial Statements
(Unaudited)
Note 1: Organization, Nature of Business, and Liquidity
Organization and Nature
of Business
Hall of Fame Resort & Entertainment
Company, a Delaware corporation (together with its subsidiaries, unless the context indicates otherwise, the “Company” or
“HOFRE”), was incorporated in Delaware as GPAQ Acquisition Holdings, Inc., a wholly owned subsidiary of our legal predecessor,
Gordon Pointe Acquisition Corp. (“GPAQ”), a special purpose acquisition company.
On July 1, 2020, the Company consummated a business
combination with HOF Village, LLC, a Delaware limited liability company (“HOF Village”), pursuant to an Agreement and Plan
of Merger dated September 16, 2019 (as amended on November 6, 2019, March 10, 2020 and May 22, 2020, the “Merger Agreement”),
by and among the Company, GPAQ, GPAQ Acquiror Merger Sub, Inc., a Delaware corporation (“Acquiror Merger Sub”), GPAQ Company
Merger Sub, LLC, a Delaware limited liability company (“Company Merger Sub”), HOF Village and HOF Village Newco, LLC, a Delaware
limited liability company (“Newco”). The transactions contemplated by the Merger Agreement are referred to as the “Business
Combination”.
The Company is a resort and entertainment company
leveraging the power and popularity of professional football and its legendary players in partnership with the National Football Museum,
Inc., doing business as the Pro Football Hall of Fame (“PFHOF”). Headquartered in Canton, Ohio, the Company owns the Hall
of Fame Village, a multi-use sports, entertainment, and media destination centered around the PFHOF’s campus. The Company is pursuing
a differentiation strategy across three pillars, including destination-based assets, HOF Village Media Group, LLC (“Hall of Fame
Village Media”), and gaming. The Company is located in the only tourism development district in the state of Ohio.
The Company has entered into
multiple agreements with PFHOF, and certain government entities, which outline the rights and obligations of each of the parties with
regard to the property on which the Hall of Fame Village sits, portions of which are owned by the Company and portions of which are net
leased to the Company by government and quasi-governmental entities (see Note 9 for additional information). Under these agreements,
the PFHOF and the lessor entities are entitled to use portions of the Hall of Fame Village on a direct-cost basis.
Reverse Stock Split
On December 27, 2022, the Company effectuated
a reverse stock split of its shares of common stock at a ratio of 1-for-22. See Note 5, Stockholders’ Equity, for additional
information. As a result, the number of shares and income (loss) per share disclosed throughout this Quarterly Report on Form 10-Q have
been retrospectively adjusted to reflect the reverse stock split.
Hall of Fame Resort &
Entertainment Company and Subsidiaries
Notes to Condensed Consolidated
Financial Statements
(Unaudited)
Note 1: Organization, Nature of Business, and Liquidity (continued)
Liquidity and Going Concern
The Company has sustained recurring losses through
March 31, 2023. Since inception, the Company’s operations have been funded principally through the issuance of debt and equity.
As of March 31, 2023, the Company had approximately $7.4 million of unrestricted cash, $7.3 million of restricted cash, and $32.3 million
of liquid investments held to maturity, consisting primarily of U.S. treasury securities. The Company has approximately $58.6 million
of debt principal coming due through May 15, 2024. For a fee of one percent of the principal, the Company may extend the maturity of up
to $41.6 million principal of debt until March 31, 2025. These factors raise substantial doubt about the Company’s ability to continue
operations as a going concern.
The Company has entered into the following two
financing transactions during the three months ended March 31, 2023. See Note 4 for more information on these transactions.
In January 2023, the Company sold 2,400 shares
of the Company’s 7.00% Series A Cumulative Redeemable Preferred Stock, par value $0.0001 per share for an aggregate purchase price
of $2,400,000.
On February 2, 2023, the Company received proceeds
from the issuance by Stark County Port Authority of $18,100,000 principal amount Tax Increment Financing Revenue Bonds, Series 2023.
Following the end of the quarter covered by this
Quarterly Report on Form 10-Q, on May 2, 2023, the Company issued 800 shares of the Company’s 7.00% Series A Cumulated Redeemable
Preferred Stock at a price of $1,000 per share for an aggregate purchase price of $800,000. (See Note 13 Subsequent Events)
The Company expects that it will need to raise
additional financing to accomplish its development plan over the next several years. The Company is seeking to obtain additional funding
through debt, construction lending, and equity financing. There are no assurances that the Company will be able to raise capital on terms
acceptable to the Company or at all, or that cash flows generated from its operations will be sufficient to meet its current operating
costs. If the Company is unable to obtain sufficient amounts of additional capital, it may be required to reduce the scope of its planned
development, which could harm its financial condition and operating results, or it may not be able to continue to fund its ongoing operations.
If management is unable to execute its planned debt and equity financing initiatives, these conditions raise substantial doubt about
the Company’s ability to continue as a going concern to sustain operations for at least one year from the issuance of these condensed
consolidated financial statements. The accompanying condensed consolidated financial statements do not include any adjustments that might
result from the outcome of these uncertainties.
Hall
of Fame Resort & Entertainment Company and Subsidiaries
Notes to Condensed Consolidated
Financial Statements
(Unaudited)
Note 2: Summary of Significant Accounting Policies
Basis of Presentation
The accompanying unaudited condensed consolidated
financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States
of America (“U.S. GAAP”) for interim financial information and Rule 10 of Regulation S-X under the Securities Act of 1933,
as amended (the “Securities Act”). Accordingly, they do not include all of the information and notes required by U.S. GAAP.
However, in the opinion of the management of the Company, all adjustments necessary for a fair presentation of the financial position
and operating results have been included in these statements. These unaudited condensed consolidated financial statements should be read
in conjunction with the consolidated financial statements and notes thereto included in the Company’s Form 10-K for the year ended
December 31, 2022, filed on March 27, 2023. Operating results for the three months ended March 31, 2023 are not necessarily indicative
of the results that may be expected for any subsequent quarters or for the year ending December 31, 2023.
Consolidation
The condensed consolidated financial statements
include the accounts and activity of the Company and its wholly owned subsidiaries. Investments in a variable interest entity in which
the Company is not the primary beneficiary, or where the Company does not own a majority interest but has the ability to exercise significant
influence over operating and financial policies, are accounted for using the equity method. All intercompany profits, transactions, and
balances have been eliminated in consolidation.
The Company owns a 60% interest in Mountaineer
GM, LLC (“Mountaineer”), whose results are consolidated into the Company’s results of operations. The portion of Mountaineer’s
net income (loss) that is not attributable to the Company is included in non-controlling interest.
Reclassification
Certain financial statement line items of the
Company’s historical presentation have been reclassified to conform to the corresponding financial statement line items in 2023.
These reclassifications have no material impact on the historical operating loss, net loss, total assets, total liabilities, or Stockholders’
equity previously reported.
Hall
of Fame Resort & Entertainment Company and Subsidiaries
Notes to Condensed Consolidated
Financial Statements
(Unaudited)
Note 2: Summary of Significant Accounting Policies (continued)
Emerging Growth Company
The Company is an “emerging growth company,”
as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”).
It may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are
not emerging growth companies including, but not limited to, not being required to comply with the auditor attestation requirements of
Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy
statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval
of any golden parachute payments not previously approved. The Company will cease to be an emerging growth company on December 31, 2023.
Further, Section 102(b)(1) of the JOBS Act exempts
emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that
is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered
under the Securities Exchange Act of 1934, as amended) are required to comply with the new or revised financial accounting standards.
The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply
to non-emerging growth companies, but any such election to opt out is irrevocable. The Company has elected not to opt out of such an
extended transition period which means that when a standard is issued or revised and it has different application dates for public or
private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt
the new or revised standard. This may make comparison of the Company’s financial statements with another public company which is
neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult
or impossible because of the potential differences in accounting standards used.
Use of Estimates
The preparation of the unaudited condensed consolidated
financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements
and the reported amounts of revenues and expenses during the reporting period. The most significant estimates and assumptions for the
Company relate to bad debt, depreciation, costs capitalized to project development costs, useful lives of long-lived assets, potential
impairment, accounting for debt modifications and extinguishments, evaluating the Company’s sale-leaseback transactions, stock-based
compensation, and fair value of financial instruments (including the fair value of the Company’s warrant liability). Management
adjusts such estimates when facts and circumstances dictate. Actual results could differ from those estimates.
Hall
of Fame Resort & Entertainment Company and Subsidiaries
Notes to Condensed Consolidated
Financial Statements
(Unaudited)
Note 2: Summary of Significant Accounting Policies (continued)
Warrant Liability
The Company accounts for warrants for shares
of the Company’s common stock, par value $0.0001 per share (“Common Stock”) that are not indexed to its own stock as
liabilities at fair value on the balance sheet under U.S. GAAP. Such warrants are subject to remeasurement at each balance sheet date
and any change in fair value is recognized as a component of other expense on the statements of operations. The Company will continue
to adjust the liability for changes in fair value until the earlier of the exercise or expiration of such Common Stock warrants. At that
time, the portion of the warrant liability related to such Common Stock warrants will be reclassified to additional paid-in capital.
Cash and Restricted Cash
The Company considers all highly liquid investments
with an original maturity of three months or less when purchased, to be cash equivalents. There were no cash equivalents as of March
31, 2023 and December 31, 2022, respectively. The Company maintains its cash and escrow accounts at national financial institutions.
The balances, at times, may exceed federally insured limits.
Restricted cash includes escrow reserve accounts
for capital improvements and debt service as required under certain of the Company’s debt agreements. The balances as of March
31, 2023 and December 31, 2022 were $7,305,895 and $7,499,835, respectively.
Investments
The Company from time to time invests in debt
and equity securities, including companies engaged in complementary businesses. All marketable equity and debt securities held by the
Company are accounted for under ASC Topic 320, “Investments – Debt and Equity Securities.” As of March 31, 2023 and
December 31, 2022, the Company held $32,307,038 and $17,033,515, respectively in securities to be held to maturity consisting of U.S
government securities carried at amortized cost. The Company recognizes interest income on these securities ratably over their term utilizing
the interest method.
As of March 31, 2023 and December 31, 2022, the
Company also had $4,067,754 and $4,067,754, respectively in securities available for sale, which are marked to market value at each reporting
period.
Hall
of Fame Resort & Entertainment Company and Subsidiaries
Notes to Condensed Consolidated
Financial Statements
(Unaudited)
Note 2: Summary of Significant Accounting Policies (continued)
Accounts Receivable
Accounts receivable are generally amounts due
under sponsorship and other agreements. Accounts receivable are reviewed for delinquencies on a case-by-case basis and are considered
delinquent when the sponsor or debtor has missed a scheduled payment. Interest is not charged on delinquencies.
The carrying amount of accounts receivable is
reduced by an allowance that reflects management’s best estimate of the amounts that will not be collected. Management individually
reviews all delinquent accounts receivable balances and based on an assessment of current creditworthiness, estimates the portion, if
any, of the balance that will not be collected. As of March 31, 2023 and December 31, 2022, the Company has recorded an allowance for
doubtful accounts of $6,761,975 and $5,575,700, respectively.
Deferred Financing Costs
Costs incurred in obtaining financing are capitalized
and amortized to additions in project development costs during the construction period over the term of the related loans, without regard
for any extension options until the project or portion thereof is considered substantially complete. Upon substantial completion of the
project or portion thereof, such costs are amortized as interest expense over the term of the related loan. Any unamortized costs are
shown as an offset to “Notes Payable, net” on the accompanying condensed consolidated balance sheets.
Upon an extinguishment of debt (or a modification that is treated
as an extinguishment), the remaining deferred financing costs are expensed against “Loss on Extinguishment of Debt”.
Hall
of Fame Resort & Entertainment Company and Subsidiaries
Notes to Condensed Consolidated
Financial Statements
(Unaudited)
Note 2: Summary of Significant Accounting Policies (continued)
Revenue Recognition
The Company follows the Financial Accounting
Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”) 606, Revenue with Contracts
with Customers, to properly recognize revenue. Under ASC 606, revenue is recognized when a customer obtains control of promised goods
or services, in an amount that reflects the consideration which the entity expects to receive in exchange for those goods or services.
To determine revenue recognition for arrangements that an entity determines are within the scope of ASC 606, the Company performs the
following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii)
determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize
revenue when (or as) the entity satisfies a performance obligation.
