Hall of Fame Resort & Entertainment Co

Item 1A. Risk factors

Our operations and financial results are subject to various risks and uncertainties, including those described in Part I, Item 1A, Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2023, as supplemented by Part II, Item 1A, Risk Factors in our Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2024, which could adversely affect our business, financial condition, results of operations, cash flows, and the trading price of our common and capital stock. There have been no material changes to our risk factors since our Annual Report on Form 10-K for the year ended December 31, 2023, as supplemented by our Quarterly Reports on Form 10-Q for the quarters ended March 31, 2024,  and June 30, 2024, other than:

We have identified a material weakness in our internal control over financial reporting. If our remediation of this material weakness is not effective, or if we experience additional material weaknesses in the future or otherwise fail to maintain effective internal controls in the future, we may not be able to accurately report our financial condition or results of operations, which may adversely affect investor confidence in us and, as a result, the value of our common stock.

Our business plan remanagement is responsible for establishing and maintaining adequate internal controls over financial reporting designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. GAAP. Our management is likewise requires additiond, on a quarterly basis, to evaluate the effectiveness of our internal controls over financial reporting and to disclose any changes and material weaknesses identified through such evaluation of those internal licontrols. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.

In connection with the audit of our consolidated financial statements for the year ended December 31, 2023, management concluded that our internal controls over financial reporting were not effective as of December 31, 2023, due to the existence of a material weaknesses as follows: We identified, a material weakness 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. This material weakness could impact our financial reporting such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. We have taken steps to remediate this material weakness in internal control over financial reporting; however, we are not yet able to determine whether the steps we are taking will fully remediate the material weakness.

Because of the material weakness in our internal control over financial reporting as previously disclosed, our principal executive officer and interim principal accounting officer concluded that, as of September 30, 2024, our disclosure controls and procedures were not effective at the reasonable assurance level. Our management, including our principal executive officer and interim principal accounting officer, have concluded that, notwithstanding the material weakness in our internal control over financial reporting, the condensed consolidated financial statements in this Quarterly Report on Form 10-Q fairly present, in all material respects, our financial position, results of operations and cash flows for the periods presented in conformity with U.S. GAAP.

The existence of material weaknesses or significant deficiencies in internal control over financial reporting could adversely affect our reputation or investor perceptions of us, which could have a negative effect on the trading price of our stock. In addition, we have and will continue to incur additional costs to remediate our material weakness in our internal control over financial reporting.

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Our recurring losses from operations have raised substantial doubt regarding our ability to continue as a going concern, and our business plan requiditres additional liquidity and capital resources that might not be available on terms that are favorable to us, or at all.

We have sustained recurring losses through JuneSeptember 30, 2024, and our accumulated deficit was $247.352.0 million as of such date. Since inception, our operations have been funded principally through the issuance of debt and equity. As of JuneSeptember 30, 2024, we had approximately $1.52.6 million of unrestricted cash and $5.04.9 million of restricted cash. Through August 14November 13, 2025, we have $99.97.1 million in debt principal payments coming due. D, including approximately $11.2 million of debt due December 4, 2024. During the sixnine months ended JuneSeptember 30, 2024, the Company used cash for operating activities of $5.37.1 million.

While our strategy assumes that we will receive sufficient capital to have sufficient working capital, we currently do not have available cash and cash flows from operations to provide us with adequate liquidity for the near-term or foreseeable future. Our current projected liabilities exceed our current cash projections and we have very limited cash flow from current operations. We therefore will require additional capital and/or cash flow from future operations to fund the Company, our debt service obligations and our ongoing business. There is no assurance that we will be able to raise sufficient additional capital or generate sufficient future cash flow from our future operations to fund the Hall of Fame Village, our debt service obligations or our ongoing business. If the amount of capital we are able to raise, together with any income from future operations, is not sufficient to satisfy our liquidity and capital needs, including funding our current debt obligations, we may be required to abandon or alter our plans for the Company. The Company may have to raise additional capital through the equity market, which could result in substantial dilution to existing stockholders. If management is unable to execute its planned debt and equity financing initiatives, these conditions raise substantial doubt about our ability to continue to sustain operations for at least one year from the issuance of our condensed consolidated financial statements for the quarter ended JuneSeptember 30, 2024 included in this quarterly report on Form 10-Q. The accompanying condensed consolidated financial statements do not include any adjustments that might result from the outcome of these uncertainties.

Our ability to obtain necessary financing may be impaired by factors such as the health of and access to capital markets, our limited track record and the limited historical financial information available, or the substantial doubt about our ability to continue as a going concern. Any additional capital raised through the sale of additional shares of our capital stock, convertible debt or other equity may dilute the ownership percentage of our stockholders.

 The perception that we may not be able to continue as a going concern may cause others to choose not to deal with us due to concerns about our ability to meet our contractual obligations.

There is no assurance that the non-binding proposal from IRG Canton Village Member, LLC (IRG), an affiliate of the Companys director Stuart Lichter, will result in a definitive transaction, and the absence of us entering into a definitive transaction agreement, changes to the proposal, or the commencement of related litigation may have an adverse impact on the market price of our common stock

We received a non-binding proposal on September 27, 2024, from IRG, an affiliate of the Companys director Stuart Lichter, outlining IRGs preliminary non-binding proposal (Proposal) to acquire, through a to-be-formed affiliated entity (Buyer), all of the outstanding shares of common stock, par value $0.0001 per share (the Common Stock), of the Company that are not held by Buyer, its affiliated entities and any potential co-investors in Buyer or its affiliates (the Proposed Transaction) at a purchase price of $1.98 per share of Common Stock, to be paid in cash, which assumes an aggregate amount of indebtedness outstanding as of the consummation of the Proposed Transaction that does not exceed the aggregate amount of indebtedness that is outstanding as of the date of the Proposal.

