The accompanying notes are an integral part of these unaudited condensed
consolidated financial statements.
The accompanying notes are an integral part of these unaudited condensed
consolidated financial statements.
The accompanying notes are an integral part of these unaudited condensed
consolidated financial statements.
The accompanying notes are an integral part of these unaudited condensed
consolidated financial statements.
The accompanying notes are an integral part of these unaudited condensed
consolidated financial statements.
Notes
to Condensed Consolidated Financial Statements
(Unaudited)
Note
1: Organization 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”.
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 creating a diversified set of revenue streams through developing themed attractions,
premier entertainment programming, sponsorships and media.
The
Company has entered into several agreements with PFHOF, an affiliate of HOFRE, 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, the 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 National Youth Football 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. 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
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.
With the State of Ohio relaxing restrictions and travel beginning to increase, the Company is targeting more events through the second
half of 2021 and moving forward.
Hall
of Fame Resort & Entertainment Company and Subsidiaries
Notes
to Condensed Consolidated Financial Statements
(Unaudited)
Note
1: Organization and Nature of Business (continued)
Liquidity
The Company has sustained recurring losses and
negative cash flows from operations through June 30, 2021. In addition, the Company has significant debt obligations maturing in the 12
month period subsequent to the date these unaudited condensed consolidated financial statements are issued. Since inception, the Company’s
operations have been funded principally through the issuance of debt and equity. As of June 30, 2021, the Company had approximately $62
million of unrestricted cash and cash equivalents and $12 million of restricted cash, respectively.
On June 4, 2021, the Company completed a private
placement with CH Capital Lending, LLC pursuant to which the Company sold to CH Capital Lending, LLC preferred stock and warrants to purchase shares of the Company’s
common stock par value $0.0001 per share (“Common Stock”), for a purchase price of $15 million. See Note 5 for more information. In addition, during February 2021, the Company received
approximately $34.5 million gross proceeds from the issuance of shares of its Common Stock, before offering costs.
The
Company believes that, as a result of these transactions and its current ongoing negotiations, it currently has
sufficient cash and future financing to meet its funding requirements over the next twelve months. 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 unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally
accepted in the United States of America (“U.S. GAAP”) for interim financial information and Rule 10 of SEC Regulation S–X.
Accordingly, they do not include all of the information and notes required by U.S. GAAP. However, in the opinion of the management of
the Company, all adjustments necessary for a fair presentation of the financial position and operating results have been included in
these statements. These unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial
statements and notes thereto included in the Company’s Form 10-K/A for the year ended December 31, 2020, filed on May 12,
2021. Operating results for the three and six months ended June 30, 2021 are not necessarily indicative of the results that may be expected
for any subsequent quarters or for the year ending December 31, 2021.
Hall
of Fame Resort & Entertainment Company and Subsidiaries
Notes
to Condensed Consolidated Financial Statements
(Unaudited)
Note
2: Summary of Significant Accounting Policies (continued)
Consolidation
The
unaudited condensed consolidated financial statements include the accounts and activity of the Company, and its wholly owned subsidiaries.
Investments in a variable interest entity in which the Company is not the primary beneficiary, or where the Company does not own a majority
interest but has the ability to exercise significant influence over operating and financial policies, are accounted for using the equity
method. All intercompany profits, transactions and balances have been eliminated in consolidation.
The Company owns a 60% interest in Mountaineer
GM, LLC (“Mountaineer”), whose results are consolidated into the Company’s results of operations. The Company acquired
60% of the equity interests in Mountaineer for a purchase price of $100 from one of its related parties. The portion of Mountaineer’s
net income (loss) that is not attributable to the Company is included in non-controlling interest.
Emerging
Growth Company
The
Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act of 1933, as amended, (the “Securities
Act”), as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), and it 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 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.
Hall
of Fame Resort & Entertainment Company and Subsidiaries
Notes
to Condensed Consolidated Financial Statements
(Unaudited)
Note
2: Summary of Significant Accounting Policies (continued)
Use
of Estimates
The preparation of the unaudited condensed consolidated
financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and liabilities at the date of the unaudited condensed consolidated financial
statements and the reported amounts of revenues and expenses during the reporting period. The most significant estimates and assumptions
for the Company relate to bad debt, depreciation, costs capitalized to project development costs, useful lives of assets, stock-based
compensation, fair value of financial instruments, and estimates and assumptions used to measure impairment. Management adjusts such estimates
when facts and circumstances dictate. Actual results could differ from those estimates.
Warrant
Liability
The
Company accounts for warrants for shares of the Company’s Common Stock that are not indexed to its own stock as liabilities at
fair value on the balance sheet. Such warrants are subject to remeasurement at each balance sheet date and any change in fair value is
recognized as a component of other expense on the statement of operations. The Company will continue to adjust the liability for changes
in fair value until the earlier of the exercise or expiration of such Common Stock warrants. At that time, the portion of the warrant
liability related to such Common Stock warrants will be reclassified to additional paid-in capital.
Property
and Equipment and Project Development Costs
Property
and equipment are recorded at historical cost and are depreciated using the straight-line method over the estimated useful lives of the
assets. During the construction period, the Company capitalizes all costs related to the development of the Hall of Fame Village powered
by Johnson Controls. Project development costs include predevelopment costs, amortization of finance costs, real estate taxes, insurance,
and other project costs incurred during the period of development. The capitalization of costs began during the preconstruction period,
which the Company defines as activities that are necessary to the development of the project. The Company ceases cost capitalization
when a portion of the project is held available for occupancy and placed into service. This usually occurs upon substantial completion
of all costs necessary to bring a portion of the project to the condition needed for its intended use, but no later than one year from
the completion of major construction activity. The Company will continue to capitalize only those costs associated with the portion still
under construction. Capitalization will also cease if activities necessary for the development of the project have been suspended. As
of June 30, 2021, the second two phases of the project remained subject to such capitalization.
The
Company reviews its property and equipment and projects under development for impairment whenever events or changes indicate that the
carrying value of the long-lived assets may not be fully recoverable. In cases where the Company does not expect to recover its carrying
costs, an impairment charge is recorded.
The
Company measures and records impairment losses on its long-lived assets when indicators of impairment are present and the undiscounted
cash flows estimated to be generated by those assets are less than their carrying amount. Considerable judgment by management is necessary
to estimate undiscounted future operating cash flows and fair values and, accordingly, actual results could vary significantly from such
estimates.
Hall
of Fame Resort & Entertainment Company and Subsidiaries
Notes
to Condensed Consolidated Financial Statements
(Unaudited)
Note
2: Summary of Significant Accounting Policies (continued)
Net
Income (Loss) Per Common Share
Basic
net income (loss) per common share is computed by dividing net income (loss) by the weighted average number of common shares outstanding during
the periods.
Diluted
net income (loss) per share is computed by dividing the net income (loss) by the weighted average number of common shares outstanding
during the period. The Company’s potentially dilutive Common Stock equivalent shares, which include incremental common shares issuable
upon (i) the exercise of outstanding stock options and warrants, (ii) vesting of restricted stock units and restricted stock awards,
(iii) conversion of preferred stock, and (iv) the conversion of convertible notes are only included in the calculation of diluted net
loss per share when their effect is dilutive.
