UNITED STATES
SECURITIES AND
EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Form 10–K
(Mark One)
☒
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended: December 31, 2021
OR
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number 001-38363
HALL OF FAME
RESORT & ENTERTAINMENT COMPANY
(Exact name of registrant as specified in its
charter)
| Delaware | | 82-1270173 |
(State or other jurisdiction of
incorporation or organization) | | (I.R.S. Employer
Identification No.) |
2626 Fulton Drive NW Canton, OH | | 44718 |
| (Address of principal executive offices) | | (Zip Code) |
(330) 458-9176
(Registrant’s telephone
number, including area code)
Securities registered under section 12(b) of the
Act:
| Title of each class | | Trading Symbol(s) | | Name of each exchange on which registered |
| Common Stock, $0.0001 par value per share | | HOFV | | Nasdaq Capital Market |
| Warrants to purchase 1.421333 shares of Common Stock | | HOFVW | | Nasdaq Capital Market |
Securities registered under section 12(g) of the
Act:
Not applicable
Indicate by check mark if the registrant is a
well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒
Indicate by check mark if the registrant is not
required to file reports pursuant to Section 13 or 15(d) of the Exchange Act. Yes ☐ No ☒
Indicate by check mark whether the registrant
(1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12
months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements
for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant
has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405
of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes
☒ No ☐
Indicate by check mark whether registrant is
a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company, or an emerging growth company.
See definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company”, and
“emerging growth company” in Rule 12b-2 of the Exchange Act:
| Large accelerated filer ☐ | Accelerated filer ☐ |
| Non-accelerated filer ☒ | Smaller reporting company ☒ |
| | Emerging growth company ☒ |
If an emerging growth company, indicate by checkmark
if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards
provided pursuant to section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant
has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial
reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or
issued its audit report. ☐
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒
As of June 30, 2021, the last day of the registrant’s
most recently completed second fiscal quarter; the aggregate market value of the registrant’s common stock held by non–affiliates
of the registrant was approximately $177,288,737.
As of March 11, 2022, the registrant had outstanding
108,123,006 shares of common stock, $0.0001 par value.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant’s Proxy Statement for the 2022 Annual
Meeting of Stockholders are incorporated herein by reference in Part III of this Annual Report on Form 10-K to the extent stated herein.
Such proxy statement will be filed with the Securities and Exchange Commission within 120 days of the registrant’s fiscal year
ended December 31, 2021.
HALL OF FAME RESORT & ENTERTAINMENT COMPANY
AND SUBSIDIARIES
INDEX
NOTE REGARDING FORWARD–LOOKING STATEMENTS
This Annual Report on
Form 10-K may contain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995.
Such statements are generally identified by use of words such as “will likely result,” “are expected to,” “will
continue,” “is anticipated,” “estimated,” “believe,” “intend,” “plan,”
“projection,” “outlook,” “target,” “seek,” or words of similar meaning. These forward-looking
statements include, but are not limited to, statements regarding the Company’s future opportunities and estimated future results.
Such forward-looking statements are based upon the current beliefs and expectations of our management and are inherently subject to significant
business, economic and competitive uncertainties and contingencies, many of which are difficult to predict and generally beyond our control.
Actual results and the timing of events may differ materially from the results anticipated in these forward-looking statements.
In addition to factors identified elsewhere in this Annual Report on
Form 10-K, the following risks, among others, could cause actual results and the timing of events to differ materially from the anticipated
results or other expectations expressed in the forward-looking statements: the benefits of the Business Combination (defined below); the
future financial performance of the Company and its subsidiaries, including Newco (as defined below); changes in the market in which the
Company competes; expansion and other plans and opportunities; the effect of the COVID-19 pandemic on the Company’s business; the
Company’s ability to raise financing in the future; the Company’s ability to maintain the listing of its Common Stock, $0.0001
par value (the “Common Stock”), on the Nasdaq Capital Market (“Nasdaq”); and other factors detailed under the
section titled “Risk Factors” in this Report.
Actual results, performance
or achievements may differ materially, and potentially adversely, from any projections and forward-looking statements and the assumptions
on which those forward-looking statements are based. There can be no assurance that the data contained herein is reflective of future
performance to any degree. You are cautioned not to place undue reliance on forward-looking statements as a predictor of future performance.
All information set forth herein speaks only as of the date hereof, in the case of information about the Company, or as of the date of
such information, in the case of information from persons other than the Company, and we disclaim any intention or obligation to update
any forward-looking statements as a result of developments occurring after the date of this Annual Report on Form 10-K. Forecasts and
estimates regarding the Company’s industry and end markets are based on sources we believe to be reliable, however there can be
no assurance these forecasts and estimates will prove accurate in whole or in part. Annualized, pro forma, projected and estimated numbers
are used for illustrative purpose only, are not forecasts and may not reflect actual results.
Unless the context indicates
otherwise, references in this Annual Report on Form 10-K to the “Company,” “HOFRE,” “we,” “us,”
“our” and similar terms refer to Hall of Fame Resort & Entertainment Company.
PART I
Item 1. Business
Unless the context otherwise requires, the “Company”,
“we,” “our,” “us” and similar terms refer to Hall of Fame Resort & Entertainment Company, a Delaware
corporation.
Overview
We are a resort and entertainment company leveraging
the power and popularity of professional football and its legendary players in partnership with the National Football Museum, Inc., doing
business as the Pro Football Hall of Fame (“PFHOF”). Headquartered in Canton, Ohio, we own the Hall of Fame Village powered
by Johnson Controls, a multi-use sports and entertainment destination centered around the PFHOF’s campus. We expect to create a
diversified set of revenue streams through developing themed attractions, premier entertainment programming and sponsorships. The strategic
plan has been developed in three phases of growth: Phase I, Phase II, and Phase III.
Phase I of the Hall of Fame Village powered by
Johnson Controls is operational, consisting of the Tom Benson Hall of Fame Stadium, the Sports Complex, and HOF Village Media Group, LLC
(“Hall of Fame Village Media” or the “Media Company”). In 2016, HOF Village substantially completed the Tom Benson
Hall of Fame Stadium, a sports and entertainment venue with a seating capacity of approximately 23,000, with continued development of
the end zones in 2021. The Tom Benson Hall of Fame Stadium hosts multiple sports and entertainment events, including the NFL Hall of Fame
Game, Enshrinement and Concert for Legends during the annual Pro Football Hall of Fame Enshrinement Week. In 2016, HOF Village opened
the Sports Complex, which will consist of eight full-sized, multi-use regulation football fields, five of which have been completed in
Phase I. The facility hosts camps and tournaments for football players, as well as athletes from across the country in other sports such
as lacrosse, rugby and soccer. In 2017, HOF Village formed a sports and entertainment media company, Hall of Fame Village Media, leveraging
the sport of professional football to produce exclusive programming by licensing the extensive content controlled by the PFHOF as well
as new programming assets developed from live events such as youth tournaments, camps and sporting events held at the Sports Complex and
the Tom Benson Hall of Fame Stadium.
We are developing new hospitality, attraction
and corporate assets surrounding the Pro Football Hall of Fame Museum as part of our Phase II development plan. Phase II plans for future
components of the Hall of Fame Village powered by Johnson Controls include two hotels (one on campus and one in downtown Canton that opened
in November 2020), the Hall of Fame Indoor Waterpark, the Constellation Center for Excellence (an office building including retail and
meeting space, that opened in October 2021), the Center for Performance (a convention center/field house), the Play Action Plaza, and
the Hall of Fame Retail Promenade. We are pursuing a differentiation strategy across three pillars, including destination-based assets,
the Media Company, and gaming (including the fantasy football league we acquired a majority stake in 2020). Phase III expansion plans
may include a potential mix of residential space, additional attractions, entertainment, dining, merchandise and more.
Corporate History
and Background
The Hall of Fame Resort & Entertainment Company
(formerly known as GPAQ Acquisition Holdings, Inc.) was incorporated in Delaware on August 29, 2019 as a subsidiary of Gordon Pointe Acquisition
Corp. (“GPAQ”), a special purpose acquisition company formed for the purpose of effecting a merger, capital stock exchange,
asset acquisition, stock purchase or other similar business combination with one or more businesses or assets.
On July 1, 2020, we consummated the 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 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 in this Annual Report on Form 10-K
as the “Business Combination.”
Upon the consummation of the Business Combination:
(i) Acquiror Merger Sub merged with and into GPAQ, with GPAQ continuing as the surviving entity (the “Acquiror Merger”) and
(ii) Company Merger Sub merged with and into Newco, with Newco continuing as the surviving entity (the “Company Merger”).
In advance of the Company Merger, HOF Village transferred all of its assets, liabilities and obligations to Newco pursuant to a contribution
agreement. In connection with the closing of the Business Combination, the Company changed its name from “GPAQ Acquisition Holdings,
Inc.” to “Hall of Fame Resort & Entertainment Company.” As a result of the Business Combination, GPAQ and Newco
continue as our wholly owned subsidiaries.
In connection with the consummation of the Business
Combination and pursuant to the Merger Agreement: (a) each issued and outstanding unit of GPAQ, if not already detached, was detached
and each holder of such a unit was deemed to hold one share of GPAQ Class A common stock and one GPAQ warrant (“GPAQ Warrant”),
(b) each issued and outstanding share of GPAQ Class A common stock (excluding any shares held by a GPAQ stockholder that elected to have
its shares redeemed pursuant to GPAQ’s organizational documents) was converted automatically into the right to receive 1.421333
shares of our Common Stock, following which all shares of GPAQ Class A common stock ceased to be outstanding and were automatically canceled
and cease to exist; (c) each issued and outstanding share of GPAQ Class F common stock was converted automatically into the right to receive
one share of Common Stock, following which all shares of GPAQ Class F common stock ceased to be outstanding and were automatically canceled
and cease to exist; (d) each issued and outstanding GPAQ Warrant (including GPAQ private placement warrants) was automatically converted
into one Warrant (which we refer to in this Annual Report on Form 10-K as a “Series A Warrant”) to purchase 1.421333 shares
of Common Stock per warrant, following which all GPAQ Warrants ceased to be outstanding and were automatically canceled and retired and
cease to exist; and (e) each issued and outstanding membership interest in Newco converted automatically into the right to receive a pro
rata portion of the Company Merger Consideration (as defined in the Merger Agreement), which was payable in shares of Common Stock.
The rights of holders of our Common Stock and
Series A Warrants are governed by our amended and restated certificate of incorporation (the “Certificate of Incorporation”),
our amended and restated bylaws (the “Bylaws’) and the Delaware General Corporation Law (the “DGCL”), and in the
case of our Series A Warrants, the Warrant Agreement, dated January 24, 2018, between GPAQ and the Continental Stock Transfer & Trust
Company. On November 3, 2020, our stockholders approved an amendment to our Certificate of Incorporation to increase the number of authorized
shares of our Common Stock from 100,000,000 to 300,000,000.
Upon consummation of the Business Combination
and, in connection therewith, we became a successor issuer to GPAQ by operation of Rule 12g-3(a) promulgated under the Securities Exchange
Act of 1934, as amended (the “Exchange Act”).
Business Strategy
Our unique position and multimedia approach makes
us the only company of our kind fully poised to capitalize on the popularity of professional football, one of the most popular brands
in sports (as measured by total league revenue and number of fans). Our principal business objectives are to successfully develop and
operate destination based assets such as the Hall of Fame Village powered by Johnson Controls as a premiere destination resort and entertainment
company leveraging the expansive popularity of professional football and PFHOF; Hall of Fame Village Media taking advantage of direct
access to exclusive content; and a gaming vertical including fantasy sports, and potential growth across eGaming and sports betting. The
resort and entertainment platform will significantly extend the presence of PFHOF, the singular institution focused on promoting and preserving
the legends and values of professional football. We are located in Canton, Ohio, the birthplace of American professional football. It
is in a market area with limited themed attractions and within an 8-hour driving distance to nearly half of the NFL franchises. Together
with the PFHOF, we intend to become an elite entertainment venue and premier attraction for the region. The current operational assets
of the PFHOF and the Company currently attract approximately two million visitors annually.
We are building a year-round, multi-use destination
complex with a master development plan that calls for the three phases described in greater detail below. Phase I, substantially complete,
includes the Tom Benson Hall of Fame Stadium, the Sports Complex, Hall of Fame Village Media, and complementary, long-term sponsorship
agreements, as well as land and infrastructure to support Phase II and Phase III. Phase II, already begun, will add the Hall of Fame Indoor
Waterpark, hotels as well as additional attractions, retail and commercial assets. Phase III expansion plans may include a potential mix
of residential space, additional attractions, entertainment, dining, merchandise and more.
Strategic Relationship with PFHOF
PFHOF is a distinct entity from the Company but
serves as a significant shareholder and aligned partner. The Pro Football Hall of Fame Museum (the “Museum”), which is owned
and operated by PFHOF and not the Company, is a 501(c)(3) not-for-profit educational institution that focuses on the education, promotion,
preservation and honoring of the individuals and moments that shaped professional football’s history. Since opening in 1963, the
Museum has grown in both size and stature. The building was expanded in 1971, 1978 and 1995, and completed major exhibit gallery renovations
in 2003, 2008, and 2009. Together, these improvements have transformed the original 19,000 square-foot Museum into an exciting internationally
recognized institution and travel destination. The “Future 50” Expansion & Renovation Project has expanded the museum
to 118,000 square feet. The two-year, $27 million project was completed in the summer of 2013 after a major renovation to 38,000 square
feet of Museum space was finished. Today, the Museum stands as a shining tribute to the over 300 men who have earned their Gold Jackets
and made professional football America’s most popular sport. The Museum and the Gold Jacket inductees serve as unique and valuable
partners that contribute to the development of the Hall of Fame Village powered by Johnson Controls.
See the section entitled “Risk Factors
– The success of our business is substantially dependent upon the continued success of the PFHOF brand and museum experience and
our ability to continue to secure favorable contracts with and maintain a good working relationship with PFHOF and its management team”
for additional information relating to the relationship with PFHOF.
About Phase I
We have invested approximately $250 million of
capital to build Phase I of the Hall of Fame Village powered by Johnson Controls in preparation for Phase II and Phase III. Phase I, substantially
complete, includes the Tom Benson Hall of Fame Stadium, the Sports Complex, Hall of Fame Village Media, complementary, long-term sponsorship
agreements, as well as land and infrastructure to support Phase II and Phase III. We are executing strategies to significantly increase
programming of the Tom Benson Hall of Fame Stadium and Sports Complex and developing unique media content through Hall of Fame Village
Media.
Tom Benson Hall of Fame Stadium
The Tom Benson Hall of Fame Stadium holds up to
approximately 23,000 spectators and hosts the annual Pro Football Hall of Fame Enshrinement Week powered by Johnson Controls as well as
other premier sporting events such as the Historic Black College Hall of Fame Game, and the Ohio State High School Football Championships.
During the Pro Football Hall of Fame Enshrinement Week, the Tom Benson Hall of Fame Stadium hosts the Hall of Fame Game, the first nationally
televised NFL game of the pre-season, and the Hall of Fame Enshrinement. The Tom Benson Hall of Fame Stadium is also equipped with cut-away
seats, allowing it to serve as an elite concert venue. The Tom Benson Hall of Fame Stadium has hosted performances by national recording
artists such as Aerosmith, Tim McGraw, Pitbull, Toby Keith and Maroon 5.
Sports Complex
The Sports Complex will consist of eight full
sized fields, five of which are completed (four turf fields and one grass field) and three of which are in the process of construction
as part of Phase II. The facility hosts camps and tournaments for football players as well as athletes from other sports such as lacrosse,
rugby and soccer from across the country.
Hall of Fame Village Media
In 2017, HOF Village formed a sports and entertainment
media company, Hall of Fame Village Media, leveraging the sport of professional football to produce exclusive content, including content
developed from live events such as tournaments, camps and sporting events held at the Sports Complex and the Tom Benson Hall of Fame Stadium.
Hall of Fame Village Media has the ability to develop multiple media formats including full length feature films, live and taped television
specials, studio shows, live sports events, books and artwork. Through our partnership with the PFHOF, Hall of Fame Village Media has
access to over 50 million pieces of photo, video and document archives. To date, Hall of Fame Village Media has produced broadcasts for
the World Youth Football Championships aired on CBS, National Signing Day, during which top high school athletes announce their college
commitments and is in the initial stages of producing six different sports related shows. Future live content is also expected to include
programming with the NFL Alumni Association, including the NFL Alumni Academy taking part on the Hall of Fame Village powered by Johnson
Controls campus in Canton, Ohio.
In 2021, Hall of Fame Village Media began developing
and selling Non-Fungible Tokens (“NFTs”), focused on highlighting memorable plays of the college and professional careers
of six legendary athletes.
In 2021, Hall of Fame Village Media co-produced
the World Chase Tag primetime special on ESPN, which was also hosted at the Hall of Fame Village.
Sponsorship Agreements
We are bringing together world-class sponsors
and partners. To date, we have struck formal agreements related to sponsorship alliances for development support from best-in-class companies,
including Johnson Controls, the founding partner and official naming rights partner, Constellation NewEnergy, Inc. (an Exelon Company),
the official energy partner, First Data Merchant Services, LLC (now Fiserv), the official processing and payment solutions partner, Forever
Lawn, the official artificial turf partner, Republic Services of Ohio, LLC, the preferred waste and recycling partner, Commscope, the
official data communications networking partner, and Cleveland Clinic, the official health care provider of the Sports Complex and the
Tom Benson Hall of Fame Stadium.
Generally, under the terms of our sponsorship
agreements, we will receive a fixed amount of revenue each year in exchange for granting certain rights to the relevant sponsor. The
revenue may consist of a combination of cash, in-kind and/or activation funds. However, in some cases, the sponsorship fee may consist
of a fixed initial payment with variable annual payments thereafter, based on our completion of certain projects or fulfillment of certain
requirements.
Under the terms of the Naming Rights Agreement
(as defined below), we will receive a fixed amount of revenue each year in return for granting to Johnson Controls, Inc. (“JCI”
or “Johnson Controls”) exclusive rights to designate the name of the destination complex as well as granting to Johnson Controls
certain branding, signage, advertising and similar rights. The Naming Rights Agreement is scheduled to expire on December 31, 2034, subject
to certain termination rights discussed below under “Item 1A. Risk Factors – Risks Related to our Business – We rely
on sponsorship contracts to generate revenues.” We are obligated to spend $18 million as activation expenses for the benefit of
promoting the Johnson Controls and our brands.
Under the terms of the Constellation Sponsorship
Agreement (as defined below), we will receive a fixed amount of revenue each year in return for granting Constellation (as defined below)
exclusive rights to designate the name of the Constellation Center for Excellence as well as granting Constellation certain branding,
signage, advertising and similar rights. The Constellation Sponsorship Agreement is scheduled to expire on December 31, 2029. The annual
revenue consists of sponsorship fees and annual activation fund proceeds. Activation fund proceeds may be used for a media plan, hospitality
packages, business development and other expenses for the benefit of promoting the Constellation brand and our brands. Annual activation
fund proceeds must be used in a particular calendar year, and any unused funds are not rolled into future contract years.
See the section entitled “Risk Factors
— We rely on sponsorship contracts to generate revenue” for additional terms and conditions relating to the Naming Rights
Agreement and the Constellation Sponsorship Agreement.
About Phase II
Phase II is expected to add additional strategic
attractions, hospitality, and corporate assets in a well-planned and synergistic manner intended to increase consumer appeal and drive
revenue and profitability growth. The Company has made material progress toward the full execution of Phase II.
To date, either through ground leases, purchase
agreements, or through acquisition of title, the Company has acquired all land and received zoning approval from the City of Canton for
the development of Phase II. In 2016 and 2017, the Company received significant support from the City of Canton through a pair of ordinances.
In June 2016, the Planning Commission of the City of Canton amended the Planning and Zoning Code of Codified Ordinances of the City of
Canton to include the Hall of Fame Village District, providing us with a zoning mechanism required to implement our mixed-use development
plan. In February 2017, the Planning Commission of the City of Canton and City Council granted approval of the Hall of Fame Village Development
plan, including plans for Phase II. The Company has gained control of over 200 parcels of land surrounding the Tom Benson Hall of Fame
Stadium, Sports Complex, and the Museum for the future development of the Hall of Fame Indoor Waterpark, on-campus hotel attached to the
Hall of Fame Indoor Waterpark, and a retail promenade offering a variety of food and beverage options, as well as other specialized entertainment
alternatives. The Company has commissioned and completed three separate Phase I Environmental Site Assessments on land underlying the
Tom Benson Hall of Fame Stadium, Sports Complex and residential land acquired for Phase II of the development plan. To date, no recognized
environmental conditions have been revealed.
In addition, the Company has made significant
progress in the design and construction of Phase II. Phase II is projected to cost approximately $330 million in capital spending. Construction
began in 2020 and all components of Phase II are expected to be complete and operational by the end of the fourth quarter of 2023. In 2018, the Company
added significantly to its construction and planning resources with the goal of developing and delivering Company assets on time and on
budget.
The Company’s master general contractors
delivered schematic and design documents in March 2020. Required permits have been identified and are in the process of being secured.
The Company received a Guaranteed Maximum Price (“GMP”) commitment from its project management consultants and general contractors
in the first quarter of 2021. The GMP, along with the design and development work completed, will serve as critical elements in arranging
a construction loan to meet the proposed schedule. The strategic plan reflects the projected $330 million in capital spending, with a
construction loan/equity/public financing used to support this spending and any other costs associated with completion and the attractive
financial return characteristics of these assets.
In Phase II, the critical business strategies
are to drive further asset development, increased event programming, new alliance sponsorships, media development and explore additional
growth verticals:
| ● | Further
Asset Development: We are constructing additional assets in Phase II to attract and entertain
guests. We have acquired or entered into agreements to acquire all land needed for Phase
II development and have completed all of the design and development. In November 2020, HOF
Village, opened its DoubleTree by Hilton hotel. Additional assets will include the Hall of
Fame Indoor Waterpark, an on-campus hotel attached to the waterpark, and a retail promenade
offering a variety of food and beverage options, as well as other specialized entertainment
alternatives. In October 2021, we opened our Constellation Center for Excellence, which is
an office complex expanding the corporate appeal of HOF Village. There will also be a Center
for Performance to provide a variety of year-round programming options, including the NFL
Alumni Academy. A green space area which will be called Play-Action Plaza is expected to
provide 3.5 acres for fun, football-themed recreation, events, and formal gatherings. Future
destination-based assets may include live entertainment, gaming, dining, and more all over
the country alongside major NFL franchise cities. |
| ● | Increased
Event Programming: We are planning to utilize the Tom Benson Hall of Fame Stadium for
an expanded offering of live entertainment and events, including top performers, sporting
events and festival programming. Also, given the appeal and popularity of youth sports, additional
year-round programming is expected to be available across multiple sports utilizing the national
appeal of the Hall of Fame brand. HOF Village has made key strategic hires and partnerships
who will help drive increased Event Programming and Alliance Sponsorships. During 2022, we
will be hosting the USFL finals and semi-finals, along with a “Fatherhood Festival”
in June. There are also plans for multiple concerts, multi-day festivals, and on-going business
event productions. |
| ● | New
Alliance Sponsorships: We have been successful attracting a strong sponsorship base and plan
to continue to form significant partnerships with leading companies and brands across a range of untapped categories. These partnerships
are expected to be in the form of naming rights agreements or additional category-specific sponsorships. HOF Village plans to target a
number of industry verticals for additional sponsorship revenue, such as autos, telecom and beverages. |
| ● | Media
Development: We are developing original content from both our event programming
and its direct access to millions of pieces of historic professional football artifacts located within the PFHOF archive through Hall
of Fame Village Media. We are planning on producing full-length films, shows and other digital content marketing through multiple channels
of distribution. Already advanced discussions with media leaders, creative, development and distribution partners have occurred. In September
2020, we hired an Executive Vice President of Content Development/Distribution, who previously served in a similar capacity as our outside
consultant, to assess and identify market opportunities for content development, develop a business plan for the Media Company, identify
sources of new creative content, and engage in discussions with distributor channels to identify the types of content they are seeking.
We are working on expanding our team and partnerships and have a robust slate of new content in development. |
| ● | Hall
of Fame Village Gaming: eGaming is expected to be the connective tissue that integrates the
rest of the business units across the Company. This encompasses youth sports as a way to increase engagement, as well as gaming as a part
of offsite asset building and programming, purpose-driven physical destination resort locations, and broadcast/streaming gaming content
within media. We entered the high-growth vertical of fantasy sports with the launch of the Hall of Fantasy League in fall 2021, which
has completed its first season, with geo-based franchises professionally managed with ownership and influence from the public. There is
potential for industry expertise to be provided by experienced fantasy analysts, NFL Hall of Famers, and NFL Alumni. |
| ● | Sports
Betting: We recently announced online and onsite retail partnerships to take advantage
of sports betting. We are beginning to develop sports betting both online and on campus through
these recently announced partnerships in connection with legislation that recently legalized
sports betting in the State of Ohio, subject to obtaining the needed entity and individual
gaming licenses. We are poised to utilize existing brand partnerships with our newly rebranded
Hall of Fantasy League and eGaming, both of which we believe could be designed to accept
sports wagering. In March 2022, we hired an executive vice president of gaming to lead our gaming division. |
| ● | Exploring
Additional Growth Verticals: HOF Village has begun exploring additional growth verticals
as part of Phase II. There also are expected to be opportunities to consider expanding certain
destination-based assets in other geographic markets leveraging the popularity of professional
football. We have hired several additional full-time employees to actively research these
and other growth verticals. These Additional Growth Verticals are not included in the current
set of financial projections. |
About Phase III
With Phase I and Phase II assets providing a
solid foundation, growth is expected to continue with the development of Phase III, including a potential mix of residential space, and
additional attractions, entertainment, dining, merchandise and more. This next phase of development would potentially be initiated upon
substantial completion of Phase II. The financial performance of Phase III is not currently fully reflected in the financial projections
contained in this Annual Report on Form 10-K.
Competition
We currently face and will face competition in
each of our businesses, as follows:
| ● | Tom
Benson Hall of Fame Stadium, the Sports Complex and the planned Center for Performance will
compete with other facilities and venues across the region and country for hosting concerts,
athletic events (including professional sports events, sports camps and tournaments) and
other major conventions. |
| ● | Hall
of Fame Village Media will compete (i) with other media and content producers to obtain creative
and performing talent, sports and other programming content, story properties, advertiser
support, distribution channels and market share and (ii) for viewers with other broadcast,
cable and satellite services as well as with home entertainment products, new sources of
broadband and mobile delivered content and internet usage. |
| ● | The
Hall of Fame Indoor Waterpark, the Hall of Fame hotels and the retail promenade, if and when
completed, will compete with other theme parks and resorts, such as Cedar Point, located
in Sandusky, Ohio, and other retail and tourist destinations in Ohio and around
the country, and with other forms of entertainment, lodging, tourism and recreation activities. |
| ● | The
Constellation Center for Excellence and Fan Engagement Zone will compete for tenants with
other suppliers of commercial and/or retail space. |
| ● | Our
sports betting and e-gaming will compete with other sports betting providers attempting to
enter the Ohio sports betting market. |
Employees
As of March 14, 2022, we had 52 employees (45
full-time employees, 2 part-time employees, and 5 temporary interns) that perform various administrative, finance and accounting, event
planning, sports programming, media development, and corporate management functions for the Company and its subsidiaries.
Properties
We own real property in Canton, Ohio, at the site
of the Hall of Fame Village powered by Johnson Controls development. Certain parcels of real property on which the Hall of Fame Village
powered by Johnson Controls is located are owned by the City of Canton and the Canton City School District (Board of Education), and are
subject to long-term ground leases and agreements with us for the use and development of such property.
Emerging Growth Company and Smaller Reporting
Company
We are an “emerging growth company,”
as defined in Section 2(a) of the Securities Act of 1933, as amended (the “Securities Act”), as modified by the Jumpstart
Our Business Startups Act of 2012 (the “JOBS Act”), and we 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 our 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.
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 registration statement under the Securities Act declared effective or do not have a class of securities
registered under the Exchange Act) 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 an election to opt out is irrevocable. We have elected not to opt out of such extended transition period, which
means that when a standard is issued or revised and it has different application dates for public or private companies, we, 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 our financial statements with another public company, which is neither an emerging growth company nor an emerging growth
company that has opted out of using the extended transition period, difficult or impossible because of the potential differences in accounting
standards used.
We will remain an emerging growth company until
the earlier of: (1) the last day of the fiscal year (a) following the fifth anniversary of the closing of the Company’s initial
public offering, (b) in which we have total annual revenue of at least $1.07 billion, or (c) in which we are deemed to be a large accelerated
filer, which means the market value of our common equity that is held by non-affiliates exceeds $700 million as of the end of the prior
fiscal year’s second fiscal quarter; and (2) the date on which we have issued more than $1.00 billion in non-convertible debt securities
during the prior three-year period. References herein to “emerging growth company” have the meaning associated with it in
the JOBS Act.
Additionally, we are a “smaller reporting
company” as defined in Item 10(f)(1) of Regulation S-K. Smaller reporting companies may take advantage of certain reduced disclosure
obligations, including, among other things, providing only two years of audited financial statements. We will remain a smaller reporting
company until the last day of any fiscal year for so long as either (1) the market value of our shares of Common Stock held by non-affiliates
did not equal or exceed $250 million as of the prior June 30, or (2) our annual revenues did not equal or exceed $100 million during
such completed fiscal year and the market value of our shares of Common Stock held by non-affiliates did not equal or exceed $700 million
as of the prior June 30.
The COVID-19 Pandemic
Since 2020, the world has been, and continues
to be, impacted by the novel coronavirus (COVID-19) pandemic. COVID-19 and the measures to prevent its spread impacted our business in
a number of ways, most significantly with regard to a reduction in the number of events and attendance at events at Tom Benson Hall of
Fame Stadium and Sports Complex, which negatively impacts our ability to sell sponsorships. Also, we opened our newly renovated DoubleTree
by Hilton in Canton in November 2020, but the occupancy rate has been negatively impacted by the COVID-19 pandemic. Further, the COVID-19
pandemic has caused a number of supply chain disruptions, which negatively impacts our ability to obtain the materials needed to complete
construction. The continued impact of these disruptions and the ongoing extent of their adverse impact on our financial and operating
results will be dictated by the length of time that such disruptions continue, which will, in turn, depend on the currently unknowable
duration and severity of the impacts of COVID-19, and among other things, the impact of governmental actions imposed in response to COVID-19
and individuals’ and companies’ risk tolerance regarding health matters going forward and developing strain mutations.
Recent Developments
Amendment
Number 6 to Term Loan
On March 1, 2022, CH
Capital Lending, LLC, which is an affiliate of our director Stuart Lichter (“CH Capital Lending”), purchased and acquired,
as administrative agent and lender, pursuant to an Assignment of Loan and Loan Documents (the “Assignment of Loan and Loan Documents”)
with Aquarian Credit Funding LLC (“Aquarian”), as existing administrative agent, and Investors Heritage Life Insurance Company
(“IHLIC”), as existing lender, our $7.4 million term loan (the “Term Loan”) and related loan documents under term
loan agreement, dated as of December 1, 2020 (as amended, the “Term Loan Agreement”)..
On March 1, 2022, immediately
after CH Capital Lending became the lender and administrative agent under the Term Loan Agreement, the Company entered into Amendment
Number 6 to Term Loan Agreement (“Amendment Number 6”) by and among the Company, Newco, and certain of Newco’s subsidiaries,
as borrowers, and CH Capital Lending, as administrative agent and lender. Under Amendment Number 6, the maturity date of the Term Loan
was extended to March 31, 2024. Also under Amendment Number 6, the Term Loan was made convertible into shares of the Company’s Common
Stock at a conversion price of $1.50, subject to adjustment. The conversion price is subject to a weighted-average antidilution adjustment.
Certain current and historical fees and expenses were added to the principal amount of the Term Loan. Amendment Number 6 increased the
interest rate from 10% to 12%. Of such 12% per annum interest: (i) 8% per annum is payable monthly and (ii) 4% per annum accumulates and
is payable on the maturity date.
As part of the consideration
for Amendment Number 6: (i) the Company issued in a transaction exempt from registration pursuant to Section 4(a)(2) of the Securities
Act: (A) 330,000 shares of Common Stock to CH Capital Lending, and (B) a Series E warrant to purchase 1,000,000 shares of Common Stock
to CH Capital Lending (the “Term Loan Warrants”), (ii) the Company shall, subject to approval of its board of directors, create
a series of preferred stock, to be known as 7.00% Series C Convertible Preferred Stock (“Series C Preferred Stock”), and,
upon the request of CH Capital Lending, exchange each share of the Company’s 7.00% Series B Convertible Preferred Stock, par value
$0.0001 per share (“Series B Preferred Stock”), that is held by CH Capital Lending for one share of Series C Preferred Stock,
and (iii) the Company and CH Capital Lending amended and restated the Series C Warrants and Series D Warrants that the Company issued
to CH Capital Lending to extend the term to March 1, 2027 and subject the exercise price to a weighted-average antidilution adjustment.
The Term Loan Warrants
have an exercise price of $1.50 per share, subject to adjustment. The exercise price is subject to a weighted-average antidilution adjustment.
The Term Loan Warrants may be exercised from and after March 1, 2023, subject to certain terms and conditions set forth in the Term Loan
Warrants. Unexercised Term Loan Warrants will expire on March 1, 2027. The Term Loan Warrants shall be cancelled without any further
action on the part of the Company or the holder, in the event that the Company repays in full on or before March 1, 2023, the Term Loan.
First Amended and Restated Promissory
Note with IRG, LLC
On November 23, 2021,
the Company issued to Industrial Realty Group, LLC (“Original Lender”) a promissory note in the original principal amount
of $8,500,000 (the “Original Note”). Pursuant to an Assignment of Promissory Note, dated March 1, 2022, Original Lender assigned
(a) a one-half (½) interest in the Original Note to IRG, LLC (the “IRG Split Note”) and (b) a one-half (½)
interest in the Original Note to JKP Financial, LLC (the “JKP Split Note”).
On March 1, 2022, the
Company entered into a First Amended and Restated Promissory Note with IRG, LLC, which amends and restates the IRG Split Note (the “Amended
Assigned IRG Note”). The Amended Assigned IRG Note extended the maturity to March 31, 2024. Under the Amended Assigned IRG Note,
the principal and accrued interest are convertible into shares of Common Stock at a conversion price of $1.50, subject to adjustment.
The conversion price is subject to a weighted-average antidilution adjustment.
As part of the consideration
for the Amended Assigned IRG Note, the Company issued in a transaction exempt from registration pursuant to Section 4(a)(2) of the Securities
Act: (i) 125,000 shares of Common Stock to IRG, LLC, and (ii) a Series E Warrant to purchase 500,000 shares of Common Stock to IRG, LLC
(the “IRG Split Note Warrants”).
The IRG Split Note Warrants
have an exercise price of $1.50 per share, subject to adjustment. The exercise price is subject to a weighted-average antidilution adjustment.
The IRG Split Note Warrants may be exercised from and after March 1, 2023, subject to certain terms and conditions set forth in the IRG
Split Note Warrants. Unexercised IRG Split Note Warrants will expire on March 1, 2027. The IRG Split Note Warrants shall be cancelled
without any further action on the part of the Company or the holder, in the event that the Company repays in full, on or before March
1, 2023, the Amended Assigned IRG Note.
First Amended and Restated Promissory
Note with JKP Financial, LLC
On March 1, 2022, the
Company entered into a First Amended and Restated Promissory Note with JKP Financial, LLC, which amends and restates the JKP Split Note
(the “Amended Assigned JKP Note”). The Amended Assigned JKP Note extended the maturity to March 31, 2024. Under the Amended
Assigned JKP Note, the principal and accrued interest are convertible into shares of Common Stock at a conversion price of $1.09, subject
to adjustment. The conversion price is subject to a weighted-average antidilution adjustment.
As part of the consideration
for the Amended Assigned JKP Note, the Company issued in a transaction exempt from registration pursuant to Section 4(a)(2) of the Securities
Act: (i) 125,000 shares of Common Stock to JKP Financial, LLC, and (ii) a Series F Warrant to purchase 500,000 shares of Common Stock
to JKP Financial, LLC (the “JKP Split Note Warrants”).
The JKP Split Note Warrants
have an exercise price of $1.09 per share, subject to adjustment. The exercise price is subject to a weighted-average antidilution adjustment.
The JKP Split Note Warrants may be exercised from and after March 1, 2022, subject to certain terms and conditions set forth in the JKP
Split Note Warrants. Unexercised JKP Split Note Warrants will expire on March 1, 2027.
Second Amendment
to JKP Promissory Note
On March 1, 2022, the
Company entered into the Joinder and Second Amendment to Secured Cognovit Promissory Note (the “Second Amendment to JKP Promissory
Note”), by and among (a) Newco, and HOF Village Hotel II, LLC (“Hotel II”), the makers (b) the Company; and (c) JKP
Financial, LLC, which amends the Secured Cognovit Promissory Note, dated as of June 19, 2020, originally executed by Hotel II and by HOF
Village, in favor of JKP Financial, LLC, as assigned by HOF Village to Newco pursuant to that certain Contribution Agreement dated as
of June 30, 2020, by and between HOF Village and Newco, and as amended by that certain First Amendment to Secured Promissory Note, dated
as of December 1, 2020 (as so assigned and amended, the “JKP Promissory Note”).