The Company generates revenues from various streams
such as sponsorship agreements, rents, cost recoveries, events, and hotel operation. The sponsorship arrangements, in which the customer
sponsors a play area or event and receives specified brand recognition and other benefits over a set period of time, recognize revenue
on a straight-line basis over the time period specified in the contract. The excess of amounts contractually due over the amounts of
sponsorship revenue recognized are included in other liabilities on the accompanying condensed consolidated balance sheets. Contractually
due but unpaid sponsorship revenue are included in accounts receivable on the accompanying condensed consolidated balance sheets. Refer
to Note 6 for more details. Revenue for rents, cost recoveries, and events are recognized at the time the respective event or service
has been performed. Rental revenue for long term leases is recorded on a straight-line basis over the term of the lease beginning on
the commencement date.
A performance obligation is a promise in a contract
to transfer a distinct good or service to a customer. If the contract does not specify the revenue by performance obligation, the Company
allocates the transaction price to each performance obligation based on its relative standalone selling price. Such prices are generally
determined using prices charged to customers or using the Company’s expected cost plus margin. Revenue is recognized as the Company’s
performance obligations are satisfied. If consideration is received in advance of the Company’s performance, including amounts
which are refundable, recognition of revenue is deferred until the performance obligation is satisfied or amounts are no longer refundable.
The Company’s owned hotel revenues primarily
consist of hotel room sales, revenue from accommodations sold in conjunction with other services (e.g., package reservations), food and
beverage sales, and other ancillary goods and services (e.g., parking) related to owned hotel properties. Revenue is recognized when
rooms are occupied or goods and services have been delivered or rendered, respectively. Payment terms typically align with when the goods
and services are provided. Although the transaction prices of hotel room sales, goods, and other services are generally fixed and based
on the respective room reservation or other agreement, an estimate to reduce the transaction price is required if a discount is expected
to be provided to the customer. For package reservations, the transaction price is allocated to the performance obligations within the
package based on the estimated standalone selling price of each component.
Hall
of Fame Resort & Entertainment Company and Subsidiaries
Notes to Condensed Consolidated
Financial Statements
(Unaudited)
Note 2: Summary of Significant Accounting Policies (continued)
Income Taxes
The Company utilizes an asset and liability approach
for financial accounting and reporting for income taxes. The provision for income taxes is based upon income or loss after adjustment
for those permanent items that are not considered in the determination of taxable income. Deferred income taxes represent the tax effects
of differences between the financial reporting and tax basis of the Company’s assets and liabilities at the enacted tax rates in
effect for the years in which the differences are expected to reverse.
The Company evaluates the recoverability of deferred
tax assets and establishes a valuation allowance when it is more likely than not that some portion or all the deferred tax assets will
not be realized. Management makes judgments as to the interpretation of the tax laws that might be challenged upon an audit and cause
changes to previous estimates of tax liability. In management’s opinion, adequate provisions for income taxes have been made. If
actual taxable income by tax jurisdiction varies from estimates, additional allowances or reversals of reserves may be necessary.
Tax benefits are recognized only for tax positions
that are more likely than not to be sustained upon examination by tax authorities. The amount recognized is measured as the largest amount
of benefit that is greater than 50 percent likely to be realized upon settlement. A liability for “unrecognized tax benefits”
is recorded for any tax benefits claimed in the Company’s tax returns that do not meet these recognition and measurement standards.
As of March 31, 2023 and December 31, 2022, no liability for unrecognized tax benefits was required to be reported.
The Company’s policy for recording interest
and penalties associated with tax audits is to record such items as a component of operating expenses on the Company’s condensed
consolidated statements of operations. There were no amounts incurred for penalties and interest for the three months ended March 31,
2023 and 2022. The Company does not expect its uncertain tax position to change during the next twelve months. Management is currently
unaware of any issues under review that could result in significant payments, accruals or material deviations from its position. The Company’s
effective tax rates of zero differ from the statutory rate for the years presented primarily due to the Company’s net operating
loss, which was fully reserved for all years presented.
The Company has identified its United States
tax return and its state tax return in Ohio as its “major” tax jurisdictions, and such returns for the years 2019 through
2022 remain subject to examination.
Hall of Fame Resort &
Entertainment Company and Subsidiaries
Notes to Condensed Consolidated
Financial Statements
(Unaudited)
Note 2: Summary of Significant Accounting Policies (continued)
Film and Media Costs
The Company capitalizes all costs to develop
films and related media as an asset, included in “project development costs” on the Company’s condensed consolidated
balance sheets. The costs for each film or media will be expensed over the expected release period. During the three months ended March
31, 2023 the Company recorded $1,305,000 in film and media costs, including impairment of $1,145,000, as the Company does not anticipate
recovering these costs. The impairment in Film and Media Costs is included in operating expenses on the Company’s condensed consolidated
statements of operations.
Accounting for Real Estate Investments
Upon the acquisition of real estate properties,
a determination is made as to whether the acquisition meets the criteria to be accounted for as an asset or business combination. The
determination is primarily based on whether the assets acquired and liabilities assumed meet the definition of a business. The determination
of whether the assets acquired and liabilities assumed meet the definition of a business include a single or similar asset threshold.
In applying the single or similar asset threshold, if substantially all the fair value of the gross assets acquired is concentrated in
a single identifiable asset or group of similar identifiable assets, the assets acquired and liabilities assumed are not considered a
business. Most of the Company’s acquisitions meet the single or similar asset threshold due to the fact that substantially all
the fair value of the gross assets acquired is attributable to the real estate acquired.
Acquired real estate properties accounted for
as asset acquisitions are recorded at cost, including acquisition and closing costs. The Company allocates the cost of real estate properties
to the tangible and intangible assets and liabilities acquired based on their estimated relative fair values. The Company determines
the fair value of tangible assets, such as land, building, furniture, fixtures, and equipment, using a combination of internal valuation
techniques that consider comparable market transactions, replacement costs, and other available information and fair value estimates
provided by third-party valuation specialists, depending upon the circumstances of the acquisition. The Company determines the fair value
of identified intangible assets or liabilities, which typically relate to in-place leases, using a combination of internal valuation
techniques that consider the terms of the in-place leases, current market data for comparable leases, and fair value estimates provided
by third-party valuation specialists, depending upon the circumstances of the acquisition.
If a transaction is determined to be a business
combination, the assets acquired, liabilities assumed, and any identified intangibles are recorded at their estimated fair values on
the transaction date, and transaction costs are expensed in the period incurred.
Hall of Fame Resort &
Entertainment Company and Subsidiaries
Notes to Condensed Consolidated
Financial Statements
(Unaudited)
Note 2: Summary of Significant Accounting Policies (continued)
Fair Value Measurement
The Company follows FASB’s ASC 820–10,
Fair Value Measurement, to measure the fair value of its financial instruments and non-financial instruments and to incorporate
disclosures about fair value of its financial instruments. ASC 820–10 establishes a framework for measuring fair value and expands
disclosures about fair value measurements. To increase consistency and comparability in fair value measurements and related disclosures,
ASC 820–10 establishes a fair value hierarchy which prioritizes the inputs to valuation techniques used to measure fair value into
three broad levels.
The three levels of fair value hierarchy defined
by ASC 820–10-20 are described below:
| Level
1 |
Quoted market prices available
in active markets for identical assets or liabilities as of the reporting date. |
| |
|
| Level 2 |
Pricing inputs other than quoted
prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date. |
| |
|
| Level 3 |
Pricing inputs that
are generally unobservable inputs and not corroborated by market data. |
Financial assets or liabilities are considered
Level 3 when their fair values are determined using pricing models, discounted cash flow methodologies, or similar techniques and at
least one significant model assumption or input is unobservable.
The fair value hierarchy gives the highest priority
to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. If
the inputs used to measure the financial assets and liabilities fall within more than one level described above, the categorization is
based on the lowest level input that is significant to the fair value measurement of the instrument.
The carrying amounts of the Company’s financial
assets and liabilities, such as cash, prepaid expenses and other current assets, accounts payable, and accrued expenses approximate their
fair values due to the short-term nature of these instruments. The carrying amount of the Company’s notes payable is considered
to approximate their fair value based on the borrowing rates currently available to the Company for loans with similar terms and maturities.
Hall of Fame Resort &
Entertainment Company and Subsidiaries
Notes to Condensed Consolidated
Financial Statements
(Unaudited)
Note 2: Summary of Significant Accounting Policies (continued)
Fair Value Measurement (continued)
The Company uses Levels 1 and 3 of the fair value
hierarchy to measure the fair value of its warrant liabilities, investments available for sale and interest rate swaps. The Company revalues
its financial instruments at every reporting period. The Company recognizes gains or losses on the change in fair value of the warrant
liabilities as “change in fair value of warrant liability” in the condensed consolidated statements of operations. The Company
recognizes gains or losses on the change in fair value of the interest rate swap as “change in fair value of interest rate swap”
in the condensed consolidated statements of operations.
The following table provides the financial liabilities
measured on a recurring basis and reported at fair value on the balance sheets as of March 31, 2023 and December 31, 2022 and indicates
the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value:
| | |
| |
March 31, | | |
December 31, | |
| | |
Level | |
2023 | | |
2022 | |
| Warrant liabilities – Public Series A
Warrants | |
1 | |
$ | 1,059,000 | | |
$ | 748,000 | |
| Warrant liabilities – Private Series A Warrants | |
3 | |
| - | | |
| - | |
| Warrant liabilities – Series
B Warrants | |
3 | |
| 90,000 | | |
| 163,000 | |
| Fair value of aggregate warrant liabilities | |
| |
$ | 1,149,000 | | |
$ | 911,000 | |
| | |
| |
| | | |
| | |
| Fair value of interest rate swap liability | |
2 | |
$ | 300,000 | | |
$ | 200,000 | |
| | |
| |
| | | |
| | |
| Investments available for sale | |
3 | |
$ | 4,067,754 | | |
$ | 4,067,754 | |
The Series A Warrants issued to the previous
shareholders of GPAQ (the “Public Series A Warrants”) are classified as Level 1 due to the use of an observable market quote
in the active market. Level 3 financial liabilities consist of the Series A Warrants issued to the sponsors of GPAQ (the “Private
Series A Warrants”) and the Series B Warrants issued in the Company’s November 2020 follow-on public offering, for which
there is no current market for these securities, and the determination of fair value requires significant judgment or estimation. Changes
in fair value measurement categorized within Level 3 of the fair value hierarchy are analyzed each period based on changes in estimates
or assumptions and recorded appropriately.
Hall of Fame Resort &
Entertainment Company and Subsidiaries
Notes to Condensed Consolidated
Financial Statements
(Unaudited)
Note 2: Summary of Significant Accounting Policies (continued)
Fair Value Measurement (continued)
Subsequent measurement
The following table presents the changes
in fair value of the warrant liabilities:
| | |
Public
Series A
Warrants | | |
Private
Series A
Warrants | | |
Series B
Warrants | | |
Total
Warrant
Liability | |
| Fair value as of December 31, 2022 | |
$ | 748,000 | | |
$ | - | | |
$ | 163,000 | | |
$ | 911,000 | |
| Change in fair value | |
| 311,000 | | |
| - | | |
| (73,000 | ) | |
| 238,000 | |
| Fair value as of March 31, 2023 | |
$ | 1,059,000 | | |
$ | - | | |
$ | 90,000 | | |
$ | 1, 149,000 | |
The key inputs into the Black Scholes valuation model for the Level
3 valuations as of March 31, 2023 and December 31, 2022 are as follows:
| | |
March 31, 2023 | | |
December 31, 2022 | |
| | |
Private
Series A
Warrants | | |
Series B
Warrants | | |
Private
Series A
Warrants | | |
Series B
Warrants | |
| Term (years) | |
| 2.3 | | |
| 2.6 | | |
| 2.5 | | |
| 2.9 | |
| Stock price | |
$ | 9.15 | | |
$ | 9.15 | | |
$ | 8.06 | | |
$ | 8.06 | |
| Exercise price | |
$ | 253.11 | | |
$ | 30.81 | | |
$ | 253.11 | | |
$ | 30.81 | |
| Dividend yield | |
| 0.0 | % | |
| 0.0 | % | |
| 0.0 | % | |
| 0.0 | % |
| Expected volatility | |
| 49.60 | % | |
| 51.36 | % | |
| 52.27 | % | |
| 63.86 | % |
| Risk free interest rate | |
| 3.81 | % | |
| 3.81 | % | |
| 4.22 | % | |
| 4.22 | % |
| | |
| | | |
| | | |
| | | |
| | |
| Number of shares | |
| 95,576 | | |
| 170,862 | | |
| 95,576 | | |
| 170,862 | |
The valuation of the investments available for sale were based on
sales of similar equity instruments in the time periods near to the measurement dates.