For
the three months ended June 30, 2021, the Company calculated net income per share, diluted, as follows:
|
|
For the
Three Months
Ended
June 30,
2021
|
|
Numerator for net income per share
|
|
|
|
Net income attributable to common stock – basic
|
|
$
|
15,541,053
|
|
Reverse: change in fair value of warrant liabilities
|
|
|
(15,025,888
|
)
|
Net income available to common stockholders – diluted
|
|
$
|
515,165
|
|
|
|
|
|
|
Denominator for net income per share
|
|
|
|
|
Weighted average shares outstanding – basic
|
|
|
94,397,222
|
|
Unvested restricted stock awards
|
|
|
477,286
|
|
Unvested restricted stock units
|
|
|
3,220,972
|
|
Warrants to purchase shares of common stock, treasury method
|
|
|
9,257,792
|
|
Weighted average shares outstanding – diluted
|
|
|
107,353,272
|
|
|
|
|
|
|
Net income per share – basic
|
|
$
|
0.16
|
|
|
|
|
|
|
Net income per share – diluted
|
|
$
|
0.00
|
|
For the six months ended June 30, 2021, and for the three and six months ended June 30, 2020, the Company was in a loss position and therefore
all potentially dilutive securities would be anti-dilutive and the calculations are presented on the accompanying condensed consolidated
statements of operations.
Hall
of Fame Resort & Entertainment Company and Subsidiaries
Notes
to Condensed Consolidated Financial Statements
(Unaudited)
Note
2: Summary of Significant Accounting Policies (continued)
Net
Income (Loss) Per Common Share (continued)
For the three and six months ended June 30, 2021,
the following outstanding Common Stock equivalents have been excluded from the calculation of net income (loss) per share because their
impact would be anti-dilutive. The Company was not a public entity as of June 30, 2020; therefore, no warrants, restricted stock awards,
restricted stock units, or convertible debt were potentially dilutive securities.
|
|
For the
Three Months
Ended
June 30,
2021
|
|
|
For the
Six Months
Ended
June 30,
2021
|
|
Warrants to purchase shares of Common Stock
|
|
|
27,214,854
|
|
|
|
41,112,349
|
|
Restricted stock awards to purchase shares of Common Stock
|
|
|
-
|
|
|
|
477,286
|
|
Restricted stock units to purchase shares of Common Stock
|
|
|
-
|
|
|
|
3,220,972
|
|
Shares of Common Stock issuable upon conversion of convertible notes
|
|
|
3,321,706
|
|
|
|
3,321,706
|
|
Total anti-dilutive securities
|
|
|
30,536,561
|
|
|
|
48,132,313
|
|
Revenue
Recognition
The
Company follows ASC 606, Revenue with Contracts with Customers. Under ASC 606, revenue is recognized when a customer obtains
control of promised goods or services, in an amount that reflects the consideration which the entity expects to receive in exchange for
those goods or services. To determine revenue recognition for arrangements that an entity determines are within the scope of ASC 606,
the Company performs the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations
in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract;
and (v) recognize revenue when (or as) the entity satisfies a performance obligation.
The
Company generates revenues from various streams such as sponsorship agreements, rents, cost recoveries, events, hotel operation, Hall
of Fantasy League, and through the sale of non-fungible tokens. The sponsorship arrangements, in which the customer sponsors a play area
or event and receives specified brand recognition and other benefits over a set period of time, recognized revenue on a straight-line
basis over the time period specified in the contract. 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.
Hall
of Fame Resort & Entertainment Company and Subsidiaries
Notes
to Condensed Consolidated Financial Statements
(Unaudited)
Note
2: Summary of Significant Accounting Policies (continued)
Revenue
Recognition (continued)
The
Company’s owned hotel revenues primarily consist of hotel room sales, revenue from accommodations sold in conjunction with other
services (e.g. packages 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 prices of each component.
Advertising
The Company expenses all advertising and marketing
costs as they are incurred. Total advertising and marketing costs for the three months ended June 30, 2021 and 2020 were $72,016 and $49,908,
respectively, and for the six months ended June 30, 2021 and 2020 were $347,874 and $267,595, respectively, which are recorded as property
operating expenses on the Company’s unaudited condensed consolidated statements of operations.
Software
Development Costs
The Company recognizes all costs incurred to establish
technological feasibility of a computer software product to be sold, leased, or otherwise marketed as research and development costs.
Prior to the point of reaching technological feasibility, all costs shall be charged to expense when incurred. Once the development of
the product establishes technological feasibility, the Company will begin capitalizing these costs. Management exercises its judgement
in determining when technological feasibility is established based on when a product design and working model have been completed and
the completeness of the working model and its consistency with the product design have been confirmed through testing.
Hall
of Fame Resort & Entertainment Company and Subsidiaries
Notes
to Condensed Consolidated Financial Statements
(Unaudited)
Note
2: Summary of Significant Accounting Policies (continued)
Accounting
for Real Estate Investments
Upon
the acquisition of real estate properties, a determination is made as to whether the acquisition meets the criteria to be accounted for
as an asset or business combination. The determination is primarily based on whether the assets acquired, and liabilities assumed meet
the definition of a business. The determination of whether the assets acquired, and liabilities assumed meet the definition of a business
include a single or similar asset threshold. In applying the single or similar asset threshold, if substantially all the fair value of
the gross assets acquired is concentrated in a single identifiable asset or group of similar identifiable assets, the assets acquired,
and liabilities assumed are not considered a business. Most of the Company’s acquisitions meet the single or similar asset threshold,
due to the fact that substantially all the fair value of the gross assets acquired is attributable to the real estate acquired.
Acquired
real estate properties accounted for as asset acquisitions are recorded at cost, including acquisition and closing costs. The Company
allocates the cost of real estate properties to the tangible and intangible assets and liabilities acquired based on their estimated
relative fair values. The Company determines the fair value of tangible assets, such as land, building, furniture, fixtures and equipment,
using a combination of internal valuation techniques that consider comparable market transactions, replacement costs and other available
information and fair value estimates provided by third party valuation specialists, depending upon the circumstances of the acquisition.
The Company determines the fair value of identified intangible assets or liabilities, which typically relate to in-place leases, using
a combination of internal valuation techniques that consider the terms of the in-place leases, current market data for comparable leases,
and fair value estimates provided by third party valuation specialists, depending upon the circumstances of the acquisition.
If
a transaction is determined to be a business combination, the assets acquired, liabilities assumed, and any identified intangibles are
recorded at their estimated fair values on the transaction date, and transaction costs are expensed in the period incurred.
Fair
Value Measurement
The
Company follows Accounting Standards Codification (“ASC”) 820–10 “Fair Value Measurement” of the Financial
Accounting Standards Board’s (“FASB”) Accounting Standards Codification to measure the fair value of its financial
instruments and 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 (3) broad levels.
Hall
of Fame Resort & Entertainment Company and Subsidiaries
Notes
to Condensed Consolidated Financial Statements
(Unaudited)
Note
2: Summary of Significant Accounting Policies (continued)
Fair
Value Measurement (continued)
The
three (3) levels of fair value hierarchy defined by ASC 820–10 are described below:
Level
1
|
|
Quoted
market prices available in active markets for identical assets or liabilities as of the reporting date.
|
|
|
|
Level
2
|
|
Pricing
inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the
reporting date.
|
|
|
|
Level
3
|
|
Pricing
inputs that are generally unobservable inputs and not corroborated by market data.
|
Financial
assets or liabilities are considered Level 3 when their fair values are determined using pricing models, discounted cash flow methodologies
or similar techniques and at least one significant model assumption or input is unobservable.