The Second Amendment
to JKP Promissory Note (i) revises the outstanding principal balance (the “JKP Promissory Loan”) of the JKP Promissory Note
to include interest thereunder that has accrued and has not been paid as of March 1, 2022, and (ii) extends the maturity of the JKP Promissory
Note to March 31, 2024. The Second Amendment to JKP Promissory Note amends the JKP Promissory Note to be convertible into shares of Common
Stock at a conversion price of $1.09, subject to adjustment. The conversion price is subject to a weighted-average antidilution adjustment.
As part of the consideration
for the Second Amendment to JKP Promissory Note, the Company issued in a transaction exempt from registration pursuant to Section 4(a)(2)
of the Securities Act: (i) 280,000 shares of Common Stock to JKP Financial, LLC, and (ii) a Series F Warrant to purchase 1,000,000 shares
of Common Stock to JKP Financial, LLC (the “JKP Promissory Note Warrants”).
JKP Promissory Note Warrants
The JKP Promissory Note
Warrants have an exercise price of $1.09 per share, subject to adjustment. The exercise price is subject to a weighted-average antidilution
adjustment. The JKP Promissory Note Warrants may be exercised from and after March 1, 2022, subject to certain terms and conditions set
forth in the JKP Promissory Note Warrants. Unexercised JKP Promissory Note Warrants will expire on March 1, 2027.
Letter Agreement
On March 1, 2022, the
Company entered into a letter agreement with Stuart Lichter (the “Letter Agreement”), pursuant to which, when Mr. Lichter
provides a guaranty for a new loan up to $4 million (the “New Loan”), the Company will issue to Mr. Lichter in a transaction
exempt from registration pursuant to Section 4(a)(2) of the Securities Act, (i) 125,000 shares of Common Stock, and (ii) a Series G Warrant
to purchase 125,000 shares of Common Stock (the “Letter Agreement Warrants”). The exercise price of the Letter Agreement Warrants
will be set in connection with the closing of the New Loan. The exercise price of the Letter Agreement Warrants is subject to a weighted-average
antidilution adjustment.
Registration
Rights Agreement
On March 1, 2022, the
Company entered into a registration rights agreement (the “Registration Rights Agreement”) with CH Capital Lending, IRG, LLC,
JKP Financial, LLC and Stuart Lichter (the “Investors”), pursuant to which, the Company agreed to provide to the Investors
certain customary resale registration rights with respect to (i) Commitment Fee Shares, (ii) the shares of Common Stock issuable upon
exercise of the Term Loan Warrants, the IRG Split Note Warrants, the JKP Split Note Warrants, the JKP Promissory Note Warrants, and the
Letter Agreement Warrants, (iii) the shares of Common Stock issuable upon conversion of the principal and accumulated but unpaid interest
under the Term Loan Agreement, the Amended Assigned IRG Note, the Amended Assigned JKP Note, and the JKP Promissory Note, and (iv) the
shares of Common Stock issuable upon conversion of the Series C Preferred Stock.
Nasdaq 19.99%
Cap
Notwithstanding anything
to the contrary contained in the March 1, 2022 transaction documents described above (the “Transaction Documents”), as set
forth in the Transaction Documents, the total cumulative number of shares of Common Stock that may be issued to CH Capital Lending, LLC,
IRG, LLC, JKP Financial, LLC and Stuart Lichter under the other Transaction Documents 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).
If the number of shares of Common Stock issued to CH Capital Lending, LLC, IRG, LLC, JKP Financial, LLC and Stuart Lichter under the Transaction
Documents reaches the Nasdaq 19.99% Cap, so as not to violate the 20% limit established in Listing Rule 5635(d), the Company, at its election,
will use reasonable commercial efforts to obtain stockholder approval of the Transaction Documents and the shares of Common Stock to be
issued thereunder, if necessary, in accordance with the requirements of Nasdaq Listing Rule 5635(d) (the “Approval”).
In connection with the
execution of Amendment Number 6, Amended Assigned IRG Note, Amended Assigned JKP Note, and Second Amendment to JKP Promissory Note, the
Company paid customary fees and expenses.
MKG DoubleTree Loan Extension
On March 1, 2022, Hotel II entered into First
Amendment to Loan Documents (“First Amendment to Construction Loan”) with Stuart Lichter, as guarantor, and ErieBank. First
Amendment to Construction Loan amended the Construction Loan Agreement dated September 14, 2020 to extend the maturity to September 13,
2023.
ATM Proceeds
From January 1 through March 14, 2022, the Company
sold 8,984,968 shares of Common Stock under its at-the-market offering program, raising net proceeds of approximately $10.2 million. See
“Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital
Resources” for a discussion of sales under the Company’s at-the-market offering program for the year ended December 31, 2021.
Item 1A. Risk Factors
Certain factors may have a material adverse effect
on our business, financial condition and results of operations. You should carefully consider the risks described below, in addition
to other information contained in this Annual Report on Form 10-K, including our financial statements and related notes. If any of these
risks and uncertainties actually occur, our business, financial condition and results of operations may be materially adversely affected.
As a result, the market price of our securities could decline, and you could lose all or part of your investment. Additionally, the risks
and uncertainties described in this Annual Report on Form 10-K are not the only risks and uncertainties that we face. Additional risks
and uncertainties not presently known to us or that we currently believe to be immaterial may become material and adversely affect our
business, financial condition and results of operations.
Unless the context otherwise indicates or requires,
as used in this section, the term “HOF Village” shall refer to HOF Village, LLC prior to the Business Combination and Newco
following the consummation of the Business Combination.
Summary of Risk Factors
Our business is subject to a number of risks,
including risks that may prevent us from achieving our business objectives or may adversely affect our business and financial performance.
These risks are discussed more fully below and include, but are not limited to, the following:
| ● | We
are an early stage company with a minimal track record and limited historical financial information
available. |
| ● | Our
ability to implement our proposed business strategy may be materially and adversely affected
by many known and unknown factors. |
| ● | The
success of our business is substantially dependent upon the continued success of the PFHOF
brand and our ability to continue to secure favorable contracts with and maintain a good
working relationship with PFHOF and its management team. |
| ● | Hall
of Fame Resort & Entertainment Company will operate in highly competitive industries
and our revenues, profits or market share could be harmed if we are unable to compete effectively. |
| ● | Our
planned sports betting, fantasy sports and eSports operations and the growth prospects and
marketability of such operations are subject to a variety of U.S. and foreign laws, many
of which are unsettled and still developing and which could subject us to claims or otherwise
harm our business. |
| ● | Changes
in consumer tastes and preferences for sports and entertainment products, including fantasy
sports, sports betting and eSports, or declines in discretionary consumer spending, consumer
confidence and general and regional economic conditions could reduce demand for our offerings
and products and adversely affect the profitability of our business |
| ● | We
are dependent on our management team, and the loss of one or more key employees could harm
our business and prevent us from implementing our business plan in a timely manner. |
| ● | The
high fixed cost structure of the Company’s operations may result in significantly lower
margins if revenues decline. |
| ● | The
COVID-19 pandemic could continue to have a material adverse effect on our business. |
| ● | Cyber
security risks and the failure to maintain the integrity of internal or guest data could
result in damages to our reputation, the disruption of operations and/or subject us to costs,
fines or lawsuits. |
| ● | The
suspension or termination of, or the failure to obtain, any business or other licenses may
have a negative impact on our business. |
| ● | We
will have to increase leverage to develop the Company, which could further exacerbate the
risks associated with our substantial indebtedness, and we may not be able to generate sufficient
cash flow from operations to service all of our indebtedness and may be forced to take other
actions to satisfy our obligations under our indebtedness, which may not be successful. |
| ● | We
currently do not intend to pay dividends on our Common Stock. Consequently, your ability
to achieve a return on your investment will depend on appreciation in the price of our Common
Stock. |
| ● | Our
Series A Warrants, Series B Warrants, and Series C Warrants are accounted for as liabilities
and the changes in value of such warrants could have a material effect on our financial statements. |
| ● | Our Certificate of Incorporation allows for our board of directors to create new series of preferred stock without further approval
by our stockholders, which could adversely affect the rights of the holders of our Common Stock. |
| ● | We currently have outstanding, and we may in the future issue, instruments which are exercisable for or convertible into shares of
Common Stock, which will result in dilution of our Common Stock. |
| ● | Antidilution provisions in certain of our convertible debt instruments may result in a reduction of the conversion price, which would
result in additional dilution of our Common Stock. |
| ● | Our Common Stock may be delisted from the Nasdaq Capital Market if we cannot satisfy Nasdaq’s continued listing requirements. |
| ● | The
trading price of our securities has been, and likely will continue to be, volatile and you
could lose all or part of your investment. |
| ● | We
may be required to take write-downs or write-offs, restructuring and impairment or other
charges that could have a significant negative effect on our financial condition, results
of operations and our stock price, which could cause you to lose some or all of your investment. |
Risks Related to Our Business
We are an early
stage company with a minimal track record and limited historical financial information available.
HOF Village was formed
as a limited liability company on December 16, 2015 by certain affiliates of Industrial Realty Group and a subsidiary of PFHOF, to own
and operate the Hall of Fame Village powered by Johnson Controls in Canton, Ohio, as a premiere destination resort and entertainment company
leveraging the expansive popularity of professional football and the PFHOF. As a result of the Business Combination, HOF Village became
our wholly owned subsidiary. As of the date hereof, the Hall of Fame Village powered by Johnson Controls has, with respect to Phase I,
and will have, with respect to Phases II and III the following major components:
Phase
I:
| |
● |
Tom Benson Hall of Fame
Stadium |
| |
● |
Hall of Fame Village Sports
Complex |
| |
● |
Hall of Fame Village Media |
Phase
II:
| |
● |
Hall of Fame Indoor Waterpark
(“Hall of Fame Indoor Waterpark”) |
| |
● |
Two hotels (one on campus
and one in downtown Canton about five minutes from campus) |
| |
● |
Constellation Center for
Excellence (Office Building, Retail and Meeting Space) |
| |
● |
Center for Performance
(Field House and Convention Center) |
| |
● |
Retail promenade (Fan Engagement
Zone) |
| |
● |
Play Action Plaza (Green
space for recreation, events and informal gatherings) |
| |
● |
Hall of Fantasy League
(Fantasy Football) |
Phase
III:
| |
● |
Entertainment, dining,
merchandise and more |
The components in Phase
I are substantially complete, and of Phase II, the DoubleTree by Hilton Canton Hotel opened in November 2020 and the Center for Excellence
opened in October 2021. To date the remaining components of Phase II are in the construction stage and Phase III is still in the planning
stage and has not commenced operations or generated any revenue. The components of the Hall of Fame Village powered by Johnson Controls
that have been developed in Phase I have limited operating history and business track record. In addition, our business strategy is broad
and may be subject to significant modifications in the future. Our current strategy may not be successful, and if not successful, we may
be unable to modify it in a timely and successful manner. A company with this extent of operations still in the development and planning
stage is highly speculative and subject to an unusually high degree of risk.
Because we are in the
early stages of executing our business strategy, we cannot provide assurance that, or when, we will be profitable. We will need to make
significant investments and expect to incur significant expenses to develop and operate the Hall of Fame Village powered by Johnson Controls,
including costs for entertainment, talent fees, marketing, salaries and maintenance of properties and equipment. We expect to incur significant
capital, operational and marketing expenses for a several years in connection with our planned Phase II and III expansion. Any failure
to achieve or sustain profitability may have a material adverse impact on the value of the shares of our Common Stock.
Our ability to
implement our proposed business strategy may be materially and adversely affected by many known and unknown factors.
Our business strategy
relies upon our future ability to successfully develop and operate the Hall of Fame Village powered by Johnson Controls as well as our
other business verticals. Our strategy assumes that we will be able to, among other things: secure sufficient capital to repay our indebtedness;
continue to lease or to acquire additional property in Canton, Ohio at attractive prices and develop such property into efficient and
profitable operations; and maintain our relationships with key partners, including PFHOF, the general contractors for the Hall of Fame
Village powered by Johnson Controls, and various other design firms, technology consultants, managers and operators and vendors that
we are relying on for the successful development and operation of the Hall of Fame Village powered by Johnson Controls, as well as to
develop new relationships and partnerships with third parties that will be necessary for the success of the Hall of Fame Village powered
by Johnson Controls. These assumptions, which are critical to our prospects for success, are subject to significant economic, competitive,
regulatory and operational uncertainties, contingencies and risks, many of which are beyond our control. These uncertainties are particularly
heightened by the fact that we have significantly limited historical financial results or data on which financial projections might be
based.
Our future ability to execute our business strategy
and develop the various components of the Hall of Fame Village powered by Johnson Controls is uncertain, and it can be expected that
one or more of our assumptions will prove to be incorrect and that we will face unanticipated events and circumstances that may adversely
affect our proposed business. Any one or more of the following factors, or other factors which may be beyond our control, may have a
material adverse effect on our ability to implement our proposed strategy:
| |
● |
the impact of the COVID-19 pandemic involving the novel strain of coronavirus, COVID-19, governmental reactions thereto, and economic conditions resulting from such governmental reactions to the pandemic on our business strategy, operations, financial results, as well as on our future ability to access debt or equity financing; |
| ● | inability
to complete development and construction on schedule, on budget or otherwise in a timely
and cost-effective manner; |
| ● | issues
impacting the brands of the PFHOF or the NFL Alumni Association or the NFL; |
| ● | inability
to secure and maintain relationships and sponsorships with key partners, or a failure by
key partners to fulfill their obligations; |
| ● | failure
to manage rapidly expanding operations in the projected time frame; |
| ● | our
or our partners’ ability to provide innovative entertainment that competes favorably
against other entertainment parks and similar enterprises on the basis of price, quality,
design, appeal, reliability and performance; |
| ● | increases
in operating costs, including capital improvements, insurance premiums, general taxes, real
estate taxes and utilities, affecting our profit margins; |
| ● | general
economic, political and business conditions in the United States and, in particular, in the
Midwest and the geographic area around Canton, Ohio; |
| ● | inflation,
appreciation of the real estate and fluctuations in interest rates; or |
| ● | existing
and future governmental laws and regulations, including changes in our ability to use or
receive Tourism Development District (“TDD”) funds, tax-increment financing (“TIF”)
funds or other state and local grants and tax credits (including Ohio Film Tax Credits). |
We are relying
on various forms of public financing and public debt to finance the Company.
We currently expect
to obtain a portion of the capital required for the development and operations of the Hall of Fame Village powered by Johnson Controls
from various forms of public financing and public debt, including TDD funds, TIF funds, state and local grants and tax credits, which
depend, in part, on factors outside of our control. The concept of a TDD was created under state law specifically for Canton, Ohio and
the Hall of Fame Village powered by Johnson Controls. Canton City Council was permitted to designate up to 600 acres as a TDD and to
approve the collection of additional taxes within that acreage to be used to foster tourism development. Canton City Council passed legislation
allowing the collection of a 5% admissions tax and an additional 2% gross receipts tax and agreed to give the revenue from its 3% municipal
lodging tax collected at any hotels built in the TDD to the Hall of Fame Village powered by Johnson Controls for 30 years. Our ability
to obtain funds from TDD depends on, among other things, ticket sales (including parking lots, garages, stadiums, auditoriums, museums,
athletic parks, swimming pools and theaters), wholesale, retail and some food sales within the TDD and revenues from our hotels within
the TDD. For TIF funds, the amount of property tax that a specific district generates is set at a base amount and as property values
increase, property tax growth above that base amount, net of property taxes retained by the school districts, can be used to fund redevelopment
projects within the district. Our ability to obtain TIF funds is dependent on the value of developed property in the specific district,
the collection of general property taxes from property owners in the specific district, the time it takes the tax assessor to update
the tax rolls and market interest rates at the time the tax increment bonds are issued.
If we are unable to
realize the expected benefits from these various forms of public financing and public debt, we may need to obtain alternative financing
through other means, including private transactions. If we are required to obtain alternative financing, such alternative financing may
not be available at all or may not be available in a timely manner or on terms substantially similar or as favorable to public financing
and public debt, which could significantly affect our ability to develop the Hall of Fame Village powered by Johnson Controls, increase
our cost of capital and have a material adverse effect on our results of operations, cash flows and financial position.
If we were to obtain
financing through private investment in public equity investments or other alternative financing, it could subject us to risks that,
if realized, would adversely affect us, including the following:
| ● | our
cash flows from operations could be insufficient to make required payments of principal of
and interest on any debt financing, and a failure to pay would likely result in acceleration
of such debt and could result in cross accelerations or cross defaults on other debt; |
| ● | such
debt may increase our vulnerability to adverse economic and industry conditions; |
| ● | to
the extent that we generate and use any cash flow from operations to make payments on such
debt, it will reduce our funds available for operations, development, capital expenditures
and future investment opportunities or other purposes; |
| ● | debt
covenants may limit our ability to borrow additional amounts, including for working capital,
capital expenditures, debt service requirements, executing our development plan and other
purposes; |
| ● | restrictive
debt covenants may limit our flexibility in operating our business, including limitations
on our ability to make certain investments; incur additional indebtedness; create certain
liens; incur obligations that restrict the ability of our subsidiaries to make payments to
us; consolidate, merge or transfer all or substantially all of our assets; or enter into
transactions with affiliates; and |
| ● | to
the extent that such debt bears interest at a variable rate, we would be exposed to the risk
of increased interest rates. |
We must retain
our key management personnel.
We aim to recruit the
most qualified candidates, and strive for a diverse and well-balanced workforce. We reward and support employees through competitive
pay, benefits, and perquisite programs that allow employees to thrive. If we are unable to retain the key management personnel at our
Company, the underlying business could suffer.
On March 9, 2022, the
Company announced the appointment of Benjamin J. Lee as the Chief Financial Officer of the Company, effective March 21, 2022. Mr. Lee
will succeed Jason Krom, who the Company previously announced resigned from the office of chief financial officer of the Company to pursue
other interests effective January 3, 2022. Mr. Krom provided consulting services to the Company for two months after the effective date
of his resignation to assist with the transition. John Van Buiten, Vice President of Accounting / Corporate Controller, is serving as
interim principal accounting officer and principal financial officer until the effective date of Mr. Lee’s appointment.
The success of
our business is substantially dependent upon the continued success of the PFHOF brand and museum experience and our ability to continue
to secure favorable contracts with and maintain a good working relationship with PFHOF and its management team.
PFHOF is a 501(c)(3)
not-for-profit organization that owns and operates the Museum in Canton, Ohio. We are geographically located adjacent to PFHOF, and the
local community and broader public generally view the Company and PFHOF as closely-connected affiliates. While PFHOF currently beneficially
owns approximately 6% of the Company’s outstanding Common Stock, the Company is neither a subsidiary of nor controlled by PFHOF.
PFHOF is a party to our Director Nominating Agreement, which among other things provides PFHOF with the right to designate one individual
to be appointed or nominated for election to the Company’s board of directors, subject to certain conditions. Our director, Ed Roth,
was designated by PFHOF pursuant to the Director Nominating Agreement.
We have entered into
several agreements with PFHOF that are of significance to our business, including: (i) a First Amended and Restated License Agreement,
dated September 16, 2019 (the “License Agreement”), (ii) an Amended and Restated Media License Agreement, dated July 1, 2020
(the “Media License Agreement”), and (iii) a Shared Services Agreements, dated June 30, 2020 and March 9, 2021 (the “Shared
Services Agreements”). These agreements address topics that include, but are not limited to, the following:
| ● | License
to use PFHOF marks. Under the License Agreement, PFHOF grants to our Company a non-transferable,
non-exclusive right and license to use PFHOF marks in conjunction with the Hall of Fame Village
complex (the “Village”), Legends Landing, any theme park, water park, theater,
sports arena, sports facility, hotel, sports bar, general or specific location-based entertainment,
youth sports programs (excluding certain NFL-sponsored youth sports programs) (“Exclusive
Fields of Use”). The license is exclusive for the Exclusive Fields of Use only within
the municipal boundary of the City of Canton, Ohio. Under the License Agreement, PFHOF agreed
that it will not grant any third party a license to use PFHOF marks outside of Canton, Ohio,
in connection with the themed entertainment industry without giving us a right of first refusal
to accept such third-party offer. In addition, the License Agreement provides that, subject
to certain exceptions, all communications with the National Football League (the “NFL”),
its 32 member clubs and its Hall of Famers must be made exclusively through PFHOF rather
than from the Company. Many of the Company’s events involve the participation of the
NFL’s Hall of Famers. The Company therefore must rely on PFHOF’s cooperation
and support to a significant extent in coordinating events and other activities involving
any of these parties. |
| ● | Sponsorships.
The License Agreement provides that PFHOF and our Company have the right to jointly seek
sponsorships from third parties in conjunction with the Village and to sublicense PFHOF marks
to such sponsors. The License Agreement provides that PFHOF and our Company have the right
to enter into exclusive sponsorships for their individually owned and operated assets. The
License Agreement provides that our Company and PFHOF will use their best efforts to coordinate
the marketing, sales and activation of sponsorships so as to maximize the revenue of both
organizations and minimize any potential negative impact to either organization. We and PFHOF
are both parties to sponsorship agreements that are important to our business, such as the
Naming Rights Agreement and the Constellation Sponsorship Agreement. We also rely on a collaborative
approach with PFHOF to pursue other joint sponsorship agreements with third parties. Our
success in obtaining those sponsorship agreements is highly dependent on the maintenance
of a good working relationship with PFHOF and its management team. In addition, once these
sponsorships are obtained, the Company must rely on PFHOF’s cooperation in performing
the obligations relating to PFHOF required by the sponsorship agreements. See “Risk
Factors – Risk Related to Our Business – We rely on sponsorship contracts to
generate revenues.” |
| ● | Use
of PFHOF media assets. The Media License Agreement provides for the sharing of media-related
opportunities between PFHOF and our Company and sets forth the terms under which PFHOF enables
our Company to exploit existing PFHOF works and create new works. Our ability to successfully
monetize PFHOF assets (e.g., photographs, videos, memorabilia and other historically significant
football-related assets) under the Media License Agreement depends upon PFHOF’s providing
access to such media assets as contemplated by the terms of the Media License Agreement. |
| ● | Shared
Services. Under the Shared Services Agreements, our Company and PFHOF agree to act in
good faith to coordinate with each other on certain services, including, without limitation,
community relations, government relations, marketing and public relations, new business development,
sponsorship activities and youth programming. Our success in these endeavors depends to a
significant extent on PFHOF’s cooperation in coordinating these services and events.. |
In the past, we have
had to renegotiate payment terms and other provisions in certain of our agreements with PFHOF as part of improving the Company’s
financial position. If we were to lose or be required to renegotiate any of these agreements or if PFHOF failed to perform any of these
agreements, our business may be adversely affected.
Changes in consumer tastes and preferences for sports and entertainment
products could reduce demand for our offerings and products and adversely affect the profitability of our business.
The success of our business
depends on our ability to consistently provide, maintain and expand attractions and events as well as create and distribute media programming,
virtual experiences and consumer products that meet changing consumer preferences. Consumers who are fans of professional football will
likely constitute a substantial majority of the attendance to Hall of Fame Village powered by Johnson Controls, and our success depends
in part on the continued popularity of professional football and on our ability to successfully predict and adapt to tastes and preferences
of this consumer group. If our sports and entertainment offerings and products do not achieve sufficient consumer acceptance or if consumer
preferences change or consumers are drawn to other spectator sports and entertainment options, our business, financial condition or results
of operations could be materially adversely affected. In the past, we have hosted major professional football events, as well as other
musical and live entertainment events, and we can provide no assurance that we will be able to continue to host such events.
Incidents or adverse
publicity concerning the Company, PFHOF, the NFL or the NFL Alumni Association could harm our reputation as well as negatively impact
our revenues and profitability.
Our reputation is an
important factor in the success of our business. Our ability to attract and retain consumers depends, in part, upon the external perceptions
of our Company, the brands we are associated with, the quality of Hall of Fame Village powered by Johnson Controls and its services and
our corporate and management integrity. If market recognition or the perception of the Company diminishes, there may be a material adverse
effect on our revenues, profits and cash flow. In addition, the operations of Hall of Fame Village powered by Johnson Controls, particularly
the Hall of Fame Indoor Waterpark, involve the risk of accidents, illnesses, environmental incidents and other incidents which may negatively
affect the perception of guest and employee safety, health, security and guest satisfaction and which could negatively impact our reputation,
reduce attendance at our facilities and negatively impact our business and results of operations.
We rely on sponsorship
contracts to generate revenues.
We will receive a portion
of our annual revenues from sponsorship agreements, including the amended and restated sponsorship and naming rights agreement, dated
as of July 2, 2020 (the “Naming Rights Agreement”), by and among HOF Village, PFHOF and Johnson Controls, the sponsorship
and services agreement, dated as of December 19, 2018, as amended (the “Constellation Sponsorship Agreement”), by and among
HOF Village, PFHOF and Constellation NewEnergy, Inc., a Delaware corporation (“Constellation”), and other sponsorship agreements
for various content, media and live events produced at Hall of Fame Village powered by Johnson Controls such as title, official product
and promotional partner sponsorships, billboards, signs and other media. We are continuously in negotiations with existing sponsors and
actively seeking new sponsors as there is significant competition for sponsorships. Some of our live events may not secure a title sponsor,
may not secure a sufficient number of sponsorships on favorable terms, or may not secure sponsorships sufficiently enough in advance
of an event, which may lead to event cancellations or otherwise adversely affect the revenue generated from such events.
The Naming Rights Agreement
is scheduled to expire on December 31, 2034, but provides termination rights both to (a) HOF Village and PFHOF and (b) Johnson Controls,
which may be exercised in the event the other party breaches any of its covenants and agreements under the Naming Rights Agreement beyond
certain notice and cure periods, applies for or consents to the appointment of a custodian of any kind with respect to all or substantially
all of its assets, becomes insolvent or is unable to pay its debts generally as they become due, makes a general assignment for the benefit
of its creditors, files a voluntary petition seeking relief under any bankruptcy law, or an involuntary petition is filed by a creditor
under any bankruptcy law and is approved by a court of competent jurisdiction. Additionally, Johnson Controls has a right to terminate
the Naming Rights Agreement if (i) we do not provide evidence to Johnson Controls by October 31, 2021, subject to day-for-day extension
due to force majeure, that we have secured sufficient debt and equity financing to complete Phase II, subject to a notice and cure period,
(ii) Phase II is not open for business by January 2, 2024 or (iii) HOF Village is in default beyond applicable notice and cure periods
under certain agreements, such as the Technology as a Service Agreement (the “TAAS Agreement”), any loan document evidencing
or securing any construction loan with respect to the Hall of Fame Village powered by Johnson Controls and any agreement with its general
contractor with respect to the construction of the Hall of Fame Village powered by Johnson Controls, among others. There can be no assurance
that Phase II will be open for business by January 2, 2024.
The Constellation Sponsorship
Agreement is scheduled to expire on December 31, 2029, but provides termination rights both to (a) HOF Village and PFHOF and (b) Constellation,
which may be exercised if a party would suffer material damage to its reputation by association with the other party or if there is an
event of default. An event of default under the Constellation Sponsorship Agreement includes a party’s failure to perform its material
obligations (which includes our failure to reach certain specified milestones in the construction of the Constellation Center for Excellence)
for 60 days after receiving written notice from the other party and failure to cure such default; a party’s becoming insolvent
or filing a voluntary petition in bankruptcy; a party’s being adjudged bankrupt; an involuntary petition under any bankruptcy or
insolvency law being filed against a party; a party’s sale, assignment or transfer of all or substantially all of its assets (other
than to an affiliate in the case of HOF Village or PFHOF). Additionally, Constellation has a right to terminate the Constellation Sponsorship
Agreement effective as of December 31, 2023 for failure to recover its investment in the form of new business, if it provides written
notice on or prior to December 1, 2022.
Loss of our existing
title sponsors or other major sponsorship agreements, including the Naming Rights Agreement and Constellation Sponsorship Agreement,
or failure to secure sponsorship agreements in the future on favorable terms, could have a material adverse effect on our business, financial
condition and results of operations.
We could be adversely
affected by declines in discretionary consumer spending, consumer confidence and general and regional economic conditions.
Our success depends to
a significant extent on discretionary consumer spending, which is heavily influenced by general economic conditions and the availability
of discretionary income. The current economic environment as a result of COVID-19, coupled with high volatility and uncertainty as to
the future global economic landscape, and increased inflation has had an adverse effect on consumers’ discretionary income and consumer
confidence. Future volatile, negative or uncertain economic conditions and recessionary periods or periods of significant inflation may
adversely impact attendance and guest spending levels at Hall of Fame Village powered by Johnson Controls, which would materially adversely
affect our business, financial condition and results of operations.
Hall of Fame Village
powered by Johnson Controls is located in Canton, Ohio. The concentration of our operations in this market exposes us to greater risks
than if our operations were more geographically diverse. As a result, negative developments in the local economic conditions in the Midwest
region, particularly those impacting travel, hotel or other real estate operations, could reduce guest attendance, negatively impact
consumer spending, increase tenant defaults and otherwise have a material adverse effect on our profitability.
Other factors that can
affect consumer spending and confidence include severe weather, hurricanes, flooding, earthquakes and other natural disasters, elevated
terrorism alerts, terrorist attacks, military actions, including in Ukraine, air travel concerns, outbreaks of disease, and geopolitical
events, as well as various industry and other business conditions, including an ever increasing number of sporting and entertainment options
that compete for discretionary spending. Such factors or incidents, even if not directly impacting us, can disrupt or otherwise adversely
impact the spending sentiment and interest of our present or potential customers and sponsors.
The Company will
operate in highly competitive industries and our revenues, profits or market share could be harmed if we are unable to compete effectively.
We will face substantial
competition in each of our businesses. For example:
| ● | Tom
Benson Hall of Fame Stadium, the Sports Complex and the Center for Performance will compete
with other facilities and venues across the region and country for hosting concerts, athletic
events (including professional sports events, sports camps and tournaments) and other major
conventions; |
| ● | Hall
of Fame Village Media will compete (i) with other media and content producers to obtain creative
and performing talent, sports and other programming content, story properties, advertiser
support, distribution channels and market share and (ii) for viewers with other broadcast,
cable and satellite services as well as with home entertainment products, new sources of
broadband and mobile delivered content and internet usage; |
| ● | The
indoor waterpark, the Hilton hotels, and the retail promenade, if and when completed, will
compete for guests with other theme parks, waterparks, and resorts, such as Cedar Point,
located in Sandusky, Ohio, and other theme parks, retail and tourist destinations in Ohio
and around the country, and with other forms of entertainment, lodging, tourism and recreation
activities; |
| ● | The
Constellation Center for Excellence and Fan Engagement Zone will compete for tenants with
other suppliers of commercial and/or retail space; and |
| ● | The
planned Hall of Fantasy League fantasy football league will face competition from existing
fantasy football leagues as well as other forms of virtual entertainment and fan interactions
during the professional football season. |
Competition in each
of these areas may increase as a result of technological developments, changes in consumer preferences, economic conditions, changes
in market structure and other factors that affect the recreation, entertainment, vacation, retail, tourism and leisure industries generally.
Increased competition may divert consumers from Hall of Fame Village powered by Johnson Controls to other forms of entertainment, which
could reduce our revenue or increase our marketing costs. Our competitors may have substantially greater financial resources than we
do, and they may be able to adapt more quickly to changes in consumer preferences or devote greater resources to promotion of their offerings
and services or to development or acquisition of offerings and services that are perceived to be of a higher quality or value than our
offerings and services. As a result, we may not be able to compete successfully against such competitors.
We may not be
able to fund capital expenditures and investment in future attractions and projects.
A principal competitive
factor for Hall of Fame Village powered by Johnson Controls is the originality and perceived quality of its events, attractions and offerings.
Even after completion of the various components of the Hall of Fame Village powered by Johnson Controls, we will need to make continued
capital investments through maintenance and the regular addition of new events, attractions and offerings. Our ability to fund capital
expenditures will depend on our ability to generate sufficient cash flow from operations and to raise capital from third parties. We
cannot assure you that our operations will be able to generate sufficient cash flow to fund such costs, or that we will be able to obtain
sufficient financing on adequate terms, or at all, which could cause us to delay or abandon certain projects or plans.
The high fixed
cost structure of the Company’s operations may result in significantly lower margins if revenues decline.
We expect a large portion
of our operating expenses to be relatively fixed because the costs for full-time employees, maintenance, utilities, advertising and insurance
will not vary significantly with attendance. These fixed costs may increase at a greater rate than our revenues and may not be able to
be reduced at the same rate as declining revenues. If cost-cutting efforts are insufficient to offset declines in revenues or are impracticable,
we could experience a material decline in margins, revenues, profitability and reduced or negative cash flows. Such effects can be especially
pronounced during periods of economic contraction or slow economic growth.
Increased labor
costs, labor shortages or labor disruptions could reduce our profitability.
Because labor costs
are and will continue to be a major component of our operating expenses, higher labor costs could reduce our profitability. Higher labor
costs could result from, among other things, labor shortages that require us to raise labor rates in order to attract employees, and
increases in minimum wage rates. Higher employee health insurance costs could also adversely affect our profitability. Additionally,
increased labor costs, labor shortages or labor disruptions by employees of our third-party contractors and subcontractors could disrupt
our operations, increase our costs and affect our profitability.
Cyber security
risks and the failure to maintain the integrity of internal or guest data could result in damages to our reputation, the disruption of
operations and/or subject us to costs, fines or lawsuits.
We anticipate that we
will collect and retain large volumes of internal and guest data, including credit card numbers and other personally identifiable information,
for business purposes, including for transactional or target marketing and promotional purposes, and our various information technology
systems enter, process, summarize and report such data. We also expect to maintain personally identifiable information about our employees.
The integrity and protection of our guest, employee and company data will be critical to our business and our guests and employees are
likely to have a high expectation that we will adequately protect their personal information. The regulatory environment, as well as
the requirements imposed on us by the credit card industry, governing information, security and privacy laws is increasingly demanding
and continues to evolve. Maintaining compliance with applicable security and privacy regulations may increase our operating costs and/or
adversely impact our ability to market our theme parks, products and services to our guests.
We also expect to rely
on accounting, financial and operational management information technology systems to conduct our operations. If these information technology
systems suffer severe damage, disruption or shutdown and our business continuity plans do not effectively resolve the issues in a timely
manner, our business, financial condition and results of operations could be materially adversely affected.
We may face various
security threats, including cyber security attacks on our data (including our vendors’ and guests’ data) and/or information
technology infrastructure. Although we will utilize various procedures and controls to monitor and mitigate these threats, there can
be no assurance that these procedures and controls will be sufficient to prevent penetrations or disruptions to our systems. Furthermore,
a penetrated or compromised data system or the intentional, inadvertent or negligent release or disclosure of data could result in theft,
loss, fraudulent or unlawful use of guest, employee or company data which could harm our reputation or result in remedial and other costs,
fines or lawsuits and require significant management attention and resources to be spent. In addition, our insurance coverage and indemnification
arrangements that we enter into, if any, may not be adequate to cover all the costs related to cyber security attacks or disruptions
resulting from such events. To date, cyber security attacks directed at us have not had a material impact on our financial results. Due
to the evolving nature of security threats, however, the impact of any future incident cannot be predicted.
Investors are
subject to litigation risk and their respective investments in the shares of our Common Stock may be lost as a result of our legal liabilities
or the legal liabilities of our affiliates.
We or our affiliates
may from time to time be subject to claims by third parties and may be plaintiffs or defendants in civil proceedings. There can be no
assurance that claims will not be brought in the future if we cannot generate the revenue that we forecast or raise sufficient capital
to pay contractors in connection with constructing other components of the project. The expense of prosecuting claims, for which there
is no guarantee of success, and/or the expense of defending against claims by third parties and paying any amounts pursuant to settlements
or judgments, would generally be borne by the Company and could result in the reduction or complete loss of all of the assets of the
Company, and investors in our Common Stock could lose all or a part of their investment.
Our business may
be adversely affected by tenant defaults or bankruptcy.
Our business may be
adversely affected if any future tenants at the Constellation Center for Excellence or Hall of Fame retail promenade default on their
obligations to us. A default by a tenant may result in the inability of such tenant to re-lease space from us on economically favorable
terms, or at all. In the event of a default by a tenant, we may experience delays in payments and incur substantial costs in recovering
our losses. In addition, our tenants may file for bankruptcy or be involved in insolvency proceedings and we may be required to expense
costs associated with leases of bankrupt tenants and may not be able to replace future rents for tenant space rejected in bankruptcy
proceedings, which could adversely affect our properties. Any bankruptcies of our tenants could make it difficult for us to enforce our
rights as lessor and protect our investment.
Fluctuations in
real estate values may require us to write down the carrying value of our real estate assets or investments.