Hall
of Fame Resort & Entertainment Company and Subsidiaries
Notes to Condensed Consolidated
Financial Statements
(Unaudited)
Note 2: Summary of Significant Accounting
Policies (continued)
Net Loss Per Common Share
Basic net loss per common share
is computed by dividing net loss by the weighted average number of common shares outstanding during the periods.
Diluted net loss per share is
computed by dividing the net loss by the weighted average number of common shares outstanding during the period. The Company’s
potentially dilutive common stock equivalent shares, which include incremental common shares issuable upon (i) the exercise of outstanding
stock options and warrants, (ii) vesting of restricted stock units and restricted stock awards, and (iii) conversion of preferred stock,
are only included in the calculation of diluted net loss per share when their effect is dilutive.
For the three months ended March 31, 2023 and
2022, the Company was in a loss position and therefore all potentially dilutive securities would be anti-dilutive and the calculations
are presented on the accompanying condensed consolidated statements of operations.
As of March 31, 2023 and 2022,
the following outstanding common stock equivalents have been excluded from the calculation of net loss per share because their impact
would be anti-dilutive.
| | |
For the Three Months Ended March 31, | |
| | |
2023 | | |
2022 | |
| Warrants to purchase shares of Common Stock | |
| 2,003,649 | | |
| 2,000,561 | |
| Unvested restricted stock awards | |
| - | | |
| 10,847 | |
| Unvested restricted stock units to be settled in shares of Common Stock | |
| 173,450 | | |
| 127,816 | |
| Shares of Common Stock issuable upon conversion of convertible notes | |
| 3,435,659 | | |
| 1,077,591 | |
| Shares of Common Stock issuable upon conversion of Series B Preferred Stock | |
| 2,971 | | |
| 2,971 | |
| Shares of Common Stock issuable upon conversion of Series C Preferred Stock | |
| 454,545 | | |
| 454,545 | |
| Total potentially dilutive securities | |
| 6,070,274 | | |
| 3,674,331 | |
Hall of Fame Resort &
Entertainment Company and Subsidiaries
Notes to Condensed Consolidated
Financial Statements
(Unaudited)
Note 3: Property and Equipment
Property and equipment consists of the following:
| | |
Useful Life | |
March 31,
2023 | | |
December 31,
2022 | |
| Land | |
| |
$ | 12,414,473 | | |
$ | 12,414,473 | |
| Land improvements | |
25 years | |
| 51,807,569 | | |
| 51,808,296 | |
| Building and improvements | |
15 to 39 years | |
| 242,742,676 | | |
| 239,068,974 | |
| Equipment | |
5 to 10 years | |
| 10,086,336 | | |
| 7,212,246 | |
| Property and equipment, gross | |
| |
| 317,051,054 | | |
| 310,503,989 | |
| | |
| |
| | | |
| | |
| Less: accumulated depreciation | |
| |
| (64,230,821 | ) | |
| (61,677,136 | ) |
| Property and equipment, net | |
| |
$ | 252,820,233 | | |
$ | 248,826,853 | |
| | |
| |
| | | |
| | |
| Project development costs | |
| |
$ | 143,271,191 | | |
$ | 140,138,924 | |
For the three months ended March 31, 2023 and
2022, the Company recorded depreciation expense of $2,553,360 and $3,242,285, respectively. For the three months ended March 31, 2023
and 2022, the Company incurred $9,163,643 and $16,905,966 of capitalized project development costs, respectively.
For the three months ended March 31, 2023 and
2022, the Company transferred $6,031,376 and $0 from Project development costs to Property and Equipment, respectively.
Included in project development costs are film
development costs of $200,000 and $982,000 as of March 31, 2023 and December 31, 2022, respectively.
Hall of Fame Resort &
Entertainment Company and Subsidiaries
Notes to Condensed Consolidated
Financial Statements
(Unaudited)
Note 4: Notes Payable, net
Notes payable, net consisted of the following
at March 31, 2023(1):
| | |
| | |
Debt discount and deferred financing | | |
| | |
Interest Rate | | |
Maturity |
| | |
Gross | | |
costs | | |
Net | | |
Stated | | |
Effective | | |
Date |
| Preferred
equity loan(2) | |
$ | 6,000,000 | | |
$ | - | | |
$ | 6,000,000 | | |
| 7.00 | % | |
| 7.00 | % | |
Various |
| City
of Canton Loan(3) | |
| 3,450,000 | | |
| (5,043 | ) | |
| 3,444,957 | | |
| 0.50 | % | |
| 0.53 | % | |
7/1/2027 |
| New Market/SCF | |
| 2,999,989 | | |
| - | | |
| 2,999,989 | | |
| 4.00 | % | |
| 4.00 | % | |
12/30/2024 |
| JKP
Capital Loan(5)(6) | |
| 9,262,133 | | |
| - | | |
| 9,262,133 | | |
| 12.50 | % | |
| 12.50 | % | |
3/31/2024 |
| MKG
DoubleTree Loan(7) | |
| 15,300,000 | | |
| - | | |
| 15,300,000 | | |
| 9.75 | % | |
| 9.75 | % | |
9/13/2023 |
| Convertible PIPE Notes | |
| 27,188,494 | | |
| (7,284,798 | ) | |
| 19,903,695 | | |
| 10.00 | % | |
| 24.40 | % | |
3/31/2025 |
| Canton Cooperative Agreement | |
| 2,620,000 | | |
| (166,566 | ) | |
| 2,453,434 | | |
| 3.85 | % | |
| 5.35 | % | |
5/15/2040 |
| CH
Capital Loan(5)(6)(8) | |
| 8,945,999 | | |
| - | | |
| 8,945,999 | | |
| 12.50 | % | |
| 12.50 | % | |
3/31/2024 |
| Constellation
EME #2(4) | |
| 3,295,583 | | |
| - | | |
| 3,295,583 | | |
| 5.93 | % | |
| 5.93 | % | |
4/30/2026 |
| IRG
Split Note(5)(6)(9) | |
| 4,351,021 | | |
| - | | |
| 4,351,021 | | |
| 12.50 | % | |
| 12.50 | % | |
3/31/2024 |
| JKP
Split Note(5)(6)(9) | |
| 4,351,021 | | |
| - | | |
| 4,351,021 | | |
| 12.50 | % | |
| 12.50 | % | |
3/31/2024 |
| ErieBank Loan | |
| 19,465,282 | | |
| (519,944 | ) | |
| 18,945,338 | | |
| 9.00 | % | |
| 9.24 | % | |
12/15/2034 |
| PACE Equity Loan | |
| 8,179,690 | | |
| (271,813 | ) | |
| 7,907,877 | | |
| 6.05 | % | |
| 6.18 | % | |
7/31/2047 |
| PACE Equity CFP | |
| 2,437,578 | | |
| (26,924 | ) | |
| 2,410,654 | | |
| 6.05 | % | |
| 6.10 | % | |
7/31/2046 |
| CFP
Loan(6)(10) | |
| 4,072,519 | | |
| - | | |
| 4,072,519 | | |
| 12.50 | % | |
| 12.50 | % | |
3/31/2024 |
| Stark County Community Foundation | |
| 5,000,000 | | |
| - | | |
| 5,000,000 | | |
| 6.00 | % | |
| 6.00 | % | |
5/31/2029 |
| CH
Capital Bridge Loan(6) | |
| 10,603,479 | | |
| - | | |
| 10,603,479 | | |
| 12.50 | % | |
| 12.50 | % | |
3/31/2024 |
| Stadium PACE Loan | |
| 33,387,844 | | |
| (4,046,531 | ) | |
| 29,341,313 | | |
| 6.00 | % | |
| 6.51 | % | |
1/1/2049 |
| Stark County Infrastructure Loan | |
| 5,000,000 | | |
| - | | |
| 5,000,000 | | |
| 6.00 | % | |
| 6.00 | % | |
8/31/2029 |
| City of Canton Infrastructure Loan | |
| 5,000,000 | | |
| (11,199 | ) | |
| 4,988,801 | | |
| 6.00 | % | |
| 6.04 | % | |
6/30/2029 |
| TDD Bonds | |
| 7,500,000 | | |
| (665,460 | ) | |
| 6,834,541 | | |
| 5.41 | % | |
| 5.78 | % | |
12/1/2046 |
| TIF | |
| 18,100,000 | | |
| (1,562,885 | ) | |
| 16,537,115 | | |
| 6.375 | % | |
| 6.71 | % | |
12/30/2048 |
| Total | |
$ | 206,510,632 | | |
$ | (14,561,163 | ) | |
$ | 191,949,469 | | |
| | | |
| | | |
|
Hall of Fame Resort &
Entertainment Company and Subsidiaries
Notes to Condensed Consolidated
Financial Statements
(Unaudited)
Note 4: Notes Payable, net (continued)
Notes payable, net consisted of the following
at December 31, 2022:
| | |
Gross | | |
Debt discount and deferred financing costs | | |
Net | |
| Preferred
equity loan(2) | |
| 3,600,000 | | |
| - | | |
| 3,600,000 | |
| City of Canton
Loan(3) | |
| 3,450,000 | | |
| (5,333 | ) | |
| 3,444,667 | |
| New Market/SCF | |
| 2,999,989 | | |
| - | | |
| 2,999,989 | |
| JKP
Capital loan(5)(6) | |
| 9,158,711 | | |
| - | | |
| 9,158,711 | |
| MKG
DoubleTree Loan(7) | |
| 15,300,000 | | |
| - | | |
| 15,300,000 | |
| Convertible PIPE Notes | |
| 26,525,360 | | |
| (8,097,564 | ) | |
| 18,427,796 | |
| Canton Cooperative Agreement | |
| 2,620,000 | | |
| (168,254 | ) | |
| 2,451,746 | |
| CH
Capital Loan(5)(6)(8) | |
| 8,846,106 | | |
| - | | |
| 8,846,106 | |
| Constellation
EME #2(4) | |
| 3,536,738 | | |
| - | | |
| 3,536,738 | |
| IRG
Split Note(5)(6)(9) | |
| 4,302,437 | | |
| - | | |
| 4,302,437 | |
| JKP
Split Note (5)(6)(9) | |
| 4,302,437 | | |
| - | | |
| 4,302,437 | |
| ErieBank Loan | |
| 19,465,282 | | |
| (536,106 | ) | |
| 18,929,176 | |
| PACE Equity Loan | |
| 8,250,966 | | |
| (273,031 | ) | |
| 7,977,935 | |
| PACE Equity CFP | |
| 2,437,578 | | |
| (27,586 | ) | |
| 2,409,992 | |
| CFP Loan(6)(10) | |
| 4,027,045 | | |
| - | | |
| 4,027,045 | |
| Stark County Community Foundation | |
| 5,000,000 | | |
| - | | |
| 5,000,000 | |
| CH
Capital Bridge Loan(6) | |
| 10,485,079 | | |
| - | | |
| 10,485,079 | |
| Stadium PACE Loan | |
| 33,387,844 | | |
| (4,091,382 | ) | |
| 29,296,462 | |
| Stark County Infrastructure Loan | |
| 5,000,000 | | |
| - | | |
| 5,000,000 | |
| City of Canton Infrastructure Loan | |
| 5,000,000 | | |
| (11,572 | ) | |
| 4,988,428 | |
| TDD Bonds | |
| 7,500,000 | | |
| (668,884 | ) | |
| 6,831,116 | |
| Total | |
$ | 185,195,572 | | |
$ | (13,879,712 | ) | |
$ | 171,315,860 | |
During the three months ended March 31, 2023
and 2022, the Company recorded amortization of note discounts of $855,891 and $1,355,974, respectively.
During three months ended March 31, 2023 and
2022, the Company recorded paid-in-kind interest of $1,127,491 and $718,294, respectively.