The
fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and
the lowest priority to unobservable inputs. If the inputs used to measure the financial assets and liabilities fall within more than
one level described above, the categorization is based on the lowest level input that is significant to the fair value measurement of
the instrument.
The
carrying amounts of the Company’s financial assets and liabilities, such as cash, prepaid expenses and other current assets, accounts
payable and accrued expenses approximate their fair values due to the short-term nature of these instruments.
The
Company uses Levels 1 and 3 of the fair value hierarchy to measure the fair value of its warrant liabilities. The Company revalues such
liabilities at every reporting period and recognizes gains or losses as change in fair value of warrant liabilities in the unaudited
condensed consolidated statements of operations that are attributable to the change in the fair value of the warrant liabilities.
The following table provides the financial liabilities
measured on a recurring basis and reported at fair value on the balance sheet as of June 30, 2021 and December 31, 2020 and indicates
the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value:
|
|
Level
|
|
June 30,
2021
|
|
|
December 31,
2020
|
|
Warrant liabilities – Public Warrants
|
|
1
|
|
$
|
15,920,000
|
|
|
$
|
4,130,000
|
|
Warrant liabilities – Private Warrants
|
|
3
|
|
|
1,550,000
|
|
|
|
420,000
|
|
Warrant liabilities – November Warrants
|
|
3
|
|
|
10,629,000
|
|
|
|
9,781,000
|
|
Warrant liabilities – December Warrants
|
|
3
|
|
|
27,706,000
|
|
|
|
4,781,000
|
|
Fair value of aggregate warrant liabilities as of June 30, 2021
|
|
|
|
$
|
55,805,000
|
|
|
$
|
19,112,000
|
|
Hall
of Fame Resort & Entertainment Company and Subsidiaries
Notes
to Condensed Consolidated Financial Statements
(Unaudited)
Note
2: Summary of Significant Accounting Policies (continued)
Fair
Value Measurement (continued)
The
Public 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 Private Warrants, November Warrants, and December Warrants, for which there is no current market for
these securities and the determination of fair value requires significant judgment or estimation. Changes in fair value measurement
categorized within Level 3 of the fair value hierarchy are analyzed each period based on changes in estimates or assumptions and
recorded as appropriate.
Subsequent
measurement
The
following table presents the changes in fair value of the warrant liabilities:
|
|
Public Warrants
|
|
|
Private Warrants
|
|
|
November Warrants
|
|
|
December 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
|
|
|
-
|
|
|
|
-
|
|
|
|
(53,342,112
|
)
|
|
|
-
|
|
|
|
(53,342,112
|
)
|
Change in fair value, exercised
|
|
|
-
|
|
|
|
-
|
|
|
|
45,400,119
|
|
|
|
-
|
|
|
|
45,400,119
|
|
Change in fair value, outstanding
|
|
|
11,790,000
|
|
|
|
1,130,000
|
|
|
|
8,789,993
|
|
|
|
22,925,000
|
|
|
|
44,634,993
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value as of June 30, 2021
|
|
$
|
15,920,000
|
|
|
$
|
1,550,000
|
|
|
$
|
10,629,000
|
|
|
$
|
27,706,000
|
|
|
$
|
55,805,000
|
|
The key inputs into the Black Scholes valuation model for the Level
3 valuations as of June 30, 2021 and December 31, 2020 are below:
|
|
June 30, 2021
|
|
|
December 31, 2020
|
|
|
|
Private Warrants
|
|
|
November Warrants
|
|
|
December Warrants
|
|
|
Private Warrants
|
|
|
November Warrants
|
|
|
December Warrants
|
|
Term (years)
|
|
|
4.0
|
|
|
|
4.4
|
|
|
|
4.5
|
|
|
|
4.5
|
|
|
|
4.9
|
|
|
|
5.0
|
|
Stock price
|
|
$
|
3.93
|
|
|
$
|
3.93
|
|
|
$
|
3.93
|
|
|
$
|
1.23
|
|
|
$
|
1.23
|
|
|
$
|
1.23
|
|
Exercise price
|
|
$
|
11.50
|
|
|
$
|
1.40
|
|
|
$
|
1.40
|
|
|
$
|
11.50
|
|
|
$
|
1.40
|
|
|
$
|
1.40
|
|
Dividend yield
|
|
|
0.0
|
%
|
|
|
0.0
|
%
|
|
|
0.0
|
%
|
|
|
0.0
|
%
|
|
|
0.0
|
%
|
|
|
0.0
|
%
|
Expected volatility
|
|
|
49.5
|
%
|
|
|
49.5
|
%
|
|
|
49.5
|
%
|
|
|
70.7
|
%
|
|
|
49.5
|
%
|
|
|
49.5
|
%
|
Risk free interest rate
|
|
|
0.9
|
%
|
|
|
0.9
|
%
|
|
|
0.9
|
%
|
|
|
0.3
|
%
|
|
|
0.3
|
%
|
|
|
0.3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of shares
|
|
|
2,103,573
|
|
|
|
3,860,570
|
|
|
|
10,036,925
|
|
|
|
1,480,000
|
|
|
|
20,535,713
|
|
|
|
10,036,925
|
|
Value (per share)
|
|
$
|
0.74
|
|
|
$
|
2.75
|
|
|
$
|
2.76
|
|
|
$
|
0.28
|
|
|
$
|
0.48
|
|
|
$
|
0.48
|
|
Hall
of Fame Resort & Entertainment Company and Subsidiaries
Notes
to Condensed Consolidated Financial Statements
(Unaudited)
Note
2: Summary of Significant Accounting Policies (continued)
Recent
Accounting Pronouncements
In
February 2016, FASB issued Accounting Standards Update (“ASU”) No. 2016-02, Leases (Topic 842), as modified by subsequently
issued ASU Nos. 2018-01, 2018-10, 2018-11, 2018-20 and 2019-01 (collectively “ASU 2016-02”). ASU 2016-02 requires recognition of right-of-use assets and lease liabilities on the balance
sheet. In June 2020, FASB issued ASU 2020-05, further extending the effective date by one year making it effective for the Company for
annual periods beginning after December 15, 2021 and interim periods within fiscal years beginning after December 15, 2022, with early
adoption permitted. Most prominent among the changes in ASU 2016-02 is the lessees’ recognition of a right-of-use asset and a lease
liability for operating leases. The right-of-use asset and lease liability are initially measured based on the present value of committed
lease payments. Leases are classified as either finance or operating, with classification affecting the pattern of expense recognition.
Expenses related to operating leases are recognized on a straight-line basis, while those related to financing leases are recognized
under a front-loaded approach in which interest expense and amortization of the right-of-use asset are presented separately in the statement
of operations. As the Company is an emerging growth company and following private company deadlines, the Company has an additional deferral
under this ASU to adopt beginning after December 15, 2021. Similarly, lessors are required to classify leases as sales-type, finance
or operating with classification affecting the pattern of income recognition.
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.