Real estate valuations
are subject to significant variability and fluctuation. The valuation of our real estate assets or real estate investments is inherently
subjective and based on the individual characteristics of each asset. Factors such as competitive market supply and demand for inventory,
changes in laws and regulations, political and economic conditions and interest and inflation rate fluctuations subject our valuations
to uncertainty. Our valuations are or will be made on the basis of assumptions that may not prove to reflect economic or demographic
reality. If the real estate market deteriorates, we may reevaluate the assumptions used in our analyses. As a result, adverse market
conditions may require us to write down the book value of certain real estate assets or real estate investments and some of those write-downs
could be material. Any material write-downs of assets could have a material adverse effect on our financial condition and results of
operations.
Our property taxes
could increase due to rate increases or reassessments or the imposition of new taxes or assessments or loss of tax credits, which may
adversely impact our financial condition and results of operations.
We are required to pay
state and local real property taxes and assessments on our properties. The real property taxes and assessments on our properties may
increase as property or special tax rates increase or if our properties are assessed or reassessed at a higher value by taxing authorities.
In addition, if we are obligated to pay new taxes or if there are increases in the property taxes and assessments that we currently pay,
our financial condition and results of operations could be adversely affected. We are relying on various forms of public financing and
public debt to finance the development and operations of the Company.
Our insurance
coverage may not be adequate to cover all possible losses that we could suffer and our insurance costs may increase.
We seek to maintain
comprehensive insurance coverage at commercially reasonable rates. Although we maintain various safety and loss prevention programs and
carry property and casualty insurance to cover certain risks, our insurance policies do not cover all types of losses and liabilities.
There can be no assurance that our insurance will be sufficient to cover the full extent of all losses or liabilities for which we are
insured, and we cannot guarantee that we will be able to renew our current insurance policies on favorable terms, or at all. In addition,
if we or other theme park operators sustain significant losses or make significant insurance claims, then our ability to obtain future
insurance coverage at commercially reasonable rates could be materially adversely affected.
Our operations
and our ownership of property subject us to environmental requirements, and to environmental expenditures and liabilities.
We incur costs to comply
with environmental requirements, such as those relating to water use, wastewater and storm water management and disposal, air emissions
control, hazardous materials management, solid and hazardous waste disposal, and the clean-up of properties affected by regulated materials.
We may be required to
investigate and clean-up hazardous or toxic substances or chemical releases, and other releases, from current or formerly owned or operated
facilities. In addition, in the ordinary course of our business, we generate, use and dispose of large volumes of water, which requires
us to comply with a number of federal, state and local regulations and to incur significant expenses. Failure to comply with such regulations
could subject us to fines and penalties and/or require us to incur additional expenses.
We cannot assure you
that we will not incur substantial costs to comply with new or expanded environmental requirements in the future or to investigate or
clean-up new or newly identified environmental conditions, which could also impair our ability to use or transfer the affected properties
and to obtain financing.
Our planned sports betting, fantasy sports and eSports operations are
subject to a variety of federal, state, and foreign laws, many of which are unsettled and still developing and which could subject us
to claims or otherwise harm our business. Any change in existing statutes, regulations or their interpretation, or the regulatory climate
applicable to our products and services, or changes in tax rules and regulations or interpretation thereof related to our products and
services, could adversely impact our ability to operate our business as currently conducted or as we seek to operate in the future, which
could have a material adverse effect on our financial condition and results of operations.
Our planned sports betting, fantasy sports and eSports operations are
generally subject to state laws and regulations relating to sports betting, fantasy sports and eSports in the jurisdictions in which we
are planning to conduct such operations or in some circumstances, in those jurisdictions in which we offer our services or they are available,
as well as the general laws and regulations that apply to all e-commerce businesses, such as those related to privacy and personal information,
tax and consumer protection. In the United States, these laws and regulations vary from one jurisdiction to another and future legislative
and regulatory action, court decisions or other governmental action, which may be affected by, among other things, political pressures,
attitudes and climates, as well as personal biases, may have a material impact on our operations and financial results. In particular,
some jurisdictions have introduced legislation attempting to restrict or prohibit online gaming, while others have taken the position
that online gaming should be licensed and regulated and have either legalized such activity or are in the process of considering legislation
and regulations to enable that to happen. Additionally, some jurisdictions in which we may operate could presently be unregulated or partially
regulated and therefore more susceptible to the enactment or change of laws and regulations.
In May 2018, the U.S. Supreme Court struck down as unconstitutional
the Professional and Amateur Sports Protection Act of 1992 (“PASPA”). This decision has the effect of lifting federal restrictions
on sports betting and thus allows states to determine by themselves the legality of sports betting. Since the repeal of PASPA, several
states (and Washington D.C.) have legalized online sports betting. To the extent new real money gaming or sports betting jurisdictions
are established or expanded, we cannot guarantee that we will be successful in penetrating such new jurisdictions. If we are unable to
effectively develop and operate directly or indirectly within existing or new jurisdictions or if our competitors are able to successfully
penetrate geographic jurisdictions that we cannot access or where we face other restrictions, there could be a material adverse effect
on our sports betting, fantasy sports and eSports operations. Our failure to obtain or maintain the necessary regulatory approvals in
jurisdictions, whether individually or collectively, would have a material adverse effect on our business. To operate in any jurisdiction,
we may need to be licensed and obtain approvals of our product offerings. This is a time-consuming process that can be extremely costly.
Any delays in obtaining or difficulty in maintaining regulatory approvals needed for expansion within existing jurisdictions or into new
jurisdictions can negatively affect our opportunities for growth, including the growth of our customer base, or delay our ability to recognize
revenue from our offerings in any such jurisdictions.
Future legislative and
regulatory action, and court decisions or other governmental action, may have a material impact on our planned sports betting, fantasy
sports and eSports operations. Governmental authorities could view us as having violated local laws, despite our efforts to obtain all
applicable licenses or approvals. There is also a risk that civil and criminal proceedings, including class actions brought by or on
behalf of prosecutors or public entities or incumbent monopoly providers, or private individuals, could be initiated against us, Internet
service providers, credit card and other payment processors, advertisers and others involved in the sports betting industry. Such potential
proceedings could involve substantial litigation expense, penalties, fines, seizure of assets, injunctions or other restrictions being
imposed upon us or our licensees or other business partners, while diverting the attention of key executives. Such proceedings could
have a material adverse effect on our business, financial condition, results of operations and prospects, as well as impact our reputation.
Failure to comply
with regulatory requirements in a particular jurisdiction, or the failure to successfully obtain a license or permit applied for in a
particular jurisdiction, could impact our ability to comply with licensing and regulatory requirements in other jurisdictions, or could
cause the rejection of license applications or cancelation of existing licenses in other jurisdictions, or could cause financial institutions,
online and mobile platforms, advertisers and distributors to stop providing services to us which we rely upon to receive payments from,
or distribute amounts to, our users, or otherwise to deliver and promote our services.
Compliance with the
various regulations applicable to fantasy sports and real money gaming is costly and time-consuming. Regulatory authorities at the non-U.S.,
U.S. federal, state and local levels have broad powers with respect to the regulation and licensing of fantasy sports and real money
gaming operations and may revoke, suspend, condition or limit our fantasy sports or real money gaming licenses, impose substantial fines
on us and take other actions, any one of which could have a material adverse effect on our business, financial condition, results of
operations and prospects. These laws and regulations are dynamic and subject to potentially differing interpretations, and various legislative
and regulatory bodies may expand current laws or regulations or enact new laws and regulations regarding these matters. We will strive
to comply with all applicable laws and regulations relating to our business. It is possible, however, that these requirements may be
interpreted and applied in a manner that is inconsistent from one jurisdiction to another and may conflict with other rules. Non-compliance
with any such law or regulations could expose us to claims, proceedings, litigation and investigations by private parties and regulatory
authorities, as well as substantial fines and negative publicity, each of which may materially and adversely affect our business.
Any fantasy sports or real money gaming license obtained could be revoked,
suspended or conditioned at any time. The loss of a license in one jurisdiction could trigger the loss of additional licenses or affect
our eligibility for such a license in another jurisdiction, and any of such losses, or potential for such loss, could cause us to cease
offering some or all of our offerings in the impacted jurisdictions. We may be unable to obtain or maintain all necessary registrations,
licenses, permits or approvals, and could incur fines or experience delays related to the licensing process, which could adversely affect
our operations. Our delay or failure to obtain or maintain licenses in any jurisdiction may prevent us from distributing our offerings,
increasing our customer base and/or generating revenues. We cannot assure you that we will be able to obtain and maintain the licenses
and related approvals necessary to conduct our planned sports betting operations. Any failure to maintain or renew our licenses, registrations,
permits or approvals could have a material adverse effect on our business, financial condition, results of operations and prospects.
Negative events
or negative media coverage relating to, or a declining popularity of, fantasy sports, sports betting, the underlying sports or athletes,
or online sports betting in particular, or other negative coverage may adversely impact our ability to retain or attract users, which
could have an adverse impact on our proposed sports betting, fantasy sports and eSports operations.
Public opinion can significantly
influence our business. Unfavorable publicity regarding us, for example, our product changes, product quality, litigation, or regulatory
activity, or regarding the actions of third parties with whom we have relationships or the underlying sports (including declining popularity
of the sports or athletes) could seriously harm our reputation. In addition, a negative shift in the perception of sports betting by
the public or by politicians, lobbyists or others could affect future legislation of sports betting, which could cause jurisdictions
to abandon proposals to legalize sports betting, thereby limiting the number of jurisdictions in which we can operate such operations.
Furthermore, illegal betting activity by athletes could result in negative publicity for our industry and could harm our brand reputation.
Negative public perception could also lead to new restrictions on or to the prohibition of sports betting in jurisdictions in which such
operations are currently legal. Such negative publicity could also adversely affect the size, demographics, engagement, and loyalty of
our customer base and result in decreased revenue or slower user growth rates, which could seriously harm our business.
The suspension
or termination of, or the failure to obtain, any business or other licenses may have a negative impact on our business.
We maintain a variety
of business licenses issued by federal, state and local authorities that are renewable on a periodic basis. We cannot guarantee that
we will be successful in renewing all of our licenses on a periodic basis. The suspension, termination or expiration of one or more of
these licenses could materially adversely affect our revenues and profits. Any changes to the licensing requirements for any of our licenses
could affect our ability to maintain the licenses. In addition, we do not yet have all of the appropriate licenses required for our operations,
including liquor licenses. The failure to obtain liquor or other licenses may negatively impact our business.
Delays or restrictions
in obtaining permits for capital investments could impair our business.
Our capital investments
require regulatory permits from one or more governmental agencies in order to build new theme parks, attractions and shows. Such permits
are typically issued by state agencies, but federal and local governmental permits may also be required. The requirements for such permits
vary depending on the location of such capital investments. As with all governmental permitting processes, there is a degree of uncertainty
as to whether a permit will be granted, the time it will take for a permit to be issued, and the conditions that may be imposed in connection
with the granting of the permit. Therefore, our capital investments in certain areas may be delayed, interrupted or suspended for varying
lengths of time, causing a loss of revenue to us and adversely affecting our results of operations.
There can be no
assurance that we will be able to meet certain construction deadlines under a Letter of Representations, which could cause a cross-default
under the Term Loan.
If construction is delayed
for any reason and we do not meet certain construction deadlines, we could be in breach of a letter of representations agreement with
the Canton City School District and Stark County Port Authority (the “Letter of Representations”). A breach of the Letter
of Representations would cause a cross-default under the Term Loan. If we default on our obligations under the Term Loan, the lender could
accelerate the entire amount of the Term Loan, declare the unpaid balance (plus interest, fees and expenses) immediately due and payable
and take other action to enforce the Term Loan, including foreclosure of substantially all of our assets that secure the Term Loan. An
affiliate of Industrial Realty Group has guaranteed certain payment obligations under the Term Loan in the event of a default.
In connection with the
Term Loan, HOF Village entered into a mortgage granting a security interest in its rights to certain premises that HOF Village leases
from the Canton City School District and Stark County Port Authority. The Letter of Representations provides that any lien created by
the mortgage or any other security interest granted in such premises in connection with the Term Loan will attach only to HOF Village’s
and the other Borrowers’ interest in such premises and would remain subordinate to and not disturb the rights and interests of
the City of Canton, Ohio, the Canton City School District, Stark County Port Authority, PFHOF, the State of Ohio, Plain Local School
District, the Canton Symphony Orchestra, and persons identified as benefitted parties under any TIF revenue bond declaration. Additionally,
the Letter of Representations provides that HOF Village and its relevant affiliates will remain bound to fulfill their respective obligations
under the existing ground leases, project leases and certain other agreements with the Canton City School District and Stark County Port
Authority and that HOF Village will cause certain payments to be made to Canton City School District and Stark County Port Authority.
If we do not receive
sufficient capital to substantially repay our indebtedness, our indebtedness may have a material adverse effect on our business, our
financial condition and results of operations and our ability to secure additional financing in the future, and we may not be able to
raise sufficient funds to repay our indebtedness.
As of December 31, 2021,
the Company’s capital structure includes debt and debt-like obligations consisting of the following gross principal amounts:
| ● | approximately $9.5 million of net indebtedness to Development Finance
Authority of Summit County, Ohio (“DFA Summit”), representing tax-increment financing proceeds; |
| ● | approximately
$3.0 million drawn on a loan facility of up to $3.0 million with New Market Project, Inc.,
the proceeds of which are to be used for the development of the McKinley Grand Hotel; |
| ● | approximately
$3.5 million drawn on a loan facility of up to $3.5 million with the City of Canton, Ohio; |
| ● | approximately
$9.6 million in financing from Constellation through its Efficiency Made Easy (“EME”)
program; |
| ● | approximately
$7.0 million of indebtedness outstanding pursuant to a promissory note, by HOF Village in
favor of JKP Financial, LLC; |
| ● | approximately
$15.3 million of net indebtedness outstanding pursuant to a construction loan agreement with
Erie Bank, the proceeds of which were used for the development of the DoubleTree Hotel; |
| ● | approximately $24.1 million of net indebtedness representing convertible
PIPE notes; |
| ● | approximately
$2.7 million of net indebtedness representing a cooperating agreement with DFA Summit, the City of Canton, Ohio, the Canton Regional
Special Improvement District, Inc. and the U.S. Bank National Association for the construction of the Series 2020C Project; |
| ● | approximately
$7.4 million of net indebtedness outstanding pursuant to a promissory note in favor of Aquarian
Credit Funding, LLC; |
| ● | approximately
$8.5 million of net indebtedness outstanding pursuant to a promissory note in favor of IRG; |
| ● | approximately
$13.3 million of net indebtedness outstanding pursuant to a construction loan agreement in
favor of Erie Bank, the proceeds of which are to be used for the development of the Center
for Performance; and |
| ● | approximately $8.3 million of net indebtedness outstanding pursuant
to financing provided by PACE Equity, Inc. |
If we do not have sufficient
funds to repay our debt at maturity, our indebtedness could subject us to many risks that, if realized, would adversely affect us, including
the following:
| ● | our
cash flows from operations would be insufficient to make required payments of principal of and interest on the debt, and a failure to
pay would likely result in acceleration of such debt and could result in cross accelerations or cross defaults on other debt; |
| ● | our
debt may increase our vulnerability to adverse economic and industry conditions; |
| ● | to
the extent that we generate and use any cash flow from operations to make payments on our
debt, it will reduce our funds available for operations, development, capital expenditures
and future investment opportunities or other purposes; |
| ● | debt covenants
limit our ability to borrow additional amounts, including for working capital, capital expenditures,
debt service requirements, executing our development plan and other purposes; |
| ● | restrictive debt
covenants may limit our flexibility in operating our business, including limitations on our
ability to make certain investments; incur additional indebtedness; create certain liens;
incur obligations that restrict the ability of our subsidiaries to make payments to us; consolidate,
merge or transfer all or substantially all of our assets; or enter into transactions with
affiliates; |
| ● | to
the extent that our indebtedness bears interest at a variable rate, we are exposed to the
risk of increased interest rates; |
| ● | debt
covenants may limit our subsidiaries’ ability to make distributions to us; |
| ● | causing
an event of default under the Term Loan if it is not repaid in full at maturity; and |
| ● | if
any debt is refinanced, the terms of any refinancing may not be as favorable as the terms
of the debt being refinanced. |
If we do not have sufficient
funds to repay our debt at maturity, it may be necessary to refinance the debt through additional debt or equity financings. If, at the
time of any refinancing, prevailing interest rates or other factors result in a higher interest rate on such refinancing, increases in
interest expense could adversely affect our cash flows and results of operations. If we are unable to refinance our debt on acceptable
terms or at all, we may be forced to dispose of uncollateralized assets on disadvantageous terms, postpone investments in the development
of our properties or the Hall of Fame Village powered by Johnson Controls or default on our debt. In addition, to the extent we cannot
meet any future debt service obligations, we will risk losing some or all of our assets that are pledged to secure such obligations.
Our business plan
requires additional liquidity and capital resources that might not be available on terms that are favorable to us, or at all.
While our strategy assumes
that we will receive sufficient capital to have sufficient working capital, we currently do not have available cash and cash flows from
operations to provide us with adequate liquidity for the near-term or foreseeable future. Our current projected liabilities exceed our
current cash projections and we have very limited cash flow from current operations. We therefore will require additional capital and/or
cash flow from future operations to fund the Company, our debt service obligations and our ongoing business. There is no assurance that
we will be able to raise sufficient additional capital or generate sufficient future cash flow from our future operations to fund the
Hall of Fame Village powered by Johnson Controls, our debt service obligations or our ongoing business. If the amount of capital we are
able to raise, together with any income from future operations, is not sufficient to satisfy our liquidity and capital needs, including
funding our current debt obligations, we may be required to abandon or alter our plans for the Company. As discussed in greater detail
above, there can be no assurance that we will be able to repay the Term Loan obligation upon maturity or otherwise avoid a default. The
Company may also have to raise additional capital through the equity market, which could result in substantial dilution to existing stockholders.
Our ability to obtain
necessary financing may be impaired by factors such as the health of and access to capital markets, our limited track record and the
limited historical financial information available, or the substantial doubt about our ability to continue as a going concern. Any additional
capital raised through the sale of additional shares of our capital stock, convertible debt or other equity may dilute the ownership
percentage of our stockholders.
We will have to
increase leverage to develop the Company, which could further exacerbate the risks associated with our substantial indebtedness.
While we used proceeds
from the Business Combination and subsequent capital raises to pay down certain outstanding debt, we will have to take on substantially
more debt to complete the construction of the Hall of Fame Village powered by Johnson Controls. We may incur additional indebtedness
from time to time in the future to finance working capital, capital expenditures, investments or acquisitions, or for other purposes.
If and when we incur additional indebtedness, the risks related to our indebtedness could intensify.
We may not be
able to generate sufficient cash flow from operations to service all of our indebtedness and may be forced to take other actions to satisfy
our obligations under our indebtedness, which may not be successful.
Our ability to make
scheduled payments on or refinance our debt obligations depends on our financial condition and operating performance, which are subject
to prevailing economic and competitive conditions and to certain financial, business, legislative, regulatory and other factors beyond
our control. We may be unable to generate a level of cash flows from operating activities sufficient to permit us to pay the principal,
premium, if any, and interest on our indebtedness. Until such time as we can service our indebtedness with cash flow from operations,
we intend to service our indebtedness from other sources.
If our cash flows, cash
on hand and other capital resources are insufficient to fund our debt service obligations, we could face continued and future liquidity
concerns and could be forced to reduce or delay investments and capital expenditures or to dispose of material assets or operations,
seek additional indebtedness or equity capital, or restructure or refinance our indebtedness. We may not be able to effect any such alternative
measures, if necessary, on commercially reasonable terms or at all and, even if successful, those alternative actions may not allow us
to meet our scheduled debt service obligations. The Term Loan restricts our ability to dispose of assets and use the proceeds from those
dispositions and may also restrict our ability to raise indebtedness or equity capital to be used to repay other indebtedness when it
becomes due. We may not be able to consummate those dispositions or to obtain proceeds in an amount sufficient to meet any debt service
obligations then due.
Our inability to generate
sufficient cash flows to satisfy our debt obligations, or to refinance our indebtedness on commercially reasonable terms or at all, would
materially and adversely affect our financial position and results of operations.
If we fail to
comply with the reporting obligations of the Exchange Act and Section 404 of the Sarbanes-Oxley Act, or if we fail to maintain adequate
internal control over financial reporting, our business, financial condition, and results of operations, and investors’ confidence
in us, could be materially and adversely affected.
As a public company,
we are required to comply with the periodic reporting obligations of the Exchange Act, including preparing annual reports, quarterly
reports, and current reports. Our failure to prepare and disclose this information in a timely manner and meet our reporting obligations
in their entirety could subject us to penalties under federal securities laws and regulations of the Nasdaq, expose us to lawsuits, and
restrict our ability to access financing on favorable terms, or at all.
In addition, pursuant
to Section 404 of the Sarbanes-Oxley Act, we are required to develop, evaluate and provide a management report of our systems of internal
control over financial reporting. During the course of the evaluation of our internal control over financial reporting, we have identified
and could identify areas requiring improvement and could be required to design enhanced processes and controls to address issues identified
through this review. This could result in significant delays and costs to us and require us to divert substantial resources, including
management time, from other activities.
If we fail to comply
with the requirements of Section 404 on a timely basis this could result in the loss of investor confidence in the reliability of our
financial statements, which in turn could, negatively impact the trading price of our stock, and adversely affect investors’ confidence
in the Company and our ability to access capital markets for financing.
The requirements
of being a public company may strain our resources and distract management.
We expect to incur significant
costs associated with our public company reporting requirements and costs associated with applicable corporate governance requirements.
These applicable rules and regulations are expected to significantly increase our legal and financial compliance costs and to make some
activities more time consuming and costly than those for privately owned companies that are not registrants with the SEC. Compliance
with these rules and regulations may divert management’s attention from other business concerns.
The COVID-19 pandemic
has had, and is expected to continue to have, a material adverse effect on our business.
Since 2020, the world
has been, and continues to be, impacted by the COVID-19 pandemic. COVID-19 and the measures to prevent its spread impacted our business
in a number of ways, most significantly with regard to a reduction in the number of events and attendance at events at Tom Benson Hall
of Fame Stadium and our Sports Complex, which negatively impacts our ability to generate revenue. Also, we opened our newly renovated
DoubleTree by Hilton in Canton in November 2020, but the occupancy rate has been negatively impacted by the COVID-19 pandemic. Further,
the COVID-19 pandemic has caused a number of supply chain disruptions, which negatively impacts our ability to obtain the materials needed
to complete construction. The continued impact of these disruptions and the ongoing extent of their adverse impact on our financial and
operating results will be dictated by the length of time that such disruptions continue, which will, in turn, depend on the currently
unknowable duration and severity of the impacts of COVID-19, and among other things, the impact of governmental actions imposed in response
to COVID-19 and individuals’ and companies’ risk tolerance regarding health matters going forward.
Even after restrictions
loosen, the demand for sports and entertainment events may decrease as fears over travel or attending large-scale events linger due to
concerns over the spread of COVID-19. If unemployment levels persist and economic disruption continues, the demand for entertainment
activities, travel and other discretionary consumer spending may also decline as consumers have less money to spend. We may be required
to enforce social distancing measures within our facilities by, among other things, limiting the number of people admitted or standing
in lines at any time, or adding social distancing signage and markers. We may incur additional costs associated with maintaining the
health and safety of our guests and employees, including facility improvements such as additional sanitization stations or requiring
the broad use of personal protective equipment. If it is alleged or determined that illness associated with COVID-19 was contracted at
one of our facilities, we may suffer reputational damage that could adversely affect attendance and future ticket sales.
Even after we are able
to open our facilities, we may elect or be required to close them in the future in response to the continued impact of COVID-19 or outbreaks
involving other epidemics. Any decrease in demand for the sports and entertainment industry would likely affect our business and financial
results. The extent and duration of the long-term impact of COVID-19 remains uncertain and the full impact on our business operations
cannot be predicted.
Risk Related to Our
Securities
We currently do
not intend to pay dividends on our Common Stock. Consequently, our stockholders’ ability to achieve a return on their investment
will depend on appreciation in the price of our Common Stock.
We do not expect to
pay cash dividends on our Common Stock. Any future dividend payments are within the absolute discretion of our board of directors and
will depend on, among other things, our results of operations, working capital requirements, capital expenditure requirements, financial
condition, level of indebtedness, contractual restrictions with respect to payment of dividends, business opportunities, anticipated
cash needs, provisions of applicable law and other factors that our board of directors may deem relevant.
We may be required
to take write-downs or write-offs, restructuring and impairment or other charges that could have a significant negative effect on our
financial condition, results of operations and our stock price, which could cause our stockholders to lose some or all of their investment.
We may be forced to
write-down or write-off assets, restructure our operations, or incur impairment or other charges that could result in our reporting losses.
Even though these charges may be non-cash items and not have an immediate impact on our liquidity, the fact that we report charges of
this nature could contribute to negative market perceptions about us or our securities. In addition, charges of this nature may cause
us to violate net worth or other covenants to which we may be subject. Accordingly, a stockholder could suffer a reduction in the value
of their shares of Common Stock.
Our Series A Warrants,
Series B Warrants, and Series C Warrants are accounted for as liabilities and the changes in value of such warrants could have a material
effect on our financial results.
On April 12, 2021, the
staff of the Securities and Exchange Commission (the “SEC”) issued a statement (the “SEC Statement”) regarding
the accounting and reporting considerations for warrants issued by special purpose acquisition companies. Specifically, the SEC Statement
focused on certain settlement terms and provisions related to certain tender offers following a business combination, which terms are
similar to those governing our Series A Warrants, Series B Warrants, and Series C Warrants. As a result of the SEC Statement, we reevaluated
the accounting treatment of such warrants, and determined to classify such warrants as derivative liabilities measured at fair value,
with changes in fair value each period reported in earnings.
As a result, included
on our balance sheets as of December 31, 2021 and 2020 contained elsewhere in this Annual Report are derivative liabilities related to
embedded features contained within our Series A Warrants, Series B Warrants, and Series C Warrants. ASC Subtopic 815, Derivatives and
Hedging, provides for the remeasurement of the fair value of such derivatives at each balance sheet date, with a resulting non-cash gain
or loss related to the change in the fair value being recognized in earnings in the statement of operations. As a result of the recurring
fair value measurement, our financial statements and results of operations may fluctuate quarterly, based on factors which are outside
of our control. Due to the recurring fair value measurement, we expect that we will recognize non-cash gains or losses on our Series
A Warrants, Series B Warrants, and Series C Warrants each reporting period and that the amount of such gains or losses could be material.
Our Certificate
of Incorporation allows for our board of directors to create new series of preferred stock without further approval by our stockholders,
which could adversely affect the rights of the holders of our Common Stock.
Our board of directors
has the authority to fix and determine the relative rights and preferences of preferred stock. Our board of directors has the authority
to issue up to 5,000,000 shares of our preferred stock (of which 52,800 shares have been designated 7.00% Series A Cumulative Redeemable
Preferred Stock, par value $0.0001 per share (“Series A Preferred Stock”), of which 3,600 shares are issued and outstanding
as of December 31, 2021, and 15,200 shares have been designated as 7.00% Series B Convertible Preferred Stock, par value $0.0001 per share
(“Series B Preferred Stock”), all of which are issued and outstanding as of December 31, 2021, without further stockholder
approval. In addition, as part of the consideration for Amendment Number 6 discussed under “Item 1. Business—Recent Developments”
above, the Company agreed, subject to approval of its board of directors, to create a series of preferred stock, to be known as 7.00%
Series C Convertible Preferred Stock (“Series C Preferred Stock”), and, upon the request of CH Capital Lending, exchange each
share of the Company’s Series B Preferred Stock that is held by CH Capital Lending for one share of Series C Preferred Stock. Our
board of directors could authorize the issuance of additional series of preferred stock that would grant to holders the preferred right
to our assets upon liquidation, the right to receive dividend payments before dividends are distributed to the holders of Common Stock
and the right to the redemption of the shares, together with a premium, prior to the redemption of our Common Stock. In addition, our board
of directors could authorize the issuance of a series of preferred stock that has greater voting power than our Common Stock
or that is convertible into our Common Stock, which could decrease the relative voting power of our Common Stock or
result in dilution to our existing stockholders. Although we have no present intention to issue any additional shares of preferred
stock or to create any additional series of preferred stock other than as disclosed, we may issue such shares in the future.
We currently have
outstanding, and we may in the future issue, instruments which are exercisable for or convertible into shares of Common Stock, which will
result in dilution of our Common Stock.
We currently have outstanding
as of March 11, 2022 the following instruments that are exercisable for or convertible into shares of our Common Stock:
| ● | Series
A Warrants, exercisable for 24,731,195 shares of Common Stock at an exercise price of $11.50 per share, subject to adjustment; |
| ● | Series
B Warrants, exercisable for 3,760,570 shares of Common Stock at an exercise price of $1.40 per share, subject to adjustment; |
| ● | Series
C Warrants, exercisable for 10,036,925 shares of Common Stock at an exercise price of $1.40 per share, subject to adjustment; |
| ● | Series
D Warrants, exercisable for 2,483,660 shares of Common Stock at an exercise price of $6.90 per share, subject to adjustment; |
| ● | Series
E Warrants, exercisable for 1,500,000 shares of Common Stock at an exercise price of $1.50 per share, subject to adjustment; |
| ● | Series
F Warrants, exercisable for 1,500,000 shares of Common Stock at an exercise price of $1.09 per share, subject to adjustment; |
| ● | $15,200,000
original issue date price Series B Preferred Stock, convertible by the holder into shares of Common Stock at a conversion price of $3.06
per share of Common Stock, subject to adjustment; |
| ● | approximately
$24.1 million of net indebtedness representing PIPE Notes, convertible by holders into shares of Common Stock at a current conversion
rate or 144.9304 shares of Common Stock per $1,000 principal amount of PIPE Notes or approximately $6.90 per share, subject to adjustment; |
| ● | $8,347,839
Term Loan, convertible by the lender into shares of Common Stock at a conversion price of $1.50 per share, subject to adjustment; |
| ● | $4,273,543
First Amended and Restated Promissory Note with IRG, LLC, convertible by the holder into shares of Common Stock at a conversion price
of $1.50 per share, subject to adjustment; |
| ● | $4,273,543
First Amended and Restated Promissory Note with JKP Financial, LLC, convertible by the holder into shares of Common Stock at a conversion
price of $1.09 per share, subject to adjustment; |
| ● | $8,394,836
JKP Promissory Note, convertible by the holder into shares of Common Stock at a conversion price of $1.09 per share, subject to adjustment;
and |
| ● | approximately
1,970,127 unvested restricted stock units to be settled in shares of Common Stock. |
We may need to issue
similar instruments in the future. In the event that these convertible instruments are exercised for or converted into shares of Common
Stock, or that we make additional issuances of other convertible or exchangeable securities, our Common Stock holders could experience
additional dilution.
Antidilution provisions
in certain of our convertible debt instruments may result in a reduction of the conversion price, which would result in additional dilution
of our Common Stock.
Our Term Loan, First
Amended and Restated Promissory Note with IRG, LLC, First Amended and Restated Promissory Note with JKP Financial, LLC and JKP Promissory
Note contain an antidilution adjustment to the conversion price. Under such antidilution provision, if the Company prior to the applicable
maturity date issues any additional shares of Common Stock (or is deemed to have issued any shares of Common Stock as provided therein),
with certain exceptions, without consideration or for a consideration per share less than the conversion price in effect immediately prior
to the issuance of Common Stock, the conversion price in effect immediately prior to such issuance shall forthwith be lowered using a
weighted average formula set forth therein. If the conversion price is lowered, the debt instruments will become convertible into additional
shares of Common Stock, which would result in additional dilution of our Common Stock.
Our Common Stock
may be delisted from the Nasdaq Capital Market if we cannot satisfy Nasdaq’s continued listing requirements.
Among the conditions required for continued listing on the Nasdaq Capital
Market, Nasdaq requires us to maintain at least $35 million market value of listed securities or at least $500,000 in net income over
the prior two years or two of the prior three years, and to maintain a stock price over $1.00 per share. We may not maintain a minimum
$35 million market value of listed securities, we may not generate over $500,000 of yearly net income moving forward, and we may not be
able to maintain a stock price over $1.00 per share. If we fail to timely comply with the applicable requirements, our stock may be delisted.
In addition, even if we demonstrate compliance with the requirements above, we will have to continue to meet other objective and subjective
listing requirements to continue to be listed on the Nasdaq Capital Market. Delisting from the Nasdaq Capital Market could make trading
our Common Stock more difficult for investors, potentially leading to declines in our share price and liquidity. Without a Nasdaq Capital
Market listing, stockholders may have a difficult time getting a quote for the sale or purchase of our stock, the sale or purchase of
our stock would likely be made more difficult, and the trading volume and liquidity of our stock could decline. Delisting from the Nasdaq
Capital Market could also result in negative publicity and could also make it more difficult for us to raise additional capital. The absence
of such a listing may adversely affect the acceptance of our Common Stock as currency or the value accorded by other parties. Further,
if we are delisted, we would also incur additional costs under state blue sky laws in connection with any sales of our securities. These
requirements could severely limit the market liquidity of our Common Stock and the ability of our stockholders to sell our Common Stock
in the secondary market. If our Common Stock is delisted by Nasdaq, our Common Stock may be eligible to trade on an over-the-counter quotation
system, such as the OTCQB market, where an investor may find it more difficult to sell our stock or obtain accurate quotations as to the
market value of our Common Stock. In the event our Common Stock is delisted from the Nasdaq Capital Market, we may not be able to list
our Common Stock on another national securities exchange or obtain quotation on an over-the counter quotation system.
The trading price
of our securities has been, and likely will continue to be, volatile and you could lose all or part of your investment.
The trading price of
our securities could be volatile and subject to wide fluctuations in response to various factors, some of which are beyond our control,
including but not limited to our general business condition, the release of our financial reports and general economic conditions and
forecasts. Broad market and industry factors may materially harm the market price of our securities irrespective of our operating performance.
The stock market in general, and Nasdaq, have experienced price and volume fluctuations that have often been unrelated or disproportionate
to the operating performance of the particular companies affected. The trading prices and valuations of these stocks, and of our securities,
may not be predictable. A loss of investor confidence in the market for the stocks of other companies which investors perceive to be
similar to us could depress our stock price regardless of our business, prospects, financial conditions or results of operations. A decline
in the market price of our securities also could adversely affect our ability to issue additional securities and our ability to obtain
additional financing in the future. Any of these factors could have a material adverse effect on our stockholders’ investment in
our securities, and our securities may trade at prices significantly below the price they paid for them. In such circumstances, the trading
price of our securities may not recover and may experience a further decline.
Anti-takeover
provisions contained in our Certificate of Incorporation and Bylaws, as well as provisions of Delaware law, could impair a takeover attempt.
Our Certificate of Incorporation
contains provisions that may discourage unsolicited takeover proposals that stockholders may consider to be in their best interests.
We are also subject to anti-takeover provisions under Delaware law, which could delay or prevent a change of control. Together, these
provisions may make more difficult the removal of management and may discourage transactions that otherwise could involve payment of
a premium over prevailing market prices for our securities. These provisions include:
| ● | no
cumulative voting in the election of directors, which limits the ability of minority stockholders
to elect director candidates; |
| ● | a
classified board of directors with three-year staggered terms, which could delay the ability
of stockholders to change the membership of a majority of our board of directors; |
| ● | the
right of our board of directors to elect a director to fill a vacancy created by the expansion
of our board of directors or the resignation, death or removal of a director in certain circumstances,
which prevents stockholders from being able to fill vacancies on our board of directors; |
| ● | a
prohibition on stockholder action by written consent, which forces stockholder action to
be taken at an annual or special meeting of our stockholders; and |
| ● | the
requirement that a meeting of stockholders may only be called by members of our board of directors, the chairman of our board of directors,
our chief executive officer, or the stockholders holding a majority of our shares, which may delay the ability of our stockholders to
force consideration of a proposal or to take action, including the removal of directors. |
Our Certificate
of Incorporation provides, subject to limited exceptions, that the Court of Chancery of the State of Delaware will be the sole and exclusive
forum for certain stockholder litigation matters, which could limit our stockholders’ ability to obtain a favorable judicial forum
for disputes with us or our directors, officers, employees or stockholders.
Our Certificate of Incorporation
requires, to the fullest extent permitted by law, that derivative actions brought in HOFRE’s name, actions against directors, officers,
stockholders and employees for breach of fiduciary duty, actions under the Delaware General Corporation Law or under our Certificate
of Incorporation, or actions asserting a claim governed by the internal affairs doctrine may be brought only in the Court of Chancery
in the State of Delaware and, if brought outside of Delaware, the stockholder bringing the suit will be deemed to have consented to service
of process on such stockholder’s counsel. This choice of forum provision does not preclude or contract the scope of exclusive federal
or concurrent jurisdiction for any actions brought under the Securities Act or the Exchange Act. Accordingly, such exclusive forum provision
will not relieve us of our duties to comply with the federal securities laws and the rules and regulations thereunder, and our stockholders
will not be deemed to have waived its compliance with these laws, rules and regulations.
