Hall of Fame Resort & Entertainment pany(HOFV) - 2023 Q4 - Annual Report

Part I Business The company operates a resort and entertainment business centered on the Pro Football Hall of Fame brand - The company operates through three main business pillars: destination-based assets, media, and gaming[16] - The Hall of Fame Village development is in three phases, with Phase II nearing completion and Phase III in planning[17][18][36] - On January 11, 2024, the company sold an 80% interest in its ForeverLawn Sports Complex business to Sandlot for a $10 million purchase price[22][57] - A dispute with Johnson Controls, Inc. was resolved, resulting in a $2.87 million award and a net gain of $4.1 million[49] Risk Factors The company faces significant financial, operational, and regulatory risks due to its early stage and high indebtedness - The company is an early-stage entity with recurring losses, an accumulated deficit of $216.6 million, and substantial doubt about its ability to continue as a going concern[64][118][120] - The business is highly dependent on external financing, with $62.1 million in debt principal payments due through December 31, 2024[75][118][119] - A material weakness in internal control over financial reporting was identified, which could result in a material misstatement of financial reports[136][137] - The company's sports betting and eSports operations are subject to complex and evolving laws and regulations[106][107] - The company's success is tied to its branded partners, including the PFHOF and the NFL, creating reputational risks[82] Unresolved Staff Comments There are no unresolved comments from the SEC staff - Not applicable[158] Cybersecurity Cybersecurity risk is managed through an integrated framework overseen by the board's audit committee - The company has integrated cybersecurity risk management into its overall risk management system, conducting periodic assessments[160][161] - The board of directors' audit committee oversees the cybersecurity risk function, with day-to-day management by key executives[166][169] - The company engages third-party consultants to assist in designing and implementing its cybersecurity policies[164] Properties The company owns property in Canton, Ohio, with key parcels subject to long-term ground leases and sale-leaseback financing - The company owns real property in Canton, Ohio, but key parcels are subject to long-term ground leases[170] - The land for the Fan Engagement Zone and Gameday Bay waterpark is subject to sale-leaseback financing arrangements[44] Legal Proceedings The company reports no pending litigation expected to have a material adverse effect on its financial results - The company is subject to occasional legal proceedings but does not currently have any pending litigation expected to have a material adverse effect[537] Mine Safety Disclosures There are no mine safety disclosures to report - Not applicable[173] 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", and no cash dividends are planned - The company's common stock is traded on The NASDAQ Capital Markets under the symbol "HOFV"[177] - A 1-for-22 reverse stock split was effective on December 27, 2022, to maintain its Nasdaq listing requirement[176][21] - The company has never declared or paid cash dividends and does not intend to in the foreseeable future[179] Management's Discussion and Analysis of Financial Condition and Results of Operations Revenues grew 51.0% in 2023, but net loss widened due to higher expenses, impairment charges, and interest costs Consolidated Results of Operations (2023 vs. 2022) | Financial Metric | 2023 | 2022 | Change (%) | | :--- | :--- | :--- | :--- | | Total Revenues | $24,129,673 | $15,979,372 | 51.0% | | Sponsorships, net | $2,819,041 | $2,697,487 | 4.5% | | Event, rents, restaurant, etc. | $13,855,169 | $7,116,594 | 94.7% | | Hotel revenues | $7,455,463 | $6,165,291 | 20.9% | | Loss from Operations | ($49,448,141) | ($37,990,305) | (30.2%) | | Net Loss | ($68,753,804) | ($46,168,311) | (48.9%) | | Net Loss per Share | ($11.97) | ($9.01) | (32.8%) | - Event, rents, and restaurant revenues increased by 94.7% to $13.9 million, driven by new events and restaurant openings[196] - Operating expenses increased by 20.0% to $43.2 million, driven by higher personnel costs and increased production costs[198] - An impairment expense of $8.8 million was recorded in 2023, related to the ForeverLawn Sports Complex and film costs[200] - The company has sustained recurring losses and has an accumulated deficit of $216.6 million, raising substantial doubt about its ability to continue as a going concern[209][210] Summary of Cash Flows (2023 vs. 2022) | Cash Flow Activity | 2023 | 2022 | | :--- | :--- | :--- | | Net cash used in operating activities | ($27,000,438) | ($4,892,748) | | Net cash used in investing activities | ($27,826,165) | ($112,128,287) | | Net cash provided by financing activities | $33,126,304 | $133,149,377 | Quantitative and Qualitative Disclosure About Market Risk The company states 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[224] Financial Statements and Supplementary Data The company's financial statements are included in Item 15 of this report, beginning on page F-1 - The financial statements required by this Item are included in Item 15 of this report and are presented beginning on page F-1[225] Changes in and Disagreements with Accountants on Accounting and Financial Disclosure The company changed its independent auditor in April 2023 without any reported disagreements on accounting matters - On April 3, 2023, the Audit Committee dismissed Marcum LLP and appointed Grant Thornton LLP as the new independent registered public accounting firm[226][229] - There were no disagreements with the former auditor, Marcum LLP, on any accounting or auditing matters[228] Controls and Procedures Disclosure controls were deemed ineffective due to a material weakness in internal control over financial reporting - Management concluded that disclosure controls and procedures were not effective as of December 31, 2023[231] - A material weakness was identified related to the timely review and analysis of information for financial statement preparation[236] - A remediation plan is underway, with an expected completion before the end of fiscal year 2024[237] Other Information There is no other information to report for this item - None[239] Part III Directors, Executive Officers, Corporate Governance, Compensation, Security Ownership, and Accountant Fees Information for these items is incorporated by reference from the company's upcoming 2024 Proxy Statement - 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[242][243][244] Part IV Exhibits and Financial Statement Schedules This section contains the consolidated financial statements and a comprehensive list of filed exhibits - The consolidated financial statements for the fiscal years covered by this Annual Report are located beginning on page F-1[248] - A detailed list of exhibits, including charter documents, warrant agreements, and numerous loan agreements, is provided[249][250][251] Form 10–K Summary This item is not applicable to the current report - Not applicable[264] Consolidated Financial Statements Report of Independent Registered Public Accounting Firm The auditor's report expresses substantial doubt about the company's ability to continue as a going concern - The auditor's report for 2023 contains a "Going Concern" paragraph, citing a net loss of $68.7 million and significant upcoming debt maturities[274] - Grant Thornton LLP served as the auditor for the 2023 financial statements, while Marcum LLP served as the auditor for 2022[273][281] Notes to Consolidated Financial Statements The notes detail the company's critical liquidity situation, complex debt structure, and significant transactions - Going Concern: Recurring losses, an accumulated deficit of $216.6 million, and significant debt raise substantial doubt about its ability to continue as a going concern[312][317] - JCI Dispute Resolution: A dispute with Johnson Controls Inc. was resolved, resulting in a $2.87 million award and a net gain of $4.1 million[516] - Sale-Leaseback Financing: Sale-leaseback transactions were accounted for as financing liabilities, totaling $63.0 million as of December 31, 2023[585][586][588] - Subsequent Events: In January 2024, the company sold an 80% interest in its sports complex business for $10 million and amended several loan agreements[597][599] Future Minimum Principal Payments on Debt (as of Dec 31, 2023) | Year | Amount | | :--- | :--- | | 2024 | $ 62,057,010 | | 2025 | $ 37,023,027 | | 2026 | $ 4,058,147 | | 2027 | $ 7,116,194 | | 2028 | $ 13,730,685 | | Thereafter | $ 105,199,947 | | Total Gross Principal | $ 229,185,010 | - The company has a full valuation allowance of $51.4 million against its net deferred tax assets due to uncertainty of realization[592]