Hall
of Fame Resort & Entertainment Company and Subsidiaries
Notes
to Condensed Consolidated Financial Statements
(Unaudited)
Note
2: Summary of Significant Accounting Policies (continued)
Subsequent
Events
Subsequent events have been evaluated
through August 12, 2021, the date the condensed consolidated financial statements were issued. Except for as disclosed in Note 4, no
events have been identified requiring disclosure or recording.
Note
3: Property and Equipment
Property
and equipment consists of the following:
|
|
Useful Life
|
|
June 30,
2021
|
|
|
December 31,
2020
|
|
Land
|
|
|
|
$
|
2,300,564
|
|
|
$
|
535,954
|
|
Land improvements
|
|
25 years
|
|
|
31,078,211
|
|
|
|
31,078,211
|
|
Building and improvements
|
|
15 to 39 years
|
|
|
157,913,580
|
|
|
|
158,020,145
|
|
Equipment
|
|
5 to 10 years
|
|
|
2,196,680
|
|
|
|
2,165,882
|
|
Property and equipment, gross
|
|
|
|
|
193,489,035
|
|
|
|
191,800,192
|
|
|
|
|
|
|
|
|
|
|
|
|
Less: accumulated depreciation
|
|
|
|
|
(43,337,496
|
)
|
|
|
(37,444,429
|
)
|
Property and equipment, net
|
|
|
|
$
|
150,151,539
|
|
|
$
|
154,355,763
|
|
|
|
|
|
|
|
|
|
|
|
|
Project development costs
|
|
|
|
$
|
126,595,920
|
|
|
$
|
107,969,139
|
|
For the three months ended June 30, 2021 and
2020, the Company recorded depreciation expense of $2,972,130 and $2,721,303, respectively, and for the six months ended June 30, 2021
and 2020, of $5,893,067 and $5,445,423, respectively. For the six months ended June 30, 2021 and 2020, the Company incurred $18,626,781
and $16,873,351 of capitalized project development costs, respectively.
Hall of Fame
Resort & Entertainment Company and Subsidiaries
Notes to Condensed
Consolidated Financial Statements
(Unaudited)
Note
4: Notes Payable, net
Notes
payable, net consisted of the following at June 30, 2021:
|
|
Gross
|
|
|
Discount
|
|
|
Net
|
|
|
Interest Rate
|
|
|
Maturity Date
|
TIF loan
|
|
$
|
9,554,000
|
|
|
$
|
(1,639,373
|
)
|
|
$
|
7,914,627
|
|
|
|
5.20
|
%
|
|
7/31/2048
|
Preferred equity loan
|
|
|
2,700,000
|
|
|
|
-
|
|
|
|
2,700,000
|
|
|
|
7.00
|
%
|
|
10/9/2025
|
City of Canton Loan
|
|
|
3,500,000
|
|
|
|
(7,100
|
)
|
|
|
3,492,900
|
|
|
|
5.00
|
%
|
|
7/1/2027
|
New Market/SCF
|
|
|
2,999,989
|
|
|
|
-
|
|
|
|
2,999,989
|
|
|
|
4.00
|
%
|
|
12/30/2024
|
Constellation EME
|
|
|
7,723,333
|
|
|
|
-
|
|
|
|
7,723,333
|
|
|
|
6.05
|
%
|
|
12/31/2022
|
JKP Capital loan
|
|
|
6,953,831
|
|
|
|
(9,260
|
)
|
|
|
6,944,571
|
|
|
|
12.00
|
%
|
|
12/2/2021
|
MKG DoubleTree Loan
|
|
|
15,300,000
|
|
|
|
(264,849
|
)
|
|
|
15,035,151
|
|
|
|
5.00
|
%
|
|
3/31/2022
|
Convertible PIPE Notes, plus PIK accrual
|
|
|
22,919,773
|
|
|
|
(12,571,254
|
)
|
|
|
10,348,519
|
|
|
|
10.00
|
%
|
|
3/31/2025
|
Canton Cooperative Agreement
|
|
|
2,670,000
|
|
|
|
(178,041
|
)
|
|
|
2,491,959
|
|
|
|
3.85
|
%
|
|
5/15/2040
|
Aquarian Mortgage Loan
|
|
|
40,000,000
|
|
|
|
(1,004,569
|
)
|
|
|
38,995,431
|
|
|
|
10.00
|
%
|
|
11/30/2021
|
Constellation EME #2
|
|
|
4,888,279
|
|
|
|
-
|
|
|
|
4,888,279
|
|
|
|
5.93
|
%
|
|
4/30/2026
|
Total
|
|
$
|
119,209,205
|
|
|
$
|
(15,674,446
|
)
|
|
$
|
103,534,759
|
|
|
|
|
|
|
|
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, plus PIK accrual
|
|
|
21,797,670
|
|
|
|
(13,475,202
|
)
|
|
|
8,322,468
|
|
Canton
Cooperative Agreement
|
|
|
2,670,000
|
|
|
|
(181,177
|
)
|
|
|
2,488,823
|
|
Aquarian
Mortgage Loan
|
|
|
40,000,000
|
|
|
|
(2,156,303
|
)
|
|
|
37,843,697
|
|
Total
|
|
$
|
116,957,539
|
|
|
$
|
(18,058,172
|
)
|
|
$
|
98,899,367
|
|
During the three months ended June 30, 2021 and
2020, the Company recorded amortization of note discounts of $1,164,613 and $3,443,333, respectively, and for the six months ended June
30, 2021 and 2020, of $2,398,727 and $6,677,746, respectively. During the three months ended June 30, 2021 and 2020, the Company recorded
paid-in-kind interest of $741,243 and $1,646,811, respectively. During the six months ended June 30, 2021 and 2020, the Company recorded
paid-in-kind interest of $952,012 and $2,199,714, respectively.
For
more information on the notes payable above, please see Note 4 of the Company’s Annual Report on Form 10-K/A, as filed on May 12,
2021.