Any person or entity
purchasing or otherwise acquiring any interest in shares of our capital stock shall be deemed to have notice of and consented to the
forum provisions in our Certificate of Incorporation. This choice of forum provision does not exclude stockholders from suing in federal
court for claims under the federal securities laws but may limit a stockholder’s ability to bring such claims in a judicial forum
that it finds favorable for disputes with HOFRE or any of its directors, officers, other employees or stockholders, which may discourage
lawsuits with respect to such claims.
Alternatively, if a
court were to find the choice of forum provision contained in our Certificate of Incorporation to be inapplicable or unenforceable in
an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could harm our business,
operating results and financial condition.
If securities
or industry analysts do not publish research or publish inaccurate or unfavorable research about our business, our stock price and trading
volume could decline.
The trading market for
our securities will depend in part on the research and reports that securities or industry analysts publish about us or our business.
If only a limited number of securities or industry analysts commence coverage of our Company, the trading price for our securities would
likely be negatively impacted. In the event securities or industry analysts initiate coverage, if one or more of the analysts who covers
us downgrades our stock or publishes unfavorable research about our business, our stock price may decline. If one or more of these analysts
ceases coverage of our Company or fails to publish reports on us regularly, demand for our securities could decrease, which might cause
our stock price and trading volume to decline.
Our executive
officers and directors, and their affiliated entities, along with our seven other largest stockholders, own a significant percentage of
our stock and will be able to exert significant control over matters subject to stockholder approval.
Our executive officers and directors, together with entities affiliated
with such individuals, along with our seven other largest stockholders, beneficially own approximately 48% of our outstanding Common Stock.
Accordingly, these stockholders are able to exert significant control over maters subject to stockholder approval. This concentration
of ownership could delay or prevent a change in control of the Company.
We are an emerging
growth company and a smaller reporting company within the meaning of the Securities Act, and if we take advantage of certain exemptions
from disclosure requirements available to emerging growth companies or smaller reporting companies, this could make our securities less
attractive to investors and may make it more difficult to compare our performance with other public companies.
We are an “emerging
growth company,” as defined in Section 2(a) of the Securities Act, as modified by the JOBS Act, and we 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 our 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.
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 registration statement under the Securities Act declared effective or do not have
a class of securities registered under the Exchange Act) 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 an election to opt out is irrevocable. We have elected not to opt out of such extended
transition period, which means that when a standard is issued or revised and it has different application dates for public or private
companies, we, 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 our financial statements with another public company, which is neither an emerging growth company
nor an emerging growth company that has opted out of using the extended transition period, difficult or impossible because of the potential
differences in accounting standards used.
We will remain an emerging
growth company until the earlier of: (1) the last day of the fiscal year (a) following the fifth anniversary of the closing of the Company’s
initial public offering, (b) in which we have total annual revenue of at least $1.07 billion, or (c) in which we are deemed to be a large
accelerated filer, which means the market value of our common equity that is held by non-affiliates exceeds $700 million as of the end
of the prior fiscal year’s second fiscal quarter; and (2) the date on which we have issued more than $1.00 billion in non-convertible
debt securities during the prior three-year period. References herein to “emerging growth company” have the meaning associated
with it in the JOBS Act.
Additionally, we are
a “smaller reporting company” as defined in Item 10(f)(1) of Regulation S-K. Smaller reporting companies may take advantage
of certain reduced disclosure obligations, including, among other things, providing only two years of audited financial statements. We
will remain a smaller reporting company until the last day of any fiscal year for so long as either (1) the market value of our shares
of our Common Stock held by non-affiliates did not equal or exceed $250 million as of the prior June 30, or (2) our annual revenues did
not equal or exceed $100 million during such completed fiscal year and the market value of our shares of our Common Stock held by non-affiliates
did not equal or exceed $700 million as of the prior June 30.
Item 1B. Unresolved Staff Comments
Not applicable.
Item 2. Properties
The Company owns real property in Canton, Ohio,
at the site of the Hall of Fame Village powered by Johnson Controls development, including the Tom Benson Hall of Fame Stadium, the Constellation
Center for Excellence, and the Company’s principal corporate office. Certain parcels of real property on which the Hall of Fame
Village powered by Johnson Controls is located are owned by the City of Canton and the Canton City School District (Board of Education)
and are subject to long-term ground leases and agreements with the Company for the use and development of such property.
On February 3, 2021, the Company purchased for
$1.75 million certain parcels of real property from PFHOF located at the site of the Hall of Fame Village powered by Johnson Controls.
In connection with the purchase, the Company granted certain easements to PFHOF to ensure accessibility to the PFHOF museum.
Item 3. Legal Proceedings
Information with respect to certain legal proceedings
is set forth in Note 8, “Contingencies,” to the Company’s Consolidated Financial Statements and is incorporated herein by reference.
Item 4. Mine Safety Disclosures
Not applicable.
PART II
Item 5. Market For Registrant’s Common Equity, Related Stockholder
Matters And Issuer’s Purchases Of Equity Securities
Market Information
Our Common Stock is traded on The NASDAQ Capital
Markets under the symbol “HOFV” and our Warrants are traded on the NASDAQ Capital Markets under the symbol “HOFVW”.
Holders
On March 11, 2022, the Company had 152 holders
of record of our Common Stock.
Dividends
The Company has never declared or paid cash dividends
on its Common Stock and has no intention to do so in the foreseeable future.
Item 6. [Reserved]
Item 7. Management’s Discussion and Analysis of Financial
Condition and Results of Operations
The following discussion and analysis provides
information which our management believes is relevant to an assessment and understanding of our financial condition and results of operations.
This discussion and analysis should be read together with our results of operations and financial condition and the audited and unaudited
consolidated financial statements and related notes that are included elsewhere in this Annual Report on Form 10-K. In addition to historical
financial information, this discussion and analysis contains forward-looking statements based upon current expectations that involve
risks, uncertainties and assumptions. See the section entitled “Cautionary Note Regarding Forward-Looking Statements.” Actual
results and timing of selected events may differ materially from those anticipated in these forward-looking statements as a result of
various factors, including those set forth under “Risk Factors” or elsewhere in this Annual Report on Form 10-K.
Certain figures, such as interest rates and
other percentages, included in this section have been rounded for ease of presentation. Percentage figures included in this section have
not in all cases been calculated on the basis of such rounded figures but on the basis of such amounts prior to rounding. For this reason,
percentage amounts in this section may vary slightly from those obtained by performing the same calculations using the figures in our
consolidated financial statements or in the associated text. Certain other amounts that appear in this section may similarly not sum
due to rounding.
Overview
We are a resort and entertainment company located in Canton, Ohio,
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. Headquartered in Canton, Ohio, we own the Hall of Fame Village powered by Johnson
Controls, a multi-use sports, entertainment and media destination centered around the PFHOF’s campus. We expect to create a diversified
set of revenue streams through developing themed attractions, premier entertainment programming, sponsorships and media. The strategic
plan has been developed in three phases of growth: Phase I, Phase II, and Phase III.
Phase I of the Hall of Fame Village powered by Johnson Controls is
operational, consisting of the Tom Benson Hall of Fame Stadium, the Sports Complex, and HOF Village Media. In 2016, HOF Village completed
the Tom Benson Hall of Fame Stadium, a sports and entertainment venue with a seating capacity of approximately 23,000. The Tom Benson
Hall of Fame Stadium hosts multiple sports and entertainment events, including the NFL Hall of Fame Game, Enshrinement and Concert for
Legends during the annual Pro Football Hall of Fame Enshrinement Week. In 2016, HOF Village opened the Sports Complex, which will consist
of eight full-sized, multi-use regulation football fields, five of which have been completed in Phase I. The facility hosts camps and
tournaments for football players, as well as athletes from across the country in other sports such as lacrosse, rugby and soccer. In 2017,
HOF Village formed a sports and entertainment media company, Hall of Fame Village Media, leveraging the sport of professional football
to produce exclusive programming by licensing the extensive content controlled by the PFHOF as well as new programming assets developed
from live events such as youth tournaments, business meetings, weddings, festivals, camps, sporting events, and more held at the Sports
Complex and the Tom Benson Hall of Fame Stadium.
We are developing new hospitality, attraction and corporate assets
surrounding the Pro Football Hall of Fame Museum as part of our Phase II development plan. Phase II plans for future components of the
Hall of Fame Village powered by Johnson Controls include two hotels (one on campus and one in downtown Canton that opened in November
2020), the Hall of Fame Indoor Waterpark, the Constellation Center for Excellence (an office building including retail and meeting space
that opened in October 2021), the Center for Performance (a convention center/field house), Play Action Plaza, and the Hall of Fame Retail
Promenade. We are pursuing a differentiation strategy across three pillars, including destination-based assets, Hall of Fame Village Media,
and gaming (including the fantasy football league we acquired a majority stake in). Phase III expansion plans may include a potential
mix of residential space, additional attractions, entertainment, dining, merchandise and more.
Key Components of the Company’s Results of Operations
Revenue
The Company’s
sponsorship revenue is derived from its agreements with third parties such as Johnson Controls and Constellation. These sponsorship
agreements are generally multi-year agreements to provide cash or some other type of benefit to the Company. Some agreements
require the Company to use a portion of the sponsorship revenue to incur marketing and other activation costs associated with the
agreement, and this revenue is shown net of those associated costs. Additionally, the Company’s Tom Benson Hall of Fame
Stadium is used to host premier entertainment and sports events to generate event revenues. The stadium is used to host a variety of
sporting events, including high school, college and professional football games throughout the year, in addition to top
entertainers. The Company plans to continue to expand programming where applicable for its live event business. The Company’s
other revenue is derived primarily from rents and cost reimbursement.
Operating Expenses
The Company’s
operating expenses include property operating expenses, depreciation expense and other operating expenses. These expenses have increased
in connection with putting the Company’s first phase into operation and the Company expects these expenses to continue to increase
with the Company’s growth.
The Company’s
property operating expenses include the costs associated with running its operational entertainment and destination assets such as the
Tom Benson Hall of Fame Stadium and the Sports Complex. As more of the Company’s Phase II assets become operational and additional
events for top performers and sporting events are held, the Company expects these expenses to continue to increase with the Company’s
development.
Other operating expenses
include items such as management fees, commission expense and professional fees. The Company expects these expenses to continue to increase
with the Company’s growth.
The Company’s
depreciation expense includes the related costs to owning and operating significant property and entertainment assets. These expenses
have grown as the Company completed Phase I development and the assets associated with Phase I became operational. The Company expects
these expenses to continue to grow as Phases II and III assets are developed and become operational.
Warrant Liabilities
We account for warrants
to purchase shares of our Common Stock that are not indexed to our own stock as liabilities at fair value on the balance sheet in accordance
with the Accounting Standards Codification Topic 815 “Derivatives and Hedging”. The warrants are subject to remeasurement
at each balance sheet date, and any change in fair value is recognized as a component of other income (expense), net on the statement
of operations. We will continue to adjust the liability for changes in fair value until the earlier of the exercise or expiration of
the Common Stock warrants. At that time, the portion of the warrant liability related to the Common Stock warrants will be reclassified
to additional paid-in capital.
Results of Operations
The following table
sets forth information comparing the components of net loss for the years ended December 31, 2021 and the comparable period in 2020:
| | |
For the Years Ended
December 31, | |
| | |
2021 | | |
2020 | |
| | |
| | |
| |
| Revenues | |
| | |
| |
| Sponsorships, net of activation costs | |
$ | 6,023,863 | | |
$ | 6,424,201 | |
| Rents and cost recoveries | |
| 305,302 | | |
| 474,020 | |
| Event and other revenues | |
| 681,408 | | |
| 38,750 | |
| Hotel revenues | |
| 3,759,811 | | |
| 162,183 | |
| Total revenues | |
$ | 10,770,384 | | |
$ | 7,099,154 | |
| | |
| | | |
| | |
| Operating expenses | |
| | | |
| | |
| Property operating expenses | |
| 27,780,351 | | |
| 26,631,821 | |
| Hotel operating expenses | |
| 4,408,691 | | |
| 419,595 | |
| Commission expense | |
| 1,020,774 | | |
| 1,671,964 | |
| Impairment expense | |
| 1,748,448 | | |
| - | |
| Depreciation expense | |
| 12,199,148 | | |
| 11,085,230 | |
| Total operating expenses | |
$ | 47,157,412 | | |
$ | 39,808,610 | |
| | |
| | | |
| | |
| Loss from operations | |
| (36,387,028 | ) | |
| (32,709,456 | ) |
| | |
| | | |
| | |
| Other expense | |
| | | |
| | |
| Interest expense | |
| (3,580,840 | ) | |
| (5,718,473 | ) |
| Amortization of discount on note payable | |
| (5,160,242 | ) | |
| (10,570,974 | ) |
| Change in fair value of warrant liability | |
| (48,075,943 | ) | |
| 26,733,116 | |
| Business combination costs | |
| - | | |
| (19,137,165 | ) |
| Gain (loss) on extinguishment of debt | |
| 390,400 | | |
| (4,282,220 | ) |
| Total other expense | |
$ | (56,426,625 | ) | |
$ | (12,975,716 | ) |
| | |
| | | |
| | |
| Net loss | |
$ | (92,813,653 | ) | |
$ | (45,685,172 | ) |
| | |
| | | |
| | |
| Series B preferred stock dividends | |
| (697,575 | ) | |
| - | |
| Loss attributable to non-controlling interest | |
| 400,260 | | |
| 196,506 | |
| | |
| | | |
| | |
| Net loss attributable to HOFRE stockholders | |
$ | (93,110,968 | ) | |
$ | (45,488,666 | ) |
| | |
| | | |
| | |
| Net loss per share – basic and diluted | |
$ | (1.03 | ) | |
$ | (1.71 | ) |
| | |
| | | |
| | |
| Weighted average shares outstanding, basic and diluted | |
| 90,295,878 | | |
| 26,644,449 | |
Year Ended December 31, 2021 as
Compared to the Year Ended December 31, 2020
Sponsorship Revenues, net of Activation Costs
The Company’s sponsorship revenues for the year ended December
31, 2021 $6,023,863 as compared to $6,424,201 for the year ended December 31, 2020, a decreased of $400,338 or 6%. This decrease was primarily
driven by the cancellation of a smaller sponsorship agreement as well as the impact of revisions to two sponsorship agreements effective
in the third quarter of 2020.
Rents and Cost Recoveries
The Company’s revenue from rents and cost recoveries for the
year ended December 31, 2021 were $305,302 as compared to $474,020 for the year ended December 31, 2020, a decrease of $168,718, or 36%.
This change was primarily driven by a decrease in utilization of our sports complex.
Event and Other Revenues
The Company’s event and other revenues for the year ended December
31, 2021 were $681,408 as compared to $38,750 for the year ended December 31, 2020, an increase of $642,658, or 1,659%. This increase
was primarily driven by revenues from the Company’s hosting of enshrinement week and other events.
Hotel Revenues
The Company’s hotel revenues for the year ended December 31,
2021 were $3,759,811 as compared to $162,183 for the year ended December 31, 2020. This was driven by the having a full year open of our
DoubleTree Hotel in 2021 as opposed to two months in 2020.
Property Operating
Expenses
The Company’s property operating expenses were $27,780,351 for
the year ended December 31, 2021 as compared to $26,631,821 for the year ended December 31, 2020, an increase of $1,148,530, or 4.3%.
This increase was driven by an increase of $1,058,861 in stock-based compensation and increase in compensation expenses.
Hotel Operating Expense
The Company’s
hotel operating expense was $4,408,691 for the year ended December 31, 2021 as compared to $419,595 for the year ended December 31, 2020,
an increase of $3,989,096 or 951%. This was driven by the having a full year open of our DoubleTree Hotel in 2021 as opposed to two months
in 2020.
Commission Expense
The Company’s
commission expense was $1,020,774 for the year ended December 31, 2021, as compared to $1,671,964 for the year ended December 31, 2020,
a decrease of $651,190, or 39%. The decrease in commission expense is primarily the result of final prior year commissions’ fees
paid in the first quarter of 2020 per the agreements in place at that time.
Impairment Expense
The Company’s impairment expense was $1,784,448 for the year
ended December 31, 2021, as compared to $0 for the year ended December 31, 2020. The impairment expense was due to an impairment of project
development costs due to a change in plans for Company’s Center for Performance, which caused the Company to abandon previous plans
that will not benefit the current plan.
Depreciation Expense
The Company’s depreciation expense was $12,199,148 for the year
ended December 31, 2021 as compared to $11,085,230 for the year ended December 31, 2020, an increase of $1,113,918, or 10%. The increase
in depreciation expense is primarily the result of additional depreciation expense incurred due to the DoubleTree Hotel being placed in
service in the fourth quarter of 2020.
Interest Expense
The Company’s
interest expense was $3,580,840 for the year ended December 31, 2021, as compared to $5,718,473 for the year ended December 31, 2020,
a decrease of $2,137,633, or 37%. The decrease in total interest expense is primarily due to extinguishment of select debt instruments
at the close of the Business Combination and the cancellation of a note we owed IRG in exchange for issuance of Common Stock and warrants
in December, as well as changes in interest rates and certain interest expense due to affiliate that was waived under a revised agreement
at June 30, 2020.
Amortization of Debt
Discount
The Company’s amortization of debt discount was $5,160,242 for
the year ended December 31, 2021, as compared to $10,570,974 for the year ended December 31, 2020, a decrease of $5,410,732, or 51%. The
decrease in total amortization of debt discount is primarily due to the conversion of the Company’s various outstanding notes payable
throughout the second half of 2020.
Gain (Loss) on Extinguishment
of Debt
The Company’s
gain (loss) on extinguishment of debt was $390,400 for the year ended December 31, 2021, as compared to $(4,282,220) for the year ended
December 31, 2020. The gain on extinguishment of debt during the year ended December 31, 2021 was related to the forgiveness of the Company’s
Paycheck Protection Loan. The loss on extinguishment of debt during the year ended December 31, 2020 was primarily due to IRG November
Note conversion resulting in a $3,404,244 loss on extinguishment of debt along with various other notes payable converting into equity
upon the consummation of the Business Combination.
Business Combination
Costs
The Company’s
Business Combination costs were $0 for the year ended December 31, 2021, as compared to $19,137,165 for the year ended December 31, 2020.
The Business Combination costs consisted of $6,233,473 in closing costs incurred for the Business Combination, $10,789,840 for shares
issued to a related party, $2,218,187 related to our CEO’s restricted stock award in which one-third vested on July 2, 2020 in
conjunction with the closing of the Business Combination, a $200,000 cash bonus to our CEO, and other legal and professional fees incurred
in the Business Combination.
Liquidity and Capital Resources
The Company has sustained recurring losses
and negative cash flows from operations through December 31, 2021. Since inception, the Company’s operations have been funded
principally through the issuance of debt and equity. As of December 31, 2021, the Company had approximately $10 million of
unrestricted cash and $7 million of restricted cash.
During February 2021, the Company received approximately $34.5 million
gross proceeds from the issuance of shares of the Company’s Common Stock, before offering costs.
On June 4, 2021, the
Company completed a private placement with CH Capital Lending, LLC for a purchase price of $15 million (i) 15,000 shares of 7.00% Series
B Convertible Preferred Stock (the “Series B Preferred Stock”), which are convertible into shares of the Company’s
Common Stock, having an aggregate liquidation preference of $15 million plus any accrued but unpaid dividends to the date of payment,
and (ii) 2,450,980 warrants, with a term of three years, exercisable six months after issuance, each exercisable for one share of Common
Stock at an exercise price of $6.90 per share, subject to certain adjustments (the “Series D Warrants”). Also on June 4,
2021, the Company closed a securities purchase agreement with another purchaser for 200 shares of Series B Preferred Stock and 32,680
Series D Warrants in exchange for $200,000.
On each of August 12,
2021 and September 22, 2021, the Company issued to American Capital Center, LLC (“ACC”) 900 shares (the “Series A Shares”)
of 7.00% Series A Cumulative Redeemable Preferred Stock (“Series A Preferred Stock”) at a price of $1,000 per share for an
aggregate purchase price of $900,000. The Company will pay the Investor an origination fee of 2% of the aggregate purchase price.
On September 30, 2021,
the Company entered into an Equity Distribution Agreement (the “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. Through December 31, 2021, approximately
1.7 million shares were sold resulting in net proceeds to the Company totaling approximately $3.5 million. The remaining availability
under the Equity Distribution Agreement as of December 31, 2021 is approximately $46.5 million.
On March 1, 2022, the Company and ErieBank agreed to extend the MKG
DoubleTree Loan (as defined in Note 4 to the Company’s Consolidated Financial Statements) in principal amount of $15,300,000 to
September 13, 2023.
On March 1, 2022, the Company executed a series of transactions with
Industrial Realty Group, LLC, a Nevada limited liability company that is controlled by the Company’s director Stuart Lichter (“IRG”)
and its affiliates, and JKP Financial, LLC (“JKP”), whereby IRG and JKP extended certain of the Company’s debt in aggregate
principal amount of $22,853,831 to March 31, 2024. See “Item 1. Business—Recent Developments” for more information.
On March 3, 2022, the Company signed a nonbinding
term sheet with a commercial lender for construction financing for the Center for Performance in an amount up to $4 million. On March
12, 2022, the Company signed a nonbinding term sheet with a different commercial lender for construction financing for the Retail Promenade
in an amount up to $17.4 million.
The Company believes that, as a result of these transactions, it currently
has sufficient cash and financing commitments to meet its funding requirements over the next year from the issuance of the Company’s
consolidated financial statements. Notwithstanding, the Company expects that it will need to raise additional financing to accomplish
its development plan over the next several years. The Company is seeking to obtain additional funding through debt, construction lending,
and equity financing. There are no assurances that the Company will be able to raise capital on terms acceptable to the Company or at
all, or that cash flows generated from its operations will be sufficient to meet its current operating costs. If the Company is unable
to obtain sufficient amounts of additional capital, it may be required to reduce the scope of its planned development, which could harm
its financial condition and operating results.
Cash Flows
Since inception, the
Company has primarily used its available cash to fund its project development expenditures. The following table sets forth a summary
of cash flows for the periods presented:
| | |
For the Year Ended
December 31, | |
| | |
2021 | | |
2020 | |
| Cash (used in) provided by: | |
| | |
| |
| Operating Activities | |
$ | (20,762,629 | ) | |
$ | (18,365,271 | ) |
| Investing Activities | |
| (70,734,055 | ) | |
| (17,579,550 | ) |
| Financing Activities | |
| 68,831,263 | | |
| 67,383,690 | |
| Net increase (decrease) in cash and restricted | |
$ | (22,665,421 | ) | |
$ | 31,438,869 | |
Cash Flows for the Years Ended December 31, 2021 and 2020
Operating Activities
Net cash used in operating
activities was $20,762,629 during the year ended December 31, 2021, which consisted primarily of a net loss of $92,813,653, offset by
non-cash depreciation expense of $12,199,148, amortization of note discounts of $5,160,242, payment-in-kind interest rolled into debt
of $2,091,990, a gain on extinguishment of debt of $390,400, non-cash stock-based compensation expense of $5,582,634, a decrease in prepaid
expenses and other assets of $680,999, an increase in accounts payable and accrued expenses of $1,113,976, an increase in due to affiliates
of $95,399, and a decrease in other liabilities of $1,891,179.
Net cash used in operating
activities was $18,365,271 during the year ended December 31, 2020, which consisted primarily of a net loss of 45,685,172, offset by
non-cash depreciation expense of $11,085,230, amortization of note discounts of $10,570,974, payment-in-kind interest rolled into debt
of $4,066,691, a loss on extinguishment of $4,282,220, non-cash stock-based compensation expense of $4,523,773, a decrease in prepaid
expenses and other assets of $4,627,992, an increase in accounts payable and accrued expenses of $29,264,412, a decrease in due to affiliates
of $9,644,241, and an increase in other liabilities of $3,542,670.
Investing Activities
Net cash used in investing
activities was $70,734,055 during the year ended December 31, 2021, which consisted solely of project development costs. Net cash used
in investing activities was $17,579,550 during the year ended December 31, 2020 and consisted of $48,614,331 of cash used for project
development costs and $31,034,781 of proceeds from the Business Combination.
Financing Activities
Net cash provided by
financing activities was $68,831,263 during the year ended December 31, 2021, which consisted primarily of $37,004,153 in proceeds from
notes payable and $50,420,975 of proceeds from common stock and preferred stock, $23,485,200 from the proceeds from warrant exercises,
offset by $39,941,576 in repayments of notes payable, and $1,569,779 in payment of financing costs.
Net cash provided by
financing activities was $67,383,690 during the year ended December 31, 2020, which consisted primarily of $106,976,651 in proceeds from
notes payable and $26,228,499 of proceeds from equity raises, offset by $62,593,562 in repayments of notes payable, and $3,227,898 in
payment of financing costs.
Subsequent Financing Activity since December
31, 2021
ErieBank Extension
On March 1, 2022, ErieBank and the Company agreed to a 12-month extension
of the ErieBank DoubleTree Loan in the amount of $15.3 million in unpaid principal from September 13, 2022 to September 13, 2023.
IRG and JKP Refinancing
On March 1, 2022, the Company executed a series of transactions with
IRG and its affiliates, and JKP, whereby IRG and JKP extended certain of the Company’s debt in aggregate principal amount of $22,853,831
to March 31, 2024. See “Item 1. Business—Recent Developments” for more information.
Construction Financing
On March 3, 2022, the Company signed a nonbinding
term sheet with a commercial lender for construction financing for the Center for Performance in an amount up to $4 million. On March
12, 2022, the Company signed a nonbinding term sheet with a different commercial lender for construction financing for the Retail Promenade
in an amount up to $17.4 million.
Contractual Obligations and Commitments
The following is a summary
of the contractual obligations as of December 31, 2021 and the effect of such obligations are expected to have on the liquidity and cash
flows in future periods, which does not reflect the results of any of our subsequent refinancings:
| | |
Total | | |
Less than
1 Year | | |
1-3 Years | | |
3-5 Years | | |
More than
5 Years | |
| Notes payable commitments | |
$ | 115,721,706 | | |
$ | 44,614,077 | | |
$ | 36,166,719 | | |
$ | 18,063,888 | | |
$ | 16,877,022 | |
| Project and ground leases | |
$ | 42,608,400 | | |
$ | 321,900 | | |
$ | 965,700 | | |
$ | 965,700 | | |
$ | 40,355,100 | |
| Total | |
$ | 158,330,106 | | |
$ | 44,935,977 | | |
$ | 37,132,419 | | |
$ | 19,029,588 | | |
$ | 57,232,122 | |
The Company has various
debt covenants that require certain financial information to be met. If the Company does not meet the requirements of the debt covenants,
the Company will be responsible for paying the full outstanding amount of the note immediately. As of December 31, 2021, we were in compliance
with all relevant debt covenants.
Off-Balance Sheet Arrangements
The Company did not
have any off-balance sheet arrangements as of December 31, 2021.
Critical Accounting Policies and Significant
Judgments and Estimates
This discussion and analysis of the Company’s
financial condition and results of operations is based on the Company’s consolidated financial statements, which have been prepared
in accordance with generally accepted accounting principles in the United States of America, or U.S. GAAP. The preparation of these financial
statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent
assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reported periods.
In accordance with U.S. GAAP, the Company bases its estimates on historical experience and on various other assumptions the Company believes
are reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions.
For information on the Company’s significant
accounting policies please refer to Note 2 to the Company’s Consolidated Financial Statements.
Item 7A. Quantitative and Qualitative Disclosure About Market Risk
The Company is not exposed to market risk related
to interest rates on foreign currencies.
Item 8. Financial Statements and Supplementary Data
The financial statements required by this Item
are included in Item 15 of this report and are presented beginning on page F-1.
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure
None.
Item 9A. Controls and Procedures
Evaluation of Disclosure Controls and
Procedures
We maintain disclosure controls and procedures designed to ensure that
the information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized
and reported within the time periods specified under the rules and forms of the SEC. Disclosure controls and procedures include, without
limitation, controls and procedures designed to ensure that such information is accumulated and communicated to our management, including
our Chief Executive Officer and our Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosures.
As required by paragraph (b) of Rules 13a-15 and 15d-15 under the Exchange Act, our Chief Executive Officer (our principal executive)
and VP Accounting / Corporate Controller (our interim principal financial officer and interim principal accounting officer) carried out
an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of December 31, 2021. Based
on this evaluation, our Chief Executive Officer and VP Accounting / Corporate Controller concluded that our disclosure controls and procedures
(as defined in paragraph (e) of Rules 13a-15 and 15d-15 under the Exchange Act) were effective as December 31, 2021.
Limitations on Internal Control over Financial Reporting
An internal control
system over financial reporting has inherent limitations and may not prevent or detect misstatements. Therefore, even those systems determined
to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Also, projections
of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in
conditions, or that the degree of compliance with the policies or procedures may deteriorate. However, these inherent limitations are
known features of the financial reporting process. Therefore, it is possible to design into the process safeguards to reduce, though
not eliminate, this risk.
Management’s
Annual Report on Internal Control over Financial Reporting
Our management is responsible
for establishing and maintaining adequate internal control over financial reporting, as defined in Exchange Act Rule 13a-15(f) and 15d-15(f).
Internal control over financial reporting is a process used to provide reasonable assurance regarding the reliability of our financial
reporting and the preparation of our financial statements for external purposes in accordance with generally accepted accounting principles
in the United States. Internal control over financial reporting includes policies and procedures that pertain to the maintenance of records
that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets; provide reasonable assurance
that transactions are recorded as necessary to permit preparation of our financial statements in accordance with generally accepted accounting
principles in the United States, and that our receipts and expenditures are being made only in accordance with the authorization of our
board of directors and management; and provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition,
use or disposition of our assets that could have a material effect on our financial statements.
Under the supervision and with the participation of our management,
including our Chief Executive Officer (our principal executive officer) and VP of Accounting / Corporate Controller (our interim principal
financial officer and interim principal accounting officer), we performed an assessment of the Company’s significant processes and
key controls. Based on this assessment, management concluded that our internal control over financial reporting was effective as of December
31, 2021.
Changes in Internal Control over Financial
Reporting
During the quarter ended
December 31, 2021, the Company hired a new Vice President of Accounting / Corporate Controller, who has experience in developing and
maintaining internal controls over financial reporting.
Item 9B. Other Information
None.
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent
Inspections
Not Applicable.
PART III
Item 10. Directors, Executive Officers and Corporate Governance
The information required by this Item 10 is incorporated by reference
to our Proxy Statement for the 2022 Annual Meeting of Stockholders to be filed with the Securities and Exchange Commission within 120
days of the fiscal year ended December 31, 2021.
Item 11. Executive Compensation
The information required by this Item 11 is incorporated by reference
to our Proxy Statement for the 2022 Annual Meeting of Stockholders to be filed with the Securities and Exchange Commission within 120
days of the fiscal year ended December 31, 2021.
Item 12. Security Ownership of Certain Beneficial Owners and Management
And Related Stockholder Matters
The information required by this Item 12 is incorporated by reference
to our Proxy Statement for the 2022 Annual Meeting of Stockholders to be filed with the Securities and Exchange Commission within 120
days of the fiscal year ended December 31, 2021.
Item 13. Certain Relationships and Related Transactions and Director
Independence
The information required by this Item 13 is incorporated by reference
to our Proxy Statement for the 2022 Annual Meeting of Stockholders to be filed with the Securities and Exchange Commission within 120
days of the fiscal year ended December 31, 2021.
Item 14. Principal Accountant Fees and Services
The information required by this Item 14 is incorporated
by reference to our Proxy Statement for the 2022 Annual Meeting of Stockholders to be filed with the Securities and Exchange Commission
within 120 days of the fiscal year ended December 31, 2021.
PART IV
Item 15. Exhibits and Financial Statement Schedules.
Financial Statements
The consolidated financial statements of the
Company for the fiscal years covered by this Annual Report are located on beginning on page F-1 of this Annual Report.