See below footnotes for the Company’s notes
payable:
| (1) | The Company’s notes payable are subject to certain customary financial and non-financial covenants. As of March 31, 2023 and 2022 the Company was in compliance with all of its notes payable covenants. Many of the Company’s notes payable are secured by the Company’s developed and undeveloped land and other assets. |
| (2) | The Company had 3,600 and 1,800 shares of Series A Preferred Stock outstanding and 52,800 and 52,800 shares of Series A Preferred Stock authorized as of March 31, 2023 and December 31, 2022, respectively. The Series A Preferred Stock is required to be redeemed for cash after five years from the date of issuance. |
| (3) | The Company has the option to extend the loan’s maturity date for three years, to July 1, 2030, if the Company meets certain criteria in terms of the hotel occupancy level and maintaining certain financial ratios. |
| (4) | The Company also has a sponsorship agreement with Constellation New Energy, Inc., the lender of the Constellation EME #2 note. |
Hall of Fame Resort &
Entertainment Company and Subsidiaries
Notes to Condensed Consolidated
Financial Statements
(Unaudited)
Note 4: Notes Payable, net (continued)
| (5) | On March 1, 2022, the Company entered into amendments to certain of its IRG and IRG-affiliated notes payable. See discussion below for the accounting and assumptions used in the transactions. |
| (6) | On November 7, 2022, the Company entered into amendments to certain of its IRG and IRG-affiliated notes payable. See discussion below for the accounting and assumptions used in the transactions. |
| (7) | On March 1, 2022, HOF Village Hotel II, LLC, a subsidiary of the Company, entered into an amendment to the MKG DoubleTree Loan with the Company’s director, Stuart Lichter, as guarantor, and ErieBank, a division of CNB Bank, a wholly owned subsidiary of CNB Financial Corporation, as lender, which extended the maturity to September 13, 2023. The Company accounted for this amendment as a modification, and expensed approximately $38,000 in loan modification costs. |
| (8) | On March 1, 2022, CH Capital Lending purchased and acquired, the Company’s $7.4 million Aquarian Mortgage Loan (as thereafter amended and acquired by CH Capital Lending, the “CH Capital Loan”). |
| (9) | On March 1, 2022, pursuant to an Assignment of Promissory Note, dated March 1, 2022, IRG assigned (a) a one-half (½) interest in the IRG Note to IRG (the “IRG Split Note”) and (b) a one-half (½) interest in the IRG Note to JKP (the “JKP Split Note”). See “IRG Split Note” and “JKP Split Note”, below. |
| (10) | See “CFP Loan”, below, for a description of the loan along with the valuation assumptions used to value the warrants issued in connection with the loan. |
| (11) | See “TIF Loan”, below, for a description of the loan. |
Accrued Interest on Notes Payable
As of March 31, 2023 and December 31, 2022, accrued
interest on notes payable, were as follows:
| | |
March 31, 2023 | | |
December 31, 2022 | |
| Preferred equity loan | |
$ | 131,931 | | |
$ | 64,575 | |
| City of Canton Loan | |
| 1,586 | | |
| 1,555 | |
| New Market/SCF | |
| 30,000 | | |
| - | |
| MKG DoubleTree Loan | |
| 127,500 | | |
| 121,656 | |
| Canton Cooperative Agreement | |
| 78,535 | | |
| 48,708 | |
| CH Capital Loan | |
| 60,036 | | |
| 55,328 | |
| IRG Split Note | |
| 41,553 | | |
| 28,490 | |
| JKP Split Note | |
| 48,201 | | |
| 35,138 | |
| ErieBank Loan | |
| 157,343 | | |
| 140,394 | |
| PACE Equity Loan | |
| 87,898 | | |
| 213,842 | |
| CFP Loan | |
| 6,042 | | |
| 5,245 | |
| Stark County Community Foundation | |
| 75,000 | | |
| - | |
| CH Capital Bridge Loan | |
| - | | |
| 70,659 | |
| Stadium PACE Loan | |
| 166,939 | | |
| 166,939 | |
| TDD Bonds | |
| 115,026 | | |
| 13,533 | |
| TIF | |
| 185,902 | | |
| - | |
| Total | |
$ | 1,313,492 | | |
$ | 966,062 | |
The amounts above were included in accounts
payable and accrued expenses on the Company’s condensed consolidated balance sheets.
Hall of Fame Resort &
Entertainment Company and Subsidiaries
Notes to Condensed Consolidated
Financial Statements
(Unaudited)
Note 4: Notes Payable, net (continued)
March 1, 2022 Refinancing Transactions
On March 1, 2022, the Company amended
certain of its IRG and IRG-affiliate held loans. This included the IRG Split Note, the JKP Split Note, the CH Capital Loan, and the
JKP Capital Loan. The amendments (i) revised the outstanding principal balance of the loans to include interest that has accrued and
has not been paid as of March 1, 2022 in the aggregate amount of $1,437,459, and (ii) extends the maturity of the loans to March 31,
2024, and (iii) amends the loans to be convertible into shares of Common Stock at a conversion price of $30.80 per share ($23.98 per
share for the JKP Split Note and JKP Capital Loan), subject to adjustment. The conversion price is subject to a weighted-average
anti-dilution adjustment.
As part of the consideration for the amendments,
the Company issued an aggregate of 39,091 shares of common stock, amended the Series C Warrants and Series D Warrants, and issued Series
E Warrants and Series F Warrants.
TIF Loan
For the Company, the Development Finance Authority
of Summit County (“DFA Summit”) offered a private placement of $10,030,000 in taxable development revenue bonds, Series
2018. The bond proceeds are to reimburse the developer for costs of certain public improvements at the Hall of Fame Village, which are
eligible uses of tax-incremental funding (“TIF”) proceeds.
The term of the TIF requires the Company to make
installment payments through July 31, 2048. The current imputed interest rate is 5.2%, which runs through July 31, 2028. The imputed
interest rate then increases to 6.6% through July 31, 2038 and finally increases to 7.7% through the remainder of the TIF. The
Company is required to make payments on the TIF semi-annually in June and December each year.
On December 27, 2022, the Company paid $9.7 million
to reacquire the TIF bonds related to the Stadium PACE agreement. In January 2023, the DFA Summit issued new bonds as TIF proceeds.
Hall of Fame Resort &
Entertainment Company and Subsidiaries
Notes to Condensed Consolidated
Financial Statements
(Unaudited)
Note 4: Notes Payable, net (continued)
TIF Loan (continued)
On February 2, 2023,
the Company received proceeds from the issuance on such date by Stark County Port Authority (“Port Authority”) of $18,100,000
principal amount Tax Increment Financing (“TIF”) Revenue Bonds, Series 2023 (“2023 Bonds”). Of the $18,100,000
principal amount, approximately $6.8 million was used to reimburse the Company for a portion of the cost of certain roadway improvements
within the Hall of Fame Village grounds, approximately $8.6 million was used to pay off the Development Finance Authority of Summit County
(“DFA”) Revenue Bonds, Series 2018 ( “2018 Bonds”) that had been acquired by the Company in December 2022 pursuant
to a previously disclosed arrangement (such that the Company received the payoff of the 2018 Bonds), approximately $1.2 million was used
to pay costs of issuance of the 2023 Bonds, and approximately $.9 million was used to fund a debt service reserve held by The Huntington
National Bank (“2023 Bond Trustee”), as trustee for the 2023 Bonds. The maturity date of the 2023 Bonds is December 30, 2048.
The interest rate on the 2023 Bonds is 6.375%. Interest payments are due on the 2023 Bonds semi-annually on June 30 and December 30 of
each year, commencing June 30, 2023.
In connection with the
issuance of the 2023 Bonds by the Port Authority, the Company transferred ownership of a portion of the roadway and related improvements
within Hall of Fame Village grounds to the Port Authority. The Company maintains management rights and maintenance obligations with regard
to such roadway pursuant to a Maintenance and Management Agreement among the Port Authority, the Company and the Company’s subsidiary,
Newco.
The 2023 Bonds will
be repaid by the Port Authority from statutory service payments in lieu of taxes paid by the Company in connection with the Company’s
Tom Benson Hall of Fame Stadium, ForeverLawn Sports Complex, Constellation Center for Excellence, Center for Performance, Retail I property,
Retail II property, Play Action Plaza and an interior private roadway, net of the portion payable to Canton City School District and
Plain Local School District and net of administrative fees of Stark County and the City of Canton, and from minimum service payments
levied against those parcels excluding the Stadium and Youth Fields. Net statutory service payments are assigned by the City of Canton
to the Port Authority for payment of the 2023 Bonds pursuant to a Cooperative Agreement among the Port Authority, City of Canton, the
Company and Newco, and then pledged by the Port Authority to the 2023 Bond Trustee for payment of the 2023 Bonds pursuant to a Trust
Indenture between the Port Authority and the 2023 Bond Trustee. Minimum service payments are a lien on the parcels under certain TIF
declarations and supplements thereto, and are paid by the Company to the 2023 Bond Trustee.
Hall of Fame Resort &
Entertainment Company and Subsidiaries
Notes to Condensed Consolidated
Financial Statements
(Unaudited)
Note 4: Notes Payable, net (continued)
November 7, 2022 Refinancing Transactions
On November 7, 2022, the Company and IRG a entered
into a letter agreement (the “IRG Letter Agreement”) whereby IRG agreed that IRG’s affiliates and related parties (“IRG
Affiliate Lenders”) will provide the Company and its subsidiaries with certain financial support described below in exchange for
certain consideration described below. The financial support provided under the IRG Letter Agreement consists of the following (“IRG
Financial Support”):
| (a) | Extend the CH Capital Bridge Loan maturity
to March 31, 2024 |
| (b) | Release the first position mortgage
lien on the Tom Benson Hall of Fame Stadium |
| (c) | Provide a financing commitment for the
Company’s Hilton Tapestry Hotel |
| (d) | Provide a completion guarantee for the
Company’s waterpark |
| (e) | Amend IRG loans to provide an optional one-year extension of maturity option to March 31, 2025 for a one percent fee |
In exchange, the Company agreed in the IRG Letter
Agreement to:
| (a) | Issue 90,909 shares to IRG and pay $4,500,000 in cash out of the Oak Street financing (See Note 12) |
| (b) | Increase interest rate on all IRG loans to 12.5% per annum |
| (c) | Make all IRG loans convertible at $12.77 per share |
| (d) | Modify the Series C through Series G Warrants to be exercisable at $12.77 per share |
In the IRG Letter Agreement, IRG and the Company
agreed to comply with all federal and state securities laws and Nasdaq listing rules and to insert “blocker” provisions for
the above-described re-pricing of the warrants and the conversion provisions, such that the total cumulative number of shares of Common
Stock that may be issued to IRG and its affiliated and related parties pursuant to the IRG Letter Agreement may not exceed the requirements
of Nasdaq Listing Rule 5635(d) (“Nasdaq 19.99% Cap”), except that such limitation will not apply following Approval (defined
below). In addition, the provisions of the IRG Letter Agreement are limited by Nasdaq Listing Rule 5635(c).
Hall
of Fame Resort & Entertainment Company and Subsidiaries
Notes to Condensed Consolidated
Financial Statements
(Unaudited)
Note 4: Notes Payable, net (continued)
CFP Loan
On April 27, 2022, Midwest
Lender Fund, LLC, a limited liability company wholly owned by our director Stuart Lichter (“MLF”), loaned $4,000,000 (the
“CFP Loan”) to HOF Village Center for Performance, LLC (“HOF Village CFP”). Interest accrues on the outstanding
balance of the CFP Loan at 6.5% per annum, compounded monthly. The CFP Loan matures on April 30, 2023 or if HOF Village CFP exercises
its extension option, April 30, 2024. The CFP Loan is secured by a mortgage encumbering the Center for Performance.
As part of the consideration
for making the Loan, on June 8, 2022 following stockholder approval, the Company issued to MLF: (A) 5,681 shares (the “Commitment
Fee Shares”) of Common Stock, and (B) a warrant to purchase 5,681 shares of Common Stock (“Series G Warrants”). The
exercise price of the Series G Warrants will be $33 per share. The Series G Warrants will become exercisable one year after issuance,
subject to certain terms and conditions set forth in the Series G Warrants. Unexercised Series G Warrants will expire five years after
issuance. The exercise price of the Series G Warrants will be subject to a weighted-average antidilution adjustment.
On November 7, 2022, the Company further amended
the CFP Loan in order to add an extension option that the Company may exercise at any time in order to extend the CFP Loan to March 31,
2025. In exchange for the amendment, the interest rate of the CFP Loan was increased to 12.5% per annum.
Huntington Loan
On September 27, 2022, HOF Village Retail I,
LLC and HOF Village Retail II, LLC, subsidiaries of the Company, as borrowers (the “Subsidiary Borrowers”), entered into
a loan agreement with The Huntington National Bank, pursuant to which the lender agreed to loan up to $10,000,000 to the Subsidiary Borrowers,
which may be drawn upon the Project achieving certain debt service coverage ratios. Under the Note, the outstanding amount of the Loan
bears interest at a per annum rate equal to the Term SOFR (as defined in the Note) plus a margin ranging from 2.60% to 3.50% per annum.
The Loan matures on
September 27, 2024 (the “Initial Maturity Date”). However, Subsidiary Borrowers have the option (the “Extension Option”)
to extend the Initial Maturity Date for an additional thirty six (36) months.
As of March 31, 2023, the Company has not drawn
under the loan agreement.