Hall of Fame
Resort & Entertainment Company and Subsidiaries
Notes to Condensed
Consolidated Financial Statements
(Unaudited)
Note
4: Notes Payable, net (continued)
Accrued
Interest on Notes Payable
As
of June 30, 2021 and December 31, 2020, accrued interest on notes payable, were as follows:
|
|
June
30,
2021
|
|
|
December 31,
2020
|
|
TIF
loan
|
|
$
|
11,154
|
|
|
$
|
-
|
|
Preferred
equity loan
|
|
|
193,919
|
|
|
|
27,125
|
|
New
Market/SCF
|
|
|
44,472
|
|
|
|
-
|
|
Constellation
EME
|
|
|
-
|
|
|
|
248,832
|
|
Paycheck
protection plan loan
|
|
|
-
|
|
|
|
2,706
|
|
City
of Canton Loan
|
|
|
1,507
|
|
|
|
4,472
|
|
JKP
Capital Note
|
|
|
834,166
|
|
|
|
416,836
|
|
MKG
Doubletree loan
|
|
|
-
|
|
|
|
67,716
|
|
Canton
Cooperative Agreement
|
|
|
36,078
|
|
|
|
20,593
|
|
Aquarian
Mortgage Loan
|
|
|
-
|
|
|
|
333,333
|
|
Total
|
|
$
|
1,121,296
|
|
|
$
|
1,121,613
|
|
The
amounts above were included in accounts payable and accrued expenses and other liabilities on the Company’s unaudited condensed
consolidated balance sheet, as follows:
|
|
June 30,
2021
|
|
|
December 31,
2020
|
|
Accounts payable and accrued expenses
|
|
$
|
927,377
|
|
|
$
|
1,094,488
|
|
Other liabilities
|
|
|
193,919
|
|
|
|
27,125
|
|
|
|
$
|
1,121,296
|
|
|
$
|
1,121,613
|
|
7.00%
Series A Cumulative Redeemable Preferred Stock (“Preferred Equity Loan”)
On April 1, 2021, the Company received
$900,000 in advance of a subscription agreement to purchase shares of 7.00% Series A Cumulative Redeemable Preferred Stock
(“Series A Preferred Stock”). On August 12, 2021, the Company entered into a subscription agreement with American
Capital Center, LLC (the “Investor”) to issue to the Investor 900 shares of Series A Preferred Stock at a price of
$1,000 per share for an aggregate purchase price of $900,000. The Company had 1,800 shares of Series A Preferred Stock outstanding
and 52,800 shares of Series A Preferred Stock authorized as of June 30, 2021 and December 31, 2020. This preferred stock is required
to be redeemed in cash after five years from the date of issuance and is recorded in notes payable, net on the Company’s
unaudited condensed consolidated balance sheet.
Hall of Fame
Resort & Entertainment Company and Subsidiaries
Notes to Condensed
Consolidated Financial Statements
(Unaudited)
Note
4: Notes Payable, net (continued)
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 six
months ended June 30, 2021, the Company recognized the forgiveness of the PPP Loan as “Gain on Forgiveness of Debt” in
the Company’s unaudited condensed consolidated statement of operations.
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 amount 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 set at the time such warrant is issued pursuant to the Note Purchase Agreement.
Constellation
EME #2
On
February 1, 2021, the Company entered into a loan facility with Constellation whereby it may borrow up to $5,100,000 (the “Constellation
EME #2”). The proceeds of the Constellation EME #2 are to be held in escrow by a custodian to fund future development costs. The
proceeds will be released from escrow as development costs are incurred. The maturity date is April 30, 2026 and payments are due in
60 monthly installments totaling $6,185,716, with an effective interest rate of 8.7%.
The
Company also has a sponsorship agreement with Constellation. Refer to Note 6 for additional information.
Hall of Fame
Resort & Entertainment Company and Subsidiaries
Notes to Condensed
Consolidated Financial Statements
(Unaudited)
Note
4: Notes Payable, net (continued)
Future
Minimum Principal Payments
The
minimum required principal payments on notes payable outstanding as of June 30, 2021 are as follows:
For the years ending December 31,
|
|
Amount
|
|
2021 (six months)
|
|
$
|
49,985,458
|
|
2022
|
|
|
21,810,248
|
|
2023
|
|
|
1,448,706
|
|
2024
|
|
|
4,596,930
|
|
2025
|
|
|
27,256,596
|
|
Thereafter
|
|
|
14,111,267
|
|
Total Gross Principal Payments
|
|
$
|
119,209,205
|
|
|
|
|
|
|
Less: Discount
|
|
|
(15,674,446
|
)
|
|
|
|
|
|
Total Net Principal Payments
|
|
$
|
103,534,759
|
|
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 June 30, 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 of, without stockholder approval, up to 5,000,000 shares of preferred stock, par value $0.0001.
Series
A Preferred Stock Designation
On October 8, 2020, the Company filed a Certificate
of Designations with the Secretary of State of the State of Delaware to establish preferences, limitations and relative rights of the
Series A Preferred Stock. The number of authorized shares of Series A Preferred Stock is 52,800.
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.
Hall of Fame
Resort & Entertainment Company and Subsidiaries
Notes to Condensed
Consolidated Financial Statements
(Unaudited)
Note 5: Stockholders’ Equity, (continued)
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 June 30, 2021 and December 31, 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”).
2020
Omnibus Incentive Plan
On July 1, 2020, in connection with the closing
of the Business Combination, the Company’s omnibus incentive plan (the “2020 Omnibus Incentive Plan”) became effective
immediately upon the closing of the Business Combination. The 2020 Omnibus Incentive Plan was previously approved by the Company’s
stockholders and Board of Directors. Subject to adjustment, the maximum number of shares of Common Stock authorized for issuance under
the 2020 Omnibus Incentive Plan was 1,812,727 shares. On June 2, 2021, the Company held its 2021 Annual Meeting whereby the Company’s
stockholders approved an amendment to the 2020 Omnibus Incentive Plan to increase by four million the number of shares of Common
Stock,
par value $0.0001 per share, of the Company that will be available for issuance under the 2020 Omnibus Incentive Plan, resulting in a
maximum of 5,812,727 shares that can be issued under the amended Plan. The amendment to the Plan was previously approved by the board
of directors of the Company, and the amended Plan became effective on June 2, 2021. As of June 30, 2021, 2,323,237 shares remained available
for issuance under the 2020 Omnibus Incentive Plan.
Hall of Fame
Resort & Entertainment Company and Subsidiaries
Notes to Condensed
Consolidated Financial Statements
(Unaudited)
Note
5: Stockholders’ Equity (continued)
Issuance
of Restricted Stock Awards
The
Company’s activity in restricted Common Stock was as follows for the six months ended June 30, 2021:
|
|
Number
of
shares
|
|
|
Weighted
average
grant date
fair
value
|
|
Non–vested
at January 1, 2021
|
|
|
477,286
|
|
|
$
|
9.30
|
|
Granted
|
|
|
24,028
|
|
|
$
|
4.93
|
|
Vested
|
|
|
(24,028
|
)
|
|
$
|
4.93
|
|
Non–vested
at June 30, 2021
|
|
|
477,286
|
|
|
$
|
9.30
|
|
For the three months ended June 30, 2021 and
2020, the Company recorded $673,005 and $0, respectively, in employee and director stock-based compensation expense, and for the six
months ended June 30, 2021 and 2020, $1,227,551 and $0, respectively. As of June 30, 2021, unamortized stock-based compensation
costs related to restricted share arrangements was $2,218,187 and will be recognized over a weighted average period of 1.0 year.
Issuance of Restricted Stock Units
During the six months ended June 30, 2021, the
Company granted an aggregate of 1,734,197 Restricted Stock Units (“RSUs”) to its employees and directors under the 2020 Omnibus
Incentive Plan. 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.
The
Company’s activity in restricted stock units was as follows for six months ended June 30, 2021:
|
|
Number
of
shares
|
|
|
Weighted
average
grant date
fair
value
|
|
Non–vested
at January 1, 2021
|
|
|
1,499,933
|
|
|
$
|
2.49
|
|
Granted
|
|
|
1,734,197
|
|
|
$
|
2.00
|
|
Vested
|
|
|
-
|
|
|
|
|
|
Forfeited
|
|
|
(13,158
|
)
|
|
|
1.98
|
|
Non–vested
at June 30, 2021
|
|
|
3,220,972
|
|
|
$
|
2.24
|
|
Hall of Fame
Resort & Entertainment Company and Subsidiaries
Notes to Condensed
Consolidated Financial Statements
(Unaudited)
Note
5: Stockholders’ Equity (continued)
Issuance
of Restricted Stock Units (continued)
For the three months ended June 30, 2021 and 2020,
the Company recorded $947,144 and $0, respectively, in employee and director stock-based compensation expense, and for the six months
ended June 30, 2021 and 2020, $1,779,141 and $0, respectively, which is a component of property operating expenses in the unaudited condensed
consolidated statement of operations. As of June 30, 2021, unamortized stock-based compensation costs related to restricted stock units
was $4,880,493 and will be recognized over a weighted average period of 1.9 years.