Exhibits
| Exhibit No. |
|
Description |
| |
|
|
| 2.1+ |
|
Agreement and Plan of Merger, dated as of September 16, 2019, by and among Gordon Pointe Acquisition Corp., GPAQ Acquisition Holdings, Inc., GPAQ Acquiror Merger Sub, Inc., GPAQ Company Merger Sub, LLC, HOF Village, LLC and HOF Village Newco, LLC (incorporated by reference to Exhibit 2.1 to Gordon Pointe Acquisition Corp.’s Current Report on Form 8-K (File No. 001-38363) filed with the Commission on September 17, 2019) |
| 2.2 |
|
First Amendment to Agreement and Plan of Merger, dated as of November 5, 2019, by and among Gordon Pointe Acquisition Corp., GPAQ Acquisition Holdings, Inc., GPAQ Acquiror Merger Sub, Inc., GPAQ Company Merger Sub, LLC, HOF Village, LLC and HOF Village Newco, LLC (incorporated by reference to Exhibit 2.2 to Gordon Pointe Acquisition Corp.’s Current Report on Form 8-K (File No. 001-38363) filed with the Commission on November 8, 2019) |
| 2.3 |
|
Second Amendment to Agreement and Plan of Merger, dated as of March 10, 2020, by and among Gordon Pointe Acquisition Corp., GPAQ Acquisition Holdings, Inc., GPAQ Acquiror Merger Sub, Inc., GPAQ Company Merger Sub, LLC, HOF Village, LLC and HOF Village Newco, LLC (incorporated by reference to Exhibit 2.1 to Gordon Pointe Acquisition Corp.’s Current Report on Form 8-K (File No. 001-38363) filed with the Commission on March 16, 2020) |
| 2.4 |
|
Third Amendment to Agreement and Plan of Merger, dated as of May 22, 2020, by and among Gordon Pointe Acquisition Corp., GPAQ Acquisition Holdings, Inc., GPAQ Acquiror Merger Sub, Inc., GPAQ Company Merger Sub, LLC, HOF Village, LLC and HOF Village Newco, LLC (incorporated by reference to Exhibit 2.1 to Gordon Pointe Acquisition Corp.’s Current Report on Form 8-K (File No. 001-38363) filed with the Commission on May 28, 2020) |
| 3.1 |
|
Amended and Restated Certificate of Incorporation of the Company (incorporated by reference to Exhibit 3.1 of the Company’s Form 8-K (001-38363), filed with the Commission on July 8, 2020) |
| 3.2 |
|
Certificate of Designations of 7.00% Series A Cumulative Redeemable Preferred Stock of Hall of Fame Resort & Entertainment Company (incorporated by reference to Exhibit 3.1 of the Company’s Form 8-K (001-38363), filed with the Commission on October 15, 2020) |
| 3.3 |
|
Certificate of Amendment to Amended and Restated Certificate of Incorporation (incorporated by reference to Exhibit 3.1 of the Company’s Form 8-K (001-38363), filed with the Commission on November 6, 2020) |
| 3.4 |
|
Certificate of Designations of 7.00% Series B Convertible Preferred Stock of Hall of Fame Resort & Entertainment Company (incorporated by reference to Exhibit 3.1 of the Company’s Form 8-K (001-38363), filed with the Commission on May 14, 2021) |
| 3.5 |
|
Amended and Restated Bylaws of the Company (incorporated by reference to Exhibit 3.1 of the Company’s Form 8-K (001-38363), filed with the Commission on August 12, 2021) |
| 4.1 |
|
Specimen Common Stock Certificate (incorporated by reference to Exhibit 4.1 of the Company’s Form 8-K (001-38363), filed with the Commission on July 8, 2020) |
| 4.2 |
|
Specimen Warrant Certificate (incorporated by reference to Exhibit 4.2 of the Company’s Form 8-K (001-38363), filed with the Commission on July 8, 2020) |
| 4.3 |
|
Form of Warrant Agreement (incorporated by reference to Exhibit 4.2 to Gordon Pointe Acquisition Corp.’s Current Report on Form 8-K (File No. 001-38363) filed with the Commission on January 30, 2018) |
| 4.4 |
|
Form of Warrant (incorporated by reference to Exhibit 4.2 of the Company’s Form 8-K (001-38363), filed with the Commission on November 19, 2020) |
| 4.5 |
|
Warrant Agency Agreement, dated November 18, 2020, between Hall of Fame Resort & Entertainment Company and Continental Stock Transfer & Trust Company (incorporated by reference to Exhibit 4.1 of the Company’s Form 8-K (001-38363), filed with the Commission on November 19, 2020) |
| 4.6 |
|
Warrant Agreement, dated as of July 1, 2020, by and among Hall of Fame Resort & Entertainment Company and purchasers party thereto (incorporated by reference to Exhibit 99.3 of the Company’s Registration Statement on Form S-1 (File No. 333-256618) filed with the Commission on May 28, 2021) |
| 4.7 |
|
Amended and Restated Series C Warrant, dated March 1, 2022, issued by Hall of Fame Resort & Entertainment Company to CH Capital Lending, LLC (incorporated by reference to Exhibit 10.7 of the Company’s Form 8-K (001-38363), filed with the Commission on March 2, 2022) |
| 4.8 |
|
Amended and Restated Series D Warrant, dated March 1, 2022, issued by Hall of Fame Resort & Entertainment Company to CH Capital Lending, LLC (incorporated by reference to Exhibit 10.8 of the Company’s Form 8-K (001-38363), filed with the Commission on March 2, 2022) |
| 4.9 |
|
Form of Series E Warrant (incorporated by reference to Exhibit 10.5 of the Company’s Form 8-K (001-38363), filed with the Commission on March 2, 2022) |
| 4.10 |
|
Form of Series F Warrant (incorporated by reference to Exhibit 10.6 of the Company’s Form 8-K (001-38363), filed with the Commission on March 2, 2022) |
| 4.11 |
|
Description of Registered Securities* |
| 10.1 |
|
Form of Lock-Up Agreement (incorporated by reference to Exhibit 10.1 to GPAQ Acquisition Holdings, Inc.’s Registration Statement on Form S-4 (File No. 333-234655) filed with the Commission on November 12, 2019) |
| 10.2 |
|
Director Nominating Agreement (incorporated by reference to Exhibit 10.2 to the Company’s Registration Statement on Form S-1 (File No. 333-252807) filed with the Commission on February 5, 2021) |
| 10.3 |
|
Form of Release Agreement (incorporated by reference to Exhibit 10.3 to GPAQ Acquisition Holdings, Inc.’s Registration Statement on Form S-4 (File No. 333-234655) filed with the Commission on November 12, 2019) |
| 10.4 |
|
Hall of Fame Resort & Entertainment Company Amended 2020 Omnibus Incentive Plan (incorporated by reference to Exhibit 10.1 of the Company’s Form 8-K (File No. 001-38363), filed with the Commission on June 4, 2021) |
| 10.5 |
|
Form of Restricted Stock Award Agreement under Hall of Fame Resort & Entertainment Company 2020 Omnibus Incentive Plan (incorporated by reference to Exhibit 99.2 of the Company’s Registration Statement on Form S-8 (File No. 333-248851) filed with the Commission on September 16, 2020) |
| 10.6 |
|
Restricted Stock Unit Award Agreement, by and between the Company and Tara Charnes, dated as of September 16, 2020 (incorporated by reference to Exhibit 99.3 of the Company’s Registration Statement on Form S-8 (File No. 333-248851) filed with the Commission on September 16, 2020) |
| 10.7 |
|
Restricted Stock Unit Award Agreement, by and between the Company and Erica Muhleman, dated as of September 16, 2020 (incorporated by reference to Exhibit 99.4 of the Company’s Registration Statement on Form S-8 (File No. 333-248851) filed with the Commission on September 16, 2020) |
| 10.8 |
|
Form of Restricted Stock Unit Award Agreement under Hall of Fame Resort & Entertainment Company 2020 Omnibus Incentive Plan (incorporated by reference to Exhibit 99.5 of the Company’s Registration Statement on Form S-8 (File No. 333-248851) filed with the Commission on September 16, 2020) |
| 10.9 |
|
Form of Non-Employee Director Restricted Stock Unit Award Agreement under Hall of Fame Resort & Entertainment Company 2020 Omnibus Incentive Plan (incorporated by reference to Exhibit 99.6 of the Company’s Registration Statement on Form S-8 (File No. 333-248851) filed with the Commission on September 16, 2020) |
| 10.10 |
|
Restricted Stock Unit Award Agreement, by and between Hall of Fame Resort & Entertainment Company and Olivia Steier, dated as of November 13, 2020 (incorporated by reference to Exhibit 99.2 of the Company’s Registration Statement on Form S-8 (File No. 333-259202), filed with the Commission on August 31, 2021) |
| 10.11 |
|
Restricted Stock Unit Award Agreement, by and between Hall of Fame Resort & Entertainment Company and Scott Langerman, dated as of November 13, 2020 (incorporated by reference to Exhibit 99.3 of the Company’s Registration Statement on Form S-8 (File No. 333-259202), filed with the Commission on August 31, 2021) |
| 10.12 |
|
Employment Agreement, dated July 1, 2020, by and between Michael Crawford, HOF Village Newco, LLC and Hall of Fame Resort & Entertainment Company (incorporated by reference to Exhibit 10.5 of the Company’s Form 8-K (001-38363), filed with the Commission on July 8, 2020) |
| 10.13 |
|
Employment Agreement, dated February 14, 2022, by and between Benjamin Lee, HOF Village Newco, LLC and Hall of Fame Resort & Entertainment Company (incorporated by reference to Exhibit 10.1 of the Company’s Form 8-K (001-38363), filed with the Commission on March 10, 2022) |
| 10.14 |
|
Employment Agreement, dated June 22, 2020, by and between Michael Levy and HOF Village, LLC (incorporated by reference to Exhibit 10.6 of the Company’s Form 8-K (001-38363), filed with the Commission on July 8, 2020) |
| 10.15 |
|
Employment Agreement, dated September 16, 2019, by and between Jason Krom and HOF Village, LLC (incorporated by reference to Exhibit 10.7 of the Company’s Amendment No. 1 to Form S-3 on Form S-1 (File No. 333-240045), filed with the Commission on September 2, 2020) |
| 10.16 |
|
Employment Agreement, dated December 1, 2019, by and between Anne Graffice and HOF Village, LLC (incorporated by reference to Exhibit 10.8 of the Company’s Amendment No. 1 to Form S-3 on Form S-1 (File No. 333-240045), filed with the Commission on September 2, 2020) |
| 10.17 |
|
Employment Agreement, dated August 31, 2020, by and between Tara Charnes and Hall of Fame Resort & Entertainment Company (incorporated by reference to Exhibit 10.9 of the Company’s Amendment No. 1 to Form S-3 on Form S-1 (File No. 333-240045), filed with the Commission on September 2, 2020) |
| 10.18 |
|
Employment Agreement dated September 14, 2020, between Erica Muhleman and Hall of Fame Resort & Entertainment Company (incorporated by reference to Exhibit 10.10 of the Company’s Amendment No. 2 to Form S-3 on Form S-1 (File No. 333-240045), filed with the Commission on September 22, 2020) |
| 10.19 |
|
Amendment No. 1, dated December 22, 2020, to Employment Agreement between Michael Crawford, HOF Village Newco, LLC and Hall of Fame Resort & Entertainment Company (incorporated by reference to Exhibit 10.16 to the Company’s Registration Statement on Form S-1 (File No. 333-252807) filed with the Commission on February 5, 2021) |
| 10.20 |
|
Amendment No. 1, dated December 22, 2020, to Employment Agreement between Michael Levy and HOF Village, LLC (incorporated by reference to Exhibit 10.17 to the Company’s Registration Statement on Form S-1 (File No. 333-252807) filed with the Commission on February 5, 2021) |
| 10.21 |
|
Amendment No. 1, dated December 22, 2020, to Employment Agreement between Jason Krom and HOF Village, LLC (incorporated by reference to Exhibit 10.18 to the Company’s Registration Statement on Form S-1 (File No. 333-252807) filed with the Commission on February 5, 2021) |
| 10.22 |
|
Letter Agreement, dated January 2, 2022, between Hall of Fame Resort & Entertainment Company and Jason Krom* |
| 10.23 |
|
Amendment No. 1, dated December 22, 2020, to Employment Agreement between Anne Graffice and HOF Village, LLC (incorporated by reference to Exhibit 10.19 to the Company’s Registration Statement on Form S-1 (File No. 333-252807) filed with the Commission on February 5, 2021) |
| 10.24 |
|
Amendment No. 1, dated December 22, 2020, to Employment Agreement between Tara Charnes and Hall of Fame Resort & Entertainment Company (incorporated by reference to Exhibit 10.20 to the Company’s Registration Statement on Form S-1 (File No. 333-252807) filed with the Commission on February 5, 2021) |
| 10.25 |
|
Amendment No. 1, dated December 22, 2020, to Employment Agreement between Erica Muhleman and Hall of Fame Resort & Entertainment Company (incorporated by reference to Exhibit 10.21 to the Company’s Registration Statement on Form S-1 (File No. 333-252807) filed with the Commission on February 5, 2021) |
| 10.26+ |
|
Note Purchase Agreement, dated July 1, 2020, by and among Hall of Fame Resort & Entertainment Company and certain funds managed by Magnetar Financial, LLC and the purchasers listed on the signature pages thereto (incorporated by reference to Exhibit 10.7 of the Company’s Form 8-K (001-38363), filed with the Commission on July 8, 2020) |
| 10.27 |
|
Registration Rights Agreement, dated July 1, 2020, by and among Hall of Fame Resort & Entertainment Company and certain funds managed by Magnetar Financial, LLC and the purchasers listed on the signature pages thereto (incorporated by reference to Exhibit 10.8 of the Company’s Form 8-K (001-38363), filed with the Commission on July 8, 2020) |
| 10.28 |
|
Note Redemption and Warrant Agreement, dated July 1, 2020, by and among Hall of Fame Resort & Entertainment Company and certain funds managed by Magnetar Financial, LLC and the purchasers listed on the signature pages thereto (incorporated by reference to Exhibit 10.9 of the Company’s Form 8-K (001-38363), filed with the Commission on July 8, 2020) |
| 10.29+ |
|
Amended and Restated Sponsorship and Naming Rights Agreement, dated July 2, 2020, by and among HOF Village, LLC, National Football Museum, Inc. and Johnson Controls, Inc. (incorporated by reference to Exhibit 10.10 of the Company’s Form 8-K (001-38363), filed with the Commission on July 8, 2020) |
| 10.30 |
|
Promissory Note, dated June 24, 2020, by HOF Village, LLC and HOF Village Hotel II, LLC in favor of JKP Financial, LLC (incorporated by reference to Exhibit 10.11 of the Company’s Form 8-K (001-38363), filed with the Commission on July 8, 2020) |
| 10.31 |
|
First Amendment to Promissory Note, dated December 1, 2020, by and among HOF Village Newco, LLC, and HOF Village Hotel II, LLC, as the makers, and JKP Financial, LLC, as holder * |
| 10.32 |
|
Joinder and Second Amendment to Promissory Note, dated March 1, 2022, by and among HOF Village Newco, LLC, and HOF Village Hotel II, LLC, as the makers, Hall of Fame Resort & Entertainment Company, and JKP Financial, LLC, as holder (incorporated by reference to Exhibit 10.4 of the Company’s Form 8-K (001-38363), filed with the Commission on March 2, 2022) |
| 10.33 |
|
Letter Agreement re Payment Terms, dated June 25, 2020, by and among Industrial Realty Group, LLC, IRG Master Holdings, LLC, HOF Village, LLC and certain affiliates party thereto (incorporated by reference to Exhibit 10.12 of the Company’s Form 8-K (001-38363), filed with the Commission on July 8, 2020) |
| 10.34+ |
|
Amendment to Sponsorship and Services Agreement, dated June 15, 2020, by and among HOF Village, LLC, National Football Museum, Inc. and Constellation NewEnergy, Inc. (incorporated by reference to Exhibit 10.14 of the Company’s Form 8-K (001-38363), filed with the Commission on July 8, 2020) |
| 10.35 |
|
First Amended and Restated License Agreement, dated September 16, 2019, between the National Football Museum, Inc. and HOF Village, LLC (incorporated by reference to Exhibit 10.5 to Amendment No. 1 to GPAQ Acquisition Holdings, Inc.’s Registration Statement on Form S-4 (File No. 333-234655) filed with the Commission on January 23, 2020) |
| 10.36+ |
|
Amended and Restated Media License Agreement, dated July 1, 2020, among National Football Museum, Inc., HOF Village Media Group, LLC and HOF Village, LLC (incorporated by reference to Exhibit 10.30 of the Company’s Amendment No. 1 to Form S-1 (File No. 333-249133), filed with the Commission on October 19, 2020) |
| 10.37+ |
|
Technology as a Service Agreement, dated October 9, 2020, by and between HOF Village NEWCO, LLC and Johnson Controls, Inc. (incorporated by reference to Exhibit 10.9 of the Company’s Form 10-Q (001-38363), filed with the Commission on November 5, 2020) |
| 10.38+ |
|
Term Loan Agreement, dated December 1, 2020, among Hall of Fame Resort & Entertainment Company, HOF Village Newco, LLC, certain of its subsidiaries, and Aquarian Credit Funding LLC (incorporated by reference to Exhibit 10.1 of the Company’s Form 8-K (001-38363), filed with the Commission on December 3, 2020) |
| 10.39 |
|
Amendment Number 1 to Term Loan Agreement, dated January 28, 2021, among Hall of Fame Resort & Entertainment Company, HOF Village Newco, LLC, certain of its subsidiaries, Aquarian Credit Funding LLC, and the Lenders party thereto (incorporated by reference to Exhibit 10.36 of the Company’s Post-Effective Amendment No. 3 to Form S-1 Registration Statement (File No. 333-249133), filed with the Commission on July 22, 2021) |
| 10.40 |
|
Amendment Number 2 to Term Loan Agreement, dated February 15, 2021, among Hall of Fame Resort & Entertainment Company, HOF Village Newco, LLC, certain of its subsidiaries, Aquarian Credit Funding LLC, and the Lenders party thereto (incorporated by reference to Exhibit 10.37 of the Company’s Post-Effective Amendment No. 3 to Form S-1 Registration Statement (File No. 333-249133), filed with the Commission on July 22, 2021) |
| 10.41 |
|
Amendment Number 3 to Term Loan Agreement, dated as of August 30, 2021 among Hall of Fame Resort & Entertainment Company, HOF Village Newco, LLC, certain of its subsidiaries, Aquarian Credit Funding LLC, and the Lenders party thereto (incorporated by reference to Exhibit 10.1 of the Company’s Form 8-K (001-38363), filed with the Commission on September 1, 2021) |
| 10.42 |
|
Amendment Number 4 to Term Loan Agreement, dated as of August 30, 2021 among Hall of Fame Resort & Entertainment Company, HOF Village Newco, LLC, certain of its subsidiaries, Aquarian Credit Funding LLC, and the Lenders party thereto (incorporated by reference to Exhibit 10.2 of the Company’s Form 8-K (001-38363), filed with the Commission on September 1, 2021) |
| 10.43 |
|
Amendment Number 5 to Term Loan Agreement, dated as of December 15, 2021 among Hall of Fame Resort & Entertainment Company, HOF Village Newco, LLC, certain of its subsidiaries, Aquarian Credit Funding LLC, and the Lenders party thereto (incorporated by reference to Exhibit 10.5 of the Company’s Form 8-K (001-38363), filed with the Commission on December 16, 2021) |
| 10.44 |
|
Assignment of Loan and Loan Documents, dated as of March 1, 2022, by and among Aquarian Credit Funding LLC, as administrative agent, Investors Heritage Life Insurance Company (“IHLIC”), as a lender, and CH Capital Lending, LLC, as assignee* |
| 10.45 |
|
Amendment Number 6 to Term Loan Agreement, dated as of March 1, 2022, among Hall of Fame Resort & Entertainment Company, HOF Village Newco, LLC, certain of its subsidiaries, and CH Capital Lending, LLC, as administrative agent and lender (incorporated by reference to Exhibit 10.1 of the Company’s Form 8-K (001-38363), filed with the Commission on March 2, 2022) |
| 10.46 |
|
Letter Agreement, dated as of December 1, 2020, by and among Hall of Fame Resort & Entertainment Company, HOF Village Newco, LLC, certain of its subsidiaries, and IRG Master Holdings, LLC (incorporated by reference to Exhibit 10.36 to the Company’s Registration Statement on Form S-1 (File No. 333-252807) filed with the Commission on February 5, 2021) |
| 10.47 |
|
Securities Purchase Agreement, dated December 29, 2020, between Hall of Fame Resort & Entertainment Company, Industrial Realty Group, LLC and CH Capital Lending, LLC (incorporated by reference to Exhibit 10.1 of the Company’s Form 8-K (001-38363), filed with the Commission on December 30, 2020) |
| 10.48 |
|
Securities Purchase Agreement, dated May 13, 2021, between Hall of Fame Resort & Entertainment Company and IRG, LLC (incorporated by reference to Exhibit 10.1 of the Company’s Form 8-K (001-38363), filed with the Commission on May 14, 2021) |
| 10.49 |
|
Equity Distribution Agreement, dated September 30, 2021, by and among Hall of Fame Resort & Entertainment Company, Wedbush Securities Inc. and Maxim Group LLC (incorporated by reference to Exhibit 1.1 of the Company’s Form 8-K (001-38363), filed with the Commission on October 1, 2021) |
| 10.50 |
|
Promissory Note, date November 23, 2021, issued by Hall of Fame Resort & Entertainment Company to Industrial Realty Group, LLC (incorporated by reference to Exhibit 10.1 of the Company’s Form 8-K (001-38363), filed with the Commission on November 24, 2021) |
| 10.51 |
|
Assignment of Promissory Note, dated March 1, 2022, by Industrial Realty Group, LLC in favor of IRG, LLC and JKP Financial, LLC, as assignees* |
| 10.52 |
|
First Amended and Restated Promissory Note, dated March 1, 2022, issued by Hall of Fame Resort & Entertainment Company to IRG, LLC (incorporated by reference to Exhibit 10.2 of the Company’s Form 8-K (001-38363), filed with the Commission on March 2, 2022) |
| 10.53 |
|
First Amended and Restated Promissory Note, dated March 1, 2022, issued by Hall of Fame Resort & Entertainment Company to JKP Financial, LLC (incorporated by reference to Exhibit 10.3 of the Company’s Form 8-K (001-38363), filed with the Commission on March 2, 2022) |
| 10.54 |
|
Loan Agreement, dated December 15, 2021, between HOF Village Center For Excellence, LLC, as borrower, and ErieBank, a division of CNB Bank, a wholly owned subsidiary of CNB Financial Corporation, as lender (incorporated by reference to Exhibit 10.1 of the Company’s Form 8-K (001-38363), filed with the Commission on December 16, 2021) |
| 10.55 |
|
Promissory Note, dated December 15, 2021, issued by HOF Village Center For Excellence, LLC to ErieBank, a division of CNB Bank, a wholly owned subsidiary of CNB Financial Corporation (incorporated by reference to Exhibit 10.2 of the Company’s Form 8-K (001-38363), filed with the Commission on December 16, 2021) |
| 10.56 |
|
Guaranty of Payment, dated December 15, 2021, by Hall of Fame Resort & Entertainment Company (incorporated by reference to Exhibit 10.3 of the Company’s Form 8-K (001-38363), filed with the Commission on December 16, 2021) |
| 10.57 |
|
Energy Project Cooperative Agreement, dated December 15, 2021, among the City of Canton, Ohio, the Canton Regional Energy Special Improvement District, Inc., HOF Village Center For Excellence, LLC and Pace Equity, LLC (incorporated by reference to Exhibit 10.4 of the Company’s Form 8-K (001-38363), filed with the Commission on December 16, 2021) |
| 21.1 |
|
Subsidiaries* |
| 23.1 |
|
Consent of independent registered public accountant.* |
| 31.1 |
|
Certification of the Principal Executive Officer required by Rule 13a-14(a) or Rule 15d-14(a)* |
| 31.2 |
|
Certification of the Principal Financial Officer required by Rule 13a-14(a) or Rule 15d-14(a)* |
| 32 |
|
Certification of the Principal Executive Officer and Principal Financial Officer required by Rule 13a-14(a) or Rule 15d-14(b) and 18 U.S.C. 1350* |
| 101.INS |
|
Inline XBRL Instance Document.* |
| 101.SCH |
|
Inline XBRL Taxonomy Extension Schema Document.* |
| 101.CAL |
|
Inline XBRL Taxonomy Extension Calculation Linkbase Document.* |
| 101.DEF |
|
Inline XBRL Taxonomy Extension Definition Linkbase Document.* |
| 101.LAB |
|
Inline XBRL Taxonomy Extension Label Linkbase Document.* |
| 101.PRE |
|
Inline XBRL Taxonomy Extension Presentation Linkbase Document.* |
| 104 |
|
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).* |
| + | Schedules to this exhibit
have been omitted pursuant to Item 601(b)(2) of Registration S-K. The registrant hereby agrees
to furnish a copy of any omitted schedules to the Commission upon request. |
Item 16. Form 10–K Summary.
Not applicable.
SIGNATURES
Pursuant to the requirements of Section 13 or
15(d) of the Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
| |
HALL OF
FAME RESORT & ENTERTAINMENT COMPANY |
| March 14,
2022 |
|
|
| |
|
|
| |
By: |
/s/
Michael Crawford |
| |
|
Michael Crawford |
| |
|
President and Chief Executive
Officer (Principal Executive Officer) |
Pursuant to the requirements of the Exchange
Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the
dates indicated.
| Signature |
|
Title |
|
Date |
| |
|
|
|
|
| /s/ Michael Crawford |
|
Chief Executive Officer and Director |
|
March 14, 2022 |
| Michael Crawford |
|
(Principal Executive Officer) |
|
|
| |
|
|
|
|
| /s/ John Van Buiten |
|
Vice President of Accounting / Corporate Controller |
|
March 14, 2022 |
| John Van Buiten |
|
(Interim Principal Financial Officer and Interim Principal Accounting Officer) |
|
|
| |
|
|
|
|
| /s/ Anthony J. Buzzelli |
|
Director |
|
March 14, 2022 |
| Anthony J. Buzzelli |
|
|
|
|
| |
|
|
|
|
| /s/ David Dennis |
|
Director |
|
March 14, 2022 |
| David Dennis |
|
|
|
|
| |
|
|
|
|
| /s/ James J. Dolan |
|
Director |
|
March 14, 2022 |
| James J. Dolan |
|
|
|
|
| |
|
|
|
|
| /s/ Karl L. Holz |
|
Director |
|
March 14, 2022 |
| Karl L. Holz |
|
|
|
|
| |
|
|
|
|
| /s/ Stuart Lichter |
|
Director |
|
March 14, 2022 |
| Stuart Lichter |
|
|
|
|
| |
|
|
|
|
| /s/ Curtis Martin |
|
Director |
|
March 14, 2022 |
| Curtis Martin |
|
|
|
|
| |
|
|
|
|
| /s/ Mary Owen |
|
Director |
|
March 14, 2022 |
| Mary Owen |
|
|
|
|
| |
|
|
|
|
| /s/ Edward J. Roth III |
|
Director |
|
March 14, 2022 |
| Edward J. Roth III |
|
|
|
|
| |
|
|
|
|
| /s/ Kimberly K. Schaefer |
|
Director |
|
March 14, 2022 |
| Kimberly K. Schaefer |
|
|
|
|
| |
|
|
|
|
| |
|
Director |
|
|
| Lisa Roy |
|
|
|
|
Hall
of Fame Resort & Entertainment Company
Consolidated
Financial Statements
For
the Years Ended December 31, 2021 and 2020
Table
of Contents
REPORT OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM
To the Stockholders and Board of Directors
of
Hall of Fame Resort & Entertainment Company
Opinion on the Financial Statements
We have audited the accompanying
consolidated balance sheets of Hall of Fame Resort & Entertainment Company (the “Company”) as of December 31, 2021 and
2020, the related consolidated statements of operations, changes in stockholders’ equity and cash flows for each of the two years
in the period ended December 31, 2021, and the related notes (collectively referred to as the “financial statements”). In
our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31,
2021 and 2020, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2021, in
conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements
are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial
statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United
States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities
laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits
in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance
about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to
have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required
to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness
of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing
procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures
that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the
financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management,
as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for
our opinion.
/s/ Marcum LLP
Marcum LLP
We have served as the
Company’s auditor since 2019.
New York, NY
March 14, 2022
HALL OF FAME RESORT & ENTERTAINMENT COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
| | |
As of December 31, | |
| | |
2021 | | |
2020 | |
| | |
| | |
| |
| Assets | |
| | |
| |
| Cash | |
$ | 10,282,983 | | |
$ | 7,145,661 | |
| Restricted cash | |
| 7,105,057 | | |
| 32,907,800 | |
| Accounts receivable, net | |
| 2,367,225 | | |
| 366,089 | |
| Prepaid expenses and other assets | |
| 8,350,604 | | |
| 6,920,851 | |
| Property and equipment, net | |
| 180,460,562 | | |
| 154,355,763 | |
| Project development costs | |
| 128,721,480 | | |
| 107,969,139 | |
| Total assets | |
$ | 337,287,911 | | |
$ | 309,665,303 | |
| | |
| | | |
| | |
| Liabilities and stockholders’ equity | |
| | | |
| | |
| Liabilities | |
| | | |
| | |
| Notes payable, net | |
$ | 101,360,196 | | |
$ | 98,899,367 | |
| Accounts payable and accrued expenses | |
| 12,120,891 | | |
| 20,538,190 | |
| Due to affiliate | |
| 1,818,955 | | |
| 1,723,556 | |
| Warrant liabilities | |
| 13,669,000 | | |
| 19,112,000 | |
| Other liabilities | |
| 3,740,625 | | |
| 4,310,469 | |
| Total liabilities | |
| 132,709,667 | | |
| 144,583,582 | |
| | |
| | | |
| | |
| Commitments and contingencies (Note 6, 7, and 8) | |
| | | |
| | |
| | |
| | | |
| | |
| Stockholders’ equity | |
| | | |
| | |
| Undesignated preferred stock, $0.0001 par value; 4,932,200 shares authorized; no shares issued or outstanding at December 31, 2021 and 2020 | |
| - | | |
| - | |
| Series B convertible preferred stock, $0.0001 par value; 15,200 shares designated; 15,200 and 0 shares issued and outstanding at December 31, 2021 and 2020, respectively | |
| 2 | | |
| - | |
| Common stock, $0.0001 par value; 300,000,000 shares authorized; 97,563,841 and 64,091,266 shares issued and outstanding at December 31, 2021 and 2020, respectively | |
| 9,756 | | |
| 6,410 | |
| Additional paid-in capital | |
| 305,117,091 | | |
| 172,112,688 | |
| Accumulated deficit | |
| (99,951,839 | ) | |
| (6,840,871 | ) |
| Total equity attributable to HOFRE | |
| 205,175,010 | | |
| 165,278,227 | |
| Non-controlling interest | |
| (596,766 | ) | |
| (196,506 | ) |
| Total equity | |
| 204,578,244 | | |
| 165,081,721 | |
| Total liabilities and stockholders’ equity | |
$ | 337,287,911 | | |
$ | 309,665,303 | |
HALL OF FAME RESORT & ENTERTAINMENT COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
| | |
For the Years Ended
December 31, | |
| | |
2021 | | |
2020 | |
| | |
| | |
| |
| Revenues | |
| | |
| |
| Sponsorships, net of activation costs | |
$ | 6,023,863 | | |
$ | 6,424,201 | |
| Rents and cost recoveries | |
| 305,302 | | |
| 474,020 | |
| Event and other revenues | |
| 681,408 | | |
| 38,750 | |
| Hotel revenues | |
| 3,759,811 | | |
| 162,183 | |
| Total revenues | |
| 10,770,384 | | |
| 7,099,154 | |
| | |
| | | |
| | |
| Operating expenses | |
| | | |
| | |
| Property operating expenses | |
| 27,780,351 | | |
| 26,631,821 | |
| Hotel operating expenses | |
| 4,408,691 | | |
| 419,595 | |
| Commission expense | |
| 1,020,774 | | |
| 1,671,964 | |
| Impairment expense | |
| 1,748,448 | | |
| - | |
| Depreciation expense | |
| 12,199,148 | | |
| 11,085,230 | |
| Total operating expenses | |
| 47,157,412 | | |
| 39,808,610 | |
| | |
| | | |
| | |
| Loss from operations | |
| (36,387,028 | ) | |
| (32,709,456 | ) |
| | |
| | | |
| | |
| Other income (expense) | |
| | | |
| | |
| Interest expense, net | |
| (3,580,840 | ) | |
| (5,718,473 | ) |
| Amortization of discount on note payable | |
| (5,160,242 | ) | |
| (10,570,974 | ) |
| Change in fair value of warrant liability | |
| (48,075,943 | ) | |
| 26,733,116 | |
| Business combination costs | |
| - | | |
| (19,137,165 | ) |
| Gain (loss) on extinguishment of debt | |
| 390,400 | | |
| (4,282,220 | ) |
| Total other expense | |
| (56,426,625 | ) | |
| (12,975,716 | ) |
| | |
| | | |
| | |
| Net loss | |
$ | (92,813,653 | ) | |
$ | (45,685,172 | ) |
| | |
| | | |
| | |
| Series B preferred stock dividends | |
| (697,575 | ) | |
| - | |
| Loss attributable to non-controlling interest | |
| 400,260 | | |
| 196,506 | |
| | |
| | | |
| | |
| Net loss attributable to HOFRE stockholders | |
$ | (93,110,968 | ) | |
$ | (45,488,666 | ) |
| | |
| | | |
| | |
| Net loss per share, basic and diluted | |
$ | (1.03 | ) | |
$ | (1.71 | ) |
| | |
| | | |
| | |
| Weighted average shares outstanding, basic and diluted | |
| 90,295,878 | | |
| 26,644,449 | |
HALL OF FAME RESORT & ENTERTAINMENT COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2021 and 2020
| | |
Series B Convertible
Preferred stock | | |
Common Stock | | |
Additional
Paid-In | | |
Retained
Earnings
(Accumulated | | |
Total Equity
Attributable
to HOFRE | | |
Non-controlling | | |
Total
Stockholders’ | |
| | |
Shares | | |
Amount | | |
Shares | | |
Amount | | |
Capital | | |
Deficit) | | |
Stockholders | | |
Interest | | |
Equity | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| |
| Balance as of January 1, 2020 | |
| - | | |
$ | - | | |
| 5,436,000 | | |
$ | 544 | | |
$ | - | | |
$ | 34,948,795 | | |
$ | 34,949,339 | | |
$ | - | | |
$ | 34,949,339 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Contribution from shareholders | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 3,699,000 | | |
| 3,699,000 | | |
| - | | |
| 3,699,000 | |
| Conversion of the preferred equity loan | |
| - | | |
| - | | |
| 12,277,428 | | |
| 1,228 | | |
| 58,438,346 | | |
| - | | |
| 58,439,574 | | |
| - | | |
| 58,439,574 | |
| Shares of common stock issued for accounts payable and due to affiliates | |
| - | | |
| - | | |
| 2,292,624 | | |
| 229 | | |
| 23,425,932 | | |
| - | | |
| 23,426,161 | | |
| - | | |
| 23,426,161 | |
| Business combination with GPAQ on July 1, 2020 | |
| - | | |
| - | | |
| 6,538,201 | | |
| 653 | | |
| 494,179 | | |
| - | | |
| 494,832 | | |
| - | | |
| 494,832 | |
| Shares of common stock issued in exchange of debt | |
| - | | |
| - | | |
| 16,093,857 | | |
| 1,609 | | |
| 54,516,767 | | |
| - | | |
| 54,518,376 | | |
| - | | |
| 54,518,376 | |
| Stock-based compensation on restricted stock awards | |
| - | | |
| - | | |
| 715,929 | | |
| 72 | | |
| 2,772,733 | | |
| - | | |
| 2,772,805 | | |
| - | | |
| 2,772,805 | |
| Stock-based compensation on restricted stock units | |
| - | | |
| - | | |
| - | | |
| - | | |
| 1,554,968 | | |
| - | | |
| 1,554,968 | | |
| - | | |
| 1,554,968 | |
| Vesting of restricted stock units | |
| - | | |
| - | | |
| 176,514 | | |
| 18 | | |
| (18 | ) | |
| - | | |
| - | | |
| - | | |
| - | |
| Stock-based compensation - common stock awards | |
| - | | |
| - | | |
| 25,000 | | |
| 3 | | |
| 195,997 | | |
| - | | |
| 196,000 | | |
| - | | |
| 196,000 | |
| Contingent beneficial conversion feature on PIPE Notes | |
| - | | |
| - | | |
| - | | |
| - | | |
| 14,166,339 | | |
| - | | |
| 14,166,339 | | |
| - | | |
| 14,166,339 | |
| November 18, 2020 capital raise, net of offering costs | |
| - | | |
| - | | |
| 17,857,142 | | |
| 1,786 | | |
| 14,476,624 | | |
| - | | |
| 14,478,410 | | |
| - | | |
| 14,478,410 | |
| December 4, 2020 capital raise, net of offering costs | |
| - | | |
| - | | |
| 2,678,571 | | |
| 268 | | |
| 2,070,821 | | |
| - | | |
| 2,071,089 | | |
| - | | |
| 2,071,089 | |
| Net loss | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| (45,488,666 | ) | |
| (45,488,666 | ) | |
| (196,506 | ) | |
| (45,685,172 | ) |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Balance as of December 31, 2020 | |
| - | | |
$ | - | | |
| 64,091,266 | | |
$ | 6,410 | | |
$ | 172,112,688 | | |
$ | (6,840,871 | ) | |
$ | 165,278,227 | | |
$ | (196,506 | ) | |
$ | 165,081,721 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Stock-based compensation on restricted stock units (“RSU”)
and restricted stock awards (“RSA”) | |
| - | | |
| - | | |
| - | | |
| - | | |
| 5,510,134 | | |
| - | | |
| 5,510,134 | | |
| - | | |
| 5,510,134 | |
| Stock-based compensation - common stock awards | |
| - | | |
| - | | |
| 25,000 | | |
| 2 | | |
| 72,498 | | |
| - | | |
| 72,500 | | |
| - | | |
| 72,500 | |
| February 12, 2021 Capital Raise, net of offering costs | |
| - | | |
| - | | |
| 12,244,897 | | |
| 1,224 | | |
| 27,560,774 | | |
| - | | |
| 27,561,998 | | |
| - | | |
| 27,561,998 | |
| February 18, 2021 Overallotment, net of offering costs | |
| - | | |
| - | | |
| 1,836,734 | | |
| 184 | | |
| 4,184,814 | | |
| - | | |
| 4,184,998 | | |
| - | | |
| 4,184,998 | |
| Issuance of vested RSUs | |
| - | | |
| - | | |
| 24,028 | | |
| 2 | | |
| (2 | ) | |
| - | | |
| - | | |
| - | | |
| - | |
| Issuance of vested RSAs | |
| - | | |
| - | | |
| 66,451 | | |
| 6 | | |
| (6 | ) | |
| - | | |
| - | | |
| - | | |
| - | |
| Sale of Series B preferred stock and warrants | |
| 15,200 | | |
| 2 | | |
| - | | |
| - | | |
| 15,199,998 | | |
| - | | |
| 15,200,000 | | |
| - | | |
| 15,200,000 | |
| Vesting of RSUs, net of tax | |
| - | | |
| - | | |
| 841,218 | | |
| 84 | | |
| (84 | ) | |
| - | | |
| - | | |
| - | | |
| - | |
| Exercise of Warrants | |
| - | | |
| - | | |
| 16,775,143 | | |
| 1,678 | | |
| 77,002,464 | | |
| - | | |
| 77,004,142 | | |
| - | | |
| 77,004,142 | |
| Sale of common stock under at the market offering | |
| - | | |
| - | | |
| 1,659,104 | | |
| 166 | | |
| 3,473,813 | | |
| - | | |
| 3,473,979 | | |
| - | | |
| 3,473,979 | |
| Series B preferred stock dividends | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| (697,575 | ) | |
| (697,575 | ) | |
| - | | |
| (697,575 | ) |
| Net loss | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| (92,413,393 | ) | |
| (92,413,393 | ) | |
| (400,260 | ) | |
| (92,813,653 | ) |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Balance as of December 31, 2021 | |
| 15,200 | | |
$ | 2 | | |
| 97,563,841 | | |
$ | 9,756 | | |
$ | 305,117,091 | | |
$ | (99,951,839 | ) | |
$ | 205,175,010 | | |
$ | (596,766 | ) | |
$ | 204,578,244 | |
HALL OF FAME RESORT & ENTERTAINMENT COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
| | |
For the Years Ended
December 31, | |
| | |
2021 | | |
2020 | |
| Cash Flows From Operating Activities | |
| | |
| |
| Net loss | |
$ | (92,813,653 | ) | |
$ | (45,685,172 | ) |
| Adjustments to reconcile net loss to cash flows used in operating activities | |
| | | |
| | |
| Depreciation expense | |
| 12,199,148 | | |
| 11,085,230 | |
| Amortization of note discounts | |
| 5,160,242 | | |
| 10,570,974 | |
| Impairment expense | |
| 1,748,448 | | |
| - | |
| Interest paid in kind | |
| 2,091,990 | | |
| 4,066,691 | |
| (Gain) loss on extinguishment of debt | |
| (390,400 | ) | |
| 4,282,220 | |
| Change in fair value of warrant liability | |
| 48,075,943 | | |
| (26,733,116 | ) |
| Stock-based compensation expense | |
| 5,582,634 | | |
| 4,523,773 | |
| Changes in operating assets and liabilities: | |
| | | |
| | |
| Accounts receivable | |
| (1,626,759 | ) | |
| 989,280 | |
| Prepaid expenses and other assets | |
| (1,429,753 | ) | |
| (4,627,992 | ) |
| Accounts payable and accrued expenses | |
| 1,113,976 | | |
| 29,264,412 | |
| Due to affiliates | |
| 95,399 | | |
| (9,644,241 | ) |
| Other liabilities | |
| (569,844 | ) | |
| 3,542,670 | |
| Net cash used in operating activities | |
| (20,762,629 | ) | |
| (18,365,271 | ) |
| | |
| | | |
| | |
| Cash Flows From Investing Activities | |
| | | |
| | |
| Additions to project development costs and property and equipment | |
| (70,734,055 | ) | |
| (48,614,331 | ) |
| Proceeds from business combination | |
| - | | |
| 31,034,781 | |
| Net cash used in investing activities | |
| (70,734,055 | ) | |
| (17,579,550 | ) |
| | |
| | | |
| | |
| Cash Flows From Financing Activities | |
| | | |
| | |
| Proceeds from notes payable | |
| 37,004,153 | | |
| 106,976,651 | |
| Repayments of notes payable | |
| (39,941,576 | ) | |
| (62,593,562 | ) |
| Payment of financing costs | |
| (1,569,779 | ) | |
| (3,227,898 | ) |
| Payment of Series B dividends | |
| (193,333 | ) | |
| - | |
| Proceeds from sale of common stock under ATM | |
| 3,099,602 | | |
| - | |
| Proceeds from sale of Series B preferred stock and warrants | |
| 15,200,000 | | |
| - | |
| Proceeds from equity raises, net of offering costs | |
| 31,746,996 | | |
| 26,228,499 | |
| Proceeds from exercise of warrants | |
| 23,485,200 | | |
| - | |
| Net cash provided by financing activities | |
| 68,831,263 | | |
| 67,383,690 | |
| | |
| | | |
| | |
| Net (decrease) increase in cash and restricted cash | |
| (22,665,421 | ) | |
| 31,438,869 | |
| | |
| | | |
| | |
| Cash and restricted cash, beginning of period | |
| 40,053,461 | | |
| 8,614,592 | |
| | |
| | | |
| | |
| Cash and restricted cash, end of period | |
$ | 17,388,040 | | |
$ | 40,053,461 | |
| | |
| | | |
| | |
| Cash | |
$ | 10,282,983 | | |
$ | 7,145,661 | |
| Restricted Cash | |
| 7,105,057 | | |
| 32,907,800 | |
| Total cash and restricted cash | |
$ | 17,388,040 | | |
$ | 40,053,461 | |
HALL OF FAME RESORT & ENTERTAINMENT COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
| | |
For the Years Ended
December 31, | |
| | |
2021 | | |
2020 | |
| Supplemental disclosure of cash flow information | |
| | |
| |
| Cash paid during the year for interest | |
$ | 3,068,627 | | |
$ | 5,962,918 | |
| Cash paid for income taxes | |
$ | - | | |
$ | - | |
| | |
| | | |
| | |
| Non-cash investing and financing activities | |
| | | |
| | |
| Project development cost acquired through accounts payable
and accrued expenses, net | |
$ | 5,929,913 | | |
$ | (1,297,215 | ) |
| Settlement of warrant liability | |
$ | 53,518,943 | | |
$ | - | |
| Non-cash contribution from PFHOF in shared services agreement | |
$ | - | | |
$ | 3,699,000 | |
| Accrued dividends | |
$ | 504,242 | | |
$ | - | |
| ATM proceeds receivable | |
$ | 374,377 | | |
$ | - | |
| Conversion of the preferred equity loan to common equity | |
$ | - | | |
$ | 58,439,625 | |
| Shares of common stock issued for accounts payable | |
$ | - | | |
$ | 23,426,161 | |
| Shares of common stock issued in exchange of debt | |
$ | - | | |
$ | 54,518,376 | |
| Conversion of GPAQ Sponsor Loan into convertible PIPE debt | |
$ | - | | |
$ | 500,000 | |
| Deferred financing costs in accounts payable and accrued expenses, net | |
$ | - | | |
$ | 610,810 | |
| Contingent beneficial conversion feature on PIPE Notes | |
$ | - | | |
$ | 14,166,339 | |
| Initial value of warrants accounted for as liabilities | |
$ | - | | |
$ | 45,845,116 | |
| Reclassify amounts from capitalized development costs to property and equipment | |
$ | 34,938,554 | | |
$ | 27,373,715 | |
Hall of Fame
Resort & Entertainment Company and Subsidiaries
Notes to Consolidated
Financial Statements
Note 1: Organization and Nature of Business
Organization and Nature of Business
Hall of Fame Resort &
Entertainment Company, a Delaware corporation (together with its subsidiaries, unless the context indicates otherwise, the “Company”
or “HOFRE”), was incorporated in Delaware as GPAQ Acquisition Holdings, Inc., a wholly owned subsidiary of our legal predecessor,
Gordon Pointe Acquisition Corp. (“GPAQ”), a special purpose acquisition company.