Additionally, in connection with the Huntington
Loan, on September 27, 2022, the Company entered into an interest rate swap agreement with a notional amount of $10 million to hedge
a portion of the Company’s outstanding Secured Overnight Financing Rate (“SOFR”) debt with a fixed interest rate of
4.0%. The effective date of the interest rate swap is October 1, 2024 and the termination date is September 27, 2027.
Hall of Fame Resort &
Entertainment Company and Subsidiaries
Notes to Condensed Consolidated
Financial Statements
(Unaudited)
Note 4: Notes Payable, net (continued)
Future Minimum Principal Payments
The minimum required principal payments on notes
payable outstanding as of March 31, 2023 are as follows:
| For the three months ending March 31, | |
Amount | |
| 2023 (nine months) | |
$ | 16,432,370 | |
| 2024 | |
| 46,918,630 | |
| 2025 | |
| 31,516,621 | |
| 2026 | |
| 3,628,669 | |
| 2027 | |
| 4,265,957 | |
| Thereafter | |
| 103,748,385 | |
| Total Gross Principal Payments | |
$ | 206,510,632 | |
| | |
| | |
Less: Debt discount and deferred financing costs | |
| (14,561,163 | ) |
| | |
| | |
| Total Net Principal Payments | |
$ | 191,949,469 | |
Hall
of Fame Resort & Entertainment Company and Subsidiaries
Notes to Condensed Consolidated
Financial Statements
(Unaudited)
Note 5: Stockholders’ Equity
Reverse Stock Split
On September 29, 2022, our stockholders approved
amendments to our Amended and Restated Certificate of Incorporation to effect a reverse stock split of our shares of common stock, and
our Board approved a final reverse stock split ratio of 1-for-22. The reverse stock split became effective on December 27, 2022. On the
effective date, every 22 shares of issued and outstanding common stock were combined and converted into one issued and outstanding share
of common stock. Fractional shares were cancelled, and stockholders received cash in lieu thereof in the aggregate amount of $118,344.
The number of authorized shares of common stock
and the par value per share of common stock remains unchanged. A proportionate adjustment was also made to the maximum number of shares
of common stock issuable under the Hall of Fame Resort & Entertainment Company Amended 2020 Omnibus Incentive Plan (the “Plan”).
As a result, the number of shares and income
(loss) per share disclosed throughout this Report on Form 10-Q have been retrospectively adjusted to reflect the reverse stock split.
Where applicable, the disclosures below have
been adjusted to reflect the 1-for-22 reverse stock split effective December 27, 2022.
Authorized Capital
On November 3, 2020, the Company’s stockholders
approved an amendment to the Company’s charter to increase the authorized shares of Common Stock from 100,000,000 to 300,000,000.
Consequently, the Company’s charter allows the Company to issue up to 300,000,000 shares of Common Stock and to issue and designate
its rights, without stockholder approval, of up to 5,000,000 shares of preferred stock, par value $0.0001.
Series A Preferred Stock Designation
On October 8, 2020, the Company filed a Certificate
of Designations with the Secretary of State of the State of Delaware to establish preferences, limitations, and relative rights of the
Series A Preferred Stock. The number of authorized shares of Series A Preferred Stock is 52,800. The Series A Preferred Stock is mandatorily
redeemable, and therefore classified as a liability on the Company’s condensed consolidated balance sheets within Notes Payable,
net.
Hall
of Fame Resort & Entertainment Company and Subsidiaries
Notes to Condensed Consolidated
Financial Statements
(Unaudited)
Note 5: Stockholders’ Equity (continued)
2020 Omnibus Incentive Plan
On July 1, 2020, the Company’s omnibus
incentive plan (the “2020 Omnibus Incentive Plan”) became effective immediately. The 2020 Omnibus Incentive Plan was previously
approved by the Company’s stockholders and Board of Directors. Subject to adjustment, the maximum number of shares of Common Stock
authorized for issuance under the 2020 Omnibus Incentive Plan was 82,397 shares. On June 2, 2021, the Company held its 2021 Annual Meeting
whereby the Company’s stockholders approved an amendment to the 2020 Omnibus Incentive Plan to increase by 181,818 the number of
shares of Common Stock, that will be available for issuance under the 2020 Omnibus Incentive Plan, resulting in a maximum of 264,214
shares that can be issued under the amended 2020 Omnibus Inventive Plan. The amendment to the 2020 Omnibus Incentive Plan was previously
approved by the Board of Directors of the Company, and the amended 2020 Omnibus Incentive Plan became effective on June 2, 2021. As of
March 31, 2023, 6,938 shares remained available for issuance under the 2020 Omnibus Incentive Plan.
Equity Distribution Agreement
On September 30, 2021, the Company entered into
an Equity Distribution Agreement with Wedbush Securities Inc. and Maxim Group LLC with respect to an at-the-market offering program under
which the Company may, from time to time, offer and sell shares of the Company’s Common Stock having an aggregate offering price
of up to $50 million. From January 1 through March 31, 2023, there were no shares sold. The remaining availability under the Equity Distribution
Agreement as of March 31, 2023 was approximately $25.9 million.
Issuance of Restricted Stock Awards
The Company’s activity in restricted Common
Stock was as follows for the three months ended March 31, 2023:
| | |
Number of
shares | | |
Weighted
average
grant date
fair value | |
| Non–vested at January 1, 2023 | |
| - | | |
$ | - | |
| Granted | |
| 6,207 | | |
$ | 8.16 | |
| Vested | |
| (6,207 | ) | |
$ | 8.16 | |
| Non–vested at March 31, 2023 | |
| - | | |
$ | | |
For the three months ended March 31, 2023 and
2022, stock-based compensation related to restricted stock awards was $50,657 and $732,757, respectively. Stock-based compensation related
to restricted stock awards was included as a component of Operating expenses in the condensed consolidated statements of
operations. As of March 31, 2023, unamortized stock-based compensation costs related to restricted share arrangements were $0.
Hall of Fame Resort &
Entertainment Company and Subsidiaries
Notes to Condensed Consolidated
Financial Statements
(Unaudited)
Note 5: Stockholders’ Equity (continued)
Issuance of Restricted Stock Units
During
the three months ended March 31, 2023, the Company granted an aggregate of 99,615 Restricted Stock Units (“RSUs”) to its
employees and directors, of which
96,875 were granted under the 2020 Omnibus Incentive Plan and 2,740 were granted as inducement awards. The RSUs were valued at the value
of the Company’s Common Stock on the date of grant, which approximated $14.70 per share for these awards. The RSUs granted to employees
vest one third on the first anniversary of their grant, one third on the second anniversary of their grant, and one third on the third
anniversary of their grant. The RSUs granted to directors vest one year from the date of grant.
The Company’s activity in RSUs was as follows
for the three months ended March 31, 2023:
| | |
Number of
shares | | |
Weighted
average
grant date
fair value | |
| Non–vested at January 1, 2023 | |
| 134,799 | | |
$ | 28.74 | |
| Granted | |
| 99,615 | | |
$ | 14.70 | |
| Vested | |
| (54,996 | ) | |
$ | 30.34 | |
| Forfeited | |
| (5,968 | ) | |
$ | 14.93 | |
| Non–vested at March 31, 2023 | |
| 173,450 | | |
$ | 20.64 | |
For the three months ended March 31, 2023 and
2022, the Company recorded $600,377 and $502,412, respectively, in employee and director stock-based compensation expense. Employee and
director stock-based compensation expense is a component of Operating expenses in the condensed consolidated statements of operations.
As of March 31, 2023, unamortized stock-based compensation costs related to restricted stock units were $3,005,663 and will be recognized
over a weighted average period of 2 years.
Warrants
The Company’s warrant activity was as follows for the three
months ended March 31, 2023:
| | |
Number of
Shares | | |
Weighted
Average
Exercise
Price (USD) | | |
Weighted
Average
Contractual
Life (years) | | |
Intrinsic
Value (USD) | |
| Outstanding - January 1, 2023 | |
| 2,003,649 | | |
$ | 149.09 | | |
| 2.86 | | |
$ | - | |
| Outstanding – March 31, 2023 | |
| 2,003,649 | | |
$ | 149.09 | | |
| 2.61 | | |
$ | - | |
| Exercisable – March 31, 2023 | |
| 1,997,972 | | |
$ | 149.48 | | |
| 2.61 | | |
$ | - | |
Hall of Fame
Resort & Entertainment Company and Subsidiaries
Notes to Condensed
Consolidated Financial Statements
(Unaudited)
Note 5: Stockholders’ Equity (continued)
Amended and Restated
Series C Warrants
On March 1, 2022, in connection with the amendment
to the IRG Split Note (as described in Note 4), the Company amended its Series C Warrants to extend the term of the Series C Warrants
to March 1, 2027. The exercise price of $30.80 per share was not amended, but the amendments subject the exercise price to a weighted-average
antidilution adjustment. The amendments also remove certain provisions regarding fundamental transactions, which subsequently allowed
the Series C Warrants to be derecognized as a liability and classified as equity.
The Company accounted for this modification as
a cost of the IRG Split Note, whereby the Company calculated the incremental fair value of the Series C Warrants and recorded them as
a discount against the IRG Split Note.
On November 7, 2022, the Company further amended
the Series C Warrants to reduce the exercise price to $12.77 per share as part of the IRG Letter Agreement. See Note 4 for more information.
The following assumptions were used to calculate
the fair value of Series C Warrants in connection with the modifications:
| | |
Original
Series C
Warrants | | |
March 1,
2022
Modification | | |
November 7,
2022 Modification | |
| Term (years) | |
| 3.8 | | |
| 5.0 | | |
| 3.1 | |
| Stock price | |
$ | 22.22 | | |
$ | 22.22 | | |
$ | 14.52 | |
| Exercise price | |
$ | 30.80 | | |
$ | 30.80 | | |
$ | 12.77 | |
| Dividend yield | |
| 0.0 | % | |
| 0.0 | % | |
| 0.0 | % |
| Expected volatility | |
| 54.7 | % | |
| 50.8 | % | |
| 63.9 | % |
| Risk free interest rate | |
| 1.5 | % | |
| 1.5 | % | |
| 4.8 | % |
| Number of shares | |
| 455,867 | | |
| 455,867 | | |
| 455,867 | |
| Aggregate fair value | |
$ | 3,336,000 | | |
$ | 3,648,000 | | |
$ | 3,230,000 | |
Hall of Fame
Resort & Entertainment Company and Subsidiaries
Notes to Condensed
Consolidated Financial Statements
(Unaudited)
Note 5: Stockholders’ Equity (continued)
Amended and Restated Series D Warrants issue
to CH Capital Lending
On March 1, 2022, in
connection with the amendment to the CH Capital Loan (as described in Note 4), the Company amended the Series D Warrants issued to CH
Capital Lending to extend the term of such Series D Warrants to March 1, 2027. The exercise price of $151.80 per share was not amended,
but the amendments subject the exercise price to a weighted-average antidilution adjustment.
On November 7, 2022, the Company further amended
the Series C Warrants to reduce the exercise price to $12.77 per share as part of the IRG Letter Agreement. See Note 4 for more information.
The following assumptions were used to calculate
the fair value of Series D Warrants in connection with the modifications:
| | |
Original Series D
Warrants | | |
March 1,
2022
Modification | | |
November 7,
2022 Modification | |
| Term (years) | |
| 3.8 | | |
| 3.8 | | |
| 3.1 | |
| Stock price | |
$ | 22.22 | | |
$ | 22.22 | | |
$ | 14.52 | |
| Exercise price | |
$ | 151.80 | | |
$ | 151.80 | | |
$ | 12.77 | |
| Dividend yield | |
| 0.0 | % | |
| 0.0 | % | |
| 0.0 | % |
| Expected volatility | |
| 63.5 | % | |
| 50.8 | % | |
| 63.9 | % |
| Risk free interest rate | |
| 1.3 | % | |
| 1.6 | % | |
| 4.8 | % |
| Number of shares | |
| 111,321 | | |
| 111,321 | | |
| 111,321 | |
| Aggregate fair value | |
$ | 50,000 | | |
$ | 138,000 | | |
$ | 910,000 | |
7.00% Series A Cumulative Redeemable Preferred
Stock
On January 12, 2023,
the Company issued to ADC LCR Hall of Fame Manager II, LLC (the “Series A Preferred Investor”) 1,600 shares of the Company’s
7.00% Series A Cumulative Redeemable Preferred Stock, par value $0.0001 per share (“Series A Preferred Stock”), at a price
of $1,000 per share for an aggregate purchase price of $1,600,000. On January 23, 2023, the Company issued to the Series A Preferred
Investor 800 additional shares (the “Shares”) of the Company’s Series A Preferred Stock at a price of $1,000 per share
for an aggregate purchase price of $800,000. The Company paid the Series A Preferred Investor an origination fee of 2% of the aggregate
purchase price for each issuance. The issuance and sale of the shares to the Series A Preferred Investor is exempt from registration
pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”). The Series A Preferred Stock
is not convertible into Common Stock. The Series A Preferred Investor has represented to the Company that it is an “accredited
investor” as defined in Rule 501 of the Securities Act and that the shares are being acquired for investment purposes and not with
a view to, or for sale in connection with, any distribution thereof.