Warrants
The
Company’s warrant activity was as follows for the six months ended June 30, 2021:
|
|
Number of Shares
|
|
|
Weighted Average Exercise Price (USD)
|
|
|
Weighted Average Contractual Life (years)
|
|
|
Intrinsic Value (USD)
|
|
Outstanding - January 1, 2021
|
|
|
55,303,832
|
|
|
$
|
5.92
|
|
|
|
4.73
|
|
|
|
|
|
Granted
|
|
|
2,483,660
|
|
|
$
|
6.90
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
(16,675,143
|
)
|
|
$
|
1.40
|
|
|
|
|
|
|
|
|
|
Outstanding – June 30, 2021
|
|
|
41,112,349
|
|
|
$
|
7.81
|
|
|
|
4.09
|
|
|
$
|
35,160,662
|
|
Exercisable – June 30, 2021
|
|
|
38,628,689
|
|
|
$
|
7.87
|
|
|
|
4.17
|
|
|
$
|
35,160,662
|
|
During the six months ended June 30, 2021, warrants
to purchase 16,675,143 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 $23,346,870 and the settlement of the Company’s warrant liability of $53,342,112.
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 of 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 Condensed
Consolidated Financial Statements
(Unaudited)
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”), that amended and restated the Sponsorship and Naming
Rights Agreement, dated as of November 17, 2016 (the “Original Sponsorship Agreement”). Among other things, the Amended Sponsorship
Agreement: (i) reduced the total amount of fees payable to Newco during the term of the Amended Sponsorship Agreement from $135 million
to $99 million; (ii) restricted the activation proceeds from rolling over from year to year with a maximum amount of activation proceeds
in one agreement year to be $750,000; and (iii) renamed the “Johnson Controls Hall of Fame Village” to “Hall of Fame
Village powered by Johnson Controls”. This is a prospective change, which the Company reflected beginning in the third quarter
of 2020.
JCI has the right to terminate
the Amended Sponsorship Agreement if Phase II is not substantially complete by January 2, 2024.
As of June 30, 2021, scheduled future cash to
be received and required activation spend under the non-cancellable period of the Amended Sponsorship Agreement is as follows:
|
|
Unrestricted
|
|
|
Activation
|
|
|
Total
|
|
2021
(six months)
|
|
$
|
2,947,917
|
|
|
$
|
500,000
|
|
|
$
|
3,447,917
|
|
Total
|
|
$
|
2,947,917
|
|
|
$
|
500,000
|
|
|
$
|
3,447,917
|
|
As
services are provided, the Company is recognizing revenue on a straight-line basis over the expected term of the Amended Sponsorship
Agreement. During the three months ended June 30, 2021 and 2020, the Company recognized $1,121,385 and $1,237,347 of net sponsorship
revenue related to this deal, respectively, and for the six months ended June 30, 2021 and 2020, $2,230,447 and $2,474,694, respectively.
Accounts receivable from JCI totaled $0 and $0 at June 30, 2021 and December 31, 2020, respectively.
Hall of Fame
Resort & Entertainment Company and Subsidiaries
Notes to Condensed
Consolidated Financial Statements
(Unaudited)
Note
6: Sponsorship Revenue and Associated Commitments (continued)
Aultman
Health Foundation
In
2016, the Company and PFHOF entered into a 10-year licensing agreement with Aultman Health Foundation (“Aultman”) allowing
Aultman use of the HOF Village and PFHOF marks and logos. Under terms of the agreement, the Company will receive $2.5 million in cash
sponsorship funds. Of those funds, the Company is contractually obligated to spend $700,000 as activation expenses for the benefit of
Aultman.
As
services are provided, the Company is recognizing revenue on a straight-line basis over the expected term of the agreement. During
the three months ended June 30, 2021 and 2020, the Company recognized $0 and $44,852 of net sponsorship revenue related to this
deal, respectively, and for the six months ended June 30, 2021 and 2020, $4,491 and $89,704, respectively. Accounts receivable from
Aultman totaled $0 and $0 at June 30, 2021 and December 31, 2020, respectively.
On
January 12, 2021, the Company notified Aultman that the Company terminated as to itself, effective as of January 26, 2021, the Sponsorship
Agreement, dated December 6, 2016, among Aultman, PFHOF and the Company. As such, the Company will no longer be receiving future sponsorship
payments from Aultman.
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 June 30, 2021, scheduled future cash to be received under the agreement are as follows:
Year ending December 31:
2021 (six months)
|
|
$
|
-
|
|
2022
|
|
|
150,000
|
|
2023
|
|
|
150,000
|
|
2024
|
|
|
150,000
|
|
2025
|
|
|
150,000
|
|
Thereafter
|
|
|
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
three months ended June 30, 2021 and 2020, the Company recognized $37,042 and $37,042 of net sponsorship revenue related to this deal,
respectively, and for the six months ended June 30, 2021 and 2020, $73,677 and $74,084, respectively. As of June 30, 2021 and December
31, 2020, accounts receivable from First Data totaled $0 and $58,141, respectively.
Hall of Fame
Resort & Entertainment Company and Subsidiaries
Notes to Condensed
Consolidated Financial Statements
(Unaudited)
Note
6: Sponsorship Revenue and Associated Commitments (continued)
Constellation
NewEnergy, Inc.
On
December 19, 2018 the Company and PFHOF entered into a sponsorship and services agreement with Constellation (the “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 for 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 provides for Constellation to pay sponsorship income and to provide activation fee funds. Activation fee funds are to
be used in the year received and do not roll forward for future years as unspent funds. The amounts are due by March 31 of the year to
which they apply, which is represented in the chart below.
The
Constellation Sponsorship Agreement includes certain contingencies reducing the sponsorship fee amount owed by Constellation if construction
is not on pace with the timeframe noted in the Constellation Sponsorship Agreement.
The
Company also has a note payable with Constellation. Refer to Note 4 for additional information.
As of June 30, 2021, scheduled future cash to
be received and required activation spend under the Constellation Sponsorship Agreement are as follows:
|
|
Unrestricted
|
|
|
Activation
|
|
|
Total
|
|
2021 (six
months)
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
2022
|
|
|
1,396,000
|
|
|
|
200,000
|
|
|
|
1,596,000
|
|
2023
|
|
|
1,423,220
|
|
|
|
200,000
|
|
|
|
1,623,220
|
|
2024
|
|
|
1,257,265
|
|
|
|
166,000
|
|
|
|
1,423,265
|
|
2025
|
|
|
1,257,265
|
|
|
|
166,000
|
|
|
|
1,423,265
|
|
Thereafter
|
|
|
5,029,057
|
|
|
|
664,000
|
|
|
|
5,693,057
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
10,362,807
|
|
|
$
|
1,396,000
|
|
|
$
|
11,758,807
|
|
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 three months ended June 30, 2021 and 2020, the Company recognized $292,378 and $326,736 of net sponsorship revenue
related to this deal, respectively, and for the six months ended June 30, 2021 and 2020, $581,543 and $653,473, respectively. Accounts
receivable from Constellation totaled $383,410 and $1,101,867 at June 30, 2021 and December 31, 2020, respectively.