On July 1, 2020, the Company
consummated a business combination with HOF Village, LLC, a Delaware limited liability company (“HOF Village”), pursuant to
an Agreement and Plan of Merger dated September 16, 2019 (as amended on November 6, 2019, March 10, 2020 and May 22, 2020, the “Merger
Agreement”), by and among the Company, GPAQ, GPAQ Acquiror Merger Sub, Inc., a Delaware corporation (“Acquiror Merger Sub”),
GPAQ Company Merger Sub, LLC, a Delaware limited liability company (“Company Merger Sub”), HOF Village and HOF Village Newco,
LLC, a Delaware limited liability company (“Newco”). The transactions contemplated by the Merger Agreement are referred to
as the “Business Combination”.
Upon the consummation of
the Business Combination: (i) Acquiror Merger Sub merged with and into GPAQ, with GPAQ continuing as the surviving entity (the “Acquiror
Merger”) and (ii) Company Merger Sub merged with and into Newco, with Newco continuing as the surviving entity (the “Company
Merger”). In advance of the Company Merger, HOF Village transferred all of its assets, liabilities and obligations to Newco pursuant
to a contribution agreement. In connection with the closing of the Business Combination, the Company changed its name from “GPAQ
Acquisition Holdings, Inc.” to “Hall of Fame Resort & Entertainment Company.” As a result of the Business Combination,
GPAQ and Newco continue as the Company’s wholly owned subsidiaries. Upon consummation of the Business Combination and, in connection
therewith, HOFRE became a successor issuer to GPAQ by operation of Rule 12g-3(a) promulgated under the Securities Exchange Act of 1934,
as amended (the “Exchange Act”). The Business Combination is, in substance, a reverse merger recapitalization and accordingly,
the historical financials prior to the date of the Business Combination in these consolidated financial statements are those of HOF Village
LLC and its subsidiaries. The Business Combination is further described in Note 11.
The Company is a resort and
entertainment company leveraging the power and popularity of professional football and its legendary players in partnership with the National
Football Museum, Inc., doing business as the Pro Football Hall of Fame (“PFHOF”). Headquartered in Canton, Ohio, the Company
owns the Hall of Fame Village powered by Johnson Controls, a multi-use sports, entertainment, and media destination centered around the
PFHOF’s campus. The Company is pursuing a differentiation strategy across three pillars, including destination-based assets, HOF
Village Media Group, LLC (“Hall of Fame Village Media”), and gaming (including the fantasy football league in which the Company
acquired a majority stake in 2020).
The Company has entered into
several agreements with PFHOF, an affiliate of the Company, and certain government entities, which outline the rights and obligations
of each of the parties with regard to the property on which the Hall of Fame Village powered by Johnson Controls sits, portions of which
are owned by the Company and portions of which are net leased to the Company by the government entities (see Note 7 for additional information).
Under these agreements, PFHOF and the government entities are entitled to use portions of the Hall of Fame Village powered by Johnson
Controls on a direct-cost basis.
COVID-19
Since 2020, the world has been, and continues to be, impacted by the
novel coronavirus (“COVID-19”) pandemic. COVID-19 and measures to prevent its spread impacted the Company’s business
in a number of ways, most significantly with regard to a reduction in the number of events and attendance at events at Tom Benson Hall
of Fame Stadium and Sports Complex, which negatively impacts the Company’s ability to sell sponsorships. Also, the Company opened
its newly renovated DoubleTree by Hilton in Canton in November 2020, but the occupancy rate has been negatively impacted by the pandemic.
Further, the COVID-19 pandemic has caused a number of supply chain disruptions, which negatively impacts the Company’s ability to
obtain the materials needed to complete construction. The impact of these disruptions and the extent of their adverse impact on the Company’s
financial and operating results will be dictated by the length of time that such disruptions continue, which will, in turn, depend on
the currently unpredictable duration and severity of the impacts of COVID-19, and among other things, the impact of governmental actions
imposed in response to COVID-19 as well as individuals’ and companies’ risk tolerance regarding health matters going forward
and developing strain mutations.
Hall of Fame
Resort & Entertainment Company and Subsidiaries
Notes to Consolidated
Financial Statements
Note 1: Organization and Nature of Business (continued)
Liquidity
The Company has sustained recurring losses and negative cash flows
from operations through December 31, 2021. Since inception, the Company’s operations have been funded principally through the issuance
of debt and equity. As of December 31, 2021, the Company had approximately $10 million of unrestricted cash and cash equivalents and $7
million of restricted cash.
During February 2021, the Company received approximately
$34.5 million gross proceeds from the issuance of shares of the Company’s common stock, par value of $0.0001 per share (“Common
Stock”), before offering costs.
On June 4, 2021, the Company completed a private
placement with CH Capital Lending, LLC for a purchase price of $15 million (i) 15,000 shares of 7.00% Series B Convertible Preferred Stock
(the “Series B Preferred Stock”), which are convertible into shares of the Company’s Common Stock, having an aggregate
liquidation preference of $15 million plus any accrued but unpaid dividends to the date of payment, and (ii) 2,450,980 warrants, with
a term of three years, exercisable six months after issuance, each exercisable for one share of Common Stock at an exercise price of $6.90
per share, subject to certain adjustments (the “Series D Warrants”). Also on June 4, 2021, the Company closed a securities
purchase agreement with another purchaser for 200 shares of Series B Preferred Stock and 32,680 Series D Warrants in exchange for $200,000.
On each of August 12, 2021 and September 22, 2021, the Company issued
to American Capital Center, LLC (“ACC”) 900 shares (the “Series A Shares”) of 7.00% Series A Cumulative Redeemable
Preferred Stock (“Series A Preferred Stock”) at a price of $1,000 per share for an aggregate purchase price of $900,000. The
Company will pay ACC an origination fee of 2% of the aggregate purchase price.
On September 30, 2021, the Company entered into
an Equity Distribution Agreement (the “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. Through December 31, 2021, approximately 1.7 million shares were
sold resulting in net proceeds to the Company totaling approximately $3.5 million. The remaining availability under the Equity Distribution
Agreement as of December 31, 2021 is approximately $46.5 million.
On March 1, 2022, the Company and ErieBank agreed
to extend the MKG DoubleTree Loan (as defined in Note 4) in principal amount of $15,300,000 to September 13, 2023. See Note 14, Subsequent
Events, for more information on this transaction.
On March 1, 2022, the Company executed a series
of transactions with Industrial Realty Group, LLC, a Nevada limited liability company that is controlled by the Company’s director
Stuart Lichter (“IRG”) and its affiliates, and JKP Financial, LLC (“JKP”), whereby IRG and JKP, among other things,
extended certain of the Company’s debt in aggregate principal amount of $22,853,831 to March 31, 2024. See Note 14, Subsequent Events,
for more information on these transactions.
On March 3, 2022, the Company signed a nonbinding
term sheet with a commercial lender for construction financing for the Center for Performance in an amount up to $4 million. On March
12, 2022, the Company signed a nonbinding term sheet with a different commercial lender for construction financing for the Retail Promenade
in an amount up to $17.4 million.
Hall of Fame
Resort & Entertainment Company and Subsidiaries
Notes to Consolidated
Financial Statements
Note 1: Organization and Nature of Business (continued)
Liquidity (continued)
The Company believes that, as a result of the
transactions described above and its current ongoing negotiations, it will have sufficient cash and future financing to meet its funding
requirements over the next twelve months from the issuance of these consolidated financial statements. Notwithstanding, the Company expects
that it will need to raise additional financing to accomplish its development plan over the next several years. The Company is seeking
to obtain additional funding through debt, construction lending, and equity financing. There are no assurances that the Company will be
able to raise capital on terms acceptable to the Company or at all, or that cash flows generated from its operations will be sufficient
to meet its current operating costs. If the Company is unable to obtain sufficient amounts of additional capital, it may be required to
reduce the scope of its planned development, which could harm its financial condition and operating results.
Note 2: Summary of Significant Accounting Policies
Basis of Presentation
The accompanying consolidated financial statements
of the Company for the years ended December 31, 2021 and 2020 have been prepared in accordance with accounting principles generally accepted
in the United States of America (“U.S. GAAP”) and applicable rules and regulations of the United States Securities and Exchange
Commission (“SEC”).
Consolidation
The consolidated financial statements include
the accounts and activity of the Company and its wholly owned subsidiaries. Investments in a variable interest entity in which the Company
is not the primary beneficiary, or where the Company does not own a majority interest but has the ability to exercise significant influence
over operating and financial policies, are accounted for using the equity method. All intercompany profits, transactions, and balances
have been eliminated in consolidation.
The Company owns a 60% interest in Mountaineer
GM, LLC (“Mountaineer”), whose results are consolidated into the Company’s results of operations. The Company acquired
60% of the equity interests in Mountaineer for a purchase price of $100 from one of its related parties. The portion of Mountaineer’s
net income (loss) that is not attributable to the Company is included in non-controlling interest.
Hall of Fame
Resort & Entertainment Company and Subsidiaries
Notes to Consolidated
Financial Statements
Note 2: Summary of Significant Accounting Policies (continued)
Emerging Growth Company
The Company is an “emerging growth company,”
as defined in Section 2(a) of the Securities Act of 1933, as amended, (the “Securities Act”), as modified by the Jumpstart
Our Business Startups Act of 2012 (the “JOBS Act”). 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.
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 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 consolidated financial statements and the reported
amounts of revenues and expenses during the reporting period. The most significant estimates and assumptions for the Company relate to
bad debt, depreciation, costs capitalized to project development costs, useful lives of assets, stock-based compensation, fair value
of financial instruments (including the fair value of the Company’s warrant liability), and estimates and assumptions used to measure
impairment. 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 Consolidated
Financial Statements
Note 2: Summary of Significant Accounting Policies (continued)
Property and Equipment and Project Development
Costs
Property and equipment are recorded at historical
cost and depreciated using the straight-line method over the estimated useful lives of the assets. During the construction period, the
Company capitalizes all costs related to the development of the Hall of Fame Village powered by Johnson Controls. Project development
costs include predevelopment costs, amortization of finance costs, real estate taxes, insurance, and other project costs incurred during
the period of development. The capitalization of costs began during the preconstruction period, which the Company defines as activities
that are necessary for the development of the project. The Company ceases cost capitalization when a portion of the project is held available
for occupancy and placed into service. This usually occurs upon substantial completion of all costs necessary to bring a portion of the
project to the condition needed for its intended use, but no later than one year from the completion of major construction activity. The
Company will continue to capitalize only those costs associated with the portion still under construction. Capitalization will also cease
if activities necessary for the development of the project have been suspended. As of December 31, 2021, the second two phases of the
project remained subject to such capitalization.
The Company reviews its property and equipment
and projects under development for impairment whenever events or changes indicate that the carrying value of the long-lived assets may
not be fully recoverable. In cases where the Company does not expect to recover its carrying costs, an impairment charge is recorded.
The Company measures and records impairment losses
on its long-lived assets when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those
assets are less than their carrying amount. Considerable judgment by management is necessary to estimate undiscounted future operating
cash flows, and fair values and accordingly, actual results could vary significantly from such estimates. In August 2021, management determined
that previously capitalized costs for the construction of the Center for Performance should be written off because of significant changes
to the plans for the project that render certain of the current capitalized costs no longer of use for the Center for Performance. Management
reviewed its capitalized costs and identified the costs that had no future benefit. As a result, in the third quarter of 2021, the Company
recorded a $1,748,448 charge as an impairment of project development costs within the accompanying statement of operations.
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 at December 31,
2021 and 2020, 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 at December 31,
2021 and 2020 were $7,105,057 and $32,907,800, respectively.
Hall of Fame
Resort & Entertainment Company and Subsidiaries
Notes to Consolidated
Financial Statements
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.
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 consolidated balance sheet.
Investment in Joint Venture
The Company previously used the equity method
to record the activities of its 50% owned joint venture in Youth Sports. The equity method of accounting required that the Company recognize
its initial capital investment at cost and subsequently, its share of the earnings or losses in the joint venture. The joint venture agreement
was structured whereby the Company was not at risk for losses above its original capital investment. Therefore, the Company did not record
a deficit that would have resulted in the equity being negative from the investment in joint venture.
The maximum exposure to loss represented the potential
loss of assets which may have been recognized by the Company relating to its investment in the joint venture. On May 29, 2020, the Company
acquired the remaining 50% in Youth Sports for the accounts receivable amounts due from them, which was fully reserved as of the date
of the transaction. The results of this non-cash transaction increased the Company’s interest to 100%. Upon acquisition, the Company
consolidated the Youth Sports joint venture, an inactive voting interest entity. The Company accounted for the transaction as an asset
acquisition under a cost accumulation model, and no gain on the change of control of interest was recognized in the consolidation, resulting
in no consolidated assets or liabilities.
Hall of Fame
Resort & Entertainment Company and Subsidiaries
Notes to Consolidated
Financial Statements
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, hotel operation, Hall of Fantasy League, and through the sale of media
assets. 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
consolidated balance sheets. Contractually due but unpaid sponsorship revenue are included in accounts receivable on the accompanying
consolidated balance sheet. Refer to Note 6 for more details. Revenue for rents, cost recoveries, and events are recognized at the time
the respective event or service has been performed.
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 Consolidated
Financial Statements
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 December
31, 2021 and 2020, no liability for unrecognized tax benefits was required to be reported.
The Company’s policy for recording interest
and penalties associated with tax audits is to record such items as a component of general and administrative expense. There were no amounts
accrued for penalties and interest for the years ended December 31, 2021 and 2020. 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 the United States and Ohio as its “major”
tax jurisdictions, and such returns for the years 2017 through 2020 remain subject to examination.
Hall of Fame Resort & Entertainment Company
and Subsidiaries
Notes to Consolidated Financial Statements
Note 2: Summary of Significant Accounting Policies (continued)
Ground
Rent Expense
Ground rent
expense is recognized on a straight-line basis over the life of the related operating lease.
Stock–Based
Compensation
The Company
recognizes compensation expense for all equity-based payments in accordance with ASC 718 “Compensation – Stock Compensation.”
Under fair value recognition provisions, the Company recognizes equity-based compensation net of an estimated forfeiture rate and recognizes
compensation cost only for those shares expected to vest over the requisite service period of the award.
Restricted
stock units are granted at the discretion of the Compensation Committee of the Company’s board of directors (the “Board of
Directors”). These awards are restricted as to the transfer of ownership and generally vest over the requisite service periods,
typically over a 12 to 36-month period.
Segments
The Company
has evaluated its business to determine whether it has multiple operating segments. The Company has concluded that, as of December 31,
2021 and 2020, it only has one operating segment, given that its chief operating decision maker reviews the Company’s results solely
on a consolidated basis.
Hall of Fame
Resort & Entertainment Company and Subsidiaries
Notes to Consolidated
Financial Statements
Note 2: Summary of Significant Accounting Policies (continued)
Warrant Liabilities
The Company accounts for warrants to purchase
shares of the Company’s common stock that are not indexed to its own stock as liabilities at fair value on the balance sheet in
accordance with ASC 815, “Derivatives and Hedging”. The warrants are subject to remeasurement at each balance sheet date and
any change in fair value is recognized as “change in fair value of warrant liabilities” on the statement of operations. The
Company will continue to adjust the liability for changes in fair value until the earlier of the exercise or expiration of the common
stock warrants. At that time, the portion of the warrant liability related to the common stock warrants will be reclassified to additional
paid-in capital.
Advertising Costs
The Company expenses all advertising and marketing
costs as they are incurred and records them as “property operating expenses” on the Company’s consolidated statements
of operations. Total advertising and marketing costs for the years ended December 31, 2021 and 2020 were $611,843 and $484,978, respectively.
Software Development Costs
The Company recognizes all costs incurred to establish
technological feasibility of a computer software product to be sold, leased, or otherwise marketed as research and development costs.
Prior to the point of reaching technological feasibility, all costs shall expensed when incurred. Once the development of the product
establishes technological feasibility, the Company will begin capitalizing these costs. Management exercises its judgement in determining
when technological feasibility is established based on when a product design and working model have been completed and the completeness
of the working model and its consistency with the product design have been confirmed through testing.
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 consolidated balance sheet.
The costs for each film or media will be expensed over the expected release period.
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.
Hall of Fame
Resort & Entertainment Company and Subsidiaries
Notes to Consolidated
Financial Statements
Note 2: Summary of Significant Accounting Policies (continued)
Accounting for Real Estate Investments (continued)
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.
Reclassification
Certain amounts in prior periods relating to the
presentation of accounts receivable and deferred sponsorship revenue have been reclassified to conform to the current period presentation.
Fair Value Measurement
The Company follows FASB’s ASC 820–10,
Fair Value Measurement, to measure the fair value of its financial instruments and to incorporate disclosures about fair value
of its financial instruments. ASC 820–10 establishes a framework for measuring fair value and expands disclosures about fair value
measurements. To increase consistency and comparability in fair value measurements and related disclosures, ASC 820–10 establishes
a fair value hierarchy which prioritizes the inputs to valuation techniques used to measure fair value into three broad levels.
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.
Hall of Fame
Resort & Entertainment Company and Subsidiaries
Notes to Consolidated
Financial Statements
Note 2: Summary of Significant Accounting Policies (continued)
Fair Value Measurement (continued)
The fair value hierarchy gives the highest priority
to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. If
the inputs used to measure the financial assets and liabilities fall within more than one level described above, the categorization is
based on the lowest level input that is significant to the fair value measurement of the instrument.
The carrying amounts of the Company’s financial
assets and liabilities, such as cash, prepaid expenses and other current assets, accounts payable, and accrued expenses approximate their
fair values due to the short-term nature of these instruments.
The Company uses Levels 1 and 3 of the fair value
hierarchy to measure the fair value of its warrant liabilities. The Company revalues such liabilities at every reporting period and recognizes
gains or losses on the change in fair value of the warrant liabilities as “change in fair value of warrant liabilities” in
the consolidated statements of operations.
The following table provides the financial liabilities
measured on a recurring basis and reported at fair value on the balance sheet as of December 31, 2021 and 2020 and indicates the fair
value hierarchy of the valuation inputs the Company utilized to determine such fair value:
| | |
| | |
December 31, | |
| | |
Level | | |
2021 | | |
2020 | |
| Warrant liabilities – Public Series A Warrants | |
| 1 | | |
$ | 4,617,000 | | |
$ | 4,130,000 | |
| Warrant liabilities – Private Series A Warrants | |
| 3 | | |
| 110,000 | | |
| 420,000 | |
| Warrant liabilities – Series B Warrants | |
| 3 | | |
| 2,416,000 | | |
| 9,781,000 | |
| Warrant liabilities – Series C Warrants | |
| 3 | | |
| 6,526,000 | | |
| 4,781,000 | |
| Fair value of aggregate warrant liabilities | |
| | | |
$ | 13,669,000 | | |
$ | 19,112,000 | |
The Series A Warrants issued to the previous shareholders
of GPAQ (the “Public Series A Warrants”) are classified as Level 1 due to the use of an observable market quote in the active
market. Level 3 financial liabilities consist of the Series A Warrants issued to the sponsors of GPAQ (the “Private Series A Warrants”),
the Series B Warrants issued in the Company’s November 2020 follow-on public offering, and the Series C Warrants issued in the Company’s
December 2020 private placement, 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 Consolidated
Financial Statements
Note 2: Summary of Significant Accounting Policies (continued)
Fair Value Measurement (continued)
Initial Measurement
The Company established the initial fair value
of its warrant liabilities at the respective dates of issuance. In the case of the Public Series A Warrants, the Company valued the warrants
using the quoted market price on the date of issuance. In the case of the Private Series A Warrants, Series B Warrants and Series C Warrants,
the Company used a Black Scholes valuation model in order to determine their value. The key inputs into the Black Scholes valuation model
for the initial valuations are below:
| | |
Private Series A Warrants | | |
Series B Warrants | | |
Series C Warrants | |
| | |
July 1,
2020 | | |
November 18,
2020 | | |
December 29,
2020 | |
| Term (years) | |
| 5.0 | | |
| 5.0 | | |
| 5.0 | |
| Stock price | |
$ | 8.44 | | |
$ | 1.22 | | |
$ | 1.29 | |
| Exercise price | |
$ | 11.50 | | |
$ | 1.40 | | |
$ | 1.40 | |
| Dividend yield | |
| 0.0 | % | |
| 0.0 | % | |
| 0.0 | % |
| Expected volatility | |
| 13.3 | % | |
| 49.4 | % | |
| 49.5 | % |
| Risk free interest rate | |
| 0.3 | % | |
| 0.4 | % | |
| 0.4 | % |
| | |
| | | |
| | | |
| | |
| Number of shares | |
| 1,480,000 | | |
| 20,535,713 | | |
| 10,036,925 | |
| Value (per share) | |
$ | 1.74 | | |
$ | 0.52 | | |
$ | 0.52 | |
Subsequent measurement
The following table presents the changes
in fair value of the warrant liabilities:
| | |
Public
Series A
Warrants | | |
Private
Series A
Warrants | | |
Series B
Warrants | | |
Series C
Warrants | | |
Total
Warrant
Liability | |
| Fair value as of January 1, 2021 | |
$ | 4,130,000 | | |
$ | 420,000 | | |
$ | 9,781,000 | | |
$ | 4,781,000 | | |
$ | 19,112,000 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | |
| Settlement of warrants, exercised | |
| - | | |
| - | | |
| (53,518,943 | ) | |
| - | | |
| (53,518,943 | ) |
| Change in fair value, exercised | |
| - | | |
| - | | |
| 43,070,207 | | |
| - | | |
| 43,070,207 | |
| Change in fair value, outstanding | |
| 487,000 | | |
| (310,000 | ) | |
| 3,083,736 | | |
| 1,745,000 | | |
| 5,005,736 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | |
| Fair value as of December 31, 2021 | |
$ | 4,617,000 | | |
$ | 110,000 | | |
$ | 2,416,000 | | |
$ | 6,526,000 | | |
$ | 13,669,000 | |
On March 1, 2022, the Company and IRG amended
the Series C Warrants. See Note 14, Subsequent Events, for more information on this transaction.
The key inputs into the Black Scholes valuation model for the Level
3 valuations as of December 31, 2021 and 2020 are as follows:
| | |
December 31, 2021 | | |
December 31, 2020 | |
| | |
Private
Series A
Warrants | | |
Series B
Warrants | | |
Series C
Warrants | | |
Private
Series A
Warrants | | |
Series B
Warrants | | |
Series C
Warrants | |
| Term (years) | |
| 3.5 | | |
| 3.9 | | |
| 4.0 | | |
| 4.5 | | |
| 4.9 | | |
| 5.0 | |
| Stock price | |
$ | 1.52 | | |
$ | 1.52 | | |
$ | 1.52 | | |
$ | 1.23 | | |
$ | 1.23 | | |
$ | 1.23 | |
| Exercise price | |
$ | 11.50 | | |
$ | 1.40 | | |
$ | 1.40 | | |
$ | 11.50 | | |
$ | 1.40 | | |
$ | 1.40 | |
| Dividend yield | |
| 0.0 | % | |
| 0.0 | % | |
| 0.0 | % | |
| 0.0 | % | |
| 0.0 | % | |
| 0.0 | % |
| Expected volatility | |
| 50.6 | % | |
| 50.6 | % | |
| 50.6 | % | |
| 70.7 | % | |
| 49.5 | % | |
| 49.5 | % |
| Risk free interest rate | |
| 1.3 | % | |
| 1.3 | % | |
| 1.3 | % | |
| 0.3 | % | |
| 0.3 | % | |
| 0.3 | % |
| Number of shares | |
| 2,103,573 | | |
| 3,760,570 | | |
| 10,036,925 | | |
| 2,103,573 | | |
| 20,535,713 | | |
| 10,036,925 | |
| Value (per share) | |
$ | 0.05 | | |
$ | 0.64 | | |
$ | 0.65 | | |
$ | 0.28 | | |
$ | 0.48 | | |
$ | 0.48 | |
Hall of Fame
Resort & Entertainment Company and Subsidiaries
Notes to Consolidated
Financial Statements
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.
At December 31, 2021 and
2020, 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 years ended
December 31, | |
| | |
2021 | | |
2020 | |
| Warrants to purchase shares of Common Stock | |
| 41,012,349 | | |
| 55,303,832 | |
| Unvested restricted stock awards | |
| 238,643 | | |
| 715,929 | |
| Unvested restricted stock units to be settled in shares of Common Stock | |
| 2,207,337 | | |
| 1,672,177 | |
| Shares of Common Stock issuable upon conversion of convertible notes | |
| 3,486,920 | | |
| - | |
| Shares of Common Stock issuable upon conversion of Series B Preferred Stock | |
| 4,967,320 | | |
| - | |
| Total potentially dilutive securities | |
| 51,912,569 | | |
| 57,691,938 | |
Recent Accounting Standards
In February 2016, FASB issued Accounting Standards
Update (“ASU”) No. 2016-02, Leases (Topic 842), as modified by subsequently issued ASU Nos. 2018-01, 2018-10, 2018-11,
2018-20, and 2019-01 (collectively “ASU 2016-02”). ASU 2016-02 requires recognition of right-of-use assets and lease liabilities
on the balance sheet. In June 2020, FASB issued ASU 2020-05, further extending the effective date by one year making it effective for
the Company for annual periods beginning after December 15, 2021 and interim periods within fiscal years beginning after December 15,
2022, with early adoption permitted. Most prominent among the changes in ASU 2016-02 is the lessees’ recognition of a right-of-use
asset and a lease liability for operating leases. The right-of-use asset and lease liability are initially measured based on the present
value of committed lease payments. Leases are classified as either finance or operating, with classification affecting the pattern of
expense recognition. Expenses related to operating leases are recognized on a straight-line basis, while those related to financing leases
are recognized under a front-loaded approach in which interest expense and amortization of the right-of-use asset are presented separately
in the statement of operations. Similarly, lessors are required to classify leases as sales-type, finance, or operating with classification
affecting the pattern of income recognition. As the Company is an emerging growth company and following private company deadlines, the
Company will implement this ASU beginning on January 1, 2022.
Hall of Fame
Resort & Entertainment Company and Subsidiaries
Notes to Consolidated
Financial Statements
Note 2: Summary of Significant Accounting
Policies (continued)
Recent Accounting Standards (continued)
Classification for both lessees and lessors is
based on an assessment of whether risks and rewards as well as substantive control have been transferred through a lease contract. ASU
2016-02 also requires qualitative and quantitative disclosures to assess the amount, timing, and uncertainty of cash flows arising from
leases. The Company is currently evaluating the impact of the pending adoption of this new standard on its condensed consolidated financial
statements.
In March 2019, the FASB issued ASU 2019-01, Leases
(Topic 842): Codification Improvements, which requires an entity (a lessee or lessor) to provide transition disclosures under Topic
250 upon adoption of Topic 842. In February 2020, the FASB issued ASU 2020-02, Financial Instruments – Credit Losses (Topic 326):
Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 119 and Update to SEC Section on Effective Date Related to
Accounting Standards Update No. 2016-02, Leases. The ASU adds and amends SEC paragraphs in the ASC to reflect the issuance of SEC
Staff Accounting Bulletin No. 119 related to the new credit losses standard and comments by the SEC staff related to the revised effective
date of the new leases standard. This new standard is effective for fiscal years beginning after December 15, 2021, including interim
periods within fiscal years beginning after December 15, 2022. Early adoption is permitted. The Company is currently evaluating the impact
of the pending adoption of this new standard on its condensed consolidated financial statements.
The Company expects that, upon the adoption of
ASC 842 on January 1, 2022, the Company will recognize a right of use asset and corresponding lease liability of approximately $4 million.
Subsequent Events
Subsequent events have been evaluated through
March 14, 2022, the date the consolidated financial statements were issued. Except for as disclosed in Notes 1, 2, 4, 9, and 14, no other
events have been identified requiring disclosure or recording.
Note 3: Property and Equipment
Property and equipment consists of the following:
| | |
Useful Life | |
December 31,
2021 | | |
December 31, 2020 | |
| Land | |
| |
$ | 4,186,090 | | |
$ | 535,954 | |
| Land improvements | |
25 years | |
| 31,194,623 | | |
| 31,078,211 | |
| Building and improvements | |
15 to 39 years | |
| 192,384,530 | | |
| 158,020,145 | |
| Equipment | |
5 to 10 years | |
| 2,338,894 | | |
| 2,165,882 | |
| Property and equipment, gross | |
| |
| 230,104,137 | | |
| 191,800,192 | |
| | |
| |
| | | |
| | |
| Less: accumulated depreciation | |
| |
| (49,643,575 | ) | |
| (37,444,429 | ) |
| Property and equipment, net | |
| |
$ | 180,460,562 | | |
$ | 154,355,763 | |
| | |
| |
| | | |
| | |
| Project development costs | |
| |
$ | 128,721,480 | | |
$ | 107,969,139 | |
Hall of Fame
Resort & Entertainment Company and Subsidiaries
Notes to Consolidated
Financial Statements
Note 3: Property and Equipment (continued)
For the years ended December 31, 2021 and 2020,
the Company recorded depreciation expense of $12,199,148 and $11,085,230, respectively. For the years ended December 31, 2021 and 2020,
the Company incurred $58,581,466 and $19,381,440 of capitalized project development costs, respectively. During October 2021, the Company
placed its Center for Excellence into service and transferred $32,938,554 from project development costs into property and equipment.
In August 2021, management determined that previously
capitalized costs for the construction of the Center for Performance should be written off because of significant changes to the plans
for the project that render certain of the current capitalized costs no longer of use for the Center for Performance. Management reviewed
its capitalized costs and identified the costs that had no future benefit. As a result, in the third quarter of 2021, the Company recorded
a $1,748,448 charge as an impairment of project development costs within the accompanying statement of operations.
Included in project development costs are film
development costs of $464,000 and $0 as of December 31, 2021 and 2020, respectively.
Note 4: Notes Payable, net
Notes payable, net consisted of the following
at December 31, 2021:
| | |
Gross | | |
Discount | | |
Net | | |
Interest Rate | | |
Maturity Date
(including effect of March 1, 2022 transactions) |
| TIF loan | |
$ | 9,451,000 | | |
$ | (1,611,476 | ) | |
$ | 7,839,524 | | |
| 5.20 | % | |
7/31/2048 |
| Preferred equity loan | |
| 3,600,000 | | |
| - | | |
| 3,600,000 | | |
| 7.00 | % | |
Various |
| City of Canton Loan | |
| 3,500,000 | | |
| (6,509 | ) | |
| 3,493,491 | | |
| 5.00 | % | |
7/1/2027 |
| New Market/SCF | |
| 2,999,989 | | |
| - | | |
| 2,999,989 | | |
| 4.00 | % | |
12/30/2024 |
| Constellation EME | |
| 5,227,639 | | |
| - | | |
| 5,227,639 | | |
| 6.05 | % | |
12/31/2022 |
| JKP Capital loan | |
| 6,953,831 | | |
| - | | |
| 6,953,831 | | |
| 12.00 | % | |
3/31/2024 |
| MKG DoubleTree Loan | |
| 15,300,000 | | |
| (83,939 | ) | |
| 15,216,061 | | |
| 5.00 | % | |
9/13/2023 |
| Convertible PIPE Notes | |
| 24,059,749 | | |
| (11,168,630 | ) | |
| 12,891,119 | | |
| 10.00 | % | |
3/31/2025 |
| Canton Cooperative Agreement | |
| 2,670,000 | | |
| (174,843 | ) | |
| 2,495,157 | | |
| 3.85 | % | |
5/15/2040 |
| Aquarian Mortgage Loan | |
| 7,400,000 | | |
| (439,418 | ) | |
| 6,960,582 | | |
| 10.00 | % | |
3/31/2024 |
| Constellation EME #2 | |
| 4,455,346 | | |
| - | | |
| 4,455,346 | | |
| 5.93 | % | |
4/30/2026 |
| IRG Note | |
| 8,500,000 | | |
| - | | |
| 8,500,000 | | |
| 8.00 | % | |
3/31/2024 |
| ErieBank Loan | |
| 13,353,186 | | |
| (598,966 | ) | |
| 12,754,220 | | |
| 4.50 | % | |
6/15/2034 |
| PACE Equity Loan | |
| 8,250,966 | | |
| (277,729 | ) | |
| 7,973,237 | | |
| 6.05 | % | |
12/31/2046 |
| Total | |
$ | 115,721,706 | | |
$ | (14,361,510 | ) | |
$ | 101,360,196 | | |
| | | |
|
Hall of Fame
Resort & Entertainment Company and Subsidiaries
Notes to Consolidated
Financial Statements
Note 4: Notes Payable, net (continued)
Notes payable, net consisted of the following
at December 31, 2020:
| | |
Gross | | |
Discount | | |
Net | |
| TIF loan | |
$ | 9,654,000 | | |
$ | (1,666,725 | ) | |
$ | 7,987,275 | |
| Syndicated unsecured term loan | |
| 170,090 | | |
| - | | |
| 170,090 | |
| Preferred equity loan | |
| 1,800,000 | | |
| - | | |
| 1,800,000 | |
| Naming rights securitization loan | |
| 1,821,559 | | |
| (113,762 | ) | |
| 1,707,797 | |
| City of Canton Loan | |
| 3,500,000 | | |
| (7,681 | ) | |
| 3,492,319 | |
| New Market/SCF | |
| 2,999,989 | | |
| - | | |
| 2,999,989 | |
| Constellation EME | |
| 9,900,000 | | |
| - | | |
| 9,900,000 | |
| Paycheck protection plan loan | |
| 390,400 | | |
| - | | |
| 390,400 | |
| JKP Capital loan | |
| 6,953,831 | | |
| (13,887 | ) | |
| 6,939,944 | |
| MKG DoubleTree Loan | |
| 15,300,000 | | |
| (443,435 | ) | |
| 14,856,565 | |
| Convertible PIPE Notes | |
| 21,797,670 | | |
| (13,475,202 | ) | |
| 8,322,468 | |
| Canton Cooperative Agreement | |
| 2,670,000 | | |
| (181,177 | ) | |
| 2,488,823 | |
| Aquarian Mortgage Loan | |
| 40,000,000 | | |
| (2,156,303 | ) | |
| 37,843,697 | |
| Total | |
$ | 116,957,539 | | |
$ | (18,058,172 | ) | |
$ | 98,899,367 | |
During the years ended December 31, 2021 and 2020, the Company recorded
amortization of note discounts of $5,160,242 and $10,570,974, respectively. During the years ended December 31, 2021 and 2020, the Company
recorded paid-in-kind interest of $2,091,990 and $4,066,691, respectively.