In response to the proposal, the Companys Board of Directors formed a special committee made up of independent, disinterested directors (the Special Committee) to evaluate the proposal. The Special Committee has retained a financial advisor and legal counsel to assist in its ongoing review and evaluation of the proposal. There is no guarantee that any proposal made by IRG regarding a proposed transaction will be accepted by the Special Committee, that definitive documentation relating to any such transaction will be executed, or that a transaction will be consummated in accordance with that documentation, if at all. The absence of a definite offer to acquire the shares of Common stock owned by persons other than Buyer, its affiliated entities and any potential co-investors in Buyer or its affiliates, or changes to the terms of the Proposed Transaction, as well as the commencement of litigation regarding any proposed transaction, would likely have an adverse effect on the market price of shares of our common stock.

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The termination of the waterpark ground lease and surrender of the waterpark premises and improvements to the landlord, which occurred October 26, 2024, and the exercise of certain remedies by waterpark landlord would be expected to have a material adverse effect on the liquidity, financial condition, and results of operations of the Company.

On October 26, 2024, HOF Village Waterpark, LLC (Tenant), a subsidiary of Hall of Fame Resort Entertainment Company (the Company), received from HFAKOH001 LLC (Landlord) a notice of termination due to event of default (the Notice) under the waterpark ground lease agreement, dated as of November 7, 2022, between Tenant and Landlord, as amended on February 23, 2024, February 29, 2024 and May 10, 2024 (as so amended, the Waterpark Ground Lease). Under the Waterpark Ground Lease, the Landlords termination requires that Tenant immediately surrender the waterpark premises under such lease to the Landlord and any improvements thereto (including the construction of new buildings thereon) with all fixtures appurtenant thereto.

The default identified in the Notice is a payment default under the Waterpark Ground Lease. The Landlord had agreed to forbear exercising remedies for the payment default until October 25, 2024. As of November 13, 2024, Tenant had not remedied the payment default. The outstanding principal balance of unpaid base rent under the Waterpark Ground Lease (inclusive of default interest and late fees accrued up to the date of termination) is approximately $2,600,000.

In addition to unpaid rent, the Waterpark Ground Lease provides that Landlord is entitled to recover the following as damages: (i) the amount by which the unpaid rent for what would have been the remaining term of the Waterpark Ground Lease exceeds the then fair market rental value of the waterpark premises, both discounted to present value, plus (ii) any damages, including without limitation reasonable attorneys fees and court costs, which Landlord sustains as a result of the breach of the covenants of the Waterpark Ground Lease other than for the payment of rent, in each case plus interest.

The Notice states that Landlord retains the absolute and unconditional right to pursue any and all remedies available under the Waterpark Ground Lease and related security agreements and applicable law, concurrently or consecutively, at Landlords sole discretion. The Companys subsidiary HOF Village Newco, LLC (Guarantor) guaranteed Tenants obligations under the Waterpark Ground Lease pursuant to a limited recourse guaranty dated as of November 7, 2022. The security agreements and collateral that support Tenant and Guarantors obligations under the Waterpark Ground Lease consist of the following:

The exercise of certain remedies by Landlord would be expected to have a material adverse effect on the liquidity, financial condition, and results of operations of the Company.

The event of default under the Waterpark Ground Lease results in an event of default under certain of the Companys loan agreements. Given the Companys financial position, the Company is in default or risks becoming in default under certain other loan agreements. The loan agreements under which the Company is in default total approximately $81 million gross principal outstanding as of September 30, 2024.

We may be required to take write-downs or write-offs, restructuring and impairment or other charges that could have a significant negative effect on our financial condition, results of operations and our stock price, which could cause our stockholders to lose some or all of their investment.

We may be forced to write-down or write-off assets, restructure our operations, or incur impairment or other charges that could result in our reporting losses. Even though these charges may be non-cash items and not have an immediate impact on our liquidity, the fact that we report charges of this nature could contribute to negative market perceptions about us or our securities. In addition, charges of this nature may cause us to violate net worth or other covenants to which we may be subject. Accordingly, a stockholder could suffer a reduction in the value of their shares of Common Stock.

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If we fail to comply with the continued listing standards of Nasdaq, our common stock may be delisted from Nasdaq, which would be expected to have a negative effect on the liquidity and market price of our common stock, reduce the number of investors willing to hold or acquire our common stock, limit or reduce the amount of analyst coverage we receive, and impair your ability to sell or purchase our common stock when you wish to do so.

The continued listing standards of the Nasdaq Stock Market, or Nasdaq, require, among other things, that (i) the minimum bid price of a listed companys stock be at or above $1.00, and (ii) a listed company hold an annual meeting of shareholders no later than one year after the end of its fiscal year. If the closing minimum bid price is below $1.00 for a period of more than 30 consecutive trading days or the Company does not hold an annual meeting of shareholders by December 31, 2024, the Company will fail to be in compliance with Nasdaqs listing rules and, if it does not regain compliance within the grace period, will be subject to delisting.

If the common stock ceases to be listed for trading on Nasdaq, the Company would expect the common stock would be traded on one of the three tiered marketplaces of the OTC Market Groups. If this were to occur, we could face significant material adverse consequences, including: (i) a limited availability of market quotations for our securities; (ii) reduced liquidity for our securities; (iii) a determination that our Common Stock are penny stock, which will require brokers trading in our Common Stock to adhere to more stringent rules and possibly result in a reduced level of trading activity in the secondary trading market for our securities; (iv) a limited amount of news and analyst coverage; (v) a decreased ability to issue additional securities or obtain additional financing in the future; and (vi) being subject to regulation in each state in which we offer our securities.