Hall of Fame
Resort & Entertainment Company and Subsidiaries
Notes to Condensed
Consolidated Financial Statements
(Unaudited)
Note
6: Sponsorship Revenue and Associated Commitments (continued)
Turf
Nation, Inc.
During
October 2018, the Company entered into a 5-year sponsorship agreement with Turf Nation, Inc. (“Turf Nation”). Under the terms
of the agreement, the Company will receive payments over the term based on the sale of Turf Nation products based on rates defined in
the sponsorship agreement. The minimum guaranteed fee per year beginning in 2020 is $50,000 per year.
As
services are provided, the Company is recognizing revenue on a straight-line basis over the expected term of the agreement. During the
three months ended June 30, 2021 and 2020, the Company recognized $14,951 and $14,951 of net sponsorship revenue related to this deal,
respectively, and for the six months ended June 30, 2021 and 2020, $29,737 and $29,901, respectively. Accounts receivable from Turf Nation
totaled $161,829 and $132,092 at June 30, 2021 and December 31, 2020, respectively.
Note
7: Other Commitments
Canton
City School District
The
Company has entered into cooperative agreements with certain governmental entities that support the development of the project overall,
where the Company is an active participant in the agreement activity, and the Company would benefit from the success of the activity.
The
Company had a commitment to the Canton City School District (“CCSD”) to provide a replacement for their Football Operations
Center (“FOC”) and to construct a Heritage Project (“Heritage”). The commitment was defined in the Operations
and Use Agreement for HOF Village Complex dated as of February 26, 2016.
Hall of Fame
Resort & Entertainment Company and Subsidiaries
Notes to Condensed
Consolidated Financial Statements
(Unaudited)
Note
7: Other Commitments (continued)
Project
and Ground Leases
Three
wholly owned subsidiaries of the Company have project leases with the Stark County Port Authority to lease project improvements and ground
leased property at the Tom Benson Hall of Fame Stadium, youth fields, and parking areas. On November 25, 2020, the Company entered into
an amendment to its Stark County Port Authority lease, whereby the lease term was extended from January 31, 2056 to September 30, 2114.
The future minimum lease commitments under non-cancellable operating leases described below reflect the amendment that was entered into
on November 25, 2020, excluding the amounts yet to be paid from escrow for the FOC noted above, as follows:
Year ending December 31:
2021
(six months)
|
|
$
|
165,950
|
|
2022
|
|
|
321,900
|
|
2023
|
|
|
321,900
|
|
2024
|
|
|
321,900
|
|
2025
|
|
|
321,900
|
|
Thereafter
|
|
|
41,320,800
|
|
|
|
|
|
|
Total
|
|
$
|
42,774,350
|
|
Rent
expense on operating leases totaled $85,189 and $99,279 during the three months ended June 30, 2021 and 2020, respectively, and for the
six months ended June 30, 2021 and 2020, $163,164 and $200,228, respectively, and is recorded as a component of property operating expenses
on the Company’s unaudited condensed consolidated statement of operations.
Hall of Fame
Resort & Entertainment Company and Subsidiaries
Notes to Condensed
Consolidated Financial Statements
(Unaudited)
Note
7: Other Commitments (continued)
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 three months ended June 30, 2021
and 2020 was $50,000, and for the six months ended June 30, 2021 and 2020, $100,000, respectively, which is included in property operating
expenses on the Company’s unaudited condensed consolidated statements of operations. The agreement term shall end on December 31,
2022.
Employment
Agreements
The
Company has employment agreements with many of its key executive officers that usually have terms between one year and three years.
Management
Agreement with Crestline Hotels & Resorts
On
October 22, 2019, the Company entered into a management agreement with Crestline Hotels & Resorts (“Crestline”). The
Company appointed and engaged Crestline as the Company’s exclusive agent to supervise, direct and control management and
operation of the DoubleTree Canton Downtown Hotel. In consideration of the services performed by Crestline, the Company agreed to
the greater of: 2% of gross revenues or $10,000 per month in base management fees and other operating expenses. The agreement will
be terminated on the fifth anniversary of the commencement date, or October 22, 2024. For the three months ended June 30, 2021 and
2020, the Company paid and incurred $30,000 and $0, respectively, in management fees, and for the six months ended June 30, 2021 and
2020, $60,000 and $0, 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.
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.
Hall of Fame
Resort & Entertainment Company and Subsidiaries
Notes to Condensed
Consolidated Financial Statements
(Unaudited)
Note
9: Related-Party Transactions
Due
to Affiliates
Due
to affiliates consisted of the following at June 30, 2021 and December 31, 2020:
|
|
June 30,
2021
|
|
|
December 31,
2020
|
|
Due to IRG Member
|
|
$
|
1,293,146
|
|
|
$
|
1,456,521
|
|
Due to IRG Affiliate
|
|
|
316,900
|
|
|
|
140,180
|
|
Due to PFHOF
|
|
|
291,946
|
|
|
|
126,855
|
|
Total
|
|
$
|
1,901,992
|
|
|
$
|
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 provide certain supporting services to the Company. As noted in the Operating Agreement of HOF Village, LLC, an affiliate
of the IRG Member, IRG Canton Village Manager, LLC, the manager of HOF Village, LLC controlled by our director Stuart Lichter, may earn
a master developer fee calculated as 4.0% of development costs incurred for the Hall of Fame Village powered by Johnson Controls, including,
but not limited to site assembly, construction supervision, and project financing. These development costs incurred are netted against
certain costs incurred for general project management.
For
the three months ended June 30, 2021 and 2020, costs incurred under these arrangements were $20 and $80,174, respectively, and for the
six months ended June 30, 2021 and 2020, costs incurred were $40 and $208,946, respectively, which were included in Project Development
Costs.
The
amounts due to the IRG Member above are for development fees, human resources support, and the Company’s engagement with them to
identify and obtain naming rights sponsorships and other entitlement partners for the Company. The Company and IRG Member have an arrangement
whereby the Company pays IRG Member $15,000 per month plus commissions. For both the three months ended June 30, 2021 and 2020, the Company
incurred $45,000 in costs to this affiliate, respectively, and for the six months ended June 30, 2021 and 2020, the Company incurred
$90,000, respectively.
The
amounts above due to related party advances are non-interest bearing advances from an affiliate of IRG Member due on demand. The Company
is currently in discussions with this affiliate to establish repayment terms of these advances, however, there could be no assurance
that the Company and IRG Member will come to terms acceptable to both parties.
On
January 13, 2020, the Company secured $9.9 million in financing from Constellation through its Efficiency Made Easy (“EME”)
program to implement energy efficient measures and to finance the construction of the Constellation Center for Excellence and other enhancements,
as part of Phase II development. The Hanover Insurance Company provided a guarantee bond to guarantee the Company’s payment obligations
under the financing, and Stuart Lichter and two trusts affiliated with Mr. Lichter have agreed to indemnify The Hanover Insurance Company
for payments made under the guarantee bond.