Accrued Interest on Notes Payable
As of December 31, 2021 and 2020, accrued interest
on notes payable, were as follows:
| | |
December 31, | |
| | |
2021 | | |
2020 | |
| TIF loan | |
$ | 22,208 | | |
$ | - | |
| Preferred equity loan | |
| 203,350 | | |
| 27,125 | |
| New Market/SCF | |
| 89,682 | | |
| - | |
| Constellation EME | |
| - | | |
| 248,832 | |
| Paycheck protection plan loan | |
| - | | |
| 2,706 | |
| City of Canton Loan | |
| 5,979 | | |
| 4,472 | |
| JKP Capital Note | |
| 1,251,395 | | |
| 416,836 | |
| MKG Doubletree loan | |
| - | | |
| 67,716 | |
| Canton Cooperative Agreement | |
| 39,416 | | |
| 20,593 | |
| Aquarian Mortgage Loan | |
| - | | |
| 333,333 | |
| ErieBank Loan | |
| 26,706 | | |
| - | |
| PACE Equity Loan | |
| 30,824 | | |
| - | |
| Total | |
$ | 1,669,560 | | |
$ | 1,121,613 | |
The amounts above were included in “accounts
payable and accrued expenses” and “other liabilities” on the Company’s consolidated balance sheets, as follows:
| | |
December 31, | |
| | |
2021 | | |
2020 | |
| Accounts payable and accrued expenses | |
$ | 1,669,560 | | |
$ | 1,094,488 | |
| Other liabilities | |
| - | | |
| 27,125 | |
| | |
$ | 1,669,560 | | |
$ | 1,121,613 | |
Hall of Fame
Resort & Entertainment Company and Subsidiaries
Notes to Consolidated
Financial Statements
Note 4: Notes Payable, net (continued)
TIF Loan
For the Company, the Development Finance Authority
of Summit County (“DFA Summit”) offered a private placement of $10,030,000 in taxable development revenue bonds, Series
2018. The bond proceeds are to reimburse the developer for costs of certain public improvements at the Hall of Fame Village powered by
Johnson Controls, which are eligible uses of tax-incremental funding (“TIF”) proceeds.
Under the cooperative agreement entered into by
the Company, two subsidiaries, the City of Canton, DFA Summit, Stark County Port Authority, and the bank trustee, the Company and certain
subsidiaries have been exempted from certain real estate taxes. However, the Company must make real estate tax payments on the TIF parcels
sufficient to cover future required payments on the bond debt service until the 2018 bonds are no longer outstanding. This is a significant
commitment made by the Company and is guaranteed by an individual’s trust, an individual, and two subsidiaries of the Company.
Since the bond debt service is fixed and determinable,
a liability has been recorded as of December 31, 2021 and 2020, representing the present value of the future bond debt service payments. 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.
7.00% Series A Cumulative Redeemable Preferred
Stock (Preferred Equity Loan)
On April 1, 2021, the Company received $900,000
in advance of a subscription agreement to purchase shares of 7.00% Series A Cumulative Redeemable Preferred Stock (“Series A Preferred
Stock”). On August 12, 2021, the Company entered into a subscription agreement with ACC to issue to the Investor 900 shares of Series
A Preferred Stock at a price of $1,000 per share for an aggregate purchase price of $900,000.
On September 22, 2021, the Company issued an additional
900 shares of Series A Preferred Stock to the Investor at a price of $1,000 per share for an aggregate purchase price of $900,000.
The Company had 3,600 and 1,800 shares of Series
A Preferred Stock outstanding and 52,800 and 52,800 shares of Series A Preferred Stock authorized as of December 31, 2021 and 2020, respectively.
The Series A Preferred Stock is required to be redeemed for cash after five years from the date of issuance and is recorded in “Notes
payable, net” on the Company’s consolidated balance sheet.
City of Canton Loan
On December 30, 2019, the Company entered into
a loan facility with the City of Canton, OH, whereby it may borrow up to $3,500,000. The loan accrues interest at a rate of 0.5%
per annum. Upon an event of default, the interest rate will increase to five percent (5%) per annum on the outstanding balance at the
time of default. The loan shall mature on July 1, 2027. During the year ended December 31, 2020, the Company borrowed the maximum
amount of $3,500,000 on the loan. 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.
Hall of Fame
Resort & Entertainment Company and Subsidiaries
Notes to Consolidated
Financial Statements
Note 4: Notes Payable, net (continued)
New Market/SCF
On December 30, 2019, the Company entered into
a loan facility with New Market Project, Inc., whereby it may borrow up to $3,000,000, of which the proceeds are to be used for the development
of McKinley Grand Hotel, as described below. During the year ended December 31, 2020 the Company borrowed $2,999,989 on this facility.
The loan has a maturity date of December 30, 2024 and accrues interest at a rate of 4% per annum. In the event of default, including
failure to pay upon final maturity, the interest rate shall increase by adding a 5% fee that applies to each succeeding interest
rate change that would have applied had there been no default.
Constellation EME
On December 30, 2019, the Company entered
into a loan facility with Constellation NewEnergy, Inc. (“Constellation”) whereby it may borrow up to $9,900,000 (the
“Constellation Loan Facility”). The proceeds of the Constellation Loan Facility are to be held in escrow by a custodian to
fund future development costs. The proceeds will be released from escrow as development costs are incurred. The Constellation Loan Facility
was amended on April 13, 2020 to modify the payment schedule and maturity date, reflecting current project timetables. The maturity
date is December 31, 2022 and payments are due in 29 monthly installments totaling $11,075,000, with an effective interest rate of 6.1%. Beginning
in August 2020 through December 2020, the monthly installment amount is $55,000, which increases in January 2021 to $450,000 through December
2022. During the year ended December 31, 2020, the Company borrowed the full amount under the Constellation Loan Facility.
The Company also has a sponsorship agreement with
Constellation. Refer to Note 6 for additional information.
Paycheck Protection Program Loan
On April 22, 2020, the Company obtained a Paycheck
Protection Program Loan (“PPP Loan”) for $390,400. The PPP Loan had a fixed interest rate of 1% and required the Company to
make 18 monthly payments beginning on November 22, 2020, with a maturity date of April 22, 2022, subject to debt forgiveness provisions
from the Small Business Association. On February 1, 2021, the Company obtained notice from the Small Business Association that the full
outstanding amount of the PPP Loan was forgiven. During the year ended December 31, 2021, the Company recognized the forgiveness of the
PPP Loan as “Gain on extinguishment of debt” in the Company’s consolidated statement of operations.
Hall of Fame
Resort & Entertainment Company and Subsidiaries
Notes to Consolidated
Financial Statements
Note 4: Notes Payable, net (continued)
JKP Capital
Loan
On June
24, 2020, HOF Village and HOFV Hotel II executed a loan evidenced by a promissory note (the “JKP Capital Loan”) in favor of
JKP Financial, LLC (“JKP”) for the principal sum of $7,000,000. The JKP Capital Loan bears interest at a rate of 12% per annum
and matures on December 2, 2021, on which date all unpaid principal and accrued and unpaid interest is due. The JKP Capital Loan is secured
by the membership interests in HOFV Hotel II held by HOF Village.
On March
1, 2022, the Company and JKP agreed, among other things, to extend the maturity date of the JKP Capital Loan to March 31, 2024. See Note
14, Subsequent Events, for more information.
MKG DoubleTree
Loan
On September
14, 2020, the Company entered into a construction loan agreement with Erie Bank, a wholly owned subsidiary of CNB Financial Corporation,
a Pennsylvania corporation, as lender. The Company has applied and been approved for a first mortgage loan for $15.3 million (“MKG
DoubleTree Loan”) with a variable interest rate of 1.75% plus the prime commercial rate, at which no time can it drop below 5%,
for the purpose of renovating the McKinley Grand Hotel in the City of Canton, Ohio. The initial maturity date is 18 months after the exercised
loan date, March 13, 2022, and the agreement includes an extended maturity date of September 13, 2022, should HOFRE need more time with
an extension fee of 0.1% of the then outstanding principal balance. The MKG DoubleTree Loan has certain financial covenants whereby the
Company must maintain a minimum tangible net worth of $5,000,000 and minimum liquidity of not less than $2,000,000. These covenants are
to be tested annually based upon the financial statements at the end of each fiscal year.
On March
1, 2022, the Company and Erie Bank agreed to extend the maturity date of the MKG DoubleTree Loan to September 13, 2023. See Note 14, Subsequent
Events, for more information.
Convertible PIPE Notes
On July 1, 2020, concurrently with the closing
of the Business Combination, the Company entered into a Note Purchase Agreement (the “Note Purchase Agreement”) with certain
funds managed by Magnetar Financial, LLC and other purchasers (together, the “Purchasers”), pursuant to which the Company
agreed to issue and sell to the Purchasers in a private placement (the “Private Placement”) $20,721,293 in aggregate principal
of the Company’s 8.00% Convertible Notes due 2025 (the “PIPE Notes”). Interest on PIPE Notes is payable quarterly in
either cash or an increase in the principal amount of PIPE Notes (“PIK Interest”). If the Company pays interest as PIK Interest,
the interest rate for such payment is 10%, rather than 8%. Pursuant to the terms of the Note Purchase Agreement, the PIPE Notes may be
converted into shares of Common Stock at a conversion price equal to $6.90 per share. There are also Note Redemption Warrants that may
be issued pursuant to the Note Purchase Agreement upon redemption of the PIPE Notes that will be exercisable for a number of shares of
Common Stock to be determined at the time any such warrant is issued. The exercise price per share of Common Stock of any warrant will
be equal to the conversion price of the PIPE Notes at the time such warrant is issued pursuant to the Note Purchase Agreement.
Hall of Fame
Resort & Entertainment Company and Subsidiaries
Notes to Consolidated
Financial Statements
Note 4: Notes Payable, net (continued)
Canton Cooperative Agreement
On September 1, 2020, HOFRE entered into a Cooperative
Agreement with DFA Summit, the City of Canton, Ohio (“Canton”), the Canton Regional Energy Special Improvement District, Inc.
(the “District”), and U.S Bank National Association for the construction of the Series 2020C Project. The Series 2020C Project
constitutes a port authority facility and a special energy improvement project under the Special Improvement District Act. HOFRE applied
and received approval from the District and Canton for the aforementioned project. The loan amount is $2,670,000, with a discount of $182,723,
which will be amortized over the life of the loan using the effective interest method.
In order to pay for the costs of the Series 2020C
Project, the District and HOFRE have requested and been approved by DFA Summit, to issue and sell the Series 2020C Bonds pursuant to an
indenture and make a portion of the proceeds of the Series 2020C Bonds available to the developer to undertake the provision of the Series
2020C Project.
While the Series 2020C Bonds are outstanding,
HOFRE shall pay the special assessment and the service payments semi-annually to the Canton County Treasurer pursuant to and in accordance
with the Assessing Ordinance, the TIF Act, and the TIF Ordinance. The service payments shall be in the same amount as the real property
taxes that would have been charged and payable against the improvements had the TIF Exemption not been granted. The special assessment
payments will be made on January 31st and July 31st over the course of 17 years, commencing on January 31, 2022
with a maturity date of January 31, 2039. For the first eight years, each payment will consist of $188,188 and decrease to $161,567 beginning
in 2030.
Aquarian Mortgage Loan
On December 1, 2020, the Company entered into
a mortgage loan (the “Aquarian Mortgage Loan”) with Aquarian Credit Funding, LLC (“Aquarian”), as administrative
agent and with Investors Heritage Life Insurance Company and Lincoln Benefit Life Company, as lenders, for $40,000,000 of gross proceeds.
The Aquarian Mortgage Loan bears interest at 10% per annum. Upon the occurrence and during the continuance of an event of default,
Aquarian may, at its option, take such action, without notice or demand, that Aquarian deems advisable to protect and enforce its rights
against the Company, including declaring the debt to become immediately due and payable.
On August 30, 2021, the Company and Aquarian amended
the terms of the Aquarian Mortgage Loan whereby the Company paid $20 million to Lincoln Benefit Life Company. In accordance with such
payment, Lincoln Benefit Life Company was removed as a lender and the aggregate principal of the Aquarian Mortgage Loan was reduced to
$20 million as of September 30, 2021. The Company and Aquarian also agreed to extend the maturity date of the Aquarian Mortgage Loan to
March 31, 2022.
On December 15, 2021, the Company repaid approximately
$13 million of the Aquarian Mortgage Loan.
On March 1, 2022, CH Capital Lending, LLC, an
affiliate of our director Stuart Lichter (“CH Capital Lending”), purchased the Aquarian Mortgage Loan from Aquarian, and
the Company and CH Capital Lending agreed, among other things, to extend the due date of the Aquarian Mortgage Loan to March 31, 2024.
See Note 14, Subsequent Events, for more information.
Hall of Fame
Resort & Entertainment Company and Subsidiaries
Notes to Consolidated
Financial Statements
Note 4: Notes Payable, net (continued)
Constellation EME #2
On February 1, 2021, the Company entered into
a loan facility with Constellation whereby it may borrow up to $5,100,000 (the “Constellation EME #2”). The proceeds of the
Constellation EME #2 are to be held in escrow by a custodian to fund future development costs. The proceeds will be released from escrow
as development costs are incurred. The maturity date is April 30, 2026, and payments are due in 60 monthly installments totaling $6,185,716,
with an effective interest rate of 8.7%.
The Company also has a sponsorship agreement
with Constellation. Refer to Note 6 for additional information.
IRG Note
On November 23, 2021, the Company, and IRG entered
into a promissory note (the “IRG Note”) pursuant to which IRG made a loan to the Company in the aggregate amount of $8,500,000
(the “Loan Amount”). Interest will accrue on the outstanding balance of the Note at a rate of 8% per annum, compounded monthly.
The Company will pay interest to IRG under the Note on the first day of each month, in arrears. The Note has a maturity date of June
30, 2022.
On March 1, 2022, IRG assigned 50% of the IRG
Note to IRG, LLC and 50% of the IRG Note to JKP. Also on March 1, 2022, the Company, IRG, and JKP agreed, among other things to extend
the maturity date of the split IRG Note to March 31, 2024. See Note 14, Subsequent Events, for more information.
ErieBank Loan
On December 15, 2021, HOF Village Center For
Excellence, LLC (“CFE”), a wholly-owned subsidiary of the Company, as borrower, entered into a loan agreement with ErieBank,
a division of CNB Bank, a wholly owned subsidiary of CNB Financial Corporation, as lender (“ErieBank”), pursuant to which
the Company may borrow up to $22,040,000 (the “ErieBank Loan”). The maturity date is June 15, 2034, provided CFE has a right
to extend the maturity date for an additional six months to December 15, 2034, subject to certain conditions. Through December 31, 2021,
the Company has borrowed $13,353,186 under the ErieBank Loan.
For the period from disbursement until June 15,
2024 or, if CFE elects and qualifies for an extension option, up to and including December 15, 2024, CFE is obligated to make interest
only monthly payments at a rate equal to the sum of 1.00% plus the prime commercial rate with a floor of 4.50% per annum. Beginning July
2024, or, if CFE elects and qualifies for an extension option, beginning January 2025, CFE shall make monthly principal plus interest
payments based upon an assumed 25-year amortization schedule, with the entire outstanding principal balance plus accrued but unpaid interest
due and payable on the maturity date at a rate, depending on a debt service coverage ratio test, equal to the five-year rate as published
by the Federal Home Loan Bank of Pittsburgh plus 2.65% - 3.00% per annum, with a floor of 3.75% - 4.25%.
The ErieBank Loan is collateralized by the Constellation
Center for Excellence.
PACE Equity Loan
On December 15, 2021, CFE entered into the Energy
Project Cooperative Agreement (the “Cooperative Agreement”) among the City of Canton, Ohio (the “City”), the Canton
Regional Energy Special Improvement District, Inc., CFE and PACE EQUITY LLC (“PACE”). Pursuant to (A) the Cooperative Agreement
and (B) a Resolution of the City Council of the City approving the Petition for Special Assessments for Special Energy Improvement Projects
submitted by CFE and Newco to the City, together with the Canton Regional Energy Special Improvement District Project Plan Supplement
to Plan for Constellation Center for Excellence project a portion of the costs of certain energy components of the Project shall be paid
for with funds from Project advances under the Cooperative Agreement. PACE made available a Project advance in the amount of $8,250,966,
of which $7,500,000.00 was used to pay down the Aquarian Mortgage Loan.
Hall of Fame Resort & Entertainment Company
and Subsidiaries
Notes to Consolidated Financial Statements
Note 4: Notes Payable, net (continued)
Bridge Loan
On June 30, 2020, the
Company entered into an amendment to the $65 million bridge loan (the “Bridge Loan”) dated March 20, 2018, that the Company
had originally utilized to build the Tom Benson Stadium, among the Company, various lenders party thereto (“Lenders”) and
GACP Finance Co., LLC (“GACP”), as administrative agent (the “Term Loan Agreement”), which further extended the
maturity date to November 30, 2020, updated certain defined terms to align with the final transaction structure resulting from the Business
Combination, specified the amount of proceeds from the Business Combination and Private Placement (defined below) that were required to
be paid towards amounts outstanding under the Term Loan Agreement (the “Gordon Pointe Transaction Prepayment Amount”), added
a fee payable to certain Lenders relative to the amounts owed after giving effect to the Gordon Pointe Transaction Prepayment Amount,
amended various provisions related to mandatory prepayments of outstanding amounts owed under the Term Loan Agreement (including, but
not limited to, prepayments due in connection with future equity and debt raises), and other minor amendments regarding HOF Village Hotel
II, LLC (“HOF Village Hotel II”) and Mountaineer to facilitate their planned operations. The Bridge Loan has an exit fee of
1% on the balance due at the maturity of the loan, which the Company is accreting over the term of the Bridge Loan.
At the date of the Business
Combination, on July 1, 2020, the Company used proceeds from the Business Combination to pay $15,500,000 on the Bridge Loan, while an
additional $15,000,000 converted into equity in the newly formed HOFRE. The remaining balance following the Business Combination was approximately
$34,500,000. The maturity date on the remaining balance had been extended one month to November 30, 2020. During the fourth quarter of
2020, the Company paid off the remaining $34,500,000 outstanding balance owed previously using a portion of the proceeds from the November
2020 Public Offering and the Aquarian Mortgage Loan.
Syndicated Unsecured
Term Loan and Preferred Equity Loan
On
January 1, 2016, as amended and restated on October 15, 2017, the Company entered into a financing agreement with a syndicate of lenders,
including affiliates of IRG Canton Village Member, LLC, a member of HOF Village (the “IRG Member”), for a loan amount up to
$150,000,000 as an unsecured promissory note (the “Syndicated Unsecured Term Loan”). The Syndicated Unsecured Term Loan may
not be prepaid either in whole or in part until the initial maturity date without the express consent of the lender. Proceeds from the
Syndicated Unsecured Term Loan are intended to cover working capital and the construction costs for venues including the Tom Benson Hall
of Fame Stadium, youth fields, and campus infrastructure projects. The maturity date is February 26, 2021, and the Syndicated Unsecured
Term Loan accrues interest at a rate of 12% per annum.
On December 11,
2018, the Company and various parties signed the Master Transaction Agreement setting forth various terms and conditions for the development
of the Hall of Fame Village powered by Johnson Controls. As part of the Master Transaction Agreement, American Capital Center, LLC (“ACC”),
an affiliate of the Company, exchanged $106,450,000 of the Company’s debt and $24,470,142 of accrued interest and origination fees,
as well as $336,579 of amounts due to PFHOF, by converting it to preferred equity instruments with a face value of $95,500,000 and an
amended subordinated debt agreement with a face value of $6,450,000. In accordance with the Extinguishment of Liabilities subtopic
of the FASB ASC 470-50, given that ACC was a related party, the Company treated the Master Transaction Agreement as a capital transaction
and recapitalized the debt to equity in the amount of $96,076,120, net of discounts and unamortized deferred financing costs.
The
subordinated debt accrues interest at a rate of 5% and the balance is due February 26, 2021. The remaining subordinated debt is subordinate
to the Bridge Loan. Additionally, the subordinated debt contains a payment-in-kind (“PIK”) interest provision, which represents
contractually deferred interest added to the subordinated debt outstanding balance that is due at maturity. For the years ended December
31, 2020 and 2019, the Company incurred PIK interest of $256,441 and $353,530, respectively. As part of the Business Combination, on July
1, 2020, the entire balance of the Preferred Equity Loan’s and all but $170,089 of the Syndicated Unsecured Term Loan outstanding
were converted into an aggregate of 13,762,039 shares of common stock.
Land Loan with Affiliate
On
July 10, 2017, the Company entered into a promissory note with the PFHOF, an affiliate of HOFRE, for purpose of the acquisition of land
at the Hall of Fame Village powered by Johnson Controls. The promissory note had an outstanding balance of $1,273,888 at June 30, 2020
and December 31, 2019, which bore interest at a rate of 1.22% per annum. The loan may be prepaid in whole or in part without penalty.
For any unpaid balance after December 31, 2017, the interest rate was increased by 5%. The loan was subordinate to the Bridge Loan and
had a maturity date of February 26, 2023. On July 2, 2020, the Company issued 580,000 shares in exchange of (a) full satisfaction of the
promissory note in the amount of $1,273,888, (b) accrued interest in the amount of $50,158, and (c) other amounts due to PFHOF in the
amount of $4,266,793. The Company determined that the issuance of shares for full satisfaction of the note resulted in a loss on extinguishment
of debt of $209,160.
Hall of Fame Resort & Entertainment Company
and Subsidiaries
Notes to Consolidated Financial Statements
Note 4: Notes Payable, net (continued)
Naming Rights Securitization
Loan
On
November 9, 2017, the Company, through a subsidiary, JCIHOFV Financing, LLC, entered into a secured loan with a financial institution
for $22,800,000, collateralized by the entire payment stream of the Johnson Controls Naming Rights Agreement, dated November 17, 2016
(see Note 6). Monthly payments include principal and interest at 4% per annum with the remaining principal balance due on March 31, 2021.
During the year ended December 31, 2021 the loan was repaid in full.
New Market/SCF
On December 30, 2019,
the Company entered into a loan facility with New Market Project, Inc., whereby it may borrow up to $3,000,000, of which the proceeds
are to be used for the development of McKinley Grand Hotel, as described below. During the year ended December 31, 2020 the Company borrowed
$2,999,989 on this facility. The loan has a maturity date of December 30, 2024 and accrues interest at a rate of 4% per annum. In the
event of default, including failure to pay upon final maturity, the interest rate shall increase by adding a 5% fee that applies to each
succeeding interest rate change that would have applied had there been no default.
McKinley Grand Mortgage
On October 22, 2019,
the Company purchased the McKinley Grand Hotel in Canton, Ohio for $3.9 million, which was partially financed by separate notes payable
of $1,900,000 and $1,807,339.
The $1,807,339 note payable,
in favor of CH Capital Lending, LLC (the “CH Capital Note”), accrued interest at a fixed rate equal to 10% per annum. The
Company was required to make payments commencing on or prior to December 30, 2019. The maturity date of the CH Capital Note was April
30, 2020 and interest was payable quarterly. The Company was previously in default on the CH Capital Note, however the CH Capital Note
was paid in full on June 24, 2020.
The $1,900,000 note payable
had a maturity date of October 22, 2021. Interest accrued at a rate equal to the greater of (i) 3.75% or (ii) the sum of the LIBOR rate
plus 2.75%. The Company was required to make interest payments commencing on November 1, 2019, and on the first day of each successive
month until the note was repaid. In September 2020, the Company paid off the full outstanding $1,900,000 principal and interest owed,
using proceeds from the MKG Double Tree Loan.
IRG November Note
On February 7, 2020,
as effective on November 27, 2019, HOF Village, as borrower, entered into a subordinated promissory note with Industrial Realty Group,
as lender, in an amount up to $30,000,000 (the “IRG November Note”). As of December 31, 2019, the aggregate principal amounts,
excluding PIK interest, borrowed under the IRG November Note was $11,585,792. The IRG November Note accrues interest at a rate of 12%
per annum and had a maturity date of November 1, 2020. Additionally, the IRG November Note contained a PIK interest provision, which represents
contractually deferred interest added to the IRG November Note outstanding balance that is due at maturity. For the years ended December
31, 2020 and 2019, the Company incurred $1,858,744 and $85,009 of PIK interest, respectively. On July 1, 2020, upon consummation of the
Business Combination, Industrial Realty Group exchanged $9,000,000 of the outstanding balance under the IRG November Note for PIPE Notes.
Hall of Fame Resort & Entertainment Company
and Subsidiaries
Notes to Consolidated Financial Statements
Note 4: Notes Payable, net (continued)
IRG November Note (continued)
On
December 29, 2020, the Company entered into a securities purchase agreement with Industrial Realty Group, LLC, a Nevada limited liability
company (“IRG”), and CH Capital Lending, LLC, a Delaware limited liability company affiliated with IRG (the “Purchaser”),
pursuant to which the Company sold Purchaser 10,813,774 shares of the Company’s common stock, par value $0.0001 per share, and warrants
to purchase 10,036,925 shares of common stock for an aggregate purchase price of $15,239,653. The Purchase Price was paid in the form
of the cancellation in full of certain financial obligations owed by the Company and its affiliates to IRG and its affiliates in the amount
of the Purchase Price, including the IRG November Note. The Company determined that the issuance of shares and warrants for full satisfaction
of the note resulted in a loss on extinguishment of debt of $3,404,244. The Company valued the warrants using the following assumptions:
| | |
Warrants | |
| Stock Price | |
$ | 1.29 | |
| Exercise Price | |
$ | 1.40 | |
| Dividend Yield | |
| N/A | |
| Expected Volatility | |
| 49.45 | % |
| Risk-Free Interest Rate | |
| 0.37 | % |
| Number of Shares | |
| 10,036,925 | |
| Value (USD) | |
$ | 5,196,116 | |
| Term (in years) | |
| 5.00 | |
SCF Subordinated Note
On June 22, 2020, the
Company entered into a loan facility with Stark Community Foundation (the “SCF Subordinated Note”) for $1,000,000. The SCF
Subordinated Note has a fixed interest rate of 5% per annum, has a PIK interest provision that was payable semi-annually in arrears on
each July 22 and January 22 commencing July 22, 2020, and with a maturity date of June 22, 2023. On July 1, 2020, the SCF Subordinated
Note was exchanged for PIPE Notes, described in greater detail above, under “Convertible PIPE Notes”.
Hall of Fame
Resort & Entertainment Company and Subsidiaries
Notes to Consolidated
Financial Statements
Note 4: Notes Payable, net (continued)
Future Minimum Principal Payments
The minimum required principal payments on notes
payable outstanding as of December 31, 2021 are as follows:
| For the years ending December 31, | |
Amount | |
| 2022 | |
| 44,614,079 | |
| 2023 | |
| 1,589,801 | |
| 2024 | |
| 4,753,428 | |
| 2025 | |
| 29,823,490 | |
| 2026 | |
| 1,397,073 | |
| Thereafter | |
| 33,543,835 | |
| Total Gross Principal Payments | |
$ | 115,721,706 | |
| | |
| | |
| Less: Discount | |
| (14,361,510 | ) |
| | |
| | |
| Total Net Principal Payments | |
$ | 101,360,196 | |
The table above does not
reflect the result of any refinancing of debt subsequent to December 31, 2021.
The Company has various
debt covenants that require certain financial information to be met. If the Company does not meet the requirements of the debt covenants,
the Company will be responsible for paying the full outstanding amount of the note immediately. As of December 31, 2021, the Company
was in compliance with all relevant debt covenants.
Note 5: Stockholders’ Equity
Authorized Capital
On November 3, 2020, the Company’s stockholders
approved an amendment to the Company’s charter to increase the authorized shares of Common Stock from 100,000,000 to 300,000,000.
Consequently, the Company’s charter allows the Company to issue up to 300,000,000 shares of Common Stock and to issue and designate
its rights, without stockholder approval, of up to 5,000,000 shares of preferred stock, par value $0.0001.
Hall of Fame
Resort & Entertainment Company and Subsidiaries
Notes to Consolidated
Financial Statements
Note 5: Stockholders’ Equity (continued)
Series A Preferred Stock Designation
On October 8, 2020, the Company filed a Certificate
of Designations with the Secretary of State of the State of Delaware to establish preferences, limitations, and relative rights of the
Series A Preferred Stock. The number of authorized shares of Series A Preferred Stock is 52,800.
Series B Preferred Stock Designation
On May 13, 2021, the Company filed a Certificate
of Designations with the Secretary of State of the State of Delaware to establish preferences, limitations, and relative rights of the
7.00% Series B Preferred Stock (as defined below). The number of authorized shares of Series B Preferred Stock is 15,200.
7.00% Series B Convertible Preferred Stock
The Company had 15,200 and 0 shares of 7.00% Series
B Convertible Preferred Stock (“Series B Preferred Stock”) outstanding and 15,200 and 0 shares authorized as of December 31,
2021 and 2020, respectively. On the third anniversary of the date on which shares of Series B Preferred Stock are first issued (the “Automatic
Conversion Date”), each share of Series B Preferred Stock, except to the extent previously converted pursuant to an Optional Conversion
(as defined below), shall automatically be converted into shares of Common Stock (the “Automatic Conversion”). At any time
following the date on which shares of Series B Preferred Stock are first issued, and from time to time prior to the Automatic Conversion
Date, each holder of Series B Preferred Stock shall have the right, but not the obligation, to elect to convert all or any portion of
such holder’s shares of Series B Preferred Stock into shares of Common Stock, on terms similar to the Automatic Conversion (any
such conversion, an “Optional Conversion”). The 7.00% Series B Convertible Preferred Stock accrues dividends at a rate of
7% per annum, whether or not declared. Of the 7.00% dividends, 4% is paid regularly, while 3% is paid at the Automatic Conversion Date.
2020 Omnibus Incentive Plan
On July 1, 2020, in connection with the closing
of the Business Combination, the Company’s omnibus incentive plan (the “2020 Omnibus Incentive Plan”) became effective
immediately upon the closing of the Business Combination. The 2020 Omnibus Incentive Plan was previously approved by the Company’s
stockholders and Board of Directors. Subject to adjustment, the maximum number of shares of Common Stock authorized for issuance under
the 2020 Omnibus Incentive Plan was 1,812,727 shares. On June 2, 2021, the Company held its 2021 Annual Meeting whereby the Company’s
stockholders approved an amendment to the 2020 Omnibus Incentive Plan to increase by four million the number of shares of the Company’s
Common Stock, par value $0.0001 per share, that will be available for issuance under the 2020 Omnibus Incentive Plan, resulting in a
maximum of 5,812,727 shares that can be issued under the amended 2020 Omnibus Inventive Plan. The amendment to the 2020 Omnibus Incentive
Plan was previously approved by the Board of Directors of the Company, and the amended 2020 Omnibus Incentive Plan became effective on
June 2, 2021. As of December 31, 2021, 2,500,347 shares remained available for issuance under the 2020 Omnibus Incentive Plan.
Hall of Fame
Resort & Entertainment Company and Subsidiaries
Notes to Consolidated
Financial Statements
Note 5: Stockholders’ Equity (continued)
Equity Distribution Agreement
On September 30, 2021, the Company entered into
an Equity Distribution Agreement with Wedbush Securities Inc. and Maxim Group LLC with respect to an at-the-market offering program under
which the Company may, from time to time, offer and sell shares of the Company’s Common Stock having an aggregate offering price
of up to $50 million. From October 1 through December 31, 2021, approximately 1.7 million shares were sold resulting in net proceeds
to the Company totaling approximately $3.5 million. The remaining availability under the Equity Distribution Agreement as of December
31, 2021 was approximately $46.5 million.
Issuance of Restricted Stock Awards
During the
year ended December 31, 2021, the Company granted 66,451 shares of the Company’s restricted stock (“RSAs”) to its directors
in lieu of their cash fee. The shares vest immediately on the date of grant.
During the
year ended December 31, 2020, the Company granted 715,929 shares of the Company’s RSAs to the Company’s Chief Executive Officer
under the 2020 Omnibus Incentive Plan. The shares will vest at three separate dates, 238,643 on July 2, 2020, 238,643 on July 2, 2021,
and fully vest on July 2, 2022 with a final installment of 238,643. In connection with vesting of 238,643 shares on July 2, 2020, the
Company withheld 106,840 shares for tax withholding.
The Company’s activity in restricted Common
Stock was as follows for the year ended December 31, 2021:
| | |
Number of shares | | |
Weighted
average
grant date
fair value | |
| Non–vested at January 1, 2021 | |
| 477,286 | | |
$ | 9.30 | |
| Granted | |
| 66,451 | | |
$ | 3.98 | |
| Vested | |
| (305,094 | ) | |
$ | 8.41 | |
| Non–vested at December 31, 2021 | |
| 238,643 | | |
$ | 9.31 | |
For the years ended December 31, 2021 and 2020,
stock-based compensation related to restricted stock awards was $2,436,091 and $3,327,280, respectively. Of the employee and director
stock-based compensation expense for the year ended December 31, 2020, $2,218,187 is included as a component of “business combination
costs” on the Company’s condensed consolidated statement of operations. As of December 31, 2021, unamortized stock-based
compensation costs related to restricted share arrangements were $1,109,093 and will be recognized over a weighted average period of
0.5 years.
Hall of Fame
Resort & Entertainment Company and Subsidiaries
Notes to Consolidated
Financial Statements
Note 5: Stockholders’ Equity (continued)
Issuance of Restricted Stock Units
During the year ended December 31, 2021, the Company
granted an aggregate of 1,734,197 Restricted Stock Units (“RSUs”) to its employees and directors. The RSUs were valued at
the value of the Company’s Common Stock on the date of grant, which was a range of $1.98 to $5.29 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.
During the year ended December 31, 2020, the Company
granted an aggregate of 1,676,447 RSUs to its employees and directors. The RSUs were valued at the value of the Company’s Common
Stock on the date of grant, which was a range of $1.30 to $4.67 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 year ended December 31, 2021:
| | |
Number of
shares | | |
Weighted average
grant date
fair value | |
| Non–vested at January 1, 2021 | |
| 1,499,933 | | |
$ | 2.49 | |
| Granted | |
| 1,734,197 | | |
$ | 2.00 | |
| Vested | |
| (1,000,477 | ) | |
$ | 2.04 | |
| Forfeited | |
| (26,316 | ) | |
$ | 1.98 | |
| Non–vested at December 31, 2021 | |
| 2,207,337 | | |
$ | 2.34 | |
For the years ended December 31, 2021 and 2020,
the Company recorded $3,074,043 and $1,003,255, respectively, in employee and director stock-based compensation expense, respectively.
Employee and director stock-based compensation expense is a component of “Property operating expenses” in the consolidated
statement of operations. As of December 31, 2021, unamortized stock-based compensation costs related to restricted stock units were $3,559,537
and will be recognized over a weighted average period of 1.3 years.
Hall of Fame
Resort & Entertainment Company and Subsidiaries
Notes to Consolidated
Financial Statements
Note 5: Stockholders’ Equity (continued)
Warrants
The Company’s warrant activity was as follows for the year ended
December 31, 2021:
| | |
Number of
Shares | | |
Weighted
Average
Exercise
Price (USD) | | |
Weighted
Average
Contractual
Life
(years) | | |
Intrinsic
Value
(USD) | |
| Outstanding - January 1, 2021 | |
| 55,303,832 | | |
$ | 5.92 | | |
| 4.73 | | |
| | |
| Granted | |
| 2,483,660 | | |
$ | 6.90 | | |
| | | |
| | |
| Exercised | |
| (16,775,143 | ) | |
$ | 1.40 | | |
| | | |
| | |
| Outstanding – December 31, 2021 | |
| 41,012,349 | | |
$ | 7.82 | | |
| 3.59 | | |
$ | 1,655,659 | |
| Exercisable – December 31, 2021 | |
| 41,012,349 | | |
$ | 7.82 | | |
| 3.59 | | |
$ | 1,655,659 | |
During the year ended December 31, 2021, warrants
to purchase 16,775,143 shares of Common Stock were exercised with an exercise price of $1.40 per share. These exercises resulted in cash
proceeds to the Company of $23,485,200 and the settlement of the Company’s warrant liability of $53,518,942.
