HALL OF FAME RST.ENTM. EQ.WARRT(HOFVW) - 2023 Q4 - Annual Report

PART I Business Hall of Fame Resort & Entertainment Company (HOFRE) leverages professional football's popularity through its Hall of Fame Village development, diversified across destination assets, media content, and gaming - The company's business model is diversified across three main pillars: developing destination-based assets (Hall of Fame Village), creating media content (Hall of Fame Village Media), and engaging in the gaming sector (fantasy sports, eGaming, sports betting)[16][23] - The Hall of Fame Village development is structured in three phases: Phase I (Operational) includes the Tom Benson Hall of Fame Stadium and the ForeverLawn Sports Complex; Phase II (Underway) includes hotels, Constellation Center for Excellence, Center for Performance, and the Gameday Bay Waterpark (expected opening early 2025); Phase III (Planning) may include residential space and additional entertainment and dining options[17][18][35] - In January 2024, the company completed a strategic sale of 80% of its ForeverLawn Sports Complex business to Sandlot Facilities, LLC for a $10 million purchase price to form a partnership focused on youth sports programming[22][56] - The company resolved a dispute with Johnson Controls, Inc. (JCI) via arbitration, resulting in a net gain of $4.1 million in 2023 and the termination of both the Naming Rights and Technology as a Service (TAAS) agreements[47][48] Risk Factors The company faces substantial risks from its early-stage nature, significant debt, and recurring losses, raising substantial doubt about its going concern ability - The company is an early-stage entity with a limited operating history and has sustained recurring losses, leading to an accumulated deficit of $216.6 million as of December 31, 2023[62][66][114] - Management has identified conditions that raise substantial doubt about the company's ability to continue as a going concern, requiring additional capital to fund operations, service its $62.1 million in debt payments due through 2024, and complete its development plans[114][115][116] - A material weakness in internal control over financial reporting has been identified related to the review and analysis of information used to prepare financial statements and disclosures, which could result in a material misstatement of financial reports[132][133] - The business is highly dependent on discretionary consumer spending, which can be negatively affected by economic downturns, and faces significant competition from other entertainment venues, theme parks, and media producers[80][84][85] - The company's sports betting and eSports operations are subject to complex and evolving laws and regulations, and failure to obtain or maintain necessary licenses could materially harm the business[101][102] Unresolved Staff Comments This section is not applicable as the company has no unresolved staff comments from the SEC - Not applicable[152] Cybersecurity The company has implemented a cybersecurity risk management program, overseen by the audit committee, and has not experienced any material incidents - The company has established policies and processes for assessing, identifying, and managing material risks from cybersecurity threats, with primary responsibility resting with the Director of IT[154][156] - The board of directors, through its audit committee, oversees the cybersecurity risk management process, receiving periodic briefings from the CEO, General Counsel, and Chief Accounting Officer[160][163] - To date, the company has not encountered cybersecurity challenges that have materially impaired its operations or financial standing[159] Properties The company owns real property in Canton, Ohio, for its Hall of Fame Village and hotel, but key parcels are subject to long-term ground leases or sale-leaseback financing arrangements - The company owns real property in Canton, Ohio, but certain key parcels for the Hall of Fame Village, including the stadium, are subject to long-term ground leases[42][164] - The land for the Fan Engagement Zone and Gameday Bay waterpark are subject to sale-leaseback financing arrangements, which allow the company to buy back the property at its option within specified time periods[43] Legal Proceedings Information regarding legal proceedings is incorporated by reference from Note 8, "Contingencies," in the Consolidated Financial Statements section of this report - Details on legal proceedings are provided in Note 8, "Contingencies," to the Consolidated Financial Statements[166] Mine Safety Disclosures This section is not applicable to the company's operations - Not applicable[167] PART II Market For Registrant's Common Equity, Related Stockholder Matters And Issuer's Purchases Of Equity Securities The company's common stock trades on NASDAQ under "HOFV", underwent a 1-for-22 reverse stock split in 2022, and has no plans for future cash dividends - The company's common stock trades on The NASDAQ Capital Markets under the symbol "HOFV"[170] - A 1-for-22 reverse stock split of common stock was completed on December 27, 2022[169] - The company has never declared or paid cash dividends and does not intend to in the foreseeable future[172] Reserved This item is reserved and contains no information Management's Discussion and Analysis of Financial Condition and Results of Operations Management reports a significant 51% increase in total revenues to $24.1 million for 2023, but net loss widened to $68.8 million due to increased expenses, impairment charges, and rising interest expense, raising substantial doubt about going concern Financial Summary | | For the Years Ended December 31, | | | :--- | :--- | :--- | | | 2023 ($) | 2022 ($) | | Total revenues | 24,129,673 | 15,979,372 | | Loss from operations | (49,448,141) | (37,990,305) | | Net loss | (68,753,804) | (46,168,311) | | Net loss attributable to HOFRE stockholders | (69,745,539) | (46,946,504) | | Net loss per share – basic and diluted | (11.97) | (9.01) | - Total revenues increased by 51.0% year-over-year, primarily driven by a 94.7% increase in event, rents, restaurant, and other revenues due to hosting the USFL, concerts, and the opening of Don Shula's restaurant[186][188] - Operating expenses rose by 20.0% to $43.2 million in 2023, driven by higher personnel costs and production costs for events and media[190] - An impairment expense of $8.8 million was recorded in 2023 related to the ForeverLawn Sports Complex and film costs; no such expense was recorded in 2022[192] - The company faces significant liquidity challenges, with recurring losses, an accumulated deficit of $216.6 million, and $62.1 million in debt principal payments due through December 31, 2024, raising substantial doubt about its ability to continue as a going concern[201][202] Cash Flow Summary | Cash Flow Summary | For the Year Ended December 31, 2023 ($) | For the Year Ended December 31, 2022 ($) | | :--- | :--- | :--- | | Operating Activities | (27,000,438) | (4,892,748) | | Investing Activities | (27,826,165) | (112,128,287) | | Financing Activities | 33,126,304 | 133,149,377 | Quantitative and Qualitative Disclosure About Market Risk The company states that it is not exposed to market risk related to interest rates on foreign currencies - The Company is not exposed to market risk related to interest rates on foreign currencies[216] Financial Statements and Supplementary Data This section indicates that the company's audited consolidated financial statements are included in Item 15 of the report, starting on page F-1 - The financial statements required by this item are included in Item 15 of this report, beginning on page F-1[217] Changes in and Disagreements with Accountants on Accounting and Financial Disclosure On April 3, 2023, the company dismissed Marcum LLP and appointed Grant Thornton LLP as its independent registered public accounting firm, reporting no disagreements with the former auditor - On April 3, 2023, the Audit Committee dismissed Marcum LLP and appointed Grant Thornton LLP as the new independent registered public accounting firm[218][221] - There were no disagreements with the former auditor, Marcum LLP, on accounting principles, practices, or financial statement disclosure[220] Controls and Procedures Management concluded that the company's disclosure controls and procedures were not effective as of December 31, 2023, due to a material weakness in financial reporting controls, with a remediation plan underway - Management concluded that disclosure controls and procedures were not effective as of December 31, 2023[223] - A material weakness was identified in internal control over financial reporting related to the "precise and timely review and analysis of information used to prepare our financial statements and disclosures in accordance with U.S. GAAP"[228] - Management has implemented a remediation plan, including designing additional controls, with the expectation of completion before the end of fiscal year 2024[229][233] Other Information There is no other information to report in this section - None[231] Disclosure Regarding Foreign Jurisdictions that Prevent Inspections This section is not applicable to the company - Not Applicable[232] PART III Directors, Executive Officers, Corporate Governance, Compensation, Security Ownership, and Accountant Fees Information for Items 10 through 14 is incorporated by reference from the company's definitive Proxy Statement for the 2024 Annual Meeting of Stockholders - Information for Items 10, 11, 12, 13, and 14 is incorporated by reference from the registrant's Proxy Statement for the 2024 Annual Meeting of Stockholders[235][236][237] PART IV Exhibits and Financial Statement Schedules This section lists all exhibits filed with the Form 10-K and directs readers to the consolidated financial statements beginning on page F-1 - The consolidated financial statements for the fiscal years covered by the report are located beginning on page F-1[241] - A comprehensive list of exhibits is provided, including corporate governance documents, material contracts such as loan and license agreements, and required SEC certifications[242][243][244] Form 10–K Summary This section is not applicable - Not applicable[257] Financial Statements Report of Independent Registered Public Accounting Firm The auditor's opinion states fair presentation but includes a "Going Concern" paragraph highlighting substantial doubt due to recurring losses, negative cash flow, and significant debt maturities - The auditor's report contains a "Going Concern" paragraph, citing the company's net loss of $68.7 million, cash used in operations of $27.0 million in 2023, and $62.1 million of debt due through December 31, 2024[267] - The financial statements have been prepared assuming the company will continue as a going concern, and do not include any adjustments related to the potential inability to meet future obligations[267] Consolidated Financial Statements The consolidated financial statements for 2023 show decreased total assets to $441.9 million, increased total liabilities to $315.2 million, and a widened net loss of $68.8 million Balance Sheet Summary | Balance Sheet Summary | As of Dec 31, 2023 ($) | As of Dec 31, 2022 ($) | | :--- | :--- | :--- | | Total Assets | 441,896,633 | 456,296,961 | | Total Liabilities | 315,159,219 | 265,038,849 | | Total Stockholders' Equity | 126,737,414 | 191,258,112 | Statement of Operations Summary | Statement of Operations Summary | For the Year Ended Dec 31, 2023 ($) | For the Year Ended Dec 31, 2022 ($) | | :--- | :--- | :--- | | Total Revenues | 24,129,673 | 15,979,372 | | Net Loss | (68,753,804) | (46,168,311) | Statement of Cash Flows Summary | Statement of Cash Flows Summary | For the Year Ended Dec 31, 2023 ($) | For the Year Ended Dec 31, 2022 ($) | | :--- | :--- | :--- | | Net cash used in operating activities | (27,000,438) | (4,892,748) | Notes to Consolidated Financial Statements The notes detail critical financial aspects, including going concern uncertainty, extensive debt obligations, sponsorship dispute resolution, related-party transactions, financing liabilities from sale-leasebacks, and the January 2024 sports complex sale - Going Concern (Note 1): The company requires additional financing to fund its development plan and working capital, and there are no assurances it can be obtained, raising substantial doubt about the company's ability to continue as a going concern[305][310] - Notes Payable (Note 4): As of December 31, 2023, the company had total net notes payable of $219.5 million, with minimum required principal payments in 2024 of $62.1 million[404][447] - Sponsorships (Note 6): The arbitration with Johnson Controls Inc. (JCI) concluded, terminating the agreements and resulting in a recognized gain of $4.1 million for the company in 2023[508] - Financing Liability (Note 12): Sale-leaseback transactions for the Fan Engagement Zone and the future waterpark were accounted for as financing arrangements, resulting in a financing liability of $63.0 million on the balance sheet as of December 31, 2023[578][579][580] - Subsequent Events (Note 15): On January 11, 2024, the company completed the sale of an 80% stake in its ForeverLawn Sports Complex business for a $10 million purchase price[588]