Hall of Fame
Resort & Entertainment Company and Subsidiaries
Notes to Condensed
Consolidated Financial Statements
(Unaudited)
Note 5: Stockholders’ Equity (continued)
Compliance with Nasdaq Minimum Bid Requirement
As previously reported,
on May 24, 2022, the Company received a deficiency letter from the Listing Qualifications Department (the “Staff”) of the
Nasdaq Stock Market (“Nasdaq”) notifying the Company that for the last 30 consecutive business days the bid price for the
Company’s common stock, par value $0.0001 per share (“Common Stock”), had closed below the minimum requirement for
continued inclusion on the Nasdaq Capital Market pursuant to Nasdaq Listing Rule 5550(a)(2) (the “Minimum Bid Requirement”).
On January 11, 2023, the Company received written
notice from the Staff of Nasdaq informing the Company that it has regained compliance with the Minimum Bid Requirement because Nasdaq
has determined that for 10 consecutive business days, the closing bid price of the Company’s Common Stock was at or above the Minimum
Bid Requirement. Accordingly, Nasdaq has advised that the matter is now closed.
Hall of Fame Resort & Entertainment Company
2023 Inducement Plan
On January 24, 2023,
the Company’s board of directors adopted the Hall of Fame Resort & Entertainment Company 2023 Inducement Plan (the “Inducement
Plan”). The Inducement Plan is not subject to stockholder approval. The aggregate number of shares of Common Stock
that may be issued or transferred pursuant to awards covered by the Plan (including existing inducement awards amended to be subject
to the Inducement Plan) is 110,000. Awards covered by the Inducement Plan include only inducement grants under Nasdaq Listing Rule
5635(c)(4).
Hall of Fame
Resort & Entertainment Company and Subsidiaries
Notes to Condensed
Consolidated Financial Statements
(Unaudited)
Note 6: Sponsorship Revenue and Associated Commitments
Johnson Controls, Inc.
On July 2, 2020, the Company entered into an
Amended and Restated Sponsorship and Naming Rights Agreement (the “Naming Rights Agreement”) among Newco, PFHOF and Johnson
Controls, Inc. (“JCI” or “Johnson Controls”), that amended and restated
the Sponsorship and Naming Rights Agreement, dated as of November 17, 2016 (the “Original Sponsorship Agreement”). Among
other things, the Amended Sponsorship Agreement: (i) reduced the total amount of fees payable to Newco during the term of the Amended
Sponsorship Agreement from $135 million to $99 million; (ii) restricted the activation proceeds from rolling over from year to year with
a maximum amount of activation proceeds in one agreement year to be $750,000; and (iii) renamed the “Johnson Controls Hall of Fame
Village” to “Hall of Fame Village”. This is a prospective change, which the Company reflected beginning in the third
quarter of 2020.
JCI has a right to terminate
the Naming Rights Agreement if the Company does not provide evidence to JCI by October 31, 2021 that it has secured sufficient debt and
equity financing to complete Phase II, or if Phase II is not open for business by January 2, 2024, in each case subject to day-for-day
extension due to force majeure and a notice and cure period. In addition, under the Naming Rights Agreement JCI’s obligation
to make sponsorship payments to the Company may be suspended commencing on December 31, 2020, if the Company has not provided evidence
reasonably satisfactory to JCI on or before December 31, 2020, subject to day-for-day extension due to force majeure, that the Company
has secured sufficient debt and equity financing to complete Phase II.
Additionally, on October 9, 2020, Newco,
entered into a Technology as a Service Agreement (the “TAAS Agreement”) with JCI. Pursuant to the TAAS Agreement, JCI will
provide certain services related to the construction and development of the Hall of Fame Village (the “Project”), including,
but not limited to, (i) design assist consulting, equipment sales and turn-key installation services in respect of specified systems to
be constructed as part of Phase 2 and Phase 3 of the Project and (ii) maintenance and lifecycle services in respect of certain systems
constructed as part of Phase 1, and to be constructed as part of Phase 2 and Phase 3, of the Project. Under the terms of the TAAS Agreement,
Newco agreed to pay JCI up to an aggregate of approximately $217 million for services rendered by JCI over the term of the TAAS Agreement.
Hall of Fame
Resort & Entertainment Company and Subsidiaries
Notes to Condensed
Consolidated Financial Statements
(Unaudited)
Note 6: Sponsorship Revenue and Associated Commitments (continued)
Johnson Controls, Inc. (continued)
The TAAS Agreement provides that in respect of
the Naming Rights Agreement, Johnson Controls and Newco intend, acknowledge and understand that: (i) Newco’s performance under the
TAAS Agreement is essential to, and a condition to Johnson Controls’ performance under, the Naming Rights Agreement; and (ii) Johnson
Controls’ performance under the Naming Rights Agreement is essential to, and a condition to Newco’s performance under, the
TAAS Agreement. In the TAAS Agreement, Johnson Controls and Newco represent, warrant and agree that the transactions agreements and obligations
contemplated under the TAAS Agreement and the Naming Rights Agreement are intended to be, and shall be, interrelated, integrated and indivisible,
together being essential to consummating a single underlying transaction necessary for the Project. The Company anticipates that resolution
of the dispute regarding the Naming Rights Agreement will include the TAAS Agreement.
On May 10, 2022, the Company received from JCI
a notice of termination (the “TAAS Notice”) of the TAAS Agreement effective immediately. The TAAS Notice states that termination
of the TAAS Agreement by JCI is due to Newco’s alleged breach of its payment obligations. Additionally, JCI in the TAAS Notice
demands the amount which is the sum of: (i) all past due payments and any other amounts owed by Newco under the TAAS Agreement; (ii)
all commercially reasonable and documented subcontractor breakage and demobilization costs; and (iii) all commercially reasonable and
documented direct losses incurred by JCI directly resulting from the alleged default by the Company and the exercise of JCI’s rights
and remedies in respect thereof, including reasonable attorney fees.
Also
on May 10, 2022, the Company received from JCI a notice of termination (“Naming Rights Notice”) of the Name Rights Agreement,
effective immediately. The Naming Rights Notice states that the termination of the Naming Rights Agreement by JCI is due to JCI’s
concurrent termination of the TAAS Agreement. The Naming Rights Notice further states that the Company must pay JCI, within 30 days following
the date of the Naming Rights Notice, $4,750,000. The Company has not made such payment to date. The Naming Rights Notice states that
Newco is also in breach of its covenants and agreements, which require Newco to provide evidence reasonably satisfactory to JCI on or
before October 31, 2021, subject to day-for-day extension due to force majeure, that Newco has secured sufficient debt and equity financing
to complete Phase II.
The
Company disputes that it is in default under either the TAAS Agreement or the Naming Rights Agreement. The Company believes JCI is in
breach of the Naming Rights Agreement and the TAAS Agreement due to their failure to make certain payments in accordance with the Naming
Rights Agreement, and, on May 16, 2022, provided notice to JCI of these breaches.
The
Company is pursuing dispute resolution pursuant to the terms of the Naming Rights Agreement to simultaneously defend against JCI’s
allegations and pursue its own claims. The parties participated in mediation in November 2022, but were unable to reach a resolution.
On January 24, 2023, Newco filed a demand for arbitration with JAMS, asserting claims against JCI for breach of contract, breach of the
implied duty of good faith and fair dealing, and unjust enrichment. On February 16, 2023, JCI filed its response, generally denying Newco’s
allegations and asserting counterclaims for breach of contract, breach of the implied covenant of good faith and fair dealing, and unjust
enrichment. On March 9, 2023, Newco filed its response to JCI’s counterclaims, generally denying JCI’s allegations. A panel
of three arbitrators has been constituted to hear and determine the dispute. The Company presently anticipates that the arbitration hearing
will be held during the fourth quarter of 2023 in Ohio. The ultimate outcome of this dispute cannot presently be determined. However,
in management’s opinion, the likelihood of a material adverse outcome is remote. Accordingly, adjustments, if any, that might result
from the resolution of this matter have not been reflected in the accompanying condensed consolidated financial statements. During the
year ended December 31, 2022, the Company suspended its revenue recognition until the dispute is resolved and has recorded an allowance
against the amounts due as of March 31, 2023 and December 31, 2022 in the amount of $6,000,000 and $4,812,500, respectively. The balances
due under the Naming Rights Agreement as of March 31, 2023 and December 31, 2022 amounted to $7,822,917 and $6,635,417 respectively.
Other Sponsorship Revenue
The Company has additional revenue primarily
from sponsorship programs that provide its sponsors with strategic opportunities to reach customers through our venue including
advertising on our website. Sponsorship agreements may contain multiple elements, which provide several distinct benefits to the
sponsor over the term of the agreement and can be for a single or multi-year term. These agreements provide sponsors various rights
such as venue naming rights, signage within our venues, the ability to be the exclusive provider of a certain category of product,
advertising on our website and other benefits as detailed in the agreements.
Hall of Fame
Resort & Entertainment Company and Subsidiaries
Notes to Condensed
Consolidated Financial Statements
(Unaudited)
Note 6: Sponsorship Revenue and Associated Commitments (continued)
Other Sponsorship Revenue (continued)
As of March 31, 2023, scheduled future cash to
be received under the agreements, excluding the Johnson Controls Naming Rights Agreement, is as follows:
Year ending December 31,
| 2023 (nine months) | |
$ | 951,750 | |
| 2024 | |
| 2,256,265 | |
| 2025 | |
| 2,167,265 | |
| 2026 | |
| 2,017,265 | |
| 2027 | |
| 1,757,265 | |
| Thereafter | |
| 4,514,529 | |
| Total | |
$ | 13,664,339 | |
As services are provided, the Company is recognizing
revenue on a straight-line basis over the expected term of the agreement. During the three months ended March 31, 2023 and 2022, the
Company recognized $673,475 and $819,290 of net sponsorship revenue, respectively.
Hall of Fame
Resort & Entertainment Company and Subsidiaries
Notes to Condensed
Consolidated Financial Statements
(Unaudited)
Note 7: Other Commitments
Management Agreement with Crestline Hotels
& Resorts
On October 22, 2019, the Company entered into
a management agreement with Crestline Hotels & Resorts (“Crestline”). The Company appointed and engaged Crestline as
the Company’s exclusive agent to supervise, direct, and control management and operation of the DoubleTree Canton Downtown Hotel.
In consideration of the services performed by Crestline, the Company agreed to the greater of: 2% of gross revenues or $10,000 per month
in base management fees and other operating expenses. The agreement will be terminated on the fifth anniversary of the commencement date,
or October 22, 2024. For the three months ended March 31, 2023 and 2022, the Company paid and incurred $45,500 and $30,000, respectively
in management fees.
Constellation EME Express Equipment Services
Program
On February 1, 2021, the Company entered into
a contract with Constellation whereby Constellation will sell and/or deliver materials and equipment purchased by the Company. The Company
is required to provide $2,000,000 to an escrow account held by Constellation, representing adequate assurance of future performance. Constellation
will invoice the Company in 60 monthly installments, which began in April 2021 for $103,095. Additionally, the Company has one note payable
with Constellation. See Note 4 for more information.
Online Sports Betting Agreement
On July 14, 2022, Newco entered into an Online
Market Access Agreement with Instabet, Inc. doing business as betr (“BETR”), pursuant to which BETR will serve as a Mobile
Management Services Provider (as defined under applicable Ohio gaming law) wherein BETR will host, operate and support a branded online
sports betting service in Ohio, subject to procurement of all necessary licenses. The initial term of the Online Market Access Agreement
is ten years.
As part of this agreement, Newco will receive
a limited equity interest in BETR and certain revenue sharing, along with the opportunity for sponsorship and cross-marketing. The limited
equity interest was in the form of penny warrants valued at $4,000,000. The grant date value of these warrants were recorded as deferred
revenue (within Other Liabilities on the condensed consolidated Balance Sheets) and will be amortized over the life of the sports betting
agreement.