February 2021 Public Offering and Over-allotment
On February 12, 2021, the Company closed its
public offering of 12,244,897 shares of Common Stock at a public offering price of $2.45 per share pursuant to the terms of the underwriting
agreement between the Company and Maxim Group LLC, entered into on February 9, 2021 (the “Underwriting Agreement”). On February
18, 2021, the Company closed the sale of an additional 1,836,734 shares of Common Stock at $2.45 per share pursuant to the exercise of
the underwriters’ over-allotment option in connection with its public offering that closed on February 12, 2021. Under the terms
of the Underwriting Agreement, each of the Company’s executive officers, directors, and stockholders owning more than 5% of the
outstanding Common Stock, signed lock-up agreements pursuant to which each agreed, subject to certain exceptions, not to transact in
the Common Stock for a period of 90 days following February 12, 2021. Gross proceeds including the over-allotment, before underwriting
discounts and commissions and estimated offering expenses, are approximately $34.5 million.
Hall of Fame
Resort & Entertainment Company and Subsidiaries
Notes to Consolidated
Financial Statements
Note 5: Stockholders’ Equity (continued)
Private Placement of Preferred Stock and Warrants
to Purchase Common Stock
On June 4, 2021, in accordance with the previously
announced Securities Purchase Agreement, dated May 13, 2021, between the Company and IRG, LLC, as assigned by IRG, LLC to CH Capital
Lending, LLC, and the binding term sheet dated January 28, 2021, the Company issued and sold to CH Capital Lending, LLC for a purchase
price of $15 million in a private placement (the “New Private Placement”) (i) 15,000 shares of Series B Preferred Stock,
which are convertible into shares of Common Stock, having an aggregate liquidation preference of $15 million plus any accrued but unpaid
dividends to the date of payment, and (ii) 2,450,980 Series D Warrants, with a term of three years, exercisable six months after issuance,
each exercisable for one share of Common Stock at an exercise price of $6.90 per share, subject to certain adjustments. Also on June
4, 2021, the Company closed a securities purchase agreement with another purchaser for 200 shares of Series B Preferred Stock and 32,680
Series D Warrants.
Note 6: Sponsorship Revenue and Associated Commitments
Johnson Controls, Inc.
On July 2, 2020, the Company entered into an Amended
and Restated Sponsorship and Naming Rights Agreement (the “Amended Sponsorship 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 powered
by Johnson Controls”. This is a prospective change, which the Company reflected beginning in the third quarter of 2020.
Additionally, Johnson Controls
has a right to terminate the Naming Rights Agreement if (i) the Company does not provide evidence to Johnson Controls by October 31, 2021,
subject to day-for-day extension due to force majeure, that the Company has secured sufficient debt and equity financing to complete Phase
II, subject to a notice and cure period, (ii) Phase II is not open for business by January 2, 2024 or (iii) HOF Village is in default
beyond applicable notice and cure periods under certain agreements, such as the Technology as a Service Agreement (the “TAAS Agreement”),
any loan document evidencing or securing any construction loan with respect to the Hall of Fame Village powered by Johnson Controls and
any agreement with its general contractor with respect to the construction of the Hall of Fame Village powered by Johnson Controls, among
others.
As of December 31, 2021,
scheduled future cash to be received under the agreement is as follows:
| | |
Unrestricted | | |
Activation | | |
Total | |
| 2022 | |
$ | 4,000,000 | | |
$ | 750,000 | | |
$ | 4,750,000 | |
| 2023 | |
| 4,000,000 | | |
| 750,000 | | |
| 4,750,000 | |
| 2024 | |
| 4,250,000 | | |
| 750,000 | | |
| 5,000,000 | |
| 2025 | |
| 4,250,000 | | |
| 750,000 | | |
| 5,000,000 | |
| Thereafter | |
| 39,781,251 | | |
| 6,750,000 | | |
| 46,531,251 | |
| | |
| | | |
| | | |
| | |
| Total | |
$ | 56,281,251 | | |
$ | 9,750,000 | | |
$ | 66,031,251 | |
As services are provided, the Company is recognizing
revenue on a straight-line basis over the expected term of the Amended Sponsorship Agreement. During the years ended December 31, 2021
and 2020, the Company recognized $4,497,864 and $4,742,111 of net sponsorship revenue related to this deal, respectively.
Hall of Fame
Resort & Entertainment Company and Subsidiaries
Notes to Consolidated
Financial Statements
Note 6: Sponsorship Revenue and Associated Commitments (continued)
First Data Merchant Services LLC
In December 2018, the Company and PFHOF entered
into an 8-year licensing agreement with First Data Merchant Services LLC (“First Data”) and Santander Bank. As of December
31, 2021, scheduled future cash to be received under the agreement is as follows:
Year ending December 31,
| 2022 | |
$ | 150,000 | |
| 2023 | |
| 150,000 | |
| 2024 | |
| 150,000 | |
| 2025 | |
| 150,000 | |
| 2026 | |
| 150,000 | |
| | |
| | |
| Total | |
$ | 750,000 | |
As services are provided, the Company is recognizing
revenue on a straight-line basis over the expected term of the agreement. During the years ended December 31, 2021 and 2020, the Company
recognized $148,575 and $148,982 of net sponsorship revenue related to this deal, respectively.
Constellation NewEnergy, Inc.
On December 19, 2018, the
Company and PFHOF entered into a sponsorship and services agreement with Constellation (the “Constellation Sponsorship Agreement”)
whereby Constellation and its affiliates will provide the gas and electric needs in exchange for certain sponsorship rights. The original
term of the Company’s Constellation Sponsorship Agreement was through December 31, 2028. However, in June 2020, the Company entered
into an amended contract with Constellation which extended the term of the Constellation Sponsorship Agreement through December 31, 2029.
The Constellation Sponsorship
Agreement provides certain rights to Constellation and its employees to benefit from the relationship with the Company from discounted
pricing, marketing efforts, and other benefits as detailed in the agreement. The Constellation Sponsorship Agreement also requires Constellation
to pay sponsorship income and to provide activation fee funds. Activation fee funds are to be used in the year received and do not roll
forward for future years as unspent funds. The amounts are due by March 31 of the year to which they apply, which is represented in the
chart below.
Hall of Fame
Resort & Entertainment Company and Subsidiaries
Notes to Consolidated
Financial Statements
Note 6: Sponsorship Revenue and Associated Commitments (continued)
Constellation
NewEnergy, Inc. (continued)
The Constellation Sponsorship Agreement includes
certain contingencies reducing the sponsorship fee amount owed by Constellation if construction is not on pace with the timeframe noted
in the Constellation Sponsorship Agreement.
The Company also has a note payable with Constellation.
Refer to Note 4 for additional information.
As of December 31, 2021, scheduled future cash
to be received and required activation spend under the Constellation Sponsorship Agreement are as follows:
| | |
Unrestricted | | |
Activation | | |
Total | |
| 2022 | |
$ | 1,396,000 | | |
$ | 200,000 | | |
$ | 1,596,000 | |
| 2023 | |
| 1,423,220 | | |
| 200,000 | | |
| 1,623,220 | |
| 2024 | |
| 1,257,265 | | |
| 166,000 | | |
| 1,423,265 | |
| 2025 | |
| 1,257,265 | | |
| 166,000 | | |
| 1,423,265 | |
| Thereafter | |
| 5,029,057 | | |
| 664,000 | | |
| 5,693,057 | |
| | |
| | | |
| | | |
| | |
| Total | |
$ | 10,362,807 | | |
$ | 1,396,000 | | |
$ | 11,758,807 | |
As services are provided, the Company is recognizing
revenue on a straight-line basis over the expected term of the Constellation Sponsorship Agreement. During the years ended December 31,
2021 and 2020, the Company recognized $1,172,724 and $1,244,655, respectively, of net sponsorship revenue related to this deal.
Other Sponsorship Agreements
The Company maintains other sponsorship agreements
of varying size ranging from one to five in duration.
Note 7: Other Commitments
Canton City School District
The Company has entered
into cooperative agreements with certain governmental entities that support the development of the project overall, where the Company
is an active participant in the agreement activity, and the Company would benefit from the success of the activity.
The Company had a commitment to the Canton City
School District (“CCSD”) to provide a replacement for their Football Operations Center (“FOC”) and to construct
a Heritage Project (“Heritage”). The commitment was defined in the Operations and Use Agreement for HOF Village Complex dated
February 26, 2016.
Hall of Fame
Resort & Entertainment Company and Subsidiaries
Notes to Consolidated
Financial Statements
Note 7: Other Commitments (continued)
Project and Ground Leases
Three wholly owned subsidiaries of the Company
have leases with the Stark County Port Authority to lease project improvements and ground leased property at the Tom Benson Hall of Fame
Stadium, youth fields, and parking areas. On November 25, 2020, the Company entered into an amendment to its Stark County Port Authority
lease, whereby the lease term was extended from January 31, 2056 to September 30, 2114. The future minimum lease commitments under non-cancellable
operating leases described below reflect the amendment that was entered into on November 25, 2020, excluding the amounts yet to be paid
from escrow for the FOC noted above, as follows:
Year ending December 31:
| 2022 | |
$ | 321,900 | |
| 2023 | |
| 321,900 | |
| 2024 | |
| 321,900 | |
| 2025 | |
| 321,900 | |
| 2026 | |
| 321,900 | |
| Thereafter | |
| 40,998,900 | |
| | |
| | |
| Total | |
$ | 42,608,400 | |
Rent expense relating to operating leases totaled
$505,935 and $418,862 for the years ended December 31, 2021 and 2020, respectively, and is recorded as a component of “Property
operating expenses” on the Company’s consolidated statement of operations.
Lessor Commitments
As of December 31, 2021, the Company’s Constellation
Center for Excellence was partially leased, including leases by certain of the Company’s subsidiaries. The future minimum lease
commitments under leases, excluding leases of the Company’s subsidiaries, are as follows:
Year ending December 31:
| 2022 | |
$ | 26,965 | |
| 2023 | |
| 163,666 | |
| 2024 | |
| 163,666 | |
| 2025 | |
| 137,833 | |
| 2026 | |
| 132,666 | |
| Thereafter | |
| 787,117 | |
| | |
| | |
| Total | |
$ | 1,411,914 | |
Hall of Fame
Resort & Entertainment Company and Subsidiaries
Notes to Consolidated
Financial Statements
Note 7: Other Commitments (continued)
SMG Management Agreement
On September 1, 2019, the Company entered into
a Service Agreement with SMG to manage the Tom Benson Hall of Fame Stadium operations. Under that agreement, the Company incurs an annual
management fee of $200,000. Management fee expense for the years ended December 31, 2021 and 2020 was $200,000 and $200,000, respectively,
which is included in “Property operating expenses” on the Company’s consolidated statements of operations. The agreement
term was to end on December 31, 2022. On November 2, 2021, the Company and SMG agreed to terminate the Service Agreement. In connection
with the termination, the Company paid $76,730 to SMG.
ASM Global Booking Services Agreement
On November 2, 2021, the Company and ASM Global
entered into a new booking services agreement, whereby ASM Global will bring concerts, festivals, and other special events to the Tom
Benson Hall of Fame Stadium. ASM Global will receive a portion of all ticket sales for events booked, along with reimbursement of direct
expenses.
Employment Agreements
The Company has employment agreements with many
of its key executive officers that usually have terms between one and three years.
Management Agreement with Crestline Hotels
& Resorts
On October 22, 2019, the Company entered into
a management agreement with Crestline Hotels & Resorts (“Crestline”). The Company appointed and engaged Crestline as
the Company’s exclusive agent to supervise, direct, and control management and operation of the DoubleTree Canton Downtown Hotel.
In consideration of the services performed by Crestline, the Company agreed to the greater of: 2% of gross revenues or $10,000 per month
in base management fees and other operating expenses. The agreement will be terminated on the fifth anniversary of the commencement date,
or October 22, 2024. For the years ended December 31, 2021 and 2020, the Company paid and incurred $120,000 and $73,225 in management
fees, respectively.
Constellation EME Express Equipment Services
Program
On February 1, 2021, the Company entered into
a contract with Constellation whereby Constellation will sell and/or deliver materials and equipment purchased by the Company. The Company
is required to provide $2,000,000 to an escrow account held by Constellation, representing adequate assurance of future performance.
Constellation will invoice the Company in 60 monthly installments, which began in April 2021 for $103,095. Additionally, the Company
has two notes payable with Constellation. See Note 4 for more information.
Hall of Fame
Resort & Entertainment Company and Subsidiaries
Notes to Consolidated
Financial Statements
Note 7: Other Commitments (continued)
TAAS Agreement
On October
9, 2020, Newco, entered into a Technology as a Service Agreement (the “TAAS Agreement”) with JCI. Pursuant to the TAAS Agreement,
JCI will provide certain services related to the construction and development of the Hall of Fame Village powered by JCI (the “Project”),
including, but not limited to, (i) design assist consulting, equipment sales and turn-key installation services in respect of specified
systems to be constructed as part of Phase 2 and Phase 3 of the Project and (ii) maintenance and lifecycle services in respect of certain
systems constructed as part of Phase 1, and to be constructed as part of Phase 2 and Phase 3, of the Project. Under the terms of the TAAS
Agreement, Newco has agreed to pay JCI up to an aggregate of approximately $217 million for services rendered by JCI over the term of
the TAAS Agreement. As of December 31, 2021 and 2020, approximately $199 million and $210 million, respectively, was remaining under the
TAAS Agreement.
Other Liabilities
Other liabilities consisted of the following
at December 31, 2021 and 2020:
| | |
December 31,
2021 | | |
December 31,
2020 | |
| Activation fund reserves | |
$ | 3,537,347 | | |
$ | 3,780,343 | |
| Deferred sponsorship revenue | |
| 203,278 | | |
| 530,126 | |
| Total | |
$ | 3,740,625 | | |
$ | 4,310,469 | |
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 December 31, 2021 and 2020:
| | |
December 31,
2021 | | |
December 31,
2020 | |
| Due to IRG Member | |
$ | 1,041,847 | | |
$ | 1,456,521 | |
| Due to IRG Affiliate | |
| 116,900 | | |
| 140,180 | |
| Due to PFHOF | |
| 660,208 | | |
| 126,855 | |
| Total | |
$ | 1,818,955 | | |
$ | 1,723,556 | |
IRG Canton Village Member, LLC, a member of HOF
Village, LLC controlled by our director Stuart Lichter (the “IRG Member”) and an affiliate, provides certain supporting services
to the Company. As noted in the Operating Agreement of HOF Village, LLC, an affiliate of the IRG Member, IRG Canton Village Manager,
LLC, the manager of HOF Village, LLC controlled by our director Stuart Lichter, may earn a master developer fee calculated as 4.0% of
development costs incurred for the Hall of Fame Village powered by Johnson Controls, including, but not limited to site assembly, construction
supervision, and project financing. These development costs incurred are netted against certain costs incurred for general project management.
For the years ended December 31, 2021 and 2020,
costs incurred under these arrangements were $0 and $1,360,944, respectively, which were included in “Project development costs”
on the condensed consolidated balance sheets.
Hall of Fame
Resort & Entertainment Company and Subsidiaries
Notes to Consolidated
Financial Statements
Note 9: Related-Party Transactions (continued)
Due to Affiliates (continued)
The amounts
due to the IRG Member above are for development fees, human resources support, and the Company’s engagement with them to identify
and obtain naming rights sponsorships and other entitlement partners for the Company. The Company and IRG Member have an arrangement whereby
the Company pays IRG Member $15,000 per month plus commissions. For the years ended December 31, 2021 and 2020, the Company incurred $180,000
and $120,000, respectively under this arrangement.
The due to related party amounts in the table
above are non-interest bearing advances from an affiliate of IRG Member due on demand. The Company is currently in discussions with this
affiliate to establish repayment terms of these advances. However, there could be no assurance that the Company and IRG Member will come
to terms acceptable to both parties.
On January 13, 2020, the Company secured $9.9
million in financing from Constellation through its Efficiency Made Easy (“EME”) program to implement energy efficient measures
and to finance the construction of the Constellation Center for Excellence and other enhancements, as part of Phase II development. The
Hanover Insurance Company provided a guarantee bond to guarantee the Company’s payment obligations under the financing, and Stuart
Lichter and two trusts affiliated with Mr. Lichter have agreed to indemnify The Hanover Insurance Company for payments made under the
guarantee bond.
The amounts above due to PFHOF relate to advances
to and from PFHOF, including costs for onsite sponsorship activation, sponsorship sales support, shared services, event tickets, and
expense reimbursements.
License Agreement
On March 10, 2016, the Company entered into a
license agreement with PFHOF, whereby the Company has the ability to license and use certain intellectual property from PFHOF in exchange
for the Company paying a fee based on certain sponsorship revenues and expenses. On December 11, 2018, the license agreement was amended
to change the calculation of the fee to be 20% of eligible sponsorship revenue. The license agreement was further amended in a First
Amended and Restated License Agreement, dated September 16, 2019. The license agreement expires on December 31, 2033.
Media License Agreement
On November 11, 2019, the Company entered into
a Media License Agreement with PFHOF. On July 1, 2020, the Company entered into an Amended and Restated Media License Agreement that terminates
on December 31, 2034. In consideration of a license to use certain intellectual property of PFHOF, the Company agreed to pay PFHOF minimum
guaranteed license fees of $1,250,000 each year during the term. After the first five years of the agreement, the minimum guarantee shall
increase by 3% on a year-over-year basis. The first annual minimum payment was due July 1, 2021, which was not paid by December 31, 2021.
The Company and PFHOF are currently in the process of renegotiating this agreement.
Hall of Fame
Resort & Entertainment Company and Subsidiaries
Notes to Consolidated
Financial Statements
Note 9: Related-Party Transactions (continued)
Purchase of Real Property from PFHOF
On February 3, 2021, the Company purchased certain
parcels of real property from PFHOF, located at the site of the Hall of Fame Village powered by Johnson Controls, for $1.75 million.
In connection with the purchase, the Company granted certain easements to PFHOF to ensure accessibility to the PFHOF museum.
Shared Services Agreement with PFHOF
On March 9, 2021, the Company entered into an
additional Shared Services Agreement with PFHOF, which supplements the existing Shared Services Agreement by, among other things, providing
for the sharing of costs for activities relating to shared services.
Note 10: Concentrations
For the year ended December 31, 2021, two customers
represented approximately 75% and 19% of the Company’s sponsorship revenue. For the year ended December 31, 2020, two customers
represented approximately 74% and 19% of the Company’s sponsorship revenue.
As of December 31, 2021, one customer represented
approximately 88% of the Company’s sponsorship accounts receivable. As of December 31, 2020, two customers represented approximately
60% and 40% of the Company’s sponsorship accounts receivable.
At any point in time, the Company can have funds
in their operating accounts and restricted cash accounts that are with third-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.
Note 11: Business Combination
On July 1, 2020, the Company (formerly known
as GPAQ Acquisition Holdings, Inc.) consummated the previously announced Business Combination with HOF Village, pursuant to the Merger
Agreement, by and among GPAQ, Acquiror Merger Sub, Company Merger Sub, HOF Village and Newco.
Upon the consummation of the Business Combination:
(i) Acquiror Merger Sub merged with and into GPAQ, with GPAQ continuing as the surviving entity (the “Acquiror Merger”) and
(ii) Company Merger Sub merged with and into Newco, with Newco continuing as the surviving entity (the “Company Merger”).
In advance of the Company Merger, HOF Village transferred all of its assets, liabilities and obligations to Newco pursuant to a contribution
agreement. In connection with the closing of the Business Combination, the Company changed its name from “GPAQ Acquisition Holdings,
Inc.” to “Hall of Fame Resort & Entertainment Company.” As a result of the Business Combination, GPAQ and Newco
continue as our wholly owned subsidiaries.
Hall of Fame
Resort & Entertainment Company and Subsidiaries
Notes to Consolidated
Financial Statements
Note 11: Business Combination (continued)
In connection with the consummation of the Business
Combination and pursuant to the Merger Agreement, (a) each issued and outstanding unit of GPAQ, if not already detached, was detached
and each holder of such a unit was deemed to hold one share of GPAQ Class A common stock and one GPAQ warrant (“GPAQ Warrant”),
(b) each issued and outstanding share of GPAQ Class A common stock (excluding any shares held by a GPAQ stockholder that elected to have
its shares redeemed pursuant to GPAQ’s organizational documents) was converted automatically into the right to receive 1.421333
shares of our common stock, following which all shares of GPAQ Class A common stock ceased to be outstanding and were automatically canceled
and cease to exist; (c) each issued and outstanding share of GPAQ Class F common stock was converted automatically into the right to
receive one share of our common stock, following which all shares of GPAQ Class F common stock ceased to be outstanding and were automatically
canceled and cease to exist; (d) each issued and outstanding GPAQ Warrant (including GPAQ private placement warrants) was automatically
converted into one warrant to purchase 1.421333 shares of our common stock per warrant, following which all GPAQ Warrants ceased to be
outstanding and were automatically canceled and retired and cease to exist; and (e) each issued and outstanding membership interest in
Newco converted automatically into the right to receive a pro rata portion of the Company Merger Consideration (as defined in the Merger
Agreement), which was payable in shares of our common stock. Our common stock is traded on The Nasdaq Capital Market, or Nasdaq, under
the symbol “HOFV” and our outstanding series of warrants (the “Existing Warrants”) are traded on Nasdaq under
the symbol “HOFVW”.
The rights of holders of the Company’s
common stock and Existing Warrants are governed by its amended and restated certificate of incorporation (the “Certificate of Incorporation”),
its amended and restated bylaws (the “Bylaws’) and the Delaware General Corporation Law (the “DGCL”), and in
the case of the Existing Warrants, the Warrant Agreement, dated January 24, 2018, between GPAQ and the Continental Stock Transfer &
Trust Company.
The Company’s net assets acquired through
the consummation of the Business Combination consisted of:
| Cash | |
$ | 31,034,781 | |
| Sponsor loan | |
| (500,000 | ) |
| Warrant liability | |
| (30,040,000 | ) |
| Net assets acquired | |
$ | 494,781 | |
Immediately following the acquisition, the sponsor
loan above was converted into the PIPE Notes. At the date of the Business Combination, on July 1, 2020, the Company used proceeds from
the Business Combination to pay $15,500,000 on the Bridge Loan, while an additional $15,000,000 converted into equity in the
newly formed Hall of Fame Entertainment & Resort entity. The remaining balance following the Business Combination was approximately
$34,500,000. The maturity date on the remaining balance has been extended one month to November 30, 2020. Should the Company be unable
to pay off the principal balance at maturity, Industrial Realty Group agreed to advance funds to the Company to pay off the Bridge Loan,
under the terms of the guarantee. As a result, Industrial Realty Group would become a lender to the Company with a maturity date of August
2021.
Hall of Fame
Resort & Entertainment Company and Subsidiaries
Notes to Consolidated
Financial Statements
Note 11: Business Combination (continued)
On July 1, 2020, concurrently with the closing
of the Business Combination, the Company completed the Private Placement of $20,721,293 in aggregate principal amount of PIPE Notes
with certain funds managed by Magnetar Financial, LLC and the Purchasers. Pursuant to the terms of the Note Purchase Agreement, at the
option of the holders thereof the PIPE Notes may be converted into shares of Common Stock at a conversion price initially equal to $11.50 per
share, subject to formula-based adjustment based on specified events. Accordingly, the aggregate amount of PIPE Notes issued and sold
in the Private Placement is convertible into 1,801,851 shares of Common Stock based on the conversion rate applicable on July
1, 2020.
On July 1, 2020, in connection with the closing
of the Business Combination, holders of Newco’s membership interests as of immediately prior to the closing date entered into a
lock-up agreement (the “Lock-Up Agreement”). Under the Lock-Up Agreement, each party thereto agreed not to sell, offer to
sell, contract or agree to sell, hypothecate, pledge, sell any option or contract to purchase, grant any option, right or warrant, make
any short sale or otherwise transfer or dispose of or lend its portion of any shares of common stock for a period after closing ending
on the date that is the later of (i) 180 days after July 1, 2020 and (ii) the expiration of the Founder Shares Lock-Up Period under,
dated January 24, 2018 among GPAQ, its officers and directors and initial shareholders.
The Company incurred $19,137,165 in costs related
to the Business Combination. Of these costs, $16,718,978 were legal and professional fees, $2,218,187 was related to a restricted stock
award to the Company’s Chief Executive Officer, and $200,000 was related to a cash bonus to the Company’s Chief Executive
Officer.
Note 12: Income Taxes
Significant components of deferred tax assets
were as follows:
| | |
As of December 31, | |
| | |
2021 | | |
2020 | |
| U.S. federal tax loss carry–forward | |
$ | 12,785,012 | | |
$ | 4,143,828 | |
| U.S. local tax loss carry–forward | |
| 1,204,422 | | |
| 389,717 | |
| Equity based compensation-RSUs | |
| 1,122,020 | | |
| 416,157 | |
| Property and equipment | |
| (1,251,926 | ) | |
| (1,741,690 | ) |
| Prepaid rent | |
| (998,606 | ) | |
| (1,040,888 | ) |
| Total deferred tax assets | |
| 12,860,922 | | |
| 2,167,124 | |
| Less: valuation allowance | |
| (12,860,922 | ) | |
| (2,167,124 | ) |
| Net deferred tax asset | |
$ | — | | |
$ | — | |
As of December 31, 2021, the Company had the
following tax attributes:
| | |
Amount | | |
Begins to
expire | |
| U.S. federal net operating loss carry–forwards | |
$ | 60,881,008 | | |
| Indefinite | |
| U.S. local net operating loss carry–forwards | |
| 60,983,412 | | |
| 2026 | |
As of December 31, 2020,
the Company had the following tax attributes:
| | |
Amount | | |
Begins to
expire | |
| U.S. federal net operating loss carry–forwards | |
$ | 19,732,513 | | |
| Indefinite | |
| U.S. local net operating loss carry–forwards | |
| 19,732,513 | | |
| 2025 | |
Hall of Fame
Resort & Entertainment Company and Subsidiaries
Notes to Consolidated
Financial Statements
Note 12: Income Taxes (continued)
As it is not more likely than not that the resulting
deferred tax benefits will be realized, a full valuation allowance has been recognized for such deferred tax assets. As of December 31,
2021, the Company has note performed a review of its changes in ownership under Section 382 of the Internal Revenue Code. However, as
the Company’s net operating losses have a full valuation allowance, any limitations are expected to be immaterial. For the years
ended December 31, 2021 and 2020, the valuation allowance increased by $10,693,798 and $2,167,124, respectively.
The provision for/(benefit from) income tax differs
from the amount computed by applying the statutory federal income tax rate to income before the provision for/(benefit from) income taxes.
The sources and tax effects of the differences are as follows:
| | |
For the Years Ended
December 31, | |
| | |
2021 | | |
2020 | |
| Expected Federal Tax | |
| (21.0 | )% | |
| (21.0 | )% |
| Local Tax (Net of Federal Benefit) | |
| (2.0 | ) | |
| (2.0 | ) |
| Business Combination Expenses | |
| (0.3 | ) | |
| 22.0 | |
| Non-controlling interest | |
| (0.1 | ) | |
| - | |
| Paycheck Protection Program Loan Forgiveness | |
| (0.1 | ) | |
| - | |
| Note Extinguishment | |
| - | | |
| 4.3 | |
| Deferred Tax Liabilities Resulting from Business Combination | |
| - | | |
| 13.2 | |
| Change in fair value of warrant liabilities | |
| 11.9 | | |
| (27.1 | ) |
| Other permanent differences | |
| - | | |
| 1.0 | |
| Change in valuation allowance | |
| 11.6 | | |
| 9.6 | |
| Effective rate of income tax | |
| - | % | |
| - | % |
The Company files income tax returns in the U.S.
federal jurisdiction and local (City of Canton) jurisdictions. As a result of the July 1, 2020 business combination and resulting conversion
from a limited liability company to a corporate taxable entity, deferred tax liabilities of $2,995,870 were recognized from accrual and
tax timing differences of property and equipment and prepaid rent existing at the time of the merger. Prior to the July 1, 2020 business
combination the Company was a pass through entity and was not subject to income tax. The deferred tax liabilities were subsequently offset
by the deferred tax assets created primarily from net operating losses incurred during the period from the merger date through the end
of the year.
Note 13: Employee
Benefit Plans
The Company has a defined
contribution plan (the “Defined Contribution Plan”) whereby employer contributions are discretionary and determined annually.
In addition, the Defined Contribution Plan allows participants to make elective deferral contributions through payroll deductions, of
which the Company will match a portion of those contributions. During the years ended December 31, 2021 and 2020, the Company expensed
matching contributions of $178,621 and $67,817, respectively.
Hall of Fame
Resort & Entertainment Company and Subsidiaries
Notes to Consolidated
Financial Statements
Note 14: Subsequent
Events
Amendment Number
6 to Term Loan
On March 1, 2022, CH
Capital Lending, LLC, which is an affiliate of the Company’s director Stuart Lichter (“CH Capital Lending”), purchased
and acquired, the Company’s $7.4 million Aquarian Loan, as amended.
On March 1, 2022, immediately
after CH Capital Lending became the lender and administrative agent under the Aquarian Loan, the maturity date of the Term Loan was extended
to March 31, 2024. Also under the amendment, the Term Loan was made convertible into shares of the Company’s common stock, par
value $0.0001 per share (“Common Stock”), at a conversion price of $1.50, subject to adjustment. The conversion price is
subject to a weighted-average antidilution adjustment. Certain current and historical fees and expenses were added to the principal amount
of the Aquarian Loan. The interest rate was increased from 10% to 12%. Of such 12% per
annum interest: (i) 8% per annum shall be payable monthly and (ii) 4% per annum shall accumulate and be payable on the maturity date.
As part of the consideration
for the amendment: (i) the Company issued in a transaction exempt from registration pursuant to Section 4(a)(2) of the Securities Act
of 1933, as amended (the “Securities Act”): (A) 330,000 shares of Common Stock to CH Capital Lending, and (B) a Series E
warrant to purchase 1,000,000 shares of Common Stock to CH Capital Lending, (ii) the Company shall, subject to approval of its board
of directors, create a series of preferred stock, to be known as 7.00% Series C Convertible Preferred Stock (“Series C Preferred
Stock”), and, upon the request of CH Capital Lending, exchange each share of the Company’s Series B Convertible Preferred
Stock, that is held by CH Capital Lending for one share of Series C Preferred Stock, and (iii) the Company and CH Capital Lending amended
and restated the Series C Warrants and Series D Warrants that the Company issued to CH Capital Lending.
The Series E Warrants
have an exercise price of $1.50 per share, subject to adjustment. The exercise price is subject to a weighted-average antidilution adjustment.
The Series E Warrants may be exercised from and after March 1, 2023, subject to certain terms and conditions set forth in the Series
E Warrants. Unexercised Series E Warrants will expire on March 1, 2027. The Series E Warrants shall be cancelled without any further
action on the part of the Company or the holder, in the event that the Company repays in full on or before March 1, 2023, the Aquarian
Loan.
Amended and Restated Series C Warrants
The Amended and Restated
Series C Warrants extend the term of the Series C Warrants to March 1, 2027. The exercise price of $1.40 per share doesn’t change,
but the amendments subject the exercise price to a weighted-average antidilution adjustment. The amendments also remove certain provisions
regarding fundamental transactions.
Amended and Restated Series D Warrants
issue to CH Capital Lending
The Amended and Restated
Series D Warrants issued to CH Capital Lending extend the term of such Series D Warrants to March 1, 2027. The exercise price of $6.90
per share doesn’t change, but the amendments subject the exercise price to a weighted-average antidilution adjustment.
Hall of Fame
Resort & Entertainment Company and Subsidiaries
Notes to Consolidated
Financial Statements
Note 14: Subsequent Events (continued)
First Amended and Restated Promissory
Note with IRG, LLC
On March 1, 2022, the
Company amended the IRG Note (the “Amended Assigned IRG Note”). The Amended Assigned IRG Note extended the maturity
to March 31, 2024. Under the Amended Assigned IRG Note, the principal and accrued interest are convertible into shares of Common Stock
at a conversion price of $1.50, subject to adjustment. The conversion price is subject to a weighted-average antidilution adjustment.
As part of the consideration
for the Amended Assigned IRG Note, the Company issued in a transaction exempt from registration pursuant to Section 4(a)(2) of the Securities
Act: (i) 125,000 shares of Common Stock to IRG, LLC, and (ii) a Series E Warrant to purchase 500,000 shares of Common Stock to IRG, LLC.
The Series E Warrants shall be cancelled
without any further action on the part of the Company or the holder, in the event that the Company repays in full, on or before March
1, 2023, the Amended Assigned IRG Note.
First Amended and Restated Promissory
Note with JKP Financial, LLC
On March 1, 2022, the
Company entered into a First Amended and Restated Promissory Note with JKP Financial, LLC, which amends and restates the JKP Split Note
(the “Amended Assigned JKP Note”). The Amended Assigned JKP Note extended the maturity to March 31, 2024. Under the
Amended Assigned JKP Note, the principal and accrued interest are convertible into shares of Common Stock at a conversion price of $1.09,
subject to adjustment. The conversion price is subject to a weighted-average antidilution adjustment. The principal amount of the Amended
Assigned JKP Note is $4,273,543.
As part of the consideration
for the Amended Assigned JKP Note, the Company issued in a transaction exempt from registration pursuant to Section 4(a)(2) of the Securities
Act: (i) 125,000 shares of Common Stock to JKP Financial, LLC, and (ii) a Series F Warrant to purchase 500,000 shares of Common Stock
to JKP Financial, LLC.
The Series F Warrants
have an exercise price of $1.09 per share, subject to adjustment. The exercise price is subject to a weighted-average antidilution adjustment.
The Series F Note Warrants may be exercised from and after March 1, 2022, subject to certain terms and conditions set forth in the Series
F Warrants. Unexercised Series F Warrants will expire on March 1, 2027.
Hall of Fame
Resort & Entertainment Company and Subsidiaries
Notes to Consolidated
Financial Statements
Note 14: Subsequent Events (continued)
Second Amendment
to JKP Promissory Note
On March 1, 2022, the Company amended the
JKP Capital Loan. The Second Amendment to JKP Capital Loan (i) revises the outstanding principal balance of the JKP Capital Loan to include
interest thereunder that has accrued and has not been paid as of March 1, 2022, and (ii) extends the maturity of the JKP Capital Loan
to March 31, 2024. The Second Amendment to JKP Capital Loan amends the JKP Capital Loan to be convertible into shares of Common Stock
at a conversion price of $1.09, subject to adjustment. The conversion price is subject to a weighted-average antidilution adjustment.
As part of the consideration for the Second
Amendment to JKP Capital Loan, the Company issued in a transaction exempt from registration pursuant to Section 4(a)(2) of the Securities
Act: (i) 280,000 shares of Common Stock to JKP Financial, LLC, and (ii) a Series F Warrant to purchase 1,000,000 shares of Common Stock
to JKP Financial, LLC.
Letter Agreement
On March 1, 2022, the Company entered into
a letter agreement with Stuart Lichter (the “Letter Agreement”). Under the Letter Agreement, when Mr. Lichter provides
a guaranty for a new loan up to $4 million, the Company will issue to Mr. Lichter in a transaction exempt from registration pursuant
to Section 4(a)(2) of the Securities Act, (i) 125,000 shares of Common Stock, and (ii) a Series G Warrant to purchase 125,000 shares
of Common Stock. The exercise price of the Series G Warrants will be set in connection with the closing of the loan. The exercise price
of the Series G Warrants is subject to a weighted-average antidilution adjustment.
MKG DoubleTree Loan Extension
On March 1, 2022, HOF Village Hotel II, LLC,
a subsidiary of the Company, entered into an Amendment to the MKG DoubleTree Loan with Stuart Lichter, as guarantor, and ErieBank, which
extended the maturity to September 13, 2023.
ATM Proceeds
From January 1 through March 14, 2022, the Company
sold 8,984,968 shares of Common Stock under its at-the-market offering vehicle, raising net proceeds of approximately $10.3 million.
Employment Agreement
On February 14, 2022, the Company and its subsidiary HOF Village Newco, LLC entered into an employment agreement with
Mr. Benjamin Lee, effective March 21, 2022. Under the terms of the employment agreement, Mr. Lee serves as the Chief Financial Officer
of the Company. The employment agreement terminates on the third anniversary of the effective date, unless earlier terminated; however,
the term will automatically renew for successive 12-month periods unless either party provides 90 days’ written notice of non-renewal.
Under the terms of the Employment Agreement, Mr. Lee will receive an annual base salary of $350,000, subject to periodic review and increase.
Additionally, Mr. Lee is eligible to receive an annual bonus targeted at 40% of his annual base salary based on the Company’s achievement
of commercially-reasonable key performance indicators determined by the Company.
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