The
amounts above due to PFHOF relate to advances to and from PFHOF, including costs for onsite sponsorship activation, sponsorship sales
support, shared services, event tickets, and expense reimbursements.
Hall of Fame
Resort & Entertainment Company and Subsidiaries
Notes to Condensed
Consolidated Financial Statements
(Unaudited)
Note
9: Related-Party Transactions (continued)
License
Agreement
On
March 10, 2016, the Company entered into a license agreement with PFHOF, whereby the Company has the ability to license and use certain
intellectual property from PFHOF in exchange for the Company paying a fee based on certain sponsorship revenue and expenses. On December
11, 2018, the license agreement was amended to change the calculation of the fee to be 20% of eligible sponsorship revenue. The license
agreement was further amended in a First Amended and Restated License Agreement, dated September 16, 2019. The license agreement expires
on December 31, 2033. During the three months ended June 30, 2021 and 2020, the Company recognized expenses of $105,221 and $464,618,
respectively, and for the six months ended June 30, 2021 and 2020, $210,442 and $1,466,222, respectively, which are included in property
operating expenses on the Company’s unaudited condensed consolidated statements of operations.
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
to 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 is due
July 1, 2021, subject to potential acceleration in the event of earlier use. As of August 12, 2021, the Company has not yet made this
payment and is in the process of renegotiating this agreement. There were no license fees incurred during the three and six months ended
June 30, 2021 and 2020 under the Media License Agreement.
Other
Liabilities
Other
liabilities consisted of the following at June 30, 2021 and December 31, 2020:
|
|
June 30,
2021
|
|
|
December 31,
2020
|
|
Activation fund reserves
|
|
$
|
4,066,492
|
|
|
$
|
3,780,343
|
|
Deferred revenue
|
|
|
1,147,337
|
|
|
|
1,709,126
|
|
Total
|
|
$
|
5,213,829
|
|
|
$
|
5,489,469
|
|
Hall of Fame
Resort & Entertainment Company and Subsidiaries
Notes to Condensed
Consolidated Financial Statements
(Unaudited)
Note
9: Related-Party Transactions (continued)
Purchase
of Real Property from PFHOF
On
February 3, 2021, the Company purchased 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.
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 three months ended June 30, 2021, two
customers represented approximately 47% and 12% of the Company’s total revenue. For the three months ended June 30, 2020, two customers
represented approximately 73% and 19% of the Company’s total revenue. For the six months ended June 30, 2021, two customers represented
approximately 52% and 14% of the Company’s total revenue. For the six months ended June 30, 2020, two customers represented approximately
68% and 18% of the Company’s total revenue. At June 30, 2021, four customers represented approximately 44%, 30%, 14%, and 11% of
the Company’s accounts receivable. At December 31, 2020, two customers represented approximately 71% and 15% of the Company’s
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 could be subject to other adverse conditions in the financial markets.
Item 2. Management’s discussion and analysis
of financial condition and results of operations
This Quarterly Report on Form 10–Q contains
forward–looking statements that involve risks and uncertainties, as well as assumptions that, if they never materialize or prove
incorrect, could cause our results to differ materially from those expressed or implied by such forward–looking statements. The
statements contained herein that are not purely historical are forward–looking statements within the meaning of Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).
Forward–looking statements are often identified by the use of words such as, but not limited to, “anticipate,” “estimates,”
“should,” “expect,” “guidance,” “project,” “intend,” “plan,” “believe”
and similar expressions or variations intended to identify forward–looking statements. These statements are based on the beliefs
and assumptions of our management based on information currently available to management. Such forward–looking statements are subject
to risks, uncertainties and other important factors that could cause actual results and the timing of certain events to differ materially
from future results expressed or implied by such forward–looking statements. Factors that could cause or contribute to such differences
include, but are not limited to, those identified below, and those discussed in the section titled “Risk Factors” included
in our Form 10-K/A for the fiscal year ended December 31, 2020 as filed with the Securities and Exchange Commission (“SEC”)
on May 12, 2021, as updated by the risk factors disclosed under the heading “Item 1A. Risk Factors” in this Quarterly Report
on Form 10-Q in addition to other public reports we filed with the SEC. The forward–looking statements set forth herein speak only
as of the date of this report. Except as required by law, we undertake no obligation to update any forward–looking statements to
reflect events or circumstances after the date of such statements.
Business Overview
The Company is a resort and entertainment company
located in Canton, Ohio, leveraging the power and popularity of professional football in partnership with the Pro Football Hall of Fame.
The Company was formed in 2015 by initial equity members IRG Canton Village Member, LLC, a Delaware limited liability company, and Hall
of Fame Village, Inc., an Ohio corporation (which transferred its membership interest to its parent, the Pro Football Hall of Fame, in
2019). In 2016, the Company was rebranded as Johnson Controls Hall of Fame Village based on a strategic long-term naming rights agreement
completed with Johnson Controls, a global Fortune 500 company listed on the NYSE. The Company expects to create a diversified set of revenue
streams through developing themed attractions, premier entertainment programming, sponsorships, gaming, and media. The strategic plan
has been developed in three phases of growth.
The first phase of the Hall of Fame Village powered
by Johnson Controls is operational, consisting of the Tom Benson Hall of Fame Stadium, the National Youth Football & Sports Complex,
and a media company. In August 2017, the Company completed the construction of 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 the Concert for Legends during the annual Pro Football Hall of Fame Enshrinement
Week. In 2016, the Company opened the National Youth Football & Sports Complex, which consists of eight full-sized, multi-use regulation
football fields, five of which have been completed in Phase I. The facility hosts camps and tournaments for football players, as well
as athletes from across the country in other sports such as lacrosse and soccer. In 2017, the Company formed a sports and entertainment
media company, HOF Village Media Group, LLC, leveraging the sport of professional football to produce exclusive programming using the
extensive content controlled by the Pro Football Hall of Fame, as well as new programming assets developed from live events such as tournaments,
camps and sporting events held at the National Youth Football & Sports Complex and the Tom Benson Hall of Fame Stadium.
The Company is developing new hospitality, attraction
and corporate assets surrounding the Pro Football Hall of Fame Museum as part of a Phase II development plan. Plans for future components
of the Hall of Fame Village powered by Johnson include two premium hotels (one on campus and one in downtown Canton about five minutes
from campus that was opened in Q4 2020), an indoor waterpark, the Center for Excellence (an office building including retail and dining
establishments), the Center for Performance (a convention center/field house), and the Hall of Fame Retail Promenade.
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 NewEnergy. These sponsorship agreements are generally
multi-year agreements to provide cash or some other type of benefit to the Company. Some agreements require the Company to use a
portion of the sponsorship revenue to incur marketing and other activation costs associated with the agreement, and this revenue is shown
net of those associated costs. Additionally, the Company’s Tom Benson Hall of Fame Stadium is used to host premier entertainment
and sports events to generate event revenues. In addition to top entertainers, the stadium is used to host a variety of sporting events,
including high school, college and professional football games throughout the year. The Company plans to continue to expand programming
where applicable for its live event business. The Company’s other revenue is derived primarily from rents and cost reimbursement.