On November 2, 2022,
the Company took the next step toward live sports betting by securing conditional approval from the state for mobile and retail sports
books.
The Ohio Casino Control
Commission provided the required authorization for HOFV to gain licensing for a physical sports operation – called a sportsbook
– as well as an online betting platform, under Ohio’s sports betting law HB29. As of January 1, 2023, sports betting
is legal in Ohio, for anyone in the state that is of legal betting age.
Hall of Fame
Resort & Entertainment Company and Subsidiaries
Notes to Condensed
Consolidated Financial Statements
(Unaudited)
Note 7: Other Commitments (continued)
Other Liabilities
Other liabilities consisted of the following
at March 31, 2023 and December 31, 2022:
| | |
March 31, 2023 | | |
December 31, 2022 | |
| Activation fund reserves | |
$ | 3,692,820 | | |
$ | 3,511,185 | |
| Deferred revenue | |
| 9,787,961 | | |
| 6,867,970 | |
| Deposits and other liabilities | |
| 383,347 | | |
| 300,549 | |
| Total | |
$ | 13,864,128 | | |
$ | 10,679,704 | |
Other Commitments
The Company has other commitments, as disclosed in Notes 6, 8 and
9 within these condensed consolidated footnotes.
Note 8: Contingencies
During the normal course of its business, the Company is subject to
occasional legal proceedings and claims. The Company does not have any pending litigation that, separately or in the aggregate, would,
in the opinion of management, have a material adverse effect on its results of operations, financial condition, or cash flows.
Note 9: Related-Party Transactions
Due to Affiliates
Due to affiliates consisted of the following
at March 31, 2023 and December 31, 2022:
| | |
March 31, 2023 | | |
December 31, 2022 | |
| Due to IRG Member | |
$ | 172,753 | | |
$ | 345,253 | |
| Due to PFHOF | |
| 571,829 | | |
| 510,232 | |
| Total | |
$ | 744,582 | | |
$ | 855,485 | |
IRG Canton Village Member, LLC, a member of HOF
Village, LLC controlled by our director Stuart Lichter (the “IRG Member”) and an affiliate, provides certain supporting services
to the Company. As noted in the Operating Agreement of HOF Village, LLC, an affiliate of the IRG Member, IRG Canton Village Manager,
LLC, the manager of HOF Village, LLC controlled by our director Stuart Lichter, may earn a master developer fee calculated as 4.0% of
development costs incurred for the Hall of Fame Village, including, but not limited to site assembly, construction supervision, and project
financing. These development costs incurred are netted against certain costs incurred for general project management.
The due to related party amounts in the table
above are non-interest bearing advances from an affiliate of IRG Member due on demand.
The amounts above due to PFHOF relate to advances
to and from PFHOF, including costs for onsite sponsorship activation, sponsorship sales support, shared services, event tickets, and
expense reimbursements.
Hall of Fame
Resort & Entertainment Company and Subsidiaries
Notes to Condensed
Consolidated Financial Statements
(Unaudited)
Note 9: Related-Party Transactions (continued)
Global License Agreement
Effective April 8, 2022, Newco and PFHOF, entered
into a Global License Agreement (the “Global License Agreement”). The Global License Agreement consolidates and replaces
the First Amended and Restated License Agreement, the Amended and Restated Media License Agreement, and the Branding Agreement the parties
had previously entered into. The Global License Agreement sets forth the terms under which PFHOF licenses certain marks and works to
Newco and its affiliates to exploit existing PFHOF works and to create new works. The Global License Agreement grants Newco and its affiliates
an exclusive right and license to use the PFHOF marks in conjunction with theme-based entertainment and attractions within the City of
Canton, Ohio; youth sports programs, subject to certain exclusions; e-gaming and video games; and sports betting. The Global License
Agreement also grants Newco and its affiliates a non-exclusive license to use the PFHOF marks and works in other areas of use, with a
right of first refusal, subject to specified exclusions. The Global License Agreement acknowledges the existence of agreements in effect
between PFHOF and certain third parties that provide for certain restrictions on the rights of PFHOF, which affects the rights that can
be granted to Newco and its affiliates. These restrictions include, but are not limited to, such third parties having co-exclusive rights
to exploit content based on the PFHOF enshrinement ceremonies and other enshrinement events. The Global License Agreement requires Newco
to pay PFHOF an annual license fee of $900,000 in the first contract year, inclusive of calendar years 2021 and 2022; an annual license
fee of $600,000 in each of contract years two through six; and an annual license fee of $750,000 per year starting in contract year seven
through the end of the initial term. The Global License Agreement also provides for an additional license royalty payment by Newco to
PFHOF for certain usage above specified financial thresholds, as well as a commitment to support PFHOF museum attendance through Newco’s
and its affiliates’ ticket sales for certain concerts and youth sports tournaments. The Global License Agreement has an initial
term through December 31, 2036, subject to automatic renewal for successive five-year terms, unless timely notice of non-renewal is provided
by either party.
The future minimum payments under this agreement
as of March 31, 2023 are as follows:
| For the years ending December 31, | |
Amount | |
| 2023 (nine months) | |
$ | 300,000 | |
| 2024 | |
| 600,000 | |
| 2025 | |
| 600,000 | |
| 2026 | |
| 600,000 | |
| 2027 | |
| 600,000 | |
| Thereafter | |
| 6,750,000 | |
| Total Gross Principal Payments | |
$ | 9,450,000 | |
During the three months ended March 31, 2023
and 2022, the Company paid $300,000 and $0 of the annual license fee, respectively.
Hall of Fame
Resort & Entertainment Company and Subsidiaries
Notes to Condensed
Consolidated Financial Statements
(Unaudited)
Note 9: Related-Party Transactions (continued)
Hotel Construction
Loan Commitment Letter
On November 3, 2022,
the Company entered into a Commitment Letter (the “Hotel Construction Loan Commitment Letter”), by and among the Company,
as guarantor, HOF Village Hotel WP, LLC (“Hotel”), an indirect wholly owned subsidiary of the Company, as borrower, and Industrial
Realty Group, Inc. (“IRGInc”), as lender. Stuart Lichter, a director of the Company, is President and Chairman of the Board
of Industrial Realty Group, LLC (“IRGLLC”). Pursuant to the terms of the Hotel Construction Loan Commitment Letter, IRGInc
committed to provide, or to arrange for one of IRGInc’s affiliates to provide, a loan of $28,000,000 (the “Hotel Construction
Loan”) to finance a portion of Hotel’s costs and expenses in connection with the ground-up development of a 180-room family
hotel (the “Hotel Project”) on approximately 1.64 acres of land located in the Hall of Fame Village, Canton, Ohio (the “Hotel
Property”), adjacent to the Waterpark Property. The commitment to provide the Hotel Construction Loan is subject to certain conditions,
including the execution and delivery of definitive documentation with respect to the Hotel Construction Loan.
The Hotel Construction
Loan will have a two-year term with one option to extend for twelve months, subject to standard extension conditions. The collateral
for the Hotel Construction Loan will include, without limitation: (a) a first priority perfected mortgage encumbering the Hotel
Property; (b) a first priority perfected assignment of leases and rents with respect to the Hotel Property; (c) a first priority perfected
assignment of all permits, licenses, entitlements, approvals, and contracts with respect to the Hotel Property; (d) UCC-1 financing statements
(all personal property, fixture filing and accounts and reserves); (e) equity pledge; and (f) all other agreements and assurances customary
in similar financings by IRGInc. The Hotel Construction Loan will bear interest at a variable rate per annum equal to the one-month Term
SOFR plus 6%, subject to a SOFR floor equal to the greater of (i) 4% and (ii) prevailing SOFR at closing of the Hotel Construction
Loan. Payments of interest only will be made during the initial two-year term, with a payments of principal and interest based on a 25-year
amortization during the extension term, if applicable. Hotel will pay 1% of the Hotel Construction Loan amount as an origination fee,
payable in full at closing. The Hotel Construction Loan definitive documentation will have representations, warranties and events of
default usual and customary for such type of loan.
IRG Financial Support
and Consideration
On November 7, 2022,
the Company entered into a letter agreement (the “IRG Letter Agreement”) with IRGLLC, pursuant to which IRGLLC agreed that
IRGLLC and IRGLLC’s affiliates and related parties will provide the Company and its subsidiaries with certain financial support
described below in exchange for certain consideration described below.
The financial support
provided under the IRG Letter Agreement consists of the following (the “IRG Financial Support”):
Waterpark Construction
Financing Facilitation. IRGLLC agreed that its affiliate CH Capital Lending, LLC (“CHCL”), would help facilitate the
closing of financing with Oak Street with regard to construction of the Waterpark Project, by among other things, releasing CHCL’s
first mortgage lien on the Stadium Leasehold Interests and pledge of membership interests in HOFV Stadium. In addition, IRGLLC agreed
to provide a completion guaranty to facilitate other needed financing for the Waterpark Project, as required.
Hall of Fame
Resort & Entertainment Company and Subsidiaries
Notes to Condensed
Consolidated Financial Statements
(Unaudited)
Note 9: Related-Party Transactions (continued)
IRG Financial Support
and Consideration (continued)
Extension of CHCL
Bridge Loan. IRGLLC agreed that CHCL would extend to March 31, 2024 the maturity of the promissory note dated June 16, 2022,
issued by the Company, HOF Village Retail I, LLC and HOF Village Retail II, LLC, as borrowers, to CHCL, as lender (the “Bridge
Loan”).
Provide One Year
Extension Option for All IRG Affiliate Lender Loans. All loans from affiliates and related parties of IRGLLC (“IRG Affiliate
Lenders”) will be amended to provide for an optional one-year extension of their maturity until March 31, 2025 for a one percent
extension fee, which is payable if and when an IRG Affiliate Lender loan is extended. The IRG Affiliate Lender loans consist of the following:
(i) Bridge Loan, with an existing modified maturity date of March 31, 2024; (ii) the term loan, payable to CHCL, with an existing
maturity of March 31, 2024; (iii) the first amended and restated promissory note, dated March 1, 2022, payable to IRG, LLC, with
an existing maturity of March 31, 2024; (iv) the first amended and restated promissory note, dated March 1, 2022, payable to JKP Financial,
LLC, with an existing maturity of March 31, 2024; (v) the Secured Cognovit Promissory Note, dated as of June 19, 2020, assigned June
30, 2020 and amended December 1, 2020 and March 1, 2022, payable to JKP Financial, LLC, with an existing maturity of March 31, 2024;
and (vi) the promissory note, dated April 27, 2022, payable to Midwest Lender Fund, LLC (“MLF”), with an existing maturity
of April 30, 2023, and with an option to extend the maturity until March 31, 2024.
Tapestry Hotel Construction
Financing Commitment Letter. IRGLLC agreed to provide a commitment for financing the Hotel Project, as set forth in the Hotel Construction
Loan Commitment Letter.
Hall of Fame
Resort & Entertainment Company and Subsidiaries
Notes to Condensed
Consolidated Financial Statements
(Unaudited)
Note 9: Related-Party Transactions (continued)
IRG Financial Support
and Consideration (continued)
In consideration of the IRG Financial Support
to be received by the Company and its subsidiaries, the Company agreed in the IRG Letter Agreement to provide the following consideration
to IRGLLC and the IRG Affiliate Lenders:
The Company agreed to
make a payment of $4,500,000 as a fee for providing the completion guaranty and other IRG Financial Support described above, payable
to CHCL to be held in trust for the IRG Affiliate Lenders, to be allocated as the IRG Affiliate Lenders shall determine. The Company
also agreed to issue 90,909 shares of common stock, par value $0.0001 per share (“Common Stock”) to the IRG Affiliate Lenders,
to be allocated as the IRG Affiliate Lenders shall determine, in reliance upon an exemption from the registration requirements of the
Securities Act of 1933, as amended, pursuant to Section 4(a)(2) thereof, as a transaction by an issuer not involving any public offering.
The Company agreed to
modify the IRG Affiliate Lender loans as follows: (i) all IRG Affiliate Lender loans will bear interest at 12.5% per annum, compounded
monthly, with payment required monthly at 8% per annum, and with the remaining interest accrued and deferred until maturity; (ii) the
price at which the principal and accumulated and unpaid interest under the IRG Affiliated Lender loans is convertible into shares of
Common Stock will be reset to a price equal to $12.77 per share; (iii) the Company and its subsidiaries will record a blanket junior
mortgage on all real estate owned or leased by the Company and its subsidiaries, whether fee or leasehold estates, other than those parcels
for which existing lenders prohibit junior financing; (iv) the Company agreed to acknowledge an existing pledge of the Company’s
100% membership interest in HOFV Newco and reflect that such pledge secures all amounts due under the IRG Affiliate Lender Loans; (v)
all IRG Affiliate Lender loans will be cross-collateralized and cross-defaulted; (vi) the Company and its subsidiaries will covenant
not to assign, pledge, mortgage, encumber or hypothecate any of the underlying assets, membership interests in affiliated entities or
IP rights without IRGLLC’s written consent; (vii) prior development fees owed by the Company to IRGLLC will be accrued and added
to the Bridge Loan, and future development fees owed by the Company to IRGLLC will be paid as when due; and (viii) the Company will pay
to IRGLLC 25% of all contractual dispute cash settlements collected by the Company with regard to existing contractual disputes in settlement
discussions, which shall be applied to outstanding IRG Affiliate Lender loans, first against accrued interest and other charges and then
against principal.
The Company agreed to
modify the Series C through Series G warrants held by IRG Affiliate Lenders as follows: (i) the exercise price of the Series C through
Series G warrants held by IRG Affiliate Lenders will be reset to Market Price; and (ii) the warrant expiration dates of the Series
C through Series G warrants held by IRG Affiliate Lenders will be extended by two years from their current expiration dates.
Hall of Fame
Resort & Entertainment Company and Subsidiaries
Notes to Condensed
Consolidated Financial Statements
(Unaudited)
Note 9: Related-Party Transactions (continued)
IRG Financial Support
and Consideration (continued)
In the IRG Letter Agreement,
IRGLLC and the Company agreed to comply with all federal and state securities laws and Nasdaq listing rules and to insert “blocker”
provisions for the above-described re-pricing of the warrants and the conversion provisions, such that the total cumulative number of
shares of Common Stock that may be issued to IRGLLC and its affiliated and related parties pursuant to the IRG Letter Agreement may not
exceed the requirements of Nasdaq Listing Rule 5635(d) (“Nasdaq 19.99% Cap”), except that such limitation will not apply
following Approval (defined below). In addition, the provisions of the IRG Letter Agreement are limited by Nasdaq Listing Rule 5635(c).
If the number of shares of Common Stock issued to IRGLLC and its affiliated and related parties pursuant to the IRG Letter Agreement
and the agreements modified thereunder exceeds the Nasdaq 19.99% Cap, then the Company will use reasonable efforts to obtain stockholder
approval of the issuance of shares in excess of the Nasdaq 19.99% Cap, no later than the next stockholder meeting (the “Approval”).
Note 10: Concentrations
For the three months ended March 31, 2023, two
customers represented approximately 42.9% and 18.3% of the Company’s sponsorship revenue. For the three months ended March 31, 2022,
two customers represented approximately 35% and 15% of the Company’s sponsorship revenue. No other customer represented more than
10% of sponsorship revenue.
As of March 31, 2023, one customer represented
approximately 83.5% of the Company’s sponsorship accounts receivable. As of December 31, 2022, one customer represented approximately
94.4% of the Company’s sponsorship accounts receivable. No other customer represented more than 10% of outstanding accounts receivable.
At any point in time, the Company can have funds
in their operating accounts and restricted cash accounts that are with third-party financial institutions. These balances in the U.S.
may exceed the Federal Deposit Insurance Corporation insurance limits. While the Company monitors the cash balances in their operating
accounts, these cash and restricted cash balances could be impacted if the underlying financial institutions fail or other adverse conditions
in the financial markets occurs.
Hall of Fame
Resort & Entertainment Company and Subsidiaries
Notes to Condensed
Consolidated Financial Statements
(Unaudited)
Note 11: Leases
The Company has entered into operating leases
as the lessee primarily for ground leases under its stadium, sports complex, and parking facilities.
At the inception of a
contract the Company assesses whether the contract is, or contains, a lease. The Company’s assessment is based on: (i) whether the
contract involves the use of a distinct identified asset, (ii) whether the Company obtained the right to substantially all the economic
benefit from the use of the asset throughout the period, and (iii) whether the Company has the right to direct the use of the asset. Leases
entered into prior to January 1, 2022, which were accounted for under ASC 840, were not reassessed for classification.
For operating leases, the lease liability is
initially and subsequently measured at the present value of the unpaid lease payments. For finance leases, the lease liability is initially
measured in the same manner and date as for operating leases, and is subsequently presented at amortized cost using the effective interest
method. The Company generally uses its incremental borrowing rate as the discount rate for leases, unless an interest rate is implicitly
stated in the lease. The present value of the lease payments is calculated using the incremental borrowing rate for operating and finance
leases, which was determined using a portfolio approach based on the rate of interest that the Company would have to pay to borrow an
amount equal to the lease payments on a collateralized basis over a similar term. The lease term for all of the Company’s leases
includes the noncancelable period of the lease plus any additional periods covered by either a Company option to extend the lease that
the Company is reasonably certain to exercise, or an option to extend the lease controlled by the lessor. All ROU assets are reviewed periodically for
impairment.
Lease expense for operating leases consists of
the lease payments plus any initial direct costs and is recognized on a straight-line basis over the lease term. Lease expense for finance
leases consists of the amortization of the asset on a straight-line basis over the shorter of the lease term or its useful life and interest
expense determined on an amortized cost basis, with the lease payments allocated between a reduction of the lease liability and interest
expense.
Hall of Fame
Resort & Entertainment Company and Subsidiaries
Notes to Condensed
Consolidated Financial Statements
(Unaudited)
Note 11: Leases (continued)
The Company’s operating leases are comprised
primarily of ground leases and equipment leases. Balance sheet information related to our leases is present below (ASC 842 was adopted
on January 1, 2022):
| | |
March 31, | | |
December 31, | |
| | |
2023 | | |
2022 | |
| Operating leases: | |
| | |
| |
| Right-of-use assets | |
$ | 7,516,840 | | |
$ | 7,562,048 | |
| Lease liability | |
| 3,417,637 | | |
| 3,413,210 | |
| Finance leases: | |
| | | |
| | |
| Right-of-use assets | |
| - | | |
| - | |
| Lease liability | |
| - | | |
| - | |
Other information related to leases is presented below:
| | |
Three Months
Ended
March 31,
2023 | | |
Three Months
Ended
March 31,
2022 | |
| Operating lease cost | |
$ | 128,143 | | |
$ | 128,976 | |
| Other information: | |
| | | |
| | |
| Operating cash flows from operating leases | |
| 78,508 | | |
| 157,549 | |
| Weighted-average remaining lease term – operating leases (in years) | |
| 91.2 | | |
| 88.2 | |
| Weighted-average discount rate – operating leases | |
| 10.0 | % | |
| 10.0 | % |
As of March 31, 2023, the annual minimum lease payments of our operating
lease liabilities were as follows:
| For The Years Ending December 31, | |
| |
| 2023 (nine months) | |
$ | 238,723 | |
| 2024 | |
| 311,900 | |
| 2025 | |
| 311,900 | |
| 2026 | |
| 311,900 | |
| 2027 | |
| 311,900 | |
| Thereafter | |
| 41,125,000 | |
| Total future minimum lease payments, undiscounted | |
| 42,611,323 | |
| Less: imputed interest | |
| (39,193,686 | ) |
| Present value of future minimum lease payments | |
$ | 3,417,637 | |
Hall of Fame
Resort & Entertainment Company and Subsidiaries
Notes to Condensed
Consolidated Financial Statements
(Unaudited)
Note 11: Leases (continued)
Lessor Commitments
As of March 31, 2023, the Company’s Constellation
Center for Excellence and retail facilities were partially leased including leases by the Company’s subsidiaries. During the three
months ended March 31, 2023 and 2022, the Company recorded $94,540 and $8,118 of lease revenue, respectively. The future minimum lease
commitments under these leases, excluding leases of the Company’s subsidiaries, are as follows:
Year ending December 31:
| 2023 (nine months) | |
$ | 463,870 | |
| 2024 | |
| 645,438 | |
| 2025 | |
| 641,542 | |
| 2026 | |
| 640,962 | |
| 2027 | |
| 619,495 | |
| Thereafter | |
| 2,972,365 | |
| Total | |
$ | 5,983,672 | |
Note 12: Financing Liability
On September 27, 2022 the Company sold the land
under the Company’s Fan Engagement Zone with Twain. Simultaneously, the Company entered into a lease agreement with the Twain (the
sale of the property and simultaneous leaseback is referred to as the “Sale-Leaseback”). The Sale-Leaseback is repayable
over a 99-year term. Under the terms of the lease agreement, the Company’s initial base rent is approximately $307,125 per quarter,
with annual increases of approximately 2% each year of the term.
On November 7, 2022, HOFV Waterpark sold the land
under the Company’s future waterpark. Simultaneously, the Company entered into a lease agreement with the buyer of the property.
The Sale-Leaseback for the waterpark is repayable over a 99-year term. Under the terms of the leaseback agreement, the Company’s
initial base rent is $4,375,000 per annum, payable monthly, with customary escalations over the lease term. On November 7, 2022, Oak Street
and HOFV Waterpark also entered into a Purchase Option Agreement (the “Purchase Option Agreement”), pursuant to which HOFV
Waterpark is granted an option to purchase the Waterpark Property back from Oak Street that can be exercised during the period beginning
on December 1, 2027 and ending on November 30, 2034 (the “Option Period”).
The Company accounted for the Sale-Leaseback transactions
with Twain and Oak Street as financing transactions with the purchaser of the property. The Company concluded the lease agreements both
met the qualifications to be classified as finance-type leases due to the significance of the present value of the lease payments, using
a discount rate of 10.25% to reflect the Company’s incremental borrowing rate, compared to the fair value of the leased property
as of the lease commencement date.
The presence of a finance-type lease in the sale-leaseback
transactions indicates that control of the land under the Fan Engagement Zone and HOFV Waterpark has not transferred to the buyer/lessor
and, as such, the transactions were both deemed a failed sale-leaseback and must be accounted for as a financing arrangement. As a result
of this determination, the Company is viewed as having received the sales proceeds from the buyer/lessor in the form of a hypothetical
loan collateralized by its leased land. The hypothetical loan is payable as principal and interest in the form of “lease payments”
to the buyer/lessor. As such, the Company will not derecognize the property from its books for accounting purposes until the lease ends.
Hall of Fame
Resort & Entertainment Company and Subsidiaries
Notes to Condensed
Consolidated Financial Statements
(Unaudited)
Note 12: Financing Liability (continued)
As of March 31, 2023, the carrying value of the
financing liability was $60,675,230, representing $2,202,986,526 in remaining payments under the leases, net of a discount of $2,142,311,296.
The monthly lease payments are split between a reduction of principal and interest expense using the effective interest rate method.
As of December 31, 2022, the carrying value of
the financing liability was $60,087,907, representing $2,204,080,276 in remaining payments under the leases, net of a discount of $2,143,992,369.
The monthly lease payments are split between a reduction of principal and interest expense using the effective interest rate method.
The Company has a right to re-purchase the land
from TWAIN at any time on or after September 27, 2025 at a fixed price according to the lease. Oak Street and HOFV Waterpark also entered
into a purchase option agreement, pursuant to which HOFV Waterpark is granted an option to purchase the waterpark property back from
Oak Street that can be exercised during the period beginning on December 1, 2027 and ending on November 30, 2034.
Remaining future cash payments related to the
financing liability, for the fiscal years ending December 31 are as follows:
| 2023 (nine months) | |
$ | 2,925,781 | |
| 2024 | |
| 4,672,544 | |
| 2025 | |
| 5,865,396 | |
| 2026 | |
| 6,005,734 | |
| 2027 | |
| 6,149,455 | |
| Thereafter | |
| 2,177,367,616 | |
| Total Minimum Liability Payments | |
| 2,202,986,526 | |
| Imputed Interest | |
| (2,142,311,296 | ) |
| Total | |
$ | 60,675,230 | |
Note 13: Subsequent Events
Subsequent events have been evaluated through
May 15, 2023, the date the condensed consolidated financial statements were issued. Except for as disclosed below, no other events have
been identified requiring disclosure or recording.
On May 2, 2023, the Hall of Fame Resort &
Entertainment Company (the “Company”) issued to ADC LCR Hall of Fame Manager II, LLC (the “Investor”) 800 shares
(the “Shares”) of the Company’s 7.00% Series A Cumulative Redeemable Preferred Stock, par value $0.0001 per share (“Series
A Preferred Stock”), at a price of $1,000 per share for an aggregate purchase price of $800,000. The Company paid the Investor an
origination fee of 2% of the aggregate purchase price. The issuance and sale of the Shares to the Investor is exempt from registration